With first financial reports, Calnex increases


Via Kristy Dorsey

Calnex Solutions’ stock rose by a quarter yesterday as Scotland’s newest listed company in the first half of its fiscal year posted a high double-digit increase in revenue and income.

In the six months to the end of September, customer order intake remained high, despite shifts in buying habits due to the pandemic. Tommy Cook, chief executive, said that some clients accelerated projects while others held back on investment, but the two balanced out “across the bunch”

Calnex, based in Linlithgow, designs telecommunications test equipment that can measure synchronization to within a billionth of a second within a network. In October, the company became the first Scottish company to list in London on the Alternative Investment Market (AIM) in more than two years.

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The bulk of the company’s revenue is accounted for by telecom equipment manufacturers such as Cisco, Huawei and Ericsson, and network operators such as BT, China Mobile and AT&T. The remainder comes from manufacturers of components and an increasing number of “hyperscale” and corporate clients such as Microsoft, Tencent, Facebook and Apple.

Revenue rose more than 36 percent year-on-year to £ 7.7 million in the first half of the year, while adjusted profit rose 69 percent . Pre-tax profit rose more than 71% to £ 2 million.

Because of Covid-19 constraints around the world, earnings and benefit were boosted by savings in travel and event expenses, which prompted Calnex sales employees to move to video meetings with clients. Mr. Cook said that savings of around £ 300,000 will be partly recovered in the second half of the year, as much of Europe remains closed to varying degrees, although the majority of customers have returned to a preference for face-to-face meetings in China, where the economy has increasingly opened up.

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Asked if he believed video conferencing would remain a staple of the sales strategy beyond the Covid crisis, Mr. Cook hypothesized that geographical and cultural disparities would largely rely on it.

“It’s much more efficient, but it depends on whether customers embrace it in the long run,” he said.

In that time, the pandemic had “no impact” on the supply chain or contract manufacturing of the company. As for the future effects of Brexit, Mr. Cook said there was “no concern” in that regard, as Calnex had met with its suppliers on the continent and after the turn of the year, everyone was “happy” with the new UK trading role.

“Our products have relatively long lead times, typically four to six weeks or even eight weeks or longer, so a few days at the border won’t make much difference,” he said.

The need for new test instruments is motivated by the transformation of the telecommunications industry to 5G, along with the rapid growth of data generation and the move of industries to cloud computing. The Target IPO raised £ 5 million of the company’s new money, which will boost growth in these markets.

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This entails the recruitment in the coming weeks of about 10 more workers. While no deals are on the immediate horizon, Calnex still continues to search for acquisitions.

Calnex shares, which floated at 48 pence, closed 18 pence higher yesterday at 90 pence, valuing the firm at 63 million pounds.

Mr. Cook sold some of his shares during the IPO, but with 21 percent of the issued share capital, he remains the company’s largest shareholder. He is followed with 15% by BGF Management, with just under 9% by Scottish Enterprise and with just under 8.6% by Otus Capital Management.

With 8.3 percent, 6.2 percent and 3 percent, respectively, Lombard Odier Wealth Management, Slater Investments and non-executive director Ann Budge round out the list of major shareholders.


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