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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Cml Microsystems Plc | LSE:CML | London | Ordinary Share | GB0001602944 | ORD 5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 20.00 | 5.48% | 385.00 | 380.00 | 390.00 | 385.00 | 365.00 | 365.00 | 13,710 | 16:03:08 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Electronic Components, Nec | 20.64M | 4.81M | 0.2978 | 12.93 | 62.19M |
From Apr 2019 to Apr 2024
TIDMCML
RNS Number : 8727H
CML Microsystems PLC
13 June 2017
13 June 2017
CML Microsystems Plc
("CML" or "the Group")
Full Year Results
CML Microsystems Plc, which designs, manufactures and markets mixed-signal and Radio Frequency (RF) semiconductors, primarily for global communication and solid state storage markets, announces its Full Year Results for the year ended 31 March 2017.
Financial Highlights
The full year results include eight months of contribution from the Sicomm acquisition
-- Group revenues increased 22% to GBP27.74m (2016: GBP22.83m) -- Gross profit up 22% to GBP19.82m (2016: GBP16.25m) -- Profit before tax up 27% to GBP4.21m (2016: GBP3.32m) -- Basic EPS up 28% to 23.09p (2016: 18.03p) -- Strong operating cashflow. Net cash reduced to GBP12.45m (2016: GBP13.60m), following:
o Net cash spend of GBP3.58m on acquisition of Sicomm;
o Share buy back totalling GBP0.67m at a price of GBP3.70 per share; and
o Dividend payment in respect of 2016 of GBP1.13m
-- Recommended final dividend increased to 7.4p (2016: 7.0p)
Operational Highlights
-- Storage 46% of group revenue
o Revenue up 9% to GBP12.69m (2016: GBP11.65m)
o Enlarged product range now includes USB, SD, SATA and MMC interface technologies
o Developed an Applications Programmers Interface (API) enabling customers to design their own proprietary security or IoT solutions
o Added Micron Technology Inc., to the customer list
-- Communications 53% of group revenue
o Revenue up 36% to GBP14.64m (2016: GBP10.78m)
-- Sicomm contribution being GBP1.66m
o Growth exceeded internal expectations, led by organic growth and the significant contribution from Sicomm
o New senior management and operational personnel recruited
o Global launch of first wireless power amplifier IC - opens new application areas such as meter reading and RFID
Chris Gurry, Group Managing Director of CML Microsystems commented on the results: "These financial results show the effects of the Group's long term focus on research and development and the strength of our customer relationships. The lead times on new products reaching meaningful revenue generation are typically long and the majority of revenues in this period relate to designs from some years ago. Therefore, as more recent new product design-ins start to reach production we would expect to see further revenue advances.
"Bookings through the latter part of the financial year were good and momentum into the new financial year is encouraging, although we are starting with a higher cost base reflecting further investments made in people and products for sustainable, long term growth. With a strong balance sheet, healthy cash balances and a clear and defined position in the markets in which we operate, we look forward to the year ahead with confidence. Board expectations are for a further advance in profitability to 31 March 2018."
CML Microsystems Plc www.cmlmicroplc.com Chris Gurry, Group Managing Tel: +44 (0)1621 875 Director 500 Neil Pritchard, Group Financial Director Cenkos Securities plc Tel: +44 (0)20 7397 8900 Alex Aylen (Sales) Max Hartley (Corporate Finance) SP Angel Corporate Finance Tel: +44 (0)20 3463 2260 LLP Jeff Keating Alma PR Josh Royston Tel: +44 (0)7780 901979 Robyn Fisher Tel: +44 (0)7540 706191
About CML Microsystems PLC
CML designs and develops semiconductors for the industrial storage and communications markets. The Group utilises a combination of in-house and outsourced manufacturing and has trading operations in Europe, the Far East and USA. CML targets niche markets with strong growth profiles and high barriers to entry. It has secured a diverse, blue chip customer base, including some of the world's leading telecoms equipment providers and industrial product manufacturers.
The spread of its customers and products largely protects the business from the cyclicality usually associated with the semiconductor industry. Growth in its end markets is being driven by factors such as the ever-increasing trend towards solid state storage devices in the commercial and industrial sectors, the upgrading of telecoms infrastructure around the world and the growing prevalence of private commercial communications networks for voice and/or data communications linked to the industrial internet of things (IIoT).
The Group is cash-generative, has no borrowings and is dividend paying.
CHAIRMAN'S STATEMENT
Introduction
Investment is a cornerstone of the CML Group's sustainable growth strategy and has once again been a major theme for CML over the past year. On the one hand the Group has benefited from prior years' focus on Research & Development spend, operational infrastructure including additional staff and from a part year contribution from our largest single investment, the acquisition of Sicomm. On the other hand, we have made further investments to ensure that the Group's prosperity continues long into the future. The platform for this investment lies in the Group's strategic focus on niche markets that we know and understand and where the quality of our products and our competitive advantages enable us to achieve strong gross margins.
In last year's report I mentioned the intended acquisition of Sicomm, which completed on 26 July 2016. I am pleased to inform shareholders that the business has integrated successfully and the benefits are already being seen. Sicomm has performed well this year, and, as anticipated, it has given the Group greater access to the Chinese market with strong local knowledge and customer relationships. Further benefits will be seen in future years as the opportunities increase for cross selling the Group's enlarged product range. Acquisitions will continue to form part of our strategy, coupled with a strong focus on organic growth, and the Board remains alert to opportunities that meet our strict criteria.
Results and Dividend
Results for the year were encouraging and include eight months of the Sicomm business acquired in July. Revenues increased by 22% to GBP27.74 million (2016: GBP22.83m), considerably ahead of the expectations set at the start of the year. Profit before taxation increased by 27% and basic EPS increased by 28%. Operating cash generation, always considered of high importance, continues to be very healthy. Total cash balances at 31 March 2017 were GBP12.45m (2016: GBP13.60m) after a net cash spend of GBP3.58m on the acquisition of Sicomm, GBP0.67m spent on a share buy back at a price of GBP3.70 per share and a dividend payment relating to the prior financial year of GBP1.13m. The cash generation is particularly pleasing given the levels of ongoing investment in the Group, with record investment in research and development being made during the year.
The Board is pleased to recommend an improved final dividend of 7.4p (2016: 7.0p) which, if approved, will be paid on 7 August 2017 to shareholders whose names appear on the register at the close of business on 7 July 2017 with an ex-dividend date of 6 July 2017. The dividend is in line with the Company's progressive policy and reflects the performance for the year, coupled with our confidence for the future whilst retaining a strong balance sheet and sufficient cash to take advantage of opportunities that may present themselves.
Management
Throughout the course of the year further appointments were made globally to strengthen the management team and to provide the necessary infrastructure and support to enable the Group to achieve its growth ambitions. I am pleased to report that the Board is confident that we now have the majority of the team in place to deliver those ambitions.
On behalf of the Board I would also like to thank Ron Shashoua for his long and dedicated service to CML. Ron joined the Company in 1996 as a non-executive Director and has been a very active and dedicated contributor to the Group's progress right up to his retirement at the end of March 2017. At the same time I would like to welcome Geoff Barnes our new non-executive Director who joined us on 1 April 2017. Geoff's experience and expertise should strengthen the Board and assist in taking the Group forward.
Behind all of our successes are the highly skilled and talented employees around the world that continue to strive to achieve our goals. On behalf of the Board I would like to thank them for their ongoing dedication and passion. I would also like to officially welcome those employees who have joined us through Sicomm, thank them for their contribution to date and let them know how much we all look forward to a continued strong relationship.
Prospects and Outlook
The Board's strategy of investing for the future is bearing fruit and we will continue along that path. As well as record investment in research and development, CML has invested in further headcount to create the right structure for further success. Obviously this adds to the overheads in the short term but is necessary to deliver long term sustainable growth.
Last year's acquisition of Sicomm has strengthened the product range and solidified our position in the Communications market. This I am sure will enhance our organic growth and we continue to review acquisition opportunities that will complement our skills, market knowledge and enlarged geographical reach.
CML has a strong position in its chosen markets with a clearly defined strategy for growth and a highly capable management team. Coupled with a strong balance sheet and underpinned by good levels of order bookings through the second half of the year just finished, this gives the Board confidence for the financial year just started and beyond.
Nigel Clark
Group Non-Executive Chairman
OPERATIONAL AND FINANCIAL REVIEW
Introduction
I'm pleased to be able to report on another solid year, with progress made across most aspects of the business and further building blocks put in place for the future. The momentum experienced in the first half of the year continued throughout and we began to see the benefits of the ongoing operational and product development investments made. We are well positioned in our chosen niche markets, namely Communication and Storage, with the Communications sector making a particularly pleasing impact. The Sicomm acquisition which completed in July 2016 has improved our footprint in China and added local expertise in an important market. Integration has gone well and the contribution to the Group for the eight months since acquisition has been encouraging, both financially and culturally. Further senior management appointments have been made within our UK and US business units and the Group's geographic footprint expanded through the opening of a sales and support office in Orange County, California. Coupled with the operational changes made at the end of the prior financial year, we believe we now have an enhanced structure in place to execute our strategy.
Financial Review
The Group's financial performance includes an eight month contribution from Sicomm, commencing August 2016. Total revenues for the year amounted to GBP27.74m (2016: GBP22.83m) with the contribution from Sicomm being GBP1.66m. Gross margins remained consistent leading to a 22% increase in gross profit to GBP19.82m (2016: GBP16.25m). The Group did benefit from currency movements through the year although it continues to have a somewhat natural hedge in respect of foreign currency exchange rate exposure.
The main driver for organic revenue growth was the continued increase in shipments to existing long-term customers, with a significant number of our top 40 customers increasing their spend. This growth was augmented by the addition of Sicomm, a currency tailwind and an element of revenue from the effects of a last-time-buy programme relating to a number of legacy Communications products.
Overall revenue grew across all major geographic regions although the strongest advance was made in the Far East region which includes predominantly China & Hong Kong, Japan, South Korea, Singapore, Taiwan and Malaysia. Far East revenues grew by 26% and now account for approximately 49% of the Group total. Revenue from the Americas grew by 19% with European revenues ahead by 16%.
As anticipated, distribution and administration costs increased to GBP16.12m (2016: GBP13.27m). The three main factors were higher amortisation of R&D activities at GBP4.10m (2016: GBP3.33m), higher direct staff costs resulting from investments made in new personnel and associated restructuring activities and the addition of Sicomm to the Group. Additionally, costs associated with onerous lease provisioning were balanced by the positive effects of foreign exchange. The total R&D spend for the year amounting to GBP6.82m (2016: GBP6.09m) rose 12% and equates to 25% of Group revenues.
Other operating income for the year amounted to GBP0.61m (2016: GBP0.41m) and resulted from rental income obtained from ex-operational property assets along with grant income received from R&D activities. This increase drove profit from operations up 27% to GBP4.31m (2016: GBP3.39m).
After adjusting for the combined effect of share-based payments and finance income, a profit before taxation figure of GBP4.21m was achieved (2016: GBP3.32m).
Adjusted EBITDA grew by 27% to GBP8.84m (2016: GBP6.97m).
The overall tax charge for the year was slightly lower at GBP0.34m (2016: GBP0.40m) reflecting the continuing benefit of UK R&D tax credits along with the additional effect of accumulated tax losses within the acquired Sicomm business. Profit after tax increased to GBP3.87m and represented an increase of 32% year on year (2016: GBP2.93m).
Cash reserves at 31 March 2017 reduced to GBP12.45m (31 March 2016: GBP13.60m) representing a pleasing result following significant cash outflows for the Sicomm acquisition, a dividend payment of GBP1.13m for the prior financial year, GBP0.67m spent on the purchase and cancellation of Company shares and a record R&D investment of GBP6.82m. The cash balance includes a conditional customer prepayment of GBP1.50m (2016: GBP1.39m) against future product purchases.
Inventory levels were higher at GBP2.15m (2016: GBP1.57m) with the increase mostly attributable to the Sicomm acquisition.
Basic earnings per share advanced 28% to 23.09p (2016: 18.03p).
Strategy Overview
Our semiconductor business continues to be focused on two important niche market areas, industrial storage applications and the industrial communications market, where our proprietary IP along with the quality and reliability of our technology sets us apart from our peers and makes us an integral part of our customers' products. We have developed a strong reputation in each of these sectors and have a world-class customer base and established sales network which has been improved further through the acquisition of Sicomm.
The on-going demand for increasing amounts of data to be delivered faster and stored more reliably and securely continues to drive demand for our products. We are committed to generating a diverse revenue stream across a broad range of customers and products. We are, to our customers, a single-source supplier, meaning that once designed in, the displacement of our chips would require end-product redesign.
Ongoing investment in R&D remains a key pillar of our growth strategy and the benefits are already being seen. This focus on developing new products should lead to design wins with both new and existing customers. This will enable us to improve our market share as well as increase our total addressable market and, we believe, deliver significant revenue generation. We continue to seek acquisition opportunities which meet our strict criteria to complement our ongoing organic growth.
Storage
The main element of our strategy within Storage is to ensure that the Group continues to increase business with our existing customers whilst simultaneously adding new customers through R&D investment. Our focus has been on expanding our product portfolio to include all major interface standards used within our target industrial end-markets and interoperation with all relevant third-party Flash Memory devices from the global tier 1 flash memory suppliers.
We have transitioned from a narrow "Controller" product portfolio with only CompactFlash as the available interface, to an enlarged product range that now also includes USB, SD, SATA & MMC interface technologies. Additionally, we have developed an Application Programmers Interface (API) and licensed it to a number of new customers enabling them to design their own proprietary security or IoT solutions in the knowledge they are built upon our highly reliable standard Controller solutions.
Storage performed well through the year with revenue increasing by 9% to GBP12.69m (2016: GBP11.65m). Management continued to focus firmly on sustainable growth opportunities, occasionally at the expense of a short-term gain. Separately, one or two customers reported being affected by the tightening of their NAND flash supply through the second half although it is not possible to judge the overall impact, if any, on the numbers reported. Importantly, from a new business opportunity perspective, the momentum experienced in the first half of the year continued into the second six months assisted by the enlarged and increasingly attractive product portfolio. Particularly pleasing was the addition of Micron Technology Inc., a world leader in innovative memory solutions, to our customer list through our wholly owned subsidiary, Hyperstone, which was announced in March 2017. Hyperstone's USB 3.1 Flash Memory controller solution, U9, has been designed into Micron's new eU500 embedded USB module, an embedded solid state storage solution aimed at networking, telecoms and Industrial Internet of Things (IIoT) markets. This followed on from the addition in the first half of the year of our proprietary hyMap technology to the USB product range which enables our industrial customers to use memory that has a lower "cost per bit". The contribution from the USB controller product line started to become meaningful, as expected.
Evolution of the hyMap technology continued both in terms of functionality offered and flash memory compatibility. Whilst the objective is to expand the product portfolio and widen the addressable market, a level of R&D spend is required to refresh the product portfolio periodically. In that respect a new Compact Flash controller solution was sampled to initial customers in financial Q4 ahead of the full market launch planned for the first half of the new financial year.
Encouragingly, order book visibility for Storage products improved a little providing greater levels of comfort. However, whether this is indicative of a long term trend or merely the current state of the market remains unclear.
Communications
During the year under review we amalgamated the reporting of the Wireless and Wireline market sectors under the single sector of Communications. Our strategy within Communications is to grow customer share and expand the customer base through R&D investments that increase the functionality that our IC's deliver within the customers' end product. This includes growing the product portfolio to include IC's with performance characteristics intended to widen the addressable market.
The enlarged organic product range has grown further through the acquisition of Sicomm culminating in the ability for a single customer radio design to potentially incorporate up to five separate Group IC's. This has the added benefit of generating increased efficiency across our sales and marketing activities and, with the aid of focused demonstration platforms, will help our customers get their own products to market faster.
Across the year, we delivered a pleasing performance and strengthened our position in the end markets addressed. Building further upon the performance reported at the interim stage, revenues for the full year increased to GBP14.64m, representing a gain of 36% against the comparable 12 month period (2016: GBP10.78m). This growth exceeded internal expectations and was possible through the combined effects of organic growth, a level of "last time buy" activity and the significant contribution from Sicomm whose revenues are wholly reported under the Communications sector.
A number of organisational reporting adjustments and resource level improvements were made throughout the year with a specific focus on Communications activities. This resulted in new senior management and operational personnel being recruited in the UK and USA. These changes were a continuation of the operational investments conveyed at the interim stage and have given the business increased focus and a scalable operating structure.
In total we released three new products across the year culminating in February 2017 with the global launch of our first wireless power amplifier IC which has generated a good level of interest and opens new application areas such as meter reading and RFID. Two additional product releases that were planned for the final quarter of the year experienced delays due to internal qualification processes and extended engineering development timescales. Whilst this is somewhat disappointing, these two products are expected to be released to market during the first half of the year to 31 March 2018.
For the year ahead we are anticipating continuing high levels of R&D investment towards new roadmap products. At the same time, we will be enhancing our silicon development methodologies to ensure resources and activities are performance optimised for evolving customer needs.
Market Developments
Solid long-term underlying growth trends exist within the two main industrial application areas addressed with the principal factor for both being the persistent demand for increasing amounts of data, to be transmitted and stored more quickly and securely.
The industrial data storage market has several specific areas which are exhibiting exciting opportunities for which we have either secured design wins or are at the somewhat earlier stage of qualifying products with our customers. These areas include the telecoms/network infrastructure market, industrial automation, various security applications and the in-vehicle infotainment market.
A number of the major original equipment manufacturers (OEMs) or tier 1 suppliers to those OEMs in each of these markets are our customers meaning we are well positioned to benefit from the growing demand.
Within the Communications market, growth areas include: the transition to higher-capacity digital networks within voice-centric markets and, in data-centric markets, the increasing data throughput requirements within terrestrial and satellite communications applications. The latter is required to meet the needs of the growing Machine to Machine (M2M) and the Industrial Internet of Things sectors (IIoT).
Again, we are already suppliers to, or working with, many of the leading OEMs in these areas and believe we are well placed for future growth.
Customer dependency across the year as a whole was broadly unchanged against the prior year. Two customers contributed greater than 10% to Group revenues with a combined contribution of approximately 25%. All other customers were below the 5% threshold.
Operational Developments
Sicomm acquisition and integration
The acquisition of Sicomm which completed in July 2016 was a significant milestone for the Group. Building on our existing capability in the region, the addition of Sicomm greatly enhances our footprint in China, providing us with a talented workforce with an in-depth knowledge of the dynamics of a key market. The integration has progressed well and we are particularly pleased with the levels of interaction across our global teams. Sicomm has delivered a good performance in line with our expectations. As the opportunities for cross-selling of product lines increases and as we collaborate further in both development and pipeline opportunities we expect to see further benefits.
The Group remains alert to acquisition opportunities that can complement our existing operations and which meet our strict criteria. We believe that there is significant organic growth to be achieved and can therefore afford to be selective.
Investment in People
We continued to enhance our operating structure through further investment in people across our operations globally. Customer service levels are extremely important to CML and we now have the right teams in place to be able to support our increasing levels of engagement as well as to support future growth initiatives.
These additional hires were across a range of skills, including senior management, sales, marketing and engineering support. The opening of an office in Orange County, California, during February improved our geographic coverage and is expected to further improve our service levels.
Outlook
These financial results show the effects of the Group's long term focus on research and development and the strength of our customer relationships. The lead times on new products reaching meaningful revenue generation are typically long and the majority of revenues in this period relate to designs from some years ago. Therefore as more recent new product design-ins start to reach production we would expect to see further revenue advances.
Bookings through the latter part of the financial year were good and momentum into the new financial year is encouraging, although we are starting with a higher cost base reflecting the investments made in people and products. With a strong balance sheet, healthy cash balances and a clear and defined position in the markets in which we operate, we look forward to the year ahead with confidence. Board expectations are for a further advance in profitability to 31 March 2018.
Chris Gurry
Group Managing Director
Consolidated income statement for the year ended 31 March 2017
Hot Features
Premium
Unaudited Audited
2017 2016
Notes GBP'000 GBP'000
------------------------------------- ----- --------------------- --------
Continuing operations
Revenue 1,2 27,737 22,833
------------------------------------- ----- --------------------- --------
Consisting of:
Revenue - excluding acquisition 26,076 22,833
Revenue - acquisition 1,661 -
------------------------------------- ----- --------------------- --------
Cost of sales (7,922) (6,580)
------------------------------------- ----- --------------------- --------
Gross profit 19,815 16,253
Distribution and administration
costs (16,116) (13,272)
------------------------------------- ----- --------------------- --------
3,699 2,981
Other operating income 614 405
------------------------------------- ----- --------------------- --------
Profit from operations 4,313 3,386
Share--based payments (139) (117)
------------------------------------- ----- --------------------- --------
Profit after share--based payments 4,174 3,269
Finance income 34 55
------------------------------------- ----- --------------------- --------
Profit before taxation 4,208 3,324
------------------------------------- ----- --------------------- --------
Consisting of:
Profit before taxation - excluding
acquisition 3,728 3,324
Profit before taxation - acquisition 480 -
------------------------------------- ----- --------------------- --------
Income tax expense 4 (341) (399)
------------------------------------- ----- --------------------- --------
Profit after taxation 3,867 2,925
------------------------------------- ----- --------------------- --------
Profit after taxation attributable
to equity owners of the parent 3,867 2,925
------------------------------------- ----- --------------------- --------
Basic earnings per share
From profit for year 5 23.09p 18.03p
------------------------------------- ----- --------------------- --------
Diluted earnings per share
From profit for year 5 22.84p 17.94p
------------------------------------- ----- --------------------- --------
Adjusted EBITDA
Adjusted EBITDA for year 68,840 6,970
------------------------- ----- -----
Consisting of:
Adjusted EBITDA - excluding acquisition 6 8,247 6,970
Adjusted EBITDA - acquisition 6 593 -
---------------------------------------- -------------------- -----
Consolidated statement of total comprehensive income for the year ended 31 March 2017
Unaudited Unaudited Audited Audited
2017 2017 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- --------- --------- ------- -------
Profit for the year 3,867 2,925
Other comprehensive income, net
of tax:
Items that will not be reclassified
subsequently to profit or loss:
Actuarial (loss)/gain on retirement
benefit obligations (1,048) 1,570
Deferred tax on actuarial loss/(gain) 178 (283)
---------------------------------------- --------- --------- ------- -------
Items reclassified subsequently
to profit or loss upon derecognition:
Foreign exchange differences 1,068 584
---------------------------------------- --------- --------- ------- -------
Other comprehensive income for
the year net of taxation attributable
to equity owners of the parent 198 1,871
---------------------------------------- --------- --------- ------- -------
Total comprehensive income for
the year attributable to the equity
holders of the parent 4,065 4,796
---------------------------------------- --------- --------- ------- -------
Consolidated statement of financial position as at 31 March 2017
Unaudited Unaudited Audited Audited
2017 2017 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- ---------- --------- ------- -------
Assets
Non--current assets
Goodwill 9,306 3,512
Other intangible assets arising
on acquisition 1,339 -
Property, plant and equipment 5,330 5,171
Investment properties 3,550 3,550
Investments 85 -
Development costs 11,401 9,292
Deferred tax assets 1,419 893
---------------------------------------- ---------- --------- ------- -------
32,430 22,418
Current assets
Inventories 2,154 1,571
Trade receivables and prepayments 2,697 3,458
Current tax assets 971 830
Cash and cash equivalents 12,447 13,596
---------------------------------------- ---------- --------- ------- -------
18,269 19,455
--------------------------------------- ---------- --------- ------- -------
Total assets 50,699 41,873
---------------------------------------- ---------- --------- ------- -------
Liabilities
Current liabilities
Trade and other payables 5,757 4,190
Current tax liabilities 57 39
Provision - current 51 -
---------------------------------------- ---------- --------- ------- -------
5,865 4,229
Non--current liabilities
Deferred tax liabilities 3,692 3,001
Retirement benefit obligation 3,084 2,067
Provision - non current 423 -
---------------------------------------- ---------- --------- ------- -------
7,199 5,068
--------------------------------------- ---------- --------- ------- -------
Total liabilities 13,064 9,297
---------------------------------------- ---------- --------- ------- -------
Net assets 37,635 32,576
---------------------------------------- ---------- --------- ------- -------
Capital and reserves attributable to equity owners of the
parent
Share capital 843 813
Share premium 8,319 5,700
Capital redemption reserve 9 -
Treasury shares - own share reserve (190) (190)
Share--based payments reserve 504 388
Foreign exchange reserve 1,386 318
Accumulated profits 26,764 25,547
---------------------------------------- ---------- --------- ------- -------
Total shareholders' equity 37,635 32,576
---------------------------------------- ---------- --------- ------- -------
Consolidated cash flow statement for the year ended 31 March 2017
Unaudited Audited
2017 2016
GBP'000 GBP'000
----------------------------------------- --------- -------
Operating activities
Profit for the year before taxation 4,208 3,324
Adjustments for:
Depreciation 325 254
Amortisation of development costs 4,100 3,330
Amortisation of intangibles recognised
on acquisition 102 -
Movement in non-cash items (31) 13
Share--based payments 139 117
Movement in provisions 474 -
Finance income (34) (55)
Movement in working capital 1,745 317
------------------------------------------ --------- -------
Cash flows from operating activities 11,028 7,300
Income tax (paid)/received (224) 279
------------------------------------------ --------- -------
Net cash flows from operating activities 10,804 7,579
------------------------------------------ --------- -------
Investing activities
Purchase of acquisition, net of
cash acquired (3,576) -
Purchase of property, plant and
equipment (450) (443)
Investment in development costs (5,763) (5,356)
Receipt/(payment) of escrow cash
deposit 385 (331)
Disposal of property, plant and
equipment 17 -
Finance income 34 55
------------------------------------------ --------- -------
Net cash flows from investing activities (9,353) (6,075)
------------------------------------------ --------- -------
Financing activities
Issue of ordinary shares 25 -
Purchase of treasury shares - (190)
Purchase of own shares for cancellation (669) -
Dividend paid to shareholders (1,134) (1,118)
------------------------------------------ --------- -------
Net cash flows from financing activities (1,778) (1,308)
------------------------------------------ --------- -------
(Decrease)/increase in cash and
cash equivalents (327) 196
------------------------------------------ --------- -------
Movement in cash and cash equivalents:
At start of year 13,596 13,188
(Decrease)/increase in cash and
cash equivalents (327) 196
Effects of exchange rate changes (822) 212
------------------------------------------ --------- -------
At end of year 12,447 13,596
------------------------------------------ --------- -------
Consolidated statement of changes in equity for the year ended 31 March 2017
Capital Foreign
Share Share redemption Treasury Share--based exchange Accumulated
capital premium reserve shares payments reserve profits Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ------- ------- ----------- -------- ------------ -------------- ----------- --------
At 31 March 2015 -
audited 813 5,700 - - 287 (266) 22,437 28,971
---------------------- ------- ------- ----------- -------- ------------ -------------- ----------- --------
Profit for year 2,925 2,925
Other comprehensive income
net of taxes
Foreign exchange
differences 584 584
Net actuarial gain
recognised directly
to equity 1,570 1,570
Deferred tax on
actuarial gain (283) (283)
---------------------- ------- ------- ----------- -------- ------------ -------------- ----------- --------
Total comprehensive
income for year - - - - - 584 4,212 4,796
---------------------- ------- ------- ----------- -------- ------------ -------------- ----------- --------
813 5,700 - - 287 318 26,649 33,767
Transactions with owners
in
their capacity as owners
Dividend paid (1,118) (1,118)
Purchase of treasury
shares (190) (190)
---------------------- ------- ------- ----------- -------- ------------ -------------- ----------- --------
Total transactions
with owners in their
capacity as owners - - - (190) - - (1,118) (1,308)
---------------------- ------- ------- ----------- -------- ------------ -------------- ----------- --------
Share--based payments
in year 117 117
Cancellation/transfer
of share--based
payments (16) 16 -
---------------------- ------- ------- ----------- -------- ------------ -------------- ----------- --------
At 31 March 2016 -
audited 813 5,700 - (190) 388 318 25,547 32,576
---------------------- ------- ------- ----------- -------- ------------ -------------- ----------- --------
Profit for year 3,867 3,867
Other comprehensive
income net of taxes
Foreign exchange
differences 1,068 1,068
Net actuarial loss
recognised directly
to equity (1,048) (1,048)
Deferred tax on
actuarial loss 178 178
---------------------- ------- ------- ----------- -------- ------------ -------------- ----------- --------
Total comprehensive
income for year - - - - - 1,068 2,997 4,065
---------------------- ------- ------- ----------- -------- ------------ -------------- ----------- --------
813 5,700 - (190) 388 1,386 28,544 36,641
Transactions with owners
in their capacity as owners
Issue of ordinary
shares re acquisition 39 2,594 2,633
Issue of ordinary
shares - 25 25
Dividend paid (1,134) (1,134)
Share purchase for
cancellation (9) 9 (669) (669)
---------------------- ------- ------- ----------- -------- ------------ -------------- ----------- --------
Total transactions
with owners in their
capacity as owners 30 2,619 9 - - - (1,803) 855
---------------------- ------- ------- ----------- -------- ------------ -------------- ----------- --------
Share--based payments
in year 139 139
Cancellation/transfer
of share--based
payments (23) 23 -
---------------------- ------- ------- ----------- -------- ------------ -------------- ----------- --------
At 31 March 2017 -
unaudited 843 8,319 9 (190) 504 1,386 26,764 37,635
---------------------- ------- ------- ----------- -------- ------------ -------------- ----------- --------
1 Segmental analysis
Reported segments and their results in accordance with IFRS 8, are based on internal management reporting information that is regularly reviewed by the chief operating decision maker (C. A. Gurry). The measurement policies the Group uses for segmental reporting under IFRS 8 are the same as those used in its financial statements.
Information about revenue, profit/loss, assets and liabilities
Unaudited 2017 Audited 2016
---------------------- ----------------------
Semiconductor Semiconductor
components Group components Group
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ------------- ------- ------------- -------
Total segmental revenue 27,737 27,737 22,833 22,833
---------------------------------- ------------- ------- ------------- -------
Consisting of:
Segmental revenue - excluding
acquisition 26,076 26,076 22,833 22,833
Segmental revenue - acquisition 1,661 1,661 - -
---------------------------------- ------------- ------- ------------- -------
Profit
Segmental result 4,174 4,174 3,269 3,269
---------------------------------- ------------- ------- ------------- -------
Consisting of:
Segmental result - excluding
acquisition 3,694 3,694 3,269 3,269
Segmental result - acquisition 480 480 - -
---------------------------------- ------------- ------- ------------- -------
Finance income 34 55
Income tax expense (341) (399)
---------------------------------- ------------- ------- ------------- -------
Profit after taxation 3,867 2,925
---------------------------------- ------------- ------- ------------- -------
Assets and liabilities
Segmental assets 44,759 44,759 36,600 36,600
------------- -------------
Unallocated corporate assets
Investment properties 3,550 3,550
Deferred tax assets 1,419 893
Current tax assets 971 830
---------------------------------- ------------- ------- ------------- -------
Consolidated total assets 50,699 41,873
---------------------------------- ------------- ------- ------------- -------
Segmental liabilities 6,231 6,231 4,190 4,190
------------- -------------
Unallocated corporate liabilities
Deferred tax liabilities 3,692 3,001
Current tax liabilities 57 39
Retirement benefit obligation 3,084 2,067
---------------------------------- ------------- ------- ------------- -------
Consolidated total liabilities 13,064 9,297
---------------------------------- ------------- ------- ------------- -------
Other segmental information
Unaudited 2017 Audited 2016
---------------------- ----------------------
Semiconductor Semiconductor
components Group components Group
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ------------- ------- ------------- -------
Property, plant and equipment
additions 450 450 443 443
--------------------------------- ------------- ------- ------------- -------
Development cost additions 5,763 5,763 5,356 5,356
--------------------------------- ------------- ------- ------------- -------
Depreciation 325 325 254 254
--------------------------------- ------------- ------- ------------- -------
Amortisation of development
costs 4,100 4,100 3,330 3,330
--------------------------------- ------------- ------- ------------- -------
Amortisation of acquired
intangibles 102 102 - -
--------------------------------- ------------- ------- ------------- -------
Other non--cash income/(expense) 31 31 (13) (13)
--------------------------------- ------------- ------- ------------- -------
Geographical information
The acquired Sicomm Group of Companies are included within the 'Far East' classification below.
UK Rest of Europe Americas Far East Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ------- -------------- -------- -------- -------
Year ended 31 March
2017 - unaudited
---------------------- ------- -------------- -------- -------- -------
Revenue to third
parties 6,744 4,856 6,047 10,090 27,737
---------------------- ------- -------------- -------- -------- -------
Property, plant and
equipment 5,056 243 16 15 5,330
---------------------- ------- -------------- -------- -------- -------
Investment properties 3,550 - - - 3,550
---------------------- ------- -------------- -------- -------- -------
Development costs 3,827 7,574 - - 11,401
---------------------- ------- -------------- -------- -------- -------
Goodwill - 3,512 - 5,794 9,306
---------------------- ------- -------------- -------- -------- -------
Other intangible
assets arising on
acquisition - - - 1,339 1,339
---------------------- ------- -------------- -------- -------- -------
Total assets 35,192 11,482 1,969 2,056 50,699
---------------------- ------- -------------- -------- -------- -------
Year ended 31 March
2016 - audited
Revenue to third
parties 5,037 4,082 4,858 8,856 22,833
---------------------- ------- -------------- -------- -------- -------
Property, plant and
equipment 4,997 143 12 19 5,171
---------------------- ------- -------------- -------- -------- -------
Investment properties 3,550 - - - 3,550
---------------------- ------- -------------- -------- -------- -------
Development costs 3,121 6,171 - - 9,292
---------------------- ------- -------------- -------- -------- -------
Goodwill - 3,512 - - 3,512
---------------------- ------- -------------- -------- -------- -------
Total assets 28,281 10,100 1,412 2,080 41,873
---------------------- ------- -------------- -------- -------- -------
2 Revenue
The geographical classification of business turnover (by destination)
is as follows:
Unaudited Audited
2017 2016
Continuing business GBP'000 GBP'000
---------------------------------------------------------------------- --------- -------
Europe 7,600 6,571
Far East 13,460 10,704
Americas 6,117 5,122
Others 560 436
---------------------------------------------------------------------- --------- -------
27,737 22,833
---------------------------------------------------------------------- --------- -------
3 Dividend - paid and proposed
It is proposed to pay a dividend of 7.4p per ordinary share of 5p in respect of the year ended 31 March 2017. During the year a dividend of 7.0p per ordinary share of 5p was paid in respect of the year ended 31 March 2016. It is proposed to pay the dividend, if approved, on 7 August 2017 to shareholders registered on 7 July 2017 (2016: 29 July 2016 to shareholders registered on 24 June 2016).
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
2017 2016
GBP'000 GBP'000
-------------------------------------------- --------- -------
Current tax
UK corporation tax on results of the
period (419) (501)
Adjustment in respect of previous
periods (1) -
-------------------------------------------- --------- -------
(420) (501)
Foreign tax on results of the period 511 433
Foreign tax - adjustment in respect
of previous periods - (2)
-------------------------------------------- --------- -------
Total current tax 91 (70)
-------------------------------------------- --------- -------
Deferred tax
Current period movement 272 453
Adjustments to deferred tax charge
in respect of previous periods (22) 16
-------------------------------------------- --------- -------
Total deferred tax 250 469
-------------------------------------------- --------- -------
Tax charge on profit on ordinary activities 341 399
-------------------------------------------- --------- -------
5 Earnings per share
Unaudited Audited
2017 2016
Basic earnings per share
From profit for year 23.09p 18.03p
From operations excluding acquisition 20.17p 18.03p
-------------------------------------- --------- -------
Diluted earnings per share
From profit for year 22.84p 17.94p
From operations excluding acquisition 19.95p 17.94p
-------------------------------------- --------- -------
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 2017 Audited 2016
---------------------------------- ------------------------------------
Weighted Earnings Weighted Earnings
average number per average 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 3,867 16,745,457 23.09 2,925 16,219,037 18.03
-------------------------------------------- ------- --------------- -------- ------- --------------- ----------
Basic earnings
per share
- from operations
excluding acquisition 3,377 16,745,457 20.17 2,925 16,219,037 18.03
-------------------------------------------- ------- --------------- -------- ------- --------------- ----------
Diluted earnings
per share
-------------------------------------------- ------- --------------- -------- ------- --------------- ----------
Basic earnings
per share 3,867 16,745,457 23.09 2,925 16,219,037 18.03
Dilutive effect
of share options - 183,699 (0.25) - 86,877 (0.09)
-------------------------------------------- ------- --------------- -------- ------- --------------- ----------
Diluted earnings
per share
* from profit for year 3,867 16,929,156 22.84 2,925 16,305,914 17.94
-------------------------------------------- ------- --------------- -------- ------- --------------- ----------
Diluted earnings
per share
* from operations excluding acquisition 3,377 16,929,156 19.95 2,925 16,305,914 17.94
-------------------------------------------- ------- --------------- -------- ------- --------------- ----------
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
2017 2016
GBP'000 GBP'000
--------------------------------------- --------- -------
Profit after taxation (earnings) 3,867 2,925
Adjustments for:
Finance income (34) (55)
Income tax expense 341 399
Depreciation 325 254
Amortisation of development costs 4,100 3,330
Amortisation of intangibles recognised
on acquisition 102 -
Share-based payments 139 117
--------------------------------------- --------- -------
Adjusted EBITDA 8,840 6,970
--------------------------------------- --------- -------
7 Investment properties
Investment properties are revalued at each discrete period end by the directors and every third year by independent Chartered Surveyors on an open market basis. No depreciation is provided on freehold investment properties or on leasehold investment properties. In accordance with IAS 40, gains and losses arising on revaluation of investment properties are shown in the income statement. Everett Newlyn, Chartered Surveyors and Commercial Property Consultants professionally valued the investment properties on the basis of open market value as at 31 March 2015. The Directors do not consider that the present valuation has materially changed as at 31 March 2017 having considered the local property market.
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. Furthermore, 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. 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, manufacturing capabilities and employment of qualified personnel will be key in the achievement of its objectives, but its ultimate success will depend on the demand for its customers' products since the Group is a component supplier. A substantial proportion of the Group's revenue and earnings are derived from outside the UK and so the Group's ability to achieve its financial objectives could be impacted by risks and uncertainties associated with local legal requirements, the enforceability of laws and contracts, changes in the tax laws, terrorist activities, natural disasters or health epidemics.
A substantial proportion of the Group's revenue and earnings are derived from outside the UK and so the Group's ability to achieve its financial objectives could be impacted by risks and uncertainties associated with local legal requirements, the enforceability of laws and contracts, changes in the tax laws, terrorist activities, natural disasters or health epidemics.
9 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 2016 financial statements.
10 Acquisition of Sicomm group of companies
Following the definitive agreement to acquire all its shares announced on 27 May 2016, and having satisfied the principal regulatory conditions and other transaction closing conditions, the Group took control (100% of voting rights) of the China--based Wuxi Sicomm Technologies Ltd ("Sicomm") and affiliated companies on 3 August 2016. The total consideration was $11.05m (GBP8.01m), payable in cash and in shares (see below). The 774,181 new shares were admitted for trading by the London Stock Exchange in August 2016. The majority of the shares are subject to specific lock--in restrictions over a three year period and were provided under existing AGM resolution approval.
Founded in 2003, Sicomm is a fabless semiconductor company and solutions provider specialising in the development of integrated baseband processors and RF semiconductors for global wireless communication markets. Sicomm has approximately 30 employees and is headquartered in Wuxi, China, with offices in Shanghai and Quanzhou. The company's product range, which partially competes with existing CML solutions, is targeted for use within consumer, industrial and professional radio products and focuses on the customer need to achieve the right balance between cost, functionality and technical performance.
This acquisition expands the Group's product portfolio, strengthens its Far Eastern regional support resources and reinforces CML's position as a leader in the professional and industrial wireless communication semiconductor market.
For the above reasons, combined with the anticipated profitability of Sicomm products in other Group markets, synergies to arise from integrating the Sicomm business into existing Group businesses, plus the ability to hire the workforce of the Sicomm group of companies (including the founder and management team), the Group paid a premium over the acquisition net assets, giving rise to goodwill. All intangible assets in accordance with IFRS3 Business Combinations were recognised at their provisional fair values on the date of acquisition, with the residual excess over net assets being recognised as goodwill. Intangibles arising from the acquisition consist of brand values, customer relationships and intellectual property and have been independently valued by professional advisors.
The following table summarises the consideration and provisional fair values of assets acquired and liabilities assumed at the date of acquisition:
Unaudited
GBP'000
----------------------------------- ----------
Property, plant and equipment 20
Long-term equity investment 84
Intangible fixed assets:
Brands 96
Customer relationships 934
Intellectual property 402
Deferred tax assets 191
Inventories 212
Trade receivables and prepayments 128
Cash and cash equivalents 1,456
Trade and other payables (1,028)
Deferred tax liabilities (154)
----------------------------------- ----------
Net assets acquired 2,341
----------------------------------- ----------
Goodwill 5,669
----------------------------------- ----------
Acquisition cost 8,010
----------------------------------- ----------
There are no non-controlling interests in relation to the Sicomm acquisition. Fair values in the above table have only been determined provisionally and may be subject to change in the light of any subsequent new information becoming available in time. The review of the fair value of assets and liabilities acquired will be completed within 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:
Unaudited GBP'000
--------------------- ------------------
Cash 5,377
Share consideration 2,633
--------------------- ------------------
Total consideration 8,010
--------------------- ------------------
Net cash outflow arising on acquisition:
Unaudited
GBP'000
------------------------------------------ ------------
Cash consideration paid (less cash
retention) 5,032
Cash returned under escrow due diligence
deposit (385)
Acquisition-related costs 281
Cash and cash equivalents within
the Sicomm business on acquisition (1,456)
------------------------------------------ ------------
Total net cash outflow on acquisition 3,472
------------------------------------------ ------------
The cash consideration excludes a GBP348,000 (RMB3m) retention which is included in other payables. Other costs relating to the acquisition have not been included in the consideration cost. Directly attributable acquisition costs include external legal and accounting costs incurred in compiling the acquisition legal contracts and the performance of due diligence activity and amount to GBP281,000. These costs have been charged in distribution and administrative expenses in the consolidated income statement.
Sicomm, in common with other Chinese companies, has a 31 December calendar year end. In the eight months to 31 March 2017, Sicomm contributed revenue of GBP1,661,000 and net profit before taxation of GBP480,000. Had the acquisition taken place from the start of the Group's financial year (from 1 April 2016), and based on figures prior to CML control, management estimate that Sicomm would have contributed revenue of GBP2,235,000 and net profit before taxation of GBP569,000 to the Group results.
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 2016 is based on the statutory accounts for the financial year ended 31 March 2016 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 2017 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 23 June 2017 and delivered to the Registrar of Companies following the Company's Annual General Meeting on 2 August 2017.
The financial information contained in this announcement does not constitute statutory accounts for the year ended 31 March 2017 or 2016 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 annual results announcement on 12 June 2017.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SFMFAEFWSESM
(END) Dow Jones Newswires
June 13, 2017 02:00 ET (06:00 GMT)
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