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CML Cml Microsystems Plc

373.00
1.00 (0.27%)
18 Mar 2024 - Closed
Delayed by 15 minutes
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
  1.00 0.27% 373.00 366.00 380.00 373.00 372.00 372.00 4,901 11:31:11
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Electronic Components, Nec 20.64M 4.81M 0.2978 12.53 60.25M

CML Microsystems PLC Full Year Results (0386R)

12/06/2018 7:00am

UK Regulatory


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TIDMCML

RNS Number : 0386R

CML Microsystems PLC

12 June 2018

12 June 2018

CML Microsystems Plc

("CML" or the "Group")

Full Year Results

CML Microsystems Plc, which designs, manufactures and markets mixed-signal and RF semiconductors, primarily for global communication and solid state storage markets, announces its Full Year Results for the year ended 31 March 2018.

Financial Highlights

   --      Group revenues increased 14% to GBP31.67m (2017: GBP27.74m) 
   --      Gross profit up 12% to GBP22.24m (2017: GBP19.82m) 
   --      Profit before tax up 9% to GBP4.58m (2017: GBP4.21m) 
   --      Basic EPS up 6% to 24.52p (2017: 23.09p) 

-- Total cash balances were a record GBP13.82m (2017: GBP12.45m) after dividend payments of GBP1.58m (2017: GBP1.13m)

   --      Recommended final dividend of 5.8p equates to 7.8p for the year (2017: 7.4p) 

Operational Highlights

   --      Storage 49% of Group revenue 

o Revenue up 22% to GBP15.43m (2017: GBP12.69m)

o Full market launch of new class-leading CompactFlash controller

o Enlarged product range now includes CompactFlash, SD, MMC, USB and SATA host interface standards

   --      Communications 51% of Group revenue 

o Revenue up 10% to GBP16.17m (2017: GBP14.64m)

o Enlarged RF product range now encompasses operation at frequencies up to 3.6GHz

o DMR, M2M/IIoT recorded strong gains against the prior year

o RF semiconductors posted a revenue gain of over 30%

o Released 5 new products

Chris Gurry, Group Managing Director of CML Microsystems commented on the results: "I am pleased to report on another year of continued progress across the Group. Our revenue and EBITDA performances are at all-time highs, as is the year end cash position. These results, achieved whilst continuing to invest in the business, are further validation of the continuing success of our strategy."

"The revenue growth we are seeing today is the result of the continuous research and development investments that we make to deliver the products our customers need. Group products released three to four years ago are now entering the growth phase amongst the customer base and we envisage a repeat of this cycle with our recently released products and those under development, providing us with a long and sustainable sales opportunity pipeline."

"Whilst we cannot predict any issues that may arise in the wider market, the Board believes that CML is well positioned to deliver steady, sustained and profitable growth."

 
CML Microsystems Plc                   www.cmlmicroplc.com 
 Chris Gurry, Group Managing Director   Tel: +44 (0)1621 875 500 
 Neil Pritchard, Group Financial 
 Director 
Cenkos Securities plc                  Tel: +44 (0)20 7397 8900 
 Max Hartley (Corporate Finance) 
 Russell Kerr (Sales) 
SP Angel Corporate Finance LLP         Tel: +44 (0)20 3470 0470 
 Jeff Keating 
Alma PR 
 Josh Royston                            Tel: +44 (0)7780 901979 
 Caroline Forde                          Tel: +44 (0)7779 664584 
 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

I am delighted to report on another year of positive progress, delivering against many of our strategic and financial objectives. Pleasingly, the year has seen the business deliver a number of record financial metrics, with the growth in revenue and profit providing us with the means to continue to invest in the business to ensure we have the right structure and product suite to maintain long-term, sustainable growth. While profit growth in the year has been dampened due to the planned increase in overheads, it is this investment that will ensure CML has the capability to drive through to the next stage of growth.

Results and Dividend

Results for the year were positive, with revenues increasing by 14% to a record GBP31.67m (2017: GBP27.74m), profit before taxation rising by 9% and basic EPS by 6%. Operating cash generation, always considered of high importance, continues to be very healthy. Total cash balances at 31 March 2018 were a record GBP13.82m (2017: GBP12.45m) after dividend payments of GBP1.58m (2017: GBP1.13m) relating to the prior financial year and a maiden interim dividend introduced at the half year. The cash generation is particularly pleasing given the levels of ongoing investment in the Group, with another record investment in research and development being made during the year.

The Board is pleased to recommend an increased total dividend payment for the year, with a final dividend of 5.8p raising the total dividend for the year to 7.8p (2017: 7.4p). If approved, this will be paid on 6 August 2018 to shareholders whose names appear on the register at the close of business on 6 July 2018 with an ex-dividend date of 5 July 2018. 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.

Employees

Following the successful integration of Sicomm, we now have over 220 employees around the world. It is their skill and commitment which forms the basis of the continued success of CML and, on behalf of the Board, I would like to thank them for their ongoing dedication and commitment to excellence.

Prospects and Outlook

Our strategy continues to be to invest in the development of products within areas that we know and understand and where the quality of our products and our competitive advantages enable us to achieve acceptable gross margins. The growth achieved in the year demonstrates the success of this strategy and with new product launches feeding into the pipeline we are confident in our ability to deliver long-term sustainable growth. Following the acquisition and integration of Sicomm, 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.

The Company has long held an outstanding reputation for the quality of its engineering and development teams, and this is now supported by a clear strategy, depth of management and a strengthened global sales team. With record net assets of over GBP41m and net cash of almost GBP14m we have a strong balance sheet on which to drive the Company forward.

In what is CML's 50(th) year as a business, we are confident that the Company is in good shape to deliver our objective of long-term, sustainable growth.

Nigel Clark

Group Non-Executive Chairman

OPERATIONAL AND FINANCIAL REVIEW

Introduction

I am pleased to be able to report on another year of continued progress across the Group. Our revenue and adjusted EBITDA performances are at all-time highs, as is the year end cash position. These results, achieved whilst continuing to invest in the business, are further validation of our strong commitment to research and development and the success of working closely with our customers to design and deliver the products that they need to meet commercial requirements.

Particularly pleasing is that this steady growth remains in line with the expectations that we set out three years ago when the current strategy was communicated and we embarked upon a number of investment and organisational initiatives to position the Company for long-term success. The Group has experienced top line growth of 45% through that period although we are yet to see the full operational benefits given the time it takes for early stage customer engagements to become revenue generating.

We have been delighted by the increase in orders across our customer base and product range. The growth in revenues has been derived largely through improved sales to our existing customers, with the majority of our top 40 customers posting a year on year increase. Importantly, we have also seen a selection of relatively new customers reach a meaningful level of sales, indicating their products have passed through the often lengthy qualification period and gained market acceptance.

During the course of the year, we continued our planned resource investment programme into the business and this is now largely complete. While we will carry on our high level of research and development spend, we now have an appropriate operational structure to manage our business and deliver growth over the medium term. Pleasingly, we are already seeing the impact made by these investments into extra resources, particularly in sales and marketing, with our potential sales pipeline growing well, and a healthy level of new design wins being secured. We are experiencing an underlying uplift in our sales opportunity metrics, which bodes well for further sustainable growth.

Financial Review

Group turnover for the year to 31 March 2018 was GBP31.67m representing an increase of 14% against the prior full year (2017: GBP27.74m). Revenues were higher across both of the main market areas addressed, namely Communications and Storage, with the shipment of products into Asian and European countries being the driver behind that growth. That said, it is important to note that annual revenue comparisons by region can be misleading as some customers can and do alter their manufacturing locations periodically. A fuller revenue analysis at the market application area level is covered later in this report.

Sales in the second half of the year were slightly lower than the first six-months, with extended raw material lead times and currency headwinds being contributing factors. Revenues in the second half were ahead 7% on the comparable period.

Gross profit improved by 12% to GBP22.24m (2017: GBP19.82m) with margins slightly reduced due to product mix.

The year under review represents the first full year of trading following the acquisition of Sicomm in August 2016. As a result of the high levels of investment in research and development and personnel that have been made in the intervening period, distribution and administration costs increased by 15% to GBP18.52m (2017: GBP16.12m). It is noteworthy to report that within these costs, the Group recorded a GBP0.4m foreign exchange loss which, when compared to the gains made in the prior financial year represents a GBP1.2m negative swing. The overall increase in distribution and administration expenditure was also impacted by higher amortisation of development costs at GBP4.75m (2017: GBP4.10m).

As expected, research and development costs for the year remained at elevated levels, totaling GBP6.87m (2017: GBP6.82m). Of this amount, GBP1.19m was expensed (2017: GBP1.06m) and GBP5.68m was capitalised under the Group's research and development policy (2017: GBP5.76m).

Other income consists of three main elements; amounts received from the commercial rental of Group-owned property assets that are now surplus to operational requirements; regional grant income associated with specific engineering development activities and an element of royalty income associated with the sale of third party technology. The amount recorded this year was GBP0.83m (2017: GBP0.61m).

Profit from operations increased by 6% to GBP4.55m compared to a figure of GBP4.31m for the prior year. After accounting for share-based payments, net finance income and a small uplift in the value of the Group's investment property assets of GBP0.14m, a profit before tax of GBP4.58m was recorded (2017: GBP4.21m), equating to growth of 9%.

Customer dependency for the year reflected some movement against the prior year. Contribution from the top two customers fell slightly to a combined contribution of approximately 28%, although only one of these customers was above the 10% threshold. All other customers remained below the 6% level.

The Group continued to benefit from UK tax credits associated with some of its research and development activities and that is the primary driver behind the lower than average rate of taxation achieved. An income tax expense of GBP0.44m was posted against a prior year figure of GBP0.34m.

Profit after tax amounted to GBP4.14m (2017: GBP3.87m), an improvement of 7%, with Basic EPS rising 6% to 24.52p (2017: 23.09p) despite a higher number of ordinary shares in issue.

The Group's cash reserves at 31 March 2018 stood at GBP13.82m, delivering an increase of GBP1.37m when compared to the same cut-off date one year earlier (31 March 2017: GBP12.45m). The balance reported follows a research and development spend of GBP6.87m, dividend payments totaling GBP1.58m and the payment of a warranty retention associated with the Sicomm acquisition of GBP0.32m. Included in the cash balance is a conditional customer prepayment of GBP1.15m made against future product purchases.

The semiconductor industry as a whole has been experiencing extended lead times for raw materials due to capacity constraints. The Group communicated a general tone of caution around the issue at the interim stage and continues to act appropriately to minimize the effects on the business. Against this backdrop, inventory levels at the year-end totaled GBP2.35m (2017: GBP2.15m), with all of the increase attributable to raw materials and work in progress. Finished goods stock levels were lower year on year.

The Group has a historic final salary pension scheme that has been closed to both new members and future accruals for many years. Along with the Company, the trustees and their professional advisers have worked diligently in recent years towards achieving the right balance between adequate scheme funding and business growth objectives. As a result, the scheme funding position has improved and for the year under review a deficit of GBP2.07m has been recorded under accounting rule IAS19 (2017: GBP3.08m). Separately, the most recent triennial actuarial valuation carried out by an independent professionally qualified actuary, as at 31 March 2017, resulted in a net pension surplus of GBP1.89m (1 April 2014: net deficit of GBP1.54m). This actuarial valuation showed that the scheme assets were sufficient to cover 111% of the benefits accrued to members, after allowing for future increases in these benefits.

Strategy Overview

The Group's strategy today remains consistent with that previously communicated. Our semiconductor business continues to be focused on two important niche market areas, industrial storage and industrial communications, 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 a strong and growing reputation in each of these market areas and have a world-class customer base as well as an established sales network which has been improved further through adding resources and the appointment of complementary distributors and representatives in specific regions.

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 have succeeded in generating a diverse revenue stream across a broad range of customers and products and will continue to expand this further. We are, to our customers, a single-source supplier, meaning that once designed in, the displacement of our chips would require some element of end-product redesign.

Ongoing investment in research and development remains a key pillar of our growth strategy and the benefits continue to be 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 deliver significant, profitable revenue generation. We continue to seek acquisition opportunities which meet our strict criteria to complement our ongoing organic growth.

Storage

Our strategy for the Storage market continues to be investment into the expansion of the product range towards increasing our share of existing customer product portfolios whilst simultaneously widening the customer base. Our focus continues to be on strengthening our product portfolio to include all major interface standards used within our intended end-markets and interoperation with all relevant third-party NAND Flash devices from top tier global memory suppliers.

Our enlarged flash memory controller product range now includes CompactFlash, SD, MMC, USB and SATA host interface standards, complemented by an Application Programmers Interface ("API") that our customers are using to develop their own proprietary security or IIoT solutions. A pleasing number of customers have adopted our API through the year and we started to see the resulting end-products launched to market.

Storage revenue for the year amounted to GBP15.43m (2017: GBP12.69m) representing an increase of 22% with the main contributors being increased shipments into the automotive, industrial automation and telecom infrastructure markets. The gain made is evidence that our focus on sustainable growth opportunities has traction. Product mix differed from expectations at the beginning of the year with a higher contribution from products shipped in silicon wafer form, resulting in a negative skew to average selling prices. As has been the case for some time, a number of customers reported being affected by continually tight levels of NAND flash supply coupled with elevated pricing although it is not possible to judge the overall impact on the numbers being reported.

It was a busy year in terms of operational progress. In August 2017 the full market launch of a new class-leading CompactFlash controller took place, enabling customers to use more recently available flash memory technologies within their CompactFlash-based storage products and benefit from the advantages they offer. A raised level of promotional activities occurred around industry-specific exhibitions in the US, China and Europe, supplemented by white papers and conference presentations designed to raise awareness of the technical superiority and reliability of our semiconductor solutions. Customer facing resources were enhanced further and a new EU-based distribution agreement was announced.

Encouragingly, the level of interest being generated through promotion of the enlarged product portfolio increased and a number of customer designs from prior years passed through the qualification phase and have begun shipping in production quantities. It was pleasing to record a design win for one of the world's largest server manufacturers. With servers typically containing a number of storage devices, each with a different host interface, the server market represents an additional growth area for the Group.

Overall, our progress with Storage activities was pleasing and the underlying sales opportunity pipeline grew well.

Communications

Our strategy within Communications is to grow customer share and expand the customer base through the development and marketing of products that offer increased functionality within the customers' end product. This includes expanding the product portfolio to include semiconductors with performance characteristics that are expected to widen the addressable market.

The enlarged product range now offers the ability for a single customer product to incorporate up to five separate CML devices. This has the added benefit of generating increased efficiency across our sales and marketing activities and, with the aid of focused demonstration platforms, helps our customers get to market faster and at lower overall cost.

The encouraging progress made in the first six months is reflected in a solid full year performance, with revenues rising 10% to GBP16.17m (2017: GBP14.64m). This figure is even more satisfying given the need to navigate through selected third-party raw material supplier delays as the year progressed. This increase is delivered as a growing number of individual customer projects reach production status and is against a particularly strong performance in the prior year.

In terms of products categories, strong increases were made with the sale of baseband processors for use within voice-centric digital radios, particularly those that operate to the DMR global standard. The Group's Data Modems for "Machine-to-Machine ("M2M") / "Industrial Internet of Things" ("IIoT") applications also recorded strong gains against the prior year, as did the sale of RF semiconductors, posting a revenue gain of over 30%.

In total we released five new products across the year targeted at end markets including marine AIS and VDES, where a technology partnership led to release of a module for a new high-speed data exchange system targeting industry adoption over the coming years. Expansion of the RF product range to field products that operate at frequencies >1GHz has been a well communicated focus and the first two products were released to market. These IC's are suitable for use in satellite communications and other more general applications. A second RF power amplifier IC capable of higher output power was also launched.

The various organisational reporting changes and resource level improvements made in the prior year along with the first full year contribution from the acquisition of Sicomm, all collectively served to drive business forward within what is now a scalable operating structure. A new sales channel agreement was signed in the USA during the year and our manufacturer's representative network was bolstered.

As reported at the interim stage, we experienced strong growth across the focus product groups and a high proportion of the opportunities being worked are for multiple CML IC's within each customer end-product. All things considered, it has been another pleasing year.

Market Developments

The long-term trends that we have consistently highlighted within our two niche industrial application areas remain as strong today as ever. The principal factor for both remains the persistent demand for increasing amounts of data to be transmitted and stored more quickly and securely.

Performance for the full year could have been stronger but for well publicised global constraints in the supply of silicon. The semiconductor market as a whole is in a growth phase at the moment and the knock-on effect of that is for a general tone of caution around raw material lead times. We continue to monitor the situation and act appropriately to minimise any effect this might have on the business. It is particularly pleasing to note that the business delivered against expectations, despite this issue and a negative impact from currency movements in the year, demonstrating the strength of our business model.

Within industrial data storage there are several exciting opportunities in which we are securing a growing number of design wins following successful product qualifications. The automotive sector has performed well again this year and continues to present opportunities for continued growth. Again, it is pleasing to note that progression is in keeping with the dynamics that we had foreseen some years ago. Other areas include industrial automation, the telecoms/network infrastructure market and various security related applications. A number of the major original equipment manufacturers ("OEMs") or tier one suppliers to those OEMs are our customers, meaning we are well positioned to benefit from the ever-growing demand.

The Communications market 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 data throughput requirements from terrestrial and satellite communications applications. The latter is required to meet the needs of the growing M2M and IIoT sectors. Ancillary markets continue to develop which serves to maintain the very fragmented nature of the Group's communications markets. New product releases over the last few of years should serve to capture a higher share of a growing market over time.

Again, we are already suppliers to, or working with, many of the leading OEMs in these areas and the Board believes we are well placed for future growth.

Operational Developments

The investment made in senior people towards the end of the prior year and early into this year has created the necessary capacity and skill set to facilitate the Group's continued growth. This process is now largely complete. Whilst our fixed cost base has increased, the benefits are already being seen with the additions in sales, marketing and customer support functions leading to an improved sales opportunity pipeline.

The other significant investment in the year has been in a new enterprise research planning ("ERP") system which is on track to go-live in the second half of this current financial year. Given the increasing scale and global nature of the business, the ERP system will unify our operating systems across different geographies, which will not only create efficiencies but also improve decision making.

Outlook

The business has continued to perform in line with expectations, which gives us confidence in the future. The lead times and sales cycles on our products are long and the revenue growth we are seeing today is the result of the continuous research and development investments that we make to deliver the products our customers need. Group products released three to four years ago are now entering the growth phase amongst the customer base and we envisage a repeat of this cycle with our recently released products and those under development, providing us with a long and sustainable pipeline of sales opportunities

Both market areas addressed are delivering a satisfying performance and continue to be well placed for future growth. Our focus on research and development investment will remain, whilst other spending initiatives will benefit the business in future years.

Clearly it is not possible to predict issues that may arise in the wider market, but a note of caution needs to be conveyed given one or two raw material supplier issues that were a feature of the latter part of the year to 31 March 2018. These events have the potential to affect customer purchasing patterns and, as a result, we currently expect revenue and profit progress for the year ahead to be weighted towards the second half.

The Board believes that CML is well positioned to deliver steady, sustained growth and expectations are for a further advance in profitability for the year to 31 March 2019.

Chris Gurry

Group Managing Director

Consolidated income statement for the year ended 31 March 2018

 
                                                                 Unaudited               Audited 
                                                                      2018                  2017 
                                               Notes               GBP'000               GBP'000 
---------------------------------------------  -----  --------------------  -------------------- 
Continuing operations 
Revenue                                          1,2                31,674                27,737 
Cost of sales                                                      (9,438)               (7,922) 
---------------------------------------------  -----  --------------------  -------------------- 
Gross profit                                                        22,236                19,815 
Distribution and administration costs                             (18,518)              (16,116) 
---------------------------------------------  -----  --------------------  -------------------- 
                                                                     3,718                 3,699 
Other operating income                                                 829                   614 
---------------------------------------------  -----  --------------------  -------------------- 
Profit from operations                                               4,547                 4,313 
Share--based payments                                                (143)                 (139) 
---------------------------------------------  -----  --------------------  -------------------- 
Profit after share--based payments                                   4,404                 4,174 
Revaluation of investment properties               7                   140                     - 
Finance income                                                          39                    34 
---------------------------------------------  -----  --------------------  -------------------- 
Profit before taxation                                               4,583                 4,208 
---------------------------------------------  -----  --------------------  -------------------- 
Income tax expense                                 4                 (444)                 (341) 
---------------------------------------------  -----  --------------------  -------------------- 
Profit after taxation                                                4,139                 3,867 
---------------------------------------------  -----  --------------------  -------------------- 
Profit after taxation attributable to equity 
 owners of the parent                                                4,139                 3,867 
---------------------------------------------  -----  --------------------  -------------------- 
 
  Basic earnings per share 
From profit for year                               5                24.52p                23.09p 
---------------------------------------------  -----  --------------------  -------------------- 
Diluted earnings per share 
From profit for year                               5                23.95p                22.84p 
---------------------------------------------  -----  --------------------  -------------------- 
 
 
Adjusted EBITDA 
Adjusted EBITDA for year   69,998  8,840 
-------------------------   -----  ----- 
 

Consolidated statement of total comprehensive income for the year ended 31 March 2018

 
                                          Unaudited  Unaudited  Audited  Audited 
                                               2018       2018     2017     2017 
                                            GBP'000    GBP'000  GBP'000  GBP'000 
---------------------------------------   ---------  ---------  -------  ------- 
Profit for the year                                      4,139             3,867 
Other comprehensive income, 
 net of tax: 
Items that will not be reclassified 
 subsequently to profit or 
 loss: 
Actuarial gain/(loss) on retirement 
 benefit obligations                            911             (1,048) 
Deferred tax on actuarial 
 (gain)/loss                                  (155)                 178 
----------------------------------------  ---------  ---------  -------  ------- 
Items reclassified subsequently 
 to profit or loss upon derecognition: 
Foreign exchange differences                   (84)               1,068 
----------------------------------------  ---------  ---------  -------  ------- 
Other comprehensive income 
 for the year net of taxation 
 attributable to equity owners 
 of the parent                                             672               198 
----------------------------------------  ---------  ---------  -------  ------- 
Total comprehensive income 
 for the year attributable 
 to the equity holders of the 
 parent                                                  4,811             4,065 
----------------------------------------  ---------  ---------  -------  ------- 
 

Consolidated statement of financial position as at 31 March 2018

 
                                     Unaudited  Unaudited  Audited  Audited 
                                          2018       2018     2017     2017 
                                       GBP'000    GBP'000  GBP'000  GBP'000 
----------------------------------   ---------  ---------  -------  ------- 
Assets 
Non--current assets 
Goodwill                                            9,190             9,306 
Other intangible assets                             1,570             1,339 
Property, plant and equipment                       5,410             5,330 
Investment properties                               3,690             3,550 
Investments                                            83                85 
Development costs                                  12,542            11,401 
Deferred tax assets                                 1,068             1,419 
-----------------------------------  ---------  ---------  -------  ------- 
                                                   33,553            32,430 
Current assets 
Inventories                              2,351               2,154 
Trade receivables and prepayments        3,112               2,697 
Current tax assets                         675                 971 
Cash and cash equivalents               13,816              12,447 
-----------------------------------  ---------  ---------  -------  ------- 
                                                   19,954            18,269 
 ----------------------------------  ---------  ---------  -------  ------- 
Total assets                                       53,507            50,699 
-----------------------------------  ---------  ---------  -------  ------- 
Liabilities 
Current liabilities 
Trade and other payables                            5,292             5,757 
Current tax liabilities                                48                57 
Provision - current                                   181                51 
-----------------------------------  ---------  ---------  -------  ------- 
                                                    5,521             5,865 
Non--current liabilities 
Deferred tax liabilities                 3,950               3,692 
Retirement benefit obligation            2,070               3,084 
Provision - non current                    196                 423 
-----------------------------------  ---------  ---------  -------  ------- 
                                                    6,216             7,199 
 ----------------------------------  ---------  ---------  -------  ------- 
Total liabilities                                  11,737            13,064 
-----------------------------------  ---------  ---------  -------  ------- 
Net assets                                         41,770            37,635 
-----------------------------------  ---------  ---------  -------  ------- 
Capital and reserves attributable to equity owners 
 of the parent 
Share capital                                         856               843 
Share premium                                       9,068             8,319 
Capital redemption reserve                              9                 9 
Treasury shares - own share 
 reserve                                            (190)             (190) 
Share--based payments reserve                         443               504 
Foreign exchange reserve                            1,302             1,386 
Accumulated profits                                30,282            26,764 
-----------------------------------  ---------  ---------  -------  ------- 
Total shareholders' equity                         41,770            37,635 
-----------------------------------  ---------  ---------  -------  ------- 
 

Consolidated cash flow statement for the year ended 31 March 2018

 
 
                                    Unaudited  Audited 
                                         2018     2017 
                                      GBP'000  GBP'000 
---------------------------------   ---------  ------- 
Operating activities 
Profit for the year before 
 taxation                               4,583    4,208 
Adjustments for: 
Depreciation                              411      325 
Amortisation of development 
 costs                                  4,745    4,100 
Amortisation of intangibles 
 recognised on acquisition                155      102 
Revaluation of investment 
 properties                             (140)        - 
Movement in non-cash items 
 (pension)                              (103)     (31) 
Share--based payments                     143      139 
Movement in provisions                   (48)      474 
Finance income                           (39)     (34) 
Movement in working capital             (874)    1,745 
----------------------------------  ---------  ------- 
Cash flows from operating 
 activities                             8,833   11,028 
Income tax received/(paid)                309    (224) 
----------------------------------  ---------  ------- 
Net cash flows from operating 
 activities                             9,142   10,804 
----------------------------------  ---------  ------- 
Investing activities 
Purchase of acquisition, net 
 of cash acquired                           -  (3,576) 
Payment of warranty retention           (320)        - 
Receipt of escrow cash deposit              -      385 
Purchase of property, plant 
 and equipment                          (488)    (450) 
Investment in development 
 costs                                (5,680)  (5,763) 
Investment in intangibles               (392)        - 
Disposal of property, plant 
 and equipment                              -       17 
Finance income                             39       34 
----------------------------------  ---------  ------- 
Net cash flows from investing 
 activities                           (6,841)  (9,353) 
----------------------------------  ---------  ------- 
Financing activities 
Issue of ordinary shares                  762       25 
Purchase of own shares for 
 cancellation                               -    (669) 
Dividends paid to shareholders        (1,581)  (1,134) 
----------------------------------  ---------  ------- 
Net cash flows from financing 
 activities                             (819)  (1,778) 
----------------------------------  ---------  ------- 
Increase/(decrease) in cash 
 and cash equivalents                   1,482    (327) 
----------------------------------  ---------  ------- 
Movement in cash and cash 
 equivalents: 
At start of year                       12,447   13,596 
Increase/(decrease) in cash 
 and cash equivalents                   1,482    (327) 
Effects of exchange rate changes        (113)    (822) 
----------------------------------  ---------  ------- 
At end of year                         13,816   12,447 
----------------------------------  ---------  ------- 
 
 

Consolidated statement of changes in equity for the year ended 31 March 2018

 
 
                          Share    Share     Capital   Treasury   Share--based   Foreign      Accumulated 
                        capital  premium  redemption     Shares       Payments  exchange          profits 
                                             reserve    reserve        reserve   reserve                      Total 
                        GBP'000  GBP'000     GBP'000    GBP'000        GBP'000   GBP'000          GBP'000   GBP'000 
----------------------  -------  -------  ----------  ---------  -------------  --------  ---------------  -------- 
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 gain 
 recognised directly 
 to equity                                                                                        (1,048)   (1,048) 
Deferred tax on 
 actuarial gain                                                                                       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 - 
 audited                    843    8,319           9      (190)            504     1,386           26,764    37,635 
----------------------  -------  -------  ----------  ---------  -------------  --------  ---------------  -------- 
Profit for year                                                                                     4,139     4,139 
Other comprehensive 
 income net of taxes 
Foreign exchange 
 differences                                                                        (84)                       (84) 
Net actuarial gain 
 recognised directly 
 to equity                                                                                            911       911 
Deferred tax on 
 actuarial gain                                                                                     (155)     (155) 
----------------------  -------  -------  ----------  ---------  -------------  --------  ---------------  -------- 
 
  Total comprehensive 
  income for year             -        -           -          -              -      (84)            4,895     4,811 
----------------------  -------  -------  ----------  ---------  -------------  --------  ---------------  -------- 
                            843    8,319           9      (190)            504     1,302           31,659    42,446 
Transactions with owners 
 in their capacity as owners 
Issue of ordinary 
 shares                      13      749                                                                        762 
Dividend paid                                                                                     (1,581)   (1,581) 
Total transactions 
 with owners in their 
 capacity as owners          13      749           -          -              -         -          (1,581)     (819) 
----------------------  -------  -------  ----------  ---------  -------------  --------  ---------------  -------- 
Share--based payments 
 in year                                                                   143                                  143 
Cancellation/transfer 
 of share--based 
 payments                                                                (204)                        204         - 
----------------------  -------  -------  ----------  ---------  -------------  --------  ---------------  -------- 
At 31 March 2018 - 
 unaudited                  856    9,068           9      (190)            443     1,302           30,282    41,770 
----------------------  -------  -------  ----------  ---------  -------------  --------  ---------------  -------- 
 
 

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 2018           Audited 2017 
                                       ----------------------  ---------------------- 
                                       Semiconductor           Semiconductor 
                                          components    Group     components    Group 
                                             GBP'000  GBP'000        GBP'000  GBP'000 
-------------------------------------  -------------  -------  -------------  ------- 
Total segmental revenue                       31,674   31,674         27,737   27,737 
-------------------------------------  -------------  -------  -------------  ------- 
Profit 
Segmental result                               4,404    4,404          4,174    4,174 
-------------------------------------  -------------  -------  -------------  ------- 
Finance income                                             39                      34 
Revaluation of investment properties                      140                       - 
Income tax expense                                      (444)                   (341) 
-------------------------------------  -------------  -------  -------------  ------- 
Profit after taxation                                   4,139                   3,867 
-------------------------------------  -------------  -------  -------------  ------- 
 
  Assets and liabilities 
Segmental assets                              48,074                  44,759 
                                       -------------           ------------- 
Unallocated corporate assets                           48,074                  44,759 
Investment properties                                   3,690                   3,550 
Deferred tax assets                                     1,068                   1,419 
Current tax assets                                        675                     971 
-------------------------------------  -------------  -------  -------------  ------- 
Consolidated total assets                              53,507                  50,699 
-------------------------------------  -------------  -------  -------------  ------- 
Segmental liabilities                          5,669                   6,231 
                                       -------------           ------------- 
Unallocated corporate liabilities                       5,669                   6,231 
Deferred tax liabilities                                3,950                   3,692 
Current tax liabilities                                    48                      57 
Retirement benefit obligation                           2,070                   3,084 
-------------------------------------  -------------  -------  -------------  ------- 
Consolidated total liabilities                         11,737                  13,064 
-------------------------------------  -------------  -------  -------------  ------- 
 

Other segmental information

 
                                              Unaudited 2018           Audited 2017 
                                          ----------------------  ---------------------- 
                                          Semiconductor           Semiconductor 
                                             components    Group     components    Group 
                                                GBP'000  GBP'000        GBP'000  GBP'000 
----------------------------------------  -------------  -------  -------------  ------- 
Property, plant and equipment additions             488      488            450      450 
----------------------------------------  -------------  -------  -------------  ------- 
Development cost additions                        5,680    5,680          5,763    5,763 
----------------------------------------  -------------  -------  -------------  ------- 
Intangible additions                                392      392              -        - 
----------------------------------------  -------------  -------  -------------  ------- 
Depreciation                                        411      411            325      325 
----------------------------------------  -------------  -------  -------------  ------- 
Amortisation of development costs                 4,745    4,745          4,100    4,100 
----------------------------------------  -------------  -------  -------------  ------- 
Amortisation of acquired intangibles                155      155            102      102 
----------------------------------------  -------------  -------  -------------  ------- 
Other non--cash income                              103      103             31       31 
----------------------------------------  -------------  -------  -------------  ------- 
 

Geographical information (by origin)

 
                                         Rest of 
                                     UK   Europe  Americas  Far East    Total 
                                GBP'000  GBP'000   GBP'000   GBP'000  GBP'000 
------------------------------  -------  -------  --------  --------  ------- 
Year ended 31 March 2018 
 - unaudited 
------------------------------  -------  -------  --------  --------  ------- 
Revenue to third parties 
 - by origin                      5,073    7,355     5,848    13,398   31,674 
------------------------------  -------  -------  --------  --------  ------- 
Property, plant and equipment     5,024      290        65        31    5,410 
------------------------------  -------  -------  --------  --------  ------- 
Investment properties             3,690        -         -         -    3,690 
------------------------------  -------  -------  --------  --------  ------- 
Development costs                 4,424    8,118         -         -   12,542 
------------------------------  -------  -------  --------  --------  ------- 
Intangibles - software              392        -         -         -      392 
------------------------------  -------  -------  --------  --------  ------- 
Goodwill                              -    3,512         -     5,678    9,190 
------------------------------  -------  -------  --------  --------  ------- 
Other intangible assets 
 arising on acquisition               -        -         -     1,178    1,178 
------------------------------  -------  -------  --------  --------  ------- 
Total assets                     23,915   15,556     2,582    11,454   53,507 
------------------------------  -------  -------  --------  --------  ------- 
 
Year ended 31 March 2017 
 - audited 
Revenue to third parties 
 - by origin                      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 
------------------------------  -------  -------  --------  --------  ------- 
 

2 Revenue

 
The geographical classification of business turnover 
 (by destination) is as follows: 
 
                                                       Unaudited  Audited 
                                                            2018     2017 
Continuing business                                      GBP'000  GBP'000 
-----------------------------------------------------  ---------  ------- 
Europe                                                     9,477    7,600 
Far East                                                  15,764   13,460 
Americas                                                   5,919    6,117 
Others                                                       514      560 
-----------------------------------------------------  ---------  ------- 
                                                          31,674   27,737 
-----------------------------------------------------  ---------  ------- 
 
 

3 Dividend - paid and proposed

During the year a final dividend of 7.4p per ordinary share of 5p was paid in respect of the year ended 31 March 2017. A maiden interim dividend of 2.0p per ordinary was paid on 15 December 2017 to shareholders on the Register on 1 December 2017.

It is proposed to pay a final dividend of 5.8p per ordinary share of 5p, taking the total dividend amount in respect of the year ended 31 March 2018 to 7.8p. It is proposed to pay the final dividend of 5.8p, if approved, on 6 August 2018 to shareholders registered on 6 July 2018 (2017: 7 August 2017 to shareholders registered on 7 July 2017).

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 
                                                       2018     2017 
                                                    GBP'000  GBP'000 
------------------------------------------------  ---------  ------- 
Current tax 
UK corporation tax on results of the year             (595)    (419) 
Adjustment in respect of previous years                  44      (1) 
------------------------------------------------  ---------  ------- 
                                                      (551)    (420) 
Foreign tax on results of the year                      626      511 
Foreign tax - adjustment in respect of previous 
 years                                                 (12)        - 
------------------------------------------------  ---------  ------- 
Total current tax                                        63       91 
------------------------------------------------  ---------  ------- 
Deferred tax 
Current period movement                                 387      272 
Adjustments to deferred tax charge in respect 
 of previous years                                      (6)     (22) 
------------------------------------------------  ---------  ------- 
Total deferred tax                                      381      250 
------------------------------------------------  ---------  ------- 
Tax charge on profit on ordinary activities             444      341 
------------------------------------------------  ---------  ------- 
 

5 Earnings per share

 
                             Unaudited  Audited 
                                  2018     2017 
Basic earnings per share 
From profit for year            24.52p   23.09p 
Diluted earnings per share 
From profit for year            23.95p   22.84p 
---------------------------  ---------  ------- 
 

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 2018                      Audited 2017 
                              ---------------------------------  --------------------------------- 
                                           Weighted                           Weighted 
                                            average                            average    Earnings 
                                             number   Earnings                  number         per 
                               Profit     of shares   per 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                           4,139    16,876,684       24.52    3,867    16,745,457       23.09 
----------------------------  -------  ------------  ----------  -------  ------------  ---------- 
 
  Diluted earnings per 
  share 
----------------------------  -------  ------------  ----------  -------  ------------  ---------- 
Basic earnings per 
 share                          4,139    16,876,684       24.52    3,867    16,745,457       23.09 
Dilutive effect of 
 share options                      -       402,348      (0.57)        -       183,699      (0.25) 
----------------------------  -------  ------------  ----------  -------  ------------  ---------- 
Diluted earnings per 
 share 
  *    from profit for year     4,139    17,279,032       23.95    3,867    16,929,156       22.84 
----------------------------  -------  ------------  ----------  -------  ------------  ---------- 
 

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 
                                                             2018     2017 
                                                          GBP'000  GBP'000 
------------------------------------------------------  ---------  ------- 
Profit after taxation (earnings)                            4,139    3,867 
Adjustments for: 
Finance income                                               (39)     (34) 
Income tax expense                                            444      341 
Depreciation                                                  411      325 
Amortisation of development costs                           4,745    4,100 
Amortisation of intangibles recognised on acquisition         155      102 
Share-based payments                                          143      139 
------------------------------------------------------  ---------  ------- 
Adjusted EBITDA                                             9,998    8,840 
------------------------------------------------------  ---------  ------- 
 

7 Investment properties

Investment properties are measured at fair value and are revalued annually by the Directors and in every third year by independent Chartered Surveyors on an open market basis. No depreciation is provided on freehold investment properties or on leasehold investment properties. In accordance with IAS 40, gains and losses arising on revaluation of investment properties are shown in the income statement. Everett Newlyn, Chartered Surveyors and Commercial Property Consultants professionally valued the investment properties on the basis of open market value as at 31 March 2018, for which the valuation of GBP3,690,000 has been advised (2017: GBP3,550,000).

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 though their end-customers may be a diversified portfolio. Key customer relationships are closely monitored; however changes in buying patterns of a key customer could have an adverse effect on the Group's performance.

Key risks of a non-financial nature

The Group is a small player operating in a highly competitive global market that is undergoing continual and geographical change. The Group's ability to respond to many competitive factors including, but not limited to, pricing, technological innovations, product quality, customer service, raw material availabilities, manufacturing capabilities and employment of qualified personnel will be key in the achievement of its objectives, but its ultimate success will depend on the demand for its customers' products since the Group is a component supplier.

A substantial proportion of the Group's revenue and earnings are derived from outside the UK and so the Group's ability to achieve its financial objectives could be impacted by risks and uncertainties associated with local legal requirements (including the UK's withdrawal from the European Union, or 'Brexit'), political risk, the enforceability of laws and contracts, changes in the tax laws, terrorist activities, natural disasters or health epidemics.

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 2017 financial statements.

10 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 2017 is based on the statutory accounts for the financial year ended 31 March 2017 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 2018 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 22 June 2018 and delivered to the Registrar of Companies following the Company's Annual General Meeting on 1 August 2018.

The financial information contained in this announcement does not constitute statutory accounts for the year ended 31 March 2018 or 2017 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.

11 Approval

The Directors approved this annual results announcement on 11 June 2018.

Glossary

   AIS                   Automatic Identification System 
   API                   Application Programmers Interface 
   EBITDA            Earnings before interest, tax, depreciation and amortisation 
   EU                    European Union 
   DMR                 Digital Mobile Radio 
   IAS                   International Accounting Standard 
   IC                     Integrated Circuit 
   IFRS                 International Financial Reporting Standards 
   IIoT                        Industrial Internet of Things 
   IP                      Intellectual Property 
   M2M                 Machine--to--machine 
   MMC                Multimedia Card 
   NAND               Not And 
   OEM                 Original Equipment Manufacturer 
   R&D                  Research and Development 
   RF                     Radio Frequency 
   SATA                Serial ATA interface 
   SD                    Secure Digital 
   USB                  Universal Serial Bus 
   VDES                VHF Data Exchange System 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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