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CML Microsystems softening of the Chinese economy hits expected new orders

CML Microsystems softening of the Chinese economy hits expected new orders

Thu 31 Jan 2019 21:23 by about : trading updates - 0 Comments - 549 words

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.

These articles are summaries / highlights and dont always include all financial news updates. Check at company website INVESTORS INFORMATION for full published results.

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