CML Microcircuits Regulatory News (CML)

CML Microsystems Plc

INTERIM RESULTS

CML Microsystems Plc ("CML"), which designs, manufactures and markets a broad range of semiconductor products, primarily for the global communication and data storage markets, announces Interim Results for the six months ended 30 September 2015.

Financial Highlights

· Group revenues up 8% to £11.00m (H1 2014: £10.21m)

· Gross profit up 10% to £7.98m (H1 2014: £7.22m)

· Underlying profit before tax up 22% to £1.51m (H1 2014: £1.24m)

· Basic EPS up 30% to 7.69p (H1 2014: 5.92p)

· Cash reserves of £12.26m (31 March 2015: £13.19m) - after £1.12m dividend payment

Operational Highlights

· Release of two new RF ICs suitable for the global industrial wireless markets

· SD and USB flash memory controller products continue to win "design-ins"

· Strengthened marketing, sales and support resources

· Higher investment in new product development

Chris Gurry, Group Managing Director of CML, said: "The first six months of the current trading year produced a meaningful advance in revenue and profitability against the comparable period.

"Whilst the recent signals from some market areas necessitate an air of caution, the Board's current expectations are for a sequential revenue improvement and for a full year advance in profitability."

Chairman's statement

I am pleased to state that as expected the Group has moved forward, increasing both sales revenue and profitability when compared to the same period last year. Results reported are broadly in line with expectations despite current global market conditions becoming more difficult.

In the first six month period to 30 September 2015, sales revenues increased 8% to £11.00m (2014: £10.21m) and pre-tax profits increased by 22% to £1.51m (2014: £1.24m). Cash at the period end reduced compared to the March year end mainly as a result of payment of the dividend, the planned increase in development expenditure and the purchase of our own shares to be held in treasury.

Recently, one or two of the market areas addressed are showing signs of softness and a small number of customers have delayed the launch of their new products, albeit only by a few months. This appears to be a short-term problem that has reduced the Board's expected growth rate for the second half. Despite this caveat, the Board remains confident that the Group will move forward for the financial year as a whole.

The Group's visible growth opportunities provide me with clear evidence that the execution of the Board's strategy is driving progress, regardless of the short-term headwinds in some market areas. I am confident of a more significant improvement in the results over the medium and longer term.

As always the progress of any business is dependent upon the quality and dedication of its employees. The Board wishes to thank its employees worldwide for the performance and commitment they have shown throughout this period.

Nigel Clark

Group Non-Executive Chairman

24 November 2015

Group Managing Director's statement and operational and financial review

Operational and Financial Review

The first six months of the current trading year produced a meaningful advance in revenue and profitability against the comparable period. Total sales reported to 30 September 2015 were £11.00m representing an increase of 8% (2014: £10.21m).

The overall rise was a result of improved trading from each of the three major market areas addressed; namely Storage, Wireless and Wireline Telecoms. Geographically, shipments into the Far East recorded the largest gain whilst across the customer base, the majority of the Group's current top customers increased their spend.

Gross margin remained robust and drove gross profit 10% higher to £7.98m (2014: £7.22m). As previously communicated, the Group continued to invest in marketing, sales and support resources whilst simultaneously maintaining high levels of R&D investment. Distribution and administration costs increased to £6.62m (2014: £6.17m), delivering an operational profit (before share-based payments and finance income) of £1.54m (2014: £1.28m).

Other operating income, principally rental proceeds from commercial properties and regional engineering development grants, fell to £0.19m (2014: £0.22m).

Profit before taxation advanced by over 22% to £1.51m (2014: £1.24m) delivering a diluted earnings per share of 7.65p (2014: 5.84p).

Cash balances at 30 September 2015 stood at £12.26m which is a reduction on the 31 March 2015 position of £13.19m due mainly to the payment of a £1.12m dividend and the increased investment in development costs.

Summary

The trading performance through the first half of the current financial year was ahead of the comparable period and reflected the Group's multifaceted approach to delivering growth.

Advances were made with strengthening our marketing, sales and support resources and new product development activities continue to receive high levels of investment.

In recent months, the Group has released two new RF ICs suitable for global industrial wireless applications along with a focused baseband processing solution for Digital Mobile Radio (DMR).

For the industrial storage markets, our SD and USB flash memory controller products continue to gain acceptance at the design-in and qualification level, although the sale of SATA interface controllers has been slower than expected. Ongoing activities are directed towards those market sub-segments that we believe will deliver on our multi-year growth objectives.

Outlook

Despite the improvement in first half results, it is important to convey that a number of the end markets the Group addresses are going through technological change with respective Group customers at varying stages of adoption, market introduction and manufacturing ramp. Predicting the timing of some of these end market transitions is challenging.

Whilst the recent signals from some market areas necessitate an air of caution, the Board's current expectations are for a sequential revenue improvement and for a full year advance in profitability.

Chris Gurry

Group Managing Director

24 November 2015

Condensed consolidated income statementfor the six months ended 30 September 2015

Condensed consolidated statement of comprehensive income

for the six months ended 30 September 2015

Condensed consolidated statement of financial positionas at 30 September 2015

Condensed consolidated cash flow statementfor the six months ended 30 September 2015

Condensed consolidated statement of changes in equityfor the six months ended 30 September 2015

Notes to the condensed consolidated financial statements

for the six months ended 30 September 2015

1 Segmental analysis

Business segment

Geographical segments

Segmental reporting is 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 full year financial statements.

Revenue

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

2 Dividend paid and proposed

A dividend of 6.9p per 5p ordinary share in respect of the year ended 31 March 2015 was paid on 3 August 2015 (2014: 6.25p per ordinary share of 5p in respect of the year ended 31 March 2014). No dividend is proposed in respect of the six months period ended 30 September 2015 (2014: £Nil per ordinary share of 5p in respect of the period ended 30 September 2014).

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, as explained below:

On 10 June 2015, the Company purchased 50,000 ordinary shares of 5p each in the Company at a price of 376.5p per ordinary share. These shares are held in treasury for the benefit of various employee share plans and are excluded from the denominators listed above for the purposes of earnings per share calculations.

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 2015 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 cash

The cash flow below is a combination of the actual cash flow and the exchange movement:

7 Retirement benefit obligations

The Directors have not obtained an actuarial IAS19 Employee Benefits 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 Group Managing Director's statement and operational and financial review include a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole together with a description of the principal risks and uncertainties that they face.

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

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 2015 financial statements.

11 General

Other than already stated within the Chairman's statement and Group Managing Director's statement and 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 Financial 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 Half Yearly Financial 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 2015.

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 2015 is based on the statutory accounts for the financial year ended 31 March 2015 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 Financial Report has not been audited or reviewed by the Group Auditor.

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

12 Approvals

The Directors approved this Half Yearly Report on 24 November 2015.