CML Microcircuits Regulatory News (CML)

CML Microsystems Plc

INTERIM RESULTS

CML Microsystems Plc ("CML"), which designs, manufactures and markets a broad range of semiconductors, primarily for global communication and data storage markets, announces Interim Results for the six months ended 30 September 2012, in line with management expectations.

Financial Highlights:

·; Revenues up 3.3% to £12.70m (2011 H1: £12.29m)

·; Gross profit up 2.6% to £8.73m (2011 H1: £8.51m)

·; Profit before tax up 19.5% to £2.41m (2011 H1: £2.02m)

·; Basic EPS up 13.5% of 11.20p (2011 H1: 9.87p)

·; Positive cash flow of £1.27m

·; Net cash position of £6.51m (2011 H1: £4.37m) - with bank borrowings reduced by £1.66m to £1.35m

Operational Highlights:

·; Good revenue growth in the Americas, a modest increase in sales to the Far East whereas Europe continues to be challenging

·; Continued growth of semiconductor flash memory controllers

·; Industrial wireless voice and data products were lower in H1 but balanced by order intake for H2

·; Products sales for Telecom applications was broadly flat

Regarding Outlook, Chris Gurry, Managing Director of CML, said:

"Top level trading performance through the first half year was ahead of the comparable period and once again reflected the Group's focus on delivering sustainable growth.

"Firm progress was made in the solid state Storage market and expansion of the controller product range to include the SATA interface standard is now fully supported by production released solutions. The industrial SATA controller market is a key growth area for the Group and customer design-in activity is on track to begin generating meaningful revenues during the year ahead.

"Within Wireless, despite the potential for sporadic contracts to cause comparable period inconsistencies, the underlying trend is one of positive growth. The on-going customer adoption of the Group's more recent RF, baseband and data modem portfolio validates medium term growth objectives along with the continuing R&D investment strategy.

"Global economic conditions continue to affect customer sentiment in some areas, and whilst the possibility exists for customer buying patterns to be impacted, trading since 1 October serves to underpin Board expectations for a firm full year advance in both revenues and profitability."

Chairman's Statement

I am pleased to report that your company has posted increased sales and profitability for the six-months opening trading period ended 30 September 2012. Although market conditions remained difficult in some areas, the results reported align generally with management expectations.

Sales revenues for the period showed an increase to £12.70m (2011: £12.29m) while pre-tax profit rose to £2.41m (2011: £2.02m).

A further reduction in the figure for bank loans and overdrafts to £1.35m (2011: £3.01m) was achieved. The growing balance sheet strength assisted the removal of all bank lien and charges over Group owned properties.

In general, trading is proceeding pretty much as expected and I see little comment that I might usefully add relating to the first half trading results. When taken with the anticipated second half-year performance, I feel confident that results for the full year to 31 March 2013 will meet market expectations.

Speaking on behalf of the Board, I once again express our thanks and appreciation to our global employees for their efforts and commitment towards the Group's success.

G. W. Gurry

Chairman

20 November 2012

Operating and Financial Review

The six-month trading period to 30 September 2012 saw Group revenues increase by just over 3% to £12.70m (2011: £12.29m) representing steady progress amidst the backdrop of generally challenging economic times. Geographically, the Group experienced double digit percentage growth within the Americas along with a modest increase into the Far East region. Trading with Europe continued to be challenging and experienced a marginal decline against the comparable six-months.

The period under review showed continued growth from the sale of semiconductor flash memory controller products into industrial solid state Storage applications. Revenues moved firmly ahead against the prior year interim figure with most of the top Storage customers increasing their purchase levels.

The sale of Group products into industrial wireless voice and data application areas was somewhat lower against the prior half-year period although order intake for delivery during the second half leaves full year expectations for further advances in Wireless shipments unchanged.

Revenues from the sale of Group semiconductors into Telecom applications were broadly flat.

The Group's equipment division, RDT, saw revenues drop to £308k (2011: £415k) as trading in its dominant UK security markets remained weak.

Gross margin remained stable at 69% leading to a reported gross profit of £8.73m (2011: £8.51m). Distribution and administration costs fell slightly to £6.42m (2011: 6.52m) and this helped to deliver an operational profit (before other income, share-based payments and finance costs) of £2.32m against a comparable period figure of £1.99m.

Other operating income, principally rental proceeds from group owned industrial properties, rose slightly to £124k (2011: £89k).

Focussed management of Group cash resources led to a net finance income being recorded of £5k against a prior year first half cost of £37k.

Profit before tax amounted to £2.41m representing a 19% increase on the comparable half-year period. (2011: £2.02m).

A combination of increased revenues, static gross margin and reduced operating costs generated positive cash flow of £1.27m. This increase was posted after payment of a £631k cash dividend. At the period end the Group had cash reserves of £7.86m (2011: £7.38m) and bank borrowings of £1.35m (2011: £3.01m).

Summary & Outlook

Top level trading performance through the first half year was ahead of the comparable period and once again reflected the Group's focus on delivering sustainable growth.

Firm progress was made in the solid state Storage market and expansion of the controller product range to include the SATA interface standard is now fully supported by production released solutions. The industrial SATA controller market is a key growth area for the Group and customer design-in activity is on track to begin generating meaningful revenues during the year ahead.

Within Wireless, despite the potential for sporadic contracts to cause comparable period inconsistencies, the underlying trend is one of positive growth. The on-going customer adoption of the Group's more recent RF, baseband and data modem portfolio validates medium term growth objectives along with the continuing R&D investment strategy.

Global economic conditions continue to affect customer sentiment in some areas, and whilst the possibility exists for customer buying patterns to be impacted, trading since 1 October serves to underpin Board expectations for a firm full year advance in both revenues and profitability.

C. A. Gurry

Managing Director

20 November 2012

Condensed Consolidated Income Statement

for the six months ended September 2012

Condensed Consolidated Statement of Comprehensive Income

for the six months ended September 2012

Condensed Consolidated Statement of Financial Position

as at 30 September 2012

Condensed Consolidated cash flow statement

for the six months ended 30 September 2012

Condensed consolidated statement of changes in equity

for the six months ended 30 September 2012

Notes to the Condensed Financial Statements

1. Segmental analysis

Business segments

Geographical segments

Reported segments and their results in accordance with IFRS 8, is based on internal management reporting information that is regularly reviewed by 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.

2. Dividend paid and proposed

A dividend of 4p per 5p ordinary share in respect of the year ended 31 March 2012 was paid on 3 August 2012 (2011: 3.5p per ordinary share of 5p in respect of the year ended 31 March 2011). No dividend is proposed in respect of the six months period ended 30 September 2012 (2011: £Nil per ordinary share of 5p in respect of the period ended 30 September 2011).

3. Income tax

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.

4. Earnings per share

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.

5. Investment properties

Investment properties are revalued at each discrete period end by the Directors and every third year by independent Chartered Surveyors on an open market basis. No depreciation is provided on freehold investment properties or on leasehold investment properties. In accordance with IAS 40, gains and losses arising on revaluation of investment properties are shown in the income statement. At 31 March 2012 the investment properties were professionally valued by Everett Newlyn, Chartered Surveyors and Commercial Property Consultants on an open market basis.

6. Analysis of cash flow movement in net debt

The cash flow above is a combination of the actual cash flow and the exchange movement.

During the period the security held by the Company's bankers over land and buildings was extinguished.

7. Retirement benefit obligations

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

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 would have a direct effect on revenue, although since the majority of the cost of sales are also linked to the US Dollar, this risk is reduced at the gross profit line. Additionally, though the Group has a very diverse customer base in certain market segments, key customers can represent a significant amount of revenue. Key customer relationships are closely monitored, however changes in buying patterns of a key customer could have an adverse effect on the Group's performance.

Key risks of a non-financial nature

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

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

9. Directors' statement pursuant to the Disclosure and Transparency Rules

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

a. the condensed financial statements, prepared in accordance with IFRS as adopted by the EU give a true and fair view of the assets, liabilities, financial position and profit of the Group and the undertakings included in the consolidation taken as a whole; and

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

c. the Chairman's statement and operating and financial review include a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole together with a description of the principal risks and uncertainties that they face.

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

10. Basis of preparation

The basis of preparation and accounting policies used in preparation of the Half Yearly Financial Report are the same accounting policies set out in the year ended 31 March 2012 financial statements.

11. General

Other than already stated within the Chairman's statement and the operating and financial review there have been no important events during the first six months of the financial year that have impacted this Half Yearly Report.

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

The principal risks and uncertainties within the business are contained within this report in note 8 above.

In the segmental analysis (note 1) inter-segmental transfers or transactions are entered into under commercial terms and conditions appropriate to the location of the entity whilst considering that the parties are related.

This interim management report includes a fair review of the information required by DTR 4.2.7/8 (indication of important events and their impact, and description of principal risks and uncertainties for the remaining six months of the financial year).

This Half Yearly Financial Report does not include all the information and disclosures required in the Annual Report, and should be read in conjunction with the consolidated Annual Report for the year ended 31 March 2012.

The financial information contained in this Half Yearly Financial Report has been prepared using International Financial Reporting Standards as adopted by the European Union. This Half Yearly Financial 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 2012 is based on the statutory accounts for the financial year ended 31 March 2012 that have been filed with the Registrar of Companies and on which the Auditor gave an unqualified audit opinion.

11. General (continued)

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 Financial 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.

12. Approval

The Directors approved this Half Yearly Report on 20 November 2012.

GLOSSARY

GPRS general packet radio services

M2M machine to machine