REG - Concurrent Tech. - Interim Results
26/09/2022 07:00
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RNS Number : 5353A Concurrent Technologies PLC 26 September 2022
This announcement contains inside information
Concurrent Technologies PLC
(the "Company")
Interim Results for the six months ended 30 June 2022
Concurrent Technologies PLC (AIM: CNC), a world leading specialist in high-end
embedded computer products for critical applications, announces its interim
results for the six months to 30 June 2022 ("H1 2022").
Financial Performance
Component supply issues have delayed shipping of some of the Company's
products, such that a proportion of expected H1 2022 revenues will be
recognised in a later period. However, this is a short-term issue and in no
way relates to the quality of the underlying business. Demand for the
Company's products is higher than ever with a strong H1 order book (£14.2M)
and record backlog (£20.3M).
· Revenue of £7.4M (H1 2021: £9.3M) - reduced solely as a result of
components supply issues
· Gross profit of £3.7M (H1 2021: £5.1M)
· Gross margin of 50.4% (H1 2021: 54.3%) - reduced as the result of
price increases of some components due to high demand and limited supply
(-£0.3M against H1 revenue)
· Operating profit of £0.1M (H1 2021: £1.6M) - predominantly driven
by revenue/gross margin variance of -£1.4M; net costs increased by c£0.2M,
in line with investment strategy
· Profit before tax of £0.0M (H1 2021: £1.6M)
· EPS of 0.75 pence (H1 2021: 2.09 pence)
· Interim dividend suspended for H1 2022 (H1 2021: 1.15 pence per
share)
· Cash Balance (including cash deposits) as at 30 June 2022 of £9.3M
(31(st) Dec 2021: £11.8M)
o reduced due to lower cashflow from operations of £0.6M, and continued
investment of £3M, in line with our strategy
o R&D investment will continue into H2 2022 at a similar level as H1
2022
Operational Summary
· Strong order intake of £14.2M as at 30 June 2022, with significant
backlog of £20.3M compared to £15.6M backlog as at 30 June 2021, up 30%
· Defence is largest market sector at 76% revenue
· Global customer base is solid with exports generating 90% of revenue
· R&D costs (talent, improved process & analysis, materials)
have increased by 50% to £2.4M (H1 2021 £1.6M), in line with stated strategy
to enhance the number of product releases per annum and reflect the more
complex nature of our offerings
· Three new products launched in H1 2022 and on track to launch eight
new products during FY2022 (approx. double previous cadence)
· Component shortages have been exceptionally challenging, causing a
significant limitation to our ability to ship product
· Major new order with a Fortune 500 medical company with a $2.3M
purchase order in 2022 and similar sized orders anticipated for several years
to come
· Experienced leadership team fully in place
· New office opened in Theale to attract and retain talent
· 20% increase in headcount, in line with strategy, to enhance new
product delivery and support our path to growth
Miles Adcock, CEO of Concurrent Technologies, commented: "Short term component
availability is resulting in constrained performance in FY2022, with limited
visibility of exactly when it will ease. However, order intake is strong,
and would otherwise reflect in a solid improvement in revenues. Order intake
should strengthen further as strategic initiatives take effect in FY2023 and
beyond. Post period end, total order intake has further strengthened to
£20.8M, producing a current backlog of £24.2M as at 12 September 2022. After
more than a full year now leading this business, I am even more confident in
our ability to grow and develop a successful global enterprise."
CHAIRMAN'S STATEMENT
Whilst it is clearly disappointing the component supply issue has impacted on
our revenues and profitability in the first half of 2022, which will continue
in the second half of the year, it is important not to lose sight of the
improving underlying fundamentals of the business, demonstrated in our product
development, new customers, order intake, backlog and management strength.
The component supply issues will ease and, although we can't be sure exactly
when, when they do we are well positioned to benefit from all the underlying
fundamentals highlighted, which will drive long term growth.
The cash position of the Company remains strong, which has allowed us to
continue to invest in engineering and product development. The long term
success of any technology company is bringing innovative new products to
market first and that is, and will remain, our focus.
Given the strong balance sheet, paying an interim dividend out of historical
retained earnings was considered. However, paying dividends from current
year earnings is an important discipline we wish to maintain. We are committed
to paying a dividend and our shareholders will see the benefit of this as we
drive growth in the coming years.
CHIEF EXECUTIVE'S REVIEW
Financial Summary
The Company has continued to operate in a very challenging environment in H1
2022. The global component shortage impacts the entire electronics sector and
has had a significant impact on short term performance. The delay in
completing the full manufacture of certain products, and a consequent delay in
their shipping, has resulted in deferred invoicing and a corresponding
reduction in revenue in the period against the prior year by 20% to £7.4M (H1
2021: £9.3M).
It is important to note that the impacted revenue is delayed and not lost, and
we continue to recognise an exceptional backlog. We have strong relationships
with our customers and are driving the pace for delivery. It is recognised by
the customer base that the issues are driven by external factors (which all
our competitors are also facing).
Demand driven increase in the costs of some components has also resulted in a
reduction in gross margin of c.7% from 54.3% to 50.4%. Both revenue and
gross margin impacts are solely driven by component shortages and are not a
reflection of the quality of our underlying business. We have delivered an
unaudited profit before tax (PBT) of £0.0M (H1 2021: £1.6M), a net variance
of -£1.6M, primarily caused by the reduction in revenue volume and gross
margin, with underlying net costs having increased by £0.2M (as per strategy,
this is predominantly driven by investment in talent).
The balance sheet remains strong with no debt and £9.3M of cash balances
(including cash deposits) as at 30 June 2022 (31 December 2021: £11.8M). In
response to the components shortage, there has been a substantial and
carefully managed investment in additional inventory, with an increase of
£2.8M, to £9.4M (H1 2021: £6.6M). As the global supply chain recovers, and
components become available, revenue generation will accelerate as the
business not only delivers normal run rate outputs, but also increases
capacity to enable the processing of the now record backlog (£20.3M at 30(th)
June 2022 compared to £15.6M at 30 June 2021). Whilst the backlog is to
some degree inflated due to the challenges of supply, it is important to note
that FY2021 order intake was at a record level (£25.2M), and an order intake
of £14.2M in H1 2022 puts the business on track to secure another very strong
year of customer commitment.
Review of Operations
Despite the headwind generated by short term components shortages, the
business is making good progress with operational improvement and
implementation of the strategy.
A refreshed leadership team is now complete, with the new CFO Kim Garrod,
being the most recent joiner in May 2022. We have also recruited additional
talent across the organisation in engineering and sales, as well as fully
implementing new functions such as HR and Legal/Commercial, growing our
headcount from 99 to 118 in the last 12 months.
We have previously stated that it is imperative that we deliver more products
to market in a timelier fashion. Having set the challenge of broadly doubling
our cadence of new product releases to eight this year, we have indeed
released three new products in the first half of 2022 and remain on track to
achieve the objective of eight for the full year. This is reflected in a
100% increase in the cost of capitalised R&D compared to H1 2021.
We said we would develop a Build to Print partner in the USA to better access
that domestic market. We have now qualified Nextek, based in Madison,
Alabama. The intent is to be able to offer to the market genuinely
'Assembled in the USA' products by the end of 2022.
In addition to designing and manufacturing single board computers, we
committed to invest in developing a systems business. Having recruited
specialist experts during H1, and engaging in business development dialogue
with potential partners and customers, we will secure initial contracts with
new customers in H2 2022. An example of another new customer relationship
that we have developed is the $2.3M purchase order from a Fortune 500 medical
sector business, with the opportunity for similar size purchase orders from
the same customer for several years to come.
Current Trading & Outlook
With a record H1 backlog of £20.3M, and a record YTD Order In-take of £20.8M
(as at 12 September 2022), the business is starting to benefit from the
refreshed approach to operations and strategy. We have transformed from
primarily relying on end of life products in recent years, to four fifths of
our orders this year being for our current and new products, which are
exciting existing and new customers. In addition to increased demand from
the market, we have built increased capacity to deliver through additional
shifts and a qualified build to print partner in the United States. Whilst
the challenge of securing semiconductor components is frustratingly
constraining everyone's ability to ship completed product, we are well
positioned for material growth as the situation resolves.
Condensed Consolidated Statement of Comprehensive Income
Unaudited interim results to 30th June 2022
Six months Six months Year
ended ended ended
Note 30/06/22 30/06/21 31/12/21
CONTINUING OPERATIONS £ £ £
Revenue 7,421,285 9,315,839 20,450,453
Cost of sales 3,680,258 4,255,669 9,016,878
Gross profit 3,741,027 5,060,170 11,433,575
Net operating expenses 3,688,676 3,439,699 7,889,921
Group operating profit 52,351 1,620,471 3,543,654
Interest Costs (26,930) (32,233) (61,679)
Finance income 6,992 3,696 1,880
Other Income - - -
Profit before tax 32,413 1,591,934 3,483,855
Tax (518,890) 56,559 638,412
Profit for the period 551,303 1,535,375 2,845,443
Other Comprehensive Income
Exchange differences on translating foreign operations 100,789 (19,626) 23,894
Tax relating to components of other comprehensive income - - -
Other Comprehensive Income for the period, net of tax 100,789 (19,626) 23,894
Total Comprehensive Income for the period 652,092 1,515,749 2,869,337
Profit for the period attributable to:
Equity holders of the parent 551,303 1,535,375 2,845,443
Total Comprehensive Income attributable to:
Equity holders of the parent 652,092 1,515,749 2,869,337
Earnings per share
Basic earnings per share 4 0.75p 2.09p 3.88p
Diluted earnings per share 4 0.75p 2.09p 3.88p
Adjusted earnings per share 0.75p 2.09p 3.72p
CONDENSED CONSOLIDATED BALANCE SHEET
Unaudited interim results to 30th June 2022
As at As at As at
30/06/22 30/06/21 31/12/21
ASSETS £ £ £
Non-current assets
Property, plant and equipment 2,445,996 1,735,125 1,436,009
Intangible assets 9,058,713 7,333,105 7,692,528
Deferred tax assets 7,243 88,455 31,042
Other Financial Assets - - -
11,511,952 9,156,685 9,159,579
Current assets
Inventories 9,460,432 6,619,081 6,425,436
Trade and other receivables 3,460,344 2,614,711 2,988,633
Current tax assets 597,086 351,104 330,748
Other Financial Assets - - -
Cash and cash equivalents 9,265,663 12,386,445 11,839,758
22,783,525 21,971,341 21,584,575
Total assets 34,295,476 31,128,026 30,744,154
LIABILITIES
Non-current liabilities
Deferred tax liabilities 2,176,884 1,638,947 2,193,418
Trade and other payables (LT Lease) 505,767 518,919 570,576
Long term provisions 18,256 18,256 19,172
2,700,907 2,176,122 2,783,166
Current liabilities
Trade and other payables 7,119,058 5,625,215 4,196,272
Short term provisions 18,256 18,256 19,300
Current tax liabilities 15,779 33,190 4,817
7,153,093 5,676,661 4,220,389
Total liabilities 9,854,000 7,852,783 7,003,555
Net assets 24,441,476 23,275,243 23,740,599
EQUITY
Capital and reserves
Share capital 739,000 739,000 739,000
Share premium account 3,699,105 3,699,105 3,699,105
Capital redemption reserve 256,976 256,976 256,976
Cumulative translation reserve 3,390 (140,919) (97,399)
Profit and loss account 19,743,006 18,721,081 19,142,917
Equity attributable to equity holders of the parent 24,441,477 23,275,243 23,740,599
Total equity 24,441,477 23,275,243 23,740,599
Condensed Consolidated Cash Flow Statement
Unaudited interim results to 30th June 2022
Six months Six months Year
ended ended ended
30/06/2022 30/06/2021 31/12/2021
£ £ £
Cash flows from operating activities
Profit before tax for the period 32,413 1,591,934 3,483,855
Adjustments for:
Finance income (6,992) (3,696) (1,880)
Finance costs 26,930 32,233 61,679
Depreciation 121,589 84,757 288,560
Amortisation 627,395 606,453 1,234,655
Impairment loss - 150,000 570,812
Loss on disposal of property, plant and equipment (PPE) - 28,778 27,401
Share-based payment 48,785 16,339 12,963
Exchange differences 111,153 (16,762) 46,623
(Increase)/decrease in inventories (3,034,996) (1,085,507) (891,862)
(Increase)/decrease in trade and other receivables (471,711) (258,554) (632,476)
Increase/(decrease) in trade and other payables 2,920,826 1,645,319 330,735
Cash generated from operations 375,392 2,791,294 4,531,065
Tax (paid)/received 270,780 (21,110) (40,274)
Net cash generated from operating activities 646,172 2,770,184 4,490,791
Cash flows from investing activities
Interest received 6,992 3,696 1,880
Cash placed on deposit - - -
Purchases of property, plant and equipment (PPE) (1,124,354) (115,045) (185,879)
Proceeds from sale of PPE - - 1,500
Purchases of intangible assets (1,993,577) (883,983) (2,124,529)
Net cash used in investing activities (3,110,939) (995,332) (2,307,028)
Cash flows from financing activities
Equity dividends paid - (1,063,769) (1,907,447)
Repayment of leasing liabilities (64,809) (56,871) (117,613)
Interest paid (26,930) (32,233) (61,679)
Cash received from share issue - - -
Purchase of treasury shares - - -
Net cash used in financing activities (91,739) (1,152,873) (2,086,739)
Effects of exchange rate changes on cash and cash equivalents (17,589) (1,508) (23,240)
Net increase/(decrease) in cash (2,574,095) 620,471 73,784
Cash at beginning of period 11,839,758 11,765,974 11,765,974
Cash at the end of the period 9,265,663 12,386,445 11,839,758
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited interim results to 30th June 2022
Capital Cumulative Profit
Share Share redemption translation and loss Total
capital premium reserve reserve account Equity
£ £ £ £ £ £
Balance at 1 January 2021 739,000 3,699,105 256,976 (121,293) 18,271,819 22,845,607
Profit for the period - - - - 1,535,375 1,535,375
Exchange differences on translating foreign operations - - - (19,626) - (19,626)
Total recognised comprehensive income for the period - - - (19,626) 1,535,375 1,515,749
Share-based payment - - - - 16,339 16,339
Deferred tax on share based payment - - - - (38,683) (38,683)
Dividends paid - - - - (1,063,769) (1,063,769)
Sale of treasury shares - - - - - -
Issue of Ordinary shares - - - - - -
Balance at 30 June 2021 739,000 3,699,105 256,976 (140,919) 18,721,081 23,275,243
Total recognised comprehensive income for the period - - - - 1,310,059 1,310,059
Exchange differences on translating foreign operations - - - 43,520 - 43,520
Total recognised comprehensive income for the period - - - 43,520 1,310,059 1,353,579
Share-based payment - - - - (3,376) (3,376)
Deferred tax on share based payment - - - - (41,169) (41,169)
Dividends paid - - - - (843,678) (843,678)
Sale of treasury shares - - - - - -
Balance at 31 December 2021 739,000 3,699,105 256,976 (97,399) 19,142,917 23,740,599
Total recognised comprehensive income for the period - - - - 551,303 551,303
Exchange differences on translating foreign operations - - - 100,789 - 100,789
Total recognised comprehensive income for the period - - - 100,789 551,303 652,092
Share-based payment - - - - 48,785 48,785
Deferred tax on share based payment - - - - 1 1
Dividends paid - - - - - -
Issue of ordinary shares - - - - - -
Sale of treasury shares - - - - - -
Balance at 30 June 2022 739,000 3,699,105 256,976 3,390 19,743,006 24,441,477
NOTES TO THE INTERIM REPORT
1. General information
The principal activity of the Group is design, manufacture and supply of
innovative high-end embedded single board computers and complementary
accessories aimed at a wide base of customers within the defence &
aerospace, telecommunications, medical and other markets.
Concurrent Technologies PLC ("the Company") is the Group's ultimate parent
company. It is incorporated and domiciled in Great Britain. Concurrent
Technologioes PLC shares are listed on the Alternative Investment Market of
the London Stock Exchange.
The Group's condensed consolidated interim financial statements are presented
in pounds sterling (£), which is also the functional currency of the parent
company.
These condensed consolidated interim financial statements, which are
unaudited, have been approved for issue by the Board of Directors on 23(rd)
September 2022.
The information relating to the six months ended 30(th) June 2022 is unaudited
and does not constitute statutory accounts within the meaning of section 434
of the Companies Act 2006. The statutory accounts for the year ended 31(st)
December 2021, prepared in accordance with IFRSs (International Financial
Reporting Standards) as adopted by the European Union, have been reported on
by the Group's auditors and delivered to the Registrar of Companies. The
auditor's report was qualified, and this qualification will be addressed in
the statutory accounts for 31(st) December 2022.
2. Summary of significant accounting policies
2.1 Basis of preparation
These condensed consolidated interim financial statements are for the six
months period ended 30(th) June 2022. They have been prepared in accordance
with IAS 34 "Interim Financial Reporting". They do not include all of the
information required for full annual financial statements and should be read
in conjunction with the consolidated financial statements of the Group for the
year ended 31(st) December 2021, which have been been prepared in accordance
with adopted IFRSs.
The accounting policies applied and methods of computation are consistent with
those of the annual financial statements for the year end 31(st) December
2021, as described in those financial statements. The accounting policies have
been consistently applied to all the periods presented.
There are no new IFRSs or IFRIC interpretations that are effective for the
first time for the financial period beginning on or after 1(st) January 2022
that would be expected to have a material impact on the results or financial
position of the Group.
2.2 Going Concern
The Directors are satisfied that the Group has sufficient resources to
continue in operation for the foreseeable future, a period of not less than 12
months from the date of this report. Accordingly the continue to adopt the
going concern basis in preparing these condensed financial statements.
2.3 Taxation
Current tax expense is recognised in these condensed consolidated interim
financial statements based on the estimated effective tax rates for the full
year.
3. Segmental reporting
The Directors consider that the Group is engaged in a single segment of
business, being design, manufacture of high-end embedded computer products and
that therefore, the Company has only a single operating segment. The key
measure of performance used by the Board to assess the Group's performance is
the Group's profit before tax, as calculated under IFRS, and therefore no
reconciliation is required between the measure of profit or loss used by the
Board and that contained in the condensed consolidated interim financial
statements.
4. Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to
ordinary equity holders for the period by the weighted average number of
ordinary shares outstanding during the period.
Diluted earnings per share is calculated adjusting the weightesd average
number of ordinary shares outstanding to assume conversion of all contracted
dilutive potential ordinary shares. The Company only has one category of
dilutive potential ordinary shares, namely share options.
The inputs to earnings per share calculation
are shown below:
Six months Six months Year
ended ended ended
30/06/22 30/06/21 31/12/21
£ £ £
Profit attributable to ordinary equity holders 551,303 1,535,375 2,845,443
Six months Six months Year
ended ended ended
30/06/22 30/06/21 31/12/21
N° N° N°
Weighted average number of ordinary shares for basic earnings per share 73,363,490 73,673,490 73,363,490
Adjustment for share options -
Weighted average number of ordinary shares for diluted earnings per share 73,363,490 73,673,490 73,363,490
5. Shareholder Communication
A copy of these condensed interim financial statements is available from the
Company's Registered office at:
4 Gilberd Court,
Newcomen Way,
Colchester,
Essex, UK
CO4 9WN
They are also available from the Company's website at www.gocct.com
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