MEMSCAP – First Half 2019 Earnings

Increase of Consolidated First Half Revenue up to Eur 6.6 Million

Regulatory News:

MEMSCAP (Paris:MEMS), the leading provider of innovative solutions based on MEMS (micro-electro-mechanical systems) technology, today announced its earnings for the first half of 2019 ending 30 June 2019.

Revenue and consolidated earnings for the first half of 2019

In accordance with the previous quarterly press releases, consolidated revenue for the first half of 2019 amounted to EUR 6.6 million (US$ 7.4 million) compared to EUR 6.5 million (US$ 7.9 million) for the first half of 2018 and EUR 6.4 million (US$ 7.4 million) for the second half of 2018.

Consolidated revenue in euro for the first half of 2019 increased by +1% compared to the first half of 2018 and +2% compared to the second half of 2018.

Consolidated revenue distribution by market segment, over the first half of 2019, is as follows:

Market segments / Revenue (M€)	For the 6 months ended 30 June 2019	%		For the 6 months ended 30 June 2018	%		Var. H1 (M€)	2019 / 2018 (%)
Aerospace	3.5	53%		3.3	50%		+0.2	+6%
Optical communications / Adaptive optics	2.1	31%		2.0	31%		+0.1	+3%
Medical / Biomedical	0.7	11%		1.0	15%		-0.2	-24%
Others	0.3	4%		0.3	4%		0.0	+9%
Total	6.6	100%		6.5	100%		+0.1	+1%

(Any apparent discrepancies in totals are due to rounding.)

The first half of 2019 was marked by the robustness of the avionics sector, which increased by 6% (+EUR 0.2 million) compared to the first half of 2018 and represented more than 53% of total consolidated sales in the first half of 2019.

This increase offset the cyclical downturn in medical / biomedical activity (-EUR 0.2 million compared to the first half of 2018).

The optical communications sector recorded solid sales results representing 31% of the consolidated revenue for the first half of 2019, up 3% compared to the first half of 2018.

* * *

MEMSCAP’s consolidated earnings for the first half of 2019 are given within the following table:

In million euros	Q1 2019	Q2 2019	H1 2019		Q1 2018 (1) (Restated)	Q2 2018 (1) (Restated)	H1 2018 (1) (Restated)		H1 2018 (Published)
Revenue	3.1	3.5	6.6		2.9	3.6	6.5		6.5
Standard products* Custom products	2.1 1.0	2.1 1.4	4.3 2.3		1.9 1.0	2.3 1.3	4.2 2.3		4.2 2.3
Cost of revenue	(2.2)	(2.3)	(4.5)		(2.0)	(2.3)	(4.3)		(4.4)
Gross margin	0.9	1.2	2.1		0.9	1.3	2.2		2.1
% of revenue	30%	33%	32%		31%	36%	33%		33%
Operating expenses**	(1.0)	(1.0)	(2.0)		(1.0)	(1.0)	(2.0)		(2.0)
Operating profit / (loss)	(0.1)	0.2	0.1		(0.1)	0.3	0.2		0.1
Financial profit / (loss)	(0.0)	(0.0)	(0.1)		(0.1)	0.0	(0.0)		0.0
Income tax expense	(0.0)	(0.0)	(0.1)		(0.0)	(0.1)	(0.1)		(0.1)
Net profit / (loss)	(0.1)	0.1	(0.1)		(0.2)	0.2	(0.0)		0.0

(Financial data were subject to a limited review by the Group’s statutory auditors. On August 30, 2019, MEMSCAP’s board of directors authorized the release of the interim condensed consolidated financial statements at 30 June 2019. Any apparent discrepancies in totals are due to rounding.)

* Including the dermo-cosmetic segment.

** Net of research & development grants.

(1) The Group has applied IFRS 16 using the full retrospective approach and the comparative information is not the same as the information previously presented in the prior year’s financial statements. The details of the changes in accounting policies are disclosed note 2.2 to the interim condensed consolidated financial statements at 30 June 2019.

The financial data for the 2018 financial year and presented in the comments below have been adjusted from the restatements relating to the adoption of IFRS 16, mandatory from 1 January 2019. These "restated" financial data are therefore different from those previously "published" for the 2018 financial year. The Group has applied IFRS 16 using the full retrospective approach with restatement of comparative information. At 30 June 2019, the adoption of IFRS 16 led to an increase of EUR 5.4 million in total consolidated assets and EUR 6.0 million in total consolidated liabilities, resulting in a -EUR.0.6 million reduction in total consolidated equity. For the first half of 2019 and 2018, the adoption of IFRS 16 resulted in a non-significant reduction in net income for the period and an increase in half-year EBITDA of +EUR 0.2 million in these periods. The detailed impacts of the adoption of IFRS 16 are presented in note 2.2 to the interim condensed consolidated financial statements at 30 June 2019.

In the first half of 2019, the Group's sales volumes led to a consolidated gross margin of EUR 2.1 million (31.6% of consolidated sales) compared to EUR 2.2 million during the restated first half of 2018 (33.4% of consolidated sales).

Operating expenses (net of research and development grants) amounted to EUR 2.0 million in the first half of 2019, similar to the restated first half of 2018. For the first half of 2019, the Group posted an operating profit of EUR 0.1 million compared to an operating profit of EUR 0.2 million for the restated first half of 2018.

The net financial loss was EUR 0.1 million compared to a non-significant net financial loss for the restated first half of 2018. The tax expense of EUR 0.1 million for the first half of 2019 and for the restated first half of 2018 corresponded to the change in deferred tax over the period with no impact on the Group's cash position.

The Group therefore reported a consolidated net loss of EUR 0.1 million for the first half of 2019 compared to a non-significant consolidated net loss in the restated first half of 2018.

* * *

Evolution of the Group’s cash / Consolidated shareholders’ equity

For the first half of 2019, the Group posted a positive EBITDA of EUR 0.7 million compared to a positive EBITDA of EUR 0.8 million for the restated first half of 2018. Cash flow from operating activities in the first half of 2019, +EUR 0.7 million vs +EUR 0.3 million for the restated first half of 2018, significantly increased by EUR 0.4 million resulting in particular from the reduction of the working capital requirement over the period. Therefore, the Group's net cash position increased by EUR 0.2 million in the first half of 2019 compared to a decrease of EUR 0.5 million in the restated first half of 2018.

At 30 June 2019, the Group reported available liquidities at EUR 3.8 million (31 December 2018: EUR 3.7 million) including cash investments for EUR 1.3 million (Corporate bonds) recorded under non-current financial assets and cash and short-term deposits for EUR 2.5 million.

Current financial debt, including lease liabilities under IFRS 16, was EUR 1.0 million at 30 June 2019, similar to the position at 30 December 2018 (restated).

MEMSCAP shareholders’ equity totalled EUR 16.8 million at 30 June 2019 compared to EUR 16.7 million at 31 December 2018 (restated).

* * *

Analysis and perspectives

The first half of 2019 confirmed the robustness of the Group's avionics business, representing more than 53% of the half-year consolidated revenue, as well as the good performance of the optical communications market despite an uncertain international context.

MEMSCAP pursues its strategy focused on avionics, medical and optical communications segments as well as increasing the flexibility of its production capabilities.

* * *

Q3 2019 Earnings: October 25, 2019

About MEMSCAP
MEMSCAP is the leading provider of innovative micro-electro-mechanical systems (MEMS)-based solutions.
MEMSCAP’s products and solutions include components, component designs (IP), manufacturing and related services.

MEMSCAP is listed on Euronext Paris - Segment C - ISIN: FR0010298620 - MEMS.

For more information, visit our website at:
www.memscap.com.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Interim condensed consolidated financial statements at 30 June 2019

		30 June 2019			31 December 2018 Restated (1)
		€000			€000
Assets
Non-current assets
Property, plant and equipment		1 713			1 794
Goodwill and intangible assets		7 985			7 908
Right-of-use assets		6 391			6 316
Other non-current financial assets		1 282			1 309
Deferred tax asset		496			541
		17 867			17 868
Current assets
Inventories		3 139			2 807
Trade and other receivables		3 099			2 943
Prepayments		391			280
Other current financial assets		41			35
Cash and short-term deposits		2 528			2 380
		9 198			8 445
Total assets		27 065			26 313
Equity and liabilities
Equity
Issued capital		1 867			1 867
Share premium		18 775			18 775
Treasury shares		(126)			(130)
Retained earnings		(1 215)			(1 199)
Foreign currency translation		(2 455)			(2 641)
		16 846			16 672
Non-current liabilities
Lease liabilities		6 022			5 977
Interest-bearing loans and borrowings		182			236
Employee benefit liability		20			20
		6 224			6 233
Current liabilities
Trade and other payables		2 900			2 297
Lease liabilities		585			589
Interest-bearing loans and borrowings		432			444
Other current financial liabilities		--			--
Provisions		78			78
		3 995			3 408
Total liabilities		10 219			9 641
Total equity and liabilities		27 065			26 313

(1) The Group has applied IFRS 16 using the full retrospective approach and the comparative information is not the same as the information previously presented in the prior year’s financial statements.
The Group has labelled the restated comparative information with the heading “restated”. The details of the changes in accounting policies are disclosed note 2.2 to the interim condensed consolidated financial statements at 30 June 2019.

CONSOLIDATED STATEMENT OF INCOME

Interim condensed consolidated financial statements at 30 June 2019

	For the six months ended 30 June
	2019		2018 Restated (1)
Continuing operations	€000		€000
Sales of goods and services	6 571		6 516
Revenue	6 571		6 516
Cost of sales	(4 494)		(4 342)
Gross profit	2 077		2 174
Other income	251		261
Research and development expenses	(1 061)		(1 018)
Selling and distribution costs	(423)		(375)
Administrative expenses	(785)		(880)
Operating profit / (loss)	59		162
Finance costs	(94)		(85)
Finance income	19		56
Profit / (loss) for the period from continuing operations before tax	(16)		133
Income tax expense	(58)		(139)
Profit / (loss) for the period from continuing operations	(74)		(6)
Profit / (loss) for the period	(74)		(6)
Earnings per share:
- Basic, for profit / (loss) for the period attributable to ordinary equity holders of the parent (in euros)	€ (0,010)		€ (0,001)
- Diluted, for profit / (loss) for the period attributable to ordinary equity holders of the parent (in euros)	€ (0,010)		€ (0,001)

(1) The Group has applied IFRS 16 using the full retrospective approach and the comparative information is not the same as the information previously presented in the prior year’s financial statements.
The Group has labelled the restated comparative information with the heading “restated”. The details of the changes in accounting policies are disclosed note 2.2 to the interim condensed consolidated financial statements at 30 June 2019.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Interim condensed consolidated financial statements at 30 June 2019

	For the six months ended 30 June
	2019		2018 Restated (1)
	€000		€000
Profit / (loss) for the period	(74)		(6)
Items that will not be reclassified subsequently to profit or loss
Actuarial gains / (losses)	--		--
Income tax on items that will not be reclassified to profit or loss	--		--
Total items that will not be reclassified to profit or loss	--		--
Items that may be reclassified subsequently to profit or loss
Net gain / (loss) on available-for-sale financial assets	57		(37)
Hedging instruments	--		16
Exchange differences on translation of foreign operations	186		335
Income tax on items that may be reclassified to profit or loss	--		--
Total items that may be reclassified to profit or loss	243		314
Other comprehensive income for the period, net of tax	243		314
Total comprehensive income for the period, net of tax	169		308

(1) The Group has applied IFRS 16 using the full retrospective approach and the comparative information is not the same as the information previously presented in the prior year’s financial statements.
The Group has labelled the restated comparative information with the heading “restated”. The details of the changes in accounting policies are disclosed note 2.2 to the interim condensed consolidated financial statements at 30 June 2019.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Interim condensed consolidated financial statements at 30 June 2019

(In thousands of euros, except for number of shares)	Number of shares		Issued capital		Share premium		Treasury shares		Retained earnings		Foreign currency translation		Total shareholders’ equity
			€000		€000		€000		€000		€000		€000
At 1 January 2018 Restated (1)	7 246 190		1 812		18 770		(126)		(1 242)		(2 606)		16 608
Loss for the period	--		--		--		--		(6)		--		(6)
Other comprehensive income for the period, net of tax	--		--		--		--		(21)		335		314
Total comprehensive income	--		--		--		--		(27)		335		308
Capital increase	218 400		54		--		--		(54)		--		--
Treasury shares	--		--		--		(11)		--		--		(11)
Share-based payment	--		--		--		--		28		--		28
At 30 June 2018 Restated (1)	7 464 590		1 866		18 770		(137)		(1 295)		(2 271)		16 933
At 1 January 2019 Restated (1)	7 468 340		1 867		18 775		(130)		(1 199)		(2 641)		16 672
Loss for the period	--		--		--		--		(74)		--		(74)
Other comprehensive income for the period, net of tax	--		--		--		--		57		186		243
Total comprehensive income	--		--		--		--		(17)		186		169
Treasury shares	--		--		--		4		--		--		4
Share-based payment	--		--		--		--		1		--		1
At 30 June 2019	7 468 340		1 867		18 775		(126)		(1 215)		(2 455)		16 846

(1) The Group has applied IFRS 16 using the full retrospective approach and the comparative information is not the same as the information previously presented in the prior year’s financial statements.
The Group has labelled the restated comparative information with the heading “restated”. The details of the changes in accounting policies are disclosed note 2.2 to the interim condensed consolidated financial statements at 30 June 2019.

CONSOLIDATED CASH FLOW STATEMENT

Interim condensed consolidated financial statements at 30 June 2019

	For the six months ended 30 June
	2019		2018   Restated (1)
	€000		€000
Cash flows from operating activities:
Net profit / (loss) for the year	(74)		(6)
Non-cash items written back:
Amortization and depreciation	596		601
Loss / (capital gain) on disposal of fixed assets	38		1
Other non-financial activities	46		167
Accounts receivable	82		(28)
Inventories	(271)		(255)
Other debtors	(160)		(95)
Accounts payable	335		(255)
Other liabilities	102		152
Total net cash flows from operating activities	694		282
Cash flows from investing activities:
Purchase of fixed assets	(190)		(377)
Proceeds from sale / (purchase) of financial assets	52		(56)
Total net cash flows from investing activities	(138)		(433)
Cash flows from financing activities:
Repayment of borrowings	(54)		(53)
Payment of lease liabilities	(306)		(288)
Sale / (purchase) of treasury shares	4		(11)
Total net cash flows from financing activities	(356)		(352)
Net foreign exchange difference	(39)		19
Increase / (decrease) in net cash and cash equivalents	161		(484)
Opening cash and cash equivalents balance	2 044		2 742
Closing cash and cash equivalents balance	2 205		2 258

(1) The Group has applied IFRS 16 using the full retrospective approach and the comparative information is not the same as the information previously presented in the prior year’s financial statements.
The Group has labelled the restated comparative information with the heading “restated”. The details of the changes in accounting policies are disclosed note 2.2 to the interim condensed consolidated financial statements at 30 June 2019.

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