Concurrent Technologies (CNC), a leading specialist in high-end embedded computer products for critical applications, has put its historical accounting issues behind it to deliver 2022 results slightly ahead of market expectations, which the company said demonstrated its strong supply chain management capabilities.
Revenue for the year reached £18.3 million, exceeding the previous year's figure of £20.5 million. However, the global components shortage that afflicted the entire electronics industry had an impact on the company's financial performance, reflected in its gross margin slipping to 48.6% from 55.9% in 2021.
That, in turn, meant EBITDA fell to £2.1 million from a restated £4.9 million in 2021), resulting in a decrease in earnings per share (EPS) to 1.35p, from 3.84p in 2021.
Supply chain issues also meant the company was forced to eat into cash reserves to address the challenges posed by the supply chain issues. This included increasing component inventory to mitigate future constraints and expanding the cost base to foster business growth and product development.
Even so, the company ended the period with £4.5m of cash in the bank – down from £11.8m at the end of 2021. And as revenues improve in line with component availability, the company anticipates a return to generating cash and a reduction in inventory holdings.
Sales growth this year is likely to be driven by what the company described as a “notable transformation” in its order intake, with 80% of orders received being for "new" and "current" products, as opposed to "last time buy" or "end of life" products in the previous year. No customer orders were cancelled.
This shift validates the company's emphasis on enhanced product development, successfully launching eight new products throughout the year and achieving a record order intake of £31.5 million, 25% increase higher than the previous year. Chief executive Miles Adcock said that a focus on securing larger design wins means it will benefit from main production revenue over several years. He added that he expected order book growth to maintain a similar momentum this year.
The rising order backlog provides substantial revenue visibility for the future, contingent upon the continued improvement in component availability. Although shortages of some important components continue to limit progress, the company is witnessing improvements in the supply chain, leading to reduced lead times and enhanced shipping volumes.
It’s also made significant progress since the December year end, notably signing a reseller agreement with Alpha Data Parallel Systems Ltd, allowing the inclusion of their FPGA cards alongside Concurrent Technologies SBS. The company has also launched the Hermes high-performance processor Plug-In Card, expanded its distribution agreement with CoC-e for deep TSN capability, and secured its first Systems win valued at over £1 million since the implementation of the revised business strategy.
House broker Cenkos pointed to “material growth ahead”, anticipating revenues to climb 36% to £25m in 2023, which will see earnings per share bounce back to 3.65p and leaves the shares attractively rated on a forecast PE of just 16.