TIDMCML
RNS Number : 7308P
CML Microsystems PLC
22 November 2016
22 November 2016
CML Microsystems Plc
Half Yearly Report
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, is pleased to announce results for the six months
ended 30 September 2016.
Financial Highlights
-- First half results materially exceeded initial expectations for the period
-- Group revenues up 19% to GBP13.04m (H1 2015: GBP11.00m)
o Sicomm contribution of GBP0.40m (H1 2015: GBPNil)
-- Gross profit up 17% to GBP9.31m (H1 2015: GBP7.98m)
-- Profit before tax up 28% to GBP1.94m (H1 2015: GBP1.51m)
-- Adjusted EBITDA up 27% to GBP4.23m (H1 2015: GBP3.33m)
-- Basic EPS up 33% to 10.25p (H1 2015: 7.69p)
-- No borrowings and net cash of GBP11.56m (31 March 2016:
GBP13.60m), following payment of net GBP3.58m cash consideration
for the acquisition of Sicomm and GBP1.13m dividend payment
Operational Highlights
-- Successful acquisition of Wuxi Sicomm Technologies Ltd
("Sicomm"), expanding the Group's technological expertise and Far
East presence
-- Launch of three new products across Storage and
Communications market sectors, expanding our addressable market
-- Successfully implemented new sales and marketing structure in the Americas
-- Continued investment in Research and Development to provide for long-term growth
-- Several design wins from prior periods now entering the early
ramping phase, expected to contribute to revenue growth in H2 FY17
and subsequent years
-- Significant number of the Group's top 40 customers increased their spend in the period
Chris Gurry, Group Managing Director of CML, commented: "We are
pleased with the operational progress we have made during the first
half. We have continued to expand our product range, increased
sales revenue from the existing customer base, made good progress
with the integration of the Sicomm acquisition and successfully
implemented a new operational structure within our American
business."
"Our strong financial position, with a healthy cash balance,
tangible assets and no borrowings provides us with the confidence
to continue to invest in the expansion of our business. Trading in
the second half of the year has begun well and we are confident of
a full-year advance in both revenues and profitability."
All figures above represent Group total including the two month
contribution from Sicomm, unless otherwise stated.
The information contained within this announcement is deemed by
the Group to constitute inside information under the Market Abuse
Regulations (EU) No. 596/2014.
CML Microsystems Plc www.cmlmicroplc.com
Chris Gurry, Group Managing Tel: +44 (0)1621 875
Director 500
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)203 463 2260
LLP
Jeff Keating
Alma PR
Josh Royston Tel: +44 (0)7780 901979
Caroline Forde Tel: +44 (0)7779 664584
Robyn McConnachie Tel: +44 (0)7540 706191
About CML Microsystems PLC
CML designs and develops semiconductors for the industrial
storage and communications markets. The Group utilises a
combination of in-house and outsourced manufacturing and has
trading operations in Europe, the Far East and the USA. CML targets
niche markets with strong growth profiles and high barriers to
entry. It has secured a diverse, blue chip customer base, including
some of the world's leading telecoms equipment providers and
industrial product manufacturers.
The spread of its customers and products largely protects the
business from the cyclicality usually associated with the
semiconductor industry. Growth in its end-markets is being driven
by factors such as the ever-increasing trend towards solid state
storage devices in the commercial and industrial sectors, the
upgrading of telecoms infrastructure around the world and the
growing prevalence of private commercial communications networks
for voice and/or data communications linked to the industrial
internet of things (IIoT).
The Group is cash-generative, has no borrowings and is dividend
paying.
Chairman's statement
Strong revenue growth coupled with stable gross margins has
meant that our first half unaudited results have materially
exceeded initial expectations. This revenue uplift, assisted by
weak Sterling and a two month contribution from Wuxi Sicomm
Technologies Ltd ("Sicomm"), was underpinned by good growth in the
underlying businesses, which is extremely pleasing. Our objective
is to achieve long-term, sustainable revenue growth which, due to
the natural gearing within our business, provides the ability to
generate accelerated profit growth.
It is evident that we are now beginning to see the results of
the strategic investments that we have made into the business over
the last few years. With our focus on R&D and customer support,
we have a more diverse customer base, an excellent customer
reputation, and are delivering leading products within our market
niches through our global distribution network.
One of the important strategic and operational highlights during
the first half of the year was the completion of the acquisition of
Sicomm, a Chinese fabless semiconductor and solutions provider for
the global wireless communications markets. Sicomm's product range,
trading relationships and technical support abilities complement
and enhance the Group's existing skills and strategy. These are
expected to enable compelling technical and commercial benefits for
our customers. We have been pleased with the success of the
integration thus far and look forward to further growth from the
business.
The Group delivered a good trading performance, with growth from
both Storage and Communications market sectors (Communications
formerly reported separately as Wireless and Wireline Telecom).
Revenues grew 19% in the half year to GBP13.04m (H1 2015:
GBP11.00m). Organic growth, excluding the Sicomm contribution, was
15%. The operational gearing within the business contributed to a
28% growth in profit before tax to GBP1.94m (H1 2015: GBP1.51m),
while maintaining high levels of investment into R&D. Cash
levels, which are always a key management focus, stood at GBP11.56m
(31 March 2016: GBP13.60m) representing a very positive outcome
following payment of an increased dividend and the cash element of
the purchase of Sicomm during the first half. We have no
borrowings.
Considering this strong performance, I must thank our employees
for their dedication and hard work. They and our growing customer
base remain fundamental to the future growth of the business.
Market conditions appear to have improved and importantly there
are solid underlying growth drivers within each of our target
markets. This coupled with our strong financial position, positive
trading momentum, expanded business and strengthened management
team provide us with the opportunity to continue our pursuit of
growth both organically and through targeted acquisitions. I am
confident we are progressively putting in place the building blocks
for the long-term success of CML.
Nigel Clark
Group Non-Executive Chairman
21 November 2016
Operational and Financial Review
Introduction
This has been a good first half of operational progress. We have
continued to expand our product range through the launch of three
new products across our Storage and Communications market sectors.
We have increased sales revenue from the existing customer base,
secured new customers, made good progress with the integration of
the Sicomm acquisition and successfully implemented a new
operational structure within our American business.
Financial Review
Total Group revenues for the six-month period amounted to
GBP13.04m (H1 2015: GBP11.00m) which included a two month
contribution of GBP0.40m from newly acquired Sicomm. Gross margins
remained relatively stable leading to a 17% increase in gross
profit to GBP9.31m (H1 2015: GBP7.98m). The Group has a somewhat
natural hedge in respect of US dollar and euro exchange rate
exposure.
Revenue growth was driven predominantly by increased shipments
with existing long-term customers, with a significant number of our
top 40 customers increasing their spend. In particular, our USB
storage products started to generate meaningful revenues whilst our
digital voice and data modem IC's contributed strongly.
Distribution and administration costs increased to GBP7.81m (H1
2015: GBP6.62m) due to a combination of a general increase in
direct staff costs, higher amortisation levels for the R&D
investment, and the addition of Sicomm.
Profit from operations climbed 29% to GBP1.99m (H1 2015:
GBP1.54m). This increase consisted of 11% from the improved trading
performance, with the balance derived from government grants
received outside of the UK and rental income from the letting of
commercial properties that the Group no longer trades from.
Profit before taxation amounted to GBP1.94m (H1 2015: GBP1.51m)
with GBP1.81m generated from non-acquired operations and the
remainder attributable to Sicomm.
Following payment of a GBP1.13m dividend in respect of the
previous year (H1 2015: GBP1.12m) and a net cash outflow, including
all costs relating to the Sicomm acquisition of GBP3.47m, cash
balances fell from GBP13.60m at the 31 March 2016 to GBP11.56m at
30 September 2016. Inventory levels were GBP1.81m against GBP1.57m
at 31 March 2016.
The basic earnings per share recorded from overall operations
was 10.25p including a 0.75p contribution from Sicomm (H1 2015:
7.69p).
Strategy Overview
Our business is focused on two important niche markets, the
industrial storage market and the industrial communications market,
where our proprietary IP along with the quality and reliability of
our technology sets us apart from our peers and makes us an
integral part of our customers' products. We have developed a
strong reputation in both of these markets and have a world-class
customer base and an established sales network.
Growth in both markets is ultimately being driven by the
on-going demand for increasing amounts of data to be delivered
faster and stored more reliably and securely. We are committed to
generating a diverse revenue stream across a broad range of
customers and products. We are a single-source supplier to our
customers, meaning that once designed in, the displacement of our
chips would require end-product redesign.
R&D is a key tenet of our growth strategy. Our focus is on
developing products which will lead to design wins with new and
existing customers that we believe have the potential to develop
into long-term, significant revenue generators. We intend to
complement our organic growth with appropriate acquisitions.
Storage
The main element of our strategy within Storage is to ensure
that the Group continues to increase business with our existing
customers whilst simultaneously adding new customers through
R&D investment. Our focus has been on expanding our product
portfolio to include all major interface standards used within our
target industrial end-markets and interoperation with all relevant
third-party Flash Memory devices from the global tier 1 flash
memory suppliers.
We have transitioned from a narrow "Controller" product
portfolio with only CompactFlash as the available interface, to an
enlarged product range that now also includes USB, SD, SATA &
MMC interface technologies.
Through the period, Storage revenue increased by 17% to GBP6.56m
(H1 2015: GBP5.60m). In line with our strategy, in the first half
of the year we added our proprietary hyMap technology to the USB
product range which greatly improves the reliability of
non-industrial class flash memory technology. The flash memory
itself is typically the most expensive component of the solid-state
storage device and, as the capacity of the storage devices
increase, hyMap enables our industrial customers to use memory that
has a lower "cost per bit".
Communications
Our strategy within Communications (previously referred to as
our Wireless and Wireline markets) has been to grow customer share
and expand the customer base through R&D investments that
increase the addressable chip content within the customers' end
product. This includes expanding our product portfolio to include
separate IC's with additional functionality and operation over a
larger Radio Frequency (RF) range capable of addressing wider
bandwidth applications. This significantly expands the size of the
market that can be addressed.
We have progressed well with this strategy in the first half of
the year evidenced by a 22% increase in revenue to GBP6.38m (H1
2015: GBP5.21m) with 15% coming from organic growth. We released
two new products; one which is ideally suited to voice-over IP
(VoIP) applications and digital voice interconnect systems and one
enhanced Analogue Front End (AFE) IC for software defined radio
(SDR) that bridges the gap between digital radio's RF section and
the customers signal progressing circuitry.
In the second half of the year, we are planning to release a new
Flash Memory controller, further hyMap enhancements and three new
Communications products - all in keeping with our strategy for
sustainable growth.
In total, the Group has released nine new products in the last
three years, however it is important to note that first half
revenues are predominantly from products that were released
pre-2013. The more recent products provide us with a pipeline of
additional future revenue, with numerous design wins already having
been secured.
Market Developments
As previously stated, the Group is focused on two industrial
markets which each show solid long-term underlying growth trends.
The overriding factor in both is the incessant demand for
ever-greater amounts of data, to be transmitted and stored more
quickly and securely.
Within the industrial data storage market there are several
specific areas which are going through exciting transitions, and
for which we have secured design wins or are in the process of
developing new products. These areas include the telecoms/network
infrastructure market, industrial automation and the in-vehicle
infotainment market.
A number of the major original equipment manufacturers (OEMs) or
tier 1 suppliers to those OEMs in each of these markets are our
customers meaning we are well positioned to benefit from the
growing demand.
Within the Communications market, the exciting growth areas
include: the transition to higher-capacity digital networks within
voice-centric markets and, in data-centric markets, the increasing
data throughput requirements within terrestrial and satellite
communications applications. The latter is required to meet the
needs of the growing Machine to Machine (M2M) and the Industrial
Internet of Things sectors (IIoT).
Again, we are already suppliers to or working with many of the
leading OEMs in these areas and believe we are well placed for
future growth.
Key customer developments
During the period we were pleased that a substantial amount of
our top 40 current customers increased their business with CML,
predominantly through delivery of our more established
semiconductor products but also through entering the shipping phase
of relatively recent new products. By maintaining a high level of
R&D spend we are constantly ensuring that we stay ahead of
customer demand across our two market sectors. We believe we are in
a strong position and have an increasing number of opportunities at
all stages of our new business pipeline.
Products entering the early ramping phase include our latest USB
controller; with one of the global leaders in flash memory
technology adopting the solution and expected to complete full
qualification in the second half.
For the Communications sector, prior design-wins achieved with
customers for both wireless voice and wireless data products have
commenced volume production and are in the early stages of
growth.
Operational Development
Sicomm acquisition and integration
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 acquisition of Sicomm. This is an important strategic
move targeted to give a long-term benefit. 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, with
excellent cross-selling potential, demonstrates the compelling
nature of this acquisition.
Throughout this year we will continue integrating Sicomm but
this will not detract from pursuing suitable acquisition
opportunities.
New Sales and Marketing structure
Operationally, important investments and enhancements were made
in sales, marketing and engineering support resources to ensure the
Group is positioned appropriately to handle the increasing customer
engagement levels that an expanding product range demands. Our
Americas business is already benefitting from efficiencies that
arise from having dedicated resources allocated to specific sectors
and products. Additionally, our structure is now inherently
scalable to facilitate future growth objectives. In the second half
of the year, we intend to continue enhancing our global operating
structure through the investment in people and practices that will
maximise our opportunities for success.
Outlook
Our strong financial position, with a healthy cash balance,
tangible assets and no borrowings, provides us with the confidence
to continue to invest in the expansion of our business. Trading in
the second half of the year has begun well and we are confident of
a full-year advance in both revenues and profitability.
Chris Gurry
Group Managing Director
21 November 2016
Condensed consolidated income statement
for the six months ended 30 September 2016
Unaudited Unaudited
Audited
6 months end 6 months end Year end
30/09/16 30/09/15 31/03/16
GBP'000 GBP'000 GBP'000
----------------------------------------------------------------------------- ------------ ------------ ---------
Continuing operations
Revenue 13,044 11,003 22,833
----------------------------------------------------------------------------- ------------ ------------ ---------
Consisting of:
Revenue - excluding acquisition 12,642 11,003 22,833
Revenue - acquisition 402 - -
----------------------------------------------------------------------------- ------------ ------------ ---------
Cost of sales (3,733) (3,027) (6,580)
----------------------------------------------------------------------------- ------------ ------------ ---------
Gross profit 9,311 7,976 16,253
Distribution and administration costs (7,805) (6,623) (13,272)
----------------------------------------------------------------------------- ------------ ------------ ---------
1,506 1,353 2,981
Other operating income 487 190 405
----------------------------------------------------------------------------- ------------ ------------ ---------
Profit from operations 1,993 1,543 3,386
Share-based payments (72) (49) (117)
----------------------------------------------------------------------------- ------------ ------------ ---------
Profit after share-based payments 1,921 1,494 3,269
Finance income 17 20 55
----------------------------------------------------------------------------- ------------ ------------ ---------
Profit before taxation 1,938 1,514 3,324
----------------------------------------------------------------------------- ------------ ------------ ---------
Consisting of:
Profit before taxation - excluding acquisition 1,811 1,514 3,324
Profit before taxation - acquisition 127 - -
----------------------------------------------------------------------------- ------------ ------------ ---------
Income tax expense (217) (266) (399)
----------------------------------------------------------------------------- ------------ ------------ ---------
Profit after taxation 1,721 1,248 2,925
----------------------------------------------------------------------------- ------------ ------------ ---------
Profit after taxation for period attributable to equity owners of the parent 1,721 1,248 2,925
----------------------------------------------------------------------------- ------------ ------------ ---------
Basic earnings per share
From operations excluding acquisition 9.50p 7.69p 18.03p
----------------------------------------------------------------------------- ------------ ------------ ---------
From profit for the period 10.25p 7.69p 18.03p
----------------------------------------------------------------------------- ------------ ------------ ---------
Diluted earnings per share
From operations excluding acquisition 9.34p 7.65p 17.94p
----------------------------------------------------------------------------- ------------ ------------ ---------
From profit for the period 10.08p 7.65p 17.94p
----------------------------------------------------------------------------- ------------ ------------ ---------
Adjusted EBITDA* 4,226 3,325 6,970
---------------------------------------- ----- ----- -----
Consisting of:
Adjusted EBITDA - excluding acquisition 3,858 3,325 6,970
Adjusted EBITDA - acquisition 368 - -
---------------------------------------- ----- ----- -----
* See Note 11 for definition and reconciliation
Condensed consolidated statement of total comprehensive
income
for the six months ended 30 September 2016
Unaudited Unaudited Audited
6 months end 6 months end Year end
30/09/16 30/09/15 31/03/16
GBP'000 GBP'000 GBP'000
-------------------------------------------------------------------------------- ------------ ------------ --------
Profit for the period 1,721 1,248 2,925
Other comprehensive income, net of tax:
Items that will not be reclassified subsequently to profit or loss:
Actuarial gain on retirement benefit obligations - - 1,570
Deferred tax movement on actuarial gain - - (283)
-------------------------------------------------------------------------------- ------------ ------------ --------
Items reclassified subsequently to profit or loss upon derecognition:
Foreign exchange differences 946 65 584
-------------------------------------------------------------------------------- ------------ ------------ --------
Other comprehensive income for the period net of taxation attributable to equity
holders of
the parent 946 65 1,871
-------------------------------------------------------------------------------- ------------ ------------ --------
Total comprehensive income for the period attributable to the equity holders of
the parent 2,667 1,313 4,796
-------------------------------------------------------------------------------- ------------ ------------ --------
Condensed consolidated statement of financial position
as at 30 September 2016
Unaudited Unaudited Audited
30/09/16 30/09/15 31/03/16
GBP'000 GBP'000 GBP'000
------------------------------------------------------------------ --------- --------- --------
Assets
Non-current assets
Goodwill 9,181 3,512 3,512
Other intangible assets arising on acquisition 1,382 - -
Property, plant and equipment 5,250 5,146 5,171
Investment properties 3,550 3,550 3,550
Equity investment 84 - -
Development costs 10,846 8,289 9,292
Deferred tax asset 1,158 1,301 893
------------------------------------------------------------------ --------- --------- --------
31,451 21,798 22,418
------------------------------------------------------------------ --------- --------- --------
Current assets
Inventories 1,812 1,779 1,571
Trade receivables and prepayments 3,451 2,525 3,458
Current tax assets 598 767 830
Cash and cash equivalents 11,557 12,263 13,596
------------------------------------------------------------------ --------- --------- --------
17,418 17,334 19,455
------------------------------------------------------------------ --------- --------- --------
Total assets 48,869 39,132 41,873
------------------------------------------------------------------ --------- --------- --------
Liabilities
Current liabilities
Trade and other payables 6,427 3,583 4,190
Current tax liabilities 46 246 39
------------------------------------------------------------------ --------- --------- --------
6,473 3,829 4,229
------------------------------------------------------------------ --------- --------- --------
Non-current liabilities
Deferred tax liabilities 3,516 2,654 3,001
Retirement benefit obligation 2,067 3,624 2,067
------------------------------------------------------------------ --------- --------- --------
5,583 6,278 5,068
------------------------------------------------------------------ --------- --------- --------
Total liabilities 12,056 10,107 9,297
------------------------------------------------------------------ --------- --------- --------
Net assets 36,813 29,025 32,576
------------------------------------------------------------------ --------- --------- --------
Capital and reserves attributable to equity owners of the parent
Share capital 851 813 813
Share premium 8,294 5,700 5,700
Treasury shares - own share reserve (190) (190) (190)
Share-based payments reserve 456 336 388
Foreign exchange reserve 1,264 (201) 318
Accumulated profits 26,138 22,567 25,547
------------------------------------------------------------------ --------- --------- --------
Total shareholders' equity 36,813 29,025 32,576
------------------------------------------------------------------ --------- --------- --------
Condensed consolidated cash flow statement
for the six months ended 30 September 2016
Unaudited Unaudited Audited
6 months end 6 months end Year end
30/09/16 30/09/15 31/03/16
GBP'000 GBP'000 GBP'000
------------------------------------------------------ ------------ ------------ --------
Operating activities
Net profit for the period before taxation 1,938 1,514 3,324
Adjustments for:
Depreciation 358 121 254
Amortisation of development costs 1,849 1,661 3,330
Amortisation of intangibles recognised on acquisition 26 - -
Movement in pension net costs - - 13
Share-based payments 72 49 117
Finance income (17) (20) (55)
Movement in working capital 2,002 435 317
------------------------------------------------------ ------------ ------------ --------
Cash flows from operating activities 6,228 3,760 7,300
Income tax received/(paid) 367 (174) 279
------------------------------------------------------ ------------ ------------ --------
Net cash flows from operating activities 6,595 3,586 7,579
------------------------------------------------------ ------------ ------------ --------
Investing activities
Purchase of acquisition, net of cash acquired (3,576) - -
Purchase of property, plant and equipment (413) (290) (443)
Investment in development costs (2,900) (2,905) (5,356)
Receipt /(payment) of escrow cash deposit 385 - (331)
Finance income 17 20 55
------------------------------------------------------ ------------ ------------ --------
Net cash flows from investing activities (6,487) (3,175) (6,075)
------------------------------------------------------ ------------ ------------ --------
Financing activities
Purchase of treasury shares - (190) (190)
Dividend paid to Group shareholders (1,134) (1,118) (1,118)
------------------------------------------------------ ------------ ------------ --------
Net cash flows from financing activities (1,134) (1,308) (1,308)
------------------------------------------------------ ------------ ------------ --------
(Decrease)/increase in cash and cash equivalents (1,026) (897) 196
------------------------------------------------------ ------------ ------------ --------
Movement in cash and cash equivalents:
At start of period/year 13,596 13,188 13,188
(Decrease)/increase in cash and cash equivalents (1,026) (897) 196
Effects of exchange rate changes (1,013) (28) 212
At end of period 11,557 12,263 13,596
------------------------------------------------------ ------------ ------------ --------
During the six month period ending 30 September 2016, 774,181
shares in CML Microsystems Plc were issued in part consideration
for the acquisition of Sicomm equity to the value of GBP2,632,000
(see note 8). As a significant non-cash transaction this is not
reflected in the above consolidated cash flow statement.
Condensed consolidated statement of changes in equity
for the six months ended 30 September 2016
Foreign
Share Share Treasury Share-based exchange Accumulated
capital premium shares payments reserve profits Total
Unaudited GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- ------- ------- -------- ----------- ---------- -------------- -------
At 31 March 2015 813 5,700 - 287 (266) 22,437 28,971
---------------------------------------- ------- ------- -------- ----------- ---------- -------------- -------
Profit for period 1,248 1,248
Other comprehensive income net of taxes:
Foreign exchange differences 65 65
---------------------------------------- ------- ------- -------- ----------- ---------- -------------- -------
Total comprehensive income for the
period - - - - 65 1,248 1,313
---------------------------------------- ------- ------- -------- ----------- ---------- -------------- -------
Transactions with owners in their
capacity as owners
Dividend paid (1,118) (1,118)
Purchase of treasury shares (190) (190)
---------------------------------------- ------- ------- -------- ----------- ---------- -------------- -------
Total of transactions with owners in
their capacity as owners - - (190) - - (1,118) (1,308)
---------------------------------------- ------- ------- -------- ----------- ---------- -------------- -------
Share-based payments 49 49
---------------------------------------- ------- ------- -------- ----------- ---------- -------------- -------
At 30 September 2015 813 5,700 (190) 336 (201) 22,567 29,025
---------------------------------------- ------- ------- -------- ----------- ---------- -------------- -------
Profit for period 1,677 1,677
Other comprehensive income net of taxes:
Foreign exchange differences 519 519
Actuarial gain on retirement benefit
obligation 1,570 1,570
Deferred tax movement on actuarial gain (283) (283)
---------------------------------------- ------- ------- -------- ----------- ---------- -------------- -------
Total comprehensive income for the
period - - - - 519 2,964 3,483
---------------------------------------- ------- ------- -------- ----------- ---------- -------------- -------
Transactions with owners in their
capacity as owners
Issue of ordinary shares - - -
---------------------------------------- ------- ------- -------- ----------- ---------- -------------- -------
Total of transactions with owners in
their capacity as owners - - - - - - -
---------------------------------------- ------- ------- -------- ----------- ---------- -------------- -------
Share-based payments 68 68
Cancellation/transfer of share-based
payments (16) 16 -
---------------------------------------- ------- ------- -------- ----------- ---------- -------------- -------
At 31 March 2016 813 5,700 (190) 388 318 25,547 32,576
---------------------------------------- ------- ------- -------- ----------- ---------- -------------- -------
Profit for period 1,721 1,721
Other comprehensive income net of taxes:
Foreign exchange differences 946 946
Total comprehensive income for the
period - - - - 946 1,721 2,667
---------------------------------------- ------- ------- -------- ----------- ---------- -------------- -------
Transactions with owners in their
capacity as owners
Dividend paid (1,134) (1,134)
Issue of ordinary shares 38 2,594 2,632
---------------------------------------- ------- ------- -------- ----------- ---------- -------------- -------
Total of transactions with owners in
their capacity as owners 38 2,594 - - - (1,134) 1,498
---------------------------------------- ------- ------- -------- ----------- ---------- -------------- -------
Share-based payments 72 72
Cancellation/transfer of share-based
payments (4) 4 -
---------------------------------------- ------- ------- -------- ----------- ---------- -------------- -------
At 30 September 2016 851 8,294 (190) 456 1,264 26,138 36,813
---------------------------------------- ------- ------- -------- ----------- ---------- -------------- -------
Notes to the condensed consolidated financial statements
for the six months ended 30 September 2016
1 Segmental analysis
Information about revenue, profit/loss, assets and
liabilities
Unaudited Unaudited Audited
6 months end 6 months end year end
30/09/16 30/09/15 31/03/16
------------------- ------------------- --------------------
Semi- Semi- Semi-
conductor conductor conductor
components Group components Group components Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ ---------- ------- ---------- ------- ---------- --------
Revenue
By origin 20,537 20,537 17,423 17,423 35,924 35,924
Inter-segmental revenue (7,493) (7,493) (6,420) (6,420) (13,091) (13,091)
------------------------------------------ ---------- ------- ---------- ------- ---------- --------
Total segmental revenue 13,044 13,044 11,003 11,003 22,833 22,833
------------------------------------------ ---------- ------- ---------- ------- ---------- --------
Consisting of:
Segmental revenue - excluding acquisition 12,642 12,642 11,033 11,033 22,833 22,833
Segment revenue - acquisition 402 402 - - - -
------------------------------------------ ---------- ------- ---------- ------- ---------- --------
Profit/(loss)
Segmental result 1,921 1,921 1,494 1,494 3,269 3,269
------------------------------------------ ---------- ------- ---------- ------- ---------- --------
Consisting of:
Segmental result - excluding acquisiiton 1,794 1,794 1,494 1,494 3,269 3,269
Segment result - acquisition 127 127 - - - -
------------------------------------------ ---------- ------- ---------- ------- ---------- --------
Finance income 17 20 55
Income tax expense (217) (266) (399)
------- ------- --------
Profit after taxation 1,721 1,248 2,925
------- ------- --------
Assets and liabilities
Segmental assets 43,563 43,563 33,514 33,514 36,600 36,600
------------------------------------------ ---------- ---------- ----------
Unallocated corporate assets
Investment properties 3,550 3,550 3,550
Deferred tax assets 1,158 1,301 893
Current tax assets 598 767 830
------- ------- --------
Consolidated total assets 48,869 39,132 41,873
------- ------- --------
Segmental liabilities 6,427 6,427 3,583 3,583 4,190 4,190
------------------------------------------ ---------- ---------- ----------
Unallocated corporate liabilities
Deferred tax liabilities 3,516 2,654 3,001
Current tax liabilities 46 246 39
Retirement benefit obligation 2,067 3,624 2,067
------- ------- --------
Consolidated total liabilities 12,056 10,107 9,297
------- ------- --------
Other segmental information
Property, plant and equipment additions 413 413 290 290 443 443
------------------------------------------ ---------- ------- ---------- ------- ---------- --------
Development cost additions 2,900 2,900 2,905 2,905 5,356 5,356
------------------------------------------ ---------- ------- ---------- ------- ---------- --------
Depreciation 358 358 121 121 254 254
------------------------------------------ ---------- ------- ---------- ------- ---------- --------
Amortisation of development costs 1,849 1,849 1,661 1,661 3,330 3,330
------------------------------------------ ---------- ------- ---------- ------- ---------- --------
Geographical segments
The acquired Sicomm Group of Companies are included within the
'Far East' classification below.
UK Rest of Europe Americas Far East Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------- ------- -------------- -------- -------- --------
Unaudited
Six months ended 30 September 2016
Revenue by origin 6,223 6,481 2,878 4,955 20,537
Inter-segmental revenue (3,443) (4,050) - - (7,493)
----------------------------------------------- ------- -------------- -------- -------- --------
Revenue to third parties 2,780 2,431 2,878 4,955 13,044
----------------------------------------------- ------- -------------- -------- -------- --------
Property, plant and equipment 5,043 189 12 6 5,250
----------------------------------------------- ------- -------------- -------- -------- --------
Investment properties 3,550 - - - 3,550
----------------------------------------------- ------- -------------- -------- -------- --------
Development costs 3,487 7,359 - - 10,846
----------------------------------------------- ------- -------------- -------- -------- --------
Goodwill - 3,512 - 5,669 9,181
----------------------------------------------- ------- -------------- -------- -------- --------
Other intangible assets arising on acquisition - - - 1,382 1,382
----------------------------------------------- ------- -------------- -------- -------- --------
Total assets 32,741 12,300 1,602 2,226 48,869
----------------------------------------------- ------- -------------- -------- -------- --------
Unaudited
Six months ended 30 September 2015
Revenue by origin 5,101 5,577 2,562 4,183 17,423
----------------------------------------------- ------- -------------- -------- -------- --------
Inter-segmental revenue (2,518) (3,902) - - (6,420)
----------------------------------------------- ------- -------------- -------- -------- --------
Revenue to third parties 2,583 1,675 2,562 4,183 11,003
----------------------------------------------- ------- -------------- -------- -------- --------
Property, plant and equipment 5,022 97 11 16 5,146
----------------------------------------------- ------- -------------- -------- -------- --------
Investment properties 3,550 - - - 3,550
----------------------------------------------- ------- -------------- -------- -------- --------
Development costs 2,906 5,383 - - 8,289
----------------------------------------------- ------- -------------- -------- -------- --------
Goodwill - 3,512 - - 3,512
----------------------------------------------- ------- -------------- -------- -------- --------
Other intangible assets arising on acquisition - - - - -
----------------------------------------------- ------- -------------- -------- -------- --------
Total assets 25,538 10,162 1,325 2,107 39,132
----------------------------------------------- ------- -------------- -------- -------- --------
Audited
Year ended 31 March 2016
Revenue by origin 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
----------------------------------------------- ------- -------------- -------- -------- --------
Other intangible assets arising on acquisition - - - - -
----------------------------------------------- ------- -------------- -------- -------- --------
Total assets 28,281 10,100 1,412 2,080 41,873
----------------------------------------------- ------- -------------- -------- -------- --------
Segmental reporting is, in accordance with IFRS 8, based on
internal management reporting information that is regularly
reviewed by the chief operating decision maker. The measurement
policies the Group uses for segmental reporting under IFRS 8 are
the same as those used in its full year financial statements.
Revenue
The geographical classification of business turnover (by
destination) is as follows:
Unaudited Unaudited Audited
6 months end 6 months end Year end
30/09/16 30/09/15 31/03/16
GBP'000 GBP'000 GBP'000
--------------- ------------ ------------ --------
United Kingdom 366 495 950
Rest of Europe 3,350 2,379 5,621
Far East 6,110 5,205 10,704
Americas 2,930 2,745 5,122
Other 288 179 436
--------------- ------------ ------------ --------
13,044 11,003 22,833
--------------- ------------ ------------ --------
2 Dividend paid and proposed
A dividend of 7.0p per 5p ordinary share in respect of the year
ended 31 March 2016 was paid on 29 July 2016 (2015: 6.9p per 5p
ordinary share in respect of the year ended 31 March 2015). No
dividend is proposed in respect of the six months period ended 30
September 2016 (2015: GBPNil per 5p ordinary share in respect of
the period ended 30 September 2015).
3 Income tax expense
Unaudited Unaudited Audited
6 months end 6 months end Year end
30/09/16 30/09/15 31/03/16
GBP'000 GBP'000 GBP'000
---------------------------------- ------------ ------------ --------
UK income tax credit (167) (167) (501)
Overseas income tax charge 268 283 431
---------------------------------- ------------ ------------ --------
Total current tax charge/(credit) 101 116 (70)
Deferred tax charge 116 150 469
---------------------------------- ------------ ------------ --------
Reported income tax expense 217 266 399
---------------------------------- ------------ ------------ --------
The Directors consider that tax will be payable at varying rates
according to the country of incorporation of its subsidiary
undertakings and have provided on that basis.
4 Earnings per share
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 2016 16,787,173 17,066,490
----------------------------------- ---------- ----------
Six months ended 30 September 2015 16,219,037 16,295,008
----------------------------------- ---------- ----------
Year ended 31 March 2016 16,219,037 16,305,914
----------------------------------- ---------- ----------
On 10 June 2015, the Company purchased 50,000 ordinary shares of
5p each in the Company at a price of 376.5p per ordinary share.
These shares are held in treasury and are excluded from the
denominators listed above for the purposes of earnings per share
calculations.
5 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. At 31 March 2015 the investment properties were
professionally valued by Everett Newlyn, Chartered Surveyors and
Commercial Property Consultants, on an open market basis.
6 Analysis of changes in net cash
6 months 6 months
Net cash at end Net cash at end Net cash at 6 months end 6 months end
01/04/15 30/09/15 30/09/15 31/03/2016 31/03/16 30/09/16 30/09/16 Net cash at
Cash flow Cash flow Cash flow Acquisition 30/09/16
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------ ----------- ----------- ----------- ----------- ----------- ------------ ------------ -----------
Cash and
cash
equivalents 13,188 (925) 12,263 1,333 13,596 1,537 (3,576) 11,557
13,188 (925) 12,263 1,333 13,596 1,537 (3,576) 11,557
------------ ----------- ----------- ----------- ----------- ----------- ------------ ------------ -----------
The cash flow above is a combination of the actual cash flow and
the exchange movement.
7 Retirement benefit obligations
The Directors have not obtained an actuarial IAS19 Employee
Benefits report in respect of the defined benefit pension scheme
for the purpose of this Half Yearly Report.
8 Acquisition of Sicomm
Following the definitive agreement to acquire all its shares
announced on 27 May 2016, and having satisfied the principal
regulatory conditions and other transaction closing conditions, the
Group took control of the China--based Wuxi Sicomm Technologies Ltd
("Sicomm") and affiliated companies on 3 August 2016. The total
consideration was $11.05m (GBP8.01m), payable in cash and in shares
(see below). The 774,181 new shares were also admitted for trading
by the London Stock Exchange in August 2016. The majority of the
shares are subject to specific lock--in restrictions over a three
year period and were provided under existing AGM resolution
approval.
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 focuses 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.
For the above reasons, combined with the anticipated
profitability of Sicomm products in other Group markets, synergies
to arise from integrating the Sicomm business into existing Group
businesses, plus the ability to hire the workforce of the Sicomm
group of companies (including the founder and management team), the
Group paid a premium over the acquisition net assets, giving rise
to goodwill. All intangible assets in accordance with IFRS3
Business Combinations were recognised at their provisional fair
values on the date of acquisition, with the residual excess over
net assets being recognised as goodwill. Intangibles arising from
the acquisition consist of brand values, customer relationships and
intellectual property and have been independently valued by
professional advisors.
The following table summarises the consideration and provisional
fair values of assets acquired and liabilities assumed at the date
of acquisition:
GBP'000
---------------------------------- -------
Property, plant and equipment 20
Long term equity investment 84
Intangible fixed assets:
Brands 96
Customer relationships 934
Intellectual property 402
Deferred tax assets 191
Inventories 212
Trade receivables and prepayments 128
Cash and cash equivalents 1,456
Trade and other payables (1,028)
Deferred tax liabilities (154)
----------------------------------- -------
Net assets acquired 2,341
----------------------------------- -------
Goodwill 5,669
----------------------------------- -------
Acquisition cost 8,010
----------------------------------- -------
There are no non-controlling interests in relation to the Sicomm
acquisition. Fair values in the above table have only been
determined provisionally and may be subject to change in the light
of any subsequent new information becoming available in time. The
review of the fair value of assets and liabilities acquired will be
completed within 12 months of the acquisition date.
The acquisition cost satisfied by:
GBP'000
---------------------- ----------------
Cash 5,378
Share consideration 2,632
---------------------- ---------------
Total consideration 8,010
---------------------- ---------------
Net cash outflow arising on acquisition:
GBP'000
------------------------------ --- ----------
Cash consideration paid
(less cash retention) 5,032
Cash returned under escrow
due diligence deposit (385)
Acquisition related costs 277
Cash and cash equivalents
within the Sicomm business
on acquisition (1,456)
------------------------------ --------
Total net cash outflow
on acquisition 3,468
------------------------------ --------
The cash consideration excludes a GBP346,000 (RMB3m) retention
which is included in Other Payables. Other costs relating to the
acquisition have not been included in the consideration cost.
Directly attributable acquisition costs include external legal and
accounting costs incurred in compiling the acquisition legal
contracts and the performance of due diligence activity and amount
to GBP277,000. These costs have been charged in distribution and
administrative expenses in the consolidated income statement.
Sicomm, in common with other Chinese companies, has a 31
December calendar year end. In the two months to 30 September 2016
Sicomm contributed revenue of GBP402,000 and net profit before
taxation of GBP127,000. Had the acquisition taken place from the
start of the Group's financial year (from 1 April 2016), management
estimate that Sicomm would have contributed revenue of GBP959,000
and net profit before taxation of GBP211,000 at the half year to
the Group results.
9 Principal risks and uncertainties
Key risks of a financial nature
The principal risks and uncertainties facing the Group are with
foreign currencies and customer dependency. With the majority of
the Group's earnings being linked to the US Dollar, a decline in
this currency would 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 Group customers can represent a significant amount of
revenue, though their end-customers may be a diversified portfolio.
Key customer relationships are closely monitored; however changes
in buying patterns of a key customer could have an adverse effect
on the Group's performance.
Key risks of a non-financial nature
The Group is a small player operating in a highly-competitive
global market, which is undergoing continual 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.
10 Directors' statement pursuant to the Disclosure and
Transparency Rules
The Directors confirm that, to the best of their knowledge:
a) the condensed financial statements, prepared in accordance
with IFRS as adopted by the EU give a true and fair view of the
assets, liabilities, financial position and profit of the Group and
the undertakings included in the consolidation taken as a whole;
and
b) the condensed set of financial statements have been prepared
in accordance with IAS 34 Interim Financial Reporting; and
c) the Chairman's statement and Group Managing Director's
statement and operational and financial review include a fair
review of the development and performance of the business and the
position of the Company and the undertakings included in the
consolidation taken as a whole together with a description of the
principal risks and uncertainties that they face.
The Directors are also responsible for the maintenance and
integrity of the CML Microsystems Plc website. Legislation in the
UK governing the preparation and dissemination of the financial
statements may differ from legislation in other jurisdictions.
11 Basis of preparation
The basis of preparation and accounting policies used in
preparation of the Half Yearly Financial Report are the same
accounting policies set out in the year ended 31 March 2016
financial statements, with the exception of the additional
accounting policy item and presentation:
Externally acquired intangibles
Externally acquired intangible assets have been recognised in
accordance with the provisions of IFRS3 Business Combinations in
relation to the acquisition of Sicomm (note 8). These acquired
intangibles have been amortised in accordance with the
following:
o Brand 10 years from date of acquisition
o Customer relationships 9 years from date of acquisition
o Intellectual property 10 years from date of acquisition
Amortisation of the above acquired intangibles assets is
recognised on consolidation and reported in distribution and
administration costs in the consolidated income statement.
Adjusted EBITDA
Adjusted earnings before interest, tax, depreciation and
amortisation ('Adjusted EBITDA') is defined as profit from
operations before all interest, tax, depreciation and amortisation
charges and before share-based payments. The following is a
reconciliation of the Adjusted EBITDA for the three periods
presented:
Unaudited Unaudited Audited
6 months end 6 months end Year end
30/09/16 30/09/15 31/03/16
GBP'000 GBP'000 GBP'000
------------------------------------------------------ ------------ ------------ --------
Profit after taxation (Earnings) 1,721 1,248 2,925
Adjustments for:
Finance income (17) (20) (55)
Income tax expense 217 266 399
Depreciation 358 121 254
Amortisation of development costs 1,849 1,661 3,330
Amortisation of intangibles recognised on acquisition 26 - -
Share-based payments 72 49 117
Adjusted EBITDA 4,226 3,325 6,970
------------------------------------------------------ ------------ ------------ --------
12 General
Other than already stated within the Chairman's statement and
Group Managing Director's statement and 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
Financial Report.
There have been no related party transactions or changes in
related party transactions described in the latest Annual Report
that could have a material effect on the financial position or
performance of the Group in the first six months of the financial
year.
The principal risks and uncertainties within the business are
contained within this report in note 9 above.
In the segmental analysis (note 1) inter-segmental transfers or
transactions are entered into under commercial terms and conditions
appropriate to the location of the entity whilst considering that
the parties are related.
This Half Yearly Financial Report includes a fair review of the
information required by DTR 4.2.7/8 (indication of important events
and their impact, and description of principal risks and
uncertainties for the remaining six months of the financial
year).
This Half Yearly Financial Report does not include all the
information and disclosures required in the Annual Report, and
should be read in conjunction with the consolidated Annual Report
for the year ended 31 March 2016.
The financial information contained in this Half Yearly
Financial Report has been prepared using International Financial
Reporting Standards as adopted by the European Union. This Half
Yearly Financial 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 2016 is based on the
statutory accounts for the financial year ended 31 March 2016 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 Financial Report has not been audited or reviewed
by the Group Auditor.
A copy of this Half Yearly Financial Report can be viewed on the
Company website www.cmlmicroplc.com.
13 Approvals
The Directors approved this Half Yearly Report on 21 November
2016.
Glossary
ATA an advanced technology attachment
DTR Disclosure and Transparency Rules
EU European Union
IAS International Accounting Standard
IC integrated circuit
IIoT Industrial Internet of Things
IFRS International Financial Reporting Standards
IP intellectual property
M2M machine--to--machine
MMC multimedia card
OEM original equipment manufacturer
R&D research and development
RF radio frequency
SATA serial ATA interface
SD secure digital
SDR software defined radio
USB universal serial bus
VoIP Voice-over Internet Protocol
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BSBDBBDDBGLB
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November 22, 2016 02:00 ET (07:00 GMT)
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