Concurrent Technologies Plc (LON:CNC), a world-leading specialist in the design and manufacture of high-end embedded computer systems and boards for critical applications, has announced an update on trading for the year ending 31 December 2022.
Based on its unaudited management accounts for FY22, the Company expects to report revenues circa 10% ahead of market expectations* and profit before tax at least in line with market expectations**.
This was achieved despite the global supply chain shortages which extended lead times throughout the year, delaying manufacture, shipping and revenues. The Company invested significant cash into holding increased inventory to react quickly once parts became available, as happened at the end of FY22. To best manage this recent surge in activity the Company implemented a double shift throughout Q4, resulting in record revenues in November and December 2022.
Cash was depleted throughout the year as a result of the Company’s declared strategy of investing in R&D, systems, and growth of its home markets in the US and UK. The additional investment in components holdings to mitigate supply shortages, resulted in a cash low point at the end of FY22, at a value of circa £4M.
With the increased shipping of product in November and December 2022, the Company anticipates strong cash generation at the start of FY23, with further episodes of cash generation as components become more available. Whilst overall supply chains are seeing a degree of recovery, the Company is in many cases dependent on some very specific components, and hence FY23 forecasts remain prudently cautious.
The Company intends to continue its strategy to invest in growth during FY23, and this includes efforts to make acquisitions that align with a strategy of owning more of the technology building blocks in embedded systems, in addition to single board computers.
FY22 has seen excellent strategic progress. The Company now sells systems products and has received its first purchase orders accordingly. It has also qualified a manufacturing partner in the USA and is therefore capable of selling domestic product in America. In addition, the Company’s accelerated R&D efforts are resulting in increased demand for evaluation boards which is the route to being designed into latter production phases that typically last several years.
Following a record order intake in FY21 of £25M, the Company is proud to announce order intake for FY22 in excess of £31M, an increase of over 25%. The FY22 closing backlog was also very strong, in excess of £26M. These figures indicate that, as supply chains ease, the Company has potential for significant revenue growth. A further cause for optimism is that the Company expects to run double shifts throughout Q1 FY23, maintaining its increased capacity.
The Board previously confirmed a policy of paying dividends from profit generated during the year. Accordingly, the Board does not currently propose to pay a dividend in respect of FY22, with cash instead being used to fund further investment across the business, including in component holdings to mitigate the impact of any potential further restrictions. However, the Board is still committed to the capital discipline of paying a dividend when future profits allow.
Chief Executive Officer Miles Adcock said “Whilst the prolonged components shortages have frustratingly slowed down revenue generation, it is clear that our strategy is yielding growth potential. The fact that we have our highest ever backlog, following a record order intake, gives us real optimism for short to mid-term performance growth as supply chains improve. In addition, our longer-term strategies are exciting our customers and colleagues, so it is all to play for.”
*Consensus revenue expectations for 2022 are £16m
**Consensus profit before tax expectations for 2022 are £0.1m