CML Microcircuits Regulatory News (CML)

01 February 2019

CML Microsystems Plc

Trading Update

CML Microsystems Plc (the "Company" or "Group"), which designs, manufactures and markets semiconductors, primarily for global communication and solid state storage markets, today issues the following trading update:

Trading Update

In the Company's half year report announced on 20 November 2018, we reported that it would be challenging for second half revenues to show a material improvement over the first six-month period. However, it was also reported that the effects on profitability were expected to be less pronounced due to product mix and diligent cost control. At that time, weaker automotive sales and extended raw material supply chain lead times were just two of the market dynamics combining to subdue progress.

Since the half year announcement, we have seen the tangible effects of a softening of the Chinese economy along with on-going geopolitical issues and can report that a number of our customers have exhibited weaker demand and remain in an inventory correction period. As a result, new order bookings have not met with internal management expectations.

With only two months of the financial year remaining, the Company now expects second half revenues to be below those achieved during the first 6 months and full year revenues to be approximately 12% lower than the prior 12-month period. Given the expected sales performance, the Company therefore expects revenues and profit before tax to be materially below current market expectations. Gross margin has continued to track above last year due to product mix and the cost base has remained stable.

Whilst this is disappointing to report, the Board believes that medium to long term growth drivers for our products remain particularly strong and we are focussed on driving the business over this period and our strategy remains unchanged. We are maintaining levels of investment in product R&D on the back of many consecutive years of profitability. The growing product portfolio and our expanded global sales coverage is driving the value of our sales opportunity pipeline significantly higher. Despite the challenges associated with current market dynamics, we believe that the Company remains very well placed to benefit as these external situations normalise.

A further update will be provided during early May in advance of the full year results announcement on 11 June 2019.

The information contained within this announcement is deemed by the Group to constitute inside information under the Market Abuse Regulations (EU) No. 596/2014.

About CML Microsystems PLC

CML designs and develops semiconductors for the industrial storage and communications markets. The Group utilises a combination of in-house and outsourced manufacturing and has trading operations in Europe, the Far East and USA. CML targets niche markets with strong growth profiles and high barriers to entry. It has secured a diverse, blue chip customer base, including some of the world's leading telecoms equipment providers and industrial product manufacturers.

The spread of its customers and products largely protects the business from the cyclicality usually associated with the semiconductor industry. Growth in its end markets is being driven by factors such as the ever increasing trend towards solid state storage devices in the commercial and industrial sectors, the upgrading of telecoms infrastructure around the world and the growing prevalence of private commercial communications networks for voice and/or data communications linked to the industrial internet of things (IIoT).

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