Revenue plunges

Calnex ‘well-positioned’ despite sliding to loss

Tommy Cook
Tommy Cook: ‘we have been here before’

Calnex Solutions, the telecoms testing equipment firm, fell to a loss as revenue plunged by more than a third in the first half of its financial year.

The Linlithgow-based company’s founder and chief executive Tommy Cook said the figures were “disappointing” but he was confident of a return to growth in 2025.

Calnex posted a loss before tax of £600,000 for the half year to the end of September against a profit of £3.1 million last year. Revenue slumped by 38% to £7.8m compared with £12.7m last time.

The board declared an interim dividend of 0.31 pence per share to be paid in December. It said it expects to close the year in line with the current market expectations and is confident in a return to growth in the 12 months to March 2025.

This will be achieved through the creation of new use cases for existing products, the development of new products and expansion into growing sectors.

Underlying market drivers, including the increase in network complexity, the build-out of 5G and data centre investment, remain positive.

Mr Cook said:  “While the results for the first half are disappointing, the strength of our offering, team, and balance sheet, resulting from our consistent delivery in recent years, means we are well positioned to weather the current conditions while continuing to invest in our product roadmap.

“We have experienced markets such as these before and are adept at managing the business back to growth.

“We believe the fundamental drivers that underpin the build out of the mobile network and the expansion of data centres and cloud computing capacity have not changed, but rather investment put on pause due to the macro-economic climate.

“We will continue to focus on the deployment of our new product programme as a means to generate additional customer demand and are confident that Calnex will return to growth in FY25.”

Shares in the company, which floated on the stock market in October 2020, fell sharply following last month’s profit warning. In the first hour of trading today they were 3p (4.84%) higher at 65p.

Analysts at Canaccord Genuity last month lowered their target price from 165p to 110p but said a recovery was likely to take place in 2024.

A note from Cavendish this morning notes that the conversion of the sales pipeline into
orders slowed as customers delayed projects.

“This is not specific to Calnex but a slowdown that has hit the entire sector, as the likes of Nokia, Eriksson and other testing and measurement sector peers such as Keysight, Viavi and Spirent have all confirmed this year,” it says.

“Calnex has not cut R&D expenditures and inventory levels are strong, which will see improved order turnaround time.

“The operational gearing that has impacted profitability during this period of subdued activity should enable a strong recovery in profitability once activity levels normalise.”

In a post-results call, Mr Cook said the downturn had not led to any changes to the company’s 106-strong payroll and there were no plans to downsize operations. The company has a strong balance sheet with cash in the bank.

He said customers were becoming more cautious because of wider concerns over the wider economy but there were still opportunities, not least in the data centres and military centres.

“It is hard to predict how this will go, but we are trying to be upbeat,” he said.

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