Interim Results

RNS Number : 1913T
Calnex Solutions PLC
23 November 2021
 

23 November 2021

Calnex Solutions plc

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

Interim Results

Calnex Solutions plc (AIM: CLX), a leading provider of test and measurement solutions for the global telecommunications sector, is pleased to announce its unaudited results for the six months ended 30 September 2021 ("H1 FY22" or "the Period").

The Board is pleased to report that the Group has experienced continued strong levels of trading in the first half of the year and expects this trend to continue through the second half of the year. The Group's robust cash position has allowed the Group to bring forward planned investment in the team to increase operational capability, in line with order growth.

The Group continues to successfully deliver on its stated growth strategy and the Board is confident in Calnex's ability to continue benefitting from the underlying market growth drivers in the telecoms market.

Financial Highlights

£000

H1 FY22

H1 FY21 *

FY21

H1 YOY % change


Unaudited

Unaudited

Audited


Revenue

9,251

7,721

17,978

+19.8%

Underlying EBITDA 1

2,479

2,593

5,496

-4.4%

Adjusted Profit before tax 2

2,308

2,319

5,068

-0.5%

Adjusted basic EPS (pence) 3

2.05

3.02

5.83

-32.1%

Adjusted diluted EPS (pence) 3

1.99

2.42

5.21

-17.8%

Closing cash

13,643

4,511

12,668

+66.8%






Statutory measures:





EBITDA

3,877

3,424

6,554

+13.2%

Profit before tax

2,308

1,950

3,647

+18.4%

Basic EPS (pence)

2.05

2.41

4.68

-14.9%

Diluted EPS (pence)

1.99

1.93

4.18

3.1%

 

  * Prior to the Company's Admission to trading on AIM, which took place on 5th October 2020

· Revenue growth of 20% on prior year to £9.3m (H1 FY21: £7.7m) as a result of strong demand for telecoms testing equipment, ahead of management's expectations at the start of FY22

· Planned and previously highlighted investment in product development and operational scalability, to support future growth

· All profit measures ahead of management expectations at the start of FY22, as a result of the strong revenue performance

· Closing cash balance of £13.6m (H1 FY21: £4.5m before 5 October 2020 IPO net proceeds of £4.9m) after positive cash flow of £0.9m in the half year driven by strong trading performance

· Movement in EPS compared with H1 FY21 is as a result of a change in the number of shares in issue pre and post IPO, as well as the subsequent issue of share options in the plc business with no corresponding direct economic value

· Maiden interim dividend of 0.28 pence per share in line with the Board's intention to implement a progressive dividend policy in the year to 31 March 2022

 

 

 

 

Operational Highlights:

· Continued strong demand for testing instrumentation, with new product launches having been well received

· The Group has seen a return to pre-COVID customer spending patterns in all regions, other than in China where demand has been in line with the previous year

· Industry regulation such as the new O-RAN standards continue to drive the requirement for performance testing

· Increased staffing levels across business development, sales, R&D and support roles, to support new product development and maximise exposure in new and existing territories

· Maintained timely shipments to customers, whilst navigating the semi-conductor component shortage

 

Outlook:

· Strong levels of trading seen in H1 have continued into the second half of the year

· Demand for telecoms testing equipment remains strong

· Global semiconductor shortage is being closely monitored by the Board but no negative impacts to date

· The Board is confident in meeting the upgraded ** market forecasts for the year

 

** Upgraded forecasts issued on 12 October 2021, following the Company's Trading Update.

 

Tommy Cook, Chief Executive Officer, and founder of Calnex, said: "These results mark another considerable step forward for Calnex, as we continue to capitalise on the global telecom industry's transition to 5G and the growth of cloud computing. The results for the first half of FY22 are materially ahead of the Board's expectations at the start of the year, as indicated in the Company's Trading Update issued in October 2021, and confidence levels remain high with the early signs being that sales momentum will continue in the second half of the year. We have invested in our team and resources and the continued positive response to the new product launches provides optimism towards the long-term demand for our offering.

 

"The breadth of our customer base across multiple regions, combined with the ongoing successful expansion of the team, our customer relationships and industry connections, places us in a strong position to continue to benefit from the underlying market growth drivers in the telecoms market."

 

 

1 EBITDA after charging R&D amortisation, adjusted in comparative periods also to exclude IPO costs and IPO related share based payments

2 Adjusted in comparative periods to exclude IPO costs and IPO related share based payments

3 Adjusted in comparative periods to exclude IPO costs and IPO related share based payments, and the tax effect of these adjustments

 

 

For more information, please contact:

 

Calnex Solutions plc

Via Alma PR

Tommy Cook, Chief Executive Officer

Ashleigh Greenan, Chief Financial Officer

 

 

 

Cenkos Securities plc - NOMAD

+44 (0)131 220 6939

Derrick Lee, Peter Lynch

 

 

 

Alma PR

+ 44(0) 20 3405 0213

Caroline Forde, Harriet Jackson, Joe Pederzolli

 

 

 

Overview of Calnex

 

Calnex designs, produces and markets test instrumentation and solutions for network synchronization and network emulation, enabling its customers to validate the performance of the critical infrastructure associated with telecoms networks. To date, Calnex has secured and delivered orders to over 600 customer sites in 68 countries across the world. Customers include BT, China Mobile, NTT, Ericsson, Nokia, Intel, Qualcomm, IBM and Facebook.

Founded in 2006, Calnex is headquartered in Linlithgow, Scotland, with additional locations in Belfast, Northern Ireland and California in the US, supported by sales teams in China and India. Calnex has a global network of partners, providing worldwide distribution capability. 

 



Operational Review

Calnex experienced strong trading during the Period. The 20% growth in revenue to £9.3m (H1 FY21: £7.7m) is a result of the continued strong demand for telecoms testing equipment across the Group's core markets. Revenues from the Americas region increased 22%, whilst the Rest of the World experienced a 33% uplift. North Asia remained flat due in part to the ongoing geopolitical tensions between the US and China. Given the overall growth in revenues, the geographical revenue split has shifted slightly in the first six months, with Americas now accounting for 35% of total revenues (FY21: 32%), ROW 41% (FY21: 35%) and North Asia 24% (FY21: 33%).

 

The transition to 5G and growth in cloud computing continue to drive demand for test instrumentation, from both new and existing customers, across each of the Group's customer categories. Factors driving the strong performance include a sustained positive response to the launch of the enhanced Paragon-Neo, Calnex's Lab Sync platform which is being adopted both by existing customers and new customers looking to deliver products addressing the new O-RAN standards. The latest version of Sentinel, Calnex's Field Sync platform, has also seen strong uptake from the telecoms customer base, plus hyperscale and enterprise customers who are investing in their own data centre operations.

The Group's adjusted profit before tax held steady at £2.3m (H1 FY21: £2.3m), ahead of the Board's expectations for the Period at the start of FY22, reflecting the uplift in revenues and the Group's on-going investment in the business. During the first six months the Group has invested in business development resources, placing more sales team members in regions that are experiencing strong growth, such as the US and India, as well as adding to the operational teams to support growth.  

 

The Group has not experienced any negative impact on product shipments from the ongoing global semiconductor shortage to date, however the Board continues to monitor the situation closely. Calnex's ability to maintain shipments on time in the current climate is testament to the strong partnership with the Group's contract manufacturer, Kelvinside Electronics, as well as the abilities and skills of the Calnex team who are successfully navigating this dynamic situation.

 

Strategy

 

Product development

 

Continued product innovation has allowed the Group to execute on its growth strategy to capitalise on the transition to 5G. Calnex has experienced strong demand for its Lab Synchronisation solutions, with its newly launched enhanced Paragon-Neo Lab Sync Platform, a very high-speed interface, seeing strong early orders as existing customers and new customers look to deliver products addressing the new O-RAN (Radio Access Network) standards. O-RAN is an industry initiative designed to open the RAN (Open Radio Access Network) network to wider vendor competition, which is leading to new companies entering the market, as well as additional developments with the established vendors creating products aligned to the O-RAN Implementation Recommendations.

 

The release in June of the new 5G OTA (Over-the-air) capability in Sentinel, Calnex's Field Sync solution, has experienced significant uptake from the telecoms customer base. This second-generation OTA implementation addresses 3G, 4G and the emerging 5G signal formats, and is driving growth in the telecoms market space. In addition, sales to hyperscale customers who are investing in their data centre operations continue to grow. The implementation of time distribution across data centres is creating a secondary market for testing of time distribution accuracy inside data centres. Together, both have meant that Calnex's Sentinel product has delivered ahead of target performance with a positive outlook moving forward.

 

The O-RAN initiative is also having a positive impact on Cloud & IT product lines as it requires testing using Network Emulators to prove interoperation between the various network elements defined by O-RAN.

 

Select M&A opportunities

Targeted acquisitions remain a favourable route to growth to complement the Group's organic growth. The Board continually assesses the market for select M&A opportunities, against strict criteria to ensure that any acquisitions are strategic and earnings enhancing. Opportunities that the Board would consider include complementary products or technologies that can enhance Calnex's existing portfolio, or where the acquisition target provides the Group with access to a related or adjacent growth market.

Market Opportunity

 

The requirement for design validation, and conformance and maintenance testing is more prevalent than ever as new standards and technology movements drive the need for network operators, equipment and component vendors and hyperscale/enterprise customers to validate equipment and network performance. Such evolutionary trends affecting the telecoms sector underpin Group-wide confidence in making further progress during the current financial year and beyond.

 

At present, a considerable market opportunity lies within the role that 5G will have to play in supporting the introduction of new services that need higher quality connections, such as autonomous vehicles, as well as mobile phones and smart devices. Additionally, the testing market will grow in influence hand in hand with the growth in the number of data centres operated by enterprise and hyperscale companies.

 

People  

 

We continue to invest in talent globally, to support and enhance the fantastic work of our team, whose commitment continues to drive the business forward. Such investment in talent, particularly within the R&D division, is part of the Group's on-going growth strategy and will continue to be a big part of our investment over the coming period. We have hired 19 new staff over the last 12 months, bringing our total headcount to 113. The recruitment market remains challenging with many companies seeking to hire; however, at present Calnex continues to be able to attract talent. The Company is also utilising its overseas sponsor license to hire from outside of the UK to strengthen its teams.

 

In August, the Company recruited a new Vice President of Operations who is tasked with advancing Calnex's internal manufacturing capabilities. These activities will enhance processes and procedures to ensure the Group's manufacturing capacity continues to evolve in a sustainable way. Such investment is aligned with our growth strategy, and we expect this to continue in the coming period as we scale the business.

 

Our staff are gradually returning to the office under the hybrid model and our experiences from the enforced lockdowns have allowed us to enhance our working environment for all. Whilst travel costs associated with customer site visits have remained low during the Period, the sales team are slowly starting to hold face-to-face customer interaction again.

 

The Board is delighted to report that the Company was awarded a Gold standard accreditation from Investors in People in June 2021, a rare achievement for companies from their first assessment by IIP. This provides recognition of Calnex as an organisation with the very best in people management excellence.

 

Outlook

 

These results mark another considerable step forward for Calnex, as the Group continues to capitalise on the global telecom industry's transition to 5G and the growth of cloud computing. Confidence levels are high throughout the Group, with an anticipation that sales momentum will continue in the second half of the year. The continued positive response to the new product launches provides optimism towards the long-term demand for our offering.

 

While Calnex has not experienced any negative impact from the ongoing global semiconductor shortage on the ability to manufacture and ship product, the Board continues to monitor the situation closely.

 

The breadth of Calnex's customer base across multiple regions, combined with the ongoing successful expansion of the team, the Group's customer relationships and industry connections, places Calnex in a strong position to continue to benefit from the underlying market growth drivers in the telecoms market.

 

The Board is confident in meeting the upgraded** market forecasts for the year

 

** upgraded forecasts issued on 12 October 2021, following the Company's Trading Update

 

Financial Review  

The Group delivered a strong financial performance in the six months to 30 September 2021, with results materially exceeding management revenue and profit expectations set out at the start of FY22.

 

Key performance indicators

£000

H1 FY22

H1 FY21

FY21


Unaudited

Unaudited

Audited

Revenue

9,251

7,721

17,978

Gross Profit

7,046

6,031

13,965

Gross Margin

76%

78%

78%

Underlying EBITDA 1

2,479

2,593

5,496

Underlying EBITDA %

27%

34%

31%

Adjusted Profit before tax 2

2,308

2,319

5,068

Adjusted Profit before tax %

25%

30%

28%

Closing cash

13,643

4,511

12,668

Capitalised R&D

1,904

1,484

3,326

Adjusted basic EPS (pence) 3

2.05

3.02

5.83

Adjusted diluted EPS (pence) 3

1.99

2.42

5.21





Statutory measures:




EBITDA

3,877

3,424

6,554

EBITDA %

42%

44%

36%

Profit before tax

2,308

1,950

3,647

Profit before tax %

25%

25%

20%

Basic EPS (pence)

2.05

2.41

4.68

Diluted EPS (pence)

1.99

1.93

4.18

 

1 EBITDA after charging R&D amortisation, adjusted in comparative periods also to exclude IPO costs and IPO related share based payments.

2 Adjusted in comparative periods to exclude IPO costs and IPO related share based payments.

3 Adjusted in comparative periods to exclude IPO costs and IPO related share based payments and the tax effect of these adjustments

 

The table below shows the reconciliation between the statutory reported income statement and the adjusted income statement:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of statutory figures to alternative performance measures



H1 FY22

H1 FY21

FY21

£000

Unaudited

Unaudited

Audited

Revenue

  9,251

7,721

17,978

Cost of sales

(2,205)

(1,689)

(4,013)

Gross Profit

  7,046

6,031

13,965

Other income

  93

103

530

Administrative expenses (excl depreciation & amortisation)

(3,262)

(2,710)

(7,941)

EBITDA

3,877

3,424

6,554

Amortisation of development costs

(1,398)

(1,200)

(2,479)

Add back exceptional items:




IPO costs

  - 

171

1,057

IPO related share based payments

  - 

198

198

Issue of SIP Free Shares on IPO

  - 

-

166

Underlying EBITDA

2,479

2,593

5,496

Other depreciation & amortisation

(160)

(135)

(273)

Operating Profit

2,319

2,458

5,223

Finance expense

(11)

(139)

(155)

Adjusted profit before tax

2,308

2,319

5,068

Exceptional items

  - 

(369)

(1,421)

Profit before tax

2,308

1,950

3,647

Tax

(512)

(505)

(194)

Profit for the Period

1,796

1,444

3,453

 

Revenue

Revenue recognised in first half of the year was £9.3m, representing 20% growth on H1 FY21 revenue of £7.7m and a significant increase on targets set at the beginning of the financial year.  Order intake and revenue increased across all three product lines. R evenues to the Americas and Rest of the World increased, with North Asia experiencing a flattening of revenues in the Period reflecting the ongoing US-China geopolitical tensions, which are also exacerbating the component shortage issues in the region . Revenue in H2 FY22 is expected to grow further on the first half of the year, as a result of the healthy closing backlog at 30 September 2021 and the strong pipeline of orders for H2 FY22.

 

Gross Margin

Gross margin in the Period was 76% (H1 FY21: 78%) and is in line with management expectations for this point in the year. This gross margin is net of commissions payable to our channel partners. Gross margins can fluctuate by 1-2% through the year depending on the mix of products and the mix of the hardware and software bundles shipped, so can differ slightly when comparing the half year periods.

 

Underlying EBITDA

Underlying EBITDA is stated after charging R&D amortisation, also adjusted in the comparative periods to exclude IPO costs and IPO related share based payments.

 

Underlying EBITDA was £2.5m in the Period (H1 FY21: £2.6m) which represents a material increase on initial management expectations at the beginning of FY22, driven by the strong revenue performance. Underlying EBITDA margin was 27% (H1 FY21: 34%), several percentage points above the original target for this point in the year. The variance against the prior period is driven by the planned step change in our cost base for FY22 as a result of investment to support the continued growth of the business. 

 

Administration costs excluding depreciation and amortisation (adjusted in prior periods to exclude IPO costs and IPO related share based payments) were £3.3m in H1 FY22 (H1 FY21: £2.3m). This variance in costs predominantly relates to the planned increase in sales, support and executive management headcount in line with our growth strategy. New hires, in line with growth expectations at the start of the year, are predominantly to support the expansion of our internal manufacturing capacity and to further enhance our sales team across the regions.

 

We initially expected travel costs to increase in H1 this year as a result of COVID restrictions being eased. This increase did not materialise as travel restrictions were predominantly still in place throughout the Period. We expect travel costs to increase in H2 FY22 as restrictions ease and an increase in face to face customer meetings return.

 

Amortisation of R&D costs in H1 FY22 were £1.4m (H1 FY21: £1.2m). The increase on the prior period   is due to planned increases in R&D headcount to support new and ongoing projects.  

 

Adjusted Profit before tax

 

Adjusted Profit before tax (with comparative periods adjusted to exclude IPO costs and IPO related share based payments) was £2.3m in the Period (H1 FY21 £2.3m).

 

Tax

 

The tax charge for the Period was £0.5m (H1 FY21: £0.5m) representing an effective tax rate of 22.2% (H1 FY21: 25.9%).

 

The Finance Act 2021, now substantively enacted, increases the UK corporation tax rate from 19% to 25% effective 1 April 2023. As a result, the Company's deferred tax assets and liabilities have been measured using the tax rates that are expected to apply when the reversal of the timing differences takes place. Using this methodology, a n effective hybrid tax rate has been calculated (offset partially by the availability of R&D tax credits) and we expect this rate to be aligned to the effective tax rate for the full year.

 

Earnings per share  

 

Basic earnings per share (adjusted in the comparative periods to exclude IPO costs and IPO related share based payments and the tax effect of these adjustments) was 2.05 pence in the Period (H1 FY21: 3.02 pence) and diluted earnings per share (adjusted in the comparative periods to exclude IPO costs and IPO related share based payments and the tax effect of these adjustments) was 1.99 pence (H1 FY21: 2.42 pence).

 

The reduction in earnings per share compared with the prior period is as a result of a change in the weighted average number of shares in issue pre and post the 5 October 2020 listing of the Company's Ordinary Shares on the AIM market of the London Stock Exchange, and the issue of share options since the listing. The weighted average number of shares in issue at 30 September 2021 takes into account the 27,475,897 shares issued on IPO, of which 14,975,897 were issued in exercise of share options and warrants with no corresponding direct economic value.  There were also 3,122,500 share options issued since the listing (472,500 issued since 31 March 2021), with no corresponding direct economic value, further increasing the weighted average diluted share capital at the end of the Period.

 

Cashflows

 

The Group generated £0.9m cash in H1 FY22 (H1 FY21: £0.9m), reflecting the strong trading in the Period and was, as with the performance in the income statement, significantly ahead of management expectations at the start of FY22.

 

Net cash from operating activities was £3.1m in the Period (H1 FY21: £2.9m). Working capital movements represented a cash outflow of £0.7m (H1 FY21: £0.7m), largely driven by movements in trade and other receivables as a result of timing and volume of shipping and invoicing to customers. 

 

Cash used in investing activities is principally cash spent on R&D activities which is capitalised and amortised over five years. Investment in R&D in the Period was £1.9m (H1 FY21: £1.5m), reflecting the growth in the team as R&D project resource demands increased as planned.

 

Cash spend on financing activities in the Period was £0.1m (H1 FY21: £0.6m), representing payment of lease obligations. There is currently no debt on the balance sheet, leading to no borrowings related cashflows in the current period.

 

Closing cash at 30 September 2021 was £13.6m (30 September 2020: £4.5m; 31 March 2021: £12.7m).

 

Dividend

 

The Board has resolved to pay a maiden interim dividend of 0.28 pence per ordinary share on 17 December 2021 to those shareholders on the register as at 3 December 2021 (FY21 Interim dividend 0p). The ex-dividend date is 2 December 2021.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Calnex Solutions plc

Consolidated income statement

For the period ended 30 September 2021

 

 

 

6 months to

6 months to

Year ended

 

 

30 Sep 2021

30 Sep 2020

31 Mar 2021

 

 

(Unaudited)

(Unaudited)

(Audited)

 

 

£'000

£'000

£'000

 

 




Revenue

5

9,251

7,721

17,978

Cost of sales


(2,205)

(1,690)

(4,013)

Gross profit


7,046

6,031

13,965

Other income


93

103

530

Administrative expenses


(4,820)

(4,045)

(10,693)

Operating profit


2,319

2,089

3,802




 


 


Presented as:



 


 


EBITDA


3,877

3,424

6,554

Depreciation and amortisation of non-R&D assets

(160)

(135)

(273)

Amortisation of R&D asset


(1,398)

(1,200)

(2,479)

Operating profit


2,319

2,089

3,802




 


 





 


 


Finance costs

6

(11)

(139)

(155)

Profit before taxation


2,308

1,950

3,647

Taxation

7

(512)

(505)

(194)

Profit and total comprehensive income for the year

1,796

1,445

3,453





Earnings per share (pence)




Basic earnings per share

8

2.05

2.41

4.68

Diluted earnings per share

8

1.99

1.93

4.18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Calnex Solutions plc

Consolidated statement of financial position

For the period ended 30 September 2021

 

 

 

6 months to


6 months to


Year ended

 

 

30 Sep 2021


30 Sep 2020


31 Mar 2021

 

 

(Unaudited)


(Unaudited)


(Audited)

 

 

£'000


£'000


£'000

Non-current assets

 


 


 


Intangible assets

 9

7,982

 

7,009

 

7,525

Property, plant and equipment

10

158

 

19

 

22

Right of use assets

11

541

 

602

 

522

Deferred tax asset

 

730

 

250

 

613


 

9,411

 

7,880

 

8,682

Current assets

 


 


 


Inventory

12

1,189

 

1,226

 

1,111

Trade and other receivables

13

2,414

 

2,148

 

1,819

Cash and cash equivalents

14

13,643

 

4,511

 

12,668


 

17,246

 

7,885

 

15,598


 


 


 


Total assets

 

26,657

 

15,765

 

24,280


 


 


 


Current liabilities

 


 


 


Borrowings

 

-

 

719

 

-

Trade and other payables

15

4,182

 

2,582

 

4,181

Lease liability payable within one year

11

175

 

162

 

130

Financial liabilities

 

-

 

52

 

-

Provisions

16

291

 

298

 

291


 

4,648

 

3,813

 

4,602


 


 


 


Non-current liabilities

 


 


 


Borrowings

 

-

 

1,217

 

-

Trade and other payables

15

868

 

349

 

749

Lease liabilities payable later than one year

11

417

 

469

 

436

Deferred tax liability


1,650

 

1,260

 

1,321

Provisions

16

15

 

15

 

15


 

2,950

 

3,310

 

2,521


 


 


 


Total liabilities

 

7,598

 

7,123

 

7,123


 


 


 



 


 


 


Net assets

 

19,059


8,642


17,157


 


 


 


Equity

 


 


 


Share capital

 

109

 

75

 

109

Share premium

 

7,484

 

1,138

 

7,484

Share option reserve

 

232

 

266

 

126

Retained earnings

 

11,234

 

7,163

 

9,438

Total equity

 

19,059

 

8,642

 

17,157


 


 


 



 


 


 


 

 

 

 

 

 

 

Calnex Solutions plc

Consolidated statement of cashflows

For the period ended 30 September 2021

 

 

6 months to


6 months to


Year ended

 

 

30 Sep 2021


30 Sep 2020


31 Mar 2021

 

 

(Unaudited)


(Unaudited)


(Audited)

 

 

£'000


£'000


£'000

Cashflow from operating activities

 


 


 


Profit before tax from continuing operations


2,308

 

1,950

 

3,647

Adjusted for

 


 


 


IPO professional fees and commissions

 

-

 

171

 

1,057

Finance costs

 

11

 

139

 

155

Foreign exchange differences

 

-

 

34

 

(65)

Government grant income

 

(93)

 

(103)

 

(204)

R&D tax credit income

 

-

 

-

 

(326)

Change in fair value of assets & liabilities


-

 

-

 

144

Movement in obsolescence provision

 

(16)

 

89

 

25

Movement in provisions

 

-

 

9

 

(14)

Share based payment transactions

 

105

 

198

 

275


 


 


 


Depreciation

 

160

 

82

 

167

Amortisation

 

1,398

 

1,253

 

2,585


 


 


 


Movement in inventories

 

(63)

 

(356)

 

(178)

Movement in trade and other receivables

 

(595)

 

141

 

818

Movement in trade and other payables

 

(74)

 

(356)

 

1,271


 


 


 


Net cash used in discontinued operations

 

-

 

(202)

 

(201)


 


 


 


Cash generated from operations

 

3,141

 

3,049

 

9,156

Interest paid

 

(11)

 

(154)

 

(107)

Net cash from operating activities

 

3,130

 

2,895

 

9,049




 


 


Investing activities



 


 


Purchase of intangible assets


(1,904)

 

(1,484)

 

(3,332)

Purchase of property, plant and equipment

 

(154)

 

(3)

 

(10)

Net cash used in investing activities

 

(2,058)

 

(1,487)

 

(3,342)


 


 


 


Financing activities

 


 


 


Repayment of borrowings

 

-


(340)


(2,276)

Payment of lease obligations

 

(97)

 

(64)

 

(193)

Share issue proceeds

 

-

 

-

 

6,000

Share options proceeds

 

-

 

-

 

328

IPO professional fees and commissions

 

-

 

(171)

 

(1,057)

Payment of deferred consideration

 

-

 

(82)

 

(83)

Government grant income

 

-

 

96

 

578

Net cash from financing activities

 

(97)

 

(561)

 

3,297


 


 


 


Net increase in cash and cash equivalents

 

975

 

847

 

9,004


 


 


 


Cash and cash equivalents at the beginning of the period

12,668

 

3,664

 

3,664


 


 


 


Cash and cash equivalents at the end of the period

 

13,643

 

4,511

 

12,668

 

 

 

 

 

Calnex Solutions plc

Consolidated statement of changes in equity

For the period ended 30 September 2021

 


Share

capital


Share premium


Share option reserve


Retained earnings


Total

equity


£'000


£'000


£'000


£'000


£'000











Balance at 30 September 2020

75


1,138


266


7,163


8,642











Share options

18 


362 


(140)


266 


506

Share Issue

 

  16


5,984




6,000

 

Profit for period ended 31 March 2021




2,009


2,009











Balance at 31 March 2021

109


7,484


126


9,438


17,157











Share options



106



106











Profit for period ended 30 September 2021



  - 


1,796


1,796











Balance at 30 September 2021

109


7,484


  232


11,234


19,059

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Calnex Solutions plc

Notes to the interim consolidated financial statements

For the period ended 30 September 2021

 

 

1.  General information

The interim consolidated financial statements cover the consolidated entity Calnex Solutions plc and the entities it controlled at the end of, or during, the interim period to 30 September 2021 ("the Group").

 

Calnex Solutions plc ("the Company") is a public limited company and is domiciled and incorporated in Scotland.

 

The registered office is:

Oracle Campus

Linlithgow

West Lothian

EH49 7LR

 

The principal activity of the Group is the design, production and marketing of test instrumentation and solutions for network synchronisation and network emulation.

 

The interim consolidated financial statements for the period ended 30 September 2021 are unaudited, and do not constitute statutory accounts as defined in section 434 of the Companies Act 2006. They do not therefore include all the information and disclosures required in annual statutory financial statements and should be read in conjunction with the

Group annual report and accounts for the year ended 31 March 2021.

 

The Group annual report and accounts for the year ended 31 March 2021 were approved by the Board of Directors on 24 May 2021 and have been delivered to the Registrar of Companies. The auditor's report on those accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement made under Section 498(2) or (3) of the Companies Act 2006.

 

The interim consolidated financial statements for the period ended 30 September 2021 were approved by the Board of Directors on 22 November 2022.

 

 

2.  Basis of preparation

The interim consolidated financial statements for the period ended 30 September 2021 have been prepared in accordance with IAS 34 'Interim Financial Reporting' as issued by the International Accounting Standards Board, endorsed by and adopted for use in the United Kingdom.

 

The accounting policies and methods of computation adopted are consistent with those applied in the Group's consolidated financial statements for the year ended 31 March 2021 and have been applied consistently to all periods presented.

 

There have been no new standards or amendments to existing standards effective from 1 April 2021 that are applicable to the Group or that has had any material impact on the financial statements and related notes as at 30 September 2021. The Directors do not anticipate that the adoption of any of the new standards and interpretations issued by the IASB and IFRIC with an effective date for the Group after the date of these interim financial statements will have a material impact on the Group's interim financial statements in the period of initial application.

 

 

 

 

 

 

 

 

 

 

3.  Going concern

The interim consolidated financial statements have been prepared on the basis that the Company will continue as a going concern.

The business has not seen any detrimental impact on trading as a result of the COVID-19 pandemic and the Group has not required the assistance of government funding. Appropriate safety measures have been put in place to protect staff while the Group continues to operate in line with government guidance across our various locations. The Directors continue to closely monitor the situation, with rolling cashflow forecasting and visibility over the order pipeline being key to provide early indication of required action in order to mitigate against any future risk of further lockdowns or new virus threats.

The Board has reviewed financial profit and cashflow forecasts for the current and succeeding financial years to 31 March 2023. Based on this review, along with regular oversight of the Company's risk management framework, the Board has concluded that given the Company's cash reserves available and access to additional liquidity through banking facilities, the Company will continue to trade as a going concern.

4.  Operating segments

Operating segments are based on the internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers) in assessing performance and determining the allocation of resources. As the Group has a central cost structure and a central pool of assets and liabilities, the Board of Directors do not consider segmentation in their review of costs or the balance sheet. The only operating segment information reviewed, and therefore disclosed, are the revenues derived from different geographies.


6 months to

30 Sep 2021


6 months to 

30 Sep 2020


Year ended 

31 Mar 2021


£'000


£'000


£'000







Americas

3,293


2,704


5,767

North Asia

2,140


2,145


5,945

ROW

3,818


2,872


6,266

Total revenue

9,251


7,721


17,978







 

5.  Revenue


6 months to 

30 Sep 2021


6 months to 

30 Sep 2020


Year ended 

31 Mar 2021

 


£'000


£'000


£'000

 







 

Sale of goods

8,268


7,173


16,509

 

Rendering of services

983


548


1,469

 

Total revenue

9,251


7,721


17,978

 







 








6.  Finance costs


6 months to 

30 Sep 2021


6 months to 

30 Sep 2020


Year ended 

31 Mar 2021

 


£'000


£'000


£'000

 







 

Interest expense for borrowings at amortised cost

-


120


107

 

Interest expense on lease liabilities

11


34


63

 

Unwinding on discount for deferred consideration

-


(15)


 (15)

 

Total finance costs

11


139


155

 







 








 

 

 

 

 

 

7.  Taxation


6 months to 

30 Sep 2021


6 months to 

30 Sep 2020


Year ended 

31 Mar 2021

 


£'000


£'000


£'000

 

Current taxation






 

UK corporation tax on profits for the period

291


-


67

 

Foreign current tax expense

5


32


12

 

Adjustments relating to prior years

-


-


(9)

 







 

Deferred taxation






 

Effect of timing differences

104


473


61

 

Adjustments relating to prior years

-


-


63

 

Effects of changes in tax rate

112


-


-

 







 

Taxation charge

512


505


194

 







 

Profit before tax for the year

2,308


1,950


3,647

 

Effective tax rate

22%


26%


5%

 

 

 

 

 







 








 

The effective tax rate forecast at 30 September 2020 for the year ended 31 March 2021 was 26%, influenced predominantly by significant non-allowable expenditure projected ahead of the Company listing on the AIM on 5th October 2020.

 

The actual effective tax rate for the year ended 31 March 2021 was 5%. The delta between the rates at half year and year end being driven by:

· Tax relief on exercise of share options on IPO, on which no deferred tax asset had previously been recognised (reduction of 16% on effective tax rate)

· Availability of R&D SME enhanced deduction which had not been claimed in the prior period (reduction of 4% on effective tax rate)

· Other cumulative variances (1% reduction on the effective tax rate)

 

The effective tax rate forecast at 30 September 2021 for the year ended 31 March 2022 is 22%. The Finance Act 2021, now substantively enacted, increases the UK corporation tax rate from 19% to 25% effective 1 April 2023. In accordance with IAS 12: (Income Taxes) the deferred tax assets and liabilities have been measured using the tax rates that are expected to apply when the reversal of the timing differences takes place.

 

8.  Earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of Ordinary Shares in issue during the year.

 

Diluted earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the total of the weighted average number of Ordinary Shares in issue during the year and adjusting for the dilutive potential Ordinary Shares relating to share options.


6 months to 

30 Sep 2021


6 months to 

30 Sep 2020


Year ended 

31 Mar 2021

 


£'000


£'000


£'000

 







 

Profit after tax attributable to shareholders

 

1,796


1,445


3,453

 

Weighted average number of shares used in calculation:






 

Basic earnings per share

87,500


60,024


73,672

 

Diluted earnings per share

90,375


75,000


82,575

 







 

Earnings per share - basic (pence)

2.05


2.41


4.68

 

Earnings per share - diluted (pence)

1.99


1.93


4.18

 








 

 

9.  Intangible Assets 

Included within intangible assets are the following significant items:

· Intellectual property representing the cost of patent applications and on-going patent maintenance fees.

· Capitalised development costs representing expenditure relating to technological advancements on the core product base of the Group. These costs meet the requirement of IAS 38 (Intangible Assets) and will be amortised over the future commercial life of the related product. Amortisation is charged to administrative expenses.


Intellectual 

property


Development

Costs


 

Total

 


£'000


£'000


£'000

 







 

Cost






 

At 1 April 2021

2,348


24,438


26,786

 

Additions

4


1,904


1,908

 

Disposals

-


-


-

 

At 30 September 2021

2,352


26,342


28,694

 







 

Amortisation






 

Balance at 1 April 2021

2,140


17,121


19,261

 

Charge for the period

53


1,398


1,451

 

Eliminated on disposal

-


-


-

 

At 30 September 2021

2,193


18,519


20,712

 







 

Net book value






 

31 March 2021

208


7,317


7,525

 







 

30 September 2021

159


7,823


7,982

 







 








 

10.  Property, plant and equipment

The Group annually reviews the carrying value of tangible fixed assets recognising the expected working lives of the plant and equipment available to the Group and known requirements. Depreciation is charged to administrative expenses.






Plant and 

equipment






total






£'000

Cost






At 1 April 2021





120

Additions





151

Disposals





(35)

At 30 September 2021





236







Amortisation






Balance at 1 April 2021





98

Charge for the period





15

Eliminated on disposal





(35)

At 30 September 2021





78







Net book value






31 March 2021





22







30 September 2021





158

 

 

 

 

 

 

 

11.  Leases

The Group has recognised a right-of use asset and a lease liability for the lease of land and buildings for its head office in Linlithgow, Scotland.

 

The Group leases IT equipment with contract terms ranging between 1 to 2 years.  The Group has recognised right-of use assets and lease liabilities for these leases. 

 

The Group also leases land and buildings in Belfast and one motor vehicle. These leases are low-value, so have been expensed as incurred. The Group has elected not to recognise right of use assets and lease liabilities for these leases.

Information about the right of use assets and leases for which the Group is a lessee is presented below:


6 months to 

30 Sep 2021


6 months to 

30 Sep 2020


Year ended 

31 Mar 2021

 


£'000


£'000


£'000

 







 

Right of use assets






 

NBV brought forward in the period

522


660


660

 

Additions to right of use assets for the period

112


20


20

 

Depreciation charge for the period

(93)


(78)


(158)

 

NBV carried forward for the period

541


602


522

 







 


6 months to


6 months to 


6 months to 

 


30 Sep 2021


30 Sep 2020


30 Sep 2021

 


£'000


£'000


£'000

 

Lease liabilities






 

Balance brought forward in the period

566


676


676

 

Lease additions for the period

112


20


20

 

Payment of lease expense

(97)


(99)


(193)

 

Interest on lease expense

11


34


63

 

Balance carried forward for the period

592


631


566







Represented as:






Due within 1 year

175


162


130

Due in more than 1 year

417


469


436

Total amounts due

592


631


566

 

 

 

12.  Inventory


6 months to 

30 Sep 2021


6 months to 

30 Sep 2020


Year ended 

31 Mar 2021

 


£'000


£'000


£'000

 







 

Finished goods

1,452


1,568


1,390

 

Provision for obsolescence

(263)


(342)


(279)

 


1,189


1,226


1,111

 







 







 

Group inventories reflect the following movement in provision for obsolescence:

 







 

At start of the financial year

279


253


253

 

Utilised

(48)


(98)


(98)

 

Provided

32


187


124

 

At end of the financial year

263


342


279

 







 

 

 

 






 








 

13.  Trade and other receivables

Trade receivables are consistent with trading levels across the Group and are also affected by exchange rate fluctuations. 

No interest is charged on the trade receivables.

The Group has reviewed for estimated irrecoverable amounts in accordance with its accounting policy, and at the balance sheet date, there are no amounts outstanding beyond agreed credit terms.

 


6 months to 

30 Sep 2021


6 months to 

30 Sep 2020


Year ended 

31 Mar 2021


£'000


£'000


£'000







Trade receivables

1,538


1,670


988

Less provision for bad debt

-


(16)


-

Other receivables

691


110


 700

Prepayments and accrued income

185


384


131


2,414


2,148


1,819






 

 

The Directors consider that the carrying amount of trade and other receivables approximates their fair value.

 

14.  Cash and cash equivalents

Cash and cash equivalent amounts included in the Consolidated Statement of Cashflows comprise the following:


6 months to 

30 Sep 2021


6 months to 

30 Sep 2020


Year ended 

31 Mar 2021


£'000


£'000


£'000







Cash at bank

7,131


4,511


7,668

Cash on short term deposit

6,512


-


5,000

Total cash and cash equivalents

13,643


4,511


12,668

 

Short term cash deposits of £6,511,647 are callable on a notice of 95 days.

 

15.  Trade and other payables

Trade and other payables are consistent with trading levels across the Group but are also affected by exchange rate fluctuations. Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The Group has financial risk management policies in place to ensure all payables are paid within the agreed credit terms.

 

Deferred income relates to fees received for ongoing services to be recognised over the life of the service rendered.


6 months to 

30 Sep 2021


6 months to 

30 Sep 2020


Year ended 

31 Mar 2021


£'000


£'000


£'000







Trade payables

884


909


944

Taxes

131


112


126

Other payables

172


50


51

Accruals

1,481


312


1,561

Deferred income

1,514


1,199


1,499


4,182


2,582


4,181







Amounts due in more than one year






Deferred income

868


349


 749







Total amounts due

5,050


2,931


4,930







 

The Directors consider that the carrying amount of trade and other payables approximates their fair value.

 

 

16.  Provisions

Current provisions are recognised in respect of potential payments to be made to overseas tax authorities, and potential payments to be made in respect of dilapidations on leased assets. No discount is recorded on recognition of the provisions or unwound due to the short-term nature of the expected outflow and the low value and estimable nature of the non-current element.


6 months to 

30 Sep 2021


6 months to 

30 Sep 2020


Year ended 

31 Mar 2021

 


£'000


£'000


£'000

 

Current provisions






 

Overseas tax

291


298


291

 







 

Non-current provisions






 

Dilapidations

15


15


15

 







 







 

Total provisions

306


313


306

 







 

 

 







17.  Alternative performance measures

The performance of the Group is assessed using a variety of performance measures, including APMs which are presented to provide users with additional financial information that is regularly reviewed by the Board of Directors. These APMs are not defined under IFRS and therefore may not be directly comparable with similarly identified measures used by other companies.


6 months to 

30 Sep 2021


6 months to 

30 Sep 2020


Year ended 

31 Mar 2021


£'000


£'000


£'000







Underlying EBITDA

2,480


2,593


5,496

Underlying EBITDA %

27%


34%


31%

Adjusted profit before tax

2,308


2,319


5,068

Adjusted profit before tax %

25%


30%


28%

Adjusted basic EPS (pence)

2.05


3.02


5.83

Adjusted diluted EPS (pence)

1.99


2.42


5.21

Capitalised R&D spend

1,904


1,484


3,326

 

 

 

· Underlying EBITDA: EBITDA including R&D amortisation, adjusted to exclude discontinued operations and IPO transaction costs and IPO related share based payments

· Adjusted profit before tax: Adjusted to exclude discontinued operations, IPO transaction costs and IPO related share based payments

· Adjusted basic and diluted EPS Adjusted to exclude discontinued operations, IPO related costs and the tax effect of these adjustments

 

 

18.  Post balance sheet event

The Board has resolved to pay a maiden interim dividend of 0.28 pence per ordinary share on 17 December 2021 to those shareholders on the register as at 3 December 2021 (FY21 Interim dividend 0p). The ex-dividend date is 2 December 2021.

 

 

19.  Availability of Interim Report

The Company's Interim Report for the six months ended 30 September 2021 will be available to view on the Company's website (www.calnexsol.com).

 

 

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