TIDMCML
RNS Number : 1909T
CML Microsystems PLC
23 November 2021
23 November 2021
CML Microsystems Plc
("CML", the "Company" or the "Group")
Half Year Results
CML Microsystems Plc (the "Group" or the "Company"), which
develops mixed-signal, RF and microwave semiconductors for global
communications markets, today announces its unaudited results for
the six months ended 30 September 2021.
Financial Highlights
-- Revenue increased by 30% to GBP8.00m (H1 FY21: GBP6.14m)
-- Profit before taxation improved to GBP1.0m (H1 FY21:
loss of GBP0.3m)
-- Adjusted EBITDA up 43% to GBP2.12m (H1 FY21: GBP1.48m)
-- Diluted EPS significantly improved to 4.87p (H1 FY21:
loss of 1.67p)
-- Cash balances at period end of GBP22.59m (31 March 2021:
net cash of GBP31.91m) following a special dividend payment
totalling GBP8.30m to shareholders in August 2021
-- Recommended half year dividend of 4.0p per share (H1
FY21: 2.0p per share)
Operational Highlights
-- Recovery in existing markets, driving growth
-- New product releases show early signs of success
-- Expanded product range targeting an increasing total
addressable market
-- Record order book at period end
-- Significant R&D investment
-- Completed move from standard segment of Main Market to
AIM
Chris Gurry, Managing Director of CML Microsystems Plc,
commented on the results:
"The foundations for expansion laid during previous years,
coupled with the energy and enthusiasm to succeed within the
business, is starting to deliver tangible results at the financial
level. The Board remains confident that continuing progress will be
made through the second half of the year, delivering a very
positive outcome for the financial year as a whole."
CML Microsystems Plc www.cmlmicroplc.com
Chris Gurry, Group Managing Director Tel: +44(0)1621 875 500
Nigel Clark, Executive Chairman
Shore Capital Tel: +44(0)20 7408 4090
Toby Gibbs
James Thomas
John More
SP Angel Corporate Finance LLP Tel: +44(0)203 463 2260
Jeff Keating
Alma PR
Josh Royston Tel: +44 (0)20 3405 0212
Caroline Forde
Andy Bryant
Matthew Young
About CML Microsystems Plc
CML develops mixed-signal, RF and microwave semiconductors for
global communications markets. The Group utilises a combination of
outsourced manufacturing and in-house testing with trading
operations in the UK, Asia and USA. CML targets sub-segments within
Communication markets with strong growth profiles and high barriers
to entry. It has secured a diverse, blue chip customer base,
including some of the world's leading commercial and industrial
product manufacturers.
The spread of its customers and diversity of the product range
largely protects the business from the cyclicality usually
associated with the semiconductor industry. Growth in its end
markets is being driven by factors such as the appetite for data to
be transmitted faster and more securely, the upgrading of telecoms
infrastructure around the world and the growing prevalence of
private commercial wireless networks for voice and/or data
communications linked to the industrial internet of things
(IIoT).
The Group is cash-generative, has no debt and is dividend
paying.
Chairman's statement
Introduction
CML has enjoyed a strong start to the year. In my Annual Report
back in June 2021, I highlighted that I had never before
experienced a year with more challenges and opportunities. Whilst
many of those challenges remain, it is particularly pleasing to see
recovery in the end-markets that were most impacted by the
pandemic. The improved trading witnessed in the second half of last
year has continued and gathered pace. This is a testament to the
Group's multi-year strategic focus on R&D, acting as a partner
to our global customer base, creating the products that help them
achieve success.
Results and trading
The previously reported figures for the prior year first half
included contributions from the Storage Division which was part of
the Group throughout the first half of the last financial year
(before being sold in February for $49m). For this set of results,
we have restated the figures, in line with reporting requirements,
but do believe this provides shareholders with a more meaningful
picture of the Group's performance. The Communications Division is
today the sole operational focus of CML.
The financial performance for the six months to 30 September
2021 is ahead of management's expectations. Revenue for the six
months increased by 30% to GBP8.00m compared to the prior year (H1
FY21: GBP6.14m). Profit before taxation improved to GBP1.0m (H1
FY21: loss GBP0.3m), with adjusted EBITDA improving by 43% to
GBP2.12m (H1 FY21: GBP1.48m) and diluted EPS showed a dramatic
improvement to 4.87p (H1 FY21: loss of 1.67p). Cash balances at the
period end stood at GBP22.59m (31 March 2021: net cash of
GBP31.91m) following a special dividend payment totalling GBP8.30m
to shareholders in August 2021 after completion of the sale of the
Storage Division. The Group has no debt.
The Board is recommending a half year dividend of 4.0p per share
(H1 FY21: 2.0p per share), payable on 17 December 2021 to
shareholders on the Register on 3 December 2021.
Move to AIM
In September this year, CML completed its move from the standard
segment of the Main Market to the AIM Market of the London Stock
Exchange ("AIM"). As highlighted above, the Company enjoys very
healthy cash balances and remains debt free. In addition, it has
considerable value in a number of non-operational assets that the
Board is continually evaluating to enable maximum shareholder value
to be delivered. A number of opportunities are currently being
actively explored and are at various stages of progression. The
Group's addressable market stands at over $1bn annually and
alongside our organic growth strategy, which is our core focus, our
balance sheet strength gives us the opportunity to seek and
consider acquisitions which could help us further our strategic
objectives. The move to AIM provides us with greater flexibility to
take advantage of any opportunities as and when they are
identified.
Employees
The improvement in our trading performance is undoubtedly a
reflection of the sheer hard work and determination shown by our
highly talented workforce. They have continued to tackle each
challenge with vigour and enthusiasm and on behalf of the Board. I
offer them my sincere thanks.
Prospects and outlook
With a record order book, a growing product range targeting an
increasing total addressable market and a strong balance sheet
affording us strategic flexibility, the future for CML has never
been brighter. We must remain conscious of the fact that many of
the challenges which have been present over recent years are still
active and could affect our customers' purchasing decisions in the
short term. However, we are confident in both the long-term
performance of the business and in meeting this year's
expectations.
Nigel Clark
Executive Chairman
23 November 2021
Operational and financial review
Introduction
It is pleasing to report that the positive momentum seen within
the business through the second half of the prior financial year
has continued through the opening six-months of the current year,
with a healthy trading improvement being recorded.
Revenues are ahead of management expectations at the halfway
stage, with the associated benefits of operational leverage flowing
through. New order intake has been strong, assisted by improving
end market conditions and increased demand linked to customer
concerns around supply chain constraints within the semiconductor
market generally. Alongside the revenue growth achieved, the
Group's order book at 30 September 2021 was once again at a record
level, with scheduled delivery visibility extending into the next
financial year.
The progress demonstrated within these interim results follows a
multi-year period of enduring headwinds. During this time, the
Group has invested heavily in research and development activities
targeted at products and application areas that are expected to
drive growth over the coming years. The business optimisation that
took place prior to this year commencing, coupled with the enhanced
strategy now being followed, positions the Group well to take
advantage of the increasing number of opportunities being
presented.
Strategy
The Group's vision is to be the first-choice semiconductor
partner to technology innovators, together transforming how the
world communicates.
We are focused on our customers' success by delivering
advantages through the improved functionality and performance of
class leading IC solutions. R&D activity is targeted at
developing the product portfolio to support emerging and evolving
customer requirements for size, cost and performance, whilst
striving to remain our customer's first choice supplier within
their advanced communication platforms.
In today's world, 'connected everything' is propelling
exponential increases in data consumption - driving growth across
wireless communications markets globally. We are expanding our
total addressable market having enlarged our market emphasis to
include applications within the so-called mega trend areas of
Industrial Internet of Things ("IIoT"), 5G and Industry 4.0. This
complements the existing markets of public safety, maritime and
mission critical wireless voice and data communications, leveraging
our systems knowledge, engineering capabilities and routes to
market.
Markets and operations
For the comparable period, revenues from voice-centric wireless
applications were heavily impacted by the COVID-19 crisis, with the
situation across a wide range of data-centric IIoT customers
somewhat mixed. More recently, we communicated that customer and
market intelligence suggested conditions for voice applications
were expected to improve as the year progressed and it is pleasing
to report that has proven to be the case.
The order intake from wireless voice product manufacturers has
grown, with a significant recovery seen amongst the leading
customers. Equally pleasing was the progress from data-centric
customers, who are producing proprietary wireless communications
equipment for a wide range of industrial and mission critical
applications including oil, gas, utilities, transport, telecom,
enterprise, precision farming, land surveying, environmental
monitoring and military applications areas.
The order intake situation is multidimensional. As a complement
to the improving market conditions, which was the main driver,
growth was assisted by new design-wins moving to the production
phase along with increased order receipts associated with customer
concerns over semiconductor part availability. Conversely, there is
evidence of ordering restraint where customers cannot secure
deliveries of more generic parts needed within their end products,
such as microprocessors, from other semiconductor suppliers.
The semiconductor market is being hindered by well documented
supply chain issues and the Group has not been immune from
associated raw material delays and extended lead times from
third-party assembly services providers. We continue to hold a
raised level of inventory to help minimise the impact the global
semiconductor supply chain scenario is having. Delays do remain and
capacity constraints in the supply chain are expected to continue
well into 2022. That said, we have an experienced team monitoring
the situation closely and have so far been able to minimise end
customer disruptions.
The communications market globally is exhibiting a number of
growth areas, including the transition to higher-capacity digital
networks within voice-centric markets and, in data-centric markets,
the increasing throughput requirements from terrestrial and
satellite communications applications. As well as the existing
wireless voice and data market areas served, our strategy for
widening the product portfolio to address broader application areas
is well underway.
Through the first six-months of the financial year, a number of
new ICs were released, or priority sampled to market, developed to
help accelerate the design of RF products operating across a wide
range of radio frequencies including microwave and millimetre wave
bands. These new products include fully matched MMIC Power
Amplifiers (PAs) along with Positive Gain Slope Amplifiers designed
to compensate for frequency related gain losses that occur when
designing wide band wireless products. Marketed under the SuRF
brand, these new ICs are beginning to achieve design-win status
with new customers and it is satisfying to report that first orders
have been received from early stage adopters within vehicle
tracking and smart grid applications. End-customer shipments are
scheduled to commence during the second half of the year.
In addition to the SuRF product range, we continue to actively
invest in new platform technology and differentiated
wireless/baseband products to gain market share in a combination of
existing and new end application areas under the communications
umbrella. These new releases build upon prior year investments and
product introductions that also serve to increase the number of
market opportunities we can address.
The quantity of product introductions emanating from the Group
is set to increase significantly as we move forward, and this has
necessitated several internal organisational and operational
adjustments since the start of the year. It is therefore essential
to acknowledge the efforts being expended by the whole team in that
regard and its importance towards maximising our chances of success
in the future.
The Group is now addressing an annual serviceable market of over
$1bn, comprising a number of key growth areas including critical
infrastructure (public utilities, smart grid, RFID), 5G (repeaters,
small/pico cells, fixed wireless access, distributed antenna
systems) and satellite communications (terminals, broadband
access). We remain in the early stages of penetrating these new
market areas but, based upon customer engagements and resulting
feedback, we expect to be successful in securing significant
design-wins to fuel our growth. Aside from technical performance
and commercial competitiveness, the focus on our customers' success
and our inherent partnership capabilities are key factors that bode
well for the future of the business.
CML has excellent routes to market and over recent years has
invested significant effort in ensuring sales channels globally
were appropriate for the direction of travel that the business was
taking. Where possible, those channels are being exploited to good
effect as the release of new products gathers pace, although the
process is one of evolution and refinement, with ongoing
adjustments needed. Customer reach has been extended further
through a widening of the existing USA distributor agreement with
RFMW to become a global partner, along with the addition of several
new manufacturers' representatives in the Americas region.
Outlook
The year commenced with the business in a relatively strong
position from which to grow. Through the first six-month period,
shipments into those application areas most affected by the
pandemic during the prior year have begun to recover and, as we
move forward, the operational effort being put towards capturing
the growth opportunities already identified should start to bear
fruit. Clearly headwinds remain, including the pandemic,
geo-political uncertainties and ongoing semiconductor capacity
issues, however the advancement the Group is making is
encouraging.
Our organic growth prospects are exciting and should drive the
business forward over the short term, although an appropriate
amount of effort is being devoted to exploring the potential for
acquisition opportunities that would accelerate delivery of our
objectives.
The foundations for expansion laid during previous years,
coupled with the energy and enthusiasm to succeed within the
business, is starting to deliver tangible results at the financial
level. The Board remains confident that continuing progress will be
made through the second half of the year, delivering a very
positive outcome for the financial year as a whole.
Financial review
Total revenues for the first six-months of the financial year
increased by 30% over the comparable prior year period, totalling
GBP8.00m (H1 FY21: GBP6.14m). As already explained, several
customers active in the Group's voice communication markets have
started to recover from the heavy impact of the pandemic.
Additionally, data-centric market sectors linked to IIoT and
machine-to-machine communications performed strongly.
The higher revenues drove a 29% uplift in gross profitability to
GBP6.05m (H1 FY21: GBP4.70m). Gross margin as a percentage was
relatively stable but is expected to come under pressure as raw
material price increases take effect. To help counteract those
pressures, it has been necessary to invoke price increases across
the Group's product range.
Geographically, sales were higher in each of the major regions
serviced, with the Far East showing the strongest growth in
absolute terms. It is noteworthy, however, that a number of the
Group's customers make use of Asian manufacturing partners for
their production requirements and Group revenues are classified
geographically in terms of shipping destination.
Distribution and administration expenses increased to GBP5.59m
(H1 FY21: GBP5.26m) and include the costs associated with the move
to an AIM listing from the Main Market (GBP0.25m).
Other operating income rose to GBP0.56m (H1 FY21: GBP0.31m) and
included a one-off contribution of GBP0.28m from a pandemic related
US government loan that was ultimately forgiven (H1 FY21:
GBP0m).
Profit from operations was GBP1.01m (H1 FY21: GBP0.30m loss)
and, after accounting for share-based payments and net finance
income, the Group recorded a profit before tax of GBP1.01m, against
a loss of GBP0.30m for the prior year first half.
Taxation was GBP0.20m compared to a slight credit during the
comparable period, leading to a diluted earnings per share of 4.87p
being recorded (H1 FY21: loss of 1.67p).
Adjusted EBITDA increased by 43% to GBP2.12m (H1 FY21:
GBP1.48m).
Inventory levels increased slightly following the previously
communicated policy to maintain a higher level of raw material
stocks commensurate with current market dynamics. This strategy
continues to help reduce the impact our customers feel from ongoing
capacity issues within the semiconductor market generally. At 30
September 2021, inventory levels were GBP1.53m (H1 FY21:
GBP1.42m).
The Group has no debt and cash balances stood at GBP22.59m at 30
September 2021 (31 March 2021: net cash of GBP31.91m) following
payment of a special dividend of GBP8.30m during August 2021. Tight
working capital control is being maintained amidst the need to keep
inventory levels appropriate.
R&D expenditure for the period was GBP2.27m (H1 FY21:
GBP1.99m) reflecting an increase in the number of new products
being developed. In addition, and linked to expansion of the
product range, capital expenditure rose to GBP0.88m due to
necessary investment into additional final test and evaluation
equipment capable of handling higher radio frequencies (H1 FY21:
GBP0.13m).
Chris Gurry
Group Managing Director
23 November 2021
Condensed consolidated income statement
for the six months ended 30 September 2021
Unaudited Unaudited Audited
6 months 6 months year end
end end 31/03/21
30/09/21 30/09/20 GBP'000
GBP'000 Restated
GBP'000
--------------------------------------------------- ------------ ----------- ----------
Continuing operations
Revenue 8,001 6,138 12,470
Cost of sales (1,951) (1,435) (3,197)
--------------------------------------------------- ------------ ----------- ----------
Gross profit 6,050 4,703 9,273
Distribution and administration costs (5,593) (5,263) (10,567)
--------------------------------------------------- ------------ ----------- ----------
457 (560) (1,294)
Other operating income 555 314 830
--------------------------------------------------- ------------ ----------- ----------
Profit/(loss) from operations 1,012 (246) (464)
Share-based payments (45) (80) (143)
--------------------------------------------------- ------------ ----------- ----------
Profit/(loss) after share-based payments 967 (326) (607)
Revaluation of investment properties - - 579
Finance income 57 40 75
Finance expense (13) (18) (37)
--------------------------------------------------- ------------ ----------- ----------
Profit / (loss) before taxation 1,011 (304) 10
Income tax (charge)/credit (202) 26 792
--------------------------------------------------- ------------ ----------- ----------
Profit/(loss) from continuing operations 809 (278) 802
Profit from discontinued operation - 1,069 22,762
--------------------------------------------------- ------------ ----------- ----------
Profit after taxation for period
attributable to equity owners of
the parent 809 791 23,564
--------------------------------------------------- ------------ ----------- ----------
The condensed consolidated income statement has been restated for
unaudited six months ended 30 September 2020 for the discontinued
operation announced on 10 December 2020, where the Group had entered
into a definitive agreement to divest its Storage Division, Hyperstone.
See note 13 for further details.
Earnings per share from continuing operations attributable
to the ordinary
equity holders of the Company:
Basic earnings per share 4.87p (1.67)p 4.81p
Diluted earnings per share 4.80p (1.67)p 4.79p
Earnings per share from total operations
attributable to the ordinary equity
holders of the Company (comparatives
include discontinued operations):
Basic earnings per share 4.87p 4.74p 141.13p
Diluted earnings per share 4.80p 4.73p 140.56p
Adjusted EBITDA(1) 2,118 1,477 2,731
------------ -----------
1. See note 12 for definition and reconciliation.
Condensed consolidated statement of total comprehensive
income
for the six months ended 30 September 2021
Unaudited Unaudited Audited
6 months 6 months year end
end end 31/03/21
30/09/21 30/09/20 GBP'000
GBP'000 Restated
GBP'000
-------------------------------------------------- ---------- ---------- ----------
Profit for the period 809 791 23,564
Other comprehensive income/(expense):
Items that will not be reclassified subsequently
to profit or loss:
Re-measurement of benefit obligation - - (897)
Deferred tax on actuarial loss - - 170
-------------------------------------------------- ---------- ---------- ----------
Items reclassified subsequently to profit
or loss upon derecognition:
Foreign exchange differences 410 123 (312)
Reclassification of foreign exchange differences
on discontinued operations - - (1,100)
-------------------------------------------------- ---------- ---------- ----------
Other comprehensive income/(expense) for
the period net of taxation attributable
to the equity holders of the parent 410 123 (2,139)
-------------------------------------------------- ---------- ---------- ----------
Total comprehensive income for the period
attributable to the equity holders of the
parent 1,219 914 21,425
Total comprehensive income for the year
attributable to the equity owners of the
parent:
Continuing operations 1,219 (155) (237)
Discontinued operations - 1,069 21,662
------------------------------------------- ------ ------ -------
1,219 914 21,425
------------------------------------------- ------ ------ -------
Condensed consolidated statement of financial position
as at 30 September 2021
Unaudited Unaudited Audited
30/09/21 30/09/20 31/03/21
GBP'000 GBP'000 GBP'000
--------------------------------------------- ---------- ---------- ----------
Assets
Non-current assets
Goodwill 7,282 10,735 7,072
Other intangible assets 1,198 1,679 1,276
Development costs 10,727 17,999 9,191
Property, plant and equipment 5,576 4,903 4,864
Right-of-use assets 524 779 409
Investment properties 3,775 3,192 3,775
Investment - 83 -
Deferred tax assets 1,822 1,188 1,531
--------------------------------------------- ---------- ---------- ----------
30,904 40,558 28,118
--------------------------------------------- ---------- ---------- ----------
Current assets
Inventories 1,532 2,768 1,450
Trade receivables and prepayments 2,433 5,043 2,434
Current tax assets 1,479 787 1,046
Cash and cash equivalents 22,587 9,014 32,196
--------------------------------------------- ---------- ---------- ----------
28,031 17,612 37,126
--------------------------------------------- ---------- ---------- ----------
Total assets 58,935 58,170 65,244
--------------------------------------------- ---------- ---------- ----------
Liabilities
Current liabilities
Bank loans and borrowings - 1,661 282
Trade and other payables 3,122 4,277 3,081
Lease liabilities 174 333 183
Current tax liabilities 42 224 80
--------------------------------------------- ---------- ---------- ----------
3,338 6,495 3,626
--------------------------------------------- ---------- ---------- ----------
Non-current liabilities
Deferred tax liabilities 3,207 5,145 2,339
Lease liabilities 220 382 262
Retirement benefit obligation 5,570 4,697 5,570
--------------------------------------------- ---------- ---------- ----------
8,997 10,224 8,171
--------------------------------------------- ---------- ---------- ----------
Total liabilities 12,335 16,719 11,797
--------------------------------------------- ---------- ---------- ----------
Net assets 46,600 41,451 53,447
--------------------------------------------- ---------- ---------- ----------
Capital and reserves attributable to equity
owners of the parent
Share capital 863 859 859
Share premium 1,222 9,286 1,039
Capital redemption reserve 9 9 9
Treasury shares - own share reserve (1,670) (1,670) (1,670)
Share-based payments reserve 497 662 570
Foreign exchange reserve 712 1,837 302
Retained earnings 44,967 30,468 52,338
--------------------------------------------- ---------- ---------- ----------
Total shareholders' equity 46,600 41,451 53,447
Condensed consolidated cash flow statement
for the six months ended 30 September 2021
Unaudited Unaudited Audited
6 months 6 months year end
end end 31/03/21
30/09/21 30/09/20 GBP'000
GBP'000 Restated
GBP'000
-------------------------------------------------- ---------- ---------- ----------
Operating activities
Profit/(loss) for the period before taxation
- continuing operations 1,011 (304) 10
Profit for the period before taxation -
discontinued operations - 1,075 22,762
Adjustments for:
Depreciation - on property, plant and equipment 171 192 370
Depreciation - on right-of-use assets 126 263 438
Impairment of development costs - - 701
Amortisation of development costs 673 2,988 3,789
Amortisation of intangibles recognised
on acquisition and purchased 136 117 212
Loss/(profit) on disposal of property,
plant and equipment - - 16
Revaluation of investment properties - - (579)
Gain on disposal of discontinued operations - - (21,740)
Movement in non-cash items (retirement
benefit obligation and non-refundable PPP
loan) (190) 90 201
Share-based payments 45 80 143
Finance income (57) (40) (75)
Finance expense 13 18 37
Movement in working capital (560) 695 1,388
-------------------------------------------------- ---------- ---------- ----------
Cash flows from operating activities 1,368 5,174 7,673
Income tax (paid)/received (118) 509 494
-------------------------------------------------- ---------- ---------- ----------
Net cash flows from operating activities 1,250 5,683 8,167
-------------------------------------------------- ---------- ---------- ----------
Investing activities
Disposal of business (net of expenses) - - 33,261
Acquisition of subsidiary, net of cash
acquired - (100) (100)
Purchase of property, plant and equipment (882) (127) (390)
Investment in development costs (2,161) (3,834) (7,270)
Investment in intangibles - 25 25
Finance income 57 40 75
Net cash flows used in investing activities (2,986) (3,996) 25,601
-------------------------------------------------- ---------- ---------- ----------
Financing activities
Lease liability repayments (142) (302) (556)
Proceeds from bank loans and borrowings - 1,661 282
Issue of ordinary shares (net of expenses) 186 - 29
Purchase of own shares for treasury - (1,590) (1,590)
Dividends paid to shareholders (8,298) (343) (674)
Share capital redemption - - (8,276)
Finance expense 3 (16) (15)
-------------------------------------------------- ---------- ---------- ----------
Net cash flows used in financing activities (8,251) (590) (10,800)
-------------------------------------------------- ---------- ---------- ----------
Increase/(decrease) in cash and cash equivalents (9,987) 1,097 22,968
-------------------------------------------------- ---------- ---------- ----------
Movement in cash and cash equivalents:
At start of period/year 32,196 8,479 8,479
Increase/(decrease) in cash and cash equivalents (9,987) 1,097 22,968
Effects of exchange rate changes 378 (562) 749
-------------------------------------------------- ---------- ---------- ----------
At end of period 22,587 9,014 32,196
Cash flows presented exclude sales taxes. Further cash-related
disclosure details are provided in notes 6 and 7.
Changes in liabilities arising from financing activities relate
to lease liabilities and borrowings only.
Condensed consolidated statement of changes in equity
for the six months ended 30 September 2021
Unaudited Share Share Capital Treasury Share- Foreign Retained Total
capital premium redemption shares based exchange earnings GBP'000
GBP'000 GBP'000 reserve GBP'000 payments reserve GBP'000
GBP'000 GBP'000 GBP'000
----------------------- --------- --------- ------------ --------- ---------- ---------- ---------- ---------
At 31 March
2020 859 9,286 9 (80) 582 1,714 30,020 42,390
----------------------- --------- --------- ------------ --------- ---------- ---------- ---------- ---------
Profit for period 791 791
Other comprehensive
income net of
taxes
Foreign exchange
differences 123 123
----------------------- --------- --------- ------------ --------- ---------- ---------- ---------- ---------
Total comprehensive
income for the
period - - - - - 123 791 914
Transactions
with owners
in their capacity
as owners
Dividend paid (343) (343)
Use of own shares
for treasury (1,590) (1,590)
----------------------- --------- --------- ------------ --------- ---------- ---------- ---------- ---------
Total of transactions
with owners
in their capacity
as owners - - - (1,590) - - (343) (1,933)
----------------------- --------- --------- ------------ --------- ---------- ---------- ---------- ---------
Share-based
payment charge 80 80
At 30 September
2020 859 9,286 9 (1,670) 662 1,837 30,468 41,451
----------------------- --------- --------- ------------ --------- ---------- ---------- ---------- ---------
Profit for period 22,773 22,773
Other comprehensive
income net of
taxes
Foreign exchange
differences (435) (435)
Reclassification
of foreign exchange
differences
on discontinued
operations (1,100) (1,100)
Re-measurement
of defined benefit
obligations (897) (897)
Deferred tax
on actuarial
loss 170 170
----------------------- --------- --------- ------------ --------- ---------- ---------- ---------- ---------
Total comprehensive
income for the
period - - - - - (1,535) (727) (2,262)
Transactions
with owners
in their capacity
as owners
Issue of ordinary
shares - exercise
of share options 29 29
Share capital
redemption (8,276) (8,276)
Dividend paid (331) (331)
----------------------- --------- --------- ------------ --------- ---------- ---------- ---------- ---------
Total of transactions
with owners
in their capacity
as owners - (8,247) - - - - (331) (8,578)
----------------------- --------- --------- ------------ --------- ---------- ---------- ---------- ---------
Share-based
payment charge 63 63
Cancellation/transfer
of share-based
payments (155) 155 -
----------------------- --------- --------- ------------ --------- ---------- ---------- ---------- ---------
At 31 March
2021 859 1,039 9 (1,670) 570 302 52,338 53,447
Unaudited Share Share Capital Treasury Share- Foreign Retained Total
capital premium redemption shares based exchange earnings GBP'000
GBP'000 GBP'000 reserve GBP'000 payments reserve GBP'000
GBP'000 GBP'000 GBP'000
----------------------- --------- --------- ------------ --------- ---------- ---------- ---------- ---------
At 31 March
2021 859 1,039 9 (1,670) 570 302 52,338 53,447
----------------------- --------- --------- ------------ --------- ---------- ---------- ---------- ---------
Profit for period 809 809
Other comprehensive
income net of
taxes
Foreign exchange
differences 410 410
----------------------- --------- --------- ------------ --------- ---------- ---------- ---------- ---------
Total comprehensive
income for the
period - - - - - 410 809 1,219
Transactions
with owners
in their capacity
as owners
Issue of ordinary
shares - exercise
of share options 4 183 187
Dividend paid (8,298) (8,298)
Total of transactions
with owners
in their capacity
as owners 4 183 - - - - (8,298) (8,111)
Share-based
payments 45 45
Cancellation/transfer
of share-based
payments (118) 118 -
----------------------- --------- --------- ------------ --------- ---------- ---------- ---------- ---------
At 30 September
2021 863 1,222 9 (1,670) 497 712 44,967 46,600
Notes to the condensed consolidated financial statement
for the six months ended 30 September 2021
1 Segmental analysis
Reported segments and their results, in accordance with IFRS 8,
are based on internal management reporting information that is
regularly reviewed by the Chief Operating Decision Maker (Chris
Gurry). The measurement policies the Group uses for segmental
reporting under IFRS 8 are the same as those used in its financial
statements.
The Group is focused for management purposes on one primary
reporting segment, being the semiconductor segment, with similar
economic characteristics, risks and returns and the Directors
therefore consider there to be one single segment, being
semiconductor components for the communications industry.
Geographical segments (by origin)
Unaudited UK Rest Americas Far East Total
GBP'000 of Europe GBP'000 GBP'000 GBP'000
GBP'000
--------------------------------- --------- ----------- --------- --------- ---------
Six months ended 30 September
2021
Revenue to third parties
- by origin 1,837 - 916 5,248 8,001
Property, plant and equipment 5,475 - 17 84 5,576
Right-of-use assets 100 - 226 198 524
Investment properties 3,775 - - - 3,775
Development costs 9,175 - - 1,552 10,727
Intangible assets - software
and
intellectual property 254 - - 98 352
Goodwill 1,531 - - 5,751 7,282
Other intangible assets arising
on acquisition 197 - - 649 846
Total assets 46,109 - 1,606 11,220 58,935
Unaudited UK Rest Americas Far East Total
GBP'000 of Europe GBP'000 GBP'000 GBP'000
GBP'000
--------------------------------- --------- ----------- --------- --------- ---------
Six months ended 30 September
2020
Revenue to third parties
- by origin 3,100 - 829 2,209 6,138
Property, plant and equipment 4,662 175 - 66 4,903
Right-of-use assets 108 174 357 140 779
Investment properties 3,192 - - - 3,192
Development costs 6,629 10,298 - 1,072 17,999
Intangible assets - software
and
intellectual property 550 - - - 550
Goodwill 1,531 3,512 - 5,692 10,735
Other intangible assets arising
on acquisition - - - 1,129 1,129
Total assets 24,443 17,831 2,127 13,769 58,170
Audited UK Rest Americas Far East Total
GBP'000 of Europe GBP'000 GBP'000 GBP'000
GBP'000
--------------------------------- --------- ----------- --------- --------- ---------
Year ended 31 March 2021
Revenue to third parties
- by origin 5,867 - 1,624 4,979 12,470
Property, plant and equipment 4,753 - 22 89 4,864
Right-of-use assets 90 - 255 64 409
Investment properties 3,775 - - - 3,775
Development costs 7,942 - - 1,249 9,191
Intangible assets - software
and intellectual property 264 - - 101 365
Goodwill 1,531 - - 5,541 7,072
Other intangible assets arising
on acquisition 210 - - 701 911
Total assets 52,228 - 2,467 10,549 65,244
Revenue
The geographical classification of business turnover (by
destination) is as follows:
Unaudited Unaudited Audited
6 months 6 months year end
end end 31/03/21
30/09/21 30/09/20 GBP'000
GBP'000 Restated
GBP'000
---------- ---------- ---------- ----------
Europe 1,927 1,259 2,996
Far East 4,837 3,718 7,005
Americas 986 926 2,000
Other 251 235 469
---------- ---------- ---------- ----------
8,001 6,138 12,470
The operational classification of business turnover (by market)
is as follows:
Unaudited Unaudited Audited
6 months 6 months year end
end end 31/03/21
30/09/21 30/09/20 GBP'000
GBP'000 Restated
GBP'000
------------------------ ---------- ---------- ----------
Semiconductor 7,652 5,694 11,622
Design and development 349 444 848
------------------------ ---------- ---------- ----------
8,001 6,138 12,470
Semiconductor products, goods and services are transferred at a
point in time, design and development over the period of the
contract on a percentage basis of contract completion, as detailed
in the Group's revenue recognition policy within its published
Annual Report.
The Group does not have any contract assets at 30 September 2021
(GBPNil at 31 March 2021) as the Group does not fulfil any of its
performance obligations in advance of invoicing to its customer.
The Group however does have contractual balances in the form of
trade receivables. See note 21 for disclosure of this in the Annual
Report and Accounts for year ended 31 March 2021. The Group does
not have any contractual liabilities at 30 September 2021 (GBPNil
at 31 March 2021).
The Group also does not have any contractual costs capitalised
or any outstanding performance obligations at 30 September 2021 and
31 March 2021.
2 Dividend paid and interim dividend
The Board is declaring an interim dividend of 4.0p per ordinary
share of 5p for the half year ended 30 September 2021, payable on
17 December 2021 to shareholders on the Register on 3 December
2021.
A final special dividend of 50.0p per ordinary share of 5p was
paid on 13 August 2021 and an interim dividend of 2.0p per ordinary
share of 5p was paid on 18 December 2020, totalling 52.0p per
ordinary share of 5p paid for the year ended 31 March 2021 (2020:
2.0p per ordinary share of 5p paid for the year ended 31 March
2020).
3 Income tax expense/(credit)
Unaudited Unaudited Audited
6 months 6 months year end
end end 31/03/21
30/09/21 30/09/20 GBP'000
GBP'000 Restated
GBP'000
------------------------------------- ---------- ---------- ----------
UK income tax credit (461) (495) (1,126)
Overseas income tax charge 89 141 248
------------------------------------- ---------- ---------- ----------
Total current tax credit (372) (354) (878)
Deferred tax charge 574 328 86
------------------------------------- ---------- ---------- ----------
Reported income tax charge/(credit) 202 (26) (792)
The Directors consider that tax will be payable at varying rates
according to the country of incorporation of its subsidiary
undertakings and have provided on that basis.
The tax charge for the six months ended 30 September 2021 has
been calculated by applying the effective tax rate which is
expected to apply to the Group for the year ended 31 March 2022,
using rates substantially enacted by 30 September 2021 as required
by IAS 34 - Interim Financial Reporting.
4 Earnings per share
Unaudited Unaudited Audited
6 months 6 months year end
end end 31/03/21
30/09/21 30/09/20 GBP'000
GBP'000 Restated
GBP'000
---------------------------------------------------- ---------- ---------- ----------
Earnings per share from continuing operations
attributable to the ordinary
equity holders of the Company:
Basic earnings per share 4.87p (1.67)p 4.81p
Diluted earnings per share 4.80p (1.67)p 4.79p
Earnings per share from total operations
attributable to the ordinary equity holders
of the Company (comparatives include discontinued
operations):
Basic earnings per share 4.87p 4.74p 141.13p
Diluted earnings per share 4.80p 4.73p 140.56p
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 Diluted
average number
number
------------------------------------ ----------- -----------
Six months ended 30 September 2021 16,608,977 16,855,132
Six months ended 30 September 2020 16,692,935 16,718,813
Year ended 31 March 2021 16,696,060 16,763,946
5 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
long 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 2021 the investment
properties were professionally valued by Fenn Wright and Lambert
Smith Hampton, Commercial Property Consultants, on an open market
basis.
6 Cash and cash equivalents
Unaudited Unaudited Audited
6 months 6 months year end
end end 31/03/21
30/09/21 30/09/20 GBP'000
GBP'000 GBP'000
----------------- ---------- ---------- ----------
Cash on deposit 16,869 4,183 20,438
Cash at bank 5,718 4,831 11,758
----------------- ---------- ---------- ----------
22,587 9,014 32,196
7 Bank loans and borrowings
Unaudited Unaudited Audited
6 months 6 months year end
end end 31/03/21
30/09/21 30/09/20 GBP'000
GBP'000 GBP'000
------------ ----------- ---------- ----------
Bank loan - 1,661 -
Borrowings - - 282
------------ ----------- ---------- ----------
- 1,661 282
8 Retirement benefit obligations
The Directors have not obtained an actuarial IAS 19 Employee
Benefits report in respect of the defined benefit pension scheme
for the purpose of this Half Yearly Report.
9 Principal risks and uncertainties
Key risks of a financial nature
The principal risks and uncertainties facing the Group are with
foreign currencies and customer dependency. With the majority of
the Group's earnings being linked to the US Dollar, a decline in
this currency will have a direct effect on revenue, although since
the majority of the cost of sales are also linked to the US Dollar,
this risk is reduced at the gross profit line. Additionally, though
the Group has a very diverse customer base in certain market
sectors, key customers can represent a significant amount of
revenue. Key customer relationships are closely monitored, however
changes in buying patterns of a key customer could have an adverse
effect on the Group's performance.
Key risks of a non-financial nature
The Group is a small player operating in a highly competitive
global market that is undergoing continual and geographical change.
The Group's ability to respond to many competitive factors
including, but not limited to, pricing, technological innovations,
product quality, customer service, raw material availabilities,
manufacturing capabilities and employment of qualified personnel
will be key in the achievement of its objectives. The Group's
ultimate success will depend on the demand for its customers'
products since the Group is a component supplier.
A substantial proportion of the Group's revenue and earnings are
derived from outside the UK and so the Group's ability to achieve
its financial objectives could be impacted by risks and
uncertainties associated with local legal requirements (including
the UK's withdrawal from the European Union, or "Brexit"),
political risk, the enforceability of laws and contracts, changes
in the tax laws, terrorist activities, natural disasters or health
epidemics.
COVID-19
During the pandemic the Group has ensured that its critical
infrastructure, resources and activities are organised to provide
continuity of our operations which has enabled us to implement a
responsive approach to COVID-19 with all non-essential operational
employees working from home.
The Group is following the guidance of the World Health
Organization and other government health agencies and has
implemented a return-to-work strategy which is closely monitored to
enable prudent steps to be mitigated in case of further potential
impacts to our employees, customers, suppliers and other
stakeholders. The Group continues to carry out regular assessments
of the modelled scenarios based on management's current
understanding of potential income and mitigating actions within the
control of management, including reductions in discretionary spend
along with tighter internal controls, but no fixed costs reductions
have been assumed.
Given the nature of the markets we operate within, we anticipate
the majority of 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.
Despite these difficult times, we still maintain the belief that
the Group is well placed to move positively forward in the medium
to long term. This belief is underpinned by a strong balance sheet
and no debt, along with a product portfolio that addresses markets
that have a positive outlook.
10 Directors' statement pursuant to the Disclosure and
Transparency Rules
The Directors confirm that, to the best of their knowledge:
-- the condensed set of financial statements have been prepared
on a consistent basis with the financial statements for the year
ended 31 March 2021 and should be read in conjunction with the FY21
Annual Report and Accounts. The annual consolidated financial
statements of the Group are prepared in accordance with IFRS and
IFRIC pronouncements as adopted by the EU;
-- the condensed set of financial statements have been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU; and
-- the Chairman's Statement and Group Managing Director's
Operational and Financial Review include a fair review of the
development and performance of the business and the position of the
Company, and the undertakings included in the consolidation taken
as a whole together with a description of the principal risks and
uncertainties that they face.
The Directors are also responsible for the maintenance and
integrity of the CML Microsystems Plc website. Legislation in the
UK governing the preparation and dissemination of the financial
statements may differ from legislation in other jurisdictions.
11 Basis of preparation
The basis of preparation and accounting policies used in
preparation of this Half Year Report have been prepared in
accordance with the same accounting policies set out in the year
ended 31 March 2021 financial statements.
12 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 6 months year end
end end 31/03/21
30/09/21 30/09/20 GBP'000
GBP'000 Restated
GBP'000
------------------------------------------------ ---------- ---------- ----------
Profit/(loss) before taxation (earnings) 1,011 (304) 10
Adjustments for:
Finance income (57) (40) (75)
Finance expense 13 18 37
Depreciation 171 151 310
Depreciation - right-of-use assets 126 138 202
Impairment of development costs - - 701
Amortisation of development costs 673 1,317 1,191
Amortisation of intangibles of purchased
and
acquired intangibles recognised on acquisition 136 117 212
Share-based payments 45 80 143
------------------------------------------------ ---------- ---------- ----------
Adjusted EBITDA 2,118 1,477 2,731
13 Disposal of the Storage Division
The Company announced on 5 February 2021 that it had
successfully completed the sale of Hyperstone, the Group's Storage
Division ("the Disposal"), for US$49m. The Disposal had not been
previously reported in the unaudited accounts ended 30 September
2020, these results have been restated to take this into account.
In the audited accounts ended 31 March 2021 this was reported as a
discontinued operation.
This reflected a deliberate decision made by the Board to
refocus exclusively on the global communications market, with all
efforts directed at capturing the exciting growth opportunities
that it presents.
Financial information relating to the discontinued operation for
the period to the date of disposal and unaudited accounts ended 30
September 2020 is set out below.
Unaudited Audited
6 months end year
30/09/20 end
GBP'000 31/03/21
GBP'000
----------------------------------------- -------------- ----------
Revenue 6,763 9,505
Cost of sales (2,191) (3,043)
----------------------------------------- -------------- ----------
Gross profit 4,572 6,462
Distribution and administration (3,478) (5,396)
----------------------------------------- -------------- ----------
1,094 1,066
Other operating income 7 8
----------------------------------------- -------------- ----------
Profit from operation 1,101 1,074
Finance income - -
Finance expenses (26) (42)
----------------------------------------- -------------- ----------
Profit before tax 1,075 1,032
Income tax expense (6) (10)
----------------------------------------- -------------- ----------
Profit after income tax of discontinued
operation 1,069 1,022
Gain on sale of subsidiary after income
tax - 21,740
----------------------------------------- -------------- ----------
Profit from discontinued operation 1,069 22,762
----------------------------------------- -------------- ----------
Further information can be found in the Annual Report and
Accounts ended 31 March 2021 which can be viewed on the Company
website: www.cmlmicroplc.com or obtained from Companies House.
14 Move to the AIM Market of the London Stock Exchange
("AIM")
The Company announced on 25 June 2021 the proposed cancellation
of the listing of the Company's ordinary shares of 5p each on the
standard segment of the London Stock Exchange's main market for
listed securities and its intention to apply for the admission of
the ordinary shares to trading on AIM. This was approved at the AGM
on 4 August 2021, with the effective date of the Cancellation and
Admission taking place on the 3 September 2021. Within the
unaudited six months ended 30 September 2021 a cost of GBP248,000
is attributable to this move.
15 General
Other than already stated within the Chairman's Statement and
Group Managing Director's Operational and Financial Review, there
have been no important events during the first six months of the
financial year that have impacted this Half Yearly Report.
There have been no related party transactions or changes in
related party transactions described in the latest Annual Report
that could have a material effect on the financial position or
performance of the Group in the first six months of the financial
year.
The principal risks and uncertainties within the business are
contained within this report in note 9 above.
This Half Yearly 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 2021.
The financial information contained in this Half Yearly Report
has been prepared in accordance with UK adopted International
Accounting Standards. This Half Yearly Report does not constitute
statutory accounts as defined by Section 434 of the Companies Act
2006. The financial information for the year ended 31 March 2021 is
based on the statutory accounts for the financial year ended 31
March 2021 that have been filed with the Registrar of Companies and
on which the auditor gave an unqualified audit opinion.
The auditor's report on those accounts did not contain a
statement under Section 498(2) or (3) of the Companies Act 2006.
This Half Yearly Report has not been audited or reviewed by the
Group auditor.
A copy of this Half Yearly Report can be viewed on the Company
website: https://www.cmlmicroplc.com .
16 Approvals
The Directors approved this Half Yearly Report on 23 November
2021.
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IR GZMZMLZKGMZM
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