26 March 2024

CML Microsystems Plc

("CML", the "Company" or the "Group") 

Trading Update and Notice of Results

CML Microsystems Plc, which develops mixed-signal, RF and microwave semiconductors for global communications markets, is today issuing a trading update for the year ended 31 March 2024 ("FY24").

As reported at the time of our interim results, the Company performed well through the first half year of trading, reporting solid growth against a backdrop of a general decline in the semiconductor market through that period. At that time, the Company sounded a note of caution on the trading outlook for the second half, due to elevated inventory levels across a selection of customers, a generally weaker than anticipated China market and the need to absorb the acquisition of Microwave Technology, Inc. (MwT).

Trading through the second half has justified the need for that mid-year caution, with some customers and channel partners continuing to reduce their inventory levels, a process that we now expect will last into the second half of this calendar year. The knock-on effect of this has led to shipments from the core CML business (excluding MwT) being lower than previously expected.

On a more encouraging note, the revenue contribution from MwT has been very positive under CML's first period of ownership and has been above management expectations. The progress made so far is pleasing and work continues to unlock the operational synergies that are expected to realise the full potential of the combined business over the medium term.

The additional MwT shipments have somewhat compensated for the protracted inventory situation, leading to full year revenue expectations close to £23m, broadly in line with expectations and 11% higher than the prior 12-month period.

This change in revenue mix between higher margin core products and lower margin MwT products impacts the overall Group margin and will result in profitability being below prior expectations. After factoring in costs associated with the MwT acquisition, pre-tax profit is now predicted to be just under the £3m level. Excluding these costs, EBITDA is predicted to be in the region of £6.4m, marginally below expectations and an increase of 8% year-on-year. The Company retains a strong balance sheet, with net cash reserves of just under £18m.

While it is disappointing that the core product inventory hangover will take longer to wash through than management predicted, it is important to note that CML remains a key partner to its customer base. As a sole source supplier, our customers are reliant on CML products to drive their own success and we look forward to a return to core product growth as the current inventory situation normalises.

The integration of the MwT business into the Group is proceeding at pace. From completion of the acquisition on 2 October 2023, and following extensive sales channel training through to the end of December, the relevant MwT products were incorporated under the CML S?RF brand with effect from January 2024. The enlarged S?RF product portfolio is being marketed and supported on a global basis and numerous other operational improvements are being addressed. A fuller update will be provided at the time of the full year results announcement.

Over the last few reporting periods, the business has successfully negotiated a number of headwinds whilst simultaneously taking actions and making investments to strategically re-position the business as a global semiconductor company focussed solely on application areas within worldwide wireless communications markets.

The Group now has in place the required resources and market focus to drive progress and the Board remains confident of capturing share of the significant growth opportunities ahead.

Notice of Results

CML will publish its full year results for FY24 on 2 July 2024.

About CML Microsystems Plc

CML develops mixed-signal, RF and microwave semiconductors for global communications markets. The Group utilises a combination of outsourced manufacturing and in-house testing with trading operations in the UK, Asia and USA. CML targets sub-segments within Communication 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 commercial and industrial product manufacturers.

Growth in its end markets is being driven by factors such as the appetite for data to be transmitted faster and more securely, the upgrading of telecoms infrastructure around the world and the growing prevalence of private commercial wireless networks for voice and/or data communications linked to the industrial internet of things (IIoT).

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