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CML Cml Microsystems Plc

315.00
0.00 (0.00%)
24 Jul 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
  0.00 0.00% 315.00 310.00 320.00 315.00 315.00 315.00 18,359 08:00:21
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Electronic Components, Nec 20.64M 4.81M 0.3003 10.49 50.45M

CML Microsystems PLC Half Year Results (6302V)

05/12/2023 7:00am

UK Regulatory


Cml Microsystems (LSE:CML)
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TIDMCML

RNS Number : 6302V

CML Microsystems PLC

05 December 2023

5 December 2023

CML Microsystems Plc

("CML", the "Company" or the "Group")

Half Year Results

Trading in line with expectations, Acquired MwT business and amalgamation progressing well

CML Microsystems Plc, which develops mixed-signal, RF and microwave semiconductors for global communications markets, today announces its unaudited results for the six months ended 30 September 2023.

Financial Highlights

 
 --   Revenue increased by 5% to GBP10.58m (H1 FY22: GBP10.05m) 
 --   Profit from operations, excluding the GBP0.30m of external 
       costs incurred in this half relating to the MwT acquisition, 
       increased by 9% to GBP1.90m (H1 FY23: GBP1.75m) 
 --   Diluted EPS decreased to 9.31p (H1 FY22: 11.58p) on higher 
       tax charge 
 --   Strong cash balances at period end of GBP20.95m (31 March 
       2023: net cash of GBP22.26m), a reduction of GBP1.31m after 
       a GBP1.75m spend on share buybacks and GBP0.9m on dividend 
       payments 
 --   Recommended half year dividend of 5p per share (H1 FY23: 5p 
       per share) 
 

Operational Highlights

 
 --   Post period end, successful completion of MwT acquisition 
       on 2 October 2023, significantly expanding the Group's product 
       portfolio and complementing existing R&D capabilities 
 --   Increasing presence in new and emerging growth sectors driving 
       growth 
 --   Board and senior management evolution, with appointment of 
       Mark McCabe as Chief Operating Officer, Michelle Jones as 
       Director of Finance and Nathan Zommer soon to be joining as 
       Non-Executive Director. 
 

Chris Gurry, Managing Director of CML Microsystems Plc, commented on the results:

"The results achieved for the six months to 30 September 2023 have been robust and the Board expects trading for the full year to be in line with expectations. CML's sustained revenue growth during the period, despite the macroenvironment headwinds facing the sector as a whole, is pleasing and serves to both validate our strategy and highlight the resilience of our business.

The successful acquisition of MwT in October 2023 marked a significant milestone for the Group. The resulting expansion of our product portfolio, and the complementary R&D capabilities that this acquisition brings, positions CML well to fully capitalise on the opportunities available in the new and expanding markets in which we operate.

The future addition of Nathan Zommer as Non-Executive Director, alongside the promotion of Mark McCabe to the Board as Chief Operating Officer and Michelle Jones to Director of Finance, significantly enhances the expertise and experience on the CML Board while adding notable impetus as we continue on our growth journey.

The financial and operational progress made during the period has been pleasing and gives the Board a great deal of confidence as we continue to deliver value to our shareholders."

Enquiries:

 
CML Microsystems Plc                   www.cmlmicroplc.com 
 Chris Gurry, Group Managing Director   Tel: +44 (0) 1621 875 500 
 Nigel Clark, Executive Chairman 
Shore Capital (Nominated Adviser       Tel: +44 (0) 20 7408 4090 
 and Broker) 
 Toby Gibbs 
 James Thomas 
 Lucy Bowden 
 Fiona Conroy (Corporate Broking) 
Alma Strategic Communications          Tel: +44 (0)20 3405 0205 
 Josh Royston 
 Andy Bryant 
 Robyn Fisher 
 Matthew Young 
 
 

About CML Microsystems PLC

CML develops mixed-signal, RF and microwave semiconductors for global communications markets. The Group utilises a combination of outsourced manufacturing and in-house testing with trading operations in the UK, Asia and USA. CML targets sub-segments within Communication markets with strong growth profiles and high barriers to entry. It has secured a diverse, blue chip customer base, including some of the world's leading commercial and industrial product manufacturers.

The spread of its customers and diversity of the product range largely protects the business from the cyclicality usually associated with the semiconductor industry. Growth in its end markets is being driven by factors such as the appetite for data to be transmitted faster and more securely, the upgrading of telecoms infrastructure around the world and the growing prevalence of private commercial wireless networks for voice and/or data communications linked to the industrial internet of things (IIoT).

The Group is cash-generative, has no debt and is dividend paying.

Chairman's statement

Introduction

Our relatively recent strategy of concentrating efforts on the communications semiconductor market and expanding the sub-sectors addressed continues to serve us well, despite the challenging macroeconomic conditions. We were very pleased to finally announce on 2 October 2023 the closing of the acquisition of Microwave Technology Inc ("MwT") but the unexpected delays in completing the transaction, due to the associated regulatory processes, means that amalgamation activities that we hoped to have well underway by now have only just started.

We are confident the assimilation work will be achieved successfully but realisation of the benefits will correspondingly move out beyond our initial expectations. That said, MwT substantially enlarges the Group's product portfolio, complements our existing R&D capabilities and expands our system level understanding, allowing us to better capitalise on the market opportunities we see.

Results and trading

Despite the global macroeconomic backdrop, the Group's financial performance for the six months to 30 September 2023 was positive and generally in line with our expectations. In a reverse of the comparative period of the prior year, revenue growth was tempered by the weakening of the average US Dollar rate against Sterling. The movement in currencies becomes less material at the profit level since costs below the revenue line are primarily denominated in other currencies.

Revenue for the first six months increased by 5% to GBP10.58m (H1 FY22: GBP10.05m). Gross profit increased 4% to GBP7.94m (H1 FY22: GBP7.62m) and profit from operations increased by 9%, before the GBP0.30m of external costs incurred in this half relating to the acquisition of MwT. Profit before taxation only marginally increased to GBP1.87m (H1 FY22: GBP1.83). The tax charge of 22% is higher than expected but reflects the changes in rules relating to R&D tax credits and a higher corporation tax rate. The result is that profit after taxation fell to GBP1.47m (H1 FY22: GBP1.87m), EBITDA was broadly flat at GBP3.23m (H1 FY23: GBP3.25m) and diluted EPS was 9.31p (H1 FY23: 11.58p). Cash balances at the end of the period stood at GBP20.95m (31 March 2023: GBP22.26m), a reduction of GBP1.31m after a GBP1.75m spend on share buybacks and GBP932k on dividend payments.

Dividend

The Board is recommending an unchanged half year dividend of 5.0p per share (H1 FY23: 5.0p per share), payable on 12 January 2024 to shareholders on the Register on 22 December 2023, with an ex-dividend date of 21 December 2023.

Property

Following the sale of the first parcel of land just prior to commencing the current financial year, building work has commenced at the Group's Essex Headquarters site, Oval Park, including relocating the car parks to the rear of the buildings and is scheduled to be completed before the current year end. The remaining excess land, circa 15 acres, which was granted planning permissions in February 2023 was placed on the market early October.

Further interest in the Group's excess commercial property in Fareham, Hampshire is currently being explored, following cessation of the negotiations referenced in the Group's annual report.

Board and senior management

At the time of the Annual General Meeting ("AGM") in August, I announced my intention to revert to the role of Non-Executive Chairman once the MwT acquisition had been completed and for this to coincide with additional appointments. In the last week we have strengthened the Board with the promotion of Mark McCabe to the position of Chief Operating Officer and the promotion of Michelle Jones to the senior management position of Director of Finance. These actions enhance the Board and leadership team bringing a diverse set of skills, expertise and experience whilst adding impetus. With these enhancements in place, I am stepping back to the position of Non-Executive Chairman with immediate effect.

The formalities of appointing Nathan Zommer as a Non-Executive Director are expected to be completed in the next couple of weeks following which an announcement will be made.

Employees

As I indicated at the start of my statement, this is a very demanding year and we clearly need the support of all employees to succeed with our ambitions. Throughout our operations globally, we are fortunate to have a great team of talented, hard-working, and dedicated employees and the Board thanks them all sincerely.

Prospects and outlook

The business continues to make good progress and has the appropriate blend of experience, enthusiasm and skills to continue to achieve its medium-term objectives.

Despite the challenges brought by multiple headwinds facing businesses in all sectors, we currently expect full year revenues to be slightly ahead of current market expectations, with the majority of the growth attributable to the addition of MwT. Profitability is expected to be in line with current market expectations, with anticipated costs relating to the incorporation of MwT likely to temper further growth this year.

Notwithstanding the macroeconomic environment, the Board has confidence in the strategy being followed and believes the robustness of our business model and a continued focus on sustainable growth will deliver a meaningful uplift in performance beyond the current year.

Nigel Clark

Non-Executive Chairman

5 December 2023

Operational and financial review

Introduction

The Group began the current financial year focused on growth, supported by relatively resilient end markets, a healthy order book and an evolving presence in new and emerging growth sectors.

Amidst an inflationary environment, global economic uncertainty and a backdrop of several industry commentators predicting the semiconductor market will shrink by double-digit percentage points in 2023, the delivery of revenue growth through the first six-month period is a pleasing outcome and serves to highlight the resilience of our business.

Equally welcome was the completion of the acquisition of Microwave Technology, Inc ("MwT") on 2 October 2023, ending what was a protracted process due to US government national security considerations relating to the technology and skillset the business possesses. Work is now underway to unlock the global potential of the MwT product portfolio and to exploit the synergies that exist.

First half progress has been positive at the revenue level, although larger than anticipated acquisition costs affected the underlying growth in operating profitability. Excluding these one-off costs, profit from operations increased by 9%. Nevertheless, prior investments in people and products coupled with the strategy being followed positions CML well to capture meaningful growth as the enlarged Group moves forward.

Strategy

The Group's vision is to be the first-choice semiconductor partner to technology innovators, together transforming how the world communicates.

Our focus is on the definition, development and marketing of standard semiconductor products that deliver compelling technical and commercial benefits to our customers. In turn, our customers utilise these solutions to develop and subsequently market end-products that are essential for the efficient and reliable transportation of voice and/or data across a predominantly wireless medium.

The global communications market is huge, with a myriad of end-application areas ranging from mobile/cellular networks to precise positioning systems to short-range remote-control devices. Within this vast landscape of opportunity, CML is actively participating in a number of sub-markets that leverage our strengths and have excellent growth potential on a sustainable basis. These markets include mission critical communications, wireless networks and satellite, Industrial Internet of Things ("IIoT") and more recently, broadcast radio. The addressable market in terms of semiconductor content easily exceeds $1billion.

Continued investment in research and development is essential to enable CML to take full advantage of the large market opportunity available. Various new product programmes are underway comprising mixed-signal complex SoC projects with multi-year engineering cycles along with more rapid micro/millimetre wave developments. The blended result is delivering more products to market each year against what is a relatively stable absolute R&D spend.

Markets and operations

Across the prior full financial year to 31 March 2023, revenues from Group customers producing voice-centric wireless communications equipment delivered good growth, with the contribution from data centric applications slightly weaker due to some customers having procured inventory in excess of their end-market needs.

In the first half of the current financial year, across most of the major customers, the voice equipment manufacturers once again achieved a solid advance in revenues whereas sales increases from data applications, such as IIoT, M2M, AMR were more moderate. We have seen early indications that order intake from this sector is set to improve but across the next few months, we are nonetheless taking a cautious stance.

Geographically, performance across the first six months within Asia was good, with a 7.5% increase in sales revenue. However, the economic and geo-political situation in parts of the region, including China and Korea, has the potential to temper growth prospects. Within China, those customers that are producing end-products for local consumption have better forecast visibility than those reliant on exports. We therefore remain mindful of the backdrop globally and have moderated our expectations for the second half year period.

The global voice communications markets addressed by the Group include the Land Mobile Radio/Private Mobile Radio (LMR/PMR) sector, encompassing high performance mission critical end-applications through to low-cost digital radio standards for use in the leisure and retail sector. For data-centric markets, "smart everything" is driving data throughput increases within industry verticals such as agriculture, construction, smart grid/city and marine safety. CML has been a significant player in these end-application areas for many years and continues to invest appropriately in growth opportunities.

In recent years, building upon substantial markets knowledge and "design for manufacturing" capabilities for silicon devices, CML commenced the development of high-performance Radio Frequency ICs ("RFICs") and Monolithic Microwave ICs ("MMICs") using compound semiconductor technologies, including GaAs and GaN. The twelve-month period to 31 March 2023 represented the first full financial year with availability of a number of new products that are marketed under CML's SuRF brand and, over time, the flow of revenue from this expanding portfolio of IC's is expected to constitute a very sizeable proportion of the Group's total revenues.

One key R&D initiative outlined at the time of announcing the FY23 full year results in June 2023, was a low-power radio receiver solution for Digital Radio Mondiale ("DRM"). DRM is a digital radio broadcast standard that has been adopted for wide area broadcasting in China, India and Pakistan and is expected to be deployed in several other nations. The DRM service provides high quality stereo audio across long distances and wide areas using low-cost, low-power infrastructure.

The DRM module was formally announced at the International Broadcasting Convention (IBC) in Amsterdam in September and is a complete "antenna to speaker" module, containing all hardware, software, IP and patent licences required for a radio equipment manufacturer to easily realise a dual mode (digital and analogue) DRM capable receiver. The module offers a 60% cost reduction and 80% power reduction over existing DRM technologies in the market. At IBC, it was announced that the DRM module has been adopted by leading manufacturer Gospell Digital Radio Technology Co, Ltd for two new portable radio families.

In support of the broadening product portfolio and expansion into new sub-markets, we exhibited at a number of trade shows through the period, including IMS Microwave Week in San Diego, European Microwave Week in Berlin and the International Broadcasting Convention (IBC) in Amsterdam.

The multi-year investments in people, products and equipment have positioned us well to continue to expand the business. The traditional voice and data centric markets have provided strong foundations on which to expand into the micro/millimetre wave and, more latterly, broadcast radio arenas. Within these newer markets we are at the early stages of a journey to drive the business forward strongly and sustainably.

Acquisition of Microwave Technology, Inc

On 2 October 2023, immediately following the half year end, we completed the acquisition of Silicon Valley based semiconductor company Microwave Technology, Inc. ("MwT"). Founded in 1982, MwT is a recognised leader in the design, manufacturing and marketing of GaAs and GaN based MMICs, Discrete Devices, and Hybrid Amplifier Products for commercial wireless communication, defence, space, and medical (MRI) applications.

The acquisition expands upon the Group's growing product portfolio and complements its existing capabilities, providing essential knowhow and experience in high-frequency system level understanding, product manufacturing and packaging techniques.

Work is now underway to ensure maximum market exposure for the product range acquired and investment areas have been identified that will improve USA-based production capacity and efficiency positioning the enlarged Group for growth in the years that follow.

As a Group, CML now has internal final testing capabilities in the UK, Asia and the Americas, providing the flexibility required to address regional customer demands as they evolve.

Financial review

Sales revenues for the opening six-month trading period increased by 5% to GBP10.58m (H1 FY23: GBP10.05m) and include a currency headwind against the comparable period one year ago. Re-stated on a constant currency basis, revenues increased by 9%. Regionally, the improvements came from greater sales into Europe and the Far East, with the Americas territory posting a decline. Excess inventory across a handful of customers tempered further growth following the supply chain dynamics that have been a feature of the last two years.

Higher sales levels combined with a slight reduction in gross margin delivered a gross profit of GBP7.94m (H1 FY23: GBP7.62m) representing an increase of 4%. Given cost of sale pressures, in part due to supplier raw material price increases that were experienced across multiple years, maintenance of the gross margin is a pleasing outcome at this interim stage.

Distribution and administration (D&A) expenses were higher at GBP6.32m (H1 FY23: GBP5.77m) and whilst an increase over the previous year was expected, the prolonged process associated with and leading up to completion of the MwT transaction resulted in additional costs of GBP0.30m being incurred.

Excluding third-party one-off costs associated with the MwT acquisition, profit from operations improved by 9% to GBP1.90m (H1 FY23 GBP1.75m). This is a key measure of the Group's performance over the period under review although under international accounting standards, the income statement does not highlight these costs as exceptional, hence the reported figure was lower at GBP1.61m.

Finance income was noticeably up at GBP0.24m (H1 FY23: GBP0.10m) and reflected the improved deposit rates being achieved on the Group's strong cash balances. Finance expenses were negligible.

Adjusted EBITDA came in at GBP3.23m (H1 FY23: GBP3.25m).

Profit before tax was flat at GBP1.87m against GBP1.83m for the prior year first half.

An income tax charge of GBP0.41m was recorded compared to a credit of GBP0.04m for the comparable period with the main contributing factors being lower UK R&D tax credits following changes to government policy and an increase in the corporation tax rate from 19% to 25%. The tax charge led to a diluted earnings per share figure of 9.31p against 11.58p for the prior year.

For some time, the Group has deliberately operated with a raised level of inventory in keeping with its strategy to help minimise the impact customers feel from the supply chain dynamics over recent years. This year is no different and despite the slight drop in inventory levels to GBP2.19m (H1 FY23: GBP2.30m), expectations are for this to climb to a higher level over the next 12-18 months due to an expanded product range along with growth expectations.

The Group continues to be debt free and had cash balances amounting to GBP20.95m at 30 September 2023 (31 March 2023: net cash of GBP22.26m). This follows investments of GBP2.01m in R&D activities, GBP0.60m in property, plant and equipment and shareholder returns of GBP2.57m by way of share repurchases (net of shares issued) and dividend payments. The strong balance sheet gives us a range of options as we look to win new clients and grow organically as well as the potential for future acquisitions in the medium-term.

Chris Gurry

Group Managing Director

5 December 2023

Condensed consolidated income statement

for the six months ended 30 September 2023

 
                        Unaudited 6 months end              Unaudited 6 months end                 Audited year end 
                  ----------------------------------  ----------------------------------  ---------------------------------- 
 
                       Before                              Before                              Before 
                  exceptional  Exceptional  30/09/23  exceptional  Exceptional  30/09/22  exceptional  Exceptional  31/03/23 
                        items        items     Total        items        items     Total        items        items     Total 
                      GBP'000      GBP'000   GBP'000      GBP'000      GBP'000   GBP'000      GBP'000      GBP'000   GBP'000 
----------------  -----------  -----------  --------  -----------  -----------  --------  -----------  -----------  -------- 
Continuing 
operations 
Revenue                10,575            -    10,575       10,045            -    10,045       20,643            -    20,643 
Cost of sales         (2,631)            -   (2,631)      (2,423)            -   (2,423)      (5,032)            -   (5,032) 
----------------  -----------  -----------  --------  -----------  -----------  --------  -----------  -----------  -------- 
Gross profit            7,944            -     7,944        7,622            -     7,622       15,611            -    15,611 
Distribution and 
 administration 
 costs                (6,318)            -   (6,318)      (5,765)            -   (5,765)     (12,644)            -  (12,644) 
Share-based 
 payments               (103)            -     (103)        (137)            -     (137)        (234)            -     (234) 
----------------  -----------  -----------  --------  -----------  -----------  --------  -----------  -----------  -------- 
                        1,523            -     1,523        1,720            -     1,720        2,733            -     2,733 
Profit on sale 
 of fixed asset             -            -         -            -            -         -            -        2,058     2,058 
Other operating 
 income                    85            -        85           30            -        30          199            -       199 
----------------  -----------  -----------  --------  -----------  -----------  --------  -----------  -----------  -------- 
Profit from 
 operations             1,608            -     1,608        1,750            -     1,750        2,932        2,058     4,990 
Other income               50            -        50            4            -         4           18            -        18 
Finance income            235            -       235           97            -        97          255            -       255 
Finance expense          (20)            -      (20)         (21)            -      (21)         (47)            -      (47) 
----------------  -----------  -----------  --------  -----------  -----------  --------  -----------  -----------  -------- 
Profit before 
 taxation               1,873            -     1,873        1,830            -     1,830        3,158        2,058     5,216 
Income tax 
 (charge)/credit        (406)            -     (406)           35            -        35         (71)        (335)     (406) 
----------------  -----------  -----------  --------  -----------  -----------  --------  -----------  -----------  -------- 
Profit after 
 taxation for 
 period 
 attributable to 
 equity owners 
 of the parent          1,467            -     1,467        1,865            -     1,865        3,087        1,723     4,810 
----------------  -----------  -----------  --------  -----------  -----------  --------  -----------  -----------  -------- 
All financial 
information 
presented 
relates to 
continuing 
activities. 
 
Earnings per 
share from total 
operations 
attributable to 
the ordinary 
equity 
holders of the 
Company: 
----------------  -----------  -----------  --------  -----------  -----------  --------  -----------  -----------  -------- 
Basic earnings 
 per share                                     9.44p                              11.72p                              30.29p 
Diluted earnings 
 per share                                     9.31p                              11.58p                              29.93p 
----------------  -----------  -----------  --------  -----------  -----------  --------  -----------  -----------  -------- 
 

The following measure is considered an alternative performance measure, not a generally accepted accounting principle. This ratio is useful to ensure that the level of borrowings in the business can be supported by the cash flow in the business. For definition and reconciliation see note 10.

 
Adjusted EBITDA    3,230  3,252  5,901 
-----------------  -----  -----  ----- 
 

Condensed consolidated statement of total comprehensive income

for the six months ended 30 September 2023

 
 
                                                                                     Unaudited     Unaudited   Audited 
                                                                                  6 months end  6 months end  year end 
                                                                                      30/09/23      30/09/22  31/03/23 
                                                                                       GBP'000       GBP'000   GBP'000 
--------------------------------------------------------------------------------  ------------  ------------  -------- 
Profit for the period                                                                    1,467         1,865     4,810 
Other comprehensive income/(expense): 
Items that will not be reclassified subsequently to profit or loss: 
Re-measurement of benefit obligation                                                         -             -     1,393 
Deferred tax on actuarial gain                                                               -             -     (348) 
--------------------------------------------------------------------------------  ------------  ------------  -------- 
Items reclassified subsequently to profit or loss upon derecognition: 
Foreign exchange differences                                                             (493)           829     (140) 
--------------------------------------------------------------------------------  ------------  ------------  -------- 
Other comprehensive income for the period net of taxation attributable to the 
 equity holders 
 of the parent                                                                           (493)           829       905 
--------------------------------------------------------------------------------  ------------  ------------  -------- 
Total comprehensive income for the period attributable to the equity holders of 
 the parent                                                                                974         2,694     5,715 
--------------------------------------------------------------------------------  ------------  ------------  -------- 
 
 

Condensed consolidated statement of financial position

as at 30 September 2023

 
 
                                                Unaudited  Unaudited    Audited 
                                                 30/09/23   30/09/22   31/03/23 
                                                  GBP'000    GBP'000    GBP'000 
----------------------------------------------  ---------  ---------  --------- 
Assets 
Non-current assets 
Goodwill                                            7,152      7,861      7,429 
Other intangible assets                               885      1,107        984 
Development costs                                  14,391     12,738     13,801 
Property, plant and equipment                       6,087      5,479      5,249 
Right-of-use assets                                   910        338      1,022 
Deferred tax assets                                   618      2,605        766 
----------------------------------------------  ---------  ---------  --------- 
                                                   30,043     30,128     29,251 
----------------------------------------------  ---------  ---------  --------- 
Current assets 
Property, plant and equipment - held for sale           -          -        485 
Investment properties - held for sale               1,975      1,975      1,975 
Inventories                                         2,187      2,302      2,425 
Trade receivables and prepayments                   2,881      2,156      2,413 
Current tax assets                                     71          -      1,659 
Cash and cash equivalents                          14,300     20,005     21,041 
Short-term cash deposits                            6,646      2,663      1,218 
----------------------------------------------  ---------  ---------  --------- 
                                                   28,060     29,101     31,216 
----------------------------------------------  ---------  ---------  --------- 
Total assets                                       58,103     59,229     60,467 
----------------------------------------------  ---------  ---------  --------- 
Liabilities 
Current liabilities 
Trade and other payables                            2,230      3,665      3,036 
Lease liabilities                                     198        133        210 
Current tax liabilities                                 4         96         78 
----------------------------------------------  ---------  ---------  --------- 
                                                    2,432      3,894      3,324 
----------------------------------------------  ---------  ---------  --------- 
Non-current liabilities 
Deferred tax liabilities                            4,450      4,103      4,343 
Lease liabilities                                     751        229        842 
Retirement benefit obligation                       1,204      2,439      1,204 
----------------------------------------------  ---------  ---------  --------- 
                                                    6,405      6,771      6,389 
----------------------------------------------  ---------  ---------  --------- 
Total liabilities                                   8,837     10,665      9,713 
----------------------------------------------  ---------  ---------  --------- 
Net assets                                         49,266     48,564     50,754 
----------------------------------------------  ---------  ---------  --------- 
 
 
 
Capital and reserves attributable to equity owners of the parent 
Share capital                                                          796     796     796 
Share premium                                                        2,327   2,462   2,462 
Capital redemption reserve                                           8,372   8,372   8,372 
Treasury shares - own share reserve                                (1,822)       -   (324) 
Share-based payments reserve                                           566     395     488 
Foreign exchange reserve                                               549   2,011   1,042 
Retained earnings                                                   38,478  34,528  37,918 
-----------------------------------------------------------------  -------  ------  ------ 
Total shareholders' equity                                          49,266  48,564  50,754 
-----------------------------------------------------------------  -------  ------  ------ 
 

Condensed consolidated cash flow statement

for the six months ended 30 September 2023

 
 
                                                                         Unaudited     Unaudited   Audited 
                                                                      6 months end  6 months end  year end 
                                                                          30/09/23      30/09/22  31/03/23 
                                                                           GBP'000       GBP'000   GBP'000 
--------------------------------------------------------------------  ------------  ------------  -------- 
Operating activities 
Profit for the period before taxation                                        1,873         1,830     5,216 
Adjustments for: 
Depreciation - on property, plant and equipment                                239           219       367 
Depreciation - on right-of-use assets                                          111           142       300 
Amortisation of development costs                                            1,020           831     1,826 
Amortisation of intangibles recognised on acquisition and purchased             99           169       224 
Profit on disposal of fixed assets                                               -             -   (2,058) 
Employee Retention Credit US                                                     -           109       110 
Movement in non-cash items (retirement benefit 
obligation)                                                                     90            90       158 
Share-based payments                                                           103           137       234 
Finance income                                                               (235)          (97)     (255) 
Finance expense                                                                 20            21        47 
Movement in working capital                                                (1,381)            32     (653) 
--------------------------------------------------------------------  ------------  ------------  -------- 
Cash flows from operating activities                                         1,939         3,483     5,516 
Income tax received/(paid)                                                   1,483          (75)     (104) 
--------------------------------------------------------------------  ------------  ------------  -------- 
Net cash flows from operating activities                                     3,422         3,408     5,412 
--------------------------------------------------------------------  ------------  ------------  -------- 
 
 
Investing activities 
---------------------------------------------------------------------------  -------  -------  ------- 
Proceeds from sale of fixed assets                                                 -        -    2,500 
Purchase of property, plant and equipment                                      (597)     (88)    (932) 
Investment in development costs                                              (1,666)  (2,291)  (4,455) 
Investment in intangibles                                                       (32)     (67)     (98) 
Repayment/(investment) in fixed term deposits (net)                          (5,428)    3,295    4,740 
Finance income                                                                   235       97      255 
---------------------------------------------------------------------------  -------  -------  ------- 
Net cash (outflow)/inflow investing activities                               (7,488)      946    2,010 
---------------------------------------------------------------------------  -------  -------  ------- 
Financing activities 
Lease liability repayments                                                     (122)    (153)    (321) 
Issue of ordinary shares (net of expenses)                                       117    1,118    1,118 
Purchase of own shares for treasury                                          (1,750)  (4,442)  (4,767) 
Dividends paid to shareholders                                                 (932)    (796)  (1,589) 
Net cash outflow from financing activities                                   (2,687)  (4,273)  (5,559) 
---------------------------------------------------------------------------  -------  -------  ------- 
(Decrease)/increase in cash, cash equivalents and short-term cash deposits   (6,753)       81    1,863 
---------------------------------------------------------------------------  -------  -------  ------- 
Movement in cash and cash equivalents: 
At start of period/year                                                       21,041   19,084   19,084 
(Decrease)/increase in cash, cash equivalents and short-term cash deposits   (6,753)       81    1,863 
Effects of exchange rate changes                                                  12      840       94 
---------------------------------------------------------------------------  -------  -------  ------- 
At end of period                                                              14,300   20,005   21,041 
---------------------------------------------------------------------------  -------  -------  ------- 
 

Cash flows presented exclude sales taxes. Further cash-related disclosure details are provided in note 7.

Changes in liabilities arising from financing activities relate to lease liabilities only.

Condensed consolidated statement of changes in equity

for the six months ended 30 September 2023

 
                                                              Capital              Share-   Foreign 
                                           Share    Share  redemption  Treasury     based  exchange  Retained 
                                         capital  premium     reserve    shares  payments   reserve  earnings    Total 
Unaudited                                GBP'000  GBP'000     GBP'000   GBP'000   GBP'000   GBP'000   GBP'000  GBP'000 
---------------------------------------  -------  -------  ----------  --------  --------  --------  --------  ------- 
At 31 March 2022                             865    1,362       8,285   (1,670)       490     1,182    39,339   49,853 
---------------------------------------  -------  -------  ----------  --------  --------  --------  --------  ------- 
Profit for period                                                                                       1,865    1,865 
Other comprehensive income net of taxes 
Foreign exchange differences                                                                    829                829 
---------------------------------------  -------  -------  ----------  --------  --------  --------  --------  ------- 
Total comprehensive income for the 
 period                                        -        -           -         -         -       829     1,865    2,694 
---------------------------------------  -------  -------  ----------  --------  --------  --------  --------  ------- 
                                             865    1,362       8,285   (1,670)       490     2,011    41,204   52,547 
Transactions with owners in their 
capacity as owners 
Issue of ordinary shares - exercise of 
 share options                                18    1,100                                                        1,118 
Purchase of own shares - treasury                                       (4,442)                                (4,442) 
Treasury share cancellation                 (87)                   87     6,112                       (6,112)        - 
Dividend paid                                                                                           (796)    (796) 
---------------------------------------  -------  -------  ----------  --------  --------  --------  --------  ------- 
Total of transactions with owners in 
 their capacity as owners                   (69)    1,100          87     1,670         -         -   (6,908)  (4,120) 
---------------------------------------  -------  -------  ----------  --------  --------  --------  --------  ------- 
Share-based payment charge                                                            137                          137 
Cancellation/transfer of share-based 
 payments                                                                           (232)                 232        - 
---------------------------------------  -------  -------  ----------  --------  --------  --------  --------  ------- 
At 30 September 2022                         796    2,462       8,372         -       395     2,011    34,528   48,564 
---------------------------------------  -------  -------  ----------  --------  --------  --------  --------  ------- 
 
 
                                                              Capital              Share-   Foreign 
                                           Share    Share  redemption  Treasury     based  exchange  Retained 
                                         capital  premium     reserve    shares  payments   reserve  earnings    Total 
Unaudited                                GBP'000  GBP'000     GBP'000   GBP'000   GBP'000   GBP'000   GBP'000  GBP'000 
---------------------------------------  -------  -------  ----------  --------  --------  --------  --------  ------- 
At 30 September 2022                         796    2,462       8,372         -       395     2,011    34,528   48,564 
Profit for period                                                                                       2,945    2,945 
Other comprehensive income net of taxes 
Foreign exchange differences                                                                  (969)              (969) 
Re-measurement of defined benefit 
 obligations                                                                                            1,393    1,393 
Deferred tax on actuarial loss                                                                          (348)    (348) 
---------------------------------------  -------  -------  ----------  --------  --------  --------  --------  ------- 
Total comprehensive income for the 
 period                                        -        -           -         -         -     (969)     3,990    3,021 
---------------------------------------  -------  -------  ----------  --------  --------  --------  --------  ------- 
                                             796    2,462       8,372         -       395     1,042    38,518   51,585 
Transactions with owners in their 
capacity as owners 
Purchase of own shares - treasury                                         (325)                                  (325) 
Treasury share cancellation                                                   1                           (1)        - 
Dividend paid                                                                                           (793)    (793) 
---------------------------------------  -------  -------  ----------  --------  --------  --------  --------  ------- 
Total of transactions with owners in 
 their capacity as owners                      -        -           -     (324)         -         -     (794)  (1,118) 
---------------------------------------  -------  -------  ----------  --------  --------  --------  --------  ------- 
Share-based payment charge                                                             97                           97 
Deferred tax on share-based payments                                                                      190      190 
Cancellation/transfer of share-based 
 payments                                                                             (4)                   4        - 
---------------------------------------  -------  -------  ----------  --------  --------  --------  --------  ------- 
At 31 March 2023                             796    2,462       8,372     (324)       488     1,042    37,918   50,754 
---------------------------------------  -------  -------  ----------  --------  --------  --------  --------  ------- 
 

Condensed consolidated statement of changes in equity continued

for the six months ended 30 September 2023

 
                                                              Capital              Share-   Foreign 
                                           Share    Share  redemption  Treasury     based  exchange  Retained 
                                         capital  premium     reserve    shares  payments   reserve  earnings    Total 
Unaudited                                GBP'000  GBP'000     GBP'000   GBP'000   GBP'000   GBP'000   GBP'000  GBP'000 
At 31 March 2023                             796    2,462       8,372     (324)       488     1,042    37,918   50,754 
Profit for period                                                                                       1,467    1,467 
Other comprehensive income net of taxes 
Foreign exchange differences                                                                  (493)              (493) 
---------------------------------------  -------  -------  ----------  --------  --------  --------  --------  ------- 
Total comprehensive income for the 
 period                                        -        -           -         -         -     (493)     1,467      974 
---------------------------------------  -------  -------  ----------  --------  --------  --------  --------  ------- 
                                             796    2,462       8,372     (324)       488       549    39,385   51,728 
Transactions with owners in their 
capacity as owners 
Issue of treasury shares - exercise of 
 share options                                      (135)                   252                                    117 
Purchase of own shares - treasury                                       (1,750)                                (1,750) 
Dividend paid                                                                                           (932)    (932) 
---------------------------------------  -------  -------  ----------  --------  --------  --------  --------  ------- 
Total of transactions with owners in 
 their capacity as owners                      -    (135)           -   (1,498)         -         -     (932)  (2,565) 
---------------------------------------  -------  -------  ----------  --------  --------  --------  --------  ------- 
Share-based payments                                                                  103                          103 
Cancellation/transfer of share-based 
 payments                                                                            (25)                  25        - 
---------------------------------------  -------  -------  ----------  --------  --------  --------  --------  ------- 
At 30 September 2023                         796    2,327       8,372   (1,822)       566       549    38,478   49,266 
---------------------------------------  -------  -------  ----------  --------  --------  --------  --------  ------- 
 

Notes to the condensed consolidated financial statements

for the six months ended 30 September 2023

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 Group Managing Director who is the Chief Operating Decision Maker. The measurement policies the Group uses for segmental reporting under IFRS 8 are the same as those used in its financial statements.

The Group is focused for management purposes on one primary reporting segment, being the semiconductor segment, with similar economic characteristics, risks and returns and the Directors therefore consider there to be one single segment, being semiconductor components for the communications industry.

Geographical segments (by origin)

 
 
                                            UK  Americas  Far East    Total 
Unaudited                              GBP'000   GBP'000   GBP'000  GBP'000 
-------------------------------------  -------  --------  --------  ------- 
Six months ended 30 September 2023 
Revenue to third parties - by origin     2,613     1,243     6,719   10,575 
Total assets                            44,942     1,512    11,649   58,103 
-------------------------------------  -------  --------  --------  ------- 
 
 
                                            UK  Americas  Far East    Total 
Unaudited                              GBP'000   GBP'000   GBP'000  GBP'000 
-------------------------------------  -------  --------  --------  ------- 
Six months ended 30 September 2022 
Revenue to third parties - by origin     2,167     1,622     6,256   10,045 
Total assets                            44,315     1,043    13,871   59,229 
-------------------------------------  -------  --------  --------  ------- 
 
                                            UK  Americas  Far East    Total 
Audited                                GBP'000   GBP'000   GBP'000  GBP'000 
-------------------------------------  -------  --------  --------  ------- 
Year ended 31 March 2023 
Revenue to third parties - by origin     5,024     3,413    12,206   20,643 
Total assets                            47,151     1,575    11,741   60,467 
-------------------------------------  -------  --------  --------  ------- 
 

2 Revenue

The geographical classification of business turnover (by destination) is as follows

 
 
              Unaudited     Unaudited   Audited 
           6 months end  6 months end  year end 
               30/09/23      30/09/22  31/03/23 
                GBP'000       GBP'000   GBP'000 
---------  ------------  ------------  -------- 
Europe            2,115         1,634     4,009 
Far East          6,660         6,194    12,036 
Americas          1,471         1,943     3,910 
Other               329           274       688 
---------  ------------  ------------  -------- 
                 10,575        10,045    20,643 
---------  ------------  ------------  -------- 
 

The operational classification of business turnover (by market) is as follows:

 
 
                            Unaudited     Unaudited   Audited 
                         6 months end  6 months end  year end 
                             30/09/23      30/09/22  31/03/23 
                              GBP'000       GBP'000  GBP'000s 
-----------------------  ------------  ------------  -------- 
Semiconductor                  10,166         9,595    19,551 
Design and development            409           450     1,092 
-----------------------  ------------  ------------  -------- 
                               10,575        10,045    20,643 
-----------------------  ------------  ------------  -------- 
 

Semiconductor products, goods and services are transferred at a point in time whereas design and development revenue is transferred over the period of the contract on a percentage basis of contract completion, as detailed in the Group's revenue recognition policy within its published Annual Report.

The Group does not have any contract assets or liabilities at 30 September 2023 (GBPNil at 31 March 2023) from semiconductors as it does not fulfil any of its performance obligations in advance of invoicing to its customer. The Group has contract assets of GBP242,000 as at 30 September 2023 (GBP363,000 at 31 March 2023) from design and development and contract liabilities of GBP4,000 as at 30 September 2023 (GBP17,000 at 31 March 2023) from design and development. The Group has contractual balances in the form of trade receivables. See note 20 for disclosure of this in the Annual Report and Accounts for the year ended 31 March 2023.

The Group expects all contractual costs capitalised or any outstanding performance obligations will be completed within the next twelve months.

3 Dividend paid and interim dividend

The Board is declaring an interim dividend of 5p per ordinary share for the half year ended 30 September 2023, payable on 12 January 2024 to shareholders on the Register on 22 December 2023.

A final dividend of 6p per ordinary share was paid on 18 August 2023 and an interim dividend of 5p per ordinary share was paid on 16 December 2022, totalling 11p per ordinary share paid for the year ended 31 March 2023 (2022: 9.0p per ordinary share paid for the year ended 31 March 2022).

4 Income tax expense/(credit)

 
 
                                                                      Unaudited  Unaudited 
                                                                   6 months end   6 months    Audited 
                                                                                       end   year end 
                                                                       30/09/23   30/09/22   31/03/23 
                                                                        GBP'000    GBP'000    GBP'000 
-----------------------------------------------------------------  ------------  ---------  --------- 
Current tax 
UK corporation tax on results of the year                                   (9)       (23)      (809) 
Adjustment in respect of previous years                                     101        366      (372) 
-----------------------------------------------------------------  ------------  ---------  --------- 
                                                                             92        343    (1,183) 
Foreign tax on results of the year                                          139        192        319 
-----------------------------------------------------------------  ------------  ---------  --------- 
Total current tax                                                           231        535      (864) 
-----------------------------------------------------------------  ------------  ---------  --------- 
Deferred tax 
Deferred tax - origination and reversal of temporary differences            153       (99)        683 
Change in deferred tax rate                                                   -          -        103 
Adjustments to deferred tax charge in respect of previous years              22      (471)        484 
-----------------------------------------------------------------  ------------  ---------  --------- 
Total deferred tax                                                          175      (570)      1,270 
-----------------------------------------------------------------  ------------  ---------  --------- 
Tax expense/(credit) on profit on ordinary activities                       406       (35)        406 
-----------------------------------------------------------------  ------------  ---------  --------- 
 

The Directors consider that tax will be payable at varying rates according to the country of incorporation of its subsidiary undertakings and have provided on that basis.

The tax charge for the six months ended 30 September 2023 has been calculated by applying the effective tax rate which is expected to apply to the Group for the year ending 31 March 2024, using rates substantially enacted by 30 September 2023.

5 Earnings per share

 
                                                           Unaudited     Unaudited 
                                                        6 months end  6 months end    Audited 
                                                                                     year end 
                                                            30/09/23      30/09/22   31/03/23 
                                                             GBP'000       GBP'000    GBP'000 
------------------------------------------------------  ------------  ------------  --------- 
Earnings per share from total operations attributable 
to the ordinary equity holders of the Company 
Basic earnings per share                                       9.44p        11.72p     30.29p 
Diluted earnings per share                                     9.31p        11.58p     29.93p 
------------------------------------------------------  ------------  ------------  --------- 
 

The calculation of basic and diluted earnings per share is based on the profit attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year, as explained below:

 
                                       Ordinary 5p shares 
                                     ---------------------- 
                                       Weighted 
                                        average     Diluted 
                                         number      number 
-----------------------------------  ----------  ---------- 
Six months ended 30 September 2023   15,546,906  15,765,610 
Six months ended 30 September 2022   15,912,744  16,111,674 
Year ended 31 March 2023             15,878,401  16,072,444 
-----------------------------------  ----------  ---------- 
 

6 Investment properties

Investment properties were measured at current market valuation. No depreciation is provided on freehold investment properties or on long leasehold investment properties. In accordance with IAS 40, gains and losses arising on revaluation of investment properties are shown in the income statement. The open market valuation of investment properties recognised is GBPNil (2023: GBPNil). Investment properties held for sale is GBP1,975,000 (GBP1,975,000 at 31 March 2023).

The investment property was reclassified on 31 March 2022 as held for sale as the property became vacant with no prospective tenant in place and is held based upon the current market valuation methodology. The property is currently expected to sell within the next twelve months.

7 Cash, cash equivalents and short-term deposits

 
 
 
                              Unaudited     Unaudited 
                           6 months end  6 months end    Audited 
                               30/09/23      30/09/22   year end 
                                                        31/03/23 
                                GBP'000       GBP'000    GBP'000 
-------------------------  ------------  ------------  --------- 
Cash on deposit                   3,016        14,157         13 
Cash at bank                     11,284         5,848     21,628 
-------------------------  ------------  ------------  --------- 
                                 14,300        20,005     21,041 
Short-term cash deposits          6,646         2,663      1,218 
-------------------------  ------------  ------------  --------- 
                                 20,946        22,668     22,259 
-------------------------  ------------  ------------  --------- 
 

8 Retirement benefit obligations

The Directors have not obtained an actuarial IAS 19 Employee Benefits Report in respect of the defined benefit pension scheme for the purpose of this Half Yearly Report.

9 Directors' statement pursuant to the Disclosure and Transparency Rules

The Directors confirm that, to the best of their knowledge:

-- the condensed set of financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting; and

-- the Chairman's Statement and Group Managing Director's Operational and Financial Review include a fair review of the development and performance of the business and the position of the Company, and the undertakings included in the consolidation taken as a whole together with a description of the principal risks and uncertainties that they face. Full disclosures can be found in Annual Report and Accounts for year ended 31 March 2023 within Strategic Report.

The Directors are also responsible for the maintenance and integrity of the CML Microsystems Plc website. Legislation in the UK governing the preparation and dissemination of the financial statements may differ from legislation in other jurisdictions.

The basis of preparation and accounting policies used in preparation of this Half Year Report have been prepared in accordance with the same accounting policies set out in the year ended 31 March 2023 financial statements.

10 Adjusted EBITDA

Adjusted earnings before interest, tax, depreciation and amortisation ("Adjusted EBITDA") is defined as profit from operations before all interest, tax, depreciation and amortisation charges and before share-based payments. The following is a reconciliation of the Adjusted EBITDA for the three periods presented:

 
 
                                                    Unaudited  Unaudited 
                                                 6 months end   6 months    Audited 
                                                                     end   year end 
                                                     30/09/23   30/09/22   31/03/23 
                                                      GBP'000    GBP'000    GBP'000 
-----------------------------------------------  ------------  ---------  --------- 
Profit before taxation (earnings)                       1,873      1,830      5,216 
Adjustments for: 
Finance income                                          (235)       (97)      (255) 
Finance expense                                            20         21         47 
Depreciation                                              239        219        367 
Depreciation - right-of-use assets                        111        142        300 
Amortisation of development costs                       1,020        831      1,826 
Amortisation of intangibles of purchased and 
acquired intangibles recognised on acquisition             99        169        224 
Share-based payments                                      103        137        234 
Profit on sale of fixed asset                               -          -    (2,058) 
-----------------------------------------------  ------------  ---------  --------- 
Adjusted EBITDA                                         3,230      3,252      5,901 
-----------------------------------------------  ------------  ---------  --------- 
 

11 Events occurring after the reporting period

Acquisition of Microwave Technology, Inc.

Following the announcement on 17 January 2023 that a definitive agreement had been signed to acquire a Silicon Valley based semiconductor company Microwave Technology, Inc (MwT) and having obtained US regulatory clearance, the acquisition completed on 2 October 2023. The Group acquired 100% of the issued share capital for a total consideration of $13.18m, of which $7.65m is payable in cash and $5.53m is payable in shares.

Founded in 1982, MwT is a Silicon Valley based company involved in the design, manufacturing and marketing of GaAs and GaN based MMICs, Discrete Devices and Hybrid Amplifier Products for Commercial Wireless Communication, Defence, Space and Medical (MRI) applications

The financial effects of the transaction have not been included in the results to 30 September 2023. The operating results and assets and liabilities of the company will be included from 2 October 2023.

12 General

Other than already stated within the Chairman's Statement and Group Managing Director's Operational and Financial Review, there have been no important events during the first six months of the financial year that have impacted this Half Yearly Report.

There have been no related party transactions or changes in related party transactions described in the latest Annual Report that could have a material effect on the financial position or performance of the Group in the first six months of the financial year.

The financial information contained in this Half Yearly Report has been prepared in accordance with UK adopted International Accounting Standards. This Half Yearly Report does not constitute statutory accounts as defined by Section 434 of the Companies Act 2006. The financial information for the year ended 31 March 2023 is based on the statutory accounts for the financial year ended 31 March 2023 that have been filed with the Registrar of Companies and on which the auditor gave an unqualified audit opinion.

The auditor's report on those accounts did not contain a statement under Section 498(2) or (3) of the Companies Act 2006. This Half Yearly Report has not been audited or reviewed by the Group auditor.

A copy of this Half Yearly Report can be viewed on the Company website: www.cmlmicroplc.com .

13 Approvals

The Directors approved this Half Yearly Report on 5 December 2023.

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