Calnex founder earns Target IPO financial incentives

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Via Kristy Dorsey

Among those expecting a multi-million pound payoff following the first listing of a Scottish company in over two years is the founder of Calnex Solution, a specialist technological testing company.

Tommy Cook, who founded Calnex in 2006, based in Linlithgow, will earn £ 2.8 million from the sale of part of his stake in the company on October 5 when it goes public on the Alternative Investment Market (AIM). Calnex would value the oversubscribed placement at £ 42 million on entry, with the stock trading at 48 pence each.

Scottish Enterprise, whose Scottish Co-Investment Fund funded Calnex’s private funding round in 2007, is entitled to a payout of £3.8 million. Ann Budge, chairman of Hearts FC, a member of the board of Calnex, will earn £ 800,000 as she reduces her stake from 5.9% to 3% .

Mr. Cook would own 21 percent of the equity after entry, led by BGF Investment Management with a 15 percent share. A 9 percent interest will be owned by Scottish Enterprise.

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The placement would raise £ 22.5 million before costs in total, with £ 16.5 million going to current shareholders and £ 6 million to the company.

Mr. Cook has said that part of the proceeds would be used for debt reduction. Companies House reports for the year to the end of March 2020 reveal that for the next 12 months, Calex had almost £ 3.9 m to pay.

This year, sales increased to £ 13.7 million from £ 10.3 million earlier, but a substantial rise in administrative costs meant that pre-tax income dropped from £ 2.4 million in the previous 12 months to £ 1.7 million.

In addition to debt reduction, the company will also look at prospects for more niche acquisitions, such as the Berlin-based Luceo Technologies takeover last year. This followed the acquisition in 2018 of Belfast-based JAR Technologies.

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Calnex, which employs 95 people, specializes in the manufacture of telecommunications network testing equipment to ensure the robustness of its networks. The company has delivered orders to date from more than 600 clients in 68 countries worldwide, including clients such as BT, China Mobile, NTT, Ericsson, Nokia, Intel, Qualcomm, IBM and Facebook.

Cook said, “The telecommunications industry is undergoing an unprecedented transformation that presents exciting opportunities for business expansion,”

“Having demonstrated sustained growth since our inception, going public will provide us with new capital, a sharpened profile and enhanced opportunities to make acquisitions as we seek to capture a greater share of the growing telecom solutions market.”

In the past three years, the company said that more than 80% of its sales came from repeat customers, with more than half of its revenue accounted for by the top 10 customers in the year to March. Non-telecom clients accounted for 14 percent of the sales of the top 10 customers.

Mr. Cook said the firm has a record backlog and a good revenue pipeline when asked about current business results.

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“We’ve been really fortunate,” he said. “Of course, there are a lot of companies and industries that are having a very hard time during this pandemic, but our sector has been virtually unaffected.”

The transition from mobile networks to 5G, which allows many more users to access the mobile Internet simultaneously, is largely driving the business. This is changing the framework of telecommunications networks in ways that Calnex believes would produce sustainable growth for the group, along with the advent of the Internet of Things and the widespread use of cloud computing.

After the listing of technology group Nucleus Financial in July 2018, the admission to Target would make Calnex the first Scottish company to successfully complete an IPO.

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