CML Microsystems Sees Strong Second Half Recovery and Strategic Progress in Full Year Results

CML Microsystems full year results: better finish to FY26, but the comeback is not complete yet

CML Microsystems has put out a set of full year results that are a bit of a mixed bag, but the direction of travel looks better than the headline revenue decline might suggest.

Revenue fell to £20.45 million from £22.90 million, and the group still reported a small pre-tax loss of £0.07 million. But the key point is that trading improved meaningfully in the second half, cash rose to £12.80 million, and management now expects a return to revenue growth in FY27.

My read is simple: this is not a blowout set of numbers, but it does look like a business coming out of a difficult patch with more momentum than it had six months ago.

CML Microsystems FY26 key numbers investors need to know

Metric	FY26	FY25
Revenue	£20.45 million	£22.90 million
Gross profit	£12.89 million	£15.89 million
Gross margin	63%	69%
Operating result before exceptional items	£1.93 million loss	£0.53 million profit
Pre-tax result	£0.07 million loss	£0.77 million loss
Cash balances	£12.80 million	£9.92 million
Net assets	£51.45 million	£49.01 million
Full year dividend	11.0p	11.0p
R&D investment	£5.50 million	£5.50 million

Those numbers tell the story quite neatly. Trading was weaker year-on-year, but the balance sheet got stronger and management kept investing for growth.

Second half recovery at CML Microsystems is the real story here

The company repeatedly points to a stronger second half, especially the final quarter. That matters because the main drag on performance has been excess customer inventory – in plain English, customers had too much stock already and did not need to reorder at normal levels.

CML now says that overhang is improving and order activity picked up across the year. It also says positive revenue momentum in the final months of FY26 has continued into the new year, which is exactly what shareholders would want to hear after a sluggish period.

That said, investors should keep both feet on the ground. A recovery in momentum is encouraging, but it is not the same as a full recovery in profitability. The business still made an operating loss before exceptional items of £1.93 million.

Why CML Microsystems margins fell and why NRE income matters

Gross margin dropped from 69% to 63%. The main reason was a higher contribution from NRE income, which stands for non-recurring engineering – essentially paid design and development work for customers.

NRE income jumped to £1.89 million from £0.36 million. That is positive in one sense because it reflects customer engagement and, in this case, progress on the big GNSS contract. But it tends to carry lower margins than product sales, so it diluted the overall gross margin.

This is one of those cases where the quality of revenue mix matters. Design income can be a useful bridge to larger future product sales, but investors will want to see that convert into higher-volume semiconductor shipments over time.

The $30 million GNSS contract could be a big strategic win for future growth

The standout operational announcement is the 12-year design and supply agreement worth more than $30 million with a leading global manufacturer of industrial GNSS equipment. GNSS means global navigation satellite system – the technology behind high-precision positioning and navigation.

This is a significant contract because it suggests CML is being trusted as more than just a chip supplier. Management says it validates the group as a systems-level partner, which should improve its standing with other potential customers too.

There is a catch, though. The initial phase is a two-to-three-year design period, so this is not an instant revenue rocket. The upside is long-term and depends on successful execution through the development phase and then into supply volumes.

Still, for a company of this size, landing a contract valued at more than $30 million is a serious commercial milestone. It gives the growth story a lot more substance than vague talk about pipeline opportunities.

CML Microsystems strategy reset: four target markets and pure-play communications focus

CML says it has now completed its transformation into a pure-play communications semiconductor company. It has also refined its focus to four market verticals: Professional & Industrial Communications, Network Infrastructure, Industrial IoT and Aerospace & Defence.

That sharper focus looks sensible. It helps management direct R&D and sales effort where it believes barriers to entry are high and long-term demand is attractive.

In FY26, 54% of revenue came from Professional & Industrial Communications and 24% from Industrial IoT. The broader opportunity set includes drones, radar, RFID, test and measurement, and 5G backhaul, but the financial contribution from these newer areas is not disclosed.

I also like the fact that CML kept R&D investment at £5.50 million. For a semiconductor business, underinvesting in product development is usually the quickest route to irrelevance, so maintaining that spend during a softer trading year is a positive signal.

Cash, land sale and dividend: stronger balance sheet, but some quality questions remain

The balance sheet is clearly stronger. Cash balances rose to £12.80 million, net assets increased to £51.45 million, and the company remains debt-free.

But it is worth being clear on where some of that strength came from. The sale of excess land at Oval Park generated £7.0 million of proceeds and a profit of £5.88 million. That is real cash, which is good, but it is also a one-off rather than a recurring trading improvement.

There was also a £1.88 million revaluation surplus on the remaining Oval Park land and buildings. Importantly, that gain did not go through the income statement because of IAS 16 accounting rules, so it did not boost reported profit before tax.

The dividend was held at 11.0p for the full year, including a recommended final dividend of 6.0p. That shows confidence, but the board openly says it wants to get back to a position where dividends are covered by trading profitability and operating cash flow. That is the right attitude, because at the moment the payout looks more balance-sheet-backed than earnings-backed.

What retail investors should watch in FY27 after these CML Microsystems results

• Whether revenue actually returns to growth, as guided by the board.
• Whether product sales recover enough to lift margins from the FY26 level of 63%.
• Progress on the GNSS design programme and signs it is moving toward future supply revenues.
• Whether the business can move from a £1.93 million operating loss before exceptional items back into profit.
• How much of the improved cash position remains after continued R&D spending and dividends.

My verdict on the CML Microsystems full year results

I think these results are cautiously positive.

The bad news is obvious enough: revenue fell, margins fell, and the core trading result before exceptional items went backwards. There was also a £4.19 million impairment of development costs, which is never a pretty sight.

But there is a better story underneath. Trading improved in the second half, supply issues on certain SµRF products were resolved, inventories came down to £4.76 million, operating cash inflow rose to £4.59 million, and the company has emerged from its strategic overhaul with a cleaner focus and a stronger balance sheet.

For me, this looks like a business that has spent several years rebuilding and is now trying to convert that work into growth. The next step is crucial. Investors do not need another year of “progress” without meaningful profit improvement. They need proof that the stronger order book, the end of the inventory drag and the $30 million-plus GNSS deal can translate into cleaner, higher-quality growth.

If FY27 delivers that, these results may end up looking like the turning point.