REG - Calnex Solutions PLC - FY22 Final Results
24/05/2022 07:16
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RNS Number : 5211M Calnex Solutions PLC 24 May 2022
24 May 2022
Calnex Solutions plc
("Calnex", the "Company" or the "Group")
FY22 Final Results
Calnex Solutions plc (AIM: CLX) provides test and measurement solutions for
the global telecommunications sector and is pleased to announce its audited
results for the 12 months ended 31 March 2022 ("FY22" or the "Year").
Financial Highlights
£000 FY22 FY21 YOY % change
Audited Audited
Revenue 22,046 17,978 23%
Underlying EBITDA(1) 6,351 5,496 16%
Adjusted profit before tax(1) 5,973 5,068 18%
Adjusted basic EPS (pence) (1,2) 5.19 5.83 (11%)
Adjusted diluted EPS (pence) (1,2) 5.00 5.21 (4%)
Closing cash and fixed term deposits (3) 15,357 12,668 21%
Statutory measures (4:)
Profit before tax 5,973 3,647 64%
Basic EPS (pence) 5.19 4.68 11%
Diluted EPS (pence) 5.00 4.18 20%
· Revenue growth of 23% to £22.0m (FY21: £18.0m) as a result of
robust trading performance, reflecting continued high demand for our range of
test and measurement solutions.
· Growth in adjusted profit before tax of 18% to £6.0m (FY21:
£5.1m).
· Closing cash position, including fixed term deposits, of £15.4m
(31 March 2021: £12.7m).
· Proposed final dividend of 0.56 pence per share, making a total of
0.84 pence per share for FY22.
Operational Highlights
· Strong demand for test instrumentation, with new product launches
in FY22 well received by customers.
· Core business supplemented by expansion into O-RAN testing for 5G
standards and data centre engagements which continue to drive the requirement
for performance testing.
· Increased staffing levels across business development, sales,
R&D and support roles, to support growing customer demand, new product
development and maximise exposure in new and existing territories.
· Maintained timely shipments to customers, whilst continuing to
navigate the semiconductor component shortage.
Post Period End Highlights
· Acquisition of iTrinegy Limited ("iTrinegy") successfully complete in
April 2022, a leading developer of Software Defined Test Networks technology
for the software application and digital transformation testing market,
representing Calnex's move into an attractive new market.
· Awarded two 2022 Queen's Awards for Enterprise: Innovation and
International Trade.
Outlook
· The business continues to benefit from the evolutionary trends
affecting the telecoms sector, notably in 5G and cloud computing. Demand for
test equipment therefore remains strong and Calnex begins FY23 with a record
order book.
· The Board remains aware of potential effects of the global
semiconductor component shortage on the business,although the Group has
successfully navigated the challenges to date.
· As a result of the continued high demand for Calnex's products and
services, and the Group's record order book, the Board is confident of
achieving another successful year of growth in FY23.
Tommy Cook, Chief Executive Officer and founder of Calnex, said:
"It is with great pride that we are presenting such a strong set of results
for Calnex, in what has been a complicated year. To deliver record
performance, exceeding market expectations, whilst dealing with the effects of
a global pandemic and global semiconductor component shortages, is truly
exceptional. The strength and quality of the Calnex team and the relationships
we hold has never been more apparent.
The transition to 5G and growth in cloud computing continues to drive demand
for test instrumentation and Calnex is in a strong position to continue
benefitting from these market trends. We have made good progress in executing
on our strategy, paving the way for accelerated future growth. The recent
acquisition of iTrinegy represents a move into a new adjacent market and we
anticipate accelerated sales in the long-term. Furthermore, we have invested
in our team and resources, the continued positive response to the new product
launches provides optimism with regards to the long-term demand for our
offering.
Whilst looking to the future with a degree of caution given the continuing
component shortage situation, we can take confidence from the ability with
which we have managed the situation to date, successfully shipping scheduled
orders as planned. We move into FY23 with a record order book and look to the
future with a strong sense of optimism."
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, Hannah Campbell, Joe Pederzolli
Overview of Calnex
Calnex Solutions designs, produces and markets test and measurement
instrumentation and solutions for the telecoms and cloud computing industries.
Calnex's portfolio enables R&D, pre-deployment and in-service testing for
network technologies and networked applications, enabling its customers
to validate the performance of the critical infrastructure associated
with telecoms and cloud computing networks and the applications that run on
it.
To date, Calnex has secured and delivered orders to over 680 customer
sites in 68 countries across the world. Customers include BT, China Mobile,
NTT, Ericsson, Nokia, Intel, Qualcomm, IBM and Meta.
Founded in 2006, Calnex is headquartered in Linlithgow, Scotland, with
additional locations in Belfast, Northern Ireland, Stevenage, England and
California in the US, supported by sales teams in China and India. Calnex has
a global network of partners, providing a worldwide
distribution capability.
Chairman's Statement
Overview
I am pleased to report on another year of strategic progress and increased
momentum at Calnex. We have experienced a record increase in demand for our
range of test and measurement solutions and continued to evolve as a listed
business. These successes are testament to the strength of our product
offering and the long-standing customer relationships the Group has developed
across our key markets. The strong performance, coupled with the Group's focus
on innovation and investment in people, has delivered another step forward for
Calnex which, alongside a record order book as we enter FY23, points to the
Group's ability to deliver significant, sustainable growth over the coming
years.
Results
The Group delivered record levels of trading in both halves of the year,
successfully fulfilling all scheduled orders to finish the year strongly. This
was aided by the introduction of new regulation and standards for the telecoms
industry, and the growth in cloud computing, which continued to drive demand
for Calnex's products. The management team successfully navigated the
challenges of the semiconductor supply chain, reducing its impact on our
ability to manufacture and ship products.
The Group delivered revenue growth in FY22 of 23% to £22.0m (FY21: £18.0m)
and adjusted profit before tax growth of 18% to £6.0m (FY21: £5.1m) (refer
to note 32 for calculation of alternative performance measures), whilst ending
the year with a closing cash figure, including fixed term deposits, of £15.4m
(FY21: £12.7m).
Acquisition
To realise our ambition to be the leading provider of test and measurement
solutions for the global telecommunications sector, part of our strategy
includes growth through acquisitions. With a proven track record of
identifying and targeting attractive market niches, alongside the successful
IPO in October 2020 which provided the Group with the funds to invest, Calnex
is well positioned to capitalise on opportunities to acquire new products or
technologies which could be enhanced by applying the Company's technical
skills, operational capabilities and distribution channels.
We were therefore delighted to announce in April 2022 the acquisition of
iTrinegy, a developer of Software Defined Test Networks (SDTN) technology for
the software application and digital transformation testing market. This is
our first acquisition since IPO and it is expected that iTrinegy will benefit
from Calnex's track record in building, supporting and growing a reseller
network, particularly into the US, to accelerate sales.
ESG
The attitude of Calnex towards caring for its people and the communities
around it has always been a key feature of the business. As part of our
journey to continually improve our performance, in a traditionally male
dominated industry, we are focused on ensuring a diverse workforce with a good
level of female representation on both our Board and executive management
team. The Group has successfully utilised its license to hire from overseas
this year as part of its recruitment campaign. Bringing people from other
countries from different cultures with different life experiences enhances the
Group through the blending of varied career experiences into its innovative
team.
The environmental impact of our operations are also important considerations.
The Board oversees a policy of active awareness of how best to incorporate
effective environmental goals into the Group's strategic decisions, operations
and supply chain. The Group has set-up an employee-led Social Responsibility
team who have a dedicated fund assigned to allow them to provide meaningful
support to social and environmental charities and events that are important to
its employees. The Board's commitment to assign 1% of profits to this
initiative underlines the importance we see in supporting our staff in making
meaningful impacts from our business success to projects that our staff care
about. As a Board, we are also committed to high standards of corporate
governance and oversight. The approach we take is set out in detail in the
Principal Risks and Uncertainties, s172 and Corporate Governance sections of
this report.
While we have no operations or customers in Russia, the Ukraine or Belarus, we
are shocked by the human tragedy that is unfolding and cognisant of the risks
it poses to all businesses in the way of increased inflationary pressures. We
are confident that we have robust financial management measures in place to
protect our operating margins as we progress through FY23.
People
The progress we have made since the IPO is a tribute to Calnex's employees'
expertise and knowledge and this has never been more true than during this
year. Their energy and commitment to providing leading test and measurement
solutions throughout the world, during the pandemic, and the challenging wider
macroeconomic environment, has not wavered and I would like to thank all our
staff across the globe for their hard work. As we continue to trade well,
despite the challenging environment, a key focus for the business remains on
ensuring the wellbeing of our employees and providing them with the support
required to succeed in their roles at Calnex.
Looking ahead
Calnex has continued to progress against its strategy in FY22. We see the
increased demand for our range of test and measurement solutions across all
key geographies as a clear demonstration that the business has built the right
platform to succeed, even in a challenging macroeconomic environment.
We are proud to have many of the world's leading players in the continually
evolving telecoms market as customers. With a proven track record in
innovation, an emerging exciting opportunity within cloud computing, continued
underlying growth drivers in the telecoms market, an enlarged product offering
and a strong order book as we head into FY23, I am confident in Calnex's
ability to continue to deliver on its growth strategy and create value for all
shareholders.
George Elliott
Non-Executive Chairman
23 May 2022
CEO's Statement and Operational Review
I am pleased to report on another strong set of results for the year ended 31
March 2022. It has been a positive period for the Group in which we have made
strong strategic progress as well as experiencing continued high demand for
our range of test and measurement solutions, delivering results considerably
ahead of our initial expectations for the year.
As I look across the business, it is reassuring to see growth across all our
product lines - with no one area driving our performance, but rather a
consistent uplift in all areas, which combined, have contributed to the
continued successful evolution of Calnex as a public company.
We are pleased to be reporting such a strong performance despite also having
to deal with the global components' shortage. Working alongside our contract
manufacturer, Kelvinside Electronics, our team have successfully mitigated the
shortages to date and shipped all scheduled orders as planned. We continue to
monitor the situation closely, implementing new purchasing processes to ensure
we can continue to manage these challenges, and I would like to thank both the
Calnex and Kelvinside teams for their skill in successfully navigating this
dynamic situation thus far. The global component shortage looks likely to
continue for much of FY23 and we will continue to work closely with Kelvinside
to navigate our way through the challenges until the situation eases.
The Group's performance during the year has been enhanced by the introduction
of industry regulation such as the new O-RAN standards that continue to drive
the requirement for performance testing, whilst the transition to 5G and
growth in cloud computing continue to drive demand from both new and existing
customers, across each of our customer categories. We are fortunate to operate
in a sector not severely impacted by the consequences of dealing with the
COVID-19 pandemic, which, if anything, has highlighted the need for robust,
fast broadband and resilient telecoms networks and infrastructure.
Calnex's record order book as we head into FY23 provides confidence in our
ability to deliver significant, sustainable growth over the coming years.
Whilst bringing only modest increases to revenue and profit in FY23, the
acquisition of iTrinegy is anticipated to be an important contributor to
Calnex profit in future years, further underpinning the sense of Group wide
optimism moving forwards.
Customer metrics
We were pleased to have seen consistency in our customer metrics in the year.
The number of customers who ordered from us this year increased by 34 to 233
(FY21: 199 customers), our top 10 customers accounted for 53% of orders (FY21:
46%), 79% of our orders in the year were from repeat customers (FY21 80%) and
alongside growth in our telecoms orders we maintained the proportion of orders
coming from non-telecoms customers at 23% (FY21: 23%). Our geographic spread
of orders across the regions show Americas and ROW each receiving 35% of
orders and North Asia receiving 30%, over a 3 year average basis.
Transition to 5G and growth in Cloud Computing
The transition to 5G and the 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. 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 plus hyperscale/enterprise
customers to validate equipment and network performance.
In the build out of the mobile network, referred to as "5G", the interest in
vendors producing equipment conforming to the O-RAN recommendations has grown
significantly over the period, opening opportunities for Calnex to engage with
new customers. The growth in data centres continues with a recent report
suggesting there are already over 8,000 data centres across the world, with
the US hosting the largest share. Along with UK, Germany and China, these four
countries host around 50% of all Data Centres7. Such evolutionary trends have
the potential to bring significant change to the telecoms sector and underpin
the Group's confidence in making further progress during the current financial
year and beyond.
Product innovation to support the transition to 5G and growth in cloud
computing
Continued product innovation has allowed the Group to execute on its growth
strategy to capitalise on the transition to 5G and expand into adjacent
markets, such as cloud computing and the data centre market.
Lab Synchronisation (Paragon-Neo)
The introduction of support for very high-speed interfaces (up to 400Gb/s) as
well as the various interface formats used in very high-speed interfaces (e.g.
PAM4) has had the expected positive impact on customer engagement and sales.
The other dynamic that resulted in growth in this product family was the
demand from companies looking to build equipment that conforms to the
recommendations produced by the O-RAN Alliance. This demand came from both
established customers looking to verify existing equipment or develop new
equipment that will be sold as compliant to the O-RAN recommendations, and new
customers seeking to establish a presence in the market.
Network Synchronisation (Sentinel & Sentry)
The release in June 2021 of the new 5G OTA (Over-the-air) capability in
Sentinel, Calnex's Field Sync solution, has resulted in significant interest
from potential customers. This second-generation OTA implementation not only
addresses 3G, 4G and the emerging 5G signal formats, but also offers an
enhancement feature set in all formats to expand the insight it provides to
operation.
In addition, the implementation of time distribution across data centres is
creating a secondary market for testing of time distribution accuracy inside
data centres. Sales to hyperscale customers who are investing in their data
centre operations are progressing well, and Calnex has already received a
considerable order for delivery in FY23, which we will look to replicate
across other hyperscale customers in the future. To align the product
portfolio with this emerging opportunity, a new version of our Network
Synchronisation Product, Sentry, will be released early in FY23. The product
will heavily leverage the technology in Sentinel but with a form, fit and
function optimised for the data centre environment. This new format will
enhance the ability to engage with potential data centre customers by
strengthening its usability in the data centre environment.
Growth in the primary market and increasing penetration of the emerging market
has enabled Calnex to perform ahead of the Board's initial expectations for
FY22, with a positive outlook moving forward.
Cloud & IT, Infrastructure Verification (SNE & Attero)
Calnex's Network Emulation products, which target customers developing
Infrastructure products (e.g. Ethernet switches, routers, SD-WAN equipment),
continued to make good progress this year. O-RAN, mentioned earlier in
connection with the Lab Sync products, has also impacted positively on this
product line. The O-RAN Alliance provides a number of recommendations for
equipment deployed in the RAN network. Synchronisation is only one element of
the functionality specified. Calnex's SNE and Attero products are being
utilised to verify performance to other aspects of these recommendations.
This year, the Group expanded its portfolio by releasing a new Virtual SNE
(network emulation) product, targeting engineering teams developing
infrastructure products for deployment in networks hosted in cloud computing
environments. While demand is at early stage, the value is in the strategic
positioning of the portfolio to track this trend as and when it grows
momentum.
Cloud & IT, Applications Verification (iTrinegy acquisition)
In April 2022, we completed the acquisition of iTrinegy Limited, a leading
developer of Software Defined Test Networks technology for the software
application and digital transformation testing market. NE-ONE hardware and
software-based Network Emulation platforms provide organisations, primarily
across the technology, financial, gaming and military / government sectors,
with the ability to accurately recreate complex, real-world network test
environments in which to analyse and verify the performance of applications,
before deployment.
(7) Data Centres Around the World: A Quick Look", United States International
Trade Commission, May 2021
The acquisition of the NE-ONE Network Emulation platform enhances Calnex's
positioning as both the leading Synchronisation Verification test vendor, and
the only company with a broad range of Network Emulation tools that provide an
unparalleled range of Network Emulation solutions for a wide range of
customers and customer needs. The acquisition of iTrinegy is consistent with
our strategy to address a new customer base and move to open a new market.
iTrinegy is being acquired on a debt free, cash free basis and we plan to
invest for growth in the business. The focus to date has been to integrate
iTrinegy's team into Calnex and provide support to the new team members,
whilst ensuring that iTrinegy is aligned with Calnex's growth aspirations.
Financial performance
Calnex experienced another year of strong trading. The 23% growth in revenue
to £22.0m (FY21: £18.0m) is a result of the continued strong demand for
telecoms testing equipment across the Group's core markets. Revenues from the
Americas region increased 23%, whilst the Rest of the World experienced a 31%
uplift. North Asia revenues grew by 14% after a flat first half due in part to
the ongoing geopolitical tensions between the US and China. Given the overall
growth in revenues, Americas account for 32% of total revenues (FY21: 32%),
ROW 37% (FY21: 35%) and North Asia 31% (FY21: 33%).
The Group's adjusted profit before tax grew by 18% to £6.0m (FY21: £5.1m),
ahead of the Board's initial expectations, reflecting the uplift in revenues
and the Group's on-going investment in the business. This year saw the Group
invest in additional business development resources, placing more sales
personnel 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 ended the year with a healthy closing cash position, including fixed
term deposits, of £15.4m (31 March 2021: £12.7m).
Operations
We have an ethos of continuous improvement, actively seeking to enhance our
performance, improve efficiencies and deliver at scale. In recent years, we
went through a significant evolution of our ISO 9001 certified Quality
Management System to utilise a more systematic auditing approach to promote
continuous improvement. Last year, these changes were 'institutionalised' into
the organisation to make them a regular part of the way we manage, assess and
enhance the way we operate across the business. As the organisation grows, we
plan to regularly assess our structure to review the roles and responsibility
of each staff member to identify where growth has resulted in the need for new
full-time roles that previously were part of someone's responsibility. The
management team hold quarterly meetings to discuss organisational
effectiveness to identify where growth is leading to change, and ensure these
changes are implemented in order to maintain performance.
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 123 at the year end, which has
subsequently increased to 136 at the date of this report, following the
acquisition of iTrinegy. The recruitment market remains challenging with many
companies seeking to hire; however, at present Calnex is able to attract
talented people. The Group is also utilising its overseas sponsor license to
hire from outside of the UK to strengthen and diversify its teams.
In August 2021, we recruited a new Vice President of Operations who is tasked
with advancing Calnex's internal order fulfilment capabilities. These
activities will enhance processes and procedures to ensure the Group's
manufacturing capacity continues to evolve in a sustainable way. The ongoing
challenges created by component shortages have reinforced the value of the new
approaches being put in place to increase our resilience to handle growth,
month-to-month variation in specific product demand and handle the challenges
of sourcing components in a dynamic environment. Such investment is aligned
with our growth strategy, and we expect this to continue in the coming period
as we scale the business.
We have also recently engaged an experienced executive with significant sector
experience to join our management team to assist with our strategic
development, and we expect this appointment will enable us to accelerate our
investigations into possible additional acquisition and strategic partnership
opportunities.
Our staff have returned to the office under a 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 year, the sales team are slowly starting to hold
face-to-face customer interaction again. We expect the volume of travel to
ramp up through the year as each region/country opens up post COVID
restrictions.
Suppliers & partners
Calnex has two key partnerships, namely with our contract manufacturer,
Kelvinside Electronics, and with Spirent Communications plc, providing a sales
channel for a significant proportion of our sales. In both cases, the
relationships are long established (with Kelvinside since 2007 and Spirent
since 2013) and mutually beneficial. We continue to work collaboratively
with our partners to identify areas for improvement, understanding there are
always opportunities to execute better to the mutual benefit of both parties.
For example, the most recent focus in Kelvinside/Calnex management discussions
has been to enhance the way we forecast build quantities and enhance inventory
management approaches to increase robustness against potential changes in
component lead times.
Community & environment
For a number of years, Calnex has had an active Social Responsibility program,
assigning a quarterly budget to charitable donations, organising fund raising
events and time off work for employees to participate in community projects.
The Board have agreed to increase the funding in FY23 onwards, to strengthen
and solidify our commitment to social, charitable and environment projects
that are important to our employees. "Make a meaningful contribution" is at
the core of the ethos. The Board has committed to assigning to the fund the
equivalent of 1% of the profits we generate, which will be at the disposal of
an employee-led group. "Meaningful" can mean matched funding to funds raised
by employees and/or employees' families to make more significant donations to
charity or environmental projects to which our employees have a connection. 1%
of Calnex profits will not change the world, but it is a substantial amount
that can be used to make a meaningful impact on community groups and charities
that have relevance in our employees' lives, enabling our employees to
contribute to their communities through their work at Calnex.
Outlook
The transition to 5G and growth in cloud computing continues to drive demand
for test instrumentation and Calnex is in a strong position to continue
benefitting from these market trends. We have made good progress in executing
on our strategy, paving the way for accelerated future growth. The recent
acquisition of iTrinegy represents a move into a new adjacent market and we
anticipate accelerated sales in the long-term. Furthermore, we have invested
in our team and resources, the continued positive response to the new product
launches provides optimism with regards to the long-term demand for our
offering.
Whilst looking to the future with a degree of caution given the continuing
component shortage situation, we can take confidence from the ability with
which we have managed the situation to date, successfully shipping scheduled
orders as planned. We move into FY23 with a record order book and look to the
future with a strong sense of optimism.
Tommy Cook
Chief Executive Officer
23 May 2022
ESG
Being responsible at Calnex
Calnex is a "people first" company built on trust and respect. Not only for
each other but also for the environment and for the local communities of our
employees across the globe, where we do whatever we can to make a meaningful
impact.
Calnex is an innovative and forward-thinking business where our employees are
encouraged to share their views, contribute to decision making, challenge
behaviours and improve our processes to make a positive contribution to
business success. This is reflected in the approach we take to delivering
leading-edge test and measurement solutions for 5G networking and wireless
technologies.
Our focus is increasingly on delivering platform products that enable software
upgrades in line with customers' aspirations. We can't control how our
customers use our products but we can influence how they benefit from
additional functionality without the need for additional hardware. Thanks to
the skills of our team, our in-depth knowledge, and market insight, our
customers enjoy hardware longevity typically between 15 and 20 years.
Our software-first approach significantly reduces the impact our products have
on the environment by building in best-in-class longevity and providing
long-term expert support through cutting-edge upgrades that anticipate
customer requirements.
Although already a low environmental impact business, the senior management
team, and our staff, are keen to do more to tackle the environmental
challenges facing the planet so we've launched an initiative to become an
ISO14001 certified business by 2023 and established an employee-led
environmental, social & charity team.
Starting this year, the Board has committed to build a Social Responsibility
fund into our Financial Plan equal to 1% of the profits we generate. An
employee-led team (with senior management sponsorship) will consider proposals
from employees for donations or support for groups and/or events that matter
to them. The Calnex Executive team want to support groups local to our
employees and offices and empower our employees to make a difference in their
community by directing their employer to support activities/groups that they
truly care about.
We also encourage employees to donate their time to make meaningful
contributions. Group activities such as planting trees, re-planting local
flower beds, helping out at food banks, etc., are beneficial in so many ways.
Beyond the obvious benefit of the primary task and the psychological benefit
from making a positive contribution, we recognise how significantly such
activities boost team spirit and engender pride in being associated with a
company that helps our employees make a meaningful, local difference.
We also work closely with the UK Electronics Skill Foundation (UKESF),
supporting the future talent of Engineering in providing student placements
and supporting STEM education and development.
Our continued success at Calnex, together with the diversity of our employees,
enables us to make meaningful contributions all over the world. Guided and
driven by what is important to our teams, we are committed to use the
resources we have at our disposal to support events, charities and groups to
demonstrate our commitment to Environmental, Social and Governance
responsibilities.
Products
Our products are innovative, leading-edge test and measurement solutions for
designers and operators of the equipment and infrastructure that enables 5G
networking and wireless technologies. 5G technologies provide enhanced
mobile broadband, mission critical communications and the Internet of Things,
all of which have a significant global impact across many aspects of society
and industry.
Our approach to product development is as follows:
· we develop hardware platforms that can be enhanced with
downloadable software upgrades in line with customers' ever-changing needs.
For example, both our Paragon-X and Sentinel platforms, introduced in 2010,
and 2013 respectively, are still supported by the Company.
· our products are built into test racks where they remain for as long
as the customers' products are supported. Customers expect their products,
once deployed in networks, to be utilised for 15-20 years.
· this longevity feeds back through the supply chain as our customers
now expect that same longevity from test equipment vendors
· our products are manufactured by a highly skilled contract
manufacturer, Kelvinside Electronics, whose close proximity allows for
excellent two-way support and communication regarding the complex technical
challenges of building and testing our products.
· our bespoke product packaging is manufactured by a local supplier with a
comprehensive environmental policy including a focus to reduce, reuse and
recycle all packaging materials wherever possible.
Environment
Both Calnex's operational processes and our products have a low environmental
impact.
The majority of our staff are office-based and have the ability to work part
of the week from home where their duties allow them to, performing their
operations using computer and internet-based services. Our contract
manufacturer, Kelvinside Electronics, is ISO14001 certified. Our products
sales and customer support services are managed by locally-based partners
together with Calnex support staff which greatly minimises global travel.
Our company HQ and the majority of our operations are based in serviced
premises leased from Oracle in Linlithgow. Calnex use the waste recycling
services provided by Oracle. Oracle have also invested in efficient lighting
and air conditioning systems to help minimise energy consumption on site.
The small amount of electrical component and circuit board waste we generate
is disposed of in accordance with the WEEE regulations.
Our products are designed as platforms enabling our customers to take
advantage of future software upgrades and hardware longevity.
Despite being a low environmental impact business, we've launched an
initiative to become an ISO14001 certified business by 2023. The ISO14001
standard defines a framework to formally manage the environmental impact of
our business operations and products. Our recent positive experience and
benefits of adopting the ISO9001 standard for our Quality Management System
has spurred us on to secure the Environmental standard, ISO14001.
People
Our Culture
Calnex is a people first company built on trust and respect. We are
transparent, sharing in the successes, the challenges and the Group's
ambitions moving forward. We help and encourage each other, supporting the
business and our colleagues in building on an already successful company.
Calnex also enjoys and thrives on a diverse workforce where inclusion is key
to building high performing, engaged and successful teams.
Respectful of each other, we consider how our actions, ideas and approaches
impact others.
We work as one team.
Our strong values, as reflected in our Investors in People Gold Award, are
promoted through a variety of employee engagement programmes:
· Robust Recruitment Process that only ever hires top talent and
employees who value and support a positive working culture.
· Supportive Induction Training Programme including a comprehensive
internally delivered training programme that supports the integration of new
employees.
· Mentoring Programme to support the development of staff and
career progression.
· Employee-built Annual Review Programme that recognises personal
achievements and supports development and career progression.
· Training and Development Opportunities to further develop
skillsets and/or secure educational qualifications.
· Group-wide Compliance Training to remain legally compliant
worldwide.
· A benchmarked Benefits Package that strongly supports the financial,
physical and mental wellbeing of our people including, amongst other things,
profit share for staff, an employee share incentive plan, a flexible/hybrid
working model, an employee wellbeing activity programme (including fitness
classes, an onsite gym, and free use of facilities the local sports and
recreation centre, a healthcare scheme available to all staff and income
protection and life assurance polices.
· Quality Management System that encourages inclusivity and drives
process improvement.
· Regular Culture sessions chaired by Calnex's CEO to gather
feedback on the Company's culture, practices and processes, encouraging
employees to provide their input into organisational development.
· Annual Employee Surveys to enable two-way dialogue on topics such as
company strategy, career progression opportunities and other current topics
affecting the working lives and wellbeing of our employees.
Tommy Cook
Chief Executive Officer
23 May 2022
Financial Review
Chief Financial Officer's Statement
The Group delivered a strong financial performance in the year to 31 March
2022, with growth in revenue, underlying EBITDA and adjusted profit before
tax, resulting in a positive trading cashflow for the year.
Financial KPIs
£000 FY22 FY21
Revenue 22,046 17,978
Gross Profit 16,528 13,965
Gross Margin 75% 78%
Underlying EBITDA (1) 6,351 5,496
Underlying EBITDA % 29% 31%
Adjusted Profit before tax (1,2) 5,973 5,068
Adjusted Profit before tax % 27% 28%
Closing cash and fixed term deposits (3) 15,357 12,668
Capitalised R&D 3,905 3,326
Adjusted basic EPS (pence) (1) 5.19 5.83
Adjusted diluted EPS (pence) (1) 5.00 5.21
Statutory measures: (4)
Profit before tax 5,973 3,647
Profit before tax % 27% 20%
Basic EPS (pence) 5.19 4.68
Diluted EPS (pence) 5.00 4.18
(1) Refer to note 32 for explanation of the alternative performance measures
calculations.
(2) Adjusted in comparative periods to exclude IPO costs and IPO related share
based payments and the tax effect of these adjustments. As a result of the
Company's admission to AIM occurring halfway through FY21, the basic and
diluted weighted average number of shares in issue in the prior year were
73,762,000 and 82,575,000 respectively, compared with 87,500,000 total share
capital and 90,150,000 diluted share capital post IPO.
(3) The Group takes advantage of high interest deposit accounts for surplus
cash balances not required for working capital. Under IAS 7 Statement of Cash
Flows, cash held on long-term deposits (being deposits with maturity of
greater than 95 days, and no more than twelve months) that cannot readily be
converted into cash is classified as a fixed term investment.
(4) A full reconciliation between Underlying EBITDA and adjusted profit before
tax and the statutory measures is shown below.
Reconciliation of statutory figures to alternative performance measures -
Income Statement
FY22 FY21
£000 £000
Revenue 22,046 17,978
Cost of sales (5,518) (4,013)
Gross Profit 16,528 13,965
Other income 648 530
Administrative expenses (excluding depreciation & amortisation) (7,917) (7,941)
EBITDA 9,259 6,554
Amortisation of development costs (2,908) (2,479)
Add back exceptional items:
IPO costs - 1,057
Issue of Free Shares on IPO under Share Incentive Scheme - 166
Share based payments - 198
Underlying EBITDA 6,351 5,496
Other depreciation & amortisation (358) (273)
Operating Profit 5,993 5,223
Finance costs (20) (155)
Adjusted profit before tax 5,973 5,068
Exceptional items - (1,421)
Profit before tax 5,973 3,647
Tax (1,433) (194)
Profit for the year 4,540 3,453
Revenue
Revenue recognised in the year grew 23% to £22.0m (FY21: £18.0m). Order
intake and revenue grew across all three product lines and regions compared to
the prior year. Revenues from the Americas and Rest of World regions
increased 23% and 31% respectively. North Asia revenues grew by 14%, after a
flat first half which was due in part to the ongoing geopolitical tensions
between the US and China. Americas accounted for 32% of total revenues (FY21:
32%), ROW 37% (FY21: 35%) and North Asia 31% (FY21: 33%) in the year.
The business also closed the FY22 year with a record order book, providing a
strong foundation going into FY23.
Revenue model
Calnex generates revenues through the sale of bundled hardware and software,
alongside the provision of software support and extended warranty programmes.
The Group's core sales model is bundled hardware and software. Sales pricing
is dependent on the product type and the complexity of the software
configuration built into the product package. Calnex also sells stand-alone
software upgrades under licence.
Each of Calnex's units comes with a standard warranty period including
maintenance and software upgrade cover in the event of any software upgrades
being released for the options purchased. Calnex also sells software support
programmes which provide customers with access to future software upgrades
which are not included as part of the standard warranty. The Group also offers
extended warranty programmes to cover repairs falling outwith the standard
warranty period.
Bundled hardware and software revenues are recognised when delivered to the
customer, with stand-alone software revenues recognised in line with the
licence period. Revenues from software support and extended warranty
programmes are typically recognised on a straight-line basis over the term of
the contract.
Many of the products and services developed and deployed by Calnex's customers
are interlinked and need to be tested independently, such as the individual
components which are then built into the equipment used in telecoms networks.
Calnex's test products can be used by a combination of equipment vendors,
component manufacturers and network operators, to carry out testing during a
new product development cycle. A customer can choose to use Calnex's products
in the knowledge that a more consistent result may be obtained if a Calnex
test solution had already been used on a particular product.
Sources of Revenue
FY22 FY21
£000 £000
Warranty support revenue - recognised over life of cover 2,006 1,469
Hardware and software revenue - recognised on despatch/delivery 20,040 16,509
Total revenue 22,046 17,978
Revenue streams
In FY22, 91% (FY21: 92%) of the Group's revenues were generated from the sale
of bundled hardware and software products, with 9% (FY21: 8%) from software
support and extended warranty programmes.
Geographical split of orders (3 year average)
FY22
% of orders
Americas 35%
North Asia 35%
Rest of World 30%
The Group's customers are located across the world. Our global customer base
and distributor network gives the Group the ability to spread risk across our
three key regions: the Americas, North Asia and Rest of the World. On a 3 year
average basis, the split of orders across the three key regions was 35% for
Americas (FY21: 34%), ROW 35% (FY21: 33%) and 30% (FY21: 33%) for North Asia.
North Asia experienced a decrease in the Period reflecting the ongoing
US-China geopolitical tensions, which are also exacerbating the component
shortage issues in the region.
Top 10 customer orders (average over 3 years)
FY21
% of orders
Top 10 customer revenues 50%
Other revenues 50%
In FY22, Calnex received orders from 233 customers, an increase of 34 on 199
customers in FY21.
The Group's top ten customers in FY22 accounted for 53% of total orders (FY21:
46%) and 50% of total orders on average over the last three years (FY21:
49%).
In FY22, no underlying customer accounted for more than 13% of Calnex's total
orders.
Repeat orders (average over 3 years)
FY21
% of revenue
Repeat orders 79%
Other orders 21%
The average length of customer relationship across the top ten customers in
FY22 is 10 years, demonstrating our high levels of repeat demand from these
customers. In addition, the Group typically experiences a high level of
repeat business from its total customer base. In FY22, 79% of orders were
generated from existing customers (FY21: 80%).
During the last five years, 199 (FY21: 177) customers have placed repeat
orders with Calnex.
Telecoms v non-telecoms customers
FY22 FY23
% of % of orders
orders
Telecoms 77% 77%
Non Telecoms 23% 23%
Calnex's sales are predominantly derived from telecoms customers where the
end-application is a telecoms (fixed and mobile) network. Non-telecoms
customers include hyperscale/data centres and enterprise customers. These
non-telecoms customers represented 23% of the Group's revenues in FY22 (FY21:
23%).
As telecoms networks evolve, we are finding a number of companies whose
primary business is hyperscale/datacentres and IT are also moving into the
telecoms space. We classify sales to these non-telecoms companies for use in
telecoms applications as telecoms sales for the purposes of this analysis.
Gross Profit
Gross profit increased by 18% to £16.5m (FY21: £13.9m) reflecting the strong
trading performance, and gross margin is in line with market expectations at
75% (FY21: 78%). Gross margin is calculated after discounts to channel
partners are applied. Gross margins can fluctuate year on year depending
on the mix of products and the mix of the hardware and software bundles at any
given time, so can differ slightly when comparing periods. The product mix
has been the main driver behind the gross margin variance to the prior
year.
Underlying EBITDA
Underlying EBITDA, which includes R&D amortisation and is adjusted in the
prior year to exclude IPO costs and specific share based payments relating to
the IPO, increased by 16% to £6.4m in the year (FY21: £5.5m), comfortably
ahead of market expectations as a result of the strong trading performance.
Administrative expenses (excluding depreciation & amortisation), excluding
IPO costs and IPO related share based payments were £7.9m in FY22 (FY21:
£6.5m). The increase in administrative costs relates to higher staff costs
as we continue to grow the teams across the business, staff profit share and
higher sales team commissions as a result of the increased trading
performance, offset by savings in foreign exchange costs. Travel and events
costs increased only slightly in the year as teams continued to work from home
for the majority of the year. We expect these costs to increase in the
following year as COVID-19 restrictions are lifted.
Amortisation of R&D costs increased by £0.4m to £2.9m (FY21: £2.5m) as
a result of increases in R&D investment in recent years supporting growth
in revenues.
Underlying EBITDA margin was 29% in FY22 compared to 31% in FY21 driven by the
change in gross margin, offset slightly by a reduction in administrative costs
as a percentage of revenue compared with the prior year.
Exceptional costs
Exceptional costs relate to costs associated with the Company's admission to
AIM in October 2020. These costs are solely related to FY21.
Adjusted profit before tax
Profit before tax (adjusted in the prior year to exclude IPO costs and IPO
related share based payments) was £6.0m (FY21: £5.1m) driven by the growth
in revenue performance in the year. Adjusted profit before tax margin was
27% in FY22 compared to 28% in FY21 driven by the change in gross margin,
offset by savings in finance costs as a result of the repayment of the term
loan in October 2020 and by a reduction in administrative costs as a
percentage of revenue compared with the prior year.
Tax
The tax charge in the year was £1.4m (FY21: £0.2m), representing an
effective tax rate of 24.0% (FY21: 5.3%).
The weighted average applicable tax rate for FY22 was 19% (FY21: 19%). The
difference between the applicable rate of tax and the effective rate is
largely due to the following:
· Recognition of the change in tax rate to 25% on certain deferred
tax assets and liabilities as they are expected to reverse after 1 April 2023
(increasing the effective rate by 5.9%);
· Availability of R&D SME enhanced deduction (decreasing
effective rate by 0.3%);
· Impact of the super deduction in relation to fixed asset
additions (decreasing the effective rate by 0.3%); and
· Other differences, such as prior year adjustments, disallowable
expenses and overseas tax (decreasing effective rate by 0.3%).
The difference between the applicable rate of tax and the effective rate in
FY21 was due to the following:
· Tax relief on exercise of share options by Calnex UK based
employees on IPO on which no deferred tax asset had previously been recognised
(decreasing the effective rate by 15.6%);
· R&D SME enhanced deduction (decreasing the effective rate by
3.4%); and
· Permanent differences such as IPO costs which are disallowed for
tax purposes (increasing the effective rate by 5.3%).
Earnings per share
Basic earnings per share was 5.19 pence in the year (FY21: 4.68 pence) and
diluted earnings per share was 5.00 pence (FY21: 4.18 pence).
Adjusted in the prior period to exclude IPO costs and IPO related share based
payments and the tax effect of these adjustments, adjusted basic earnings per
share was 5.19 pence in the year (FY21: 5.83 pence) and adjusted diluted
earnings per share was 5.00 pence (FY21: 5.21 pence).
Adjusted EPS excludes IPO costs (including IPO related share based payments)
and the tax effect of these adjustments:
Year ended 31 March 2022 Year ended 31 March 2021
£000
Profit after tax 4,540 3,453
Adjusted for:
Discontinued operations - -
IPO exceptional costs - 1,421
Tax relief on share option exercise - (570)
Total adjusted profit after tax 4,540 4,304
Weighted average number of ordinary shares:
Basic earnings per share 87,500 73,762
Diluted earnings per share 90,845 82,575
Earnings per share
Basic earnings per share 5.19 4.68
Diluted earnings per share 5.00 4.18
Adjusted basic earnings per share 5.19 5.83
Adjusted diluted earnings per share 5.00 5.21
The variance in the adjusted EPS figures compared to the prior year is largely
driven by:
- The basic and diluted weighted average number of shares in issue
in the prior year were 73,762,000 and 82,575,000 respectively, compared with
87,500,000 total share capital and 90,845,000 diluted share capital post
IPO.
- Additionally, the FY21 tax charge adjusted for the items above
is £0.7m and the adjusted effective tax rate is 15% (£0.7m tax charge as
percentage of the adjusted profit before tax of £5.1m), compared to the
effective tax rate of 24% in FY22.
Cashflows
The Group generated £2.7m cash in FY22 including fixed term deposits,
compared with £9.0m in FY21 which included IPO net proceeds and government
grant cash received in advance. Cash generated in FY21 excluding these factors
was £5.4m.
Reconciliation of statutory figures to alternative performance measures -
Cashflow
FY22 FY21
£000 £000
Net cash from operating activities 7,350 9,049
Investing activities - intangible and property, plant and equipment (4,213) (3,342)
Dividends paid (245) -
Other financing activities (excluding IPO related cashflows) (203) (276)
Increase in cash before IPO, debt and advanced government grant cashflows, and 2,689 5,430
transfers to fixed term investments
Repayments of borrowings - (2,276)
IPO related cashflows - 5,271
Government grant cash received in advance - 578
Fixed term investment: fixed term deposit (1,500) -
Increase in cash per consolidated cashflow statement 1,189 9,003
Net cash from operating activities was £7.4m in the year compared to £9.0m
in FY21. The £2.2m increase in profit before tax in FY22 compared to FY21
was offset by a £4.0m swing in working capital movements, driven
predominantly by increases in trade receivables as a result of the strong
trading performance in the year. Trade receivables were £4.1m at 31 March
2022 (31 March 2021: £1.0m). £3.9m of this cash was received in the 30
days post year end.
Cash used in investing activities is principally spent on R&D activities
which is capitalised and amortised over five years. Investment in R&D in
the year was £3.9m (FY21: £3.3m), reflecting the growth in the team as
R&D project resource demands increased as planned.
The Group takes advantage of high interest deposit accounts for surplus cash
balances not required for working capital. Under IFRS, cash held on long-term
deposits (being deposits with maturity of greater than 95 days, and no more
than twelve months) that cannot readily be converted into cash is classified
as a fixed term investment. This is shown separately on the balance sheet
and also classed as a cash outflow within investing activities in the
consolidated cashflow statement. It is added back in the non-statutory cash
flow reconciliation above as we regard this as cash generated and owned by the
Group in the year.
Cash spend on financing activities in the year was £0.4m (FY21: £3.3m
inflow; £0.3m outflow before IPO related cashflows and government grant cash
received in advance), representing payment of lease obligations and dividend
payments. The Board approved 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), totalling £0.3m. A final
dividend of 0.56 pence per share (£0.5m) is proposed by the Board to be paid
if approved by shareholders at Company's AGM in August 2022.
There is currently no debt on the balance sheet, leading to no borrowings
related cashflows in the current period.
The total proceeds raised from the IPO in the prior year was £22.5m, which
comprised 34,375,000 shares sold on behalf of existing shareholders to raise
£16.5m and 12,500,000 new shares issued to raise £6.0m (before expenses) for
the Group. £0.3m cash was also raised as a result of the exercise of share
options. Total IPO fees were £1.1m in the prior year. The Group also
received £0.6m in grant funding from Scottish Enterprise in FY21. £0.5m of
this cash was received in advance for the FY22 year.
Closing cash at 31 March 2022, including fixed term deposits, was £15.4m (31
March 2020: £12.7m).
Ashleigh Greenan
Chief Financial Officer
23 May 2022
Consolidated statement of comprehensive income
__________________________________________________________________________________________________________________
Year ended Year ended
31 March 31 March
2022 2021
Note £'000 £'000
Revenue 5 22,046 17,978
Cost of sales (5,518) (4,013)
Gross profit 16,528 13,965
Other income 6 648 530
Administrative expenses (11,183) (10,693)
Operating profit 5,993 3,802
Finance costs 10 (20) (155)
Profit before taxation 5,973 3,647
Taxation 11 (1,433) (194)
Profit and total comprehensive
income for the year 4,540 3,453
Basic earnings per share 27 5.19 4.68
Diluted earnings per share 27 5.00 4.18
Consolidated and Company statement of financial position
__________________________________________________________________________________________________________________
Group Company
31 March 31 March 31 March 31 March
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Non-current assets Note
Intangible assets 12 8,424 7,525 8,424 7,525
Plant and equipment 13 274 22 274 22
Right-of-use assets 19 791 522 791 522
Deferred tax asset 20 304 613 304 613
9,793 8,682 9,793 8,682
Current assets
Inventories 14 998 1,111 998 1,111
Trade and other receivables 15 4,997 1,819 5,197 2,200
Cash and cash equivalents 16 13,857 12,668 13,592 12,277
Short term investment 16 1,500 - 1,500 -
21,352 15,598 21,287 15,588
Total assets 31,145 24,280 31,080 24,270
Current liabilities
Trade and other payables 18 5,569 4,181 5,549 4,157
Lease liabilities 19 193 130 193 130
Provisions 21 141 291 141 291
5,903 4,602 5,883 4,578
Non-current liabilities
Trade and other payables 18 718 749 718 749
Lease liabilities 19 664 436 664 436
Deferred tax liabilities 20 2,017 1,321 2,017 1,321
Provisions 21 15 15 15 15
3,414 2,521 3,414 2,521
Total liabilities 9,317 7,123 9,297 7,099
Net assets 21,828 17,157 21,783 17,171
Equity
Share capital 109 109 109 109
Share premium 7,484 7,484 7,484 7,484
Share option reserve 502 126 502 126
Retained earnings 13,733 9,438 13,688 9,452
Total equity 21,828 17,157 21,783 17,171
Consolidated statement of changes in equity
__________________________________________________________________________________________________________________
Share
Share Share option Retained Total
capital premium reserve earnings equity
£'000 £'000 £'000 £'000 £'000
Balance at 31 March 2020 25 1,138 69 5,769 7,001
Issue of shares 16 5,984 - - 6,000
Share options 18 362 57 266 703
Bonus share issue 50 - - (50) -
Total comprehensive income for the year - - - 3,453 3,453
Balance at 31 March 2021 109 7,484 126 9,438 17,157
Share options - - 376 - 376
Interim dividend (245) (245)
Total comprehensive income for the year - - - 4,540 4,540
Balance at 31 March 2022 109 7,484 502 13,733 21,828
Company statement of changes in equity
__________________________________________________________________________________________________________________
Share
Share Share option Retained Total
capital premium reserve earnings equity
£'000 £'000 £'000 £'000 £'000
Balance at 31 March 2020 25 1,138 69 5,715 6,947
Issue of shares 16 5,984 - - 6,000
Share options 18 362 57 266 703
Bonus share issue 50 - - (50) -
Total comprehensive income for the year - - - 3,521 3,521
Balance at 31 March 2021 109 7,484 126 9,452 17,171
Share options - - 376 - 376
Interim dividend (245) (245)
Total comprehensive income for the year - - - 4,481 4,481
Balance at 31 March 2022 109 7,484 502 13,688 21,783
Consolidated and Company cash flow statement
__________________________________________________________________________________________________________________
Group Company
31 March 31 March 31 March 31 March
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Cashflows from operating activities
Profit before tax from continuing operations 5,973 3,647 5,872 3,715
Adjusted for:
IPO professional fees and commissions - 1,057 - 1,057
Finance costs 20 155 20 155
Foreign exchange differences - (65) - (65)
Government grant income (197) (204) (197) (204)
R&D tax credit income (457) (326) (457) (326)
Change in fair value of assets and liabilities - 144 - 144
Movement in provisions (150) (14) (150) (14)
Share based payment transactions 262 275 262 275
Depreciation 252 167 252 167
Amortisation 3,014 2,585 3,014 2,585
Movement in inventories (38) (178) (38) (178)
Movement in obsolescence provision 150 25 150 25
Movement in trade and other receivables (2,815) 818 (2,567) 436
Movement in trade and other payables 1,129 1,271 1,108 1,230
Net cash used in discontinued operations - (201) - (201)
Cash generated from operations 7,143 9,156 7,269 8,801
Interest paid - (107) - (107)
R&D tax credit refunds received 207 - 207
Net cash from operating activities 7,350 9,049 7,476 8,694
Investing activities
Purchase of intangible assets (3,913) (3,332) (3,913) (3,332)
Purchase of property and equipment (300) (10) (300) (10)
Short term investment: fixed term deposit (1,500) - (1,500) -
Net cash used in investing activities (5,713) (3,342) (5,713) (3,342)
Financing activities
Repayment of borrowings - (2,276) - (2,276)
Payment of lease obligations (203) (193) (203) (193)
Dividends paid (245) - (245) -
Share issue proceeds - 6,000 - 6,000
Share options proceeds - 328 - 328
IPO professional fees and commissions - (1,057) - (1,057)
Payment of deferred consideration - (83) - (83)
Government grant income - 578 - 578
Net cash from financing activities (448) 3,297 (448) 3,297
Net increase in cash and cash equivalents 1,189 9,004 1,315 8,649
Cash and cash equivalents at beginning of the year 12,668 3,664 12,277 3,628
Cash and cash equivalents at end of the year 13,857 12,668 13,592 12,277
Notes to the financial statements
____________________________________________________________________________________________________________
1. General information
Calnex Solutions plc ("the Company") is a public limited company domiciled and
incorporated in Scotland. The registered office is Oracle Campus, Linlithgow,
West Lothian, EH49 7LR.
The Company (together with its subsidiary, the "Group") were under the control
of the directors throughout the period covered in the financial statements.
The list of the subsidiaries consolidated in the financial statements are
shown in Note 25.
The principal activity of the Group is the design, production and marketing of
test instrumentation and solutions for network synchronisation and network
emulation enabling its customers to validate the performance of critical
infrastructure associated with telecoms networks, enterprise networks and data
centres.
The financial statements were authorised for issue, in accordance with a
resolution of directors, on 23 May 2022. The directors have the power to amend
and reissue the financial statements.
2. Basis of preparation
a) Statement of compliance
This financial information does not include all information required for full
annual financial statements and therefore does not constitute statutory
accounts within the meaning of section 435(1) and (2) of the Companies Act
2006 or contain sufficient information to comply with the disclosure
requirements of International Financial Reporting Standards. These should be
read in conjunction with the Financial Statements of the Group as at and for
the year ended 31 March 2022.
The report of the auditors for the year ended 31 March 2022 was (i)
unqualified, (ii) did not include a reference to any matters to which the
auditors drew attention by way of emphasis without qualifying their report,
and (iii) did not contain a statement under section 498 (2) or (3) of the
Companies Act 2006.
b) Basis of accounting
The financial statements have been prepared under the historical cost
convention, except for certain financial assets and liabilities including
financial instruments, which are stated at their fair values.
The preparation of the financial statements in conformity with UK-adopted IAS
requires the directors to make judgements, estimates and assumptions that
affect the application of policies and reported amounts of assets and
liabilities, income and expense. The estimates and judgements are based on
historical experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis of
making judgements about carrying amounts of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from
these estimates. The accounting policies set out below have, unless otherwise
stated, been applied consistently to all periods presented.
c) Functional and presentation currency
The financial statements are presented in pounds Sterling, which is the
functional and presentation currency of the Group. Results in these financial
statements have been prepared to the nearest thousand.
d) Basis of consolidation
The consolidated financial statements incorporate those of Calnex Solutions
plc, and all its subsidiaries. A subsidiary is an entity controlled by the
Group, i.e. the Group is exposed to, or has the rights, to variable returns
from its involvement with the entity and has the ability to affect those
returns through its current ability to direct the entity's relevant activities
(power over the investee). All intra-Group transactions, balances, and
unrealised gains on transactions between Group companies are eliminated on
consolidation. Unrealised losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred. The total
comprehensive income, assets and liabilities of the entities are amended,
where necessary, to align the accounting policies.
The Group applies the acquisition method to account for all acquired
businesses, whereby the identifiable assets acquired and the liabilities
assumed are measured at their acquisition date fair values (with a few
exceptions as required by IFRS 3 Business Combinations).
The cost of a business combination is the fair value at the acquisition date
of the assets given, equity instruments issued and liabilities incurred or
assumed, plus costs directly attributable to the business combination. The
excess of the cost of a business combination over the fair value of the
identifiable assets, liabilities and contingent liabilities is recognised as
goodwill.
The acquisition of assets that falls outside the scope of IFRS 3 are accounted
for by bringing the assets and liabilities of the acquired entity into the
financial statements at their nominal value from the date of acquisition.
Comparative information is not restated.
Notes to the financial statements
__________________________________________________________________________________________________________________
2. Basis of preparation (continued)
e) Going Concern
The financial information for the year to 31 March 2022 has 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 did not require the assistance of government
funding during the government mandated lockdowns. The Group is not
significantly exposed to industries that have been heavily affected by
COVID-19 and management has been able to implement remote working from home
since the beginning of the rollout of global lockdown measures to continue to
operate effectively and meet customer requirements. Appropriate safety
measures have also been put in place to protect staff that need to visit our
offices whilst adhering to government advice on stay at home directives across
our various locations. The staff have now returned to the offices and are
operating a hybrid working model allowing staff to work from home where
supported by management. The directors continue to monitor the government
guidance and will reintroduce all safety measures where required.
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 the commercial
effect of further lockdowns or new virus threats.
The Board has approved financial profit and cashflow forecasts for the current
and succeeding financial years to 31 March 2024. 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.
3. Significant accounting policies
(a) Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for goods and services provided
in the normal course of business, net of sales related taxes and discounts and
is recognised at the point in time when the relevant performance obligation is
satisfied.
Where revenue contracts have multiple elements, all aspects of the transaction
are considered to determine whether these elements can be separately
identified. Where transaction elements can be separately identified and
revenue can be allocated between them on a fair and reliable basis, revenue
for each element is accounted for according to the relevant policy below.
Where transaction elements cannot be separately identified, revenue is
recognised over the contract period.
The Group recognises revenue from the following major sources:
Hardware & software revenue
Revenue from the sale of hardware and bundled software, is recognised when the
Group transfers the risk and rewards to the customer. Each unit sale comes
with a standard warranty period during which the Group agrees to provide
warranty cover, maintenance cover and software upgrade cover in the event of
any software upgrades being released. This is recognised as a separately
identifiable obligation from the provision of the hardware and is recognised
over the life of the cover provided, being a year.
For the sale of stand-alone software, the licence period and therefore the
revenue recognition, commences upon delivery.
Extended warranty programme
The Group enters into agreements with purchasers of its equipment to perform
necessary repairs falling outside the Group's standard warranty period. As
this service involves an indeterminate number of acts, the Group is required
to 'stand ready' to perform whenever a request falling within the scope of the
program is made by a customer. Revenue is recognised on a straight-line basis
over the term of the contract.
This method best depicts the transfer of services to the customer as:
i) The Group's historical experience demonstrates no
statistically significant variation in the quantum of services provided in
each year of a multi-year contract; and
ii) no reliable prediction can be made as to if and when any
individual customer will require service.
Software support programme
The Group enters into agreements with purchasers of its equipment to provide
software support and access to future software updates. Revenue is recognised
on a straight-line basis over the term of the contract.
Notes to the financial statements
__________________________________________________________________________________________________________________
3. Significant accounting policies (continued)
Grant income
The Group obtains grant funding from the Scottish Government in the form of
reimbursement for research and development costs eligible for reclaim under
the grant agreement. Costs are incurred before they can be reclaimed under the
grant agreement and revenue is only recognised after receipt of the funds from
the government. Grant funds received are recognised over five years, in line
with the amortisation policy on capitalised research and development costs.
(b) Retirement benefit costs
Payments to defined contribution schemes are charged to the Statement of
comprehensive income as an expense as they fall due.
(c) Share based payments
Equity-settled and cash settled share-based compensation benefits are provided
to some employees. Equity-settled transactions are awards of shares, or
options over shares that are provided to employees in exchange for the
rendering of services.
The cost of equity-settled transactions are measured at fair value on grant
date. Fair value is independently determined using the Black-Scholes option
pricing model that takes into account the exercise price, the term of the
option, the impact of dilution, the share price at grant date and expected
price volatility of the underlying share, the expected dividend yield and the
risk free interest rate for the term of the option, together with non-vesting
conditions that do not determine whether the Group receives the services that
entitle the employees to receive payment. There are no other vesting
conditions.
The cost of equity-settled transactions are recognised as an expense with a
corresponding increase in equity over the vesting period. The cumulative
charge to profit or loss is calculated based on the grant date fair value of
the award, the best estimate of the number of awards that are likely to vest
and the expired portion of the vesting period. The amount recognised in profit
or loss for the period is the cumulative amount calculated at each reporting
date less amounts already recognised in previous periods.
The cost of cash-settled transactions is initially, and at each reporting date
until vested, determined by applying the Black-Scholes option pricing model,
taking into consideration the terms and conditions on which the award was
granted. The cumulative charge to profit or loss until settlement of the
liability is calculated as follows:
● during the vesting period, the liability at each reporting
date is the fair value of the award at that date multiplied by the expired
portion of the vesting period.
● from the end of the vesting period until settlement of the
award, the liability is the full fair value of the liability at the reporting
date.
All changes in the liability are recognised in profit or loss. The ultimate
cost of cash-settled transactions is the cash paid to settle the liability.
If equity-settled awards are modified, as a minimum an expense is recognised
as if the modification has not been made. An additional expense is recognised,
over the remaining vesting period, for any modification that increases the
total fair value of the share-based compensation benefit as at the date of
modification.
If the non-vesting condition is within the control of the Group or employee,
the failure to satisfy the condition is treated as a cancellation. If the
condition is not within the control of the Group or employee and is not
satisfied during the vesting period, any remaining expense for the award is
recognised over the remaining vesting period, unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on
the date of cancellation, and any remaining expense is recognised immediately.
If a new replacement award is substituted for the cancelled award, the
cancelled and new award is treated as if they were a modification.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled, or the asset is realised. Deferred tax
is charged or credited in the income statement, except when it relates to
items charged or credited directly to equity, in which case the deferred tax
is also dealt with in equity.
Deferred tax assets and liabilities are offset when the relevant requirements
of IAS 12 are satisfied.
Notes to the financial statements
__________________________________________________________________________________________________________________
3. Significant accounting policies (continued)
(d) Taxation
The tax expense represents the sum of the current tax and deferred tax charge
for the year. The tax currently payable is based on taxable profit for the
year. The Group's liability for current tax is calculated using the tax rates
that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is measured on differences between the carrying amounts of assets
and liabilities in the financial statements and the corresponding tax bases,
as used in the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are generally
recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be
available. Such assets and liabilities are not recognised if the temporary
difference arises from goodwill or from the initial recognition (other than in
a business combination) of financial assets and liabilities in a transaction
that affects neither the taxable profit nor the accounting profit.
(e) Business Combinations
The acquisition method of accounting is used to account for business
combinations regardless of whether equity instruments or other assets are
acquired.
The consideration transferred is the sum of the acquisition-date fair values
of the assets transferred, equity instruments issued or liabilities incurred
by the Group to former owners of the acquirer. All acquisition costs are
expensed as incurred to profit or loss.
On the acquisition of a business, the Group assesses the financial assets
acquired and liabilities assumed for appropriate classification and
designation in accordance with the contractual terms, economic conditions, the
Group's operating or accounting policies and other pertinent conditions in
existence at the acquisition-date.
Contingent consideration to be transferred by the acquirer is recognised at
the acquisition-date fair value. Subsequent changes in the fair value of the
contingent consideration classified as an asset or liability is recognised in
profit or loss.
The difference between the acquisition-date fair value of assets acquired and
liabilities assumed and the fair value of the consideration transferred is
recognised as goodwill. If the consideration transferred is less than the fair
value of the identifiable net assets acquired, a bargain purchase is
recognised as a gain directly in profit or loss by the Group on the
acquisition-date.
Business combinations are initially accounted for on a provisional basis. The
Group retrospectively adjusts the provisional amounts recognised and also
recognises additional assets or liabilities during the measurement period,
based on new information obtained about the facts and circumstances that
existed at the acquisition-date. The measurement period ends on either the
earlier of (i) 12 months from the date of the acquisition or (ii) when the
acquirer receives all the information possible to determine fair value.
(f) Intangible assets
Intangible assets acquired as part of a business combination, other than
goodwill, are initially measured at their fair value at the date of the
acquisition. Intangible assets acquired separately are initially recognised at
cost. Indefinite life intangible assets are not amortised and are subsequently
measured at cost less any impairment. Finite life intangible assets are
subsequently measured at cost less amortisation and any impairment. The method
and useful lives of finite life intangible assets are reviewed annually.
Changes in the expected pattern of consumption or useful life are accounted
for prospectively by changing the amortisation method or period.
Research costs are expensed in the period in which they are incurred.
Development costs are capitalised when it is probable that the project will be
a success considering its commercial and technical feasibility; the Group is
able to use or sell the asset; the Group has sufficient resources and intent
to complete the development; and its costs can be measured reliably.
Capitalised development costs are amortised on a straight-line basis over the
period of their expected benefit, being their finite life of 5 years.
Significant costs associated with patents and trademarks are deferred and
amortised on a straight-line basis over the period of their expected benefit,
being their finite life of 10 years. Amortisation is charged to
administrative expenses in the Statement of Comprehensive Income.
Goodwill and other intangible assets that have an indefinite useful life are
not subject to amortisation and are tested annually for impairment, or more
frequently if events or changes in circumstances indicate that they might be
impaired. Other non-financial assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not
be recoverable. An impairment loss is recognised for the amount by which the
asset's carrying amount exceeds its recoverable amount. The recoverable amount
is the higher of an asset's fair value less costs of disposal and
value-in-use. The value-in-use is the present value of the estimated future
cash flows relating to the asset using a pre-tax discount rate specific to the
asset or cash-generating unit to which the asset belongs. Assets that do not
have independent cash flows are grouped together to form a cash-generating
unit.
Notes to the financial statements
__________________________________________________________________________________________________________________
3. Significant accounting policies (continued)
(g) Financial assets
Where there is no publicly quoted market value, other investments, including
subsidiaries, are shown at cost less provisions for impairment.
(h) Plant and equipment
Plant and equipment are shown at cost, net of depreciation and any provision
for impairment. Depreciation is provided on all property, plant and
equipment at varying rates calculated to write off cost less residual value
over the useful lives. Depreciation is charged to administrative expenses in
the Statement of Comprehensive Income. The principal rates employed are:
Plant and
machinery
25-33% straight line
The carrying values of property, plant and equipment are reviewed for
impairment when events or changes in circumstances indicate these values may
not be recoverable. If there is an indication that impairment does exist,
the carrying values are compared to the estimated recoverable amounts of the
assets concerned.
The recoverable amount is the greater of an asset's value in use and its fair
value less the cost of selling it. Value in use is calculated by discounting
the future cash flows expected to be derived from the asset. Where the
carrying value of an asset exceeds its recoverable amount, the asset is
considered impaired and is written down through the income statement to its
recoverable amount.
An item of property, plant and equipment is written off either on disposal or
when there is no expected future economic benefit from its continued use.
Any gain or loss (calculated as the difference between the net disposal
proceeds and the carrying value of the asset) is included in the income
statement in the year.
(i) Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The
right-of-use asset is measured at cost, which comprises the initial amount of
the lease liability, adjusted for, as applicable, any lease payments made at
or before the commencement date net of any lease incentives received, any
initial direct costs incurred, and, except where included in the cost of
inventories, an estimate of costs expected to be incurred for dismantling and
removing the underlying asset, and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the
unexpired period of the lease or the estimated useful life of the asset,
whichever is the shorter. Where the Group expects to obtain ownership of the
leased asset at the end of the lease term, the depreciation is over its
estimated useful life. Right-of use assets are subject to impairment or
adjusted for any re-measurement of lease liabilities.
(j) Inventories
Inventories are valued at the lower of cost and net realisable value. In
determining the cost of raw materials, consumables and goods for resale, the
average purchase price is used. For work in progress and finished goods,
cost is taken as production cost which includes an appropriate proportion of
overheads.
Inventories are assessed for indicators of impairment at each year end and
where a provision is required the income statement is charged directly.
(k) Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently
measured at amortised cost using the effective interest method, less any
allowance for expected credit losses.
The simplified approach to measuring expected credit losses has been applied,
this uses a lifetime expected loss allowance. To measure the expected credit
losses, trade receivables have been grouped based on days overdue.
Other receivables are recognised at amortised cost, less any allowance for
expected credit losses.
Notes to the financial statements
__________________________________________________________________________________________________________________
3. Significant accounting policies (continued)
(l) Cash and cash equivalents
Cash at bank and in hand are basic financial assets and include cash in hand,
deposits held at call with banks, other short-term liquid investments with
original maturities of 95 days or less, and bank overdrafts. Bank overdrafts
are shown within borrowings in current liabilities.
(m) Short term investments
Cash at bank on fixed term deposit, and other liquid investments with
maturities of greater than 95 days, but less than 12 months at the reporting
date.
(n) Borrowings
Interest-bearing loans and bank overdrafts are initially recorded at the fair
value of proceeds received and are subsequently stated at amortised cost.
Finance charges, including premiums payable on settlement or redemption and
direct issue costs, are accounted for on an accruals basis in the income
statement using the effective interest method and are added to the carrying
amount of the instrument to the extent that they are not settled in the period
in which they arise.
(o) Trade and other payables
Trade payables are non-interest-bearing and are measured at amortised cost.
(p) Provisions
Provisions are recognised when the Group has a present legal or constructive
obligation arising as a result of a past event, it is probable that an outflow
of economic benefits will be required to settle the obligation and a reliable
estimate can be made. Provisions are measured at the present value of the
expenditure expected to be required to settle the obligation using a pre-tax
rate that reflects current market assessments of the time value of money and
the risks specific to the obligation. The increase in the provision due to the
passage of time is recognised as an interest expense.
(q) Financial liabilities
Financial liabilities are recognised on the Group's Statement of financial
position when the Group becomes a party to the contractual provisions of that
instrument.
Derivatives are initially recognised at fair value on the date a derivative
contract is entered into and are subsequently re-measured to their fair value
at each reporting date. The changes in fair value are recorded in the
statement of comprehensive income.
(r) Lease
liabilities
A lease liability is recognised at the commencement date of a lease. The lease
liability is initially recognised at the present value of the lease payments
to be made over the term of the lease, discounted using the interest rate
implicit in the lease or, if that rate cannot be readily determined, the
Group's incremental borrowing rate. The lease term is the non-cancellable
period of the lease plus extension periods that the group is reasonably
certain to exercise and termination periods that the group is reasonably
certain not to exercise. Lease payments comprise of fixed payments less any
lease incentives receivable, variable lease payments that depend on an index
or a rate, amounts expected to be paid under residual value guarantees,
exercise price of a purchase option when the exercise of the option is
reasonably certain to occur, and any anticipated termination penalties. The
variable lease payments that do not depend on an index or a rate are expensed
in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest
method. The carrying amounts are re-measured if there is a change in the
following: future lease payments arising from a change in an index or a rate
used; residual guarantee; lease term; certainty of a purchase option and
termination penalties. When a lease liability is re-measured, an adjustment is
made to the corresponding right-of use asset, or to profit or loss if the
carrying amount of the right-of-use asset is fully written down.
The Group has elected not to recognise a right-of-use asset and corresponding
lease liability for short-term leases with terms of 12 months or less and
leases of low-value assets. Lease payments on these assets are expensed to
profit or loss as incurred.
Notes to the financial statements
____________________________________________________________________________________________________________
3. Significant accounting policies (continued)
(s) Foreign currency
In preparing the financial statements, transactions in currencies other than
pounds sterling are recorded at the exchange rate ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign
currencies at the balance sheet date are translated to sterling at the foreign
exchange rate ruling at that date. Exchange differences arising on
translation are recognised in the consolidated Statement of comprehensive
income for the period.
Non-monetary assets and liabilities denominated in foreign currencies that are
stated at fair value are translated at the rates prevailing at the dates when
the fair value was determined. Non-monetary assets and liabilities that are
measured at historical cost in a foreign currency (e.g. property, plant and
equipment purchased in a foreign currency) are translated using the exchange
rate prevailing at the date of the transaction. Exchange differences arising
on the translation of net assets are affected through the Statement of
Comprehensive Income.
For the purpose of presenting consolidated financial statements, the assets
and liabilities of the Group's foreign operations are translated at exchange
rates prevailing on the balance sheet date. Income and expense items are
translated at the average exchange rates for the period and recognised in the
Statement of Comprehensive Income.
(t) Dividends
Dividends are recognised when declared during the financial year. The
declaration of dividends is at the discretion of the directors.
(u) Value Added Tax
Revenues, expenses and assets are recognised net of the amount of associated
VAT, unless the VAT incurred is not recoverable from the tax authority. In
this case it is recognised as part of the cost of the acquisition of the asset
or as part of the expense.
Receivables and payables are stated inclusive of the amount of VAT receivable
or payable. The net amount of VAT recoverable from, or payable to, the tax
authority is included in other receivables or other payables in the statement
of financial position.
Commitments and contingencies are disclosed net of the amount of VAT
recoverable from, or payable to, the tax authority.
(v) Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to
the shareholders, excluding any costs of servicing equity other than ordinary
shares, by the weighted average number of ordinary shares outstanding during
the financial year, adjusted for bonus elements in ordinary shares issued
during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of
basic earnings per share to take into account dilutive potential ordinary
shares and the weighted average number of shares assumed to have been issued
for no consideration in relation to dilutive potential ordinary shares.
(w) Critical judgements in applying the Groups accounting estimates
In the process of applying the Group's accounting policies, the directors have
made the following judgements that have the most significant effect on the
amounts recognised in the financial statements.
Share based payment transactions
The Group measures the cost of equity-settled transactions with employees by
reference to the fair value of the equity instruments at the date at which
they are granted. The fair value is determined by using the Black-Scholes
model taking into account the terms and conditions upon which the instruments
were granted. The accounting estimates and assumptions relating to
equity-settled share-based payments would have no impact on the carrying
amounts of assets and liabilities within the next annual reporting period but
may impact profit or loss and equity.
Provision for impairment of inventories
The provision for impairment of inventories assessment requires a degree of
estimation and judgement. The level of the provision is assessed by taking
into account the recent sales experience, the ageing of inventories and other
factors that affect inventory obsolescence.
Impairment
Determining whether any non-current asset has been impaired requires an
estimation of the value in use of the cash generating units to which these
assets are allocated. The value in use calculation requires the Group to
identify appropriate cash generating units, to estimate the future cash flows
expected to arise from each cash generating unit and a suitable discount rate
in order to calculate present value. Impairment exercises on fixed tangible
assets, goodwill and indefinite life intangible assets have been undertaken
each year presented.
Notes to the financial statements
__________________________________________________________________________________________________________________
3. Significant accounting policies (continued)
(w) Critical judgements in applying the Groups accounting estimates
(continued)
Useful lives
The Group uses forecast cash flow information and estimates of future growth
to assess whether goodwill and other intangible fixed assets are impaired, and
to determine the useful economic lives of its goodwill and intangible
assets. If the results of operations in a future period are adverse to the
estimates used a reduction in useful economic life may be required.
(x) New accounting standards
There have been no applicable new standards, amendments to standards and
interpretations effective from 1 April 2021 that have been applied by the
Group which have resulted in a significant impact on its consolidated results
or financial position.
4 Operating Segments
Operating segments are based on the internal reports that are reviewed and
used by the Board (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 does not consider segmentation in their review of costs
or the statement of financial position. The only operating segment information
reviewed, and therefore disclosed, are the revenues derived from different
geographies.
Year ended Year ended
31 March 31 March
2022 2021
£'000 £'000
Americas 7,066 5,767
North Asia 6,780 5,945
Rest of World 8,200 6,266
22,046 17,978
5 Revenue
Year ended Year ended
31 March 31 March
2022 2021
£'000 £'000
Sale of goods 20,040 16,509
Rendering of services 2,006 1,469
Total revenue 22,046 17,978
76% (2021: 72%) of the Group order intake has been generated through the
network of the Group's principal distribution partner. Included within order
intake is an amount of £3,656,051 (2021: £2,144,773) which arose from the
Groups largest customer. This is the only customer to exceed 10% of the
Group's orders.
Notes to the financial statements
__________________________________________________________________________________________________________________
6 Other income
Year ended Year ended
31 March 31 March
2022 2021
£'000 £'000
Government grant income 191 204
R&D tax credit 457 326
648 530
7 Material operating profit items
Year ended Year ended
31 March 31 March
2022 2021
£'000 £'000
Operating profit for the year is stated after charging/(crediting):
IPO related professional fees and commissions - 1,057
Issue of free shares to employees - 166
Share based payments 262 275
Amortisation of intangible assets 3,014 2,585
Auditor's remuneration
Fees payable to the Group's auditor and its associates for the audit of the 44 35
Group's annual accounts
Fees payable to the Group's auditor and its associates for the audit of the - -
Company's subsidiaries
Total fees payable for audit services 44 35
Fees payable to the Group's auditor and its associates for other services:
Audit related services 2 -
Tax related services - -
Other services - 151
Total fees payable to the Group's auditor and its associates 46 186
8 Employee benefits costs
Average monthly number of employees
Year ended Year ended
31 March 31 March
2022 2021
£'000 £'000
Development staff 64 58
Administrative staff 42 33
Management staff 10 9
116 100
Year ended Year ended
31 March 31 March
2022 2021
£'000 £'000
Employee costs during the year (including directors remuneration) amounted to:
Wages and salaries 7,694 6,875
Social security costs 630 586
Defined contribution pension 251 212
Share incentive scheme 210 215
Equity-settled share based payment 249 275
Cash-settled share based payment 13 -
9,047 8,163
Total gross wages and salaries capitalised in the year, included in the 3,138 2,728
analysis above
Notes to the financial statements
_________________________________________________________________________________________________________________
9 Key management personnel emoluments
Year ended Year ended
31 March 31 March
2022 2021
£'000 £'000
Wages and salaries 638 654
Social security costs 67 58
Defined contribution pension 6 6
Equity-settled share based payment 29 91
740 809
Gains made on share options converted by directors in the year - 613
The number of directors who accrued benefits under the company pension plans
Defined contribution plans 1 1
Remuneration of the highest paid director in respect of qualifying services:
Aggregate remuneration 255 184
10 Finance costs
Year ended Year ended
31 March 31 March
2022 2021
£'000 £'000
Interest expense for borrowings at amortised cost - 107
Interest expense on lease liabilities 20 63
Unwinding of discount on deferred consideration - (15)
20 155
Notes to the financial statements
_______________________________________________________________________________________________________________
11 Taxation
Year ended Year ended
31 March 31 March
2022 2021
£'000 £'000
Current taxation
UK corporation tax on profits for the year 373 67
Foreign current tax expense 46 12
Adjustments relating to prior years (120) (9)
299 70
Deferred taxation
Origination and reversal of temporary differences 799 61
Adjustments relating to prior periods (46) 63
Effect of changes in tax rates 381 -
1,134 124
Total taxation charge 1,433 194
Year ended Year ended
31 March 31 March
2022 2021
£'000 £'000
Profit before tax for the year 5,973 3,647
Tax thereon at 19% 1,134 693
Effects of:
Expenses disallowable for tax purposes 67 196
Adjustments in respect of prior periods - current tax (120) (9)
Adjustments in respect of prior periods - deferred tax (46) 64
Change in tax rate on opening balance 381 -
Movement in unprovided deferred tax related to share options - (573)
Movement in unprovided deferred tax related to timing differences now - (54)
recognised
SME R&D credit (9) (123)
Impact of super deduction (20) -
Overseas tax 46 -
Effect of non-UK losses - -
Taxation charge 1,433 194
The weighted average applicable tax rate for the year ended 31 March 2022 was
19% (2021: 19%). The effective rate of tax for the year, based on the taxation
charge for the year as a percentage of the profit before tax is 24.0% (2021:
5.3%) The 5 percentage point difference between the applicable rate of tax and
the effective rate is largely due to the following:
· Recognition of the change in tax rate to 25% on certain deferred
tax assets and liabilities as they are expected to reverse after 1 April 2023;
and
· Availability of R&D SME enhanced deduction which was included
in the tax returns for 31 March 2020 and 31 March 2021 and benefit recognised
as an adjustment to prior periods.
Notes to the financial statements
_________________________________________________________________________________________________________________
13 Intangible assets
Included within intangible assets are the following significant items:
· 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 Development Group Company
property costs Total Total
£'000 £'000 £'000 £'000
Cost
At 1 April 2021 2,348 24,438 26,786 26,786
Additions 8 3,905 3,913 3,913
Disposals (132) (1,105) (1,237) (1,237)
At 31 March 2022 2,224 27,238 29,462 29,462
Amortisation
At 1 April 2021 2,140 17,121 19,261 19,261
Charge for the year 106 2,908 3,014 3,014
Eliminated on disposal (132) (1,105) (1,237) (1,237)
At 31 March 2022 2,114 18,924 21,038 21,038
Net book value
31 March 2021 208 7,317 7,525 7,525
31 March 2022 110 8,314 8,424 8,424
During the year, a review of the carried development costs brought forward has
resulted in a disposal of £1,105,063, and elimination of amortisation of
£1,105,063 resulting in a net book value impact of £nil. This reflects
removal of aged spend on product features that are now considered to be
superseded by current product developments.
Notes to the financial statements
__________________________________________________________________________________________________________________
14 Plant and equipment
The Group annually reviews the carrying value of tangible fixed assets taking
recognition of the expected working lives of the plant and equipment available
to the Group and known requirements. Depreciation is charged to administrative
expenses.
Group Company
Plant and Plant and
equipment equipment
Total Total
£'000 £'000
Cost
At 1 April 2021 119 119
Additions 300 300
Disposals (84) (84)
At 31 March 2022 335 335
Depreciation
At 1 April 2021 97 97
Charge for the year 48 48
Eliminated on disposal (84) (84)
At 31 March 2022 61 61
Net book value
31 March 2021 22 22
31 March 2022 274 274
15 Inventories
Group Company
Year ended Year ended Year ended Year ended
31 March 31 March 31 March 31 March
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Finished goods 1,427 1,390 1,427 1,390
Provision for obsolescence (429) (279) (429) (279)
998 1,111 998 1,111
Cost of inventories recognised as an expense 4,811 3,591 4,811 3,591
Group inventories reflect the following movement in provision for
obsolescence:
At start of the financial year 279 253 279 253
Utilised (23) (98) (23) (98)
Provided 173 124 173 124
At end of the financial year 429 279 429 279
Notes to the financial statements
__________________________________________________________________________________________________________________
16 Trade and other receivables
Group Company
Year ended Year ended Year ended Year ended
31 March 31 March 31 March 31 March
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Amounts due within one year
Trade receivables 4,120 988 4,120 988
Other receivables 748 700 748 700
Amounts owed by group companies - - 201 381
Prepayments and accrued income 129 131 128 131
4,997 1,819 5,197 2,200
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.
The Group's credit risk is primarily attributable to its trade and other
receivables. Management has a credit policy in place and the exposure to
credit risk is monitored on an ongoing basis. Credit evaluations are
performed on customers as appropriate to the level of credit extended. In
addition, credit insurance would be sought for major areas of exposure,
although this has not been required in the year under review.
The Group reviews trade receivables past due but not impaired on a regular
basis and considers, based on experience, that the credit quality of these
amounts at the balance sheet date has not deteriorated since the date of the
transaction.
Included in the Group's trade receivables balance are debtors with a carrying
amount of £103,605 (2021: £78,664), which are past due at the reporting date
but for which the Group has not provided against. As there has not been a
significant change in credit quality, the Group believes that all amounts
remain recoverable.
Ageing of past due but not impaired trade receivables
Group Company
Year ended Year ended Year ended Year ended
31 March 31 March 31 March 31 March
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Overdue by
0-30 days 104 46 104 46
30-60 days - 32 - 32
60+ days - - - -
104 78 104 78
The Directors consider that the carrying amount of trade and other receivables
approximates their fair value.
Note 22 includes disclosures relating to the credit risk exposures and
analysis relating to the allowance for expected credit losses. The calculated
credit risk is £11,080 (2021: £3,221). Due to the immaterial nature of the
balance, no provision has been recognised.
Notes to the financial statements
__________________________________________________________________________________________________________________
17 Cash and cash equivalents
Cash and cash equivalent amounts included in the Consolidated Statement of
Cashflows comprise the following:
Group Company
Year ended Year ended Year ended ended Year ended
31 March 31 March 31 March 31 March
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Cash at bank 7,330 7,668 7,065 7,277
Cash on short term deposit 6,527 5,000 6,527 5,000
Total cash and cash equivalents 13,857 12,668 13,592 12,277
Short term investment: fixed term deposit 1,500 - 1,500 -
Short term cash deposits of £1,501,049 (2021: £nil) are callable on a notice
of 65 days.
Short term cash deposits of £5,025,495 (2021: £5,000,000) are callable on a
notice of 95 days.
Cash held on long-term deposits (being deposits with maturity of greater than
95 days, and no more than twelve months) that cannot readily be converted into
cash have been classified as a short term investment. A total of £1,500,000
(2021: £nil) is currently held on fixed term deposit, with a maturity on this
investment of less than twelve months at the reporting date.
The Directors consider that the carrying value of cash and cash equivalents
and short-term investments approximates their fair value. Details of the
Group's credit risk management are included in note 22.
18 Borrowings
The Group currently has a £3,000,000 revolving credit facility, at an
interest rate of 2.25% above the Bank of England base rate, and secured with a
floating charge over the Group assets. The total amount drawn from the
borrowing facility as at 31 March 2022 was £nil. (31 March 2021: £nil)
This facility is subject to the following financial covenants:
i) Leverage covenant: Gross borrowings to R&D adjusted
EBITDA: The ratio of Gross Borrowings at the end of each relevant period to
R&D Adjusted EBITDA for such Relevant Period shall not exceed 1.75 to 1.
R&D adjusted EBITDA is defined as EBITDA less capitalised development
expenditure in the period.
ii) Interest Cover Covenant: EBIT to Net Financing Costs: The
ratio of EBIT for each Relevant Period to Net Financing Costs for such
Relevant Period shall not fall below 4.00 to 1.
The Group has passed all covenant tests during the review period.
Notes to the financial statements
__________________________________________________________________________________________________________________
19 Trade and other payables
Group Company
Year ended Year ended Year ended ended Year ended
31 March 31 March 31 March 31 March
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Amounts due within one year
Trade payables 924 944 911 927
Other taxes and social security 149 126 149 126
Other payables 60 51 60 51
Accruals 2,406 1,561 2,399 1,554
Deferred income 2,030 1,499 2,030 1,499
5,569 4,181 5,549 4,157
Amounts due after one year
Deferred income 718 749 718 749
Total amounts due 6,287 4,930 6,267 4,906
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.
The directors consider that the carrying amount of trade and other payables
approximates their fair value.
Deferred income relates to fees received for ongoing services to be recognised
over the life of the service rendered, and grant proceeds received but not yet
released to the Statement of comprehensive income.
Notes to the financial statements
__________________________________________________________________________________________________________________
20 Leases
The Group leases land and buildings for its head office in Linlithgow,
Scotland. The current lease was agreed on 1 December 2019 and will run for the
5-year period to 30 November 2024. The Group had previously recognised the
right-of use asset and a lease liability applying a discount rate of 11%,
which was consistent with the incremental borrowing rate at the date of the
initial agreement. During the year, the Group has amended the lease agreement,
and upon amendment has rebaselined the discount rate to be consistent with the
incremental borrowing rate for the business post IPO. The revised discount
rate applied for the remainder of the lease is 2.25%.
On the 4 March 2022 the Group agreed an additional premises lease for office
space in Belfast. This lease has an initial 5 year term, with the right-of-use
asset and subsequent lease liability being recognised by applying a 3.5%
discount rate. This rate is consistent with the rebased incremental borrowing
rate applied to the Linlithgow lease, inclusive of subsequent national
interest rate increases.
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 carrying value of right of use assets, and lease obligations recognised
with respect to these leases are shown below:
Building Group Company
Lease IT equipment Total Total
£'000 £'000 £'000 £'000
Cost
At 1 April 2021 649 91 740 740
Additions 394 79 473 473
Disposals - - - -
At 31 March 2022 1,043 170 1,213 1,213
Depreciation
At 1 April 2021 173 45 218 218
Charge for the year 162 42 204 204
Eliminated on disposal - - - -
At 31 March 2022 335 87 422 422
Net book value
31 March 2021 476 46 522 522
31 March 2022 708 83 791 791
Right-of-use assets Group Company
Year ended Year ended Year ended ended Year ended
31 March 31 March 31 March 31 March
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Balance at 1 April 522 660 522 660
Additions to right of use assets 473 20 473 20
Depreciation charge for the year (204) (158) (204) (158)
Balance at 31 March 791 522 791 522
Notes to the financial statements
__________________________________________________________________________________________________________________
19 Leases (continued)
Lease liabilities
Group Company
Year ended Year ended Year ended ended Year ended
31 March 31 March 31 March 31 March
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Balance at 1 April 566 676 566 676
Acquisition of new leases 474 20 474 20
Payment of lease liabilities (203) (193) (203) (193)
Interest expense on lease liabilities 20 63 20 63
Balance at 31 March 857 566 857 566
Disclosed as
Current 193 130 193 130
Non-current 664 436 664 436
857 566 857 566
During the year, the Group also leased additional land and buildings in
Belfast and one motor vehicle. These leases were 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.
Lease commitments for short-term and low value leases
Group Company
Year ended Year ended Year ended ended Year ended
31 March 31 March 31 March 31 March
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Motor vehicles 17 15 17 15
Land and buildings 51 30 51 30
68 45 68 45
Amounts recognised in the profit and loss
Group Company
Year ended Year ended Year ended ended Year ended
31 March 31 March 31 March 31 March
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Depreciation charge - building lease 162 130 162 130
Depreciation charge - IT equipment 42 28 42 28
Interest on lease liabilities 20 63 20 63
Low value lease rental 68 42 68 42
Amounts recognised in statement of cashflows
Group Company
Year ended Year ended Year ended ended Year ended
31 March 31 March 31 March 31 March
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Total cash outflow for leases (203) (193) (203) (193)
A maturity analysis of lease liabilities is included in note 22 (d).
Notes to the financial statements
__________________________________________________________________________________________________________________
20 Deferred tax
The 2021 budget proposal increases the corporation tax rate to 25% from 1
April 2023. This was substantively enacted in the Finance Act 2021 on 24 May
2021.
Deferred tax asset
Group Company
Year ended Year ended Year ended ended Year ended
31 March 31 March 31 March 31 March
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Opening balance 613 554 613 554
Recognised in statement of comprehensive income (424) 9 (424) 9
Recognised in equity 115 50 115 50
Closing balance 304 613 304 613
Deferred tax assets arise as follows:
Unused tax losses - 491 - 491
Share based remuneration 265 64 265 64
Other timing differences 39 58 39 58
Total deferred tax asset 304 613 304 613
Deferred tax liability
Group Company
Year ended Year ended Year ended ended Year ended
31 March 31 March 31 March 31 March
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Opening liability 1,321 1,188 1,321 1,188
Recognised in statement of comprehensive income 696 133 696 133
Recognised in equity - - - -
Closing liability 2,017 1,321 2,017 1,321
Deferred tax liabilities arise as follows:
Deferred tax on acquisition 19 38 19 38
Timing differences on development costs 1,915 1,275 1,915 1,275
Accelerated capital allowances 87 11 87 11
Accrued pension costs (4) (3) (4) (3)
Total deferred tax liability 2,017 1,321 2,017 1,321
Notes to the financial statements
__________________________________________________________________________________________________________________
21 Provisions
Group Company
Year ended Year ended Year ended ended Year ended
31 March 31 March 31 March 31 March
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Current provisions
Overseas tax 141 291 141 291
Non-current provisions
Dilapidations 15 15 15 15
Total provisions 156 306 156 306
The movement in the total provision liability
At start of financial year 306 304 306 304
Recognised in profit and loss (150) 2 (150) 2
At end of financial year 156 306 156 306
Current year 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.
Notes to the financial statements
__________________________________________________________________________________________________________________
22 Financial instruments
The Group's activities expose it to a variety of financial risks: market risk
(including foreign currency risk, price risk and interest rate risk), credit
risk and liquidity risk. The Group's overall risk management program focuses
on the unpredictability of financial markets and seeks to minimise potential
adverse effects on the financial performance of the Group. The Group uses
derivative financial instruments in the form of forward foreign exchange
contracts to hedge certain risk exposures. Derivatives are exclusively used
for hedging purposes, and not as trading or other speculative instruments. The
Group uses different methods to measure different types of risk to which it is
exposed. These methods include sensitivity analysis in the case of interest
rate, foreign exchange and other price risks and ageing analysis for credit
risk.
Capital management
The Board's policy is to maintain a strong capital base so as to cover all
liabilities and to maintain the business and to sustain its development. The
Board defines capital as total equity, as recognised in the statement of
financial position, plus net debt. Net debt is calculated as total borrowings
less cash and cash equivalents. In order to maintain or adjust the capital
structure, the Group may return capital to shareholders, issue new shares or
sell assets to reduce debt.
There were no changes in the Group's approach to capital management during the
year.
Neither the Company nor any of its subsidiaries are subject to externally
imposed capital requirements.
(a) Categories of financial instruments
Group Company
Year ended Year ended Year ended ended Year ended
31 March 31 March 31 March 31 March
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Financial assets (current and non-current) at amortised cost
Trade and other receivables 4,279 1,688 4,480 2,069
Cash and cash equivalents 13,857 12,668 13,592 12,277
Short term investments 1,500 - 1,500 -
Financial liabilities (current and non-current) at amortised cost
Lease liabilities 857 566 857 566
Trade and other payables 3,391 2,682 3,371 2,658
Unless otherwise stated, the carrying amounts of financial instruments reflect
their fair value. Under the fair value three-level hierarchy, based on the
lowest level of input that is significant to the entire fair value
measurement, being:
• Level 1: Quoted prices
(unadjusted) in active markets for identical assets or liabilities that the
Group can access at the measurement date;
• Level 2: Inputs other than quoted
prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly; and
• Level 3: Unobservable inputs for
the asset or liability.
Notes to the financial statements
__________________________________________________________________________________________________________________
22 Financial instruments (continued)
Financial risk management objectives
The Group's senior management team manage the financial risks relating to the
operations of each department. These risks include market risk, credit risk
and liquidity risk.
Where appropriate, the Group seeks to minimise the effects of market risks by
using financial instruments to mitigate these risk exposures as appropriate.
The Group does not enter into or trade in financial instruments for
speculative purposes.
(b) Market risks
Foreign currency risk
The Group's activities expose it primarily to the financial risks of changes
in foreign currency exchange rates.
As at 31 March 2022 Sterling Euro US Dollar Total
£'000 £'000 £'000 £'000
Trade receivables 89 93 3,938 4,120
Lease liabilities (857) - - (857)
Trade payables (818) - (106) (924)
Cash and cash equivalents 12,989 207 661 13,857
Short term investments: fixed term deposit 1,500 - - 1,500
12,903 300 4,493 17,696
Based on this exposure, had Pound Sterling weakened by 5% the Group's profit
before tax would have been £239,650 lower. The percentage change is based on
management's assessment of reasonable possible fluctuations.
As at 31 March 2021 Sterling Euro US Dollar Total
£'000 £'000 £'000 £'000
Trade receivables 70 215 703 988
Borrowings - - - -
Lease liabilities (566) - - (566)
Trade payables (864) - (80) (944)
Cash and cash equivalents 11,658 112 898 12,668
10,298 327 1,521 12,146
Based on this exposure had Pound Sterling weakened by 5% the Group's profit
before tax would have been £92,400 lower. The percentage change is based on
management's assessment of reasonable possible fluctuations.
Interest rate risk
The Group is not exposed to any significant interest rate risk as borrowings
are obtained at fixed rates.
Other market price risk
The Group is not exposed to any other significant market price risks.
Notes to the financial statements
__________________________________________________________________________________________________________________
22 Financial instruments (continued)
(c) Credit risk management
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations and arises principally from the Group's receivables from
customers.
The Group's principal financial assets, other than business assets, are trade
and other receivables and cash and cash equivalents. These represent the
Group's maximum exposure to credit risk in relation to financial assets.
Group Company
Year ended Year ended Year ended ended Year ended
31 March 31 March 31 March 31 March
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Trade and other receivables 4,075 1,688 4,276 2,069
Cash and cash equivalents 13,857 12,668 13,592 12,277
Short term investments 1,500 - 1,500 -
19,432 14,356 18.368 14,346
Trade and other receivables
The Group's exposure to credit risk is influenced mainly by the individual
characteristics of each customer.
The balance presented in the balance sheet is net of allowances for doubtful
receivables and returns, estimated by the Group's management based on prior
experience and their assessment in the current economic climate. No adjustment
has been estimated for the allowance for credit loss.
The Group's main concentration of credit risk relates to where a credit risk
management approach is employed, including strict retention of title, customer
stock holding visibility and the use of credit insurance.
The Group applies the IFRS 9 simplified model of recognising lifetime expected
credit losses for all trade receivables as these items do not have a
significant financing component.
In measuring the expected credit losses, the trade receivables have been
assessed on a collective basis as they possess shared credit risk
characteristics. They have been grouped based on the days past due.
The expected credit loss for trade receivables as at 31 March 2022 and 31
March 2021 were determined as follows:
Days past due 0 1-30 31-60 >60 Total
2022
Balance outstanding (£'000) 4,016 104 - - 4,120
Historic loss rate 0% 0% 0% 0%
Estimated credit loss provision 0.25% 1% 1.5% 2%
Potential credit loss allowance (£'000) 10 1 - - 11
Days past due 0 1-30 31-60 >60 Total
2021
Balance outstanding (£'000) 910 46 32 - 988
Historic loss rate 0% 0% 0% 0%
Estimated credit loss provision 0.25% 1% 1.5% 2%
Potential credit loss allowance (£'000) 3 - - - 3
Due to the immaterial nature of the assessed credit risk, no provision has
been recognised for 31 March 2022 or 31 March 2021.
Notes to the financial statements
__________________________________________________________________________________________________________________
22 Financial instruments (continued)
(c) Credit risk management (continued)
Cash
Cash is held with banks in the UK/US with high credit ratings and no financial
loss due to the banks' failure to meet their contractual obligations is
expected.
(d) Liquidity risk management
The Group manages liquidity risk through the monitoring of forecast cash flows
and through the use of bank loans when required thereby maintaining sufficient
liquid assets to fund its contractual obligations and maintain the ongoing
development of the Group.
The table below provides an analysis of the Group's financial liabilities to
be settled on a gross basis by relevant maturity categories from the balance
sheet date to the contractual settlement date. The table includes both
interest and principal cash flows disclosed as remaining contractual
maturities and therefore these totals may differ from their carrying amount in
the statement of financial position.
1 year or 1 to 2 to Over 5 Total
less 2 years 5 years years liabilities
31 March 2022 £'000 £'000 £'000 £'000 £'000
Trade payables 924 - - - 924
Other payables 2,615 - - - 2,615
Lease liabilities 193 462 202 - 857
3,732 462 202 - 4,396
1 year or 1 to 2 to Over 5 Total
less 2 years 5 years years liabilities
31 March 2021 £'000 £'000 £'000 £'000 £'000
Trade payables 944 - - - 944
Other payables 1,738 - - - 1,738
Lease liabilities 161 117 288 - 566
2,843 117 288 - 3,248
23 Retirement benefits
Contributions by Group companies are charged to the income statement as an
expense as they fall due. The amount recognised as an expense in relation to
defined contributions plans was £250,504 (2021: £212,482).
Notes to the financial statements
__________________________________________________________________________________________________________________
24 Share based payments
Year ended Year ended
31 March 31 March
2022 2021
£'000 £'000
Charged to administration expenses:
Equity settled share based payments 249 275
Cash settled share based payments 13 -
Total share based payments 262 275
During the year 1.9m share options were granted (2021: 2.7m). The fair value
of share options granted has been estimated at the date of the grant using the
Black-Scholes binomial model. The following table gives the assumptions made
in arriving at the share based payment charge and the fair value:
Year ended Year ended
31 March 31 March
2022 2021
Options issued 1,917,000 2,650,000
Weighted average share price (pence) 118 51
Weighted average exercise price (pence) 118 48
Expected volatility (%) 77.2 - 105.2 61.0
Vesting period (years) 3-5 3-5
Option life (years) 10 10
Risk free rate (%) 0.02 0.02
Dividend yield (%) 1.0 1.0
Fair value at grant date (£'000) 1,071 598
During the year 0.1m share options were forfeited.
Equity options in issue at 31 March 2021 2,650,000
Equity options issued in the year 1,917,000
Equity options forfeited in the year (92,065)
Equity options in issue at 31 March 2022 4,474,935
Expected volatility in the current year was determined by calculating the
historical volatility of the Group's share price over the previous year, which
the Board consider to be representative of future volatility.
For the year ended 31 March 2021, due to the relative immaturity of the
Group's share history at reporting date, the volatility of comparable
companies in the same industry was utilised in the determination of future
volatility included within the model assumptions.
During the year 0.2m cash settled options were granted (2021: nil). The fair
value has been measured at the reporting date using the Black-Scholes binomial
model. Due to the proximity of the reporting date to the issue of equity
settled share options granted, the model assumptions on volatility, risk free
rate, and dividend yield used for the cash settled options do not materially
differ from those in the table above.
Year ended Year ended
31 March 31 March
2022 2021
Options issued 150,500 -
Weighted average share price (pence) 117 -
Weighted average exercise price (pence) 117 -
Vesting period (years) 3-5 -
Option life (years) 10 -
Fair value at reporting date (£'000) 80 -
Notes to the financial statements
__________________________________________________________________________________________________________________
25 Group companies
Country of
registration
% of direct shares held
Subsidiary
undertakings or
incorporation
Principal
activity
2022 2021
Calnex Americas Corporation
USA
Sales and marketing
100% 100%
Support services to
Calnex Solutions plc
26 Called up share capital
As at 31 March 2022, the Company had 87,500,000 Ordinary Shares held at a
nominal value of 0.125p.
Group and Company
Year ended Year ended
31 March 31 March
2022 2021
£'000 £'000
Ordinary shares of 0.125p each 109 109
On issue at the start of the financial year 109 25
Bonus issue of shares - 50
Share options exercised - 18
Shares issued - 16
In issue at end of the financial year 109 109
27 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 and warrants.
Year ended Year ended
31 March 31 March
2022 2021
£'000 £'000
Profit after tax attributable to shareholders 4,540 3,453
Weighted average number of ordinary shares used in calculating:
Basic earnings per share 87,500 73,762
Diluted earnings per share 90,845 82,575
Earnings per share - basic (pence) 5.19 4.68
Earnings per share - diluted (pence) 5.00 4.18
Notes to the financial statements
__________________________________________________________________________________________________________________
28 Notes to the Statement of Cashflow
Reconciliation of changes in liabilities to cashflows arising from financing
activities
Lease
liabilities Total
£'000 £'000
Balance at 31 March 2021 566 566
Lease repayment (203) (203)
Interest payments 20 20
Total changed from financing cashflows 383 383
Acquisition of new lease 474 474
Total other changes 474 474
Balance at 31 March 2022 857 857
29 Share schemes
The company operates a number of share incentive plans on behalf of its
employees, details of which can be found in the Remuneration Committee
report. Included in these are the UK Share Incentive Plan and a cash settled
phantom plan for Non-UK employees:
UK Employee Share Incentive Plan (UK SIP)
The UK SIP is an all-employee HMRC approved share plan open to employees based
in the UK. Employees can elect to invest up to £150 each month (£1,800 per
year), deducted from their gross salary, which is used to purchase shares at
market value as "partnership" shares. The Company offers participants
"matching" shares, which are subject to forfeiture for three years, on the
basis of one free matching share for each partnership share purchased.
Non-UK Employee Incentive Plan
Under the SIP Plan, shares may only be awarded to UK based employees of the
Group. As the Board also wanted to have the discretion to grant awards to
contractors and overseas employees, it was necessary to set up a separate
Non-UK Employee Incentive Plan under the rules of the Notional Plan (refer to
the Remuneration Committee Report for more detail). This Plan acts as a
non-tax advantaged shadow equity interest plan to the SIP, mirroring the SIP
awards for overseas employees and contractors with equity ownership being
replaced by cash settlement. The non-UK Employee Incentive plan is therefore
available to employees in countries other than the UK, on a cash-settled
basis. Employees can elect to save funds up to £150 each month (£1,800 per
year), deducted from their pre-tax salary, for a 12-month period, and matched
by the Group. In the cash settled model, these savings are then returned to
the participant at the prevailing market share price at the end of the savings
period, had the funds been used to purchase Calnex shares (returns being fully
funded by the Group). Employees participating in this scheme during the period
under review included those based in China, Hong Kong and India and the USA.
The fair value assessment of this obligation at the year-end was £150,000
(2021: £70,000), and is included within other creditors.
30 Dividends
All dividends are determined and paid in Pound Sterling.
Year ended Year ended
31 March 31 March
2022 2021
£'000 £'000
Declared and paid in the year
Interim dividend 2022: 0.28p per share 245 -
Proposed for approval at the AGM (not recognised as a liability at 31 March
2022)
Final/Interim dividend 2022: 0.56p per share 490 -
The Directors are proposing a final dividend with respect to the financial
year ended 31 March 2022 of 0.56p per share which will represent £490,000 of
a dividend payment. The final dividend will be proposed for approval at the
AGM and, if approved, will be paid at an agreed date shortly thereafter.
Notes to the financial statements
_________________________________________________________________________________________________________________
31 Post balance sheet events
On 11 April 2022, the Group acquired the entire share capital of iTrinegy Ltd
and its wholly owned subsidiary company iTrinegy, Inc on a 'cash free, debt
free' basis. The consideration comprises an initial cash payment of £2.5m,
with up to a further £1.0m potentially payable in a combination of new
ordinary shares in Calnex and cash (the "Earn-out Payment"). The Earn-out
Payment is subject to the achievement of certain sales targets from iTrinegy
products in the year to 31 March 2024. A maximum of 322,579 new shares will be
issued under the Earn-out Payment. The initial cash payment of £2.5m has been
financed entirely from available cash resources.
Given the proximity of the date of the acquisition to the date of signing of
these accounts, the initial accounting for the business combination remains
incomplete and the financial impact of the transaction is still to be fully
calculated.
32 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.
Year ended Year ended
31 March 31 March
2022 2021
£'000 £'000
Underlying EBITDA 6,351 5,496
Underlying EBITDA % 29% 31%
Adjusted profit before tax 5,973 5,068
Adjusted profit before tax % 27% 28%
Capitalised R&D 3,905 3,326
Adjusted basic EPS (pence) 5.19 5.83
Adjusted diluted EPS (pence) 5.00 5.21
Key performance measures:
· Underlying EBITDA: EBITDA after charging R&D amortisation,
adjusted in comparative periods also to exclude IPO costs and IPO related
share based payments
· Adjusted profit before tax: Adjusted in comparative periods to
exclude IPO costs and IPO related share based payments
· Adjusted basic & diluted EPS: Adjusted in comparative
periods to exclude IPO costs and IPO related share based payments and the tax
effect of these adjustments. As a result of the Company's admission to AIM
occurring halfway through FY21, the basic and diluted weighted average number
of shares in issue in the prior year were 73,762,000 and 82,575,000
respectively, compared with 87,500,000 total share capital and 90,150,000
diluted share capital post IPO.
32 Alternative performance measures (continued)
Reconciliation of statutory figures to alternative performance measures -
Income Statement
FY22 FY21
£000 £000
Revenue 22,046 17,978
Cost of sales (5,518) (4,013)
Gross Profit 16,528 13,965
Other income 648 530
Administrative expenses (excluding depreciation & amortisation) (7,917) (7,941)
EBITDA 9,259 6,554
Amortisation of development costs (2,908) (2,479)
Add back exceptional items:
IPO costs - 1,057
Issue of Free Shares on IPO under Share Incentive Scheme - 166
Share based payments - 198
Underlying EBITDA 6,351 5,496
Other depreciation & amortisation (358) (273)
Operating Profit 5,993 5,223
Finance costs (20) (155)
Adjusted profit before tax 5,973 5,068
Exceptional items - (1,421)
Profit before tax 5,973 3,647
Tax (1,433) (194)
Profit for the year 4,540 3,453
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