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Wolfson Microelectro (WLF)

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Tuesday 29 April, 2014

Wolfson Microelectro

1st Quarter Results

RNS Number : 7387F
Wolfson Microelectronics PLC
29 April 2014
 



29 April 2014

 

Wolfson Microelectronics plc

First quarter results to 30 March 2014

 

Improved margins and costs offset lower revenues; strong second half expected

 

Wolfson Microelectronics plc ("Wolfson" or "the Company"), a leading supplier of audio solutions for consumer electronic products, announces its financial results for the first quarter ended 30 March 2014.

 

Financial summary:

·     Revenue of $28.8m (Q1 2013: $48.1m)

·     Gross margin 47.1% (Q1 2013: 40.3%)

·     Underlying* overheads reduced by 18% sequentially and year-on-year to $18.1m (Q1 2013: $22.1m)

·     Net cash inflow from operating activities of $1.6m (Q1 2013: $11.6m outflow)  

·     Underlying* operating loss of $4.5m (Q1 2013: $2.8m loss)

·     Operating loss of $5.7m (Q1 2013: $6.3m loss after exceptional charge)

·     Cash and short-term deposits of $25.2m at 30 March 2014 (29 December 2013: $25.9m), no debt ($25m working capital facility undrawn)

 

Operational summary:

·     Revenue continued to be impacted, as expected, by customer inventory overhangs caused by last year's faster-than-anticipated transition from 3G to 4G (LTE) smartphones

·     Higher value-added Audio Hubs starting to come to market resulted in gross margin recovering strongly, up 680 basis points year-on-year

·     Firm spending control and the benefit of  recent  re-structuring reduced overheads by 18% sequentially

·     Wolfson and MediaTek announced a collaboration that will result in Wolfson's High Definition (HD) Audio solutions being a pre-integrated option on MediaTek's mobile LTE reference platform

·     Wolfson continues to strengthen its relationship with Samsung with a number of design wins across a widening range of products including its GALAXY range of smartphones (including LTE models), tablet computers, digital still cameras, televisions and personal computers

·     Outside of mobile phones and tablet computers, Wolfson's audio solutions are being adopted for a wide range of consumer electronics applications including the Internet of Things (IoT)

 

Outlook:

·     Q2 2014 revenue is expected to be in the range of $28m - $36m depending on customer new product introduction timing and sell-through

·     Gross margin in Q2 2014 is expected to be between 45% and 47%, depending on product mix

·     LTE platforms that include Wolfson products are expected to come to market and be deployed as the year progresses

 

Recommended Cash Acquisition:

·     As announced today, the Board of Wolfson has recommended a cash acquisition of Wolfson by Cirrus Logic Inc for the entire issued and to be issued ordinary share capital of Wolfson

·     Under the terms of the acquisition, Wolfson shareholders will be entitled to receive 235 pence in cash per Wolfson share. The acquisition price per Wolfson share represents a premium of approximately 75.4 per cent. to the closing price per Wolfson share of 134.00 on 28 April 2014 (being the last Dealing Day prior to the date of this announcement)

 

 

 

 

Commenting on the results, Mike Hickey, CEO of Wolfson, said: "As expected, revenue continued to be impacted by customer inventory overhangs caused by last year's faster-than-anticipated flagship smartphone transition from 3G to LTE. However, these near-term revenue headwinds are being offset by strong improvements in gross margin as new higher value-added products start to contribute, and we realise the benefits of cost base reductions resulting from last year's restructuring activities. 

 

"We are on track for a strong recovery in revenue as LTE smartphone platforms that do include Wolfson products are expected to come to market in the second half. Our position as audio partner of choice for most LTE silicon platform vendors has been further strengthened by our collaboration with MediaTek for its LTE solutions, which should also improve our position in the fast-growing Chinese smartphone and tablet market where MediaTek has strong market share."

 

 

*Underlying results exclude: charges for the amortisation of acquired intangible assets (Q1 2014: $0.3m; Q1 2013: $0.4m); share-based compensation charges, including associated payroll taxes (Q1 2014: $0.9m; Q1 2013: $1.0m). Also, in Q1 2013, severance costs of $1.5m (Q1 2014: $nil) and an exceptional charge of $0.6m (Q1 2014: $nil). The term "underlying" is not defined in IFRS and therefore may not be comparable with similarly titled measures reported by other companies. Underlying measures are not intended as a substitute for, or a superior measure to, IFRS measures.

 

 

Enquiries:

 

  Wolfson Microelectronics


  Mike Hickey, CEO

  Mark Cubitt, CFO

0131 272 7000

 



  Luther Pendragon


  Harry Chathli, Claire Norbury

020 7618 9100

 

 

This document contains certain statements that are not historical facts, including statements about Wolfson's expectations and beliefs and statements with respect to its business plan, operations and financial performance and condition and other objectives.  Such statements are forward-looking statements.  These statements typically contain words such as "intends", "expects" "anticipates", "estimates", "aims", "believes", "assumes", "should", and words of similar import, which are predictions of or indicate future events and future trends.  Undue reliance should not be placed on such statements, which are based on Wolfson's current plans, estimates, projections and assumptions.  By their nature, forward-looking statements involve known and unknown risk and uncertainty because they relate to events and depend on circumstances which may occur in the future and which in some cases are beyond Wolfson's control.  There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements.  These factors include, but are not limited, to future revenues being lower than expected; increasing competitive pressures within the industry; general economic conditions or conditions affecting the relevant industries, both domestically and internationally, being less favourable than expected.

 



Operating Review

 

Revenue in the first quarter of 2014 was at the lower end of guidance at $28.8m (Q1 2013: $48.1m). Revenue continues to be impacted by customer inventory overhangs resulting from the faster-than-anticipated transition from 3G to 4G (LTE) flagship smartphones last year. This slowed sales into 3G flagship smartphones and also benefited a competitor that was also the dominant supplier of LTE platforms (they include their own audio codec as part of their LTE platform) in 2013. Wolfson's participation in LTE smartphone models should start to improve as 2014 progresses and other application processor vendors, most of which are Wolfson reference partners, introduce their LTE platforms and these are adopted by smartphone and tablet manufacturers.

 

Audio Hubs continue to be the major contributor to revenue at around 75% of sales, with Mobile Audio Hubs accounting for 95% of Audio Hub revenue. Mobile phones remain Wolfson's largest applications market. However, revenue was down significantly year-on-year as the aforementioned LTE transition affected sales to Wolfson's largest customer, and the customer that was Wolfson's second largest in the first quarter of last year experienced market share issues. Encouragingly, outside these two customers, overall revenue in the quarter grew year-on-year, driven by improving sales in non-mobile phone applications. Sales into gaming consoles and tablet computers grew very strongly year-on-year on the back of customer new product launches. Revenue from printers, portable media players and car infotainment systems also grew year-on-year, but sales to home audio and digital still cameras were lower.

 

Recently, Wolfson and MediaTek, one of the world's largest semiconductor companies, announced a collaboration that will deliver Wolfson's industry-leading HD Audio solutions as a pre-integrated option on MediaTek's mobile LTE reference platform. This collaboration combines the latest technology of both companies in a single LTE reference design that brings new audio use cases and performance levels to smartphones and tablets whilst also delivering both cost and time-to-market advantages.

 

Product Adoption by Existing and New Customers

Design-ins continue to be dominated in value terms by smartphone and tablet computer applications. The Company also had design-in success in next-generation gaming consoles and controllers, home audio, printers, digital still cameras, car infotainment systems and, increasingly, across a wider base of other applications as the need for advanced audio solutions proliferates across new application areas. This is driving customer adoption of Wolfson's low power Audio Hubs, audio software solutions and MEMS microphones in new markets.

 

Market penetration increased in mobile phones, smartphones and tablet/PC computing, with notable new Wolfson product adoptions launched at both existing and new customers that include:

 

·     Samsung selecting a new Wolfson Audio Hub for its new GALAXY S5 smartphone. Wolfson's audio solutions have also been selected for the Samsung GALAXY Tablet Pro 10.1 and Samsung ATIV9 2014 edition personal computer

·     LG selecting Wolfson audio solutions for a number of its new mobile phones

·     Fujitsu selecting a Wolfson audio solution for its latest smartphone

·     Leading Chinese manufacturers OPPO Electronics and its subsidiary BBK Electronics selecting Wolfson audio solutions for their mobile phones

·     A further two Chinese mobile phone manufacturers selecting Wolfson audio solutions for their new mobile phones

·     A North American smartphone manufacturer continuing to design in Wolfson's MEMS microphones, which will feature in its next generation smartphones

·     A number of leading-brand tablet computer Original Equipment Manufacturers (OEMs) selecting Wolfson's audio solutions

 



 

Outside of mobile phones and computing applications, Wolfson solutions were adopted for a wide range of consumer electronics applications, including:

 

·     Samsung selecting Wolfson audio solutions for the Samsung NX30 digital still camera

·     Two leading-brand Japanese digital still camera manufacturers selecting Wolfson audio solutions

·     Two leading-brand manufacturers selecting Wolfson's audio solutions for their next generation of gaming products

·     A number of leading-brand car infotainment manufacturers selecting Wolfson audio solutions

·     Wolfson audio solutions selected by a number of home audio and television manufacturers

·     A number of leading-brand printer OEMs selecting Wolfson imaging solutions

 

In addition, Wolfson product adoptions for applications in the "Internet of Things" continued with further successes in the first quarter of 2014 including;

 

·     A leading-brand multinational corporation selecting a Wolfson Audio Hub for the second generation of its ground-breaking visual computing wearable device

·     A leading North American design company selecting a Wolfson Audio Hub for its voice alert home safety monitor

·     A North American multinational company selecting Wolfson MEMS microphones for its latest wearable device

 

Product Development

Wolfson launched two new products in Q1 2014, adding to the Company's family of Audio Hubs and MEMS microphone portfolio.

 

This addition to the Audio Hub platform delivers outstanding audio to mobile devices and can run Wolfson's Ez2 suite of software, customers' own software or third party software. This enables OEMs to offer class-leading audio features to smartphones and tablets, such as 24-bit 192 kHz high resolution Master Hi-Fi audio playback; exceptional voice call quality, including industry-leading ambient noise cancellation; ultra-low power 'always on' voice control; excellent hands-free speakerphone and video-calling quality; as well as superior speaker drivers, speaker protection and a reduced bill of material cost.

 

Wolfson also announced a new analogue MEMS microphone with a small footprint, high signal-to-noise ratio (SNR) and wide dynamic range that delivers true high definition audio capture, perfect for voice control applications. This is the ideal microphone to work with Wolfson's WM8280 and Ez2 controlTMsoftware to provide customers with a low power "always on, always listening" feature.

 

In addition to the continuing improvement and enhancements to the Wolfson Ez2 suite of software, the Company's software team is a significant contributor to the Linux kernel, an open source operating system that is the foundation for the overlaid Android operating system. Wolfson is recorded as one of the top 10 corporate Linux kernel contributors.

 

Wolfson Partner Programme

Building on Wolfson's ultra-low power Audio Hub hardware platforms, the Company has further expanded its growing partner programme to enhance Wolfson's audio solutions and offer customers a variety of options to differentiate their products across the tiers, including:

 

·     Audyssey Laboratories Inc., a leader in the research, design and development of innovative audio technologies, made its AudioFrame advanced audio recording technology available on Wolfson's low-power Audio Hub portfolio, including the WM8280 Audio Hub solution. With AudioFrame, the recorded audio signal dynamically adjusts to match the video zoom, focusing on the action within the frame and filtering out superfluous, unrelated sounds and noise. The result is a recording where the audio perfectly matches the video.

 

·     Malaspina Labs Inc., a leading audio processing technology company, made its VoiceBoost 'always listening' Voice Activation solution available on Wolfson's WM5102S Audio Hub product for mobile devices, enabling the user to 'wake' a device from a low-power state by speaking an OEM-defined or user-defined trigger phrase, without the need for physical interaction with the phone, such as button presses or typing. In addition to this, Malaspina Labs also made its VoiceBoost suite of phonetic speech enhancement technologies available on Wolfson's WM5102S, helping to improve voice recognition effectiveness and accuracy, and deliver an enhanced hands-free voice calling experience, even in noisy environments.

 

·     Wolfson also added another professional services partner with the appointment of Incube Solutions, a leading systems design company. Through this agreement, Incube Solutions will provide turnkey services to Wolfson's customers and partners including porting, optimisation and integration of software audio technologies for the consumer electronics and mobile device markets.

 

 

 



Financial Review

 

Income Statement

The Company's financial performance for Q1 2014 is summarised below.

 




Q1 2014

Q1 2013

Q4 2013




$m

% revs

$m

% revs

$m

% revs

Revenue


28.8


48.1


42.0











Gross profit


13.6

47.1%

19.3

40.3%

17.7

42.2%

Overheads









Research & development

(11.1)

39%

(13.6)

28%

(13.4)

32%


Distribution & Selling

(4.5)

16%

(5.6)

12%

(5.4)

13%


Administration


(2.5)

9%

(2.9)

6%

(3.4)

8%










Underlying* operating loss

(4.5)

-16%

(2.8)

-6%

(4.5)

-11%











Share based compensation

(0.9)

3%

(1.0)

2%

(1.1)

3%


Amortisation charges

(0.3)

1%

(0.4)

1%

(0.3)

1%


Severance recognised in overheads

-

-

(1.5)

3%

(0.9)

2%


Asset write down recognised in overheads

-

-

-

-

(1.7)

4%


Exceptional item:








- pension past service cost

-

-

(0.6)

1%

-

-










Operating loss


(5.7)

-20%

(6.3)

-13%

(8.5)

-20%










Net Financing Expense


(0.1)


-


-











Loss before tax


(5.8)

-20%

(6.3)

-13%

(8.5)

-20%










Income tax credit


1.2


1.3


1.6











Loss after tax


(4.6)

-16%

(5.0)

-10%

(6.9)

-16%










Average £/$ exchange rate


 1.53  


 1.58 


    1.60











 

 

* Underlying results are reconciled to the results reported in accordance with IFRS in notes 5 and 6 to the financial information.

 

 

 

 



Revenue

Revenue in Q1 2014 amounted to $28.8m, a decline of 40% year-on-year (Q1 2013: $48.1m) and a decline of 31% sequentially (Q4 2013: $42.0m). Q1 2014 revenue was impacted by customer inventory overhangs resulting from the faster-than-anticipated transition from 3G to 4G (LTE) smartphones in 2013, and customer inventories continuing to run down prior to new product ramps. The largest customer in Q1 2014 represented 34% of total revenue (Q1 2013: 62%; Q4 2013: 32%).

 

Gross Profit

Gross profit was $13.6m compared with $19.3m in Q1 2013 (Q4 2013: $17.7m). Gross margin of 47.1% reflects a 680 and 490 basis point improvement on the prior year and quarter respectively as the high volume part at significantly lower than typical margins is replaced with the latest higher average selling price and margin Audio Hub product. Gross margin in Q1 2013 was 40.3% (Q4 2013: 42.2%).

 

Operating Expenses

Total underlying operating expenses were $18.1m in Q1 2014 compared with $22.1m in Q1 2013 and $22.2m in Q4 2013, a reduction of 18% over both periods, reflecting the benefits of the cost reduction programme commenced in late 2013 combined with tight cost control. Excluded from underlying expenses are: i) Share-based compensation, calculated in accordance with IFRS 2 (including the related payroll taxes), amounting to $0.9m, compared with $1.0m in Q1 2013 (Q4 2013: $1.1m); and ii) Amortisation charges relating to the intangible assets arising from acquisitions amounting to $0.3m, compared with $0.4m in Q1 2013 (Q4 2013: $0.3m). 

 

Also excluded from underlying operating expenses were: in Q1 2013 severance costs of $1.5m and pension exceptional costs of $0.6m. In Q4 2013 there were severance costs of $0.9m and asset write down costs of $1.7m. There were no such costs in Q1 2014.

 

The full year 2014 overheads are estimated to be in the range of $75m to $78m, compared with $88.6m in 2013, a reduction of 11% to 14%. The amortisation charges are expected to remain at $0.3m per quarter for the remainder of 2014 whilst the share-based compensation expense is expected to be around $1.2m per quarter, estimated based on the Q1 2014 quarter end share price of 132 pence.

 

Operating Loss

The underlying operating loss was $4.5m, compared with a $2.8m loss in Q1 2013 (Q4 2013: $4.5m loss). Despite the 40% or $19.3m fall in revenues, the loss was restricted to an increase of $1.7m as a result of the improved gross margins and lower overheads.

 

Earnings and Taxation

There was a $0.1m net finance charge relating to discounting deferred consideration, compared with $nil for Q1 2013 (Q4 2013: $nil).

 

The loss before tax reduced to $5.8m, compared with a $6.3m loss for Q1 2013 (Q4 2013: $8.5m loss).

 

The effective tax rate was approximately 20% in the quarter (a credit). The effective tax rate is favourably affected by the availability of tax allowances on research and development expenditure, but is adversely impacted by expenses that are not deductible for tax purposes and the lower UK corporation tax rate, of 20%, applicable to the recognition of deferred tax.

 

The effective average US dollar to sterling rate for Q1 2014 was $1.53/£1, compared with $1.58/£1 for Q1 2013 and $1.60/£1 for Q4 2013. It is estimated that every 1 cent increase in the US dollar/sterling exchange rate has the effect of reducing the Company's operating result by $300,000 on an annualised basis. Sterling-denominated overheads for the whole of 2014 are hedged at $1.565/£1, with H1 2014 hedged at $1.53 and H2 2014 at $1.60.  

 

The underlying fully diluted loss per share for Q1 2014 was 3.1 cents compared with a 2.0 cents loss in Q1 2013 (Q4 2013: 3.3 cents loss).

 

Balance Sheet and Cash Flow

Cash and short-term deposits amounted to $25.2m at 30 March 2014 compared with $25.9m at 29 December 2013, a cash outflow of $0.7m in the quarter. There have been no drawings made on the $25m committed bank facility negotiated in Q1 2014.

 

Summarised Consolidated Cash Flow






Q1

Q1






2014

2013






$m

$m








Loss before tax




(5.8)

(6.3)

Depreciation & amortisation



2.4

2.5

Net finance expense


0.1

-

Loss before interest, tax, depreciation and amortisation


(3.3)

(3.8)

Share-based compensation



0.9

1.0

Change in working capital:






Receivables


5.7

0.7


Inventory


(3.2)

(5.1)


Payables


1.8

(3.1)

Payments to pension scheme



-

(1.3)

Foreign exchange gain



(0.3)

-

Net cash inflow / (outflow) from operating activities

1.6

(11.6)

Capital expenditure




(1.7)

(0.8)

Free cash flow




(0.1)

(12.4)

Deferred consideration payments


(0.8)

(1.6)

Foreign exchange




0.2

0.1

Net cash outflow



(0.7)

(13.9)

Opening cash balances



25.9

48.0

Closing cash balances



25.2

34.1

 

 

Net cash inflow from operating activities was $1.6m in Q1 2014 compared with an outflow of $11.6m in Q1 2013. As 2014 progresses, working capital needs are expected to increase to support the higher level of forecast revenues in the second half of the year. 

 

Days of inventory, trade receivables and trade payables were 130, 50 and 49 respectively at 30 March 2014 (91, 51 and 29 days respectively at 29 December 2013; and 94, 46 and 47 days respectively at 31 March 2013). Days of inventory is expected to normalise to around 90 days during H2 2014.

 

Cash outflow on capital expenditure in Q1 2014 amounted to $1.7m compared with $0.8m in Q1 2013. This primarily represented spend on software licences and IT equipment.

 

The Company paid $0.8m (Q1 2013: $1.6m) for deferred consideration as milestones were achieved on the 2007 acquisition of Sonaptic (ANC).

 

In Q2 2014 a payment of $1.7m will be made into the closed defined benefit pension scheme under the schedule of contributions agreed with the scheme trustees.


 

 

Condensed consolidated income statement









For the period ended 30 March 2014


Q1 2014



Q1 2013



Q4 2013



13-week period from 30 December 2013 to 30 March 2014

 

13-week period from 31 December 2012 to

31 March 2013

 

13-week period from 30 September 2013 to 29 December 2013





Before exceptional charge

Exceptional charge

(note 4)

Total





(Unaudited)

 

(Unaudited)

(Unaudited)

(Unaudited)

 

(Unaudited)


Notes

$'000


$'000

$'000

$'000


$'000

Revenue

3

28,805


48,059

-

48,059


42,027

Cost of sales


(15,248)


(28,710)

-

(28,710)


(24,290)



_______


_______

_______

_______


_______

Gross profit

3

13,557


19,349

-

19,349


17,737

Distribution and selling costs

5

(4,696)


(6,274)

-

(6,274)


(7,528)

Research and development expenses

5

(11,873)


(15,601)

-

(15,601)


(14,957)

Administrative expenses

5

(2,717)


(3,161)

-

(3,161)


(3,774)

Past service cost on defined benefit plan

4

-


-

(600)

(600)


-



_______


_______

_______

_______


_______

Operating loss

6

(5,729)


(5,687)

(600)

(6,287)


(8,522)










Financial income


7


28

-

28


7

Financial expenses


(48)


(58)

-

(58)


(19)



_______


_______

_______

_______


_______

Net financing expense


(41)


(30)

-

(30)


(12)



_______


_______

_______

_______


_______

Loss before tax


(5,770)


(5,717)

(600)

(6,317)


(8,534)

Income tax credit

7

1,166


1,125

138

1,263


1,646



_______


_______

_______

_______


_______

Loss for the period attributable

to the owners of the Company


(4,604)


(4,592)

(462)

(5,054)


(6,888)



               


               

               

               


               

Basic loss per share (cents)

8

(3.94)




(4.33)


(5.90)



               




               


               

Diluted loss per share (cents)

8

(3.94)




(4.33)


(5.90)



               




               


               

 



 

Condensed consolidated income statement





For the period ended 30 March 2014

(continued)



2013




52-week period from 31 December 2012 to 29 December 2013*



Before exceptional charge

Exceptional charge

(note 4)

Total







Notes

$'000

$'000

$'000

Revenue

3

179,436

-

179,436

Cost of sales


(103,457)

-

(103,457)



_______

_______

_______

Gross profit

3

75,979

-

75,979

Distribution and selling costs


(24,604)

-

(24,604)

Research and development expenses


(58,334)

-

(58,334)

Administrative expenses


(12,731)

-

(12,731)

Past service cost on defined benefit plan

4

-

(600)

(600)



_______

_______

_______

Operating loss

6

(19,690)

(600)

(20,290)






Financial income


95

-

95

Financial expenses


(178)

-

(178)



_______

_______

_______

Net financing expense


(83)

-

(83)



_______

_______

_______

Loss before tax


(19,773)

(600)

(20,373)

Income tax credit


3,815

138

3,953



_______

_______

_______

Loss for the period attributable

to the owners of the Company


(15,958)

(462)

(16,420)



               

               

               

Basic loss per share (cents)

8



(14.07)





               

Diluted loss per share (cents)

8



(14.07)





               

 

* The results for the 52-week period ended 29 December 2013 have been extracted from the statutory accounts for the 52-week period ended 29 December 2013, which have been reported on by the Company's auditors and delivered to the Registrar of Companies.



 

 

 

Condensed consolidated statement of comprehensive income





For the period ended 30 March 2014

Q1 2014

Q1 2013

Q4 2013

2013


13-week period from 30 December 2013 to 30 March 2014

13-week period from 31 December 2012 to 31 March 2013

13-week period from 30 September 2013 to 29 December 2013

52-week period from 31 December 2012 to 29 December 2013*







(Unaudited)

(Unaudited)

(Unaudited)



$'000

$'000

$'000

$'000






Loss for the period

(4,604)

(5,054)

(6,888)

(16,420)


_______

_______

_______

_______

Other comprehensive income:





Items that will never be reclassified to profit or loss:





Actuarial gain on net defined benefit obligations

-

-

472

2,403

Increase in defined benefit liabilities recognised in accordance with IFRIC 14

-

-

(300)

(2,400)

Movement in unrecognised surplus on defined benefit plan

(10)

-

(301)

(2,236)

Deferred tax on net defined benefit items recognised in equity

2

-

(11)

398


_______

_______

_______

_______


(8)

-

(140)

(1,835)


_______

_______

_______

_______

Items that are or may be reclassified subsequently to profit or loss:





Foreign exchange translation differences on foreign operations

(1)

(4)

1

(5)

Effective portion of changes in fair value of cash flow hedges

(391)

(2,442)

765

1,768


_______

_______

_______

_______


(392)

(2,446)

766

1,763


_______

_______

_______

_______

Other comprehensive income for the period

(400)

(2,446)

626

(72)


_______

_______

_______

_______

Total comprehensive income for the period attributable

to the owners of the Company

(5,004)

(7,500)

(6,262)

(16,492)


               

               

               

               






 

* The results for the 52-week period ended 29 December 2013 have been extracted from the statutory accounts for the 52-week period ended 29 December 2013, which have been reported on by the Company's auditors and delivered to the Registrar of Companies.


Condensed consolidated balance sheet




As at 30 March 2014

As at 30 March 2014

As at 29 December 2013*

As at 31 March

2013


(Unaudited)


(Unaudited)


$'000

$'000

$'000

Assets




Property, plant and equipment

19,905

20,501

23,426

Intangible assets

33,370

32,073

32,788

Deferred tax assets

18,479

17,403

14,258


_______

_______

_______

Total non-current assets

71,754

69,977

70,472


_______

_______

_______

Inventories

27,362

24,221

29,784

Trade and other receivables

23,215

28,899

37,130

Other investments, including derivatives

1,998

2,389

-

Short-term deposits

-

-

28,000

Cash and cash equivalents

25,182

25,886

6,086


_______

_______

_______

Total current assets

77,757

81,395

101,000


_______

_______

_______

Total Assets

149,511

151,372

171,472


               

               

               

Equity




Issued share capital

194

194

194

Share premium account

61,430

61,430

61,253

Capital redemption reserve

503

503

503

Hedging reserve

1,998

2,389

(1,821)

Retained earnings

56,576

60,429

73,024


_______

_______

_______

Total equity attributable to equity holders of the parent

120,701

124,945

133,153


_______

_______

_______

Liabilities




Employee benefits

3,900

3,900

1,669

Other payables

292

483

245


_______

_______

_______

Total non-current liabilities

4,192

4,383

1,914


_______

_______

_______

Income tax payable

89

78

62

Trade and other payables, including derivatives

23,708

20,966

34,942

Provisions

821

1,000

1,401


_______

_______

_______

Total current liabilities

24,618

22,044

36,405


_______

_______

_______

Total Liabilities

28,810

26,427

38,319


_______

_______

_______

Total equity and liabilities

149,511

151,372

171,472


               

               

               

 

* The results for the 52-week period ended 29 December 2013 have been extracted from the statutory accounts for the 52-week period ended 29 December 2013, which have been reported on by the Company's auditors and delivered to the Registrar of Companies.

Condensed consolidated statement of changes in equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to owners of the Company

 

Share capital

Total equity

 

$'000

$'000

Balance at 31 December 2012

194

139,910

 

 

 

Loss for the period

-

(5,054)

Other comprehensive income:

 

 

Foreign exchange translation difference on foreign operations

-

(4)

Effective portion of changes in fair value of cash flow hedges

-

(2,442)

 

_______

_______

Total comprehensive income for the period ended 31 March 2013

-

(7,500)

 

_______

_______

Equity settled share-based payment transactions

-

1,005

Deferred tax on equity settled share-based payment transactions recognised in equity

-

(262)

 

_______

_______

Total contributions by and distributions to owners of the Company

-

743

 

_______

_______

 

 

 

Balance at 31 March 2013

194

133,153

 

              

              

 

 

 

 

$'000

$'000

Balance at 30 December 2013

194

124,945

 

 

 

Loss for the period

-

(4,604)

Other comprehensive income:

 

 

Movement in unrecognised surplus on defined benefit plan

-

(10)

Deferred tax on net defined benefit items recognised in equity

-

2

Foreign exchange translation differences on foreign operations

-

(1)

Effective portion of changes in fair value of cash flow hedges

-

(391)

 

_______

_______

Total comprehensive income for the period ended 30 March 2014

-

(5,004)

 

_______

_______

Equity settled share-based payment transactions

-

884

Deferred tax on equity settled share-based payment transactions recognised in equity

-

(121)

Company shares acquired by employee trust

-

(3)

 

_______

_______

Total contributions by and distributions to owners of the Company

-

760

 

_______

_______

 

 

 

Balance at 30 March 2014

194

120,701

 

              

              

              

              

              

              

 



 

Condensed consolidated statement of cash flows

 

 

 

 

For the period ended 30 March 2014

Q1 2014

Q1 2013

Q4 2013

2013

 

13-week period from 30 December 2013 to 30 March

2014

13-week period from 31 December 2012 to 31 March

2013

13-week period from

30 September 2013 to 29 December 2013

52-week period from 31 December 2012 to 29 December 2013*

 

(Unaudited)

(Unaudited)

(Unaudited)

 

 

$'000

$'000

$'000

$'000

Cash flow from operating activities

 

 

 

 

Loss for the period

(4,604)

(5,054)

(6,888)

(16,420)

Adjustments for:

 

 

 

 

Depreciation, amortisation and impairment loss on property, plant and equipment

2,367

2,468

4,280

11,839

Loss on disposal of property, plant and equipment

-

-

35

35

Foreign exchange (gain) / loss

(263)

48

74

292

Net financing expense

41

30

12

83

Equity-settled share-based payment expenses

884

1,005

1,141

1,674

Income tax credit

(1,166)

(1,263)

(1,646)

(3,953)

 

_______

_______

_______

_______

 

(2,741)

(2,766)

(2,992)

(6,450)

(Increase) / decrease in inventories

(3,141)

(5,082)

6,541

481

Decrease in trade and other receivables

5,691

666

1,001

9,059

Increase / (decrease) in trade and other payables

1,997

(3,090)

(2,724)

(12,457)

Decrease in provisions and employee benefits

(179)

(1,311)

(460)

(3,576)

 

_______

_______

_______

_______

Cash generated from / (absorbed by) the operations

1,627

(11,583)

1,366

(12,943)

Income tax (paid) / received

(20)

(19)

(40)

64

 

_______

_______

_______

_______

Net cash inflow / (outflow) from operating activities

1,607

(11,602)

1,326

(12,879)

 

_______

_______

_______

_______

Cash flow from  investing activities

 

 

 

 

Interest received

7

38

10

106

Acquisition of property, plant and equipment and intangible assets

(1,745)

(758)

(2,177)

(7,757)

Proceeds from the sale of property, plant and equipment

-

-

180

180

Deferred consideration on acquisition in prior periods

(800)

(1,600)

(173)

(1,773)

Amounts withdrawn from short-term deposits

-

-

5,000

28,000

 

_______

_______

_______

_______

Net cash (outflow) / inflow from investing activities

(2,538)

(2,320)

2,840

18,756

 

_______

_______

_______

_______

Cash flow from financing activities

 

 

 

 

Proceeds from the issue of share capital

-

-

83

177

Company shares acquired by employee trust

(3)

-

-

(2)

Interest paid

(6)

(6)

-

(14)

 

_______

_______

_______

_______

Net cash (outflow) / inflow from financing activities

(9)

(6)

83

161

 

_______

_______

_______

_______

Net (decrease) / increase in cash and cash equivalents

(940)

(13,928)

4,249

6,038

Cash and cash equivalents at start of period

25,886

19,974

21,674

19,974

Effect of exchange rate fluctuations on cash held

236

40

(37)

(126)

 

_______

_______

_______

_______

Cash and cash equivalents at end of period

25,182

6,086

25,886

25,886

 

              

              

              

              

Cash and cash equivalents at end of period

25,182

6,086

25,886

25,886

Short-term deposits at end of period

-

28,000

-

-

 

_______

_______

_______

_______

Total cash and short-term deposits at end of period

25,182

34,086

25,886

25,886

 

              

              

              

              

 

* The results for the 52-week period ended 29 December 2013 have been extracted from the statutory accounts for the 52-week period ended 29 December 2013, which have been reported on by the Company's auditors and delivered to the Registrar of Companies.

Notes to the financial information

 

1.   Basis of preparation

 

The financial information set out above contains the financial information of Wolfson Microelectronics plc (the "Company") and its subsidiaries (together referred to as the "Group") for the thirteen week period ended 30 March 2014. The comparative periods are the thirteen week period ended 31 March 2013 and the thirteen week period ended 29 December 2013.

 

A copy of this press release is available on the Company's website at www.wolfsonmicro.com.

 

The financial information set out above does not constitute the Company's statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the fifty-two week period ended 29 December 2013, which were prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the EU, are available on the Company's website at www.wolfsonmicro.com and have been delivered to the Registrar of Companies. The auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

 

2.   Accounting policies

 

This financial information has been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the fifty-two week period ended 29 December 2013. There is no actuarial gain or loss recognised for the thirteen week period ended 30 March 2014 as the Company has not updated the actuarial valuation of the defined benefit pension scheme, for accounting purposes, from the position as at 29 December 2013.

                                                                                           

As permitted by IAS 1: Presentation of Financial Statements, the Group has disclosed additional information in respect of exceptional items on the face of the income statement, for the thirteen week period ended 31 March 2013 and for the fifty-two week period ended 29 December 2013, in order to aid understanding of the Group's financial performance. An item is treated as exceptional if it is considered that by virtue of its nature, scale of incidence and being of such significance that separate disclosure is required for the financial statements to be properly understood.

 

In the process of applying the Group's accounting policies, management necessarily makes judgements and estimates that have a significant effect on the amounts recognised in the condensed financial statements.  Actual results may differ from these estimates. Changes in the assumptions underlying the estimates could result in a significant impact to the financial information.  The most critical of these accounting judgement and estimation areas were noted in the Company's consolidated financial statements for the fifty-two week period ended 29 December 2013.

 

3.   Segment information

 

The chief operating decision-maker is the Chief Executive Officer ('CEO') of the Company.  The CEO reviews the Group's internal reporting in order to assess performance and allocate resources.  Management has determined the operating segments based on these reports.

 

The Group has two reportable segments, which reflect the organisational structure in the internal reporting as used by the CEO in order to assess performance and allocate resources. These two reportable segments are the Group's Audio Hubs and Discrete and Power Products segments which are reported separately to the chief operating decision-maker to allow greater management focus on the Audio Hubs strategy.  The following summary describes the operations in the Group's reportable segments:

 

Audio Hubs - this segment includes the supply and sale of Wolfson's Audio Hubs high performance audio integrated circuit solutions.  Audio Hubs are feature-rich devices which contain many of Wolfson's audio technologies combined into a single Hub device.

 

Discrete and Power Products - this segment includes the supply and sale of integrated circuits which are discrete components, such as : Analogue-to-Digital Converters; Digital-to-Analogue Converters; and this segment also includes those components which are power management integrated circuits and the silicon microphone devices based on Micro-Electro-Mechanical Systems ('MEMS') technology.

 

3.   Segment information (continued)

 

The other operating segment does not meet any of the quantitative thresholds for determining a reportable segment in the periods presented and, accordingly, the relevant revenue and segment gross profits are shown as 'other operating segment'.

 

The CEO assesses the performance of the operating segments based on revenue and a measure of gross profit.  The gross profit measurement basis excludes the effects of non-recurring expenditure from operating segments, such as restructuring costs and exceptional inventory write downs.  Interest income and expenditure are not included in the result for each operating segment that is reviewed by the CEO.  Other information provided to the CEO is measured in a manner consistent with that in the financial statements. The segment information is prepared using accounting policies consistent with those of the Group as a whole.  There were no inter-segment transactions in the periods presented.

 

The assets and liabilities of the Group are not reviewed by the chief operating decision-maker on a segment basis.  Therefore none of the Group's assets and liabilities are segmental assets and segmental liabilities respectively and all are unallocated for segmental disclosure purposes.

 


Q1 2014

Q1 2013

Q4 2013

2013


13-week period from 30 December 2013 to 30 March

2014

13-week

period from

31 December 2012 to 31 March

2013

13-week

period from

30 September 2013 to 29 December

2013

52-week

period from

31 December 2012 to 29 December

2013

               

$'000

$'000

$'000

$'000






Segment revenue:





Audio Hubs

21,741

41,508

27,533

136,371

Discrete and Power Products

6,989

6,521

14,477

42,973

Other operating segment

75

30

17

92


_______

_______

_______

_______






Total revenue for the period

28,805

48,059

42,027

179,436


               

               

               

               

Segment gross profit:





Audio Hubs

10,156

16,252

11,353

55,996

Discrete and Power Products

3,522

3,130

6,436

20,065

Other operating segment

(121)

(33)

(52)

(82)


_______

_______

_______

_______

Total gross profit for segments in the period

13,557

19,349

17,737

75,979


               

               

               

               






 

4.   Exceptional charge

 

There were no exceptional charges recognised in the thirteen week periods ended 30 March 2014 and 29 December 2013.

 

Past service cost on defined benefit plan.

Exceptional charge recognised in the thirteen week period ended 31 March 2013 and in the fifty-two week period ended 29 December 2013:

In November 2012 the Company initiated an Enhanced Transfer Value (ETV) offer to the 83 deferred members of the Company's defined benefit pension scheme. The Company estimated (for accounting purposes) the projected level of take up of the ETV offer and, as a result, recognised an exceptional charge of $1.4 million in the thirteen and fifty-two week periods ended 30 December 2012. Following the closure of the ETV offer, the actual accounting cost of the ETV to be recognised was $2.0 million for those members that decided to take up the offer. Therefore the difference of $0.6 million between the actual accounting cost and the estimated cost of $1.4 million, recorded as at 30 December 2012, was recognised as an exceptional charge in the Company's condensed financial statements in the thirteen week period ended 31 March 2013 and therefore also in the financial statements for the fifty-two week period ended 29 December 2013.


5.   Operating expenses: reconciliation from Underlying to IFRS

 


Underlying

Share-based compensation (including related payroll taxes)

Amortisation  of acquired intangible assets

Severance

costs

Impairment loss on property plant and equipment (asset write down)

Exceptional charge

IFRS

               

$'000

$'000

$'000

$'000

$'000

$'000

$'000

Q1 2014

13-week period from 30 December 2013 to 30 March 2014








Distribution and selling costs

(4,513)

(183)

-

-

-

-

(4,696)

Research and development expenses

(11,044)

(551)

(278)

-

-

-

(11,873)

Administrative expenses

(2,521)

(196)

-

-

-

-

(2,717)


_______

_______

_______

_______

_______

_______

_______


(18,078)

(930)

(278)

-

-

-

(19,286)


               

               

               

               

               

               

               









Q1 2013

13-week period from 31 December 2012 to 31 March 2013








Distribution and selling costs

(5,639)

(235)

-

(400)

-

-

(6,274)

Research and development expenses

(13,566)

(532)

(403)

(1,100)

-

-

(15,601)

Administrative expenses

(2,944)

(217)

-

-

-

-

(3,161)

Past service cost on defined benefit plan

-

-

-

-

-

(600)

(600)


_______

_______

_______

_______

_______

_______

_______


(22,149)

(984)

(403)

(1,500)

-

(600)

(25,636)


               

               

               

               

               

               

               









Q4 2013

13-week period from 30 September to 29 December 2013








Distribution and selling costs

(5,380)

(252)

-

(183)

(1,713)

-

(7,528)

Research and development expenses

(13,447)

(614)

(277)

(619)

-

-

(14,957)

Administrative expenses

(3,401)

(280)

-

(93)

-

-

(3,774)


_______

_______

_______

_______

_______

_______

_______


(22,228)

(1,146)

(277)

(895)

(1,713)

-

(26,259)


               

               

               

               

               

               

               









 

 



 

 


6.   Operating loss: reconciliation from Underlying to IFRS

 


Q1 2014

Q1 2013

Q4 2013

2013


13-week period from 30 December 2013 to 30 March

2014

13-week period from 31 December 2012

to 31 March

2013

13-week period from 30 September 2013 to 29 December 2013

52-week period from 31 December 2012

to 29 December 2013

               

$'000

$'000

$'000

$'000

Underlying operating loss

(4,521)

(2,800)

(4,491)

(12,580)

Share-based payment expenses and related payroll taxes

(930)

(984)

(1,146)

(1,642)

Amortisation of acquired intangible assets

(278)

(403)

(277)

(1,360)

-

(1,500)

(895)

(2,395)

Impairment loss on property, plant and equipment recognised in overheads

-

-

(1,713)

(1,713)

Exceptional charge:

-

(600)

-

 

(600)


_______

_______

_______

_______

Operating loss (IFRS)

(5,729)

(6,287)

(8,522)

(20,290)


               

               

               

               

 

7.   Income tax credit

 

The income tax credit for the thirteen week period ended, and the related deferred tax asset as at, 30 March 2014 reflects the estimated total effective tax rate on the result before taxation for the Group of approximately 20% for the fifty-two week period ending 28 December 2014.  This reflects the UK corporation tax rate applicable for that fifty-two week period as favourably affected by tax allowances on research and development expenditure but adversely impacted by disallowable expenses and the lower UK corporation tax rate, of 20%, applicable to the recognition of deferred tax.

 

8.   Earnings per share


Q1 2014

Q1 2013

Q4 2013

2013


13-week period from 30 December 2013 to 30 March 2014

13-week period from 31 December 2012

to 31 March

2013

13-week period from 30 September 2013 to 29 December 2013

52-week period from 31 December 2012

to 29 December 2013


$'000

$'000

$'000

$'000

Loss for the period attributable to equity shareholders (basic and diluted)

(4,604)

(5,054)

(6,888)

(16,420)

Share-based payment expenses and related payroll taxes*

730

755

879

1,260

Amortisation of acquired intangible assets*

218

309

213

1,044

Severance costs recognised in overheads*

-

1,151

687

1,838

Impairment loss on property, plant and equipment recognised in overheads*

-

-

1,315

1,315

Exceptional charge*

-

462

-

462


_______

_______

_______

_______

Underlying loss for the period attributable to equity shareholders (basic and diluted)

(3,656)

(2,377)

(3,794)

(10,501)


               

               

               

               


cents

cents

cents

cents

Basic loss per share

(3.94)

(4.33)

(5.90)

(14.07)


               

               

               

               

Diluted loss per share

(3.94)

(4.33)

(5.90)

(14.07)

 

               

               

               

               

Underlying basic loss per share

(3.13)

(2.04)

(3.25)

(9.00)

 

               

               

               

               

Underlying diluted loss per share

(3.13)

(2.04)

(3.25)

(9.00)

 

               

               

               

               

* After the estimated tax impact of this item





8.   Earnings per share (continued)

 

 

The weighted average number of ordinary shares used in the calculation of basic and diluted (loss) / earnings per share for each period was calculated as follows:

 

 


Q1 2014

Q1 2013

Q4 2013

2013


13-week period from 30 December 2013 to 30 March 2014

13-week period from 31 December 2012 to 31 March 2013

13-week period from 30 September 2013 to 29 December 2013

52-week period from 31 December 2012 to 29 December 2013


No. of shares

No. of shares

No. of shares

No. of shares






Issued ordinary shares at start of period

116,780,433

116,643,442

116,724,729

116,643,442






Effect of shares issued during the period from: exercise of employee share options; and/or vesting of employee contingent share awards

759

1,077

49,740

66,711


_______

_______

_______

_______

Weighted average number of ordinary shares at end of period - for basic (loss) / earnings per share and for diluted loss per share

116,781,192

116,644,519

116,774,469

116,710,153






Effect of dilutive share options in issue

419,984

860,982

488,815

671,707


_______

_______

_______

_______

Weighted average number of ordinary shares at end of period - for diluted earnings per share

117,201,176

117,505,501

117,263,284

117,381,860

 

               

               

               

               

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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