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 2011.

Financial Highlights:

·     Revenues up 9% to £12.29m (2010 H1: £11.21m)

·     Gross profit up 8% to £8.51m (2010 H1: £7.83m)

·     Profit before tax up 59% to £2.02m (2010 H1: £1.27m)

·     Basic EPS up 63% of 9.87p (2010 H1: 6.05p)

·     Net cash position of £4.37m (2010 H1: £553k) - with bank borrowings reduced by £1.5m to £3m

Operational Highlights:

·     Strong revenue growth globally

·     Stable cost base and margins within targets

·     Solid cash flow, improved net cash position

·     Maintained investment levels for key new product development programs

Regarding Outlook, Chris Gurry, Managing Director of CML, said:

"Trading performance through the first half year was encouraging and reflected the Group's established multi-year strategy for sustainable growth.

"Within our three major market areas of wireless, storage and wireline telecom, we continue to see growth opportunities within existing customer product portfolios in addition to general expansion of the overall customer base.

"Following the period end, overall order book levels have remained healthy although it is possible that the general economic climate in some regions may affect customer buying patterns or investment decisions. Despite this, the Board currently anticipates positive trading conditions to prevail through what is traditionally a slightly weaker second half."

Enquiries:

Chairman's Statement

I am pleased to report that your Company continued to improve its performance through the opening six-month period of the present trading year, with increased sales revenue, pre-tax profit and earnings-per-share the outcome for that period.

Group sales rose to £12.29m (2010: £11.21m), with gains posted for each of the principal product market areas, while a gross profit of £8.51m (2010: £7.83m) reflects a materially unchanged gross profit margin.

Profit before tax grew to £2.02m (2010: £1.27m), while diluted EPS show an increase to 9.78p per share on the enlarged share capital (2010: 5.99p).

The Company has continued with steps to re-balance its debt/asset cash position, resulting in net cash of £4.37m (2010: £553k) at the end of the period and a reduction in the outstanding bank loan to £3m (2010: £4.5m).

In the period post 30 September the Company sold one of the USA based properties held for sale for approximately $1m.  The proceeds will be subject to appropriate taxes.

The uncertainties and negative factors that presently affect many business areas are not helpful to near-term growth, but I nevertheless believe that subject to unforeseen circumstances, your Company's results for the current full trading year will meet present market expectations.

On behalf of your Directors I once again express our appreciation and thanks to the Group's employees for their efforts and commitment towards its success.

G W Gurry

Chairman                                                                                                                         

21 November 2011

Operating and Financial Review

Group revenues for the six months to 30 September 2011 rose to £12.29m representing a 9% increase over the comparable half year period (2010: £11.21m). Semiconductor shipments increased in each of the three major geographical regions, with the Americas showing the highest percentage growth, the Far East maintaining its position as the single largest region and Europe contributing solid growth.

Group products for use within wireless and storage applications contributed approximately 83% of overall Group revenues whilst products sold into wireline telecom markets accounted for close to 12%.

Within the target wireless markets, dominant end applications continued to include voice and/or data transmission within two-way radio products, control and data acquisition systems, regional transport and infrastructure systems, and marine safety systems.

Flash memory controller chips for use within removable and embedded solid state storage media dominated revenues from the storage sector. The Group benefited from the combined effects of increased shipment volumes to established customers along with a higher contribution from more recent customer design wins.

Group semiconductor products for telecom applications experienced high single-digit percentage sales growth across a range of end applications including point-of-payment terminals, security alarm panels and medical monitoring devices.

Sales at the Group's equipment division, RDT, increased 17% to £415k (2010: £354k) largely as a result of higher export sales of telemetry and control products for transport applications. Entry into the M2M market was initiated with the launch of a GPRS modem and router for industrial users.

The gross margin was maintained at 69% delivering a reported gross profit of £8.51m (2010: £7.83m). Distribution and administration costs of £6.52m were very slightly down (2010: 6.64m) and this helped to deliver an operational profit (before other income, share-based payments and finance costs) of £1.99m against a comparable period figure of £1.19m.

Income from other operating activities, principally rental proceeds from group owned industrial properties fell from £169k to £89k due to a lower occupancy rate through the period.

Net finance costs amounted to £37k (2009: £68k) and a profit before tax of £2.02m was recorded (2010: £1.27m).

A combination of improved revenue levels, static gross margin and tight cost control resulted in positive cash flow of £2.04m through the six months under review. At the period end the Group had cash reserves of £7.38m and reduced bank borrowings of £3.01m.

Summary and outlook

Trading performance through the first half year was encouraging and reflected the Group's established multi-year strategy for sustainable growth.

Within our three major market areas of wireless, storage and wireline telecom, we continue to see growth opportunities within existing customer product portfolios in addition to general expansion of the overall customer base.

Important new engineering development activities and partnership programs, some of which were announced in the prior financial year, will be sampled through the remainder of the current trading year. These products are expected to commence meaningful revenue contributions starting next financial year.

Following the period end, overall order book levels have remained healthy although it is possible that the general economic climate in some regions may affect customer buying patterns or investment decisions. Despite this, the Board currently anticipates positive trading conditions to prevail through what is traditionally a slightly weaker second half.

C A Gurry

Managing Director                                                                                                                     

21 November 2011

Condensed Consolidated Income Statement

Condensed Consolidated Statement of Comprehensive Income

Condensed Consolidated Statement of Financial Position

Condensed Consolidated Cash Flow Statement

Condensed Consolidated Statement of Changes in Equity

Notes to the Condensed Financial Statements

1.            Segmental analysis

Business segments

Geographical segments

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.

2.            Dividend paid and proposed

A dividend of 3.5p per 5p ordinary share in respect of the year end 31 March 2011 was paid on 5 August 2011 (2010: £Nil per ordinary share of 5p in respect of the year ended 31 March 2010).  No dividend is proposed in respect of the six months period ended 30 September 2011(2010: £Nil per ordinary share of 5p in respect of the period end 30 September 2010).

3.            Income tax

The Directors consider that tax will be payable at varying rates according to the country of incorporation of its subsidiary 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.

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 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

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 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 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 profit 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 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 2011 financial statements.

11.          General

Other than already stated within the Chairman's statement and the operating and financial review there have been no important events during the first six months of the financial year that have impacted this Half Yearly 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 interim management report includes a fair review of the information required by DTR 4.2.7 (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 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 2011.

The financial information contained in this Half Yearly Report has been prepared using International Financial Reporting Standards as adopted by the European Union. This Half Yearly 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 2011 is based on the statutory accounts for the financial year ended 31 March 2011 that have been filed with the Registrar of Companies and on which the auditors gave an unqualified audit opinion. The auditors' report on those accounts did not contain a statement under Section 498(2) or (3) of the Companies Act 2006. This Half Yearly Report has not been audited or reviewed by the Group Auditors.

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

12.          Approval

The Directors approved this Half Yearly Report on 21 November 2011.