TIDMCML
RNS Number : 3095P
CML Microsystems PLC
09 June 2020
9 June 2020
CML Microsystems Plc
("CML" or the "Group")
Full Year Results
CML Microsystems Plc, which designs, manufactures and markets
semiconductors, primarily for global communication and solid state
storage markets, announces its Full Year Results for the year ended
31 March 2020.
Financial Highlights
-- Group revenues of GBP26.42m (2019: GBP28.14m)
-- Gross profit GBP19.57m (2019: GBP20.25m)
-- Profit before tax GBP1.37m (2019: GBP2.98m)
-- Basic EPS 8.98p (2019: 15.77p)
-- Net cash of GBP8.48m (31 March 2019: GBP12.81m) reflecting
record R&D investment, the acquisition of PRFI and two dividend
payments totaling GBP1.33m
-- Recommended final dividend of 2.0p equates to 4.0p for the
year (2019: 7.8p), reflects prudence in light of COVID-19
environment
Operational Highlights
-- Communications 57% of Group revenue (2019: 54%)
o Revenue GBP15.0m (2019: GBP15.2m)
o Solid gains in USA and Europe did not offset fall in Far
East
o Five new products released, including first Raspberry Pi
platform
o Market continues to exhibit a number of growth areas
-- Storage 43% of Group revenue (2019: 46%)
o Revenue GBP11.4m (2019: GBP12.9m)
o Sales in H2 up 12% on first half
o Three new products released
o M ass production availability of X1 SATA3 Controller IC
-- Acquisition of Plextek RFI Ltd
o Complements organic growth plans, adds new independent
services and consulting income stream
-- Record R&D investment of GBP8.46m (2018: GBP8.24m)
Chris Gurry, Group Managing Director of CML Microsystems
commented on the results :
" There is no hiding from the fact that the year under review
has been difficult, and the current environment is delaying
realisation of the benefits to come from the hard work taking place
behind the scenes.
The current financial year did commence with a healthier order
book than the prior year, although it remains to be seen how this
translates to actual market consumption as there may be an element
attributable to COVID-19 related supply concerns amongst the
customer base.
Nevertheless, following the operational adjustments made across
the prior year, the business is tuned to react swiftly to a revival
in demand and the Board remain convinced that a return to growth
will be secured as conditions improve. "
CML Microsystems Plc www.cmlmicroplc.com
Chris Gurry, Group Managing Tel: +44(0)1621 875 500
Director Tel: +44(0)1621 875 500
Nigel Clark,
Group Non-Exec Chairman and
Financial Director
Shore Capital Tel: +44(0)20 7408 4090
Edward Mansfield
James Thomas
SP Angel Corporate Finance Tel: +44(0)20 3463 2260
LLP
Jeff Keating
Alma PR
Josh Royston Tel: +44 (0)20 3405 0206
Caroline Forde
About CML Microsystems PLC
CML designs and develops semiconductors for the industrial
storage and communications markets. The Group has trading
operations in Europe, the Far East and USA. CML targets niche
markets with strong growth profiles and high barriers to entry. It
has secured a diverse, blue chip customer base, including some of
the world's leading telecoms equipment providers and industrial
product manufacturers.
The spread of its customers and products largely protects the
business from the cyclicality usually associated with the
semiconductor industry. Growth in its end markets is being driven
by factors such as the ever increasing trend towards solid state
storage devices in the commercial and industrial sectors, the
upgrading of telecoms infrastructure around the world and the
growing prevalence of private commercial communications networks
for voice and/or data communications linked to the industrial
internet of things (IIoT).
The Group is cash-generative, has a net cash position and is
dividend paying.
CHAIRMAN'S STATEMENT
Introduction
As I look back over the year, I take pride in the resilience of
the Group; its people, operational structure and balance sheet
strength. We entered the year faced with the ongoing market-wide
challenges of extended raw material supply times and the US/China
trade war, and we closed the year facing the unprecedented
challenge presented by COVID-19. However, against this backdrop,
the Group has delivered a year of stabilisation. While COVID-19 may
impact a return to growth in the short term, the depth and quality
of our product portfolio, the breadth of our customer base and the
strength of our extended sales operation mean the long-term
opportunity for the Company is undiminished.
Results and dividend
Revenues for the year fell by 6.1% to GBP26.42m (2019:
GBP28.14m). With costs of GBP0.7m relating to M&A activities
and restructuring announced in November 2019, profit before
taxation fell by 54% to GBP1.37m (2019: GBP2.98m) and basic EPS by
43% to 8.98p (2019: 15.77p). Net cash at the year end was GBP8.48m,
a drop of GBP4.33m (2019:GBP12.81m), reflecting record R&D
investment, the acquisition of PRFI and two dividend payments
totalling GBP1.33m.
The Group continues to benefit from a strong balance sheet with
a healthy net cash position and operating cash generation. The
Board remains committed to its dividend policy of being progressive
in line with revenues and profitability. Despite the ongoing
uncertainty caused by the COVID-19 pandemic, the Board is confident
in the Group's ability to continue to generate cash underpinned by
a robust balance sheet. As such, the Board has recommended a final
dividend of 2.0p per ordinary 5p share, equating to a total for the
year of 4.0p (2019: 7.8p). If approved, this will be paid on 7
August 2020 to shareholders whose names appear on the register at
close of business 24 July 2020.
Strengthened operational structure
This has been a year of significant strategic activity across
the Group, to ensure our resources and capabilities are closely
aligned with our ambitions. This activity has resulted in global
operational changes that will improve our effectiveness and
efficiency as we enter the next financial year and help accelerate
delivery of the business strategy. The acquisition of
Cambridge-based specialist design house, Plextek RFI Ltd (" PRFI"),
in March 2020 was another important element of this activity,
complementing our plans for expansion within the Communications
markets.
COVID-19
Our primary focus since January has been the welfare of our
teams around the world in the face of the COVID-19 pandemic. We
have closed locations in a timely manner as government legislation
has required us to do so, and only maintained production activity
where it has been deemed possible to achieve within government
safety guidelines. At this time, our China operations based in Wuxi
and Shanghai are once again fully operational, in line with all
relevant government safeguarding legislation. Travel restrictions
within China are gradually being lifted. We have maintained a
reduced production team at our UK operations, with all office-based
staff working remotely. We have had no requirement to furlough any
staff. Supply chain disruptions to date are minimal and of a
short-term nature.
Given the nature of the professional markets in which we
operate, we anticipate our end customers being insulated from a
consumer downturn to some extent, although the roll-out of some new
products may be delayed, dampening demand for our semiconductors.
Our current order book is strong, however it is not yet clear as to
whether this will be a long-term trend or reflects a precautionary
increase in inventory by our customers.
Employees
The positive response by our teams to the changes we have been
required to implement to our working practices has been very
supportive. Once again, the CML teams across the world have proven
their resilience and dedication, for which we, the Board, are
extremely grateful. They have continued to work tirelessly under
difficult circumstances and their dedication both to CML and our
customers has not waivered. While many of us have not been able to
meet our new colleagues from PRFI face to face, they have
integrated well and we have enjoyed welcoming them into the Group.
As we continue to face the challenges of COVID-19, we do so with
the support of a dedicated, talented team around the world.
Our Company has a rich culture having been in operation for over
50 years, which runs through all of our operations and with a
combined sense of purpose is evident in every facet of our
business.
The Board
As announced in November 2019, our CFO Neil Pritchard resigned
to pursue other business opportunities and the Board would like to
thank him for his service to the Company. Having previously held
the position of Group CFO, I re-assumed the role on an interim
basis until such time as we are able to commence a full recruitment
process, which at this stage we anticipate will be in the second
half of the current financial year. In the meantime, I have stepped
off the Audit Committee until such time as a replacement CFO has
been recruited.
Prospects and outlook
Clearly these are difficult times with a global pandemic,
geo-political trade issues and Brexit looming but, as a Board, even
in these difficult times, we still maintain the belief that the
Group is well placed to move positively forward in the medium to
long term. This belief is underpinned by a strong balance sheet and
no debt, coupled with a sound product portfolio that addresses
markets that have a positive outlook. The strategy in place, when
eventually these current global uncertainties and negative
influences subside, should mean, we are well placed to return a
meaningful uplift in the Group's performance.
Nigel Clark
Group Non-Executive Chairman
OPERATIONAL AND FINANCIAL REVIEW
Introduction
As we entered into the 2019/2020 financial year our strong
belief was that it would prove to be a year of stabilisation,
following previous periods of inventory correction, raw material
constraints and political headwinds. I'm pleased to report that
despite the highly challenging conditions, including the COVID-19
pandemic, this has proved to be the case. The first half of the
financial year confirmed our view that there was no further
deterioration in our end markets with sequential six-monthly order
bookings a little ahead. A shortening of the timescale between
customer order placement and requested delivery date was also
evidenced, which is another good indicator for our business.
Following the interim results announcement in November 2019,
order intake was improving before the outbreak of the coronavirus
hampered this progress as companies, firstly in China and then
globally, initiated their business continuity processes.
Nevertheless, overall revenues for the second half were similar to
those of the first half.
During the course of the year we have continually assessed the
resources and capabilities within CML to ensure that they are
aligned with the direction of travel for our business and a number
of operational changes have been made which will improve our
effectiveness and efficiency. These follow the investments made in
previous periods to broaden and augment our sales reach, which have
improved our pipeline of opportunities. In tandem with this, in
March we acquired Plextek RFI Ltd ("PRFI") a UK based design house
specialising in the design and development of RF, Microwave and
Millimetre-wave (mm-wave) ICs and modules. PRFI's design expertise
expands upon the Group's existing skills and provides a new
independent services and consulting income stream for CML. Most of
the costs associated with these operational changes and corporate
activities have been recognised in this year under review, which
impacted pre-tax profits for the year.
Financial review
Total revenues for the year fell by 6.1% to GBP26.42m (2019:
GBP28.14m) including a small one month contribution (GBP0.06m) from
the acquisition of PRFI Limited during March 2019. At the gross
profit level, an improved margin helped reduce the decline to just
over 3%, delivering a gross profit of GBP19.57m (2019:
GBP20.25m).
Geographically, the Far East region was the single largest
contributor to the overall drop in sales, delivering a reduction of
GBP2.17m (16%) and exceeding the overall Group revenue drop of
GBP1.72m. The remaining regions either grew or were robust by
comparison. The Far East accounted for 50% of Group revenues with
sales into Europe, the Americas and Others representing 30%, 19%
and 1% of Group revenues respectively.
Distribution and administration costs increased to GBP18.75m
(2019: GBP18.07m) driven by abnormal costs of GBP0.7m and higher
R&D amortisation charges. These abnormal costs result from a
combination of M&A activities, one of which resulted in the
acquisition of PRFI Ltd, along with global restructuring expenses
that were incurred following completion of an assessment of the
Group's resources and capabilities, first communicated to the
market in November 2019.
Total R&D spend for the year rose slightly to GBP8.46m
(2019: GBP8.24m) with associated amortisation of development costs
climbing GBP0.56m to GBP5.71m (2019: GBP5.15m).
The Group operated a tight cost control policy throughout the
year under review and aside from non-recurring expenses and the
increased R&D spend, underlying costs were relatively
stable.
The Group recorded a small loss of GBP0.05m from foreign
currency exchange compared to a gain of GBP0.26m in the prior year
although continues to have a somewhat natural hedge at the gross
profit line in respect of foreign currency exposure, given that the
majority of both revenues and raw material costs are US Dollar
denominated.
Other operating income for the year amounted to GBP0.69m (2019:
GBP0.64m) and was a result of rental income obtained from
ex-operational property assets, grant income received from R&D
activities and an element of profit on third-party product
re-sales.
Profit from operations fell by 44% to GBP1.50m (2019:
GBP2.81m).
After adjusting for the combined effects of share-based payments
and finance income, a profit before taxation figure of GBP1.37m was
achieved (2019: GBP2.98m) which included a small loss of GBP0.02m
from newly acquired PRFI Ltd.
An income tax credit of GBP0.16m was recorded for the year
against a charge of GBP0.29m in the preceding year reflecting lower
profitability for the year and the ongoing benefit of UK R&D
tax credits. Profit after tax was GBP1.54m (2019: GBP2.69m).
The Group, along with many other companies under IFRS GAAP,
adopted the new leasing standard (IFRS 16) with effect from 1 April
2019. The overall effect has been to record operating leases (such
as property, vehicle and office equipment rentals etc.) as an asset
on the balance sheet as if those items had been purchased, with the
corresponding lease payments recognised as a liability. The net
result of these changes is negligible. Rentals are now replaced by
depreciation and interest which has had little impact on net
profitability, but the EBITDA calculation shows the depreciation
for these 'right-of-use' assets as an additional add-back
adjustment of GBP0.46m for the period. Adjusted EBITDA was GBP8.28m
(2019: GBP8.75m) and assisted by an improved tax rate, the basic
earnings per share figure recorded was 8.98p (2019: 15.77p).
Cash management across the Group remained an important focus
area throughout the year. Net cash reserves at 31 March 2019 stood
at GBP8.48m (31 March 2019: GBP12.81m) following record R&D
investment, the acquisition of PRFI and two dividend payments
totalling GBP1.33m; being the final payment for the FY19 financial
year (GBP0.99m) and an interim payment in respect of FY20
(GBP0.34m).
Overall inventory levels at the financial year end were 17%
lower than the beginning of the year at GBP2.39m (2019: GBP2.88m)
with finished goods stocks in particular at very low levels. The
policy that the Group had in place to mitigate certain supply chain
difficulties helped react promptly to the improving order intake
that was seen as we entered the current calendar year
The pension deficit associated with the Group's historic final
salary scheme, as calculated under IAS 19, increased to GBP4.70m
(2019: GBP3.55m). The assets of the scheme fell to GBP19.18m (2019:
GBP20.63m) with the present value of funded obligations reducing to
GBP23.87m (2019: GBP24.18m). The main reasons for the increased
deficit in the IAS 19 accounting position relate to (i) changes in
the assumptions in using a lower discount rate due to the fall in
corporate bond yields at the period end; and (ii) the Scheme's
investments return was lower than the IAS 19 mandated increase in
the obligation over the year.
Separately from the IAS 19 calculation, the most recent
triennial actuarial valuation on the scheme carried out by an
independent professionally qualified actuary, as at 31 March 2017,
resulted in a net pension surplus of GBP1.89m. An approximate
update of the funding position was carried out as at 31 March 2019
which, when viewed as a continuing scheme, showed a net surplus of
GBP3.15m (31 March 2018: GBP3.17m). The report further stated that
the scheme assets remained sufficient to cover 118% of the benefits
accrued to members, after allowing for future increases in these
benefits.
COVID-19
The welfare and safety of our employees has been of paramount
importance throughout the pandemic and remains a priority. Our
China-based operations were the first to be affected in January and
we were swift to implement the necessary precautions and measures
in line with guidance and were able to supply our workforce there
with personal protective equipment that was scarce locally. Our
experience in China helped us as we implemented similar processes
throughout our operations as the virus spread, again in line with
all local guidance.
Due to the nature of our work, our facilities, and indeed those
of our key suppliers, are clean and manufacturing facilities need
to meet strict hygiene regulations, with access limited to the
workforce. As at the time of publication of this report, our
operations are fully functional, albeit through a change in working
methodologies and it is comforting to note that we have had no
confirmed incidences of COVID-19 related ill health. Travel
restrictions, both within individual countries as well as
internationally, affect our sales teams' ability to mobilise and
physically meet with customers but they have reacted well to remote
working.
Strategy overview
The Group's strategy today remains consistent with that
previously communicated. Our business remains focused on two
important markets, namely industrial Communications and industrial
Storage, where our proprietary IP along with the quality and
reliability of our technology sets us apart from our peers and
makes us an integral part of our customers' products. We have
developed a strong reputation in both of these markets and we
continue to supply a growing world class customer base. This,
coupled with an extensive sales network and expanded presence
globally, will enable us to scale further once market conditions
ease.
Growth in both markets is continually being driven by the
persistent demand for increasing amounts of data to be delivered
faster and stored more reliably and securely. We remain committed
to generating a diverse revenue stream across a broad range of
customers. We are a single-source supplier to our customers,
meaning that once designed in, the displacement of our chips would
require our customers to undertake an element of product redesign.
This has served us particularly well recently as geo-political
issues have made international trade between certain countries more
difficult. Rather than sourcing locally produced goods as potential
replacements, the evidence is that customers are insisting on our
products due to their proven quality and reliability.
R&D remains a key tenet of our growth strategy. Our focus is
on developing products which will lead to design wins with new and
existing customers that we believe have the potential to develop
into long-term, significant revenue generators. Throughout the
difficult trading conditions, we have continued our investment into
R&D as we have no doubt that this approach will serve us best
in the long run and deliver superior, sustainable returns for our
shareholders. With that said, as a Board we are mindful of the
ongoing conditions and continue to monitor investment levels
carefully.
The acquisition of PRFI was a further example of our desire to
add businesses which can help us achieve our strategic goals and
complement our organic growth. The Company has a proven track
record of successful corporate activity and will continue to seek
and evaluate appropriate opportunities.
Communications
Our strategy within the Communications market is to grow
revenues through wider customer engagement and drive a larger
serviceable market from an expanded semiconductor product range
that builds upon an extensive intellectual property library.
The Group has been a key component supplier to major blue chip
OEMs within numerous sub-sectors of the global Communications
market for a number of decades. Product functionality over time has
evolved from tone switches and decoders through to signal
processing solutions, baseband processors and integrated modem
solutions for a variety of dedicated industrial wireless networks
around the world.
The feature sets of those products are generally radio frequency
("RF") agnostic, but over the last ten years or so, significant
investments have been made into engineering skills and associated
R&D activities to introduce a range of RF components. The
resulting combined chip-sets now cover customer functionality needs
from the antenna through to the microprocessor of choice. Initial
product releases focussed on operating frequency bands below 1GHz,
while more recently the range has been extended to encompass
frequencies up to 3.6GHz.
Sales revenues from applications within the Communications
sector were slightly down year on year and amounted to GBP14.94m
(2019: GBP15.14m). Shipments into wireless public safety customers
were generally quite robust while the situation across a wide range
of data-centric Industrial Internet of Things (IIoT) customers was
mixed and biased towards customer products prioritising high
performance and reliability. Revenues from the Americas and Europe
posted good gains but were unable to make up a significant
shortfall from the Far East customer base. Continued uncertainty
over the trade war with the USA remains, including expectations
that phase two of a trade agreement will not be in place ahead of
the US elections in the autumn. This is still impacting government
spending on some local infrastructure projects, such as railway and
power, whilst customers in surrounding countries who depend upon
exports into China are also affected.
Five new products were released across the year targeted at a
number of communications sub-markets including satellite
communications, wireless power telemetry networks and marine
collision avoidance. Associated demonstration and development
platforms were also released, including the Group's first Raspberry
Pi platform bringing the advanced features of the CMX655D audio
codec, launched during the prior year, to the Raspberry Pi
community. The Raspberry Pi is a series of small single-board
computers originally developed in the United Kingdom by the
Raspberry Pi Foundation to promote teaching of basic computer
science in schools and in developing countries. As time has
progressed, alongside traditional educational use, more serious
industrial and
commercial uses are foreseen making it a viable solution for "IIoT" applications.
The Communications market continues to exhibit a number of
growth areas including the transition to higher-capacity digital
networks within voice-centric markets and, in data-centric markets,
the increasing data throughput and reliability requirements from
terrestrial and satellite communications applications. The latter
is required to meet the needs of the growing Machine-to-Machine
("M2M") and IIoT sectors.
Storage
The focus within the Storage market sector has been on expanding
our product portfolio to include all major interface standards used
within the target industrial end-markets and to ensure
interoperation with all relevant third-party Flash Memory devices
from a number of leading global suppliers. This enables customers
to benefit from bill-of-materials cost efficiencies linked to new
flash technologies.
Over the last few years, the product portfolio has 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. An
associated proprietary Application Programmers Interface ("API")
enables customers to either develop or "port" their own solutions
to the Group's standard Controller solutions and benefit from the
class-leading levels of reliability and durability that the Group's
Hyperstone brand is becoming increasingly recognised for
globally.
Storage revenue for the majority of the year continued to feel
the combined effects of customer inventory over build and the
economic trade conflict between the USA and China. The challenges
associated with this environment resulted in a revenue decline of
11% for the year as a whole to GBP11.41m (2019: GBP12.87m). That
said, sales in the six months to March 31 2020 were up 12%
sequentially following a stronger period of order bookings and
subsequent shipments during the closing months of the year. As with
the Communications sector, uncertainties persist around US-China
trade relations but, encouragingly, there are one or two end
application areas that are bucking the trend.
At the interim stage, we reported that 4G/5G infrastructure
design wins and a number of industrial SATA SSD opportunities were
poised to drive growth in the future. It is therefore pleasing to
report that at the turn of the calendar year the situation began to
improve, evidenced by increased order bookings and subsequent
shipments related to a number of prior design wins in multi-year
growth application areas, including 5G infrastructure and data
security for point of sale applications.
In November 2019 we announced mass production availability of
the X1 SATA3 controller following its sampling availability in the
early part of the calendar year. The product has subsequently
achieved design-in status across a number of major industrial
customers with several customer designs ongoing including mSATA and
CFAST industrial form factors. Three new products were released
over the period, targeted at specific Compact-Flash and USB host
interface variants. Several new API customers were secured and the
evolution of the hyMap firmware continued, specifically related to
functionality and flash memory compatibility which are essential
factors in the success of the complete controller product range.
Advanced health monitoring and SMART tools were also developed to
optimise Controller solutions for specific applications and ensure
fail safe operation.
The industrial data storage market has several specific areas
which represent attractive growth opportunities playing to the core
strengths of the business. These include applications within
industrial automation, the telecoms/network infrastructure market
and an increasing number of security conscious sub-markets where
the Group's proprietary technology and bespoke programming
capabilities offer customers enhanced levels of security compared
to competitor products.
Market developments
The underlying growth trends within our two main industrial
application areas continue to strengthen and underpin confidence in
our strategy. The persistent demand for increasing amounts of data
to be transmitted and stored more quickly and securely remains. For
Communications markets this equates to more product opportunities
through higher speed requirements, enhanced error correction
techniques and operation at higher radio frequencies where wider RF
channels are permitted. Within industrial Storage markets, the
transition to solid state technology from hard disk drives is well
and truly underway at a time when our product portfolio has
expanded, positioning the business well to capture share over
time.
Operational developments
The performance of the business at an operational level has been
particularly encouraging given the environment created by the
COVID-19 pandemic. A new global Enterprise Resource Planning
("ERP") system that commenced live rollout in the prior calendar
year has been successfully deployed throughout the Group with the
exception of the China operations due to travel restrictions
associated with COVID-19. That aside, the Group benefited from the
efficiencies associated with running a unified system during the
year.
The Group has continued to perform well at an operational level
with disciplined execution across a number of areas. The operations
team overcame several challenges associated with a combination of
temporary and permanent supplier factory closures across the year
and it is a great credit to our operations team that impact on the
business was limited.
The investments made in sales and marketing capabilities during
prior years has helped to increase the pipeline of opportunities
and improved our overall reach and routes to market. As a
consequence, further enhancements and efficiencies were made to the
sales channels over the last year, resulting in the appointment of
additional distribution partners in the USA, the consolidation of
existing sales channels within Europe and the closing of our own
warehousing facility in North America.
We periodically assess the wider resource levels and
capabilities within the Group to ensure that they reflect the
direction of travel on which the Group is heading. As a result,
various changes have been made during the year, touching operations
in the UK, Asia and the Americas. The resulting structure and
associated capability mix positions us well for growth
Outlook
There is no hiding from the fact that the year under review has
been difficult, and the current environment is delaying realisation
of the benefits to come from the hard work taking place behind the
scenes.
The current financial year did commence with a healthier order
book than the prior year, although it remains to be seen how this
translates to actual market consumption as there may be an element
attributable to COVID-19 related supply concerns amongst the
customer base.
Nevertheless, following the operational adjustments made across
the prior year, the business is tuned to react swiftly to a revival
in demand and the Board remain convinced that a return to growth
will be secured as conditions improve.
Chris Gurry
Group Managing Director
Consolidated income statement for the year ended 31 March
2020
Unaudited Audited
2020 2019
Notes GBP'000 GBP'000
---------------------------------------------- ------ ---------- ---------
Continuing operations
Revenue 1,2 26,420 28,140
---------------------------------------------- ------ ---------- ---------
Cost of sales (6,855) (7,887)
---------------------------------------------- ------ ---------- ---------
Gross profit 19,565 20,253
Distribution and administration costs (18,762) (18,074)
---------------------------------------------- ------ ---------- ---------
803 2,179
Other operating income 689 635
---------------------------------------------- ------ ---------- ---------
Profit from operations 1,492 2,814
Share -- based payments (139) (117)
---------------------------------------------- ------ ---------- ---------
Profit after share -- based payments 1,353 2,697
Profit on disposal of property 7 - 222
Profit on disposal of property, plant and 11 -
equipment
Finance income 106 64
Finance expense (96) (1)
Profit before taxation 1,374 2,982
---------------------------------------------- ------ ---------- ---------
Income tax credit / (expense) 4 162 (288)
---------------------------------------------- ------ ---------- ---------
Profit after taxation 1,536 2,694
---------------------------------------------- ------ ---------- ---------
Profit after taxation attributable to equity
owners of the parent 1,536 2,694
---------------------------------------------- ------ ---------- ---------
Basic earnings per share
From profit for year 5 8.98p 15.77p
---------------------------------------------- ------ ---------- ---------
Diluted earnings per share
From profit for year 5 8.94p 15.36p
---------------------------------------------- ------ ---------- ---------
Adjusted EBITDA
Adjusted EBITDA for year 6 8,276 8,754
-------------------------- ------ ------
Consolidated statement of total comprehensive income for the
year ended 31 March 2020
Unaudited Unaudited Audited Audited
2020 2020 2019 2019
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- ---------- ---------- -------- --------
Profit for the year 1,536 2,694
Other comprehensive (expense)/income:
Items that will not be reclassified
subsequently to profit or
loss:
Actuarial loss on retirement
benefit obligations (995) (1,317)
Deferred tax on actuarial
loss 187 224
----------------------------------------- ---------- ---------- -------- --------
Items reclassified subsequently
to profit or loss upon derecognition:
Foreign exchange differences 308 104
----------------------------------------- ---------- ---------- -------- --------
Other comprehensive expense
for the year net of taxation
attributable to equity owners
of the parent (500) (989)
----------------------------------------- ---------- ---------- -------- --------
Total comprehensive income
for the year attributable
to the equity owners of the
parent 1,036 1,705
----------------------------------------- ---------- ---------- -------- --------
Consolidated statement of financial position as at 31 March
2020
Unaudited Unaudited Audited Audited
2020 2020 2019 2019
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ---------- ---------- -------- --------
Assets
Non -- current assets
Goodwill 10,741 9,235
Other intangible assets 1,823 1,775
Development costs 16,930 14,495
Property, plant and equipment 4,976 5,307
Right-of-use assets 1,184 -
Investment properties 3,170 3,170
Investments 83 83
Deferred tax assets 1,343 908
------------------------------------ ---------- ---------- -------- --------
40,250 34,973
Current assets
Inventories 2,390 2,882
Trade receivables and prepayments 5,075 3,430
Current tax assets 1,044 1,118
Cash and cash equivalents 8,479 13,471
------------------------------------ ---------- ---------- -------- --------
16,988 20,901
----------------------------------- ---------- ---------- -------- --------
Total assets 57,238 55,874
------------------------------------ ---------- ---------- -------- --------
Liabilities
Current liabilities
Bank loans and overdrafts - 662
Trade and other payables 4,036 4,634
Lease liabilities 502 -
Current tax liabilities 85 77
Provisions - current - 195
------------------------------------ ---------- ---------- -------- --------
4,623 5,568
Non -- current liabilities
Deferred tax liabilities 4,960 4,420
Lease liabilities 568 -
Retirement benefit obligation 4,697 3,548
Provisions - non current - 16
------------------------------------ ---------- ---------- -------- --------
10,225 7,984
----------------------------------- ---------- ---------- -------- --------
Total liabilities 14,848 13,552
------------------------------------ ---------- ---------- -------- --------
Net assets 42,390 42,322
------------------------------------ ---------- ---------- -------- --------
Capital and reserves attributable to equity owners
of the parent
Share capital 859 859
Share premium 9,286 9,279
Capital redemption reserve 9 9
Treasury shares - own share
reserve (80) (342)
Share -- based payments reserve 582 507
Foreign exchange reserve 1,714 1,406
Accumulated profits reserve 30,020 30,604
------------------------------------ ---------- ---------- -------- --------
Total shareholders' equity 42,390 42,322
------------------------------------ ---------- ---------- -------- --------
Consolidated cash flow statement for the year ended 31 March
2020
Unaudited Audited
2020 2019
GBP'000 GBP'000
---------------------------------------- -------- ----------------- ----------
Operating activities
Profit for the year before
taxation 1,374 2,982
Adjustments for:
Depreciation - on property,
plant and equipment 397 400
Depreciation - on right-of-use 456 -
assets
Amortisation of development
costs 5,708 5,146
Amortisation of intangibles
recognised on acquisition and
purchased 212 172
Profit on disposal of property,
plant and equipment (5) (222)
Movement in non-cash items
(pension) 154 161
Share -- based payments 139 117
Movement in provisions - (193)
Finance income (106) (64)
Finance expense 96 1
Movement in working capital (1,868) (1,743)
-------------------------------------------------- ----------------- ----------
Cash flows from operating activities 6,557 6,757
Income tax received 526 454
-------------------------------------------------- ----------------- ----------
Net cash flows from operating
activities 7,083 7,211
-------------------------------------------------- ----------------- ----------
Investing activities
Acquisition of subsidiary, (1,295) -
net of cash acquired
Purchase of property, plant
and equipment (57) (294)
Lease liability repayments (682) -
Investment in development costs (7,936) (7,169)
Investment in intangibles (28) (368)
Investment in loan note (323) -
Proceeds from disposal of property 11 750
Finance income 106 64
Finance expense (34) (1)
Net cash flows used in investing
activities (10,238) (7,018)
-------------------------------------------------- ----------------- ----------
Financing activities
Issue of ordinary shares 7 214
Purchase of own shares for
treasury - (152)
Dividends paid to shareholders (1,332) (1,332)
-------------------------------------------------- ----------------- ----------
Net cash flows used in financing
activities (1,325) (1,270)
-------------------------------------------------- ----------------- ----------
Decrease in cash and cash equivalents (4,480) (1,077)
-------------------------------------------------- ----------------- ----------
Movement in cash and cash equivalents:
At start of year 12,809 13,816
Decrease in cash and cash equivalents (4,480) (1,077)
Effects of exchange rate changes 150 70
-------------------------------------------------- ----------------- ----------
At end of year 8,479 12,809
-------------------------------------------------- ----------------- ----------
Cash flows presented exclude sales taxes.
Consolidated statement of changes in equity for the year ended
31 March 2020
Capital Share --
Share Share Treasury based Foreign Accumulated
capital premium redemption shares payments exchange profits
reserve reserve reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- -------- -------- ----------- --------- --------- --------- ------------ ------------
At 31 March 2018 -
audited 856 9,068 9 (190) 443 1,302 30,282 41,770
----------------------- -------- -------- ----------- --------- --------- --------- ------------ ------------
Profit for year 2,694 2,694
Other comprehensive income
Foreign exchange
differences 104 104
Net actuarial gain
recognised directly
to equity on
retirement benefit
obligations (1,317) (1,317)
Deferred tax on
actuarial gain 224 224
----------------------- -------- -------- ----------- --------- --------- --------- ------------ ------------
Total comprehensive
income for year - - - - - 104 1,601 1,705
----------------------- -------- -------- ----------- --------- --------- --------- ------------ ------------
856 9,068 9 (190) 443 1,406 31,883 43,475
Transactions with
owners in
their capacity as
owners
Issue of ordinary
shares 3 211 214
Purchase of own shares
- treasury (152) (152)
Dividend paid (1,332) (1,332)
Total transactions
with owners in their
capacity as owners 3 211 - (152) - - (1,332) (1,270)
----------------------- -------- -------- ----------- --------- --------- --------- ------------ ------------
Share -- based
payments in year 117 117
Cancellation/transfer
of share -- based
payments (53) 53 -
----------------------- -------- -------- ----------- --------- --------- --------- ------------ ------------
At 31 March 2019 -
audited 859 9,279 9 (342) 507 1,406 30,604 42,322
Changes in accounting
policy- IFRS 16 (30) (30)
----------------------- -------- -------- ----------- --------- --------- --------- ------------ ------------
Restated at 31 March
2019 859 9,279 9 (342) 507 1,406 30,574 42,292
Profit for year 1,536 1,536
Other comprehensive
income
Foreign exchange
differences 308 308
Net actuarial gain
recognised directly
to equity on
retirement benefit
obligations (995) (995)
Deferred tax on
actuarial gain 187 187
----------------------- -------- -------- ----------- --------- --------- --------- ------------ ------------
Total comprehensive
income for year - - - - - 308 728 1,036
859 9,279 9 (342) 507 1,714 31,302 43,328
Transactions with owners
in their capacity as owners
Issue of ordinary
shares - exercise of
share options 7 7
Purchase of own shares
- treasury 262 (14) 248
Dividend paid (1,332) (1,332)
Total transactions
with owners in their
capacity as owners - 7 - 262 - - (1,346) 1,077
----------------------- -------- -------- ----------- --------- --------- --------- ------------ ------------
Share -- based payment
charge 139 139
Cancellation/transfer
of share -- based
payments (64) 64 -
----------------------- -------- -------- ----------- --------- --------- --------- ------------ ------------
At 31 March 2020 -
unaudited 859 9,286 9 (80) 582 1,714 30,020 42,390
----------------------- -------- -------- ----------- --------- --------- --------- ------------ ------------
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.
The Group is focused for management purposes on one primary
reporting segment, being the semiconductor segment, with similar
economic characteristics, risks and returns and the Directors
therefore consider there to be one business segment
classification.
Information about revenue, profit/loss, assets and
liabilities
Unaudited 2020 Audited 2019
------------------------ ------------------------
Semiconductor Semiconductor
components Group components Group
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- -------------- -------- -------------- --------
Total segmental revenue 26,420 26,420 28,140 28,140
----------------------------------- -------------- -------- -------------- --------
Profit
Segmental result 1,353 1,353 2,697 2,697
----------------------------------- -------------- -------- -------------- --------
Finance income 106 64
Finance expense (96) (1)
Profit on disposal of property,
plant and equipment 11 222
Income tax expense 162 (288)
----------------------------------- -------------- -------- -------------- --------
Profit after taxation 1,536 2,694
----------------------------------- -------------- -------- -------------- --------
Assets and liabilities
Segmental assets 51,681 50,678
-------------- --------------
51,681 50,678
Unallocated corporate assets
Investment properties 3,170 3,170
Deferred tax assets 1,343 908
Current tax assets 1,044 1,118
----------------------------------- -------------- -------- -------------- --------
Consolidated total assets 57,238 55,874
----------------------------------- -------------- -------- -------------- --------
Segmental liabilities 5,106 5,507
-------------- --------------
5,106 5,507
Unallocated corporate liabilities
Deferred tax liabilities 4,960 4,420
Current tax liabilities 85 77
Retirement benefit obligation 4,697 3,548
----------------------------------- -------------- -------- -------------- --------
Consolidated total liabilities 14,848 13,552
----------------------------------- -------------- -------- -------------- --------
Other segmental information
Unaudited 2020 Audited 2019
------------------------ ------------------------
Semiconductor Semiconductor
components Group components Group
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------- -------------- -------- -------------- --------
Property, plant and equipment additions 57 57 294 294
----------------------------------------- -------------- -------- -------------- --------
Right-of-use assets additions 86 86 - -
----------------------------------------- -------------- -------- -------------- --------
Development cost additions 7,936 7,936 7,169 7,169
----------------------------------------- -------------- -------- -------------- --------
Intangible asset additions 28 28 368 368
----------------------------------------- -------------- -------- -------------- --------
Depreciation 397 397 400 400
----------------------------------------- -------------- -------- -------------- --------
Depreciation - right-of-use assets 456 456 - -
----------------------------------------- -------------- -------- -------------- --------
Amortisation of development costs 5,708 5,708 5,146 5,146
----------------------------------------- -------------- -------- -------------- --------
Amortisation of acquired and purchased
intangibles 212 212 172 172
----------------------------------------- -------------- -------- -------------- --------
Other non -- cash expenditure (pension) 154 154 161 161
----------------------------------------- -------------- -------- -------------- --------
Geographical information (by origin)
Rest of
UK Europe Americas Far East Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ----------- -------- --------- --------- --------
Year ended 31 March 2020
- unaudited
---------------------------------- ------- -------- --------- --------- --------
Revenue to third parties
- by origin 6,793 5,903 4,856 8,868 26,420
---------------------------------- ------- -------- --------- --------- --------
Property, plant and equipment 4,724 182 30 40 4,976
---------------------------------- ------- -------- --------- --------- --------
Right -of-use assets 164 244 547 229 1,184
---------------------------------- ------- -------- --------- --------- --------
Investment properties 3,170 - - - 3,170
---------------------------------- ------- -------- --------- --------- --------
Development costs 6,161 9,793 - 976 16,930
---------------------------------- ------- -------- --------- --------- --------
Intangibles - software and
intellectual property 596 - - 118 714
---------------------------------- ------- -------- --------- --------- --------
Goodwill 1,531 3,512 - 5,698 10,741
---------------------------------- ------- -------- --------- --------- --------
Other intangible assets
arising on acquisition 235 - - 874 1,109
---------------------------------- ------- -------- --------- --------- --------
Total assets 24,606 16,984 2,203 13,445 57,238
---------------------------------- ------- -------- --------- --------- --------
Year ended 31 March 2019
- audited
Revenue to third parties
- by origin 7,419 6,051 5,207 9,463 28,140
---------------------------------- ------- -------- --------- --------- --------
Property, plant and equipment 4,941 260 66 40 5,307
---------------------------------- ------- -------- --------- --------- --------
Investment properties 3,170 - - - 3,170
---------------------------------- ------- -------- --------- --------- --------
Development costs 5,359 9,136 - - 14,495
---------------------------------- ------- -------- --------- --------- --------
Intangibles - software and
intellectual property 611 - - - 611
---------------------------------- ------- -------- --------- --------- --------
Goodwill - 3,512 - 5,723 9,235
---------------------------------- ------- -------- --------- --------- --------
Other intangible assets
arising on acquisition - - - 1,164 1,164
Total assets 25,174 16,070 1,594 13,036 55,874
---------------------------------- ------- -------- --------- --------- --------
2 Revenue
The geographical classification of business turnover
(by destination) is as follows:
Unaudited Audited
2020 2019
Continuing business GBP'000 GBP'000
--------------------------------------------------- ------------ ---------
Europe 7,844 7,201
Far East 13,182 15,348
Americas 4,907 5,251
Others 487 340
--------------------------------------------------- ------------ ---------
26,420 28,140
--------------------------------------------------- ------------ ---------
3 Dividend - paid and proposed
During the year a final dividend of 5.8p per ordinary share of
5p was paid in respect of the year ended 31 March 2019. An interim
dividend of 2.0p per ordinary was paid on 13 December 2019 to
shareholders on the Register on 29 November 2019.
It is proposed to pay a final dividend of 2.0p per ordinary
share of 5p, taking the total dividend amount in respect of the
year ended 31 March 2020 to 4.0p. It is proposed to pay the final
dividend of 2.0p, if approved, on 7 August 2020 to shareholders
registered on 24 July 2020 (2019: paid 5 August 2019 to
shareholders registered on 5 July 2019).
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
2020 2019
GBP'000 GBP'000
------------------------------------------------------- ---------- --------
Current tax
UK corporation tax on results of the year (588) (722)
Adjustment in respect of previous years - 4
------------------------------------------------------- ---------- --------
(588) (718)
Foreign tax on results of the year 245 92
Foreign tax - adjustment in respect of previous
years 1 4
------------------------------------------------------- ---------- --------
Total current tax (342) (622)
------------------------------------------------------- ---------- --------
Deferred tax
Deferred tax - Origination and reversal of temporary
differences 97 913
Deferred tax - relating to changes in rates 106 -
Adjustments to deferred tax charge in respect
of previous years (23) (3)
------------------------------------------------------- ---------- --------
Total deferred tax 180 910
------------------------------------------------------- ---------- --------
Tax (income)/ charge on profit on ordinary activities (162) 288
------------------------------------------------------- ---------- --------
5 Earnings per share
Unaudited Audited
2020 2019
Basic earnings per share
From profit for year 8.98p 15.77p
Diluted earnings per share
From profit for year 8.94p 15.36p
---------------------------- ---------- --------
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
shown below:
Unaudited 2020 Audited 2019
---------------------------------- ------------------------------------
Weighted Weighted
average Earnings average Earnings
number per number per
Profit of shares share Profit of shares share
Basic earnings per
share GBP'000 Number p GBP'000 Number p
----------------------------- -------- ------------- --------- -------- ------------- -----------
Basic earnings per
share
- from profit for
year 1,536 17,099,216 8.98 2,694 17,087,788 15.77
----------------------------- -------- ------------- --------- -------- ------------- -----------
Diluted earnings per
share
----------------------------- -------- ------------- --------- -------- ------------- -----------
Basic earnings per
share 1,536 17,099,216 8.98 2,694 17,087,788 15.77
Dilutive effect of
share options - 88,355 (0.04) - 448,311 (0.41)
----------------------------- -------- ------------- --------- -------- ------------- -----------
Diluted earnings per
share
* from profit for year 1,536 17,187,571 8.94 2,694 17,536,099 15.36
----------------------------- -------- ------------- --------- -------- ------------- -----------
6 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 years presented:
Unaudited Audited
2020 2019
GBP'000 GBP'000
---------------------------------------------------- ---------- --------
Profit after taxation (earnings) 1,536 2,694
Adjustments for:
Finance income (106) (64)
Finance expense 96 1
Income tax (expense)/credit (162) 288
Depreciation 397 400
Depreciation - right-of-use assets 456 -
Amortisation of development costs 5,708 5,146
Amortisation of acquired and purchased intangibles
recognised on acquisition 212 172
Share-based payments 139 117
---------------------------------------------------- ---------- --------
Adjusted EBITDA 8,276 8,754
---------------------------------------------------- ---------- --------
7 Investment properties
Investment properties are measured at fair value and are
revalued annually by the Directors and in every third year by
independent Chartered Surveyors on an open market basis. No
depreciation is provided on freehold investment properties or on
leasehold investment properties. In accordance with IAS 40, gains
and losses arising on revaluation of investment properties are
shown in the income statement. No formal market valuation was
conducted in the year.
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. The Group does
however have significant Euro-denominated fixed costs.
Additionally, though the Group has a very diverse customer base in
certain market sectors, key customers can represent a significant
amount of revenue 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 that is undergoing continual and geographical change.
The Group's ability to respond to many competitive factors
including, but not limited to, pricing, technological innovations,
product quality, customer service, raw material availabilities,
manufacturing capabilities and employment of qualified personnel
will be key in the achievement of its objectives, but its ultimate
success will depend on the demand for its customers' products since
the Group is a component supplier.
A substantial proportion of the Group's revenue and earnings are
derived from outside the UK and so the Group's ability to achieve
its financial objectives could be impacted by risks and
uncertainties associated with local legal requirements (including
the UK's withdrawal from the European Union, or 'Brexit'),
political risk, the enforceability of laws and contracts, changes
in the tax laws, terrorist activities, natural disasters or health
epidemics.
Brexit
The Group has assessed the risks relating to Brexit and the
impact it will have on its customer base and supply chain. Brexit
developments are being monitored, and the risks status regularly
assessed to respond to any market effects of uncertainty that may
be caused by the outcome of the negotiations between the UK
Government and the EU.
COVID-19
During the period leading up to the date of this report the
global impact of COVID-19 escalated. The Board have considered
possible impacts of the COVID-19 outbreak on the Group's trading
and cashflow forecasts. In preparing this analysis a number of
scenarios were modelled based on the management's current
understanding of potential income. In each scenario, mitigating
actions within the control of management, including reductions in
discretionary spend and tighter internal controls, have been
modelled, but no fixed costs reductions have been assumed.
Given the nature of the markets we operate within, we anticipate
our end customers being insulated from a consumer downturn to some
extent, although the roll-out of some of the new products may be
delayed, dampening demand for our semiconductors. Even in these
difficult times, we still maintain the belief that the Group is
well placed to move positively forward in the medium to long term.
This belief is underpinned by a strong balance sheet and no debt,
along with product portfolio that addresses markets that have a
positive outlook.
9 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 2019 financial statements with the
exception of the adoption of IFRS 16 - Leases. The impact of the
adoption is set out below:
(i ) IFRS 16 Leases
The Group has adopted IFRS 16 Leases for the financial year
ending 31 March 2020, and it has chosen to use a modified
retrospective approach to adoption. The approach adopted does not
require the restatement of prior year figures. As a result of the
fact the right-of-use assets are measured based on the lease
commencement date compared to the lease liabilities being
calculated based on the initial application date, there is an
adjustment to brought forward reserves as shown in the condensed
consolidated statement of changes in equity.
-- Property leases
-- Office equipment leases
-- Motor Vehicle leases
-- Other leases
These leases have been recognised on the balance sheet, in
financial liabilities, by recognising the future cash-flows of the
lease obligation, discounted using an implicit interest rate of 4%
for property leases, for office equipment and 7% for motor
vehicles. These rates are in line with industry published discount
rates.
Corresponding right-of-use assets have been recognised in the
Group balance sheet for right-of-use assets property, office
equipment and motor vehicles and have been measured as being equal
to the discounted lease liability at the date of inception plus any
lease payments made at or before the inception of the lease.
Cash-flows from these leases have been recognised by including the
lease payments in cash-flows from investing activities
As the Group has chosen to adopt IFRS 16 using the modified
retrospective approach, comparatives have not been restated and are
accounted for under the Group's previous lease accounting
policy:
Under this approach, prior year figures have not been restated
to reflect leases that were in effect at that time. On transition
to IFRS 16, the group has applied the practical expedient of using
a single discount rate to a portfolio of leases with reasonably
similar characteristics:
-- Using a single discount rate to a portfolio of leases with
reasonably similar characteristics.
-- The Group has chosen to transition all leases previously
identified under IAS 17 to IFRS 16 and has not reassessed whether
these contracts are leases.
-- Reliance on the assessment of onerous leases at the 31(st)
March 2019 instead of performing an impairment review on transition
at 1(st) April 2019.
-- In assessing the length of the lease, where options to extend
or terminate the contract exist at the transition date these have
been taken into account or the known length of the lease has been
used.
Key judgements and estimates
The Group determines the lease term as the non-cancellable term
of the lease together with any periods covered by an option to
extend the lease it is reasonable certain to be exercised, or any
periods covered by an option to terminate the lease, if it is
reasonable certain not to be exercised.
Where the implicit rate of interest relating to a lease is not
readily available, the Group has used a discounted rate of 4% for
property leases and 7% for motor vehicles.
GBP'000
------------------------------------------------ --------
Undiscounted operating lease obligations as at
31 March 2019 1,038
Discounting (48)
Lease Liabilities at 1 April 2019 990
------------------------------------------------- --------
The effect of adoption of IFRS 16 as at 1st April 2019
increase/(decrease) is as follows:
GBP'000
--------------------- --------
Non-current assets
Right of use assets 960
---------------------- --------
Total assets 960
---------------------- --------
Liabilities
Lease liabilities 990
---------------------- --------
Total liabilities 990
---------------------- --------
Equity
Reserves (30)
---------------------- --------
Total Equity (30)
---------------------- --------
10 Acquisition of Plextek RFI Limited
Following the acquisition announced on the 3 March 2020 and
having satisfied the principal regulatory conditions and other
transaction closing conditions, the Group took control (100% of
voting rights) of UK based Plextek RFI Limited ("PRFI"). The total
consideration was GBP1.9m, payable in cash and from issuing of
treasury shares.
Founded in 2015, PRFI is a UK based design house specialising in
the design and development of RF, Microwave and Millimetre-wave
(mm-wave) ICs and modules.
The acquisition expands and strengthens the Group's product
design capabilities. For this reason combined with the anticipated
synergies to arise from integrating the PRFI business into existing
Group businesses, the Group paid a premium over the acquisition net
assets, giving rise to goodwill. All intangible assets in
accordance with IFRS 3 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 25
Intangible fixed assets:
Brands 37
Customer relationships 25
Intellectual property 175
Trade receivables and prepayments 187
Cash and cash equivalents 105
Trade and other payables (101)
Deferred tax liabilities (43)
Net assets acquired 410
Goodwill 1,531
------------------------------------ --------
Consideration 1,941
------------------------------------ --------
There are no non-controlling interests in relation to the PRFI
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 twelve months of the acquisition date. Receivables
at the acquisition date are expected to be collected in accordance
with the gross contractual amounts.
The acquisition cost was satisfied by:
GBP'000
----------------------------------- --------
Cash 1,693
Treasury shares issued 248
Lease Liabilities at 1 April 2019 1,941
------------------------------------ --------
Net cash outflow arising on acquisition:
GBP'000
------------------------------------------------ --------
Cash consideration paid (less cash retention) 1,400
Cash and cash equivalents within PRFI business
on acquisition (105)
Total net cash outflow on acquisition 1,295
------------------------------------------------- --------
The cash consideration excludes a GBP100,000 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 GBP145,000. These costs have been charged in distribution and
administrative expenses in the consolidated income statement.
PRFI has a 29 February 2020 financial period end, in the one
month period to 31 March 2020, PRFI contributed revenue of
GBP64,000 and net loss before taxation of GBP15,000. If PRFI was
part of the group for the full reporting period the contributed
revenue would have been GBP790,000 and net loss before taxation of
GBP187,000.
11 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. Whilst the financial
information included in this preliminary announcement has been
prepared in accordance with the recognition and measurement
criteria of International Financial Reporting Standards (IFRSs), as
adopted for use in the EU, this announcement does not itself
contain sufficient information to comply with IFRSs.
The audited financial information for the year ended 31 March
2019 is based on the statutory accounts for the financial year
ended 31 March 2019 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 2020 are
expected to be finalised on the basis of the financial information
presented by the Directors in this preliminary announcement and
signed following approval by the Board of Directors on 19 June 2020
and delivered to the Registrar of Companies following the Company's
Annual General Meeting on 29 July 2020.
The financial information contained in this announcement does
not constitute statutory accounts for the year ended 31 March 2020
or 2019 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 .
12 Approval
The Directors approved this preliminary results announcement on
8 June 2020.
Glossary
5G Fifth Generation Cellular Network Technology
API Application Programmers Interface
EBITDA Earnings before interest, tax, depreciation and amortisation
EU European Union
DMR Digital Mobile Radio
GMP Guaranteed Minimum Pension
GPS Global Positioning System
IAS International Accounting Standard
IC Integrated Circuit
IFRS International Financial Reporting Standards
IIoT Industrial Internet of Things
IP Intellectual Property
M2M Machine -- to -- machine
NAND Not And
OEM Original Equipment Manufacturer
P25 Project 25 digital mobile radio public safety standard
R&D Research and Development
RF Radio Frequency
RTK Real-Time Kinematic
SATA Serial ATA interface
SD Secure Digital
TETRA Terrestrial Trunked Radio
VP Vice-President
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SSAFIAESSEDM
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