rnsitem
REG-CML Microsystems PLC Half Yearly Report - Part 1
Released: 24/11/2009
http://pdf.reuters.com/Regnews/regnews.asp?i=43059c3bf0e37541&u=urn:newsml:reuters.com:20091124:RnsX9602C
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RNS Number : 9602C
CML Microsystems PLC
24 November 2009
CML Microsystems Plc
Interim 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 six months ended 30 September 2009.
CML has operations in the UK, Germany, the US, Singapore and Taiwan.
Chairman's Statement
The unaudited results posted for the six month trading period ended 30 September
2009 reflect a continuation of the weak conditions evident in the group's
markets during the opening months, with group sales recording a 13% decline to
£7.18m against those for the comparable earlier period (2008: £8.23m).
Reductions in operating costs and other earlier steps to improve efficiencies
contributed to a material increase in gross margins and a reduced pre-tax loss
for the period.
The loss per share improved to 7.06p (2008: loss per share 11.21p).
The Operating Review that follows this statement provides financial and trading
information for the period in further detail.
The Board's objective is to drive medium to long-term shareholder value. It is
clear that the markets in which the Group operates have suffered weak trading
conditions for some time and there is an obvious lack of demand for the
Company's shares.
Alongside this situation, your Board currently sees little benefit in retaining
a listing of the Company's shares. The Board is seeking appropriate advice on
the matter with the intention of releasing an update in due course.
I believe your Company is taking actions appropriate to countering the trading
problems and which will further its aims to return to profit.
As reported at the AGM in August this year, your Board anticipates improved
trading results for the full year.
Operating and Financial Review
Overview
The adverse global market environment that has prevailed over the past 12 to 14
months continued to impact overall Group revenues through the six-month
reporting period to 30 September 2009. Lower operating costs as a direct result
of cost saving measures helped reduce the impact this had at the operating
level; however, revenue growth through the second half of the period failed to
reach the levels previously anticipated.
This resulted in the posting of a net trading performance fractionally ahead of
the comparable period and below management expectations.
Financial results & Business Summary
Group revenues for the period under review were £7.18m representing a 13%
reduction against the prior year comparable (2008: £8.23m). Semiconductor
shipments into all major market segments declined although, geographically, the
Far East region exhibited the greatest resilience. The sales of Group products
into wireless and storage application areas continued to dominate, accounting
for approximately 77% of revenues. Total order bookings were slightly behind
those for the comparable period.
Gross profit margin improved to 72% (2008: 67%) as a result of lower raw
material costs and a reduction in fixed labour charges.
Group operating costs reduced to £6.42m (2008: £6.73m) reflecting improvements
undertaken and completed prior to the commencement of the current financial
year. Net finance costs amounted to £92k (2008: £197k) and a corresponding loss
before tax of £1.1m was recorded (2008: £1.3m).
Cash balances were assisted by a decrease in working capital requirements and an
anticipated R&D tax credit that was received in the final weeks of the first
half. This coupled with good cash management resulted in a net inflow through
the period of £207k.
Summary & Outlook
Revenue performance during the opening six months was disappointing, although
actions taken prior to the commencement of the year ensured the Group now
operates on a more appropriate cost base and is well positioned to take
advantage of improvements in the target markets as they materialise.
Following the period end there has been an improvement in order book visibility
from certain 'storage' customers although it is too early to predict if this
will translate into a prolonged period of recovery. Through the remainder of the
financial year we will continue to focus on achieving sustainable revenue growth
through producing class- leading semiconductor products for an increasing number
of customers globally.
On behalf of the Board, I would like to thank our dedicated employee base
worldwide for their continued best efforts and ongoing commitment to the
successful future of the Group.
Condensed Consolidated Income Statement
Unaudited Unaudited Audited
6 months End 30/09/09 6 months End 30/09/08 Year End 31/03/09
Continuing operations
£'000 £'000 £'000
Revenue 7,181 8,226 16,089
Cost of sales (2,034) (2,755) (5,887)
Gross Profit 5,147 5,471 10,202
Distribution and administration costs (6,415) (6,728) (12,466)
(1,268) (1,257) (2,264)
Other operating income 281 208 489
Loss before share based payments (987) (1,049) (1,775)
Share based payments (52) (49) (101)
Loss after share based payments (1,039) (1,098) (1,876)
Revaluation of investment properties - - 5
Finance costs (94) (210) (333)
Finance income 2 13 115
Loss before taxation (1,131) (1,295) (2,089)
Income tax (expense)/credit 76 (380) (47)
Loss after taxation attributable to equity holders of
the Company (1,055) (1,675) (2,136)
Loss per share
Basic (7.06)p (11.21)p (14.29)p
Diluted (7.06)p (11.21)p (14.29)p
Condensed Statement of Comprehensive Income
Unaudited Unaudited Audited
6 months End 30/09/09 6 months End 30/09/08 Year End
31/03/09
£'000 £'000
Loss for the year (1,055) (1,675) (2,136)
Other comprehensive income:
Foreign exchange differences (188) 210 397
Actuarial loss - (1,671)
Income tax on actuarial loss - 507
Net (loss)/income for the year directly recognised in
equity (188) 210 (767)
Total comprehensive income for the period (1,243) (1,465) (2,903)
Condensed Consolidated Statement of Financial Position
Unaudited Unaudited Audited
30 September 2009 30September 2008 31 March 2009
£'000 £'000 £'000
Assets
Non current assets
Property, plant and equipment 5,781 6,091 5,931
Investment properties 3,850 415 3,850
Development costs 4,910 5,146 5,192
Goodwill 3,512 3,512 3,512
Deferred tax asset 2,000 1,295 2,019
20,053 16,459 20,504
Current assets
Inventories 1,100 1,720 1,366
Trade receivables and prepayments 2,121 2,290 2,504
Current tax assets 98 137 355
Cash and cash equivalents 2,537 1,841 2,192
5,856 5,988 6,417
Non current assets classified as held for
sale - properties 420 3,807 468
Total assets 26,329 26,254 27,389
Liabilities
Current liabilities
Bank loans and overdrafts 6,200 5,211 6,062
Trade and other payables 2,078 2,315 2,069
Current tax liabilities 5 24 15
8,283 7,550 8,146
Non current liabilities
Deferred tax liabilities 2,453 2,524 2,459
Retirement benefit obligation 1,990 - 1,990
4,443 2,524 4,449
Total liabilities 12,726 10,074 12,595
Net Assets 13,603 16,180 14,794
Capital and reserves attributable to equity holders
of the Company
Share capital 747 747 747
Share premium 4,148 4,148 4,148
Share based payments reserve 203 99 151
Foreign exchange reserve 255 256 443
Accumulated profits 8,250 10,930 9,305
Shareholders' equity 13,603 16,180 14,794
Condensed Consolidated Cash Flow Statement
Unaudited Unaudited Audited
6 months End 30/09/09 6 months End 30/09/08 Year End 31/03/09
£'000 £'000 £'000
Operating activities
Net loss for the period before income taxes (1,131) (1,295) (2,089)
Adjustments for:
Depreciation 161 224 437
Amortisation of development costs 1,792 1,997 4,183
Movement in pensions deficit - - 319
Share based payments 52 49 101
Interest expense 94 210 333
Interest income (2) (13) (115)
Decrease in working capital 657 263 132
Cash flows from operating activities 1,623 1,435 3,301
Income tax refunded/(paid) 320 257 225
Net cash flows from operating activities 1,943 1,692 3,526
Investing activities
Purchase of property, plant and equipment (22) (52) (66)
Investment in development costs (1,563) (1,811) (3,969)
Disposals of property, plant and equipment - 6 38
Interest income 2 13 115
Net cash flows from investing activities (1,583) (1,844) (3,882)
Financing activities
Increase in short term borrowings 138 136 987
Interest expense (94) (210) (333)
Net cash flows from financing activities 44 (74) 654
Increase/(decrease) in cash and cash equivalents
404 (226) 298
Movement in cash and cash equivalents:
At start of year 2,192 1,891 1,891
Increase/(decrease) in cash and cash equivalents
404 (226) 298
Effects of exchange rate changes (59) 176 3
At end of year 2,537 1,841 2,192
Condensed Consolidated Statement of Changes in Equity
Share Based Payments Foreign Exchange Reserve Accumulated Profits
Unaudited Share Capital Share Premium Total
£'000 £'000 £'000 £'000 £'000 £'000
At 1 April 2008 747 4,148 50 46 12,605 17,596
Loss for period (1,675) (1,675)
Other comprehensive income:
Foreign Exchange differences
210 210
747 4,148 50 256 10,930 16,131
Share based payments 49 49
At 30 September 2008 747 4,148 99 256 10,930 16,180
Loss for period (461) (461)
Other comprehensive income:
Foreign Exchange differences
187 187
Defined benefit pension scheme
(1,671) (1,671)
Tax on defined benefit pension scheme
507 507
747 4,148 99 443 9,305 14,742
Share based payments 52 52
At 31 March 2009 747 4,148 151 443 9,305 14,794
Loss for period (1,055) (1,055)
Other comprehensive income:
Foreign Exchange differences
(188) (188)
747 4,148 151 255 8,250 13,551
Share based payments 52 52
At 30 September 2009 747 4,148 203 255 8,250 13,603
Notes to the condensed financial statements
1. Segmental Analysis
Business segments
Unaudited Unaudited Audited
6 Months End 6 Months End Year End
30/09/09 30/09/08 31/03/09
Semi-conductor components Semi-conductor components Semi-conductor components
Equipment Group Equipment Group Equipment Group
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue
By origination 332 11,043 11,375 479 10,678 11,157 979 20,928 21,907
Inter-segmental revenue (4,194) (4,194) - (2,931) (2,931) - (5,818) (5,818)
Segmental revenue 332 6,849 7,181 479 7,747 8,226 979 15,110 16,089
(Loss)/Profit
Segmental result (34) (1,005) (1,039) 55 (1,153) (1,098) 54 (1,930) (1,876)
Net financial income/(expense)
(92) (197) (218)
Revaluation of investment properties
- - 5
Income tax 76 (380) (47)
Loss after taxation (1,055) (1,675) (2,136)
Assets and Liabilities
Segmental assets 606 19,355 19,961 731 19,869 20,600 686 20,012 20,698
Unallocated corporate assets
Investment property 4,270 4,222 4,317
(Including held for sale)
Deferred taxation 2,000 1,295 2,019
Current tax receivable 98 137 355
Consolidated total assets
26,329 26,254 27,389
Segmental liabilities 76 2,002 2,078 115 2,200 2,315 51 2,018 2,069
Unallocated corporate liabilities
Deferred taxation 2,453 2,524 2,459
Current tax liability 5 24 15
Bank loans and overdrafts 6,200 5,211 6,062
Retirement benefit obligation 1,990 - 1,990
Consolidated total liabilities
12,726 10,074 12,595
Other segmental information
Property, plant and equipment additions
- 22 22 30 22 52 30 36 66
Development cost additions
1,527 36 1,563 35 1,776 1,811 74 3,895 3,969
Depreciation 157 4 161 9 215 224 16 421 437
Amortisation 1,760 32 1,792 31 1,966 1,997 73 4,110 4,183
Geographical Segments
UK Germany Americas Far East Total
£'000 £'000 £'000 £'000 £'000
Unaudited
6 month end 30 September 2009
Revenue by origination 4,760 2,448 1,340 2,827 11,375
Inter-segmental revenue (2,032) (2,157) - (5) (4,194)
Revenue to third parties 2,728 291 1,340 2,822 7,181
Property, plant and equipment additions 18 4 - - 22
Development cost additions 855 708 - - 1,563
Total assets 19,293 3,810 1,503 1,723 26,329
Unaudited
6 month end 30 September 2008
Revenue by origination 4,343 1,773 2,580 2,461 11,157
Inter-segmental revenue (1,173) (1,515) (243) - (2,931)
Revenue to third parties 3,170 258 2,337 2,461 8,226
Property, plant and equipment additions 35 12 4 1 52
Development cost additions 1,172 639 - - 1,811
Total assets 19,441 3,520 1,790 1,503 26,254
Audited
Year ended 31March 2009
Revenue by origination 9,043 3,427 4,569 4,868 21,907
Inter-segmental revenue (2,521) (2,794) (503) - (5,818)
Revenue to third parties 6,522 633 4,066 4,868 16,089
Property, plant and equipment additions 36 22 4 4 66
Development cost additions 2,366 1,603 - - 3,969
Total assets 20,280 3,883 1,713 1,513 27,389
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. No comparative figures needed restating to comply with the fact that
IFRS 8 needed to be applied retrospectively.
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.
2. Dividend paid and proposed
No dividend has been paid or proposed in the 6 months period end 30 September
2008, 30 September 2009 or the year end 31 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 Unaudited Audited
6 Months End 6 Months End Year End
30/09/09 30/09/08 31/03/09
£'000 £'000 £'000
UK income tax (125) (175) (305)
Overseas income tax 49 161 114
Total current tax credit (76) (14) (191)
Deferred tax - 394 238
Reported income tax (credit)/charge (76) 380 47
4. Loss per share
The calculation of basic and diluted 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
6 months end 30 September 2009 14,947,626 14,947,626
6 months end 30 September 2008 14,947,626 14,947,626
Year end 31 March 2009 14,947,626 14,947,626
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
31 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 6m pe 30/09/08 Net debt at 6m pe 31/03/09 Net debt at 6m pe 30/09/09 Net debt at
01/04/08 Cash Flow 30/09/08 Cash Flow 31/03/09 Cash Flow 30/09/09
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Cash and Cash equivalents 1,891 (50) 1,841 351 2,192 345 2,537
Bank loans and overdrafts (5,075) (136) (5,211) (851) (6,062) (138) (6,200)
(3,184) (186) (3,370) (500) (3,870) 207 (3,663)
The cash flow above is a combination of the actual cash flow and the exchange
movement.
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 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 a 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.
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 loss of the company 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 includes
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