CML Microcircuits Regulatory News (CML)

20 Nov 2007 07:01

CML Microsystems PLC20 November 2007 20 November 2007 CML MICROSYSTEMS Plc INTERIM RESULTS CML Microsystems Plc ("CML"), which designs, manufactures and markets a broadrange of integrated circuits, primarily for global communication and datastorage markets, announces its Interim Results for the half year ended 30September 2007. CML has operations in the UK, Germany, the US, Singapore, Chinaand Taiwan. Commenting on the results, George Gurry, Chairman said: "The results for the six-month trading period ending 30 September 2007 show aloss somewhat greater than earlier internal expectations and reflect the furthereffects of the operational problems that impacted heavily on the previous year'strading performance. "They nevertheless mark an expected material improvement over the results forthe immediately preceding six months and are an indication of progress takingplace at the group operating level." Financial Highlights • Turnover down 11% to £8.49m (2006: £9.46m) • Loss before tax of £1.1m (2006: Loss of £0.83m) • Loss per share of 8.05p (2006: Loss of 4.90p) • Cash in bank and at hand of £1.8m Business Review • New product releases within the storage and wireless market segments. • Adoption of voice privacy Integrated Circuits made a notable contribution. • Storage segment benefited from an increase of product shipments into the Americas. • New customer design wins expected to contribute meaningful revenues in the next calendar year. • Sale of Group products into the telecom segment continued to be volatile. • Significant investment to ensure the Group is well placed to reap future benefits. Regarding prospects, George Gurry, Chairman said: "The remainder of this current trading year will continue to be challenging, butyour Board remains confident, subject to unforeseen circumstances, that theGroup's return to profitability will become evident shortly thereafter." Enquiries: CML Microsystems Plc www.cmlmicroplc.com Nigel Clark, Financial Director 020 7479 7933 (today)Chris Gurry, Managing Director 01621 875 500 (thereafter) Parkgreen Communications Ltd 020 7479 7933Paul McManus 07980 541 893 Chairman's Statement Introduction The results for the six-month trading period ending 30 September 2007 show aloss somewhat greater than earlier internal expectations and reflect the furthereffects of the operational problems that impacted heavily on the previous year'strading performance. They nevertheless mark an expected material improvement over the results for theimmediately preceding six months and are an indication of progress taking placeat the group operating level. Results Group revenues for the opening six-month period were £8.49m, down approximately11% against the comparable previous period (2006: £9.46m), and the loss beforetax is increased to £1.1m (2006: £0.83m). The reported loss per ordinary share shows an increase to 8.05p (2006: loss4.90p per share) resulting partly from a higher comparative income tax charge. Further details and background to the results are given in the Operating andFinancial Review that follows from this Statement. Dividend As in previous years, your Board is not recommending payment of an interimdividend. Property In June of this year your Board announced its intention to improve shareholderreturn from the non-operational property assets held in the balance sheet, andone such property at Fareham, Hampshire was placed for sale to the market.Having recently completed preparatory steps, it is likely that a furtherproperty, the original UK operating premises at Witham, Essex, will also bedisposed of as circumstances favour. Prospects The Board has taken steps earlier this year to begin implementing the changesrequired to deliver a growth-oriented business. Realisation of the benefitsassociated with these changes will take time to flow through but the Group'smanagement team are committed to following this strategic direction and creatingsustainable profit growth for the Group. The remainder of this current trading year will continue to be challenging, butyour Board remains confident, subject to unforeseen circumstances, that theGroup's return to profitability will become evident shortly thereafter. G. W. GurryChairman 19 November 2007 Operating and Financial Review Introduction Our strategy remains the delivery of increasing shareholder value by leveragingthe Group's extensive design skills, diversified technology portfolio andsystem-level understanding, to develop world-class semiconductor products forglobal communication and data storage market segments. During recent years we have invested heavily in developing technology thatenables us to be at the forefront of certain emerging markets whilst continuingto ensure that existing market segments will be served by class-leading productintroductions for a number of years to come. The first six months of the year ending 31 March 2008 saw important new productreleases within the storage and wireless market segments. Early stage customeradoption cycles commenced and certain extensive pre-qualification procedurescontinued through the period end. During this period of important new productreleases and protracted customer adoption rates, the Board continued to focus oncost control whilst having due regard for the Group's growth objectives. Financial Results & Business Summary Group revenues for the six-month period to 30 September 2007 were £8.49mrepresenting a decrease over the £9.46m achieved in the first half of 2006.Revenues during the first six months of 2006 included shipments to a keycustomer that, as previously reported, withdrew from the memory card marketduring that year. A corresponding loss before tax of £1.1m was recorded. Thisreflected an increase over the comparable period (2006: £0.83m) and animprovement against the sequential half year. Gross profit margin improved to71% (2006: 64%) largely as a result of product mix. During the first six months, the Group had one customer who accounted for 12% ofGroup revenues and one customer who represented 4%. No other single customercontributed more than 3% of Group revenues. Cash balances reduced from £3m to £1.82m following the payment of the 2007dividend (£0.75m) and an increase in inventory levels from £1.6m at 31 March2007 to £1.96m at 30 September 2007. The increased period end inventory levelwas expected and subsequently returned to appropriate levels. As highlighted in the last annual report, the Board expects further pressure tobe placed on cash-reserves and working capital throughout the remainder of theyear and, during the first six months, continued to prioritise resources towardsensuring a return to profitability for the Group. Existing bank facilities wererenewed in July for a further 12 months and the Board has communicated itsintention to realise value from the sale of certain non-operational propertyassets. The future timing of any property disposals represents an element ofuncertainty with regards to cash flow and other income. Through the first half year, the majority of customer transactions were in USdollars. The Group does not enter into hedging arrangements in respect offoreign currency exposure although a partial natural hedge exists due to themajority of raw material purchases being in US dollars. Whilst this affords someprotection, our largest cost centres are located in the UK and Germany resultingin a substantial exposure to foreign currencies, and a potential future risk. Markets Within the wireless market segment, the prominent application areas for our IC'sthrough the period were professional mobile radio, leisure two-way radio andnarrowband wireless data. Adoption of our voice privacy IC's within both theprofessional and leisure markets made a notable contribution and expansion ofthe product range to include RF (radio frequency) functionality continued. The storage segment benefited from an increase of product shipments into theAmericas, where the Group has a significant addressable market. The existing customer base began to ramp production volumes and new customerdesign wins were recorded that are expected to begin contributing meaningfulrevenues during the next calendar year. The major applications for our storageproducts in the first half were inclusion within solid state disk (SSD) anddisk-on-module products which are used as an alternative to magnetic storagemedia in commercial and industrial application areas that demandhigh-reliability and an extended product lifecycle. The sale of Group products into the telecom segment continued to be volatile.Good demand for modem IC's within wireless security alarm products was counteredby weakness in shipments into wireless local loop telephony applications. Thismarket situation is expected to continue for the remainder of the financialyear. The Group has reduced costs and improved functionality of the productrange in this segment and is well placed to capitalise on opportunities as theymaterialise. The networking segment exhibited improved shipments during the period withinitial deliveries being recorded for our HyNet products for use withinIP-camera applications. This followed the release of a reference-design for thisapplication area which is typical of the demands from our Far East customerbase. Summary Group performance during the first six months reflects the period of transitionwe are in. Certain historic markets are exhibiting technological change and theGroup has invested significantly to ensure we are well placed to reap therewards associated with those changes. Newer application areas for Groupproducts are poised for substantial growth and we are well placed to benefitfrom the associated opportunities. The Board continue to focus on being able todeliver sustainable progress beyond this year. As previously announced, our Chairman, Chief Executive and co-founder, GeorgeGurry, relinquished his executive roles at the period end and will remainnon-executive Chairman. His contribution has been fundamental in positioning theGroup for future growth and, on behalf of the Board, I would like to thank himfor his considerable achievements. Finally, I would like to thank our dedicated employees for their achievements sofar and acknowledge the crucial role they continue to play in our future. Thereremains much to do in achieving future success but the Board has confidence inthe medium term outlook. C.A. GurryManaging Director 19 November 2007CML Microsystems Plc Consolidated Income Statement 6 Months End 30/09/ 6 Months End 30/ 12 Months End 31/03 07 09/06 /07 £'000 £'000 £'000Continuing OperationsRevenue 8,487 9,460 17,768Cost of sales (2,437) (3,455) (6,729)Gross Profit 6,050 6,005 11,039 Distribution and administration costs (7,162) (7,149) (14,985) (1,112) (1,144) (3,946) Other operating income 125 374 660Operating loss before adjustments (987) (770) (3,286) Release of restructuring provision 18 - -Share based payments (18) (40) (76)Operating loss after adjustments (987) (810) (3,362) Finance cost (166) (110) (228)Finance income 57 88 381Loss before taxation (1,096) (832) (3,209) Income Tax (107) 100 591 Loss for the period attributable to equityshareholders (1,203) (732) (2,618) Loss per shareBasic (8.05p) (4.90p) (17.53p)Diluted (8.05p) (4.90p) (17.53p) Statement of Recognised Income and Expense 6 Months End 30/09 6 Months End 30/09 12 Months End 31/03 /07 /06 /07 £'000 £'000 £'000 Loss for the period (1,203) (732) (2,618) Foreign exchange differences (44) (261) (346)Actuarial gain - - 1,063Income tax on actuarial gain - - (319) Recognised losses relating to the period (1,247) (993) (2,220) Consolidated Balance Sheet 30/09/07 30/09/06 31/03/07 £'000 £'000 £'000AssetsNon current assetsTangible assets - Property, plant and equipment 6,699 7,084 6,803Tangible assets - Investment property 2,245 3,845 2,245Intangible assets - Development costs 5,729 6,789 5,984Intangible assets - Goodwill on consolidation 3,512 3,512 3,512Deferred tax asset 1,715 1,159 1,717 19,900 22,389 20,261Current assetsInventories 1,963 1,766 1,595Trade receivables and prepayments 3,005 3,985 3,057Current tax assets 148 - 419Cash and cash equivalents 1,816 3,978 3,000 6,932 9,729 8,071Non current assets classified as held for sale - property 1,600 - 1,600 8,532 9,729 9,671 Total assets 28,432 32,118 29,932 LiabilitiesCurrent liabilitiesBank loan 4,000 4,000 4,000Trade and other payables 3,093 2,826 2,248Current tax liabilities 424 302 761 7,517 7,128 7,009 Non current liabilitiesDeferred tax liabilities 3,126 3,135 3,128Provisions - 52 30Retirement benefit obligation 2,289 3,135 2,289 5,415 6,322 5,447 Total liabilities 12,932 13,450 12,456 Net Assets 15,500 18,668 17,476 EquityShare capital 747 747 747Capital reserve 4,148 4,148 4,148Share based payments reserve 19 202 238Foreign exchange reserve (80) 49 (36)Accumulated profits 10,666 13,522 12,379Shareholders' equity 15,500 18,668 17,476 Consolidated Cash Flow Statement 6 Months End 6 Months End 12 Months End 30/09/07 30/09/06 31/03/07 £'000 £'000 £'000Operating activitiesNet loss for the period before income taxes (1,096) (832) (3,209)Adjustments for:Depreciation 324 377 706Amortisation of development costs 2,205 1,895 4,789Movement in pension deficit - - 217Share based payments 18 40 76Exceptional restructuring costs (30) (95) (117)Interest expense 166 110 228Interest income (57) (88) (381)Increase in working capital 530 1,159 1,418Cash flows from operating activities 2,060 2,566 3,727Income tax (paid)/refunded (176) 334 236Net cash flows from operating activities 1,884 2,900 3,963 Investing activitiesPurchase of tangible assets (230) (281) (369)Investment in intangible assets (1,919) (2,605) (4,704)Disposals of tangible assets - 32 56Interest income 57 88 381Net cash flows from investing activities (2,092) (2,766) (4,636) Financing activitiesDividends paid (747) (1,564) (1,564)Interest expense (166) (110) (228)Net cash flows from financing activities (913) (1,674) (1,792) Decrease in cash and cash equivalents (1,121) (1,540) (2,465) Movement in cash and cash equivalents:At start of period 3,000 5,708 5,708Decrease (1,121) (1,540) (2,465)Effects of exchange rate changes (63) (190) (243)At end of period 1,816 3,978 3,000 Consolidated Statement of Changes in Equity Share Convertible Capital Share based Foreign Accumulated Total capital warrants reserve payments exchange profits reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 April 2006 745 120 4,039 162 310 15,809 21,185 Warrants converted/lapsed 2 (120) 109 9 -Foreign exchangedifferences (261) (261)Dividends paid (1,564) (1,564)Loss for period (732) (732)Share based payments 40 40 At 30 September 2006 747 - 4,148 202 49 13,522 18,668 Foreign exchangedifferences (85) (85)Net actuarial gainsrecognised directly toequity 1,063 1,063Deferred tax on actuarialgains (319) (319)Loss for period (1,887) (1,887)Share based payments 36 36 At 31 March 2007 747 - 4,148 238 (36) 12,379 17,476 Foreign exchangedifferences (44) (44)Dividends paid (747) (747)Loss for period (1,203) (1,203)Share based payments (219) 237 18 At 30 September 2007 747 - 4,148 19 (80) 10,666 15,500 Notes to the financial statements 1. Segmental Analysis Primary - Business Unaudited Unaudited Audited 6 Months End 6 Months End 12 Months End 30/09/07 30/09/06 31/03/07 Semi-conductor Semi-conductor Semi-conductor components components components Equipment Group Equipment Group Equipment Group £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000RevenueSegmental Sales 587 7,900 8,487 503 8,957 9,460 1,003 16,765 17,768 (Loss)/ProfitSegmentaloperating (loss)/profit 110 (1,097) (987) 57 (867) (810) 101 (3,463) (3,362)Net financialincome/(expense) (109) (22) 153Income Tax (107) 100 591Loss after (1,203) (732) (2,618)taxationAssets andLiabilitiesSegmental assets 815 21,908 22,723 804 26,082 26,886 762 23,190 23,952Unallocatedcorporate assets 5,709 5,232 5,980Consolidatedtotal assets 28,432 32,118 29,932Segmental 133 2,301 2,434 245 2,633 2,878 158 2,120 2,278liabilitiesUnallocatedcorporateliabilities 10,498 10,572 10,178Consolidatedtotal liabilities 12,932 13,450 12,456Other segmentalinformationTangible assetadditions - 230 230 - 281 281 - 368 368Intangible assetadditions 34 1,885 1,919 38 2,567 2,605 74 4,630 4,704Depreciation 8 316 324 8 369 377 17 689 706Amortisation 32 2,173 2,205 33 1,862 1,895 76 4,713 4,789 2. Dividend paid and proposed Declared and paid during the period Unaudited Unaudited Audited 6 Months End 6 Months End 12 Months End 30/09/07 30/09/06 31/03/07 £'000 £'000 £'000Equity dividends paid on 5pordinary shares10.5p per share dividend for yearended 31 March 2006 - 1,564 1,5645p per share dividend for yearended 31 March 2007 747 - - The directors do not recommend the payment of an interim dividend. 3. Income tax The directors consider that tax will be payable at varying rates according tothe country of incorporation of a subsidiary and have provided on that basis.Deferred taxation is not reassessed at the interim stage. Unaudited Unaudited Audited 6 Months End 6 Months End 12 Months End 30/09/07 30/09/06 31/03/07 £'000 £'000 £'000 UK income tax (144) - (358)Overseas income tax 251 (100) 645Total current tax 107 (100) 287Deferred tax - - (878)Reported income tax charge/(credit) 107 (100) (591) 4. Earnings per share The calculation of basic earnings per share is based on the profit attributableto shareholders for the period and on the following weighted average number ofshares in issue: Ordinary 5p shares Weighted Average Number Diluted Number6 months ended 30 September 2007 14,947,626 14,947,6266 months ended 30 September 2006 14,919,839 14,919,83912 months ended 31 March 2007 14,933,733 14,933,733 5. Retirement benefit obligations The directors have not obtained an actuarial report in respect of the definedbenefit pension scheme for the purpose of this Half Yearly Report. 6. Tangible assets - Investment Property Investment properties are re-valued at each discreet period end by the directorsand every third year by independent Chartered Surveyors on an existing use openmarket basis. No depreciation is provided on freehold properties or on leaseholdinvestment properties where the un-expired lease term exceeds 20 years. Inaccordance with IAS 40, gains and losses arising on revaluation of investmentproperties are shown in the income statement. The directors are of the opinionthat there has been no material change in the carrying value of investmentproperties. Subsequent to the 30 September 2007 the Group's property at Witham, Essex hasbeen placed on the market for sale. 7. General Other than already stated within the Chairman's statement and the operating andfinancial review there have been no important events during the first six monthsof the financial year that have impacted this Half Yearly Report. There have been no related party transactions or changes in related partytransactions described in the latest annual report that could have a materialeffect on the financial position or performance of the Group in the first sixmonths of the financial year. The principal risks and uncertainties within the business are contained in theOperating and Financial Review on pages 2 and 3 of this Half Yearly Report. This interim management report includes a fair review of the informationrequired by DTR 4.2.7 (indication of important events and their impact, anddescription of principal risks and uncertainties for the remaining six months ofthe financial year). This Half Yearly Report has been prepared in accordance with InternationalAccounting Standard 34 "Interim Financial Reporting". This Half Yearly Reportdoes not include all the information and disclosures required in the AnnualFinancial Statements, and should be read in conjunction with the consolidatedAnnual Financial Statements for the year ended 31 March 2007. The financial information contained in this Half Yearly Report has been preparedusing International Financial Reporting Standards as adopted by the EuropeanUnion. The accounting policies used in preparation of the Half Yearly Report arethe same accounting policies set out in the year ended 31 March 2007 financialstatements. This Half Yearly Report does not constitute statutory accounts asdefined by Section 240 of the Companies Act 1985. The financial information forthe year ended 31 March 2007 is based on the statutory accounts for thefinancial year ended 31 March 2007 that have been filed with the Registrar ofCompanies and on which the auditors gave an unqualified audit opinion. Theauditors report on those accounts did not contain a statement under section 237(2) or (3) of the Companies Act 1985. This Half Yearly Report has not beenaudited or reviewed by the Group Auditors. All shareholders will be sent a copy of this Half Yearly Report which can alsobe obtained from the company's registered office at Oval Park, Maldon, Essex CM96WG, England. 8. Approval of results The directors approved this Half Yearly Report on 19 November 2007. 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