Concurrent Technologies Plc - Interim Results for the six months ended 30 June 2019
· Turnover of £9.5m (H1 2018: £7.9m)
· Gross profit of £4.9m (H1 2018: £4.1m)
· Gross margin of 51.7% (H1 2018: 51.7%)
· Group operating profit of £1.6m (H1 2018: £1.1m)
· Profit before tax of £2.7m (H1 2018: £1.1m) - including other, non-recurring income of £1.0m
· EPS of 3.31 pence (H1 2018: 1.50 pence)
· Adjusted EPS on continuing activities of 2.21 pence (H1 2018: 1.50 pence)*
· Interim dividend increased to 1.05p per share (H1 2018: 0.95p)
· Cash balance (including cash deposits) at 30 June 2019 of £10.0m (H1 2018: £7.8m)
* Adjusted results are prepared to provide a more comparable indication of the Group's core business performance by removing the impact of certain items including exceptional items (material and non-recurring).
· Sales increased across all sectors, with defence still the largest individual sector, accounting for 58% of Group turnover during the period
· Increased order intake resulting in record order book
· Global customer base continues to expand with exports generating 90% of Group revenues (H1 2018: 88%)
· Investment in R&D during the period increased to £1.4m (H1 2018: £1.2m)
· Committed to further investment in UK manufacturing facility
· Two additional senior managers appointed to expand skills and experience
Michael Collins, Chairman of Concurrent Technologies Plc, commented: "The operational performance during the first half of the year has been strong with excellent sales, good cost control and successful recruitment into the senior management team."
"Whilst the turnover of the first half may not reach the same level in the second half, the increased order intake has resulted in a new record order book, the majority of which is expected to ship within the next 12 months. As such, the Board is confident that the Company will deliver a successful performance for the full financial year."
The first half of 2019 has been a sad one for Concurrent, with the unexpected and sudden death of its MD, Glen Fawcett. Glen helped start the Company in the 1980's and worked tirelessly to build it into the vibrant and exciting company it is today. He is, and will be, greatly missed both professionally and personally.
Jane Annear was confirmed as Managing Director in May, having previously held the position of Commercial Director. Jane's appointment provides the Company with continuity and stability and she is already overseeing the introduction of new skills through the recruitment of additional senior personnel to broaden the management team.
In respect of trading, the first half of 2019 has been extremely positive with strong sales, profit before tax and investment in the first six months of the year.
Revenue for the period was £9.5m (H1 2018: £7.9m), gross margin remained consistently high at 51.7% (H1 2018: 51.7%) and gross profit was £4.9m (H1 2018: £4.1m). The unaudited profit before tax (PBT) for the period was £2.7m (H1 2018: £1.1m), with associated earnings per share (EPS) of 3.31 pence (H1 2018: 1.50 pence). These PBT and EPS figures include non-recurring receipts of £1m; adjusting for this, the H1 2019 PBT of the continuing operations is £1.7m with an associated EPS of 2.21 pence.
The Group's balance sheet remains strong, with cash balances (including cash deposits) at 30 June 2019 of £10.0m (H1 2018: £7.8m). These balances have been enhanced by the proceeds of a key man insurance policy. Total equity increased to £21.5m (H1 2018: £19.1m).
The Board has declared a first interim dividend of 1.05p per share (H1 2018: 0.95p) - an increase of 10.5%. The total cost of this dividend will amount to £763,544. The ex-dividend date for this interim dividend is 26 September 2019, the record date is 27 September 2019 and the payment date is 11 October 2019.
Review of Operations
The operational performance during the first half of the year has been strong, with excellent sales, good cost control and successful recruitment into the senior management team.
The Group has seen sales increase in all market sectors during 2019, with the defence sector remaining our largest individual market and revenue generator, accounting for 58% of all sales revenues so far in 2019. Our telecommunications revenue has also been buoyant with an increase of over a third from H1 2018. It should be noted that the Group has benefited from some non-recurring sales programmes which have boosted the half-yearly sales revenue.
Several hardware and software product announcements have been made during 2019 and the development of new products and services remains a key focus of the management team. To further drive this expanding pipeline of new products the Group invested £1.4m in R&D during the first half of the year (H1 2018: £1.2m).
A Chief Technology Officer (CTO) has been recruited with the remit to develop and widen the Group's product range by introducing new technologies, some of which are targeted for applications such as Artificial Intelligence (AI) and Deep Learning. The CTO works closely with our existing engineering teams based in the UK and overseas.
Additionally, a Director of Sales has joined the management team with responsibility for all sales outside of North America. This key appointment brings particular knowledge of software and solution sales within the Defence market sectors, building on our existing expertise of hardware products.
These new additions to the management team bring a wealth of industry experience and will help position the Company to take advantage of the opportunities in the marketplace.
The Company still awaits details of the trade and tariff regime which will apply if the UK leaves the European Union (EU). The Company has long established exporting procedures and systems in place for our sales to Asia and North America, and we expect to apply the same processes for sales into the EU if necessary. Current World Trade Organisation (WTO) rules apply a zero-tariff rating to most of the items we buy and sell and our current assessment has concluded that, while there may be limited logistical disruption following the UK's departure and some negative sentiment directed towards the UK, leaving the EU should have little lasting impact on our trading.
Our engineering teams will continue to develop new hardware designs based on Intel processors in addition to developing complementary products to enhance the overall capabilities and functionality of our current range. Work is also continuing on the development of AI compatible rugged solutions, for which marketing is already underway. In addition, we will continue to increase our support for firmware and software products to facilitate the use of our hardware. This strategy is expected to particularly benefit users of our VPX and MicroTCA ranges which are increasingly sold as system level solutions.
Support for our ranges of VME and CPCI product lines will continue, through long term manufacturing of established products and the development of new boards to provide suitable upgrade paths for both new and existing customers.
As part of the continual improvement to operations and manufacturing, we have ordered a new Automatic Optical Inspection machine with enhanced 3D inspection and Foreign Object Debris (FOD) detection capability and a new high speed component surface mount machine. This additional equipment will complement the upgrade to the main production line which was introduced in 2018. These new machines are expected to be installed before the end of 2019, providing improved capabilities and increased capacity, as well as further future-proofing the Group's manufacturing facilities in the UK.
The recruitment of additional senior personnel has enhanced the management team and introduced new skills and experience which will benefit the Group going forward. Whilst the turnover of the first half may not reach the same level in the second half, the increased order intake has resulted in a new record order book, the majority of which is expected to ship within the next 12 months. As such, the Board is confident that the Company will deliver a successful performance for the full financial year.
9 September 2019