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CLX Calnex Solutions Plc

58.50
-0.50 (-0.85%)
28 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Calnex Solutions Plc LSE:CLX London Ordinary Share GB00BMBK7016 ORD GBP0.00125
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -0.50 -0.85% 58.50 58.00 59.00 58.50 58.50 58.50 105,827 08:00:00
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Communications Services, Nec 27.45M 5.91M 0.0675 8.67 51.2M

Calnex Solutions PLC FY23 Final Results (2598A)

23/05/2023 7:00am

UK Regulatory


Calnex Solutions (LSE:CLX)
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TIDMCLX

RNS Number : 2598A

Calnex Solutions PLC

23 May 2023

23 May 2023

Calnex Solutions plc

("Calnex", the "Company" or the "Group")

FY23 Final Results

Calnex Solutions plc (AIM: CLX) provides test and measurement solutions for the global telecommunications sector and is pleased to announce its audited results for the 12 months ended 31 March 2023 ("FY23" or the "Year").

Financial Highlights

 
 GBP000                       FY23      FY22         YOY 
                                                % change 
                           Audited   Audited 
 Revenue                    27,449    22,046         25% 
 Underlying EBITDA(1)        7,980     6,351         26% 
 Profit before tax           7,208     5,973         21% 
 Basic EPS (pence)            6.75      5.19         30% 
 Diluted EPS (pence)          6.42      5.00         28% 
 Closing cash and fixed 
  term deposits (2)         19,098    15,357         24% 
 
 
 

(1) A full reconciliation between Underlying EBITDA and profit before tax is also shown in the Financial Review below.

(2) The Company takes advantage of high interest deposit accounts for surplus cash balances not required for working capital. Under IAS 7 Statement of Cash Flows, cash held on long-term deposits (being deposits with maturity of greater than 95 days, and no more than twelve months) that cannot readily be converted into cash is classified as a fixed term investment.

Financial Highlights

   --      Revenue growth of 25% to GBP27.4m (FY22: GBP22.0m). 
   --      Growth in profit before tax of 21% to GBP7.2m (FY22: GBP6.0m). 

-- Closing cash position, including fixed term deposits, of GBP19.1m (31 March 2022: GBP15.4m).

-- Proposed final dividend of 0.62 pence per share, making a total of 0.93 pence per share for FY23 (FY22: 0.84 pence).

Operational Highlights

-- Successful mitigation of well-documented supply chain challenges, delivering all orders as planned.

-- Growing relationship with hyperscale customers, securing one significant contract and seed unit sales into two other hyperscalers during the year.

   --      Encouraging early uptake of Sentry, our Network Synchronisation product launched in H2. 
   --      Full integration of iTrinegy, expected to be an important contributor to future profit. 

-- Increased staffing levels across business development, sales, R&D, and support roles, to support growing customer demand, new product development and maximise exposure in new and existing territories.

Outlook

-- Trading in Q1 FY24 has continued as anticipated, and the Board is confident in delivering results for the year in line with market expectations as revised in March 2023.

-- Whilst customer budgets continue to be restricted in the near term, customer engagement levels remain high and Calnex's mid-term order funnel has strengthened during Q1 FY24, although the timing of conversion of these opportunities into orders remains unclear.

-- The breadth of Calnex's customer base across multiple regions, expanding product portfolio and strong balance sheet, alongside the market's structural growth drivers, provide continued confidence in the future.

Tommy Cook, Chief Executive Officer and founder of Calnex, said:

" FY23 was another year of solid progress where we executed on our strategy, increasing our addressable market, whilst successfully navigating the supply chain challenges, achieving revenue and profit growth, in line with market expectations.

" While customer budgets remain restricted in the short term, customer engagement levels remain high, and we have been encouraged to see the early signs of a more stable macro environment.

"We are confident the market's structural growth drivers will continue to drive long-term growth opportunities for Calnex. These include the need to build out new mobile networks to support the transition to 5G, and ongoing data centre investment to support the demand for cloud computing coupled with the need to be more energy efficient.

"The breadth of our customer base across multiple regions, expanding product portfolio and strong balance sheet, mean we look to the future with continued confidence. "

For more information, please contact:

 
 Calnex Solutions plc                               Via Alma PR 
 Tommy Cook, Chief Executive Officer 
  Ashleigh Greenan, Chief Financial Officer 
 
                                                    +44 (0)131 220 
 Cenkos Securities plc - NOMAD                       6939 
 Derrick Lee, Peter Lynch 
 
                                                    + 44(0) 20 3405 
 Alma PR                                             0213 
 Caroline Forde, Hannah Campbell, Joe Pederzolli 
 

Overview of Calnex

Calnex Solutions designs, produces and markets test and measurement instrumentation and solutions for the telecoms and cloud computing industries. Calnex's portfolio enables R&D, pre-deployment and in-service testing for network technologies and networked applications, enabling its customers to validate the performance of the critical infrastructure associated with telecoms and cloud computing networks and the applications that run on it.

To date, Calnex has secured and delivered orders in 68 countries across the world. Customers include BT, China Mobile, NTT, Ericsson, Nokia, Intel, Qualcomm, IBM and Meta.

Founded in 2006, Calnex is headquartered in Linlithgow, Scotland, with additional locations in Belfast, Northern Ireland, Stevenage, England and California in the US, supported by sales teams in China and India. Calnex has a global network of partners, providing a worldwide distribution capability.

Chair's Statement

Overview

It gives me great pleasure to present my first statement as Chair of Calnex Solutions, following my appointment to the role in August 2022, post the Company's AGM.

Upon joining the Board as a Non-Executive Director in January 2022, I found a company with an innovative product offering, highly experienced leadership, an expert and dedicated team, long-standing blue-chip customers, and strong partner relationships. These factors have enabled Calnex to deliver strong profit and revenue growth since IPO, which have in turn provided the means to invest in its people and offering, while maintaining a strong balance sheet.

A positive performance in FY23

The Group successfully delivered results in line with market expectations. This was driven by the growth in cloud computing and the roll out of 5G along with the introduction of new standards for the telecoms industry, driving demand for the Group's products.

There was an improved performance in H2 as expected and for the year the Group achieved revenue growth of 25% to GBP27.4m (FY22: GBP22.0m) and profit before tax increased by 21% to GBP7.2m (FY22: GBP6.0m). We closed the year with a strong cash (including short term investments) figure of GBP19.1m (FY22: GBP15.4m).

Calnex's relationship with its long-standing partners deepened during the year with key highlights being the renewal of the contract with Spirent, the Company's principal distribution partner, as well as the successful management of supply chain issues with our contract manufacturer, Kelvinside Electronics. We also made good progress in data centre activities and the integration of iTrinegy has gone to plan.

ESG

The attitude of Calnex towards caring for its people and the communities around it has always been a key feature of the business. As a business and Board, we are committed to having a positive impact on our society, the environment, and our team.

The Group follows the Quoted Companies Alliance Practical Guide to ESG, which is intended to supplement The Quoted Companies Alliance Corporate Governance Code (the QCA Code), which the Group also follows. The QCA Practical Guide provides pragmatic steps for small and medium sized listed companies to develop how to identify and disclose those ESG issues that are important to them and outlines an approach that is proportionate to the resource availability within smaller companies, whilst also giving stakeholders the relevant information that they need.

Within product development, our focus is increasingly on delivering platform products that enable software upgrades in line with customers' aspirations. Thanks to our dedicated team, their in-depth knowledge, and market insight, our customers enjoy hardware longevity typically between 10 and 15 years, thereby reducing the impact our products have on the environment and providing long-term expert support through cutting-edge upgrades that anticipate customer requirements. Where possible, we look to work locally. Our product packaging is manufactured by a local supplier with a comprehensive environmental policy and our company HQ, and the majority of our operations are based in serviced premises leased from Oracle in Linlithgow.

In FY22 the Board committed to build a Calnex Corporate Giving Scheme into our Financial Plan equal to 1% of the profits we generate. An employee-led team was created in FY23 to consider proposals from employees for donations or support for groups and events that matter to them. We used 100% of the Calnex Corporate Giving Scheme this year. We have two main initiatives in place to utilise this fund - Calnex Corporate Responsibility Fund where employees can nominate charities, clubs, or organisations for a monetary donation each quarter and our Calnex in the Community scheme where employees are given two days each financial year to volunteer. In FY23 Calnex donated GBP70,000 to 84 charities and organisations and social events across the globe through our Corporate Giving Scheme.

As a Board, we are also committed to high standards of corporate governance and oversight. The approach we take is set out in detail in the Principal Risks and Uncertainties, s172 and Corporate Governance sections of our Annual Report and Accounts.

As part of our journey to continually improve our performance, our focus remains on ensuring a diverse workforce with a good level of female representation on both our Board and executive management team. The success we have delivered since IPO is a tribute to the workforce's expertise and knowledge. Their energy and professionalism whilst navigating the supply chain challenges has been immense and on behalf of the Board, I would like to thank all our staff across the globe for their hard work.

Board updates

I am delighted to have taken up the mantle as Chair during the period and I have come to know Calnex's culture and structure well in my time so far. We were also pleased to welcome Helen Kelisky to the Board in 2023, who brings with her a wealth of cloud and data centre experience, which has already proven of immense value.

I would also like to take this opportunity to thank George Elliott who retired as Chair at last year's AGM, as well as Ann Budge, who stepped down as Non-Executive Director in February of this year. The importance of both George and Ann cannot be overstated, both of whom having provided significant guidance along the way on Calnex's growth journey.

Outlook

As described in our Trading Update issued in March 2023, the macro-economic conditions have prompted a more cautious approach to investment decisions by our customer base. While we are seeing signs of a more stable macro environment, t rading in the current financial year has continued as anticipated at that time. Customer engagement levels are high, although the timing of orders remains unclear, consistent with wider industry dynamics.

The Board remains confident in the delivery of results for the year in line with the revised market expectations and believes the breadth of product offering, and the market's structural growth drivers, provide Calnex with a considerable long-term opportunity.

Stephen Davidson

Non-Executive Chair

22 May 2023

CEO's Statement and Operational Review

We have delivered a strong FY23 financial performance, reporting double digit growth across revenue and profit, in line with market expectations. Improved performance in the second half was driven by the successful conversion of our order book and we have continued to make considerable operational and strategic progress during the period.

I am proud of the way in which the team has been able to deliver these results while dealing with well-documented supply chain challenges. The mitigation strategies in place enabled us to shield our customers from any impact, successfully scheduling all orders aligned to customer needs. We continue to benefit from the experience of our team and from the strength of the relationship with our contract manufacturer, Kelvinside Electronics, in this regard. We are optimistic about an improving picture and that the process improvements we have put in place leave us well-positioned to capitalise on the opportunities available to us.

Further execution of our growth strategy during the year has increased Calnex's market opportunity as we move into adjacent areas of the testing market. Relationships with hyperscalers continue to grow and we are encouraged by the early performance of Sentry, our newly launched Network Synchronisation product. We have also recently initiated discussions with Data Centre and Telcom Network operators for the supply of a Monitoring system for synchronisation quality across their network, SyncSense. Following the full integration of the recently acquired iTrinegy, we now see it as an important contributor to future profit. Following further investment into our team's capabilities during the year, we believe we have the right team in place to continue our journey.

Following three years of revenue and profit growth since becoming a listed business, we are now a considerably larger business (headcount and turn-over), with strong customer relationships across all territories. Although contending with near-term uncertainty and delayed customer spending, we remain a profitable, cash generative, well-managed business, with a diverse customer base in growing markets and strong balance sheet.

Customer metrics

The number of customers who ordered from us this year increased by 72 to 305 (FY22: 233 customers) and the proportion of orders coming from non-telecoms customers was 34% (FY22: 23%). The step change is primarily driven by sales of NE-ONE products to customers new to Calnex. Over a three-year average basis, our top 10 customers accounted for 47% of orders (FY22: 50%) and 74% of our orders were from repeat customers (FY22: 79%). Again, the impact of NE-ONE new customers accounts for this significant change compared to FY22. Our geographic spread of orders across the regions on a three-year average basis, shows Americas receiving 34%, North Asia receiving 27% and ROW receiving 39%.

Market backdrop

Many telecoms sector participants, including global equipment manufacturers, have recently reported a general softening of demand for their products and services in the short-term, albeit noting that the long-term structural growth drivers, including the exponential increase in network complexity and the transition to 5G, remain strong.

Importantly, our customers remain committed to the delivery of projects which we know will rely on Calnex's test instrumentation and solutions.

Product innovation to support the transition to 5G and entry into cloud computing market

Continued product innovation has allowed the Group to execute on its growth strategy to capitalise on the transition to 5G and expand into adjacent areas of the testing market, such as cloud computing and the data centre market.

Launch of new product to optimise entry into cloud computing market

The need for hyperscale and enterprise companies to drive greater efficiency and performance in their data centre operations continues to drive growth in the testing market and Calnex's relationship with these customers has continued to develop during the year. In H2 we launched a new version of our Network Synchronisation product, Sentry, which heavily leverages the technology in Sentinel, Calnex's Field Sync solution, but with a form, fit and function optimised for the data centre environment. This new format enhances the ability to engage with potential data centre customers by strengthening its usability in the data centre environment. Following the large deal secured in FY22, our focus has remained on building relationships with other hyperscalers and this year we successfully secured seed unit sales into two other hyperscalers. We are now focused on using these early units to build relationships and develop further opportunities.

Engagement with both data centre operators and telecom network operators has identified an emerging opportunity to offer a monitoring system that provides an indication of the quality of synchronisation across the network. Calnex has recently launched its SyncSense product offering to address this need. Calnex's reputation as experts in synchronisation enables us to provide reassurance to network operators that we have the knowledge and insight to collect and interpret the data obtained across the network to identify nodes that are not operating correctly. For telecom operators, poor timing limits the customer connectivity that can be supported. For data centre operators, good synchronisation between servers increases processing bandwidth and reduces the investment required for expansion of their server infrastructure to meet the needs of their customers.

Cloud & IT, Infrastructure Verification (SNE, SNE-X & SNE-Ignite)

Calnex's Network Emulation products, which target customers developing Infrastructure products (e.g. Ethernet switches, routers, SD-WAN equipment), continued to make good progress this year. O-RAN has also impacted positively on this product line. The O-RAN Alliance provides recommendations for equipment deployed in the RAN network. Synchronisation is only one element of the functionality specified. Calnex's SNE products are being utilised to verify performance to other aspects of these recommendations.

This year, the Group expanded its portfolio by releasing a new SNE (network emulation) product, SNE-X, a multi-port, high-performance network emulator designed to drive product/application quality and reduce the cost of testing with rigorous, scalable test capability. In FY24 the Group plans to release a further product, SNE-Ignite, to target applications requiring performance and accuracy only achievable with hardware-based implementation. With the SNE family, Calnex now has a full suite of products capable of addressing the needs of all applications in the target market.

Cloud & IT, Applications Verification (iTrinegy acquisition)

In April 2022 Calnex acquired iTrinegy Limited, a leading developer of Software Defined Test Networks technology for the software application and digital transformation testing market. NE-ONE hardware and software-based Network Emulation platforms provide organisations, primarily across the technology, financial, gaming and military / government sectors, with the ability to accurately recreate complex, real-world network test environments in which to analyse and verify the performance of applications, before deployment. The acquisition of iTrinegy's NE-ONE Network Emulation platform has enhanced the Company's position as a leading Synchronisation Verification test vendor, and we believe Calnex is the leading provider of Network Emulation tools for its industry segments.

The integration of the iTrinegy team is progressing as planned, with the focus during the period on building out the team and sales channel, which will continue in FY24.

Financial performance

Calnex experienced another year of strong trading, achieving results in line with market expectations. We delivered double digit growth across revenue and profits with an improved performance in H2, as expected. The 25% growth in revenue to GBP27.4m (FY22: GBP22.0m) is a result of the continued strong demand for telecoms testing equipment across the Group's core markets. Three-year revenue CAGR is 26%, reflecting the solid performance of the business since IPO. Revenues from the Americas region increased 36%, whilst the Rest of the World experienced a 38% uplift. North Asia revenues saw a slight decline of 4% due to the ongoing geopolitical tensions between the US and China. Given the overall growth in revenues, Americas account for 35% of total revenues (FY22: 32%), ROW 41% (FY22: 37%) and North Asia 24% (FY22: 24%).

The Group's adjusted profit before tax grew by 21% to GBP7.2m (FY22: GBP6.0m), in line with market expectations, reflecting the uplift in revenues and the Group's on-going investment in the business. This year saw the Group invest in additional business development resources, products, and inventory, such that we are in a stronger position to successfully respond to customer demands. The Group ended the year with a healthy closing cash position, including fixed term deposits, of GBP19.1m (31 March 2021: GBP15.4m).

People

We continue to invest in talent globally, to support and enhance the fantastic work of our team, whose commitment continues to drive the business forward. Such investment in talent, particularly within the R&D division, is part of the Group's on-going growth strategy. We have grown our headcount by 33 staff over the past 12 months, including the iTrinegy acquisition, bringing our total headcount to 155 as at 31 March 2023. We continue to be able to use Calnex's platform as a means to attract talented people and continue to use our overseas sponsor license to hire from outside of the UK in order to strengthen and diversify our teams.

In January 2023, we welcomed Helen Kelisky to the Board as Non-Executive Director. Helen brings over 30 years of technology sales leadership experience and a track record of driving top line growth, leading national and international businesses. Her experience across the cloud and data centre world is already proving to be of immense value to Calnex as we exploit the growth in the testing market, with the need for greater efficiency and performance in data centre operations.

Following nine years on the Board, George Elliott retired as Chair at last year's AGM. George was a significant source of support to me and the business through our subsequent growth and journey onto the public markets. Also, following 13 years on the Board, Ann Budge stepped down as Non-Executive Director in February 2023. Ann was an early-stage investor in Calnex and was pivotal in introducing the Discovery Investment Fund syndicate as seed investors when the Group raised capital in 2007. I would like to take this opportunity to thank both George and Ann for the valuable roles they played in Calnex's growth journey, helping to establish a solid platform to support the Group's financial and strategic ambitions.

Calnex is a people first business where we help and encourage each other, supporting the business and our colleagues in building on our successful achievements. During 2022, we introduced a range of programmes to support the development of our employees including the Leadership Development, Power Skills and Psychological Safety programmes, to ensure they can thrive in a safe and supportive environment. I am pleased to report that in the last 12 months, the Group's learning and development activities have led to 24 promotions and five cross-departmental moves.

During the year, we also worked closely with the UK Electronics Skill Foundation, supporting the future talent of Engineering in providing student placements and supporting STEM education and development.

Our continued success at Calnex, together with the diversity of our employees, enables us to make meaningful contributions all over the world. Guided and driven by what is important to our teams, we are committed to use the resources we have at our disposal and our platform to support events, charities, and groups to demonstrate our commitment to Environmental, Social and Governance responsibilities.

Outlook

FY23 was another year of solid progress where we executed on our strategy, increasing our addressable market, whilst successfully navigating the supply chain challenges, achieving revenue and profit growth, in line with market expectations.

In our Trading Update issued in March 2023, we described how some customers had begun to take a more cautious approach to investment decisions in response to the macro-economic conditions, prompting a revision in market expectations for FY24. Trading in the first few months of FY24 has continued as anticipated, and the Board remains confident in delivering results for the year in line with the revised market expectations.

Customer engagement levels remain high, and we have been encouraged to see the early signs of a more stable macro environment. Whilst customer budgets continue to be restricted in the near term, we have seen our mid-term order funnel strengthen during Q1 FY24, although the timing of conversion of these opportunities into orders remains unclear, which is as expected and consistent with wider industry dynamics.

We are confident the market's structural growth drivers will continue to drive long-term growth opportunities for Calnex. These include the need to build out new mobile networks to support the transition to 5G, and ongoing data centre investment to support the demand for cloud computing coupled with the need to be more energy efficient.

The breadth of our customer base across multiple regions, expanding product portfolio and strong balance sheet, mean we look to the future with continued confidence.

Tommy Cook

Chief Executive Officer

22 May 2023

ESG

A meaningful impact

Calnex is a "people first" company built on trust and respect. Not only for each other but also for the environment and for the local communities of our employees across the globe, where we do our best to make a meaningful impact.

Calnex is an innovative and forward-thinking business where our employees are encouraged to share their views, contribute to decision making, challenge each other and improve our processes to make a positive contribution to business success. This is reflected in the approach we take to delivering leading-edge test and measurement solutions for 5G networking and wireless technologies.

Our focus is increasingly on delivering platform products that enable software upgrades in line with customers' aspirations. We can't control how our customers use our products, but we can influence how they benefit from additional functionality without the need for additional hardware. Thanks to the skills of our team, our in-depth knowledge, and market insight, many of our customers enjoy hardware longevity of between 10 and 15 years.

Our software-first approach significantly reduces the impact our products have on the environment by building in best-in-class longevity and providing long-term expert support through cutting-edge upgrades that anticipate customer requirements. Although already a low environmental impact business, the senior management team and our staff are keen to do more to tackle the environmental challenges facing the planet and we are working towards becoming an ISO14001 certified business by the end of 2023. Our recently established employee-led environmental, social & charity team have also had a very successful FY23.

At the end of FY22, the Board committed to build a Calnex Corporate Giving Scheme into future Financial Plans equal to 1% of the profits we generate. An employee-led team (with senior management sponsorship) was created in FY23 to consider proposals from employees for donations or support for groups and/or events that matter to them. The Calnex senior management team want to support groups local to our employees and offices and empower our employees to make a difference in their community by directing the Company to support activities/groups that they truly care about.

We also encourage employees to donate their time to make meaningful contributions. Group activities such as planting trees, re-planting local flower beds and helping out at food banks are beneficial in so many ways. Beyond the obvious benefit of the primary task and the psychological benefit from making a positive contribution, we recognise how significantly such activities boost team spirit and engender pride in being associated with a company that helps our employees make a meaningful, local difference.

We also work closely with the UK Electronics Skill Foundation (UKESF), supporting the future talent of Engineering in providing student placements and supporting STEM education and development.

We are pleased to report that we used 100% of the Calnex Corporate Giving Scheme this year. We have two main initiatives in place to utilise this fund - the Calnex Corporate Responsibility Fund where employees can nominate charities, clubs or organisations for a monetary donation each quarter and our Calnex in the Community scheme where employees are given two days each financial year to volunteer within their local community during working hours, without the need to book annual leave.

This financial year Calnex has donated GBP70,000 to 84 charities and organisations and social events across the globe through our Corporate Giving Scheme. Key charitable initiatives included:

-- Donating 120 sleeping bags to a homeless charity in Belfast, as well as supplying 120 meals across our worldwide regions to those in need during the festive period;

-- The Calnex September250 challenge where we encouraged our employees across the world to either walk 250,000 steps, cycle 250 miles, or take part in 25 exercises during the month of September to help support four worldwide charities - Mind , Sea Shepherd , Save the Children and National Autistic Society ;

-- Eighty employees from every region (UK, US, North Asia, India) accepted our challenge, which resulted in Calnex donating over GBP16,000 from our Corporate Responsibility Fund to split between these charities. During September our employees walked 13,877,757 steps, cycled 2,752 miles and took part in 230 exercise classes which not only raised a lot of money for charity but helped keep our employees and their families active;

-- The Christmas Tree Gift Tag Appeal in our Linlithgow and Belfast office. In each office we decided to put up our Christmas trees early and attach gift tags which gave suggestions on toys to purchase for disadvantaged children. Our employees did an amazing job and brought in more than 100 gifts which were then donated to Cash for Kids Northern Ireland and River Kids in Scotland;

-- The return of our Annual Christmas Charity Raffle in aid of HopScotch , which provide a much-needed seaside holiday for disadvantaged children in the UK;

-- 24 large bug hotels were donated to nurseries and primary schools local to our employees across the UK, allowing the schools to educate and base projects around the wildlife that inhabit the hotels;

-- All 3 UK offices took part in our charity bake sale in aid of Fare Share, who redistribute good food which would otherwise go to waste to almost 11,000 frontline charities nationwide. With over 30 home baked goods brought in by our employees across all 3 sites and with Calnex matching the amount raised through employee donations, we raised GBP1,795 for Fare Share; and

-- As well as these activities organised by Calnex, 62 out of the 84 donations to clubs, charities and organisations were suggested by employees across the globe. A few key employee donations were:

o GBP4,000 to SEAL Dunfermline, Scotland, who support the health and wellbeing of young people aged between 8 - 16 who are referred through social work and schools. As SEAL recently had their funding reduced due to council cutbacks, this money allowed them to continue their work;

o GBP1,000 to Stevenage Scouts Group, England, which was used to help enable disadvantaged children to attend a trip to Normandy;

o GBP1,000 to Operation 143, USA, who support over 30 schools providing disadvantaged children with backpacks containing easy to prepare food to feed them over the weekend; and

o GBP2,000 to Linlithgow Rose Community Football Club under 10s, Scotland. The money helped purchase new kit for all the young players.

This financial year Calnex has organised 7 Calnex in the Community days for our employees across Northern Ireland, England, Scotland and India, including:

-- Fife Coastal Path Clear-Up: 22 employees from our HQ office in Linlithgow helped collect rubbish along Fife Coastal Path;

-- Assisi Animal Sanctuary: 8 employees from our Belfast office volunteered with the sanctuary, clearing out and reorganising their donations container and giving the walls a fresh lick of paint;

-- Five Sister Zoo: 17 employees from our HQ office in Linlithgow volunteered with the zoo to paint their large wooden ship play park and tidy up their Japanese inspired garden by clearing out leaves and laying new gravel;

-- Akshaya Patra: our India-based team of 4 became our first overseas volunteering activity. The team helped package up and deliver lunchtime meals to disadvantaged schools in the area;

-- Muiravonside Country Park: 20 employees from our HQ office in Linlithgow volunteered in the county park to help create a wildflower field as well as placing, filling and planting up their new planters, moving 8 tonnes of soil and stone in the process;

-- Shepreth Wildlife Park: 10 employees from our Stevenage office in England volunteered to help scarify the large grass mound where the prairie dogs lived, removing all the moss to enable their resident donkey to move back home; and

-- Ulster Wildlife Bog Meadows: 4 employees from our Belfast office volunteered to help plant the last of their one million trees for the year.

Products

Our products are innovative, leading-edge test and measurement solutions for designers and operators of the equipment and infrastructure that enables 5G networking and wireless technologies. 5G technologies provide enhanced mobile broadband, mission critical communications and the Internet of Things, all of which have a significant global impact across many aspects of society and industry.

Our approach to product development is as follows:

-- we develop hardware platforms that can be enhanced with downloadable software upgrades in line with customers' everchanging needs. For example, both our Paragon-X and Sentinel platforms, introduced in 2010, and 2013 respectively, are still supported by the Company;

-- our products are built into test racks where they remain for as long as the customers' products are supported. Customers expect their products, once deployed in networks, to be utilised for 10 - 15 years;

-- this longevity feeds back through the supply chain as our customers now expect that same longevity from test equipment vendors;

-- our products are manufactured by a highly skilled contract manufacturer, Kelvinside Electronics, whose close proximity allows for excellent two-way support and communication regarding the complex technical challenges of building and testing our products; and

-- our bespoke product packaging is manufactured by a local supplier with a comprehensive environmental policy including a focus to reduce, reuse and recycle all packaging materials wherever possible.

Environment

Both Calnex's operational processes and products have a low environmental impact.

The majority of our staff are office-based and have the ability to work part of the week from home where their duties allow, performing their operations using computer and internet-based services. Our contract manufacturer, Kelvinside Electronics, is ISO14001 (Environmental Management Systems) certified. Our products sales and customer support services are managed by locally-based partners together with Calnex support staff, which greatly minimises global travel.

Our company HQ and the majority of our operations are based in serviced premises leased from Oracle in Linlithgow. Calnex uses the waste recycling services provided by Oracle. Oracle have also invested in efficient lighting and air conditioning systems which minimise energy consumption on site.

The small amount of electrical component and circuit board waste we generate is disposed of in accordance with the WEEE regulations.

Our products are designed as platforms enabling our customers to take advantage of future software upgrades and hardware longevity.

Despite being a low environmental impact business, a project is currently underway to gain ISO14001 certification. The ISO14001 standard defines a framework to formally manage the environmental impact of our business operations and products.

As well as the charitable giving activities mentioned above, other environmental initiatives include:

-- We have initiated a Product Packaging Project to measure and improve the recyclability of our product packaging. We used a defined measurement method to provide consistency in measurement across all our product lines. All material included in the packaging that we deliver to customers is identified and weighed and assessed for its recyclability. This exercise has helped to allocate an internal environmental score to each product in our portfolio;

-- We are currently conducting a product design improvement exercise to assess if we can reduce or change materials included in our hardware designs to take environmental impact into account, whilst also adding appropriate recycling labelling information to customers. Every improvement identified is reviewed to ensure changes do not have a detrimental impact on quality of the product, protection of our intellectual property or the customer experience; and

-- We have initiated an energy usage and business travel data collation project which will allow us to have visibility on our Scope 1 and 2 emissions for future reporting requirements.

People

Calnex is a people first company built on trust and respect. We are transparent, sharing in the successes, the challenges and the Group's ambitions moving forward. We help and encourage each other, supporting the business and our colleagues in building on an already successful company. Calnex also enjoys and thrives on a diverse workforce where inclusion is key to building high performing, engaged and successful teams.

Respectful of each other, we consider how our actions, ideas and approaches impact others.

We work as one team.

Our strong values, as reflected in our Investors in People Gold Award, are promoted through a variety of employee engagement programmes:

-- Robust Recruitment Process that only ever hires top talent and employees who value and support a positive working culture, (each potential employee has a 'fit interview' as well as skills and experience assessments).

-- Supportive Induction Training Programme including a comprehensive internally delivered training programme that supports the integration of new employees.

   --      Mentoring Programme to support the development of staff and career progression. 

-- Employee-built Annual Review Programme that recognises personal achievements and supports development and career progression.

-- Training and Development Opportunities to further develop skillsets and/or secure educational qualifications.

   --      Group-wide Compliance Training to remain legally compliant worldwide. 

-- A benchmarked Benefits Package that strongly supports the financial, physical and mental wellbeing of our people including, amongst other things, profit share for staff, an employee share incentive plan, a flexible/hybrid working model, an employee wellbeing activity programme (including fitness classes, an onsite gym, and free use of facilities at the local sports and recreation centre, a healthcare scheme available to all staff and income protection and life assurance polices.

   --      Quality Management System that encourages inclusivity and drives process improvement. 

-- Regular Culture sessions chaired by Calnex's CEO to gather feedback on the Company's culture, practices and processes, encouraging employees to provide their input into organisational development.

-- Annual Employee Surveys to enable two-way dialogue on topics such as company strategy, career progression opportunities and other current topics affecting the working lives and wellbeing of our employees.

In 2022, partnering with Connect Three, we have introduced Leadership Development (LDP) and Power Skills programmes. Our LDP is a mandatory programme for managers which supports them in leading high performing teams, developing capability, effective communication and leading effective change. As the business continues to grow and change, self-awareness and psychological safety training has also become a key element of this programme as we strive to retain the positive, inclusive and collaborative culture that has contributed to our success to date.

Our employee designed Power Skills programme provides all our employees with regular access to a weekly programme of skills sessions designed to engender confidence, understanding and awareness of a wide variety of skills ranging from Understanding Self and Others, Resilience and Change to Super Powering Communication and Influencing and Developing a Global Mindset.

The introduction of our new Psychological Safety programme also nurtures an inclusive, supportive and safe environment for our employees to thrive in, providing a work environment where we support each other through change and growth ensuring our positive, people-focused culture remains at the heart of everything we do.

In the last 12 months, our learning and development activities have led to 24 promotions and 5 cross-departmental moves. Structural development within the organization due to rapid growth over the last three years has created openings for 16 new management positions. Our focus on internal skills and leadership development has meant that we have been able to fill 60% of these positions internally, which is a major positive for both the business and the careers of those involved.

To actively support our employees' mental wellbeing, we have also partnered with David Beeney at Breaking the Silence to deliver interactive manager and employee workshops on managing our own mental health and supporting our colleagues in the workplace. Employees also have direct access to David for more personal support.

Calnex has also engaged a Chartered Financial Planner to provide financial wellbeing workshops for all employees and 1:1 free financial support to our UK team.

Our continued success at Calnex, together with the diversity of our employees, enables us to make meaningful contributions all over the world. Guided and driven by what is important to our teams, we are committed to use the resources we have at our disposal to support events, charities and groups to demonstrate our commitment to Environmental, Social and Governance responsibilities.

Tommy Cook

Chief Executive Officer

22 May 2023

Financial Review

Chief Financial Officer's Statement

The Group delivered a solid financial performance in the year to 31 March 2023, with growth in revenue, underlying EBITDA, profit before tax and cash in the year.

Financial KPIs

 
 GBP000                       FY23     FY22 
 Revenue                    27,449   22,046 
 Gross Profit               20,472   16,528 
 Gross Margin                  75%      75% 
 Underlying EBITDA (1)       7,980    6,351 
 Underlying EBITDA %           29%      29% 
 Profit before tax           7,208    5,973 
 Profit before tax %           26%      27% 
 Closing cash and fixed 
  term deposits (2)         19,098   15,357 
 Capitalised R&D             4,523    3,905 
 Basic EPS (pence)            6.75     5.19 
 Diluted EPS (pence)          6.42     5.00 
 
 

(1) Refer to note 33 for explanation of the alternative performance measures calculations. A full reconciliation between Underlying EBITDA and the statutory measures is also shown below.

(2) The Group takes advantage of high interest deposit accounts for surplus cash balances not required for working capital. Under IAS 7 Statement of Cash Flows, cash held on long-term deposits (being deposits with maturity of greater than 95 days, and no more than twelve months) that cannot readily be converted into cash is classified as a fixed term investment and shown separately on the balance sheet.

 
 Reconciliation of statutory figures to alternative performance 
  measures - Income Statement 
                                                      FY23       FY22 
                                                    GBP000     GBP000 
 Revenue                                            27,449     22,046 
 Cost of sales                                     (6,977)    (5,518) 
 Gross Profit                                       20,472     16,528 
 Other income                                          751        648 
            Administrative expenses (excluding 
                  depreciation & amortisation)     (9,928)    (7,917) 
----------------------------------------------  ----------  --------- 
 EBITDA                                             11,295      9,259 
 Amortisation of development costs                 (3,315)    (2,908) 
 Underlying EBITDA                                   7,980      6,351 
 Other depreciation & amortisation                   (746)      (358) 
 Operating Profit                                    7,234      5,993 
 Finance costs                                        (26)       (20) 
----------------------------------------------  ----------  --------- 
 Profit before tax                                   7,208      5,973 
 Tax                                               (1,297)    (1,433) 
----------------------------------------------  ----------  --------- 
 Profit for the year                                 5,911      4,540 
 

Revenue

Revenues in the year increased 25% to GBP27.4m (FY22: GBP22.0m), with growth across all of the major product lines compared to the prior year. Revenues from the Americas and Rest of World regions increased 36% and 38% respectively. North Asia revenues experienced a slight 4% decline on the prior year due in part to the ongoing geopolitical tensions between the US and China. Americas accounted for 35% of total revenues (FY22: 32%), ROW 41% (FY22: 37%) and North Asia 24% (FY22: 31%) in the year.

Revenue model

Calnex generates revenues through the sale of bundled hardware and software, alongside the provision of software support and extended warranty programmes.

The Group's core sales model is bundled hardware and software. Sales pricing is dependent on the product type and the complexity of the software configuration built into the product package. Calnex also sells stand-alone software upgrades under licence.

Each of Calnex's units comes with a standard warranty period including maintenance and software upgrade cover in the event of any software upgrades being released for the options purchased. Calnex also sells software support programmes which provide customers with access to future software upgrades which are not included as part of the standard warranty. The Group also offers extended warranty programmes to cover repairs falling outside of the standard warranty period.

Bundled hardware and software revenues are recognised when delivered to the customer, with stand-alone software revenues recognised in line with the licence period. Revenues from software support and extended warranty programmes are typically recognised on a straight-line basis over the term of the contract.

Many of the products and services developed and deployed by Calnex's customers are interlinked and need to be tested independently, such as the individual components which are then built into the equipment used in telecoms networks. Calnex's test products can be used by a combination of equipment vendors, component manufacturers and network operators, to carry out testing during a new product development cycle. A customer can choose to use Calnex's products in the knowledge that a more consistent result may be obtained if a Calnex test solution had already been used on a particular product.

Sources of Revenue

Revenue streams

 
                                                      FY23      FY22 
                                                    GBP000    GBP000 
 
 Warranty support revenue - recognised over the 
  life of cover                                      2,870     2,006 
 Hardware and software revenue - recognised on 
  despatch/delivery                                 24,579    20,040 
                                                  --------  -------- 
 Total revenue                                      27,449    22,046 
 

In FY23, 90% (FY22: 91%) of the Group's revenues were generated from the sale of bundled hardware and software products, with 10% (FY22: 9%) from software support and extended warranty programmes.

Geographical split of orders (average over 3 years)

 
                          FY23 
                   % of orders 
 
 Americas                  39% 
 North Asia                27% 
 Rest of World             34% 
 

The Group's customers are located across the world. Our global customer base and distributor network enables the Group to spread risk across our three key regions: the Americas, North Asia and Rest of the World (ROW). On a three-year average basis, the split of orders across the three key regions was 39% for ROW (FY22: 35%), 34% for Americas (FY22: 35%) and 27% (FY22: 30%) for North Asia. North Asia experienced a decrease in the period reflecting the ongoing US-China geopolitical tensions.

Top 10 customer orders (average over 3 years)

 
                                     FY23 
                              % of orders 
 
 Top 10 customer revenues             47% 
 Other revenues                       53% 
 

In FY23, Calnex received orders from 305 customers, an increase of 72 on 233 customers in FY22.

The Group's top ten customers in FY23 accounted for 39% of total orders (FY22: 53%) and 47% of total orders on average over the last three years (FY22: 50%). The step change in percentage in the year is primarily driven by sales of NE-ONE products to customers new to Calnex.

In FY23, no underlying customer accounted for more than 8% of Calnex's total orders.

Repeat customers (average over 3 years)

 
                          FY23 
                   % of orders 
 
 Repeat orders             74% 
 Other orders              26% 
 

The average length of customer relationship across the top ten customers in FY23 is 10 years (FY22: 10 years), demonstrating our high levels of repeat demand from these customers. In addition, the Group typically experiences a high level of repeat business from its total customer base. In FY23, using a three year order average, 74% of orders were generated from existing customers (FY22: 79%). The impact of NE-ONE new customers accounts for this change compared to FY22.

During the last five years, 230 customers have placed repeat orders with Calnex (FY22: 199).

Telecoms v non-telecoms customers (average over 3 years, excluding NE-ONE in FY23)

 
                  FY23    FY22 
                  % of orders 
 
 Telecoms          75%     77% 
 Non Telecoms      25%     23% 
 

Calnex's sales are predominantly derived from telecoms customers where the end-application is a telecoms (fixed and mobile) network. Non-telecoms customers include hyperscale/data centres and enterprise customers. On a three year average basis, and excluding NE-ONE orders (as these are a new set of customers in FY23 only), these non-telecoms customers represented 25% in FY23 (FY22: 23%).

Including NE-ONE in FY23, the three year average percentage of non-telecoms customers represents 26% in FY23 (FY22: 23%).

As telecoms networks evolve, we are finding a number of companies whose primary business is hyperscale/datacentres and IT are also moving into the telecoms space. We classify sales to these non-telecoms companies for use in telecoms applications as telecoms sales for the purposes of this analysis.

Gross Profit

Gross profit increased by 24% to GBP20.5m (FY22: GBP16.5m) reflecting the solid trading performance. Gross margin, which is calculated after discounts to channel partners are applied, is in line with the prior year at 75% (FY22: 75%).

Underlying EBITDA

Underlying EBITDA, which includes R&D amortisation, increased by 26% to GBP8.0m in the year (FY22: GBP6.4m), in line with market expectations, as a result of the strong trading performance. Administrative expenses (excluding depreciation & amortisation) were GBP10.0m in FY23 (FY22: GBP7.9m). This increase relates predominantly to the planned investment in the management, sales and support teams across the business in line with the Group's growth strategy, increases in travel costs as COVID-19 restrictions have been lifted across the majority of our regions, increases in US dollar based costs for our overseas sales teams as a result of the strengthening of USD over GBP and overheads relating to the Stevenage site after the acquisition of iTrinegy. Administration costs also include GBP0.2m of non-recurring acquisition related deal costs and GBP0.1m of a charge in relation to the contingent consideration accounting in relation to the iTrinegy acquisition.

Amortisation of R&D costs increased by GBP0.4m to GBP3.3m (FY22: GBP2.9m) due to increased R&D investment in recent years to support the growth in revenues.

Underlying EBITDA margin was 29% in FY23, in line with the prior year.

Profit before tax

Profit before tax increased by 21% in the year to GBP7.2m (FY22: GBP6.0m) driven by the growth in revenue performance. Profit before tax margin was 26% in FY23 compared to 27% in FY22. This slight change in profit margin is driven by the increase in other depreciation and amortisation costs as an additional GBP0.3m amortisation of acquired intangible assets was charged to the income statement in the Period in relation to the iTrinegy acquisition.

Tax

The tax charge in the year was GBP1.4m (FY22: GBP1.3m), representing an effective tax rate of 18% (FY22: 24%).

The weighted average applicable tax rate for FY23 was 19%. The difference between the applicable rate of tax and the effective rate is largely due to the following:

   --      Availability of enhanced 130% SME R&D deduction (decreasing the effective rate by 2.2%); 
   --      Deferred tax charged directly to equity (decreasing the effective rate by 2.2%); 

-- Recognition of the change in tax rate to 25% on certain deferred tax assets and liabilities as they are expected to reverse after 1 April 2023 (increasing the effective rate by 0.7%);

   --      Overseas taxes (increasing the effective rate by 2.0%); 

-- Other differences, such as prior year adjustments and disallowable expenses (increasing the effective rate by 0.7%).

The weighted average applicable tax rate for FY22 was 19%. The difference between the applicable rate of tax and the effective rate of 24% was largely due to the following:

-- Recognition of the change in tax rate to 25% on certain deferred tax assets and liabilities as they are expected to reverse after 1 April 2023 (increasing the effective rate by 5.9%);

   --      Availability of R&D SME enhanced deduction (decreasing effective rate by 0.3%); 

-- Impact of the super deduction in relation to fixed asset additions (decreasing the effective rate by 0.3%); and

-- Other differences, such as prior year adjustments, disallowable expenses and overseas tax (decreasing effective rate by 0.3%).

The 2021 budget proposal increases the corporation tax rate to 25% from 1 April 2023. This was substantively enacted in the Finance Act 2021 on 24 May 2021.

Earnings per share

Basic earnings per share was 6.75 pence in the Period (FY22: 5.19 pence) and diluted earnings per share was 6.42 pence (FY22: 5.00 pence), with the increases in both metrics reflecting the strong performance in the year.

iTrinegy acquisition

The acquisition of 100% of the issued share capital of iTrinegy Ltd (together with its wholly owned subsidiary iTrinegy Inc.) completed on 12 April 2022 on a cash free, debt free basis, for an initial cash consideration of GBP2.5m, fully funded from the Group's free cash. An additional GBP0.5m was paid to the vendors in exchange for them leaving all available cash (GBP0.7m at acquisition date) within the acquired business. The net cash effect of the transaction was GBP2.3m. A detailed summary of the transaction is set out in note 13 to the financial statements.

Up to a further GBP1m is potentially payable to the vendors subject to the achievement of revenue growth targets from the NE-ONE product line in the year ended 31 March 2024. This "Earn-Out Payment" would be paid as a combination of cash and new shares issued in Calnex Solutions plc.

The Earn-Out Payment in relation to those iTrinegy vendors who have remained as employees of the new Group has been treated as remuneration, with the fair value expensed to the income statement (using current forecasts, the Earn Out Payment is assumed to be paid out at 50% of the maximum). This results in a charge of GBP0.3m related to post acquisition service, and this will be charged to the Income Statement over the vesting period. In the current year, GBP0.1m has been charged to administrative expenses within the Income Statement.

GBP1.3m of a fair value adjustment has been calculated as valuation of the intellectual property associated with the acquired technology, and customer relationships (offset by a GBP0.3m deferred tax liability recognised in relation to the fair value uplift on the intangibles balance). The goodwill balance of GBP2.0m represents an accelerated R&D development timeline, cost and sales channel synergies expected from combination, as well as intangible assets not qualifying for separate recognition, such as workforce in place.

GBP0.2m of acquisition related expenses for legal and professional fees, as well as GBP0.3m amortisation of acquired intangible assets have also been charged to the income statement in the year.

Cashflows

The Group generated cash before acquisitions of GBP6.0m in FY23 (FY22: GBP2.7m), reflecting the solid trading performance and working capital movements in the year.

 
 Cashflow summary 
                                                           FY23      FY22 
                                                         GBP000    GBP000 
 Net cash from operating activities                      11,111     7,350 
 Investing activities - intangible and property, 
  plant and equipment                                   (4,704)   (4,213) 
 Dividends paid                                           (761)     (245) 
 Other financing and investing activities                   358     (203) 
-----------------------------------------------------  --------  -------- 
 Increase in cash before acquisitions and transfers 
  to fixed term investments                               6,004     2,689 
-----------------------------------------------------  --------  -------- 
 Purchase of subsidiary: net of cash acquired           (2,263)         - 
 Fixed term investment: fixed term deposit                 (15)   (1,500) 
-----------------------------------------------------  --------  -------- 
 Increase in cash per consolidated cashflow 
  statement                                               3,726     1,189 
-----------------------------------------------------  --------  -------- 
 
 

Net cash from operating activities was GBP11.1m in the year (FY22: GBP7.4m). Working capital movements represented a cash outflow of GBP0.4m (FY22: GBP1.5m), predominately as a result of the timing and volume of shipping and invoicing to customers.

Cash used in investing activities is principally cash spent on R&D activities which is capitalised and amortised over five years. Investment in R&D in the year was GBP4.5m (FY22: GBP3.9m), reflecting the planned growth in the R&D team as projects resource demands increased.

Cash spend on financing activities in the year was GBP0.6m (FY22: GBP0.4m), largely representing dividends paid in the year of GBP0.8m (FY22: 0.3m), which included the final dividend for FY22 of 0.56p per share, approved at the Company's AGM and paid on 30 August 2022, and the interim dividend for FY23 of 0.31 pence per share, paid on 16 December 2022. This was offset by GBP0.4m of cash received for the final tranche of the Scottish Enterprise government grant, which came to the end of its term in January 2023. The remainder of the cash spend on financing activities reflects payment of lease obligations.

The Group places surplus cash balances not required for working capital into notice and fixed term deposit accounts. Under IFRS, cash held on long-term deposits (being deposits with maturity of greater than 95 days, and no more than twelve months) that cannot readily be converted into cash is classified as a fixed term investment. This is shown separately on the balance sheet and is accounted for as a cash outflow within investing activities in the consolidated cashflow statement for the year ended 31 March 2022. It is added back in the non-statutory cash flow reconciliation above as we regard this as cash generated and owned by the Group in the year.

There is currently no debt on the balance sheet, leading to no borrowings related cashflows in the current or prior periods. Closing cash, including fixed term deposits, at 31 March 2023 was GBP19.1m (31 March 2022: GBP15.4m).

Dividend

The directors are proposing a final dividend with respect to the financial year ended 31 March 2023 of 0.62p per share. The final dividend will be proposed for approval at the Annual General Meeting in August 2023 and, if approved, will be paid on 30 August 2023 to all shareholders on the register as at close of business on 28 July 2023, the record date. The ex-dividend date will be 27 July 2023.

Ashleigh Greenan

Chief Financial Officer

22 May 2023

Consolidated statement of Comprehensive Income

 
                                    Year      Year 
                                   ended     ended 
                                31 March  31 March 
                                    2023      2022 
                          Note   GBP'000   GBP'000 
 
Revenue                    5      27,449    22,046 
Cost of sales                    (6,977)   (5,518) 
                                --------  -------- 
Gross profit                      20,472    16,528 
Other income               6         751       648 
Administrative expenses         (13,989)  (11,183) 
                                --------  -------- 
Operating profit                   7,234     5,993 
Finance costs              10       (26)      (20) 
                                --------  -------- 
Profit before taxation             7,208     5,973 
Taxation                   11    (1,297)   (1,433) 
                                --------  -------- 
Profit and total 
 comprehensive 
income for the year                5,911     4,540 
                                ========  ======== 
 
 
Basic earnings per 
 share                     29       6.75      5.19 
Diluted earnings 
 per share                 29       6.42      5.00 
 
 
 

Consolidated and Company Statement of Financial Position

__________________________________________________________________________________________________________________

 
 
                                                                    Group                        Company 
                                                                   31         31    31 March      31 March 
                                                                March      March 
                                                                 2023       2022        2023          2022 
                                                              GBP'000    GBP'000     GBP'000       GBP'000 
Non-current assets            Note 
Intangible assets              12                              10,565      8,424       9,525         8,424 
                              13, 
Goodwill                       14                               2,000          -           -             - 
Plant and equipment            15                                 404        274         404           274 
Right-of-use assets            21                                 533        791         533           791 
Deferred tax asset             22                                 272        304         272           304 
                                                               13,774      9,793      10,734         9,793 
 
Current assets 
Inventories                    16                               2,748        998       2,748           998 
Trade and other receivables    17                               3,130      4,997       3,455         5,197 
Cash and cash equivalents      18                              17,583     13,857      17,186        13,592 
Short term investment          18                               1,515      1,500       1,515         1,500 
                                                ---------------------  ---------   ---------      -------- 
                                                               24,976     21,352      24,904        21,287 
 
Total assets                                                   38,750     31,145      35,638        31,080 
                                                ---------------------  ---------   ---------      -------- 
 
Current liabilities 
 
Trade and other payables       20                               5,988      5,569       5,806         5,549 
Corporation tax                                                   843          -         741             - 
Lease liabilities              21                                 260        193         260           193 
Provisions                     23                                   -        141           -           141 
                                                                                   ---------      -------- 
                                                                7,091      5,903       6,807         5,883 
 
Non-current liabilities 
 
Trade and other payables       20                               1,396        718       1,356           718 
Lease liabilities              21                                 431        664         431           664 
Deferred tax liabilities       22                               2,457      2,017       2,197         2,017 
Provisions                     23                                  15         15          15            15 
                                                                4,299      3,414       3,999         3,414 
 
Total liabilities                                              11,390      9,317      10,806         9,297 
                                                ---------------------  --------- 
 
 
Net assets                                                     27,360     21,828      24,832        21,783 
                                                =====================  =========   =========      ======== 
 
Equity 
Share capital                  28                                 109        109         109           109 
Share premium                                                   7,495      7,484       7,495         7,484 
Share option reserve           26                                 873        502         873           502 
Retained earnings                                              18,883     13,733      16,355        13,688 
                                                ---------------------  --------- 
Total equity                                                   27,360     21,828      24,832        21,783 
                                                =====================  =========   =========      ======== 
 
 
 
 
 
 
 
 
 

Consolidated Statement of Changes in Equity

_________________________________________________________________________________________________________________

 
 
                                                      Share 
                                  Share     Share    option     Retained     Total 
                                capital   premium   reserve     earnings    equity 
                                GBP'000   GBP'000   GBP'000      GBP'000   GBP'000 
 
Balance at 31 March 2021            109     7,484       126        9,438    17,157 
 
Transactions with owner in 
 their capacity as owners 
Share options                         -         -       376            -       376 
Dividends paid                                  -         -        (245)     (245) 
                                -------   -------   -------   ----------   ------- 
Total transactions with owner 
 in their capacity as owners                            376        (245)       131 
 
Total comprehensive income 
 for the year                         -         -         -        4,540     4,540 
 
Balance at 31 March 2022            109     7,484       502       13,733    21,828 
 
Transactions with owner in 
 their capacity as owners 
Share options exercised               0        11         -            -        11 
Share options                         -         -       371            -       371 
Dividends paid                        -         -         -        (761)     (761) 
                                -------   -------   -------   ----------   ------- 
Total transactions with owner 
 in their capacity as owners          0        11       371        (761)     (379) 
 
 
Total comprehensive income 
 for the year                         -         -         -        5,911     5,911 
 
Balance at 31 March 2023            109     7,495       873       18,883    27,360 
                                -------   -------   -------   ----------   ------- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Company Statement of Changes in Equity

__________________________________________________________________________________________________________________

 
 
                                                      Share 
                                  Share     Share    option     Retained     Total 
                                capital   premium   reserve     earnings    equity 
                                GBP'000   GBP'000   GBP'000      GBP'000   GBP'000 
 
Balance at 31 March 2021            109     7,484       126        9,452    17,171 
 
Transactions with owner in 
 their capacity as owners 
Share options                         -         -       376            -       376 
Dividends paid                        -         -         -        (245)     (245) 
                                -------   -------   -------   ----------   ------- 
Total transactions with owner 
 in their capacity as owners                            376        (245)       131 
 
Total comprehensive income 
 for the year                         -         -         -        4,481     4,481 
 
Balance at 31 March 2022            109     7,484       502       13,688    21,783 
 
Transactions with owner in 
 their capacity as owners 
Share options exercised               0        11         -            -        11 
Share options                         -         -       371            -       371 
Dividends paid                        -         -         -        (761)     (761) 
                                -------   -------   -------   ----------   ------- 
Total transactions with owner 
 in their capacity as owners          0        11       371        (761)     (379) 
 
Total comprehensive income 
 for the year                         -         -         -        3,428     3,428 
 
Balance at 31 March 2023            109     7,495       873       16,355    24,832 
                                -------   -------   -------   ----------   ------- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Consolidated and Company Cash Flow Statement

__________________________________________________________________________________________________________________

 
                                                        Group                            Company 
                                                   31 March      31 March    31 March   31 March 
                                                       2023          2022        2023       2022 
                                                    GBP'000       GBP'000     GBP'000    GBP'000 
Cashflows from operating 
 activities 
Profit before tax from continuing 
 operations                                           7,208         5,973       4,459      5,872 
Adjusted for: 
Finance costs                                            26            20          26         20 
Interest received                                     (160)             -       (160)          - 
Government grant income                               (201)         (197)       (201)      (197) 
R&D tax credit income                                 (390)         (457)       (390)      (457) 
Movement in provisions                                    -         (150)           -      (150) 
Share-based payment transactions                        574           262         574        262 
Depreciation                                            371           252         371        252 
Amortisation                                          3,690         3,014       3,422      3,014 
Impairment of investment                                  -             -       2,436          - 
Movement in inventories                             (1,554)          (38)     (1,557)       (38) 
Movement in obsolescence 
 provision                                            (122)           150       (122)        150 
Movement in trade and other 
 receivables                                          1,619       (2,815)       1,484    (2,567) 
Movement in trade and other 
 payables                                             (329)         1,129       (770)      1,108 
                                             --------------  ------------    --------   -------- 
Cash generated from operations                       10,732         7,143       9,572      7,269 
 
Movement in provisions (overseas 
 tax)                                                 (140)             -       (140)          - 
Corporation & foreign tax 
 payments                                              (70)             -           -          - 
R&D tax credit refunds received                         589           207         589        207 
                                             --------------  ------------ 
Net cash from operating 
 activities                                          11,111         7,350      10,021      7,476 
                                             --------------  ------------    --------   -------- 
 
Investing activities 
Purchase of intangible assets                       (4,523)       (3,913)     (4,523)    (3,913) 
Purchase of property and 
 equipment                                            (181)         (300)       (181)      (300) 
Purchase of subsidiary: net 
 of cash acquired                                   (2,263)             -     (2,263)          - 
Distribution from subsidiary from 
 pre-acquisition reserves                                 -             -         767          - 
Dividend received from subsidiary 
 of post-acquisition reserves                             -             -         191          - 
Short term investment: fixed 
 term deposit                                          (15)       (1,500)        (15)    (1,500) 
Interest received                                       160             -         160 
                                                                             --------   -------- 
Net cash used in investing 
 activities                                         (6,822)       (5,713)     (5,864)    (5,713) 
                                             --------------  ------------    ========   ======== 
 
Financing activities 
Payment of lease obligations                          (245)         (203)       (245)      (203) 
Dividends paid                                        (761)         (245)       (761)      (245) 
Share options proceeds                                   11             -          11          - 
Government grant income                                 432             -         432          - 
                                                                             --------   -------- 
Net cash from financing 
 activities                                           (563)         (448)       (563)      (448) 
                                             --------------  ------------    ========   ======== 
 
Net increase in cash and 
 cash equivalents                                     3,726         1,189       3,594      1,315 
 
Cash and cash equivalents 
 at beginning of the year                            13,857        12,668      13,592     12,277 
 
Cash and cash equivalents 
 at end of the year                                  17,583        13,857      17,186     13,592 
                                             --------------  ------------    ========   ======== 
 
 
 
 

Notes to the Financial Statements

____________________________________________________________________________________________________________

   1.        General information 

Calnex Solutions plc ("the Company") is a public limited company domiciled and incorporated in Scotland. The registered office is Oracle Campus, Linlithgow, West Lothian, EH49 7LR.

The Company (together with its subsidiary, the "Group") was under the control of the directors throughout the period covered in the financial statements. The list of the subsidiaries consolidated in the financial statements is shown in Note 27.

The principal activity of the Group is the design, production and marketing of test instrumentation and solutions for network synchronisation and network emulation, enabling its customers to validate the performance of critical infrastructure associated with telecoms networks, enterprise networks and data centres.

The financial statements were authorised for issue, in accordance with a resolution of directors, on 22 May 2023. The directors have the power to amend and reissue the financial statements.

   2.        Basis of preparation 
   (a)       Statement of compliance 

This financial information does not include all information required for full annual financial statements and therefore does not constitute statutory accounts within the meaning of section 435(1) and (2) of the Companies Act 2006 or contain sufficient information to comply with the disclosure requirements of International Financial Reporting Standards. These should be read in conjunction with the Financial Statements of the Group as at and for the year ended 31 March 2023. The report of the auditors for the year ended 31 March 2023 was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

   (b)      Basis of accounting 

The financial statements have been prepared under the historical cost convention, except for certain financial assets and liabilities including financial instruments, which are stated at their fair values.

The preparation of the financial statements in conformity with UK-adopted IAS requires the directors to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expense. The estimates and judgements are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented.

   (c)       Functional and presentation currency 

The financial statements are presented in pounds Sterling, which is the functional and presentation currency of the Group. Results in these financial statements have been prepared to the nearest thousand.

   (d)      Basis of consolidation 

The consolidated financial statements incorporate those of Calnex Solutions plc, and all its subsidiaries. A subsidiary is an entity controlled by the Group, i.e. the Group is exposed to, or has the rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its current ability to direct the entity's relevant activities (power over the investee). All intra-Group transactions, balances, and unrealised gains on transactions between Group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The total comprehensive income, assets and liabilities of the entities are amended, where necessary, to align the accounting policies.

The Group applies the acquisition method to account for all acquired businesses, whereby the identifiable assets acquired and the liabilities assumed are measured at their acquisition date fair values (with a few exceptions as required by IFRS 3 Business Combinations).

The cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the business combination. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities is recognised as goodwill.

The acquisition of assets that falls outside the scope of IFRS 3 are accounted for by bringing the assets and liabilities of the acquired entity into the financial statements at their nominal value from the date of acquisition. Comparative information is not restated.

Notes to the Financial Statements continued

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   2.        Basis of preparation (continued) 
   (e)      Going Concern 

The financial information for the year to 31 March 2023 has been prepared on the basis that the Company will continue as a going concern.

The Board has approved financial forecasts for the current and succeeding financial period to 31 March 2025. Based on this review, along with regular oversight of the Company's risk management framework, the Board has concluded that given the Company's cash reserves available and access to additional liquidity through banking facilities the Company will continue to trade as a going concern.

   3.        Significant accounting policies 
   (a)       Revenue recognition 

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of sales related taxes and discounts and is recognised at the point in time when the relevant performance obligation is satisfied.

Where revenue contracts have multiple elements, all aspects of the transaction are considered to determine whether these elements can be separately identified. Where transaction elements can be separately identified and revenue can be allocated between them on a fair and reliable basis, revenue for each element is accounted for according to the relevant policy below. Where transaction elements cannot be separately identified, revenue is recognised over the contract period.

The Group recognises revenue from the following major sources:

Hardware & software revenue

Revenue from the sale of bundled hardware and software, is recognised when the Group transfers the risk and rewards to the customer. Each unit sale comes with a standard warranty period during which the Group agrees to provide warranty cover, maintenance cover and software upgrade cover in the event of any software upgrades being released. This is recognised as a separately identifiable obligation from the provision of the hardware and is recognised over the life of the cover provided, being a year.

For the sale of stand-alone software, the licence period and therefore the revenue recognition, commences upon delivery.

Extended warranty programme

The Group enters into agreements with purchasers of its equipment to perform necessary repairs falling outside the Group's standard warranty period. As this service involves an indeterminate number of acts, the Group is required to 'stand ready' to perform whenever a request falling within the scope of the program is made by a customer. Revenue is recognised on a straight-line basis over the term of the contract.

This method best depicts the transfer of services to the customer as:

i) The Group's historical experience demonstrates no statistically significant variation in the quantum of services provided in each year of a multi-year contract; and

ii) no reliable prediction can be made as to if and when any individual customer will require service.

Software support programme

The Group enters into agreements with purchasers of its equipment to provide software support and access to future software updates. Revenue is recognised on a straight-line basis over the term of the contract.

Notes to the Financial Statements continued

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   3.        Significant accounting policies (continued) 

Grant income

The Group obtains grant funding from the Scottish Government in the form of reimbursement for research and development costs eligible for reclaim under the grant agreement. Costs are incurred before they can be reclaimed under the grant agreement and revenue is only recognised after receipt of the funds from the government. Grant funds received are recognised over five years, in line with the amortisation policy on capitalised research and development costs.

   (b)      Retirement benefit costs 

Payments to defined contribution schemes are charged to the Statement of Comprehensive Income as an expense as they fall due.

   (c)       Share-based payments 

Equity-settled and cash settled share-based compensation benefits are provided to some employees. Equity-settled transactions are awards of shares, or options over shares that are provided to employees in exchange for the rendering of services.

The cost of equity-settled transactions is measured at fair value on grant date. Fair value is independently determined using the Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the Group receives the services that entitle the employees to receive payment. There are no other vesting conditions.

The cost of equity-settled transactions is recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods.

The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying the Black-Scholes option pricing model, taking into consideration the terms and conditions on which the award was granted. The cumulative charge to profit or loss until settlement of the liability is calculated as follows:

-- during the vesting period, the liability at each reporting date is the fair value of the award at that date multiplied by the expired portion of the vesting period.

-- from the end of the vesting period until settlement of the award, the liability is the full fair value of the liability at the reporting date.

All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the cash paid to settle the liability.

If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification.

If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the Group or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited.

If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when the relevant requirements of IAS 12 are satisfied.

Notes to the Financial Statements continued

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   3.        Significant accounting policies (continued) 
   (d)      Taxation 

The tax expense represents the sum of the current tax and deferred tax charge for the year. The tax currently payable is based on taxable profit for the year. The Group's liability for current tax is calculated using the tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is measured on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases, as used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of financial assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

   (e)      Business Combinations 

The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired.

The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the Group to former owners of the acquirer. All acquisition costs are expensed as incurred to profit or loss. On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the Group's operating or accounting policies and other pertinent conditions in existence at the acquisition-date.

Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss.

The difference between the acquisition-date fair value of assets acquired and liabilities assumed and the fair value of the consideration transferred is recognised as goodwill. If the consideration transferred is less than the fair value of the identifiable net assets acquired, a bargain purchase is recognised as a gain directly in profit or loss by the Group on the acquisition-date.

Business combinations are initially accounted for on a provisional basis. The Group retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value.

   (f)       Intangible assets 

Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period.

Research costs are expensed in the period in which they are incurred. Development costs are capitalised when it is probable that the project will be a success considering its commercial and technical feasibility; the Group is able to use or sell the asset; the Group has sufficient resources and intent to complete the development; and its costs can be measured reliably. Capitalised development costs are amortised on a straight-line basis over the period of their expected benefit, being their finite life of 5 years.

Significant costs associated with patents and trademarks are deferred and amortised on a straight-line basis over the period of their expected benefit, being their finite life of 10 years. Amortisation is charged to administrative expenses in the Statement of Comprehensive Income.

Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit.

Notes to the Financial Statements continued

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   3.        Significant accounting policies (continued) 
   (g)       Financial assets 

Where there is no publicly quoted market value, other investments, including subsidiaries, are shown at cost less provisions for impairment.

   (h)      Plant and equipment 

Plant and equipment are shown at cost, net of depreciation and any provision for impairment. Depreciation is provided on all property, plant and equipment at varying rates calculated to write off cost less residual value over the useful lives. Depreciation is charged to administrative expenses in the Statement of Comprehensive Income. The principal rates employed are:

   Plant and machinery                                                            25-33% straight line 

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate these values may not be recoverable. If there is an indication that impairment does exist, the carrying values are compared to the estimated recoverable amounts of the assets concerned.

The recoverable amount is the greater of an asset's value in use and its fair value less the cost of selling it. Value in use is calculated by discounting the future cash flows expected to be derived from the asset. Where the carrying value of an asset exceeds its recoverable amount, the asset is considered impaired and is written down through the income statement to its recoverable amount.

An item of property, plant and equipment is written off either on disposal or when there is no expected future economic benefit from its continued use. Any gain or loss (calculated as the difference between the net disposal proceeds and the carrying value of the asset) is included in the income statement in the year.

   (i)        Right-of-use assets 

A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset.

Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any re-measurement of lease liabilities.

   (j)        Inventories 

Inventories are valued at the lower of cost and net realisable value. In determining the cost of raw materials, consumables and goods for resale, the average purchase price is used. For work in progress and finished goods, cost is taken as production cost which includes an appropriate proportion of overheads.

Inventories are assessed for indicators of impairment at each year end and where a provision is required the income statement is charged directly.

   (k)       Trade and other receivables 

Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses.

The simplified approach to measuring expected credit losses has been applied, this uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue.

Other receivables are recognised at amortised cost, less any allowance for expected credit losses.

Notes to the Financial Statements continued

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   3.        Significant accounting policies (continued) 
   (l)        Cash and cash equivalents 

Cash at bank and in hand are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of 95 days or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

   (m)     Short term investments 

Cash at bank on fixed term deposit, and other liquid investments with maturities of greater than 95 days, but less than 12 months at the reporting date.

   (n)      Borrowings 

Interest-bearing loans and bank overdrafts are initially recorded at the fair value of proceeds received and are subsequently stated at amortised cost. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis in the income statement using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

   (o)      Trade and other payables 

Trade payables are non-interest-bearing and are measured at amortised cost.

   (p)      Provisions 

Provisions are recognised when the Group has a present legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Provisions are measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as an interest expense.

   (q)      Financial liabilities 

Financial liabilities are recognised on the Group's Statement of financial position when the Group becomes a party to the contractual provisions of that instrument.

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value at each reporting date. The changes in fair value are recorded in the statement of comprehensive income.

   (r)       Lease liabilities 

A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. The lease term is the non-cancellable period of the lease plus extension periods that the group is reasonably certain to exercise and termination periods that the group is reasonably certain not to exercise. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred.

Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are re-measured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is re-measured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down.

The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred.

Notes to the Financial Statements continued

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   3.        Significant accounting policies (continued) 
   (s)       Foreign currency 

In preparing the financial statements, transactions in currencies other than pounds sterling are recorded at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to sterling at the foreign exchange rate ruling at that date. Exchange differences arising on translation are recognised in the consolidated Statement of comprehensive income for the period.

Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated at the rates prevailing at the dates when the fair value was determined. Non-monetary assets and liabilities that are measured at historical cost in a foreign currency (e.g. property, plant and equipment purchased in a foreign currency) are translated using the exchange rate prevailing at the date of the transaction. Exchange differences arising on the translation of net assets are affected through the Statement of Comprehensive Income.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period and recognised in the Statement of Comprehensive Income.

   (t)       Dividends 

Dividends are recognised when declared during the financial year. The declaration of dividends is at the discretion of the directors.

   (u)      Value Added Tax 

Revenues, expenses and assets are recognised net of the amount of associated VAT, unless the VAT incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of VAT receivable or payable. The net amount of VAT recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position.

Commitments and contingencies are disclosed net of the amount of VAT recoverable from, or payable to, the tax authority.

   (v)       Earnings per share 

Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to the shareholders, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.

Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

   (w)     Critical judgements in applying the Groups accounting estimates 

In the process of applying the Group's accounting policies, the directors have made the following estimates that have the most significant effect on the amounts recognised in the financial statements.

Share-based payment transactions

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using the Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity.

Notes to the Financial Statements continued

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   3.        Significant accounting policies (continued) 
   (w)     Critical judgements in applying the Groups accounting estimates (continued) 

Useful lives

The Group uses forecast cash flow information and estimates of future growth to assess whether goodwill and other intangible fixed assets are impaired, and to determine the useful economic lives of its goodwill and intangible assets. If the results of operations in a future period are adverse to the estimates used a reduction in useful economic life may be required.

intangible assets acquired through business combination

Where Intangible assets are acquired through business combination for which no active market for the asset exists, fair value is determined by discounting estimated future net cashflows generated by the asset. Estimates relating to the future cashflows and discount rates used may have a material effect on the reported amounts of finite lived intangible assets.

   (x)       New accounting standards 

There have been no applicable new standards, amendments to standards and interpretations effective from 1 April 2023 that have been applied by the Group which have resulted in a significant impact on its consolidated results or financial position.

   4         Operating Segments 

Operating segments are based on the internal reports that are reviewed and used by the Board (who are identified as the Chief Operating Decision Makers) in assessing performance and determining the allocation of resources. As the Group has a central cost structure and a central pool of assets and liabilities, the Board does not consider segmentation in their review of costs or the statement of financial position. The only operating segment information reviewed, and therefore disclosed, are the revenues derived from different geographies.

 
                          Year      Year 
                         ended     ended 
                      31 March  31 March 
                          2023      2022 
                       GBP'000   GBP'000 
 
Americas                 9,644     7,066 
North Asia               6,475     6,780 
Rest of World           11,330     8,200 
                        27,449    22,046 
                      ========  ======== 
 
   5         Revenue 
 
                                  Year      Year 
                                 ended     ended 
                              31 March  31 March 
                                  2023      2022 
                               GBP'000   GBP'000 
 
Sale of goods                   24,579    20,040 
Rendering of services            2,870     2,006 
Total revenue                   27,449    22,046 
 
 

69% (2022: 76%) of the Group order intake has been generated through the network of the Group's principal distribution partner. Included within orders there are no customers which exceed 10% of the Group's orders (2022: GBP3,656,051 from one customer exceeded 10% of Group orders).

Notes to the Financial Statements continued

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   6         Other income 
 
                              Year      Year 
                             ended     ended 
                          31 March  31 March 
                              2023      2022 
                           GBP'000   GBP'000 
 
Government grant 
 income                        201       191 
R&D tax credit                 390       457 
Interest received              160         - 
                               751       648 
                          ========  ======== 
 
   7         Material operating profit items 
 
                                                                    Year      Year 
                                                                   ended     ended 
                                                                31 March  31 March 
                                                                    2023      2022 
                                                                 GBP'000   GBP'000 
 
Operating profit for the year is stated after 
 charging/(crediting): 
Share-based payments                                                 574       262 
Legal and professional fees associated with acquisition 
 of subsidiary                                                       200         - 
Depreciation of tangible and ROU assets                              371       252 
Amortisation of intangible 
 assets                                                            3,690     3,014 
                                                                --------  -------- 
 
Auditor's remuneration 
Fees payable to the Group's auditor and its associates 
 for the audit of the Group's annual accounts                         44        44 
Total fees payable 
 for audit services                                                   44        44 
 
Fees payable to the Group's auditor and its associates 
 for other services: 
Audit related services                                                 -         2 
Tax related services                                                   -         - 
Other services                                                         -         - 
Total fees payable to the Group's auditor and 
 its associates                                                       44        46 
                                                                --------  -------- 
 
 
   8         Employee benefits costs 

Average monthly number of employees

 
                                 Year      Year 
                                ended     ended 
                             31 March  31 March 
                                 2023      2022 
                              GBP'000   GBP'000 
 
Development staff                  70        64 
Administrative staff               68        42 
Management staff                   11        10 
                                  149       116 
                             --------  -------- 
 
 
                                                                Year      Year 
                                                               ended     ended 
                                                            31 March  31 March 
                                                                2023      2022 
                                                             GBP'000   GBP'000 
Employee costs during the year (including directors 
 remuneration) amounted to: 
 
Wages and salaries                                             8,560     7,694 
Social security costs                                            875       630 
Defined contribution 
 pension                                                         418       251 
Share incentive scheme                                           233       210 
Equity-settled share-based 
 payment                                                         531       249 
Cash-settled share-based 
 payment                                                          43        13 
                                                              10,660     9,047 
                                                            --------  -------- 
 
Total gross wages and salaries capitalised in 
 the year, included in the analysis above                      3,837     3,138 
                                                            --------  -------- 
 

Notes to the Financial Statements continued

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   9         Key management personnel emoluments 
 
                                                               Year      Year 
                                                              ended     ended 
                                                           31 March  31 March 
                                                               2023      2022 
                                                            GBP'000   GBP'000 
 
Wages and salaries                                              636       638 
Social security costs                                           100        67 
Defined contribution 
 pension                                                          7         6 
Equity-settled share-based 
 payment                                                         29        29 
                                                                     -------- 
                                                                772       740 
                                                           --------  -------- 
 
The number of directors who accrued benefits under 
 the company pension plans: 
Defined contribution plans                                        1         1 
                                                           --------  -------- 
 
Remuneration of the highest paid director 
 in respect of qualifying services: 
Aggregate remuneration                                          237       255 
                                                           --------  -------- 
 
Key management refers to the directors 
 of the Group. 
 
   10      Finance costs 
 
                                      Year      Year 
                                     ended     ended 
                                  31 March  31 March 
                                      2023      2022 
                                   GBP'000   GBP'000 
 
Interest expense on lease 
 liabilities                            26        20 
                                  --------  -------- 
 
 

Notes to the Financial Statements continued

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   11      Taxation 
 
                                        Year      Year 
                                       ended     ended 
                                    31 March  31 March 
                                        2023      2022 
                                     GBP'000   GBP'000 
 
Current taxation 
UK corporation tax on 
 profits for the year                  1,143       373 
Foreign current tax expense              149        46 
Adjustments relating 
 to prior years                          (4)     (120) 
                                       1,288       299 
Deferred taxation 
Origination and reversal 
 of temporary differences               (46)       799 
Adjustments relating 
 to prior periods                          -      (46) 
Effect of changes in 
 tax rates                                55       381 
                                           9     1,134 
 
Total taxation charge                  1,297     1,433 
 
 
 
                                                    Year      Year 
                                                   ended     ended 
                                                31 March  31 March 
                                                    2023      2022 
                                                 GBP'000   GBP'000 
 
Profit before tax for 
 the year                                          7,208     5,973 
                                                ========  ======== 
 
 
Tax thereon at 19%                                 1,369     1,134 
 
Effects of: 
Expenses disallowable 
 for tax purposes                                     40        67 
Adjustments in respect of prior periods 
 - current tax                                       (4)     (120) 
Adjustments in respect of prior periods 
 - deferred tax                                        -      (46) 
Change in tax rate on opening balance                 55       381 
SME R&D credit                                     (161)       (9) 
Timing differences not recognised 
 in the computation                                   19         - 
Impact of super deduction                           (10)      (20) 
Deferred tax (charged)/credited 
 directly to equity                                (160)         - 
Overseas tax                                         149        46 
Taxation charge                                    1,297     1,433 
                                                ========  ======== 
 

The weighted average applicable tax rate for the year ended 31 March 2023 was 19% (2022: 19%). The effective rate of tax for the year, based on the taxation charge for the year as a percentage of the profit before tax is 18% (2022: 24.0%) The (1.0) percentage point difference between the applicable rate of tax and the effective rate is largely due to the following:

   --      Availability of enhanced 130% SME R&D deduction 
   --      Overseas taxes 

The 2021 budget proposal increases the corporation tax rate to 25% from 1 April 2023. This was substantively enacted in the Finance Act 2021 on 24 May 2021.

Notes to the Financial Statements continued

_________________________________________________________________________________________________________________

   12      Intangible assets 

Included within intangible assets are the following significant items:

   --      Cost of patent applications and on-going patent maintenance fees. 
   --      Acquired intellectual property from business combinations. 

-- Capitalised development costs representing expenditure relating to technological advancements on the core product base of the Group. These costs meet the requirement of IAS 38 (Intangible Assets) and will be amortised over the future commercial life of the related product. Amortisation is charged to administrative expenses.

 
                                Intellectual  Development    Group 
                                    property        Costs    Total 
                                     GBP'000      GBP'000  GBP'000 
Cost 
At 1 April 2022                        2,224       27,238   29,462 
Additions                                  -        4,523    4,523 
Acquired through business 
 combination                           1,308            -    1,308 
Disposals                                (6)      (1,366)  (1,372) 
At 31 March 2023                       3,526       30,395   33,921 
                                ------------  -----------  ------- 
 
Amortisation 
At 1 April 2022                        2,114       18,924   21,038 
Charge for the year                      375        3,315    3,690 
Eliminated on disposal                   (6)      (1,366)  (1,372) 
At 31 March 2023                       2,483       20,873   23,356 
                                ------------  -----------  ------- 
 
Net book value 
31 March 2022                            110        8,314    8,424 
                                ------------  -----------  ------- 
 
31 March 2023                          1,043        9,522   10,565 
                                ------------  -----------  ------- 
 
 
 
                             Intellectual  Development  Company 
                                 property        Costs    Total 
                                  GBP'000      GBP'000  GBP'000 
Cost 
At 1 April 2022                     2,224       27,238   29,462 
Additions                               -        4,523    4,523 
Disposals                             (6)      (1,366)  (1,372) 
At 31 March 2023                    2,218       30,395   32,613 
                             ------------  -----------  ------- 
 
Amortisation 
At 1 April 2022                     2,114       18,924   21,038 
Charge for the year                   107        3,315    3,422 
Eliminated on disposal                (6)      (1,366)  (1,372) 
At 31 March 2023                    2,215       20,873   23,088 
                             ------------  -----------  ------- 
 
Net book value 
31 March 2022                         110        8,314    8,424 
                             ------------  -----------  ------- 
 
31 March 2023                           3        9,522    9,525 
                             ------------  -----------  ------- 
 
 

During the year, a review of the carried development costs brought forward has resulted in a disposal of GBP1,365,530, and elimination of amortisation of GBP1,365,530 resulting in a net book value impact of GBPnil. This reflects removal of aged spend on product features that are now considered to be superseded by current product developments.

Within Group intellectual property, additions of GBP1,308,000 are included relating to the fair value assessment of intellectual property on the NE-ONE product range resulting from the business combination of iTrinegy. This intellectual property addition has also resulted in GBP267,970 of amortisation being charged to administration expenses in the year. Details of the business combination are included in note 13.

Notes to the Financial Statements continued

__________________________________________________________________________________________________________________

   13      Business combinations 

On 12 April 2022, Calnex Solutions plc acquired 100 per cent of the issued share capital of iTrinegy Ltd, a leading developer of Software Defined Test Networks technology for the software application and digital transformation testing market. The core product, the NE-ONE hardware and software based Network Emulation platforms, provide organisations, primarily across the technology, financial, gaming and military/government sectors, with the ability to accurately recreate complex, real-world network test environments in which to analyse and verify the performance of applications, before deployment. The NE-ONE platform, provides users with insight which enables them to reduce deployment costs and risk, whilst also addressing the needs of the cloud-based and virtual development environments, a rapidly growing sub-sector of the application development market.

This acquisition was made on a cash free, debt free basis, for an initial cash consideration of GBP2.5 million, fully funded from Group free cash. An additional GBP0.5 million was also paid to the vendors in exchange for them leaving all available cash (GBP0.7m at acquisition date) within the acquired business. Up to a further GBP1 million consideration is potentially payable subject to the achievement of revenue growth from the NE-ONE product line in the year ended 31 March 2024 (the 'Earn-Out Payment'). This Earn-Out Payment will be realised as a combination of cash and new ordinary shares issued in Calnex Solutions plc. The maximum number of new ordinary shares that may be issued as a result of the Earn-Out Payment targets being met in full is 322,579.

The Earn-Out Payment in relation to those iTrinegy vendors who have remained as employees of the new Group has been treated as remuneration, with the fair value expensed to the income statement. The share-based element of the Earn-Out Payment has been measured at fair value as at grant date, whilst the cash element of the Earn-Out Payment will be fair value assessed at each reporting date, consistent with IFRS 2 Share-based Payment. This results in a charge of GBP0.3m related to post acquisition service, and this will be charged to the Income Statement over the vesting period. In the current year, GBP0.1m has been charged to administrative expenses within the Income Statement.

GBP0.2m of acquisition related expenses for legal and professional fees, as well as GBP0.3m amortisation of acquired intangible assets have been charged to administrative expenses in the period.

The fair values of the identifiable net assets are set our below:

 
                                                 Fair 
                                                value 
                                     Book  Adjustment     Fair 
                                    value                value 
                                  GBP'000     GBP'000  GBP'000 
 
Intangible assets                       -       1,308    1,308 
Deferred tax liability                  -       (311)    (311) 
Plant & equipment                       8           -        8 
Cash and cash equivalents             737           -      737 
Trade and other receivables           397           -      397 
Inventories                            74           -       74 
Trade and other payables          (1,010)           -  (1,010) 
                                  -------  ----------  ------- 
Total identifiable assets             206         997    1,203 
Goodwill on acquisition                                  2,000 
Total consideration                                      3,203 
                                                       ------- 
 
Satisfied by: 
Initial cash consideration                               3,000 
Contingent consideration                                   203 
                                                         3,203 
                                                       ------- 
 
Cashflow 
Initial cash consideration                               3,000 
Cash acquired                                            (737) 
Net cashflow impact of 
 acquisition                                             2,263 
                                                       ======= 
 

The fair value adjustment noted above has been derived from the valuation of the intellectual property associated with acquired technology, and customer relationships. These intangible assets have been assigned a useful life of between three and five years.

The book value of all other assets and liabilities recognised at acquisition date have been determined to approximate their fair value. Trade and other receivables acquired were mainly trade receivables, of which no recovery issues were identified post-acquisition.

The values identified in relation to the acquisition of iTrinegy are final as at 31 March 2023.

Notes to the Financial Statements continued

__________________________________________________________________________________________________________________

   13      Business combinations (continued) 

The acquired business contributed revenues of GBP1.3m and profit after tax of GBP0.2m profit for the period 12 April 2022 to 31 March 2023. If the acquisition had occurred on 1 April 2022 the full year contributions to revenue and profit after tax would have been GBP1.3m and GBP0.2m profit after tax. The proximity of the acquisition date to the beginning of the financial year resulted in a significant amount of the acquired business transactions for financial year being captured post acquisition.

The directors have reviewed the GBP2.0m goodwill valuation and are comfortable it benchmarks consistently with similar acquisitions within the sector. Goodwill carried reflects the inherent value of an accelerated R&D development timeline to address the network emulation market with the NE-ONE product, coupled with significant cost and sales channel synergies the group will be able to leverage from its more mature organisational and sales structure. Goodwill also includes intangible assets not qualifying for separate recognition, such as workforce in place.

The goodwill is not expected to be deductible for tax purposes.

As part of the integration of the iTrinegy business, the Group has transferred all iTrinegy staff and trading over to Calnex Solutions plc, with the iTrinegy legal entities being 'hived up' into the existing Calnex entities. Details of the group structure changes in the year are detailed in note 27.

   14      Goodwill 

The goodwill arising in a business combination is allocated, at acquisition, to the cash generating units that are expected to benefit from the business combination. The Board consider the Group to consist of a single cash generating unit, reflective of not only the manner in which the Board (who operate as the Chief Operating Decision Makers) assess and review performance and resource allocation of the group, but also the centralised cost structure and pooled assets and liabilities which are critical to revenue generation across all platforms. The determination of a single cash generating unit within the group therefore reflects accurately the way the Group manages its operations and with which goodwill would naturally be associated.

 
 
                                       Group 
                                    31 March 
                                        2023 
                                     GBP'000 
Cost 
As at 1 April 2022                         - 
Acquisitions (note 13)                 2,000 
As at 31 March 2023                    2,000 
 
 

Goodwill of GBP2,000,000 has been recognised in the Group in the year, following the acquisition of iTrinegy Ltd.

The Group test goodwill for impairment annually, or more frequently if there are indications that the goodwill has been impaired. Goodwill is tested for impairment by comparing the carrying amount of the cash generating unit, including goodwill, with the recoverable amount. The recoverable amounts are determined based on value-in-use calculations which require assumptions. The calculations use cashflow projections based on financial budgets approved by the Board covering a two year period, together with management forecasts for a further three year period. These budgets and forecasts have regard to historical financial performance and knowledge of the current market, together with the Group's views on the future achievable growth and the impact of committed cashflows. Cashflows beyond this are extrapolated using estimated growth rates.

Key assumptions used in the value in use calculation:

-- The terminal cash flows are extrapolated in perpetuity using a growth rate of 2%, which has been based on management judgement reflecting sector and industry experience. This is not considered to be higher than the average long-term industry growth rate.

-- The discount rate is based on the weighted average cost of capital (WACC) of 11.7%, which would be anticipated for a market participant investing in the Group.

Management has performed sensitivity analysis on the key assumptions both with other variables held constant and with the other variables simultaneously changed. Management has concluded that there are no reasonable changes in the key assumptions that would cause the carrying amount of goodwill to exceed the value in use for the cash generating unit.

No evidence of impairment was found at balance sheet date.

Notes to the Financial Statements continued

__________________________________________________________________________________________________________________

   15      Plant and equipment 

The Group annually reviews the carrying value of tangible fixed assets taking recognition of the expected working lives of the plant and equipment available to the Group and known requirements. Depreciation is charged to administrative expenses.

 
                                      Group    Company 
                                      Plant      Plant 
                                        and        and 
                                  equipment  equipment 
                                      Total      Total 
                                    GBP'000    GBP'000 
Cost 
At 1 April 2022                         335        335 
Additions                               235        235 
Acquired through business 
 combination                              8          8 
Disposals                               (8)        (8) 
At 31 March 2023                        570        570 
                                  --------- 
 
Depreciation 
At 1 April 2022                          61         61 
Charge for the year                     113        113 
Eliminated on disposal                  (8)        (8) 
At 31 March 2023                        166        166 
                                  ---------  --------- 
 
Net book value 
31 March 2022                           274        274 
                                  =========  ========= 
 
31 March 2023                           404        404 
 
 
   16      Inventories 
 
                                         Group              Company 
                                       Year      Year      Year      Year 
                                      ended     ended     ended     ended 
                                   31 March  31 March  31 March  31 March 
                                       2023      2022      2023      2022 
                                    GBP'000   GBP'000   GBP'000   GBP'000 
 
Finished goods                        3,055     1,427     3,055     1,427 
Provision for obsolescence            (307)     (429)     (307)     (429) 
                                      2,748       998     2,748       998 
                                   ========  ========  ========  ======== 
 
Cost of inventories recognised 
 as an expense                        5,744     4,811     5,685     4,811 
 
 

Group inventories reflect the following movement in provision for obsolescence:

 
At start of the financial 
 year                           429   279    429   279 
Utilised                      (122)  (23)  (122)  (23) 
Provided                          -   173      -   173 
At end of the financial 
 year                           307   429    307   429 
                              =====  ====  =====  ==== 
 
 

Notes to the Financial Statements continued

__________________________________________________________________________________________________________________

   17      Trade and other receivables 
 
                                    Group              Company 
                                  Year      Year      Year      Year 
                                 ended     ended     ended     ended 
                              31 March  31 March  31 March  31 March 
                                  2023      2022      2023      2022 
                               GBP'000   GBP'000   GBP'000   GBP'000 
Amounts due within one 
 year 
Trade receivables                2,605     4,120     2,605     4,120 
R&D tax credit repayments            -       598         -       598 
Other receivables                  213       150       213       150 
Amounts owed by group 
 companies                           -         -       325       201 
Prepayments and accrued 
 income                            312       129       312       128 
                                 3,130     4,997     3,455     5,197 
                              ========  ========  ========  ======== 
 

Trade receivables are consistent with trading levels across the Group and are also affected by exchange rate fluctuations.

No interest is charged on the trade receivables. The Group has reviewed for estimated irrecoverable amounts in accordance with its accounting policy.

The Group's credit risk is primarily attributable to its trade and other receivables. Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on customers as appropriate to the level of credit extended. In addition, credit insurance would be sought for major areas of exposure, although this has not been required in the year under review.

The Group reviews trade receivables past due but not impaired on a regular basis and considers, based on experience, that the credit quality of these amounts at the balance sheet date has not deteriorated since the date of the transaction.

Included in the Group's trade receivables balance are debtors with a carrying amount of GBP339,366 (2022: GBP103,605), which are past due at the reporting date but for which the Group has not provided against. As there has not been a significant change in credit quality, the Group believes that all amounts remain recoverable.

Ageing of past due but not impaired trade receivables

 
                     Group              Company 
                   Year      Year      Year      Year 
                  ended     ended     ended     ended 
               31 March  31 March  31 March  31 March 
                   2023      2022      2023      2022 
                GBP'000   GBP'000   GBP'000   GBP'000 
Overdue by 
0-30 days           322       104       322       104 
30-60 days            3         -         3         - 
60+ days             14         -        14         - 
                    339       104       339       104 
 
 

The Directors consider that the carrying amount of trade and other receivables approximates their fair value.

Note 24 includes disclosures relating to the credit risk exposures and analysis relating to the allowance for expected credit losses. The calculated credit risk is GBP9,214 (2022: GBP11,080). Due to the immaterial nature of the balance, no provision has been recognised.

Notes to the Financial Statements continued

__________________________________________________________________________________________________________________

   18      Cash and cash equivalents 

Cash and cash equivalent amounts included in the Consolidated Statement of Cashflows comprise the following:

 
                                          Group              Company 
                                        Year      Year      Year      Year 
                                       ended     ended     ended     ended 
                                                           ended 
                                    31 March  31 March  31 March  31 March 
                                        2023      2022      2023      2022 
                                     GBP'000   GBP'000   GBP'000   GBP'000 
 
Cash at bank                          12,439     7,330    12,042     7,065 
Cash on short term deposit             5,144     6,527     5,144     6,527 
Total cash and cash equivalents       17,583    13,857    17,186    13,592 
                                    --------  --------  --------  -------- 
 
Short term investment: 
 fixed term deposit                    1,515     1,500     1,515     1,500 
                                    --------  --------  --------  -------- 
 
 

Short term cash deposits of GBP12,974 (2022: GBP1,501,049) are callable on a notice of 65 days.

Short term cash deposits of GBP5,130,587 (2022: GBP5,025,495) are callable on a notice of 95 days.

Cash held on long-term deposits (being deposits with maturity of greater than 95 days) that cannot readily be converted into cash have been classified as a short term investment. A total of GBP1,515,000 (2021: GBP1,500,000) is currently held on fixed term deposit, with a maturity on this investment of less than twelve months at the reporting date.

The directors consider that the carrying value of cash and cash equivalents and short-term investments approximates their fair value. Details of the Group's credit risk management are included in note 24.

   19      Borrowings 

The Group currently has a GBP3,000,000 revolving credit facility, at an interest rate of 2.25% above the Bank of England base rate and secured with a floating charge over the Group assets. The total amount drawn from the borrowing facility as at 31 March 2023 was GBPnil. (31 March 2022: GBPnil)

This facility is subject to the following financial covenants:

i) Leverage covenant: Gross borrowings to R&D adjusted EBITDA: The ratio of Gross Borrowings at the end of each relevant period to R&D Adjusted EBITDA for such Relevant Period shall not exceed 1.75 to 1.

R&D adjusted EBITDA is defined as EBITDA less capitalised development expenditure in the period.

ii) Interest Cover Covenant: EBIT to Net Financing Costs: The ratio of EBIT for each Relevant Period to Net Financing Costs for such Relevant Period shall not fall below 4.00 to 1.

The Group has passed all covenant tests during the review period.

   20      Trade and other payables 
 
                                 Group              Company 
                               Year      Year      Year      Year 
                              ended     ended     ended     ended 
                                                  ended 
                           31 March  31 March  31 March  31 March 
                               2023      2022      2023      2022 
                            GBP'000   GBP'000   GBP'000   GBP'000 
Amounts due within one 
 year 
Trade payables                1,770       924     1,767       911 
Other taxes and social 
 security                       197       149       197       149 
Other payables                   75        60        75        60 
Accruals                      1,275     2,406     1,264     2,399 
Deferred income               2,671     2,030     2,503     2,030 
                              5,988     5,569     5,806     5,549 
Amounts due after one 
 year 
Deferred income               1,166       718     1,126       718 
Other payables                  230         -       230         - 
                           --------  --------  --------  -------- 
                              1,396       718     1,356       718 
 
Total amounts due             7,384     6,287     7,162     6,267 
 
 

Notes to the Financial Statements continued

__________________________________________________________________________________________________________________

   20      Trade and other payables (continued) 

Trade and other payables are consistent with trading levels across the Group but are also affected by exchange rate fluctuations.

Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The Group has financial risk management policies in place to ensure all payables are paid within the agreed credit terms.

The directors consider that the carrying amount of trade and other payables approximates their fair value.

Deferred income relates to fees received for ongoing services to be recognised over the life of the service rendered, and grant proceeds received but not yet released to the Statement of Comprehensive Income.

   21      Leases 

Right of use assets

The Group leases land and buildings for its head office in Linlithgow, Scotland. The current lease was agreed on 1 December 2019 and will run for the 5 year period to 30 November 2024. On the 4 March 2022 the Group agreed an additional premises lease for office space in Belfast. This lease has an initial 5 year term and will run until 4 March 2027.

The Group leases IT equipment with contract terms ranging between 1 to 2 years. The Group has recognised right-of use assets and lease liabilities for these leases.

The carrying value of right of use assets, and lease obligations recognised with respect to these leases are shown below:

 
                           Building                  Group  Company 
                              Lease  IT equipment    Total    Total 
                            GBP'000       GBP'000  GBP'000  GBP'000 
Cost 
At 1 April 2022               1,044           170    1,214    1,214 
Additions                         -             -        -        - 
Disposals                         -             -        -        - 
                                                            ------- 
At 31 March 2023              1,044           170    1,214    1,214 
                                                   -------  ------- 
 
Depreciation 
At 1 April 2022                 336            87      423      423 
Charge for the year             218            40      258      258 
Eliminated on disposal            -             -        -        - 
At 31 March 2023                554           127      681      681 
                                                            ------- 
 
Net book value 
31 March 2022                   708            83      791      791 
                           --------  ------------  -------  ------- 
 
31 March 2023                   490            43      533      533 
                           -------- 
 
 
 
Right-of-use assets               Group              Company 
                                Year      Year      Year      Year 
                               ended     ended     ended     ended 
                                                   ended 
                            31 March  31 March  31 March  31 March 
                                2023      2022      2023      2022 
                             GBP'000   GBP'000   GBP'000   GBP'000 
 
Balance at 1 April               791       522       791       522 
Additions to right of 
 use assets                        -       473         -       473 
Depreciation charge for 
 the year                      (258)     (204)     (258)     (204) 
Balance at 31 March              533       791       533       791 
                            ========  ========  ========  ======== 
 
 

Notes to the Financial Statements continued

__________________________________________________________________________________________________________________

   21      Leases (continued) 

Lease liabilities

 
                                       Group              Company 
                                     Year      Year      Year      Year 
                                    ended     ended     ended     ended 
                                                        ended 
                                 31 March  31 March  31 March  31 March 
                                     2023      2022      2023      2022 
                                  GBP'000   GBP'000   GBP'000   GBP'000 
 
Balance at 1 April                    857       566       857       566 
Acquisition of new leases              53       474        53       474 
Payment of lease liabilities        (245)     (203)     (245)     (203) 
Interest expense on lease 
 liabilities                           26        20        26        20 
Balance at 31 March                   691       857       691       857 
                                 ========  ========  ========  ======== 
 
Disclosed as 
Current                               260       193       260       193 
Non-current                           431       664       431       664 
                                 -------- 
                                      691       857       691       857 
                                 ========  ========  ========  ======== 
 

During the year, the Group also leased additional land and buildings in Belfast and one motor vehicle. These leases were low-value, so have been expensed as incurred. The Group has elected not to recognise right -- of -- use assets and lease liabilities for these leases.

Lease commitments for short-term and low value leases

 
                             Group              Company 
                           Year      Year      Year      Year 
                          ended     ended     ended     ended 
                                              ended 
                       31 March  31 March  31 March  31 March 
                           2023      2022      2023      2022 
                        GBP'000   GBP'000   GBP'000   GBP'000 
 
Motor vehicles               17        17        17        17 
Land and buildings           58        51        58        51 
                             75        68        75        68 
                       --------  --------  --------  -------- 
 

Amounts recognised in the income statement

 
                                        Group              Company 
                                      Year      Year      Year      Year 
                                     ended     ended     ended     ended 
                                                         ended 
                                  31 March  31 March  31 March  31 March 
                                      2023      2022      2023      2022 
                                   GBP'000   GBP'000   GBP'000   GBP'000 
 
Depreciation charge - 
 building lease                        218       162       218       162 
Depreciation charge - 
 IT equipment                           40        42        40        42 
Interest on lease liabilities           26        20        26        20 
Low value lease rental                  75        68        75        68 
 
 

Amounts recognised in statement of cashflows

 
                                 Group              Company 
                               Year      Year      Year      Year 
                              ended     ended     ended     ended 
                                                  ended 
                           31 March  31 March  31 March  31 March 
                               2023      2022      2023      2022 
                            GBP'000   GBP'000   GBP'000   GBP'000 
 
Total cash outflow for 
 leases                       (245)     (203)     (245)     (203) 
 
 

A maturity analysis of contractual cashflows relating to lease liabilities is included in note 24 (d).

Notes to the Financial Statements continued

__________________________________________________________________________________________________________________

   22      Deferred tax 

The 2021 budget proposal increased the corporation tax rate to 25% from 1 April 2023. This was substantively enacted in the Finance Act 2021 on 24 May 2021.

Deferred tax asset

 
                                                   Group              Company 
                                                 Year      Year      Year      Year 
                                                ended     ended     ended     ended 
                                                                    ended 
                                             31 March  31 March  31 March  31 March 
                                                 2023      2022      2023      2022 
                                              GBP'000   GBP'000   GBP'000   GBP'000 
 
Opening balance                                   304       613       304       613 
Recognised in statement of comprehensive 
 income                                         (192)     (424)     (192)     (424) 
Recognised in equity                              160       115       160       115 
                                             -------- 
Closing balance                                   272       304       272       304 
                                             --------  --------  --------  -------- 
 
Deferred tax assets arise 
 as follows: 
Share-based remuneration                          250       265       250       265 
Other timing differences                           22        39        22        39 
Total deferred tax asset                          272       304       272       304 
                                             --------  --------  --------  -------- 
 
 
 

Deferred tax liability

 
                                                     Group               Company 
                                                   Year      Year       Year      Year 
                                                  ended     ended      ended     ended 
                                                                       ended 
                                               31 March  31 March   31 March  31 March 
                                                   2023      2022       2023      2022 
                                                GBP'000   GBP'000    GBP'000   GBP'000 
 
Opening liability                                 2,017     1,321      2,017     1,321 
Recognised in statement of comprehensive 
 income                                             440       696        180       696 
Recognised in equity                                  -         -          -         - 
Closing liability                                 2,457     2,017      2,197     2,017 
                                               ========  ========   ========  ======== 
 
Deferred tax liabilities 
 arise as follows: 
Deferred tax on acquisition                         260        19          -        19 
Timing differences on 
 development costs                                2,108     1,915      2,108     1,915 
Accelerated capital allowances                       89        83         89        83 
                                               --------  -------- 
Total deferred tax liability                      2,457     2,017      2,197     2,017 
                                               ========  ========   ========  ======== 
 
 

Notes to the Financial Statements continued

__________________________________________________________________________________________________________________

   23      Provisions 
 
                                     Group              Company 
                                   Year      Year      Year      Year 
                                  ended     ended     ended     ended 
                                                      ended 
                               31 March  31 March  31 March  31 March 
                                   2023      2022      2023      2022 
                                GBP'000   GBP'000   GBP'000   GBP'000 
 
Current provisions 
Overseas tax                          -       141         -       141 
                               --------  --------  --------  -------- 
 
Non-current provisions 
Dilapidations                        15        15        15        15 
                               --------  --------            -------- 
 
 
Total provisions                     15       156        15       156 
                               ========  ========  ========  ======== 
 
The movement in the 
 total provision liability 
At start of financial 
 year                               156       306       156       306 
Recognised in profit 
 and loss                         (141)     (150)     (141)     (150) 
At end of financial year             15       156        15       156 
                               ========  ========  ========  ======== 
 

Following submission and acceptance of all required documentation, provisions recognised in respect of potential payments to be made to overseas tax authorities of GBP141,000 have been released in the current year.

Remaining provisions pertain to potential payments to be made in respect of dilapidations on leased assets.

No discount is recorded on recognition of the provisions or unwound due to the low value and estimable nature of the non-current element.

Notes to the Financial Statements continued

__________________________________________________________________________________________________________________

   24      Financial instruments 

The Group's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and interest rate risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. When required, the Group uses derivative financial instruments in the form of forward foreign exchange contracts to hedge certain risk exposures. Derivatives are exclusively used for hedging purposes, and not as trading or other speculative instruments. The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks and ageing analysis for credit risk.

Capital management

The Board's policy is to maintain a strong capital base so as to cover all liabilities and to maintain the business and to sustain its development. The Board defines capital as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total borrowings less cash and cash equivalents. In order to maintain or adjust the capital structure, the Group may return capital to shareholders, issue new shares or sell assets to reduce debt.

There were no changes in the Group's approach to capital management during the year.

Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.

   (a)       Categories of financial instruments 
 
                                              Group              Company 
                                            Year      Year      Year      Year 
                                           ended     ended     ended     ended 
                                                               ended 
                                        31 March  31 March  31 March  31 March 
                                            2023      2022      2023      2022 
                                         GBP'000   GBP'000   GBP'000   GBP'000 
Financial assets (current and 
 non-current) at amortised cost 
Trade and other receivables                2,605     4,279     2,930     4,480 
Cash and cash equivalents                 17,583    13,857    17,186    13,592 
Short term investments                     1,515     1,500     1,515     1,500 
                                        ========  ========  ========  ======== 
 
Financial liabilities (current 
 and non-current) at amortised cost 
Lease liabilities                            691       857       691       857 
Trade and other payables                   4,636     3,391     4,600     3,371 
                                        ========  ========  ========  ======== 
 
 

Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. Under the fair value three-level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being:

-- Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date;

-- Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and

   --                     Level 3: Unobservable inputs for the asset or liability. 

Notes to the Financial Statements continued

__________________________________________________________________________________________________________________

   24      Financial instruments (continued) 

Financial risk management objectives

The Group's senior management team manage the financial risks relating to the operations of each department. These risks include market risk, credit risk and liquidity risk.

Where appropriate, the Group seeks to minimise the effects of market risks by using financial instruments to mitigate these risk exposures as appropriate. The Group does not enter into or trade in financial instruments for speculative purposes.

   (b)      Market risks 

Foreign currency risk

The Group's activities expose it primarily to the financial risks of changes in foreign currency exchange rates.

 
As at 31 March 2023                 Sterling      Euro   US Dollar     Total 
                                     GBP'000   GBP'000     GBP'000   GBP'000 
 
Trade receivables                        400       378       1,827     2,605 
Lease liabilities                      (691)         -           -     (691) 
Trade payables                       (1,706)       (2)        (62)   (1,770) 
Cash and cash equivalents             13,309       517       3,757    17,583 
Short term investments: 
 fixed term deposit                    1,515         -           -     1,515 
                                   ---------  -------- 
                                      12,827       893       5,522    19,242 
                                   --------- 
 
 
Based on this exposure, had Pound Sterling weakened by 5% 
 the Group's profit before tax would have been GBP320,750 
 lower. The percentage change is based on management's assessment 
 of reasonable possible fluctuations. 
 
 
As at 31 March 2022           Sterling     Euro  US Dollar    Total 
                               GBP'000  GBP'000    GBP'000  GBP'000 
 
Trade receivables                   89       93      3,938    4,120 
Borrowings                           -        -          -        - 
Lease liabilities                (857)        -          -    (857) 
Trade payables                   (818)        -      (106)    (924) 
Cash and cash equivalents       12,989      207        661   13,857 
Short term investments: 
 fixed term deposit              1,500        -          -    1,500 
                              -------- 
                                12,903      300      4,493   17,696 
                              --------  -------  ---------  ------- 
 

Based on this exposure had Pound Sterling weakened by 5% the Group's profit before tax would have been GBP239,650 lower. The percentage change is based on management's assessment of reasonable possible fluctuations.

Interest rate risk

The Group is not exposed to any significant interest rate risk as borrowings are obtained at fixed rates.

Other market price risk

The Group is not exposed to any other significant market price risks.

Notes to the Financial Statements continued

__________________________________________________________________________________________________________________

   24      Financial instruments (continued) 
   (c)       Credit risk management 

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group's receivables from customers.

The Group's principal financial assets, other than business assets, are trade and other receivables and cash and cash equivalents. These represent the Group's maximum exposure to credit risk in relation to financial assets.

 
                                      Group              Company 
                                    Year      Year      Year      Year 
                                   ended     ended     ended     ended 
                                                       ended 
                                31 March  31 March  31 March  31 March 
                                    2023      2022      2023      2022 
                                 GBP'000   GBP'000   GBP'000   GBP'000 
 
Trade and other receivables        2,605     4,075     2,930     4,276 
Cash and cash equivalents         17,583    13,857    17,186    13,592 
Short term investments             1,515     1,500     1,515     1,500 
                                  21,703    19,432    21,631    19,368 
                                ========  ========  ========  ======== 
 

Trade and other receivables

The Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer.

The balance presented in the balance sheet is net of allowances for doubtful receivables and returns, estimated by the Group's management based on prior experience and their assessment in the current economic climate. No adjustment has been estimated for the allowance for credit loss.

The Group's main concentration of credit risk relates to where a credit risk management approach is employed, including strict retention of title, customer stock holding visibility and the use of credit insurance.

The Group applies the IFRS 9 Financial Instruments simplified model of recognising lifetime expected credit losses for all trade receivables as these items do not have a significant financing component.

In measuring the expected credit losses, the trade receivables have been assessed on a collective basis as they possess shared credit risk characteristics. They have been grouped based on the days past due.

The expected credit loss for trade receivables as at 31 March 2023 and 31 March 2022 were determined as follows:

 
Days past due                        0    1-30    31-60    >60    Total 
2023 
Balance outstanding (GBP'000)    2,267     322        2     14    2,605 
Historic loss rate                  0%      0%       0%     0% 
Estimated credit loss provision  0.25%      1%     1.5%     2% 
                                 -----    ----    -----    ---    ----- 
Potential credit loss allowance 
 (GBP'000)                           6       3        0      0        9 
                                 =====    ====    =====    ===    ===== 
 
 
Days past due                        0    1-30    31-60    >60    Total 
2022 
Balance outstanding (GBP'000)    4,016     104        -      -    4,120 
Historic loss rate                  0%      0%       0%     0% 
Estimated credit loss provision  0.25%      1%     1.5%     2% 
                                 -----    ----    -----    ---    ----- 
Potential credit loss allowance 
 (GBP'000)                          10       1        -      -       11 
                                 =====    ====    =====    ===    ===== 
 

Due to the immaterial nature of the assessed credit risk, no provision has been recognised for 31 March 2023 or 31 March 2022.

Notes to the Financial Statements continued

__________________________________________________________________________________________________________________

   24      Financial instruments (continued) 
   (c)       Credit risk management (continued) 

Cash

Cash is held with banks in the UK and US with high credit ratings and no financial loss due to the banks' failure to meet their contractual obligations is expected.

   (d)      Liquidity risk management 

The Group manages liquidity risk through the monitoring of forecast cash flows and through the use of bank loans when required, thereby maintaining sufficient liquid assets to fund its contractual obligations and maintain the ongoing development of the Group.

The table below provides an analysis of the Group's financial liabilities to be settled on a gross basis by relevant maturity categories from the balance sheet date to the contractual settlement date. The table includes both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position.

 
                     1 year                       Over 
                         or     1 to     2 to        5        Total 
                       less  2 years  5 years    years  liabilities 
31 March 2023       GBP'000  GBP'000  GBP'000  GBP'000      GBP'000 
 
Trade payables        1,770        -        -        -        1,770 
Other payables        2,834      230        -        -        3,064 
Lease liabilities       293      269      143        -          705 
                      4,897      499      143        -        5,539 
                    -------  -------  -------  -------  ----------- 
 
 
                     1 year                       Over 
                         or     1 to     2 to        5        Total 
                       less  2 years  5 years    years  liabilities 
31 March 2022       GBP'000  GBP'000  GBP'000  GBP'000      GBP'000 
 
Trade payables          924        -        -        -          924 
Other payables        2,615        -        -        -        2,615 
Lease liabilities       243      239      674        -        1,156 
                      3,782      239      674        -        4,695 
                    -------  -------  -------  -------  ----------- 
 
 
   25      Retirement benefits 

Contributions by Group companies are charged to the income statement as an expense as they fall due. The amount recognised as an expense in relation to defined contributions plans was GBP417,521 (2022: GBP250,504).

Notes to the Financial Statements continued

__________________________________________________________________________________________________________________

   26      Share-based payments 
 
                                       Year      Year 
                                      ended     ended 
                                   31 March  31 March 
                                       2023      2022 
                                    GBP'000   GBP'000 
Charged to administration 
 expenses: 
Equity settled share-based 
 payments                               531       249 
Cash settled share-based 
 payments                                43        13 
                                   --------  -------- 
Total share-based payments              574       262 
 

During the year 0.8m share options were granted (2022: 1.9m). The fair value of share options granted has been estimated at the date of the grant using the Black-Scholes binomial model. The following table gives the assumptions made in arriving at the share-based payment charge and the fair value:

 
                                       Year       Year 
                                      ended      ended 
                                   31 March   31 March 
                                       2023       2022 
 
Options issued                      797,500  1,917,000 
Weighted average share 
 price (pence)                          117        118 
Weighted average exercise 
 price (pence)                          117        118 
Expected volatility (%)           63.4-67.1      77.2- 
                                                 105.2 
Vesting period (years)                  3-5        3-5 
Option life (years)                      10         10 
Risk free rate (%)                0.75-4.25       0.02 
Dividend yield (%)                      1.0        1.0 
Fair value at grant date 
 (GBP'000)                              399      1,071 
 
 
Equity options in issue 
 at 31 March 2022                  4,474,935 
Equity options issued 
 in the year                         797,500 
Equity options realised 
 in the year                        (23,935) 
Equity options forfeited 
 in the year                        (49,500) 
                                   --------- 
Equity options in issue 
 at 31 March 2023                  5,199,000 
                                   --------- 
 

Expected volatility in the current year was determined by calculating the historical volatility of the Group's share price over the previous year, which the Board consider to be representative of future volatility.

During the year 38,000 cash settled options were granted (2022: 150,500). The fair value has been measured at the reporting date using the Black-Scholes binomial model. Due to the proximity of the reporting date to the issue of equity settled share options granted, the model assumptions on volatility, risk free rate, and dividend yield used for the cash settled options do not materially differ from those in the table above.

 
                                      Year      Year 
                                     ended     ended 
                                  31 March  31 March 
                                      2023      2022 
 
Options issued                      38,000   150,500 
Weighted average share 
 price (pence)                         115       117 
Weighted average exercise 
 price (pence)                         115       117 
Vesting period (years)                 3-5       3-5 
Option life (years)                     10        10 
Fair value at reporting 
 date (GBP'000)                         18        80 
 

Notes to the Financial Statements continued

__________________________________________________________________________________________________________________

   26      Share-based payments (continued) 
 
                                                       Year      Year 
                                                      ended     ended 
Share option reserve                               31 March  31 March 
 reconciliation 
                                                       2023      2022 
                                                    GBP'000   GBP'000 
Opening balance                                         502       126 
Equity settled share-based 
 payments                                               531       249 
Deferred taxation on share options: charge 
 recognised in equity                                 (160)       127 
                                                   --------  -------- 
Total share option reserve                              873       502 
 
   27      Group companies 

Country of registration % of direct shares held

Subsidiary undertakings or incorporation Principal activity 2023 2022

Calnex Americas Corporation USA Sales and marketing 100% 100%

Support services to

Calnex Solutions plc

iTrinegy Ltd UK Development and marketing 100% -

of software defined test

network technology

On 12 April 2022, Calnex Solutions plc acquired 100 per cent of the issued share capital of iTrinegy Ltd. The operations and trading of iTrinegy Ltd have been hived up into the Calnex Solutions plc entity, and the company is currently in the process of strike-off, which is expected to complete in the proceeding financial year. As part of the integration of the iTrinegy business, the Group has transferred all iTrinegy staff and trading over to Calnex solutions plc, with the iTrinegy legal entities being 'hived up' into the existing Calnex entities.

The first stage of this reorganisation completed on 30 September 2022 when iTrinegy Inc a 100% owned subsidiary of iTrinegy Ltd. Was merged with Calnex Americas Corporation, a 100% owned subsidiary of Calnex Solutions plc.

On 31 December 2022, all of the assets of iTrinegy Ltd were transferred to Calnex Solutions plc. The directors are currently in the process of striking off iTrinegy Ltd. It is anticipated this will complete within the first half of the FY24 financial year.

Movement in fixed asset investments

 
                                                              Company 
 
                                                            Shares in 
                                                   group undertakings 
                                                              GBP'000 
Cost or valuation 
As at 1 April 2022                                                  - 
Cost recognised for acquisition 
 of iTrinegy Ltd                                                3,203 
Dividends received from pre-acquisition 
 reserves of subsidiary                                         (767) 
Impairment of investment value                                (2,436) 
As at 31 March 2023                                                 - 
                                                  ------------------- 
 
As at 31 March 2022                                                 - 
                                                  ------------------- 
 
 

As a result of the intention to strike off the remaining iTrinegy Ltd entity, investment value impairment of GBP2,436,000 has been recognised within the Company in the current year.

Notes to the Financial Statements continued

__________________________________________________________________________________________________________________

   28      Called up share capital 

As at 31 March 2023, the Company had 87,523,935 (2022: 87,500,000) Ordinary Shares held at a nominal value of 0.125p. During the year, an exercise of share options resulted in 23,935 shares being issued.

 
                                                                                  Group and Company 
                                                                                31 March    31 March 
                                                                                    2023        2022 
                                                                                 GBP'000     GBP'000 
 
Ordinary shares of 0.125p each                                                       109         109 
                                                                              ==========   ========= 
 
 
In issue at the start of the financial 
 year                                                                                109         109 
Share options exercised                                                                0           - 
In issue at end of the financial 
 year                                                                                109         109 
 
 
 
   29      Earnings per share 

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of Ordinary Shares in issue during the year.

Diluted earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the total of the weighted average number of Ordinary Shares in issue during the year and adjusting for the dilutive potential Ordinary Shares relating to share options and warrants.

 
                                                 Year      Year 
                                                ended     ended 
                                             31 March  31 March 
                                                 2023      2022 
                                              GBP'000   GBP'000 
 
Profit after tax attributable to 
 shareholders                                   5,911     4,540 
 
Weighted average number of ordinary 
 shares used in calculating: 
Basic earnings per share                       87,520    87,500 
Diluted earnings per share                     92,070    90,845 
 
Earnings per share - basic (pence)               6.75      5.19 
Earnings per share - diluted (pence)             6.42      5.00 
 
   30      Notes to the Statement of Cashflow 

Reconciliation of changes in liabilities to cashflows arising from financing activities

 
                                           Lease 
                                     liabilities     Total 
                                         GBP'000   GBP'000 
 
 Balance at 31 March 2022                    857       857 
 
 Lease repayment                           (245)     (245) 
 Interest payments                            26        26 
                                    ------------  -------- 
 Total changed from financing 
  cashflows                                  638       638 
 
 Acquisition of new lease                     53        53 
 Total other changes                          53        53 
 
 Balance at 31 March 2023                    691       691 
                                    ------------  -------- 
 
 

Notes to the Financial Statements continued

__________________________________________________________________________________________________________________

   31      Share schemes 

The company operates a number of share incentive plans on behalf of its employees, details of which can be found in the Remuneration Committee report. Included in these are the UK Share Incentive Plan and a cash settled phantom plan for Non-UK employees:

UK Employee Share Incentive Plan (UK SIP)

The UK SIP is an all-employee HMRC approved share plan open to employees based in the UK. Employees can elect to invest up to GBP150 each month (GBP1,800 per year), deducted from their gross salary, which is used to purchase shares at market value as "partnership" shares. The Company offers participants "matching" shares, which are subject to forfeiture for three years, on the basis of one free matching share for each partnership share purchased.

Non-UK Employee Incentive Plan

Under the UK SIP Plan, shares may only be awarded to UK based employees of the Group. As the Board also wanted to have the discretion to grant awards to contractors and overseas employees, it was necessary to set up a separate Non-UK Employee Incentive Plan under the rules of the Notional Plan (refer to the Remuneration Committee Report for more detail). This Plan acts as a non-tax advantaged shadow equity interest plan to the UK SIP, mirroring the UK SIP awards for overseas employees and contractors with equity ownership being replaced by cash settlement. The non-UK Employee Incentive plan is therefore available to employees in countries other than the UK, on a cash-settled basis. Employees can elect to save funds up to GBP150 each month (GBP1,800 per year), deducted from their pre-tax salary, for a 12-month period, and matched by the Group. In the cash settled model, these savings are then returned to the participant at the prevailing market share price at the end of the savings period, had the funds been used to purchase Calnex Solutions plc shares (returns being fully funded by the Group). Employees participating in this scheme during the period under review included those based in China, Hong Kong and India and the USA. The fair value assessment of this obligation at the year-end was GBP180,000 (2022: GBP150,000) and is included within other creditors.

   32      Dividends 

All dividends are determined and paid in Pound Sterling.

 
                                                            Year      Year 
                                                           ended     ended 
                                                        31 March  31 March 
                                                            2023      2022 
                                                         GBP'000   GBP'000 
Declared and paid in the year 
Interim dividend 2022: 0.28p per 
 share                                                         -       245 
Final dividend 2022: 0.56p per 
 share                                                       490 
Interim dividend 2023: 0.31p per 
 share                                                       271 
 
Proposed for approval at the Annual General 
 Meeting (not recognised as a liability at 31 
 March 2023) 
Final 2023: 0.62p per share                                  543 
 
  The directors are proposing a final dividend with respect 
  to the financial year ended 31 March 2023 of 0.62p per share, 
  which will represent GBP542,648 of a dividend payment. The 
  final dividend will be proposed for approval at the Annual 
  General Meeting in August 2023 and, if approved, will be 
  paid on 30 August 2023 to all shareholders on the register 
  as at close of business on 28 July 2023, the record date. 
  The ex-dividend date will be 27 July 2023. 
 

Notes to the Financial Statements continued

__________________________________________________________________________________________________________________

   33      Alternative performance measures (APMs) 

The performance of the Group is assessed using a variety of performance measures, including APMs which are presented to provide users with additional financial information that is regularly reviewed by the Board. These APMs are not defined under IFRS and therefore may not be directly comparable with similarly identified measures used by other companies.

 
                                                     Year        Year 
                                                    ended       ended 
                                                 31 March    31 March 
                                                     2023        2022 
                                                  GBP'000     GBP'000 
 
Underlying EBITDA                                   7,979       6,351 
Underlying EBITDA %                                   29%         29% 
Capitalised R&D                                     4,523       3,905 
 
  Key performance measures: 
 
       *    Underlying EBITDA : EBITDA after charging R&D 
            amortisation 
 
 
 Reconciliation of statutory figures to alternative performance 
  measures - Income Statement 
                                                      FY23       FY22 
                                                    GBP000     GBP000 
 Revenue                                            27,449     22,046 
 Cost of sales                                     (6,977)    (5,518) 
 Gross Profit                                       20,472     16,528 
 Other income                                          751        648 
 Administrative expenses (excluding 
  depreciation & amortisation)                     (9,928)    (7,917) 
----------------------------------------------  ----------  --------- 
 EBITDA                                             11,295      9,259 
 Amortisation of development costs                 (3,315)    (2,908) 
 Underlying EBITDA                                   7,980      6,351 
 Other depreciation & amortisation                   (746)      (358) 
 Operating Profit                                    7,234      5,993 
 Finance costs                                        (26)       (20) 
----------------------------------------------  ----------  --------- 
 Profit before tax                                   7,208      5,973 
 Tax                                               (1,297)    (1,433) 
----------------------------------------------  ----------  --------- 
 Profit for the year                                 5,911      4,540 
 

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