REG - Calnex Solutions PLC - Interim Results
23/11/2021 07:00
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RNS Number : 1913T Calnex Solutions PLC 23 November 2021
23 November 2021
Calnex Solutions plc
("Calnex", the "Company" or the "Group")
Interim Results
Calnex Solutions plc (AIM: CLX), a leading provider of test and measurement
solutions for the global telecommunications sector, is pleased to announce its
unaudited results for the six months ended 30 September 2021 ("H1 FY22" or
"the Period").
The Board is pleased to report that the Group has experienced continued strong
levels of trading in the first half of the year and expects this trend to
continue through the second half of the year. The Group's robust cash position
has allowed the Group to bring forward planned investment in the team to
increase operational capability, in line with order growth.
The Group continues to successfully deliver on its stated growth strategy and
the Board is confident in Calnex's ability to continue benefitting from the
underlying market growth drivers in the telecoms market.
Financial Highlights
£000 H1 FY22 H1 FY21(*) FY21 H1 YOY % change
Unaudited Unaudited Audited
Revenue 9,251 7,721 17,978 +19.8%
Underlying EBITDA (1) 2,479 2,593 5,496 -4.4%
Adjusted Profit before tax (2) 2,308 2,319 5,068 -0.5%
Adjusted basic EPS (pence)( 3) 2.05 3.02 5.83 -32.1%
Adjusted diluted EPS (pence)( 3) 1.99 2.42 5.21 -17.8%
Closing cash 13,643 4,511 12,668 +66.8%
Statutory measures:
EBITDA 3,877 3,424 6,554 +13.2%
Profit before tax 2,308 1,950 3,647 +18.4%
Basic EPS (pence)( ) 2.05 2.41 4.68 -14.9%
Diluted EPS (pence)( ) 1.99 1.93 4.18 3.1%
(*)Prior to the Company's Admission to trading on AIM, which took place on
5th October 2020
· Revenue growth of 20% on prior year to £9.3m (H1 FY21: £7.7m) as a
result of strong demand for telecoms testing equipment, ahead of management's
expectations at the start of FY22
· Planned and previously highlighted investment in product development
and operational scalability, to support future growth
· All profit measures ahead of management expectations at the start of
FY22, as a result of the strong revenue performance
· Closing cash balance of £13.6m (H1 FY21: £4.5m before 5 October
2020 IPO net proceeds of £4.9m) after positive cash flow of £0.9m in the
half year driven by strong trading performance
· Movement in EPS compared with H1 FY21 is as a result of a change in
the number of shares in issue pre and post IPO, as well as the subsequent
issue of share options in the plc business with no corresponding direct
economic value
· Maiden interim dividend of 0.28 pence per share in line with the
Board's intention to implement a progressive dividend policy in the year to 31
March 2022
Operational Highlights:
· Continued strong demand for testing instrumentation, with new product
launches having been well received
· The Group has seen a return to pre-COVID customer spending patterns
in all regions, other than in China where demand has been in line with the
previous year
· Industry regulation such as the new O-RAN standards continue to drive
the requirement for performance testing
· Increased staffing levels across business development, sales, R&D
and support roles, to support new product development and maximise exposure in
new and existing territories
· Maintained timely shipments to customers, whilst navigating the
semi-conductor component shortage
Outlook:
· Strong levels of trading seen in H1 have continued into the second
half of the year
· Demand for telecoms testing equipment remains strong
· Global semiconductor shortage is being closely monitored by the Board
but no negative impacts to date
· The Board is confident in meeting the upgraded(** )market forecasts
for the year
(**)Upgraded forecasts issued on 12 October 2021, following the Company's
Trading Update.
Tommy Cook, Chief Executive Officer, and founder of Calnex, said: "These
results mark another considerable step forward for Calnex, as we continue to
capitalise on the global telecom industry's transition to 5G and the growth of
cloud computing. The results for the first half of FY22 are materially ahead
of the Board's expectations at the start of the year, as indicated in the
Company's Trading Update issued in October 2021, and confidence levels remain
high with the early signs being that sales momentum will continue in the
second half of the year. We have invested in our team and resources and the
continued positive response to the new product launches provides optimism
towards the long-term demand for our offering.
"The breadth of our customer base across multiple regions, combined with the
ongoing successful expansion of the team, our customer relationships and
industry connections, places us in a strong position to continue to benefit
from the underlying market growth drivers in the telecoms market."
(1) EBITDA after charging R&D amortisation, adjusted in comparative
periods also to exclude IPO costs and IPO related share based payments
(2 )Adjusted in comparative periods to exclude IPO costs and IPO related share
based payments
(3) Adjusted in comparative periods to exclude IPO costs and IPO related share
based payments, and the tax effect of these adjustments
For more information, please contact:
Calnex Solutions plc Via Alma PR
Tommy Cook, Chief Executive Officer
Ashleigh Greenan, Chief Financial Officer
Cenkos Securities plc - NOMAD +44 (0)131 220 6939
Derrick Lee, Peter Lynch
Alma PR + 44(0) 20 3405 0213
Caroline Forde, Harriet Jackson, Joe Pederzolli
Overview of Calnex
Calnex designs, produces and markets test instrumentation and solutions for
network synchronization and network emulation, enabling its customers
to validate the performance of the critical infrastructure associated
with telecoms networks. To date, Calnex has secured and delivered
orders to over 600 customer sites in 68 countries across the
world. Customers include BT, China Mobile, NTT, Ericsson, Nokia, Intel,
Qualcomm, IBM and Facebook.
Founded in 2006, Calnex is headquartered in Linlithgow, Scotland, with
additional locations in Belfast, Northern Ireland and California in the US,
supported by sales teams in China and India. Calnex has a global network of
partners, providing worldwide distribution capability.
Operational Review
Calnex experienced strong trading during the Period. The 20% growth in revenue
to £9.3m (H1 FY21: £7.7m) is a result of the continued strong demand for
telecoms testing equipment across the Group's core markets. Revenues from the
Americas region increased 22%, whilst the Rest of the World experienced a 33%
uplift. North Asia remained flat due in part to the ongoing geopolitical
tensions between the US and China. Given the overall growth in revenues, the
geographical revenue split has shifted slightly in the first six months, with
Americas now accounting for 35% of total revenues (FY21: 32%), ROW 41% (FY21:
35%) and North Asia 24% (FY21: 33%).
The transition to 5G and growth in cloud computing continue to drive demand
for test instrumentation, from both new and existing customers, across each of
the Group's customer categories. Factors driving the strong performance
include a sustained positive response to the launch of the enhanced
Paragon-Neo, Calnex's Lab Sync platform which is being adopted both by
existing customers and new customers looking to deliver products addressing
the new O-RAN standards. The latest version of Sentinel, Calnex's Field Sync
platform, has also seen strong uptake from the telecoms customer base, plus
hyperscale and enterprise customers who are investing in their own data centre
operations.
The Group's adjusted profit before tax held steady at £2.3m (H1 FY21:
£2.3m), ahead of the Board's expectations for the Period at the start of
FY22, reflecting the uplift in revenues and the Group's on-going investment in
the business. During the first six months the Group has invested in business
development resources, placing more sales team members in regions that are
experiencing strong growth, such as the US and India, as well as adding to the
operational teams to support growth.
The Group has not experienced any negative impact on product shipments from
the ongoing global semiconductor shortage to date, however the Board continues
to monitor the situation closely. Calnex's ability to maintain shipments on
time in the current climate is testament to the strong partnership with the
Group's contract manufacturer, Kelvinside Electronics, as well as the
abilities and skills of the Calnex team who are successfully navigating this
dynamic situation.
Strategy
Product development
Continued product innovation has allowed the Group to execute on its growth
strategy to capitalise on the transition to 5G. Calnex has experienced strong
demand for its Lab Synchronisation solutions, with its newly launched enhanced
Paragon-Neo Lab Sync Platform, a very high-speed interface, seeing strong
early orders as existing customers and new customers look to deliver products
addressing the new O-RAN (Radio Access Network) standards. O-RAN is an
industry initiative designed to open the RAN (Open Radio Access Network)
network to wider vendor competition, which is leading to new companies
entering the market, as well as additional developments with the established
vendors creating products aligned to the O-RAN Implementation Recommendations.
The release in June of the new 5G OTA (Over-the-air) capability in Sentinel,
Calnex's Field Sync solution, has experienced significant uptake from the
telecoms customer base. This second-generation OTA implementation addresses
3G, 4G and the emerging 5G signal formats, and is driving growth in the
telecoms market space. In addition, sales to hyperscale customers who are
investing in their data centre operations continue to grow. The implementation
of time distribution across data centres is creating a secondary market for
testing of time distribution accuracy inside data centres. Together, both have
meant that Calnex's Sentinel product has delivered ahead of target performance
with a positive outlook moving forward.
The O-RAN initiative is also having a positive impact on Cloud & IT
product lines as it requires testing using Network Emulators to prove
interoperation between the various network elements defined by O-RAN.
Select M&A opportunities
Targeted acquisitions remain a favourable route to growth to complement the
Group's organic growth. The Board continually assesses the market for select
M&A opportunities, against strict criteria to ensure that any acquisitions
are strategic and earnings enhancing. Opportunities that the Board would
consider include complementary products or technologies that can enhance
Calnex's existing portfolio, or where the acquisition target provides the
Group with access to a related or adjacent growth market.
Market Opportunity
The requirement for design validation, and conformance and maintenance testing
is more prevalent than ever as new standards and technology movements drive
the need for network operators, equipment and component vendors and
hyperscale/enterprise customers to validate equipment and network performance.
Such evolutionary trends affecting the telecoms sector underpin Group-wide
confidence in making further progress during the current financial year and
beyond.
At present, a considerable market opportunity lies within the role that 5G
will have to play in supporting the introduction of new services that need
higher quality connections, such as autonomous vehicles, as well as mobile
phones and smart devices. Additionally, the testing market will grow in
influence hand in hand with the growth in the number of data centres operated
by enterprise and hyperscale companies.
People
We continue to invest in talent globally, to support and enhance the fantastic
work of our team, whose commitment continues to drive the business forward.
Such investment in talent, particularly within the R&D division, is part
of the Group's on-going growth strategy and will continue to be a big part of
our investment over the coming period. We have hired 19 new staff over the
last 12 months, bringing our total headcount to 113. The recruitment market
remains challenging with many companies seeking to hire; however, at present
Calnex continues to be able to attract talent. The Company is also utilising
its overseas sponsor license to hire from outside of the UK to strengthen its
teams.
In August, the Company recruited a new Vice President of Operations who is
tasked with advancing Calnex's internal manufacturing capabilities. These
activities will enhance processes and procedures to ensure the Group's
manufacturing capacity continues to evolve in a sustainable way. Such
investment is aligned with our growth strategy, and we expect this to continue
in the coming period as we scale the business.
Our staff are gradually returning to the office under the hybrid model and our
experiences from the enforced lockdowns have allowed us to enhance our working
environment for all. Whilst travel costs associated with customer site visits
have remained low during the Period, the sales team are slowly starting to
hold face-to-face customer interaction again.
The Board is delighted to report that the Company was awarded a Gold standard
accreditation from Investors in People in June 2021, a rare achievement for
companies from their first assessment by IIP. This provides recognition of
Calnex as an organisation with the very best in people management excellence.
Outlook
These results mark another considerable step forward for Calnex, as the Group
continues to capitalise on the global telecom industry's transition to 5G and
the growth of cloud computing. Confidence levels are high throughout the
Group, with an anticipation that sales momentum will continue in the second
half of the year. The continued positive response to the new product launches
provides optimism towards the long-term demand for our offering.
While Calnex has not experienced any negative impact from the ongoing global
semiconductor shortage on the ability to manufacture and ship product, the
Board continues to monitor the situation closely.
The breadth of Calnex's customer base across multiple regions, combined with
the ongoing successful expansion of the team, the Group's customer
relationships and industry connections, places Calnex in a strong position to
continue to benefit from the underlying market growth drivers in the telecoms
market.
The Board is confident in meeting the upgraded(**) market forecasts for the
year
(**)upgraded forecasts issued on 12 October 2021, following the Company's
Trading Update
Financial Review
The Group delivered a strong financial performance in the six months to 30
September 2021, with results materially exceeding management revenue and
profit expectations set out at the start of FY22.
Key performance indicators
£000 H1 FY22 H1 FY21 FY21
Unaudited Unaudited Audited
Revenue 9,251 7,721 17,978
Gross Profit 7,046 6,031 13,965
Gross Margin 76% 78% 78%
Underlying EBITDA (1) 2,479 2,593 5,496
Underlying EBITDA % 27% 34% 31%
Adjusted Profit before tax (2) 2,308 2,319 5,068
Adjusted Profit before tax % 25% 30% 28%
Closing cash 13,643 4,511 12,668
Capitalised R&D 1,904 1,484 3,326
Adjusted basic EPS (pence) (3) 2.05 3.02 5.83
Adjusted diluted EPS (pence) (3) 1.99 2.42 5.21
Statutory measures:
EBITDA 3,877 3,424 6,554
EBITDA % 42% 44% 36%
Profit before tax 2,308 1,950 3,647
Profit before tax % 25% 25% 20%
Basic EPS (pence) 2.05 2.41 4.68
Diluted EPS (pence) 1.99 1.93 4.18
(1 )EBITDA after charging R&D amortisation, adjusted in comparative
periods also to exclude IPO costs and IPO related share based payments.
(2 )Adjusted in comparative periods to exclude IPO costs and IPO related share
based payments.
(3) Adjusted in comparative periods to exclude IPO costs and IPO related share
based payments and the tax effect of these adjustments
The table below shows the reconciliation between the statutory reported income
statement and the adjusted income statement:
Reconciliation of statutory figures to alternative performance measures
H1 FY22 H1 FY21 FY21
£000 Unaudited Unaudited Audited
Revenue 9,251 7,721 17,978
Cost of sales (2,205) (1,689) (4,013)
Gross Profit 7,046 6,031 13,965
Other income 93 103 530
Administrative expenses (excl depreciation & amortisation) (3,262) (2,710) (7,941)
EBITDA 3,877 3,424 6,554
Amortisation of development costs (1,398) (1,200) (2,479)
Add back exceptional items:
IPO costs - 171 1,057
IPO related share based payments - 198 198
Issue of SIP Free Shares on IPO - - 166
Underlying EBITDA 2,479 2,593 5,496
Other depreciation & amortisation (160) (135) (273)
Operating Profit 2,319 2,458 5,223
Finance expense (11) (139) (155)
Adjusted profit before tax 2,308 2,319 5,068
Exceptional items - (369) (1,421)
Profit before tax 2,308 1,950 3,647
Tax (512) (505) (194)
Profit for the Period 1,796 1,444 3,453
Revenue
Revenue recognised in first half of the year was £9.3m, representing 20%
growth on H1 FY21 revenue of £7.7m and a significant increase on targets set
at the beginning of the financial year. Order intake and revenue increased
across all three product lines. Revenues to the Americas and Rest of the World
increased, with North Asia experiencing a flattening of revenues in the Period
reflecting the ongoing US-China geopolitical tensions, which are also
exacerbating the component shortage issues in the region. Revenue in H2 FY22
is expected to grow further on the first half of the year, as a result of the
healthy closing backlog at 30 September 2021 and the strong pipeline of orders
for H2 FY22.
Gross Margin
Gross margin in the Period was 76% (H1 FY21: 78%) and is in line with
management expectations for this point in the year. This gross margin is net
of commissions payable to our channel partners. Gross margins can fluctuate by
1-2% through the year depending on the mix of products and the mix of the
hardware and software bundles shipped, so can differ slightly when comparing
the half year periods.
Underlying EBITDA
Underlying EBITDA is stated after charging R&D amortisation, also adjusted
in the comparative periods to exclude IPO costs and IPO related share based
payments.
Underlying EBITDA was £2.5m in the Period (H1 FY21: £2.6m) which represents
a material increase on initial management expectations at the beginning of
FY22, driven by the strong revenue performance. Underlying EBITDA margin was
27% (H1 FY21: 34%), several percentage points above the original target for
this point in the year. The variance against the prior period is driven by the
planned step change in our cost base for FY22 as a result of investment to
support the continued growth of the business.
Administration costs excluding depreciation and amortisation (adjusted in
prior periods to exclude IPO costs and IPO related share based payments) were
£3.3m in H1 FY22 (H1 FY21: £2.3m). This variance in costs predominantly
relates to the planned increase in sales, support and executive management
headcount in line with our growth strategy. New hires, in line with growth
expectations at the start of the year, are predominantly to support the
expansion of our internal manufacturing capacity and to further enhance our
sales team across the regions.
We initially expected travel costs to increase in H1 this year as a result of
COVID restrictions being eased. This increase did not materialise as travel
restrictions were predominantly still in place throughout the Period. We
expect travel costs to increase in H2 FY22 as restrictions ease and an
increase in face to face customer meetings return.
Amortisation of R&D costs in H1 FY22 were £1.4m (H1 FY21: £1.2m). The
increase on the prior period is due to planned increases in R&D
headcount to support new and ongoing projects.
Adjusted Profit before tax
Adjusted Profit before tax (with comparative periods adjusted to exclude IPO
costs and IPO related share based payments) was £2.3m in the Period (H1 FY21
£2.3m).
Tax
The tax charge for the Period was £0.5m (H1 FY21: £0.5m) representing an
effective tax rate of 22.2% (H1 FY21: 25.9%).
The Finance Act 2021, now substantively enacted, increases the UK corporation
tax rate from 19% to 25% effective 1 April 2023. As a result, the Company's
deferred tax assets and liabilities have been measured using the tax rates
that are expected to apply when the reversal of the timing differences takes
place. Using this methodology, an effective hybrid tax rate has been
calculated (offset partially by the availability of R&D tax credits) and
we expect this rate to be aligned to the effective tax rate for the full year.
Earnings per share
Basic earnings per share (adjusted in the comparative periods to exclude IPO
costs and IPO related share based payments and the tax effect of these
adjustments) was 2.05 pence in the Period (H1 FY21: 3.02 pence) and diluted
earnings per share (adjusted in the comparative periods to exclude IPO costs
and IPO related share based payments and the tax effect of these adjustments)
was 1.99 pence (H1 FY21: 2.42 pence).
The reduction in earnings per share compared with the prior period is as a
result of a change in the weighted average number of shares in issue pre and
post the 5 October 2020 listing of the Company's Ordinary Shares on the AIM
market of the London Stock Exchange, and the issue of share options since the
listing. The weighted average number of shares in issue at 30 September 2021
takes into account the 27,475,897 shares issued on IPO, of which 14,975,897
were issued in exercise of share options and warrants with no corresponding
direct economic value. There were also 3,122,500 share options issued since
the listing (472,500 issued since 31 March 2021), with no corresponding direct
economic value, further increasing the weighted average diluted share capital
at the end of the Period.
Cashflows
The Group generated £0.9m cash in H1 FY22 (H1 FY21: £0.9m), reflecting the
strong trading in the Period and was, as with the performance in the income
statement, significantly ahead of management expectations at the start of
FY22.
Net cash from operating activities was £3.1m in the Period (H1 FY21: £2.9m).
Working capital movements represented a cash outflow of £0.7m (H1 FY21:
£0.7m), largely driven by movements in trade and other receivables as a
result of timing and volume of shipping and invoicing to customers.
Cash used in investing activities is principally cash spent on R&D
activities which is capitalised and amortised over five years. Investment in
R&D in the Period was £1.9m (H1 FY21: £1.5m), reflecting the growth in
the team as R&D project resource demands increased as planned.
Cash spend on financing activities in the Period was £0.1m (H1 FY21: £0.6m),
representing payment of lease obligations. There is currently no debt on the
balance sheet, leading to no borrowings related cashflows in the current
period.
Closing cash at 30 September 2021 was £13.6m (30 September 2020: £4.5m; 31
March 2021: £12.7m).
Dividend
The Board has resolved to pay a maiden interim dividend of 0.28 pence per
ordinary share on 17 December 2021 to those shareholders on the register as at
3 December 2021 (FY21 Interim dividend 0p). The ex-dividend date is 2 December
2021.
Calnex Solutions plc
Consolidated income statement
For the period ended 30 September 2021
6 months to 6 months to Year ended
30 Sep 2021 30 Sep 2020 31 Mar 2021
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Revenue 5 9,251 7,721 17,978
Cost of sales (2,205) (1,690) (4,013)
Gross profit 7,046 6,031 13,965
Other income 93 103 530
Administrative expenses (4,820) (4,045) (10,693)
Operating profit 2,319 2,089 3,802
Presented as:
EBITDA 3,877 3,424 6,554
Depreciation and amortisation of non-R&D assets (160) (135) (273)
Amortisation of R&D asset (1,398) (1,200) (2,479)
Operating profit 2,319 2,089 3,802
Finance costs 6 (11) (139) (155)
Profit before taxation 2,308 1,950 3,647
Taxation 7 (512) (505) (194)
Profit and total comprehensive income for the year 1,796 1,445 3,453
Earnings per share (pence)
Basic earnings per share 8 2.05 2.41 4.68
Diluted earnings per share 8 1.99 1.93 4.18
Calnex Solutions plc
Consolidated statement of financial position
For the period ended 30 September 2021
6 months to 6 months to Year ended
30 Sep 2021 30 Sep 2020 31 Mar 2021
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Non-current assets
Intangible assets 9 7,982 7,009 7,525
Property, plant and equipment 10 158 19 22
Right of use assets 11 541 602 522
Deferred tax asset 730 250 613
9,411 7,880 8,682
Current assets
Inventory 12 1,189 1,226 1,111
Trade and other receivables 13 2,414 2,148 1,819
Cash and cash equivalents 14 13,643 4,511 12,668
17,246 7,885 15,598
Total assets 26,657 15,765 24,280
Current liabilities
Borrowings - 719 -
Trade and other payables 15 4,182 2,582 4,181
Lease liability payable within one year 11 175 162 130
Financial liabilities - 52 -
Provisions 16 291 298 291
4,648 3,813 4,602
Non-current liabilities
Borrowings - 1,217 -
Trade and other payables 15 868 349 749
Lease liabilities payable later than one year 11 417 469 436
Deferred tax liability 1,650 1,260 1,321
Provisions 16 15 15 15
2,950 3,310 2,521
Total liabilities 7,598 7,123 7,123
Net assets 19,059 8,642 17,157
Equity
Share capital 109 75 109
Share premium 7,484 1,138 7,484
Share option reserve 232 266 126
Retained earnings 11,234 7,163 9,438
Total equity 19,059 8,642 17,157
Calnex Solutions plc
Consolidated statement of cashflows
For the period ended 30 September 2021
6 months to 6 months to Year ended
30 Sep 2021 30 Sep 2020 31 Mar 2021
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Cashflow from operating activities
Profit before tax from continuing operations 2,308 1,950 3,647
Adjusted for
IPO professional fees and commissions - 171 1,057
Finance costs 11 139 155
Foreign exchange differences - 34 (65)
Government grant income (93) (103) (204)
R&D tax credit income - - (326)
Change in fair value of assets & liabilities - - 144
Movement in obsolescence provision (16) 89 25
Movement in provisions - 9 (14)
Share based payment transactions 105 198 275
Depreciation 160 82 167
Amortisation 1,398 1,253 2,585
Movement in inventories (63) (356) (178)
Movement in trade and other receivables (595) 141 818
Movement in trade and other payables (74) (356) 1,271
Net cash used in discontinued operations - (202) (201)
Cash generated from operations 3,141 3,049 9,156
Interest paid (11) (154) (107)
Net cash from operating activities 3,130 2,895 9,049
Investing activities
Purchase of intangible assets (1,904) (1,484) (3,332)
Purchase of property, plant and equipment (154) (3) (10)
Net cash used in investing activities (2,058) (1,487) (3,342)
Financing activities
Repayment of borrowings - (340) (2,276)
Payment of lease obligations (97) (64) (193)
Share issue proceeds - - 6,000
Share options proceeds - - 328
IPO professional fees and commissions - (171) (1,057)
Payment of deferred consideration - (82) (83)
Government grant income - 96 578
Net cash from financing activities (97) (561) 3,297
Net increase in cash and cash equivalents 975 847 9,004
Cash and cash equivalents at the beginning of the period 12,668 3,664 3,664
Cash and cash equivalents at the end of the period 13,643 4,511 12,668
Calnex Solutions plc
Consolidated statement of changes in equity
For the period ended 30 September 2021
Share Share premium Share option reserve Retained earnings Total
capital equity
£'000 £'000 £'000 £'000 £'000
Balance at 30 September 2020 75 1,138 266 7,163 8,642
Share options 18 362 (140) 266 506
Share Issue 5,984 - - 6,000
16
- - - 2,009 2,009
Profit for period ended 31 March 2021
Balance at 31 March 2021 109 7,484 126 9,438 17,157
Share options - - 106 - 106
Profit for period ended 30 September 2021 - - - 1,796 1,796
Balance at 30 September 2021 109 7,484 232 11,234 19,059
Calnex Solutions plc
Notes to the interim consolidated financial statements
For the period ended 30 September 2021
1. General information
The interim consolidated financial statements cover the consolidated entity
Calnex Solutions plc and the entities it controlled at the end of, or during,
the interim period to 30 September 2021 ("the Group").
Calnex Solutions plc ("the Company") is a public limited company and is
domiciled and incorporated in Scotland.
The registered office is:
Oracle Campus
Linlithgow
West Lothian
EH49 7LR
The principal activity of the Group is the design, production and marketing of
test instrumentation and solutions for network synchronisation and network
emulation.
The interim consolidated financial statements for the period ended 30
September 2021 are unaudited, and do not constitute statutory accounts as
defined in section 434 of the Companies Act 2006. They do not therefore
include all the information and disclosures required in annual statutory
financial statements and should be read in conjunction with the
Group annual report and accounts for the year ended 31 March 2021.
The Group annual report and accounts for the year ended 31 March 2021 were
approved by the Board of Directors on 24 May 2021 and have been delivered to
the Registrar of Companies. The auditor's report on those accounts was
unqualified, did not draw attention to any matters by way of emphasis and did
not contain a statement made under Section 498(2) or (3) of the Companies Act
2006.
The interim consolidated financial statements for the period ended 30
September 2021 were approved by the Board of Directors on 22 November 2022.
2. Basis of preparation
The interim consolidated financial statements for the period ended 30
September 2021 have been prepared in accordance with IAS 34 'Interim Financial
Reporting' as issued by the International Accounting Standards Board, endorsed
by and adopted for use in the United Kingdom.
The accounting policies and methods of computation adopted are consistent with
those applied in the Group's consolidated financial statements for the year
ended 31 March 2021 and have been applied consistently to all periods
presented.
There have been no new standards or amendments to existing standards effective
from 1 April 2021 that are applicable to the Group or that has had any
material impact on the financial statements and related notes as at 30
September 2021. The Directors do not anticipate that the adoption of any of
the new standards and interpretations issued by the IASB and IFRIC with an
effective date for the Group after the date of these interim financial
statements will have a material impact on the Group's interim financial
statements in the period of initial application.
3. Going concern
The interim consolidated financial statements have been prepared on the basis
that the Company will continue as a going concern.
The business has not seen any detrimental impact on trading as a result of the
COVID-19 pandemic and the Group has not required the assistance of government
funding. Appropriate safety measures have been put in place to protect staff
while the Group continues to operate in line with government guidance across
our various locations. The Directors continue to closely monitor the
situation, with rolling cashflow forecasting and visibility over the order
pipeline being key to provide early indication of required action in order to
mitigate against any future risk of further lockdowns or new virus threats.
The Board has reviewed financial profit and cashflow forecasts for the current
and succeeding financial years to 31 March 2023. Based on this review, along
with regular oversight of the Company's risk management framework, the Board
has concluded that given the Company's cash reserves available and access to
additional liquidity through banking facilities, the Company will continue to
trade as a going concern.
4. Operating segments
Operating segments are based on the internal reports that are reviewed and
used by the Board of Directors (who are identified as the Chief Operating
Decision Makers) in assessing performance and determining the allocation of
resources. As the Group has a central cost structure and a central pool of
assets and liabilities, the Board of Directors do not consider segmentation in
their review of costs or the balance sheet. The only operating segment
information reviewed, and therefore disclosed, are the revenues derived from
different geographies.
6 months to 6 months to Year ended
30 Sep 2021 30 Sep 2020 31 Mar 2021
£'000 £'000 £'000
Americas 3,293 2,704 5,767
North Asia 2,140 2,145 5,945
ROW 3,818 2,872 6,266
Total revenue 9,251 7,721 17,978
5. Revenue
6 months to 6 months to Year ended
30 Sep 2021 30 Sep 2020 31 Mar 2021
£'000 £'000 £'000
Sale of goods 8,268 7,173 16,509
Rendering of services 983 548 1,469
Total revenue 9,251 7,721 17,978
6. Finance costs
6 months to 6 months to Year ended
30 Sep 2021 30 Sep 2020 31 Mar 2021
£'000 £'000 £'000
Interest expense for borrowings at amortised cost - 120 107
Interest expense on lease liabilities 11 34 63
Unwinding on discount for deferred consideration - (15) (15)
Total finance costs 11 139 155
7. Taxation
6 months to 6 months to Year ended
30 Sep 2021 30 Sep 2020 31 Mar 2021
£'000 £'000 £'000
Current taxation
UK corporation tax on profits for the period 291 - 67
Foreign current tax expense 5 32 12
Adjustments relating to prior years - - (9)
Deferred taxation
Effect of timing differences 104 473 61
Adjustments relating to prior years - - 63
Effects of changes in tax rate 112 - -
Taxation charge 512 505 194
Profit before tax for the year 2,308 1,950 3,647
Effective tax rate 22% 26% 5%
The effective tax rate forecast at 30 September 2020 for the year ended 31
March 2021 was 26%, influenced predominantly by significant non-allowable
expenditure projected ahead of the Company listing on the AIM on 5(th) October
2020.
The actual effective tax rate for the year ended 31 March 2021 was 5%. The
delta between the rates at half year and year end being driven by:
· Tax relief on exercise of share options on IPO, on which no
deferred tax asset had previously been recognised (reduction of 16% on
effective tax rate)
· Availability of R&D SME enhanced deduction which had not been
claimed in the prior period (reduction of 4% on effective tax rate)
· Other cumulative variances (1% reduction on the effective tax
rate)
The effective tax rate forecast at 30 September 2021 for the year ended 31
March 2022 is 22%. The Finance Act 2021, now substantively enacted, increases
the UK corporation tax rate from 19% to 25% effective 1 April 2023. In
accordance with IAS 12: (Income Taxes) the deferred tax assets and liabilities
have been measured using the tax rates that are expected to apply when the
reversal of the timing differences takes place.
8. Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable
to ordinary shareholders by the weighted average number of Ordinary Shares in
issue during the year.
Diluted earnings per share is calculated by dividing the earnings attributable
to ordinary shareholders by the total of the weighted average number of
Ordinary Shares in issue during the year and adjusting for the dilutive
potential Ordinary Shares relating to share options.
6 months to 6 months to Year ended
30 Sep 2021 30 Sep 2020 31 Mar 2021
£'000 £'000 £'000
Profit after tax attributable to shareholders 1,796 1,445 3,453
Weighted average number of shares used in calculation:
Basic earnings per share 87,500 60,024 73,672
Diluted earnings per share 90,375 75,000 82,575
Earnings per share - basic (pence) 2.05 2.41 4.68
Earnings per share - diluted (pence) 1.99 1.93 4.18
9. Intangible Assets
Included within intangible assets are the following significant items:
· Intellectual property representing the cost of patent
applications and on-going patent maintenance fees.
· Capitalised development costs representing expenditure relating
to technological advancements on the core product base of the Group. These
costs meet the requirement of IAS 38 (Intangible Assets) and will be amortised
over the future commercial life of the related product. Amortisation is
charged to administrative expenses.
Intellectual Development
property Costs Total
£'000 £'000 £'000
Cost
At 1 April 2021 2,348 24,438 26,786
Additions 4 1,904 1,908
Disposals - - -
At 30 September 2021 2,352 26,342 28,694
Amortisation
Balance at 1 April 2021 2,140 17,121 19,261
Charge for the period 53 1,398 1,451
Eliminated on disposal - - -
At 30 September 2021 2,193 18,519 20,712
Net book value
31 March 2021 208 7,317 7,525
30 September 2021 159 7,823 7,982
10. Property, plant and equipment
The Group annually reviews the carrying value of tangible fixed assets
recognising the expected working lives of the plant and equipment available to
the Group and known requirements. Depreciation is charged to administrative
expenses.
Plant and
equipment
total
£'000
Cost
At 1 April 2021 120
Additions 151
Disposals (35)
At 30 September 2021 236
Amortisation
Balance at 1 April 2021 98
Charge for the period 15
Eliminated on disposal (35)
At 30 September 2021 78
Net book value
31 March 2021 22
30 September 2021 158
11. Leases
The Group has recognised a right-of use asset and a lease liability for the
lease of land and buildings for its head office in Linlithgow, Scotland.
The Group leases IT equipment with contract terms ranging between 1 to 2
years. The Group has recognised right-of use assets and lease liabilities
for these leases.
The Group also leases land and buildings in Belfast and one motor vehicle.
These leases are low-value, so have been expensed as incurred. The Group has
elected not to recognise right‑of‑use assets and lease liabilities for
these leases.
Information about the right of use assets and leases for which the Group is a
lessee is presented below:
6 months to 6 months to Year ended
30 Sep 2021 30 Sep 2020 31 Mar 2021
£'000 £'000 £'000
Right of use assets
NBV brought forward in the period 522 660 660
Additions to right of use assets for the period 112 20 20
Depreciation charge for the period (93) (78) (158)
NBV carried forward for the period 541 602 522
6 months to 6 months to 6 months to
30 Sep 2021 30 Sep 2020 30 Sep 2021
£'000 £'000 £'000
Lease liabilities
Balance brought forward in the period 566 676 676
Lease additions for the period 112 20 20
Payment of lease expense (97) (99) (193)
Interest on lease expense 11 34 63
Balance carried forward for the period 592 631 566
Represented as:
Due within 1 year 175 162 130
Due in more than 1 year 417 469 436
Total amounts due 592 631 566
12. Inventory
6 months to 6 months to Year ended
30 Sep 2021 30 Sep 2020 31 Mar 2021
£'000 £'000 £'000
Finished goods 1,452 1,568 1,390
Provision for obsolescence (263) (342) (279)
1,189 1,226 1,111
Group inventories reflect the following movement in provision for
obsolescence:
At start of the financial year 279 253 253
Utilised (48) (98) (98)
Provided 32 187 124
At end of the financial year 263 342 279
13. Trade and other receivables
Trade receivables are consistent with trading levels across the Group and are
also affected by exchange rate fluctuations.
No interest is charged on the trade receivables.
The Group has reviewed for estimated irrecoverable amounts in accordance with
its accounting policy, and at the balance sheet date, there are no amounts
outstanding beyond agreed credit terms.
6 months to 6 months to Year ended
30 Sep 2021 30 Sep 2020 31 Mar 2021
£'000 £'000 £'000
Trade receivables 1,538 1,670 988
Less provision for bad debt - (16) -
Other receivables 691 110 700
Prepayments and accrued income 185 384 131
2,414 2,148 1,819
The Directors consider that the carrying amount of trade and other receivables
approximates their fair value.
14. Cash and cash equivalents
Cash and cash equivalent amounts included in the Consolidated Statement of
Cashflows comprise the following:
6 months to 6 months to Year ended
30 Sep 2021 30 Sep 2020 31 Mar 2021
£'000 £'000 £'000
Cash at bank 7,131 4,511 7,668
Cash on short term deposit 6,512 - 5,000
Total cash and cash equivalents 13,643 4,511 12,668
Short term cash deposits of £6,511,647 are callable on a notice of 95 days.
15. Trade and other payables
Trade and other payables are consistent with trading levels across the Group
but are also affected by exchange rate fluctuations. Trade payables and
accruals principally comprise amounts outstanding for trade purchases and
ongoing costs. The Group has financial risk management policies in place to
ensure all payables are paid within the agreed credit terms.
Deferred income relates to fees received for ongoing services to be recognised
over the life of the service rendered.
6 months to 6 months to Year ended
30 Sep 2021 30 Sep 2020 31 Mar 2021
£'000 £'000 £'000
Trade payables 884 909 944
Taxes 131 112 126
Other payables 172 50 51
Accruals 1,481 312 1,561
Deferred income 1,514 1,199 1,499
4,182 2,582 4,181
Amounts due in more than one year
Deferred income 868 349 749
Total amounts due 5,050 2,931 4,930
The Directors consider that the carrying amount of trade and other payables
approximates their fair value.
16. Provisions
Current provisions are recognised in respect of potential payments to be made
to overseas tax authorities, and potential payments to be made in respect of
dilapidations on leased assets. No discount is recorded on recognition of the
provisions or unwound due to the short-term nature of the expected outflow and
the low value and estimable nature of the non-current element.
6 months to 6 months to Year ended
30 Sep 2021 30 Sep 2020 31 Mar 2021
£'000 £'000 £'000
Current provisions
Overseas tax 291 298 291
Non-current provisions
Dilapidations 15 15 15
Total provisions 306 313 306
17. Alternative performance measures
The performance of the Group is assessed using a variety of performance
measures, including APMs which are presented to provide users with additional
financial information that is regularly reviewed by the Board of Directors.
These APMs are not defined under IFRS and therefore may not be directly
comparable with similarly identified measures used by other companies.
6 months to 6 months to Year ended
30 Sep 2021 30 Sep 2020 31 Mar 2021
£'000 £'000 £'000
Underlying EBITDA 2,480 2,593 5,496
Underlying EBITDA % 27% 34% 31%
Adjusted profit before tax 2,308 2,319 5,068
Adjusted profit before tax % 25% 30% 28%
Adjusted basic EPS (pence) 2.05 3.02 5.83
Adjusted diluted EPS (pence) 1.99 2.42 5.21
Capitalised R&D spend 1,904 1,484 3,326
· Underlying EBITDA: EBITDA including R&D amortisation, adjusted to
exclude discontinued operations and IPO transaction costs and IPO related
share based payments
· Adjusted profit before tax: Adjusted to exclude discontinued
operations, IPO transaction costs and IPO related share based payments
· Adjusted basic and diluted EPS Adjusted to exclude discontinued
operations, IPO related costs and the tax effect of these adjustments
18. Post balance sheet event
The Board has resolved to pay a maiden interim dividend of 0.28 pence per
ordinary share on 17 December 2021 to those shareholders on the register as at
3 December 2021 (FY21 Interim dividend 0p). The ex-dividend date is 2 December
2021.
19. Availability of Interim Report
The Company's Interim Report for the six months ended 30 September 2021 will
be available to view on the Company's website (www.calnexsol.com).
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