rnsitem
REG-CML Microsystems PLC Final Results
Released: 16/06/2009
http://pdf.reuters.com/Regnews/regnews.asp?i=43059c3bf0e37541&u=urn:newsml:reuters.com:20090616:RnsP9387T
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RNS Number : 9387T
CML Microsystems PLC
16 June 2009
CML Microsystems Plc
Preliminary results
CML Microsystems Plc ("CML"), which designs, manufactures and markets a broad
range of integrated circuits, primarily for global communication and data
storage markets, announces results for the full year ended 31 March 2009. CML
has operations in the UK, Germany, the US, Singapore, China and Taiwan.
Chairman's Statement
Introduction
The results posted for the full trading year ending 31 March 2009 reflect a
continuation throughout the second half of the depressed trading conditions
reported in the Group's marketplaces at the interim stage.
As anticipated with my concluding comments in the Interim Statement, conditions
throughout the remaining months of the year remained challenging and a clear
reduction in half on half performance was recorded.
Results
Details of the results are reported in the Operating and Financial Review. In
summary, these show that Group revenues for the year posted a 6% decline to
£16.09m (2008: £17.10m) and gross margin was 5% lower at 63% (2008: 68%). The
lower gross margin results to some extent from variations in product sales mix.
An increased loss before tax of £2.09m (2008: £1.73m loss) is consequent to an
accounting rules gain and the positive movement of exchange rates during the
period, in all totalling approximately £1m. If this gain is discounted the loss
is broadly in line with market expectations for the year.
The reported loss per ordinary share is 14.29p (2008: 4.13p loss per share).
Dividend
Your directors have given consideration to the savings expected from cost
reduction measures that the Group has already and continues to implement,
together with the funding of operational plans to increase its performance in
the difficult circumstances that presently exist.
They conclude that payment of a dividend would not be an appropriate use of
resources at this present time. The directors therefore do not recommend payment
of a dividend for the year ending 31 March 2009.
Property
The UK freehold properties that the Group had earlier placed on the market have
been withdrawn from sale pending an improvement in commercial property values.
Prospects
The breadth and duration of the markets slowdown has exceeded the expectations I
had when reporting to you at the interim stage.
Sales levels in the opening months of the current year show no improvement over
those of the preceding months, but the Group's product, marketing and business
activities remain rightly focussed towards the growth opportunities identified
as conditions improve.
I have confidence in your Group's ability to achieve a future return to growth.
Operating and Financial Review
Overview
During the year to 31 March 2009 the particularly adverse global market
environment that commenced towards the end of the first-half impacted trading.
Internal progress was made with our product development strategy for driving
sustainable business growth but prevailing market and customer conditions
prevented that progress from driving an annual revenue improvement.
Operational cost efficiencies were receiving management focus prior to the start
of the financial year and that process escalated during the second-half
culminating in a significant reduction in employee levels. These reductions
affected the majority of our trading subsidiaries whilst particular emphasis was
placed on maintaining the resources required to ultimately achieve sustained
growth within our chosen market areas. All costs associated with this exercise
were realised prior to the year-end and are contained within these financial
results.
The uncertain outlook, low visibility and soft trading conditions reported in
recent management statements continued through to the end of the period under
review.
Financial results
Group revenues for the year ended 31 March 2009 were £16.09m reflecting a 6%
decrease over the comparable period (2008: £17.10m). The majority of customer
transactions were in US dollars and the strengthening of the dollar against
sterling through the year made a positive contribution.
Gross margin fell to 63% (2008: 68%) largely as a result of product mix and a
reduced gross profit of £10.20m was recorded for the full year (2008: £11.71m).
Reported distribution and administration expenses improved to £12.47m (2008:
£13.67m) assisted by lower amortisation costs and an unrealised gain of £507k
relating to an inter-group loan.
Net finance costs amounted to £218k (2008: £144k).
The revenue reduction and margin loss were the largest contributing factors to
the group posting an increased loss before tax of £2.09m (2008: £1.73m loss).
Continued tight management of the Group's cash resources led to a reduced
outflow of £0.69m (2008: £2.12m) for the year. Cash balances stood at £2.19m at
the 31 March 2009.
A decrease in both raw materials and finished goods saw inventory levels fall to
£1.37m (2008: £1.75m). This, coupled with lower revenues, resulted in a working
capital reduction of £132k. Capital expenditure was £66k (2008: £358k)
The Group does not enter into hedging arrangements in respect of foreign
currency exposure although a partial natural hedge exists due to the majority of
raw material purchases and the majority of customer transactions being
denominated in US dollars. Although this affords some protection, our largest
cost centres are located in the UK and Germany resulting in substantial exposure
to foreign currency fluctuations.
The tax expense within the income statement of £47k (2008: £1.11m credit)
includes a charge of £392k in respect of the government enacting the proposal to
withdraw Industrial Buildings Allowances. This event was fully anticipated and
highlighted within the 2008 Annual Report and Accounts.
The Group continued to benefit from the focus on leveraging internal engineering
resources across multiple product and market segments at the expense of external
development resources, where appropriate. Several key new product releases were
made during the year whilst development expenses remained flat at £3.97m (2008:
£3.95m).
The effect on the income statement of accounting for pensions under IAS 19 was
to increase the administration costs by £391k (2008: decrease of £259k) and to
increase the finance income by £72k (2008: £96k). The retirement benefit
obligation liability under IAS 19 grew to £1.99m compared to a surplus of £459k
at the 31st March 2008.
After careful consideration, and with effect from 31 March 2009, the Company
took the decision to close the UK defined benefit pension scheme in respect of
future benefit accruals. The scheme had already closed to new entrants some
years earlier but, after receiving the latest triennial valuation from the
scheme actuary, it became clear that it continued to represent a significant and
unpredictable future financial exposure. The Company intends to continue making
payments into the scheme in respect of accrued liabilities and has agreed a
multi-year payment plan with the trustees. All affected employees were offered
the chance to join an existing Group Money Purchase Scheme.
MARKETS REVIEW
Wireless
Revenues from the sale of semiconductors into the wireless market were flat
year-on-year with the majority coming from the Far East and European regions.
Customer products through the period included military, professional and leisure
two-way radios, paging devices and narrowband wireless data modems. Our
integrated circuits (IC's) performed a number of functions within each of these
products including signal processing, voice privacy and radio frequency (RF)
transmission and reception.
Growth was recorded in the contribution made from those products built on our
proprietary FirmASIC technology and the RF product family expanded to include a
high-performance IQ modulator along with a flexible quadrature receiver chip.
Initial customer programs with these products are encouraging and support the
underlying strategy to expand the CML silicon footprint within each customer's
end product.
Revenues from the low-cost analogue radio market were subdued as customers chose
to suspend the release of new products in response to the general market
conditions. Semiconductor shipments into China for public utility telemetry and
marine electronics applications continued to perform slightly ahead of
expectations. Overall, the wireless segment proved to be quite resilient through
the year.
Storage
The prominent applications for our semiconductors within this market during the
year were inclusion within removable memory cards and solid-state drive products
in varying form factors. Customer products containing our IC's were typically
used as an alternative to magnetic storage media in commercial and industrial
application areas that demand high-reliability under arduous operating
conditions.
Percentage revenue growth in this segment was close to double-digits with the
Far East and Europe performing particularly well. The growth came from a
combination of historic and new customers. Throughout the particular
sub-segments of the storage market where the Group is active, we continued to
enhance our reputation in relation to product quality, performance and customer
service levels. A growing list of major international organisations built their
products on our proprietary technology
Telecom
The sale of semiconductors into the telecom segment fell significantly for the
second consecutive year and was the main contributor to the overall reduction in
Group revenues. Whilst all geographic regions posted a reduction, the fall in
demand from specific North American security applications was the single biggest
factor. Despite this disappointing performance, the product range remained both
price and performance competitive for the target markets and several new
customer design-wins were achieved.
Networking
Revenue contributions from the networking segment were slightly down against the
prior year and remain at relatively low-levels. Development of the support tools
required to successfully market the product range reached the stage for
promotional activities to commence.
Equipment
The Group's equipment division, Radio Data Technology Ltd, suffered a reduction
in revenues to £980k (2008: £1.13m) as a direct result of the economic
conditions in the UK delaying the placement of commercial orders for CCTV
transmission equipment. A focused product development plan was initiated and is
expected to drive global growth as conditions improve.
Across all market areas during the year, no customer accounted for more than 10%
of Group revenues and only one customer accounted for more than 5%.
SUMMARY & OUTLOOK
The year under review was a difficult one. Despite a reasonable performance
during the opening few months, global events that commenced towards the end of
the first half impaired our ability to post a trading improvement fur the full
year. Whilst I am encouraged by the resilience exhibited within the wireless
segment and the growth delivered from storage products, forward visibility
remains low and directly affects our ability to anticipate the timing of any
upturn in the markets.
We enter the 2009/10 financial year with a cost base better aligned to recent
revenue levels and remain hopeful that general market conditions improve to
facilitate a return to profitability at the earliest opportunity.
The Board continues to have confidence in the medium term outlook and considers
that actions taken through the year will ultimately deliver positive results.
The strategic and operational focus continues to be on achieving sustainable
growth as conditions improve.
The Company has now been in existence for 40 years and the success achieved
during that time has been fundamentally built on the quality, dedication and
support of the Group's past and present employees worldwide. On behalf of the
Board, I would like to extend our sincere thanks for their loyal support and
effort throughout the year.
CML Microsystems Plc
Condensed Consolidated Income Statement
Unaudited Audited
Year end 31st March 2009 Year end 31st March 2008
Continuing operations
£'000 £'000
Revenue 16,089 17,098
Cost of sales (5,887) (5,393)
Gross Profit 10,202 11,705
Distribution and administration costs (12,466) (13,671)
(2,264) (1,966)
Other operating income 489 430
Loss before share based payments (1,775) (1,536)
Share based payments (101) (48)
Loss after share based payments (1,876) (1,584)
Revaluation of investment properties 5 -
Finance costs (333) (334)
Finance income 115 190
Loss before taxation (2,089) (1,728)
Income tax (expense)/credit (47) 1,111
Loss after taxation attributable to equity holders of
the Company (2,136) (617)
Loss per share
Basic (14.29)p (4.13)p
Diluted (14.29)p (4.13)p
Condensed Statement of Recognised Income and Expense
Unaudited Audited
Year end 31st March 2009 Year end 31st March 2008
£'000 £'000
Loss for the year (2,136) (617)
Foreign exchange differences 397 82
Actuarial (loss)/gain (1,671) 1,934
Income tax on actuarial (loss)/gain 507 (580)
Net (loss)/income for the year directly recognised in equity (767) 1,436
Recognised (losses) and gains relating to the year attributable
to equity holders of the Company (2,903) 819
CML Microsystems Plc
Condensed Consolidated Balance Sheet
Unaudited Audited
31st March 2009 31st March 2008
£'000 £'000
Assets
Non current assets
Property, plant and equipment 5,931 6,261
Investment properties 3,850 415
Development costs 5,192 5,341
Goodwill 3,512 3,512
Deferred tax asset 2,019 1,290
20,504 16,819
Current assets
Inventories 1,366 1,745
Trade receivables and prepayments 2,504 2,535
Current tax assets 355 410
Cash and cash equivalents 2,192 1,891
6,417 6,581
Non current assets classified as held for
sale - property 468 3,770
Total assets 27,389 27,170
Liabilities
Current liabilities
Bank loans and overdrafts 6,062 5,075
Trade and other payables 2,069 2,320
Current tax liabilities 15 54
8,146 7,449
Non current liabilities
Deferred tax liabilities 2,459 2,125
Retirement benefit obligation 1,990 -
4,449 2,125
Total liabilities 12,595 9,574
Net Assets 14,794 17,596
Capital and reserves attributable to equity holders
of the Company
Share capital 747 747
Share premium 4,148 4,148
Share based payments reserve 151 50
Foreign exchange reserve 443 46
Accumulated profits 9,305 12,605
Shareholders' equity 14,794 17,596
CML Microsystems Plc
Condensed Consolidated Cash Flow Statement
Unaudited Audited
Year end Year end
31st March 2009 31st March 2008
£'000 £'000
Operating activities
Net loss for the year before income taxes (2,089) (1,728)
Adjustments for:
Depreciation 437 579
Amortisation of development costs 4,183 4,684
Movement in pensions deficit 319 (355)
Share based payments 101 48
Interest expense 333 334
Interest income (115) (190)
Decrease in working capital 132 440
Cash flows from operating activities 3,301 3,812
Income tax refunded/(paid) 225 (747)
Net cash flows from operating activities 3,526 3,065
Investing activities
Purchase of property, plant and equipment (66) (358)
Investment in development costs (3,969) (3,952)
Disposals of property, plant and equipment 38 13
Interest income 115 190
Net cash flows from investing activities (3,882) (4,107)
Financing activities
Increase in short term borrowings 987 1,075
Dividends paid - (747)
Interest expense (333) (334)
Net cash flows from financing activities 654 (6)
Increase/(decrease) in cash and cash equivalents 298 (1,048)
Movement in cash and cash equivalents:
At start of year 1,891 3,000
Increase/(decrease) in cash and cash equivalents 298 (1,048)
Effects of exchange rate changes 3 (61)
At end of year 2,192 1,891
CML Microsystems Plc
Condensed Consolidated Statement of Changes in Equity
Share Based Payments Foreign Exchange Reserve
Share Capital Share Premium Accumulated Profits Total
£'000 £'000 £'000 £'000 £'000 £'000
At 1st April 2007 747 4,148 238 (36) 12,379 17,476
Audited
Foreign Exchange differences
82 82
Net actuarial gains recognised directly to equity
1,934 1,934
Deferred tax on actuarial gains
(580) (580)
Loss for year (617) (617)
747 4,148 238 46 13,116 18,295
Dividends paid (747) (747)
Share based payments transferred on cancellation
(236) 236 -
Share based payments 48 48
At 1st April 2008 747 4,148 50 46 12,605 17,596
Unaudited
Foreign Exchange differences
397 397
Net actuarial losses recognised directly to equity
(1,671) (1,671)
Deferred tax on actuarial losses
507 507
Loss for year (2,136) (2,136)
747 4,148 50 443 9,305 14,693
Dividends paid
Share based payments in year
101 101
Share based payments transferred on cancellation
At 31st March 2009 747 4,148 151 443 9,305 14,794
CML Microsystems Plc
Notes to the financial statements
1. Segmental Analysis
Primary - Business
Unaudited Audited
2009 2008
Semi-conductor components Semi-conductor components
Equipment Group Equipment Group
£'000 £'000 £'000 £'000 £'000 £'000
Revenue
By origination 979 20,928 21,907 1,130 22,474 23,604
Inter-segmental revenue - (5,818) (5,818) - (6,506) (6,506)
Segmental revenue 979 15,110 16,089 1,130 15,968 17,098
(Loss)/Profit
Segmental results 54 (1,930) (1,876) 178 (1,762) (1,584)
Net financial income/(expense)
(218) (144)
Revaluation of investment properties
5 -
Income tax (47) 1,111
Loss after taxation (2,136) (617)
Assets and Liabilities
Segmental assets 686 20,012 20,698 708 20,578 21,286
Unallocated corporate assets
Investment property 4,317 4,184
Deferred taxation 2,019 1,290
Current tax receivable 355 410
Consolidated total assets 27,389 27,170
Segmental liabilities 51 2,018 2,069 93 2,227 2,320
Unallocated corporate liabilities
Deferred taxation 2,459 2,125
Current tax liability 15 54
Bank loans and overdrafts
6,062 5,075
Retirement benefit obligation
1,990 -
Consolidated total liabilities
12,595 9,574
Other segmental information
Property plant and Equipment additions
30 36 66 2 356 358
Development cost additions
74 3,895 3,969 72 3,880 3,952
Depreciation 16 421 437 16 563 579
Amortisation 73 4,110 4,183 73 4,611 4,684
Other significant
non cash expenses - 391 391 - 54 54
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.
CML Microsystems Plc
2. Dividend paid and proposed - Final
Declared and paid during the period
Equity dividends paid on 5p ordinary shares Unaudited Audited
2009 2008
£'000 £'000
5p per share dividend for year ended 31 March 2007 - 747
The directors do not recommend the payment of a dividend in respect of the year
ended 31st March 2009.
3. Income tax
The directors consider that tax will be payable at varying rates according to
the country of incorporation of a subsidiary and have provided on that basis.
Unaudited Audited
2009 2008
£'000 £'000
UK income tax (305) (364)
Overseas income tax 114 329
Total current tax 191 (35)
Deferred tax (238) (1,076)
Reported income tax charge/(credit) 47 (1,111)
4. Loss per share
The calculation of basic earnings per share is based on the loss attributable to
ordinary shareholders divided by the weighted average number of shares in issue
during the year. The share options are not expected to have a dilutive effect on
the loss per share as the likelihood of exercise is low given the recent share
price movements.
Ordinary 5p shares
Weighted Average Number Diluted
Number
12 months ended 31 March 2009 (unaudited) 14,947,626 14,947,626
12 months ended 31 March 2008 (audited) 14,933,733 14,933,733
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 the
31st March 2009 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
Net debt at Exchange Net debts at
1st April 2008 Cash Flow Movement 31st March 2009
£'000 £'000 £'000 £'000
Cash and Cash equivalents 1,891 298 3 2,192
Bank loans and overdrafts (5,075) (987) - (6,062)
(3,184) (689) 3 (3,870)
7. 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 will 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 non-financial nature
The Group is a small player operating in a highly competitive global market,
which is undergoing continual and 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.
8. Directors' statement pursuant to the Disclosure and Transparency Rules
The directors confirm that, to the best of their knowledge:
a.
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