Concurrent Technologies PLC Final results for the year ended 31 December 2023

RNS Number : 7090M

Concurrent Technologies PLC

01 May 2024

 

 

1 May 2024

 

 

Concurrent Technologies Plc

(the "Company" or the "Group")

 

Full year results for the year ended 31 December 2023

 

Solid year of growth providing confidence in updated strategy

 

Concurrent Technologies Plc (AIM: CNC), a designer and manufacturer of leading-edge computer products, systems and mission critical solutions used in high-performance markets by some of the world's major OEMs, is pleased to announce its results for the year ended 31 December 2023.

 

Financial highlights

 

	2023	2022	% change
Revenue	£31.7m	£18.3m	73%
Gross profit	£15.6m	£8.9m	49%
Profit before tax & exceptionals	£3.7m	£0.4m	959%
Earnings per share	4.98p	1.35p	-
Dividend per share	1.0p	0p	-
EBITDA	£6.0m	£2.1m	-
Order intake	£28.2m	£31.5m
Closing Cash	£11.12m	£4.51m	146%
Investment in R&D	£3.80m	£3.69m	3%
Total assets	£47.8m	£32.6m	48%

 

·	Strong financial performance in FY23, achieving revenues of £31.7m and profit before tax of £3.7m (excluding exceptional costs), notwithstanding a significant investment in the cost base throughout the year to accelerate future growth.
·	Gross profit margin increased to 49.4% (FY22 48.5%) reflecting easing components challenges and operational efficiency gains.
·	EBITDA more than doubled to £6.0m (FY22 £2.1m).
·	Cash generative with closing net cash balance at £11.12m.
·	Increasingly optimised R&D investment in line with stated strategy to improve the cadence and time to market of products that offer the very latest technology.

 

Dividend

 

·	The Board will propose, at the Annual General Meeting to be held on 20 June 2024, a final dividend of 1 pence per Ordinary Share in the Company. Subject to the approval of shareholders, the final dividend will be paid on 12 July 2024 to shareholders on the register on 28 June 2024.
·	Further details of the Annual General Meeting will be announced in due course.

 

Operational highlights

 

·	Worked closely with suppliers and customers to successfully manage the supply chain issues that previously impacted performance and the Board is pleased to report that these factors eased as the year progressed.
·	Continued to transition the business towards a culture and go-to-market strategy that is positioned to scale.
·	Increased headcount by c.18%, with key hires in product strategy, engineering, commercial, and finance.

 

Systems division

 

·	Secured first substantial systems contract at £1.27m in June 2023 with a UK FTSE 250 company in the defence sector.
·	Successful acquisition of Phillips Aerospace in the US enabling the Company to move further into the development of systems, providing a platform for future growth.

 

Boards division

 

·	Secured eight major design wins, representing an expected lifetime value to the business of at least £100m, to be realised from 2026 onwards, in the UK and a significant majority in the US, the world's largest market.
·	£5m of orders from the UK, a five-fold increase on typical prior volumes.
·	Introduction of numerous new processes, practices, and state-of-the-art tools to enhance design efficiency and quality in FY24 across the Group's key markets.

 

Outlook

 

·	Strategic focus remains on developing and designing boards and systems at pace for a range of applications to deliver on the Group's short-term financial targets and the longer-term lifetime value.
·	Demand for the Group's product remain high, and the Company is developing a pipeline of opportunities which include, COTs (commercial off the shelf), MOTs (Modified off the shelf) and Systems.
·	The Group entered FY24 with good momentum evidenced by the $1.57m contract win with a major global US Prime Contractor and new VME board launched, Rhea.
·	Trading in the first four months of the year is in line with market expectations, providing confidence in delivering another year of profitable growth.

 

 

Miles Adcock, CEO of Concurrent Technologies, commented: "We achieved remarkable success in FY23, putting in place the building blocks that will enable us to deliver long-term, sustainable growth. This is driven by significant design-in wins and strategic investment in the Systems division, including the acquisition of Phillips Aerospace.  

 

"During the year, there was a step change in how the Group invests in marketing, sales, and partnerships to expand our market opportunities. Looking ahead, we will remain focused on leveraging the knowledge and the long-standing relationships the leadership team has developed to invest in a measured way to design boards and systems for a range of applications. As a Board we are confident in the Group's ability to continue building momentum and deliver results for FY24 in line with market expectations."

 

Enquiries:

 

Concurrent Technologies Plc Miles Adcock - CEO Kim Garrod - CFO	[phone]
Alma Strategic Communications Josh Royston Hannah Campbell	[phone]
Cavendish Capital Markets Limited (NOMAD) Neil McDonald Peter Lynch	[phone] [phone]

About Concurrent Technologies Plc

Concurrent Technologies Plc develops and manufactures high-end embedded Plug In Cards and Systems for use in a wide range of high performance, long life cycle applications within the telecommunications, defence, security, telemetry, scientific and aerospace markets, including applications within extremely harsh environments. The processor products feature Intel® processors, including the latest generation embedded Intel® Core™ processors, Intel® Xeon® and Intel Atom™ processors.  The products are designed to be compliant with industry specifications and support many of today's leading embedded Operating Systems.  The products are sold world-wide.

For more information on Concurrent Technologies Plc and its products please visit www.gocct.com.

All trademarks, registered trademarks and trade names used in this announcement are the property of their respective owners.

 

Chairman's statement

 

Overview

FY23 was another step in the transformation of Concurrent Technologies into a high-growth business by leveraging our design heritage and market leadership position through the continued investment in our culture, people, sales and marketing and, more broadly, driving a step change in our go-to-market strategy.

 

In the year, we delivered both record revenues and profit, underpinned by the successful execution of the Group's refreshed strategy. We are focused on developing a broader range of products and systems, in addition to our boards business, both organically and through acquisition. This positions the business for long-term growth, and this year has solidified our view that we now have the right strategic focus and people in place to achieve our ambitions.

 

The year in review

The first half of the year saw a recovery in trading thanks to the increased customer demand for the Group's products and the team's incredible effort in navigating the previous component shortage issues. This momentum continued into the second half of the year and, for FY23, the Company delivered record revenues and profitability.

 

Cash balances remain strong, buoyed by the raising of £6.8m through the placing of new ordinary shares to new and existing shareholders in August to partly fund the acquisition of Phillips Aerospace, leaving us in a strong position to invest in the systems business further. On behalf of the Board, I would like to thank all investors who participated in the oversubscribed placing.

 

Execution against strategy

Throughout the year, Concurrent Technologies achieved significant milestones in line with its strategic objectives. We secured eight substantial design wins, underscoring the excellence of our products and engineering capabilities. These wins will ramp up in the coming years in line with our customers' programmes, but they provide long-term, multi-year revenue visibility, which supports the investment plans in our R&D roadmap.

 

Additionally, we released several new cutting-edge products in the year that have enriched our portfolio. We remain committed to investing in our product portfolio and capabilities and we are optimistic about the opportunities in FY24 to expand into new markets and deepen our presence within our home markets. 

 

Our end markets remain robust, and we have not only deepened several key relationships with existing customers and partners in the year but, importantly, we are now seeing the opportunity to engage with new customers, servicing a range of projects and geographies, and expect to have the opportunity to bid on larger programmes we were not historically considered for.  

 

The acquisition of Phillips Aerospace in September 2023 marked a significant milestone for the business and has supported our strategic goal of adding both systems capability and US-based manufacturing. We welcome our new Phillips Aerospace colleagues to the Group and recognise the additional talent and skills they bring to our ever-more expert team. The early impact of the acquisition has been positive, and we believe it will significantly improve the Company's capability to design and manufacture rugged systems utilising its existing plug-in cards.

 

Board

Post-period end, we further strengthened our Board with the appointment of Issy Urquhart as an independent Non-Executive Director to the Company. Issy is an experienced commercial human resources (HR) director with over 30 years' experience working with global technology and financial services businesses in both the public and private sectors. She has joined the Group at a particularly exciting time, and we are already benefiting from her guidance in driving people and change management strategies across our transatlantic operations. 

 

Dividend

With the return to profitability, a 1.0p dividend has been proposed for shareholder approval at the annual general meeting (AGM) which, if passed, will amount to £862,000 paid in early July 2024. Going forward, the Board anticipates dividends will increase in line with profits, with an appropriate level of cover maintained to enable investment for future growth.

 

Outlook for FY24

In FY24 our strategic focus will remain on developing and designing boards and systems at pace for a range of applications. The year will also see us continue our investment in systems and onboarding new programmes to deliver on our short-term financial targets. Alongside this, a combination of our product leadership and a drive to expand our presence in our focus sectors should deliver a significant increase in multi-year contracts in the medium term.

 

Mark Cubitt

Chairman

 

 

CEO's statement 

Overview

FY23 was an outstanding year both financially and operationally. As the headwinds of the global components shortages subsided during the year, the underlying progress in order intake and execution has been reflected in the Group's results, particularly in the second half. Solid progress was also made on our strategic priorities, including the acquisition of Phillips Aerospace in the US, and a material increase in our 'major design wins' that underpin a real step up in revenues in future years as our customers ramp up production and reach their own planned delivery volumes. With a significant investment in additional managerial, technical and sales professionals, we now have an excellent team in place to take the business forward for a period of growth. It is clear the revised strategy and associated transformation are coming together and, as a Board, we are extremely excited about the Group's future.

 

Financial performance

FY23 was a record year for the Group, achieving revenues of £31.7m (FY22: £18.3m) and profit before tax (excluding exceptional costs of £0.2m, related to the acquisition of Phillips Aerospace) of £3.7m, notwithstanding a significant investment in the cost base throughout the year to accelerate future growth. The strength of our order intake over the preceding 24 months enabled this significant investment in product development to facilitate new customers and design wins. We also worked closely with suppliers and customers to successfully manage the supply chain issues that previously impacted performance and we are pleased to report that these factors eased as the year progressed. Our gross margin has now stabilised, with a slight improvement on FY22. We do believe FY24 should be predominantly unhindered by the issues of the last two years regarding component availability and resulting price pressures.

 

On 6 September 2023, the Company completed the acquisition of Phillips Aerospace for $3.3m (£2.8m) through a combination of $1.1m (£0.8m) cash, the issue of equity of $1.5m (£1.3m) to the owners of Phillips Aerospace and a further $0.8m (£0.7m) cash in repayment of outstanding loans balances within Phillips Aerospace. Simultaneously, the Company raised £6.8m through the issue of fresh equity to broaden our product offering and strengthen the balance sheet to drive further growth.

Investing for growth amid supply chain shortages inevitably impacted cash. Having started the year at £4.5m, the first half of FY23 experienced a net outflow of £1.5m to a cash balance low of £3m in June. As shipments, and hence invoicing, strengthened, the business reverted to being cash generative, with a year-end cash balance of £11.12m. Q4 was our most productive period, for which only some of the associated customer invoices were paid in 2023, with £5.4m of FY23 revenue to be collected as cash in Q1 FY24, as per our payment terms with customers.

 

In-year order intake of £28.2m remains strong, despite c.£8m of a small number of large orders slipping into FY24. In all cases, these are opportunities we are down-selected for (i.e. we already secured the design win), but the customers' programme of work experienced delays vs expectations. Positively, this had little detrimental impact on in-year revenue. While we expect order intake to continue to build in FY24 and FY25, it is in subsequent years that we will experience the material benefit of the design wins secured in FY23. This focus on design wins is a large investment in time and activity, since they are typically larger and more strategic business-winning campaigns. While they yield little immediate business benefit, the impact on the medium-to-long-term business is transformative in terms of scale. We intend to ever-increase the number of design wins secured each year. We expect the design wins secured in FY23 to yield a significant lifetime value of at least £100m to be realised from FY26 onwards. 

 

Having already doubled the capacity of our Colchester, UK-based factory, we are planning to enhance both internal and external capacity to accommodate this growth, and indeed any major binary upside opportunities that will require a further capacity increase. 

 

Delivery against strategy

With a year-on-year increase in revenue of over 70%, it is clear our revised strategy and focus on creating a sustainable, high-growth business is delivering the intended results. The Company now comprises two divisions: a Boards division and a nascent Systems division, which we expect to represent an increasing percentage of Group sales in the coming years. The refreshed sales team is core to delivering the Company's strategy, and the level of order intake and revenue delivery in FY23 are evidence of their capability.

 

Boards division

This is our long-standing business that designs and manufactures computer boards, where we have substantial expertise and a reputation for quality and collaboration. During FY23, we continued to transition the business towards having a culture and go-to-market strategy that is positioned to scale. The strategy here is simple: to provide the right product to market as quickly as possible, with a refreshed focus on customer engagement utilising talented engineers and sales professionals. We have now created a team, cost base and sales strategy capable of delivering c.£40m per annum, before any other material investment is required. 

 

As demonstrated by the revenue performance during FY23 H2, the business has already made material progress and is now positioned to deliver much higher volumes thanks to the investment we have made in expanding the capacity in our Colchester factory. Much of our business in boards is secured via 'design wins', whereby a customer designs us into their own programme, and we can then plan for purchase orders in future years as they reach their own production volumes, typically two to three years after the initial design win. A 'major design win' is one with the potential to achieve peak volumes of >£1m per annum for several consecutive years. Historically, the Company may have secured one or two major design wins per annum. In FY23, we secured eight major design wins, which is an extremely positive leading indicator for future growth, representing a lifetime value to the business of at least £100m. Every region is important to us, but the UK and US are our home markets in which we have a material presence operationally. I am pleased to confirm that we won over £5m of orders from the UK in FY23, a five-fold increase on typical prior volumes. 

 

The boards division has been through significant transformation in all aspects during the year and is now fit to focus on execution in FY24 across our key markets. We are exploring options for additional internal and external capacity in line with our anticipated continued order intake growth in the medium term.

 

Concurrent Technologies is a Titanium member of the Intel® Partner Alliance, meaning we get direct support from Intel® with allocated resources. In addition, our applications for early access to future silicon are given priority over Gold members and we've been successful in all our recent applications. We also have access to Intel®'s 'Market Development Funds' programme, which allows us to claim a percentage of our marketing costs back if we explicitly promote that we're using Intel® devices. Having our products on the Intel® Partner Showcase enables Intel® salespeople globally to search for our products easily.

 

Systems division

Since I joined the Company in 2021, we have explored ways to enter the systems market and move up the value chain by supplying whole systems rather than single boards, enabling us to generate substantially higher revenues and open up new market opportunities. We have made excellent progress this year; the systems line of business now includes the acquired Phillips Aerospace in the US in addition to the capability in the UK business, which will be moved out of the boards line of business going forward. This means that from FY24 we will report the top-level financials of both boards and systems individually. This is to give increased transparency and also recognises that each will have different characteristics financially. For example, average sell prices for systems are typically higher, but gross margins are less than for boards because there is more third-party content. Systems will also often include upfront funding from customers for the design of their customer solution. While we do not currently have a business unit structure (with the exception of the acquired business), this will likely be implemented as revenue from systems grows, in order to provide the necessary, dedicated focus and resources on this business.

 

In the first half of FY23, we won a £1.27m contract for a UK-based system, providing validation of our proposition and capability. The addition of Phillips Aerospace provides a further platform for the Systems division to be a core part of our future growth. Previously, Phillips Aerospace had designed and manufactured our initial standard products for systems, meaning both teams had a successful history of working together and integration post-acquisition was seamless. We have welcomed a highly capable team into the Group, who provide the credibility needed to win and deliver systems solutions that complement our existing boards business. The Board has been encouraged by the level of motivation and integration that the Phillips Aerospace senior management team has shown, contributing significantly to the technical and managerial community within the Group. Revenue contribution by the Phillips Aerospace business since the completion of the acquisition is approximately £0.8m, slightly stronger than we had expected based on the prior annual performance. The Board expects this to increase significantly as systems contracts are secured in the future.

 

Acquisitive growth

In the medium term, we believe there are a range of opportunities to expand our capability, customer list and market penetration through acquisition. The acquisition of Phillips Aerospace is a good example of our acquisition criteria: a business we knew well; a business that had long-standing customer relationships; and an opportunity for us to add new product expertise, additional major customers, appropriate necessary accreditations and strengthening of our position in our chosen home markets. We are excited by our opportunity to significantly scale Concurrent Technologies organically over the next few years, but we have a clear target to participate in industry consolidation and add to our growth and offering by acquiring leading businesses where possible.

 

R&D

We continue to focus on investing in R&D in line with our strategy to improve the cadence and time to market of our products that offer the very latest technology.

 

At the same time that Intel® launched its Raptor Lake-P processor for the embedded market, we announced Hermes, our latest flagship board based on the VPX standard for critical defence applications at the edge. This was our first card based on Intel®'s hybrid architecture consisting of six performance and eight efficient cores, allowing our customers to scale their performance to fit their power and thermal envelope.

 

In Q3, to meet a key customer need, we shipped a new variant of one of our popular boards with double the amount of memory. We were able to react extremely quickly to secure a critical long-term design win with this variant against strong competition, demonstrating that our robust processes and revitalised culture are succeeding.

 

We also announced a rugged board to the CompactPCI standard that is still widely used for industrial and defence applications. This was deliberately backwards compatible with legacy cards to secure design wins where programs are undergoing a technology transition extending the life span.

 

In Q4, we announced our highest-performance processor board, using 'Air Flow Through' technology. This and our first Air Flow Through card, a novel technology for a cooling board that was announced in FY22, are being integrated by the end customers and, having learned a lot by designing boards, we are looking to offer integrated Air Flow Through systems in the future.

 

To interconnect our processor boards with systems, we introduced a high-performance dual enclave switch. This supports separate 100Gb Ethernet data and 10Gb Ethernet control connections to each board. Having physical data and control separation is critical in many defence applications to ensure security between the two enclaves.

 

Post-period end, we announced the launch of the Rhea VME single-board computer, which coincided with the launch of Intel®'s latest Atom processor, to harness this very latest technology for customers looking for a simple, cost-effective upgrade.

 

The product portfolio strengthens with continued investment in R&D and sales, enabling a strong pipeline of opportunities, and conversion of these, to underpin future revenue growth.

 

Partnerships

As part of our strategy to develop a broader range of products and services, securing and maintaining partnerships is critical for expanding the size and markets available to us.

 

In H1 FY23, we signed a distribution agreement with SoC-e, an internationally recognised provider of advanced equipment for real-time and deterministic Ethernet networking for critical sectors, to enhance our product offering. The collaboration enables us to enhance our leading range of solutions and systems to our home and global markets with the addition of time-sensitive networking capability, which we are starting to see as a requirement for future combat platforms. We also secured a key partnership agreement with Alpha Data to act as a reseller of its field programmable gate array- (FPGA) based boards and modules.

 

In H2 FY23, we showcased our defence-related products at the DSEI Exhibition, Europe's largest defence and aerospace show. We worked with partners like Alpha Data and SoC-e to demonstrate our integration capability by showing products like Helios, our new rugged vision computer.

 

Markets

Defence is the dominant target market for the Group, now accounting for 85% of our board revenue. Industrial (6%), medical (5%) and scientific (4%) are our other important domains.

 

People and ESG

In recent years, we have assembled a Board and Leadership Team with experience in transforming businesses and growing sales globally, and our success in FY23 is due to the efforts of this driven, refreshed team. During the year, we increased headcount by 17.8%. Attracting and retaining talent is core to our strategy, and I am delighted that in November 2023 we were awarded Gold status by the 5% Club, recognising that more than 5% of our workforce is engaged in 'earn & learn' learning programmes.

 

Culture change

We believe that culture is what you do and how you behave and that it drives business performance, so we have taken deliberate and active action partnering with Coode Associates to create the company culture that is right for us. Our target culture includes a renewed focus on output, collaboration, empowerment and growth, which in turn has positively impacted our productivity and output.

We will continue to instil this through the business, led by our Leadership Team who, on a daily basis, demonstrate and represent our culture. We have invested heavily in our leadership capability to lead our culture and will continue to do so at all levels.

 

ESG

We are continuing with our significant transformation to deliver more products faster to market through operational excellence and refined governance. Our key focus for ESG is our people and therefore we have largely invested our time and energy in making sure that we have an attractive reward and benefits offering and providing a developmental place to work.

 

Outlook

We have achieved remarkable success in FY23, marked by a record financial performance, and have put in place the building blocks that will enable us to deliver long-term, sustainable growth. This is driven by significant design-in wins and strategic investment in the Systems divisions, including the acquisition of Phillips Aerospace.

 

During the year, there was a step change in how the Group invests in marketing, sales and partnerships to expand our market opportunities. Looking ahead, we will remain focused on leveraging the knowledge and the long-standing relationships the Leadership Team has developed to invest in a measured way to design boards and systems for a range of applications. FY24 will be about balancing our investment and mobilising to win and deliver systems to achieve our short-term financial targets.

 

Miles Adcock

Chief Executive Officer

 

CFO's Statement

The Group delivered a strong financial performance in the FY23, with a significant growth in revenue and profit before tax (adjusted for exceptional items), resulting in a solid cash position.

Financial KPIs

 

	2023	2022	2021
Revenue	£31.7m	£18.3m	£20.5m
% change vs previous year	73%	-10%	-3%
Gross profit	£15.6m	£8.88m	£11.4m
% gross margin	49%	49%	56%
Profit before tax & exceptionals	£3.7m	£0.4m	£3.5m
% change vs previous year	959%	-89%	25%
Earnings per share	4.98p	1.35p	3.84p
Proposed dividend per share	1p	0p	2.55p
EBITDA*	£6.0m	£2.1m	£4.9m
Closing cash	£11.12m	£4.51m	£11.84m
% change vs previous year	146%	-62%	5%
Investment in R&D	£3.8m	£3.69m	£1.82m
% change vs previous year	3%	103%	50%
Total assets	£47.8m	£32.6m	£29.8m
Shareholders' funds	£35.0m	£23.2m	£22.7m

*EBITDA is defined as operating profit excluding finance costs, taxation, depreciation and amortisation.

Revenue

The Company generates sales through products and associated services. A minimal amount of revenue (c.£1.1m) is included in FY23 for system sales (including sales for the acquisition of Phillips Aerospace from 6 September 2023). FY23 saw a record year for revenue, despite being constrained in the first half of the year due to component shortages.

 

Geographical split of revenue

 

Revenue						Year to		Year to
						31 December		31 December
						2023		2022
						£		£
				United States		13,060,691		6,564,816
				Malaysia		392,850		3,047,798
				Germany		6,450,372
				United Kingdom		2,148,568		1,167,266
				Other Europe		4,178,401		4,003,849
				Rest of the World		5,425,434		3,491,042
						31,656,316		18,274,771

 

The geographical split of revenue is quite different in FY23 versus the prior year. FY22 was driven by component availability and, therefore, what we were able to ship to customers. FY23 still had an element of this but it was less extreme, with H2 being relatively unconstrained by component availability. We have one customer in Malaysia, and the profile is simply reflective of its schedule. Germany has represented a significant growth area due to timing of programs (orders in FY22 and FY23), with higher production and development volume creating revenue in FY23. A key point to note is the growth in the UK and US, both our home markets, where we have been concentrating our business development activities. An important element of our strategy has been to reduce our reliance on one customer, which was a feature of the past business, and this strategy is clearly working, as evidenced by the table below.

 

% Revenue by top customers

 

 

Revenue by market

 

Defence	£26,758,184	85%
Industrial and scientific	£3,169,680	10%
Medical, communications and other	£1,728,452	5%
Total	£31,656,316

 

Gross profit

Gross profit increased by 76% to £15.64m (FY22: £8.88m), reflecting the significant increase in revenue. Our gross profit margin of 49.4% (FY22: 48.6%) is reflective of the improving components situation and more efficient delivery.

Profit

Profit before tax (excluding exceptionals) increased by 959% to £3.7m (FY22: £0.4m). This is a result of the record revenues achieved in FY23. EBITDA (measured as operating profit plus depreciation and amortisation) increased by 184% to £6.0m (FY22: £2.1m). Amortisation of our products was up by 23% to £1.35m, reflecting the new product portfolio starting to be released into the profit-and-loss account. Depreciation is also significantly up by 91%, of which 17% reflects the investment in new machinery and the improved offices of Theale, Reading and the remainder is the effect of bringing in the acquisition balances. The new products and the new facility are both key elements in the growth strategy of the Group and will enable the realisation of exceptional further growth.

 

Earnings per share (EPS) was 4.98p (FY22: 1.35p). This reflects the increased weighted average number of ordinary shares in FY23 generated by the equity raise completed in August 2023. On the previous basis, the EPS would have been 5.0p.

Cost base

It has been necessary to improve the cost base of the business; it has significantly increased with FY23 at £12.2m (FY22: £8.3m). This reflects the investment needed in the business to prepare and be ready for growth. This will be achieved through our new ways of working (e.g. business development, systems, design wins, product development).

 

The Group continues to pursue the strategy, investing in R&D, developing new products and securing talented people to deliver and drive the business. Through FY23, the business has started to see the results of that investment.

 

 

 

As per the table above, a major part of the cost increase has been the investment in people, with salaries increasing by £2.1m. Headcount has increased by 23, from 129 to 152 (including 12 from the acquisition of Phillips) from 31 December 2022, and has increased from 109 at the beginning of FY22.

Bonuses and commission have also risen in FY23, due to excellent performance and a change to the commission scheme (to simplify and pay on order performance), which generated a one-off catch-up in FY23 of c.£0.3m.

 

Foreign exchange rates also had a significant impact on the FY23 accounts, with a swing in rates causing a negative effect against FY22. All other costs were relatively flat.

 

Tax

The Group has undertaken a full tax review and computation, in accordance with UK tax regulations. Due to having significant R&D investment, we remain in a tax credit position for FY23.

 

Cash flow

The business has a healthy cash balance of £11.1m, with £5.6m generated from normal operations (a strong increase from FY22 at -£0.9m). Revenue was strong in Q4, meaning trade debtors going out of FY23 were high at £5.4m. The business was cash generative in FY23; this is a reversal of the difficult position in FY22 (due to components availability), which saw a decrease of £7.3m.

 

Statement of financial position

Inventory at the close of FY23 was £11.96m (FY22: £10.09m). This was driven by the management of parts throughout the challenging period due to the components crisis, where the business chose to invest cash in increasing inventory based on market availability to enable the delivery of products. This is now followed by a period of growth and, therefore, inventory holding will revert to 'normal' levels based on a higher-revenue business. These two drivers will continue to play out throughout FY24. The business reviews inventory regularly and provides for obsolescence and slow-moving inventory accordingly, which totalled £1.26m in FY23 (FY22: £0.7m).

 

Inventory is a key factor in enabling the business to deliver most efficiently and effectively, with careful management contributing to the reduction in lead times in getting products to customers.

 

Trade payables have increased to £5.7m (FY22: £2.98m). This is predominantly due to the purchase of an end-of-life component that is used across many of the products. This component was delivered in FY23; however, payment terms were agreed that enable payment in April FY24.

 

Acquisition

On 5 September 2023, Concurrent Technologies Group completed the acquisition of Phillips Aerospace in California, USA.

 

The acquisition aims to underpin and execute the systems strategy of the business. It provides a footprint, capability, accreditations and credibility that will support the drive for systems revenue going forward.

 

Phillips Aerospace was purchased for $3.3m (£2.8m), split between cash at $1.1m (£0.8m), equity of $1.5m (£1.3m), and repayment of outstanding loan balances within Phillips Aerospace of $0.8m (£0.7m). A detailed summary of the transaction is set out in Note 27 to the financial statements.

 

Two of the owners (the third was a silent partner) remain with the business and are fully committed to driving the systems strategy forward with the business.

 

The fair value of the assets acquired has been considered under IFRS 3 and a purchase price allocation exercise has been undertaken and reflected in Note 27 of the accounts.

 

In the period since the business has been owned by Concurrent Technologies, it delivered £0.8m revenue and contributed £0.2m profit to the Group.

 

Kim Garrod

Chief Financial Officer

 

Consolidated statement of comprehensive income for the year ended 31 December 2023

 

For the year ended 31 December 2023	Note
			Year to		Year to
			31 December		31 December
			2023		2022
			£		£
Revenue	3		31,656,316		18,274,771
Cost of sales			(16,018,368)		(9,397,449)
Gross profit			15,637,948		8,877,322
Administrative expenses			(11,951,314)		(8,390,682)
Group operating profit	4		3,686,634		486,640
Finance expense			(86,010)		(104,505)
Finance income	5		68,145		546
Exceptional acquisition expenses	27		(195,881)		-
Profit before tax			3,472,888		382,681
Tax credit	6		400,248		604,344
Profit for the year			3,873,136		987,025
Other comprehensive income
Exchange (losses)/gains) on translating foreign operations			(101,340)		69,463
Other comprehensive income for the year, net of tax			(101,340)		69,463
Total comprehensive income for the year			3,771,796		1,056,488
Profit for the period attributable to:
Equity holders of the Parent			3,873,136		987,025
Total comprehensive income attributable to:
Equity holders of the Parent			3,771,796		1,056,488
Earnings per share
Basic earnings per share	8		4.98p		1.35p
Diluted earnings per share	8		4.85p		1.35p

 

 

All operations were continuing within the year.

 

This statement should be read in conjunction with accompanying notes

 

 

Consolidated Statement of Financial Position for the year ended 31 December 2023

 

For the year ended 31 December 2023			31 December	31 December
			2023	2022
			£	£
ASSETS
Non-current assets
Property, plant and equipment	11		2,465,883	2,685,107
Intangible assets	12		13,914,398	8,807,290
Deferred tax assets	13		432,642	350,753
			16,812,923	11,843,150
Current assets
Inventories	15		11,958,500	10,090,437
Trade and other receivables	16		6,442,827	5,439,912
Current tax assets	6		1,492,621	762,545
Cash and cash equivalents			11,118,728	4,512,720
			31,012,676	20,805,614
Total assets			47,825,599	32,648,764
LIABILITIES
Non-current liabilities
Deferred tax liabilities	13		2,094,095	2,126,588
Trade and other payables	17		695,273	1,257,820
Provisions	19		315,135	304,336
			3,104,503	3,688,744
Current liabilities
Trade and other payables	17		9,666,412	5,765,262
Provisions	19		18,256	18,256
			9,684,668	5,783,518
Total liabilities			12,789,171	9,472,262
Net assets			35,036,428	23,176,502
EQUITY
Capital and reserves
Share capital	21		861,692	739,000
Share premium account	21		9,950,231	3,699,105
Merger reserve	21		1,283,457	-
Capital redemption reserve	21		256,976	256,976
Cumulative translation reserve	21		(129,276)	(27,936)
Profit-and-loss account			22,813,348	18,509,357
Equity attributable to equity holders of the Parent			35,036,428	23,176,502
Total equity			35,036,428	23,176,502

 

 

 

This statement should be read in conjunction with accompanying notes.

 

 

Company Statement of Financial Position for the year ended 31 December 2023

 

			31 December		31 December
			2023		2022
			£		£
ASSETS
Non-current assets
Property, plant and equipment	11		2,374,209		2,628,501
Intangible assets	12		11,217,904		8,807,290
Deferred tax assets	13		432,642		350,753
Investments	14		1,572,640		1,446,952
			15,597,395		13,233,496
Current assets
Inventories	15		11,754,564		10,090,437
Trade and other receivables	16		8,534,995		5,870,077
Current tax assets	6		1,434,921		703,087
Cash and cash equivalents			9,111,243		1,704,517
			30,835,723		18,368,118
Total assets			46,433,118		31,601,614
LIABILITIES
Non-current liabilities
Deferred tax liabilities	13		1,834,823		2,178,634
Trade and other payables	17		677,607		1,211,405
Provisions	19		315,135		304,336
			2,827,565		3,694,375
Current liabilities
Trade and other payables	17		8,890,046		5,171,306
Provisions	19		18,256		18,256
			8,908,302		5,189,562
Total liabilities			11,735,867		8,883,937
Net assets			34,697,251		22,717,677
EQUITY
Capital and reserves
Share capital	21		861,692		739,000
Share premium account	21		9,950,231		3,699,105
Merger reserve	21		1,283,457		-
Capital redemption reserve	21		256,976		256,976
Profit-and-loss account	21		22,344,895		18,022,596
Equity attributable to equity holders of the Parent			34,697,251		22,717,677
Total equity			34,697,251		22,717,677

 

 

 

This statement should be read in conjunction with accompanying notes.

 

 

 

Consolidated Cash Flow Statement for the year ended 31 December 2023

 

For the year ended 31 December 2023			Year to		Year to
			31 December		31 December
			2023		2022
			£		£
Cash flows from operating activities
Profit before tax for the period			3,472,888		382,681
Adjustments for:
Finance income			(68,145)		(546)
Finance expense			86,010		104,505
Depreciation			806,236		422,047
Amortisation			1,509,167		1,197,972
Impairment loss			31,557		327,526
Share-based payment			430,854		219,363
Exchange differences			(145,706)		82,384
Increase in inventories			(1,868,063)		(3,665,001)
Increase in trade and other receivables			(1,029,033)		(2,451,279)
Increase in trade and other payables			2,853,322		2,222,123
Cash generated/(used in) from operations			6,079,087		(1,158,225)
Tax received/(paid)			(444,210)		267,884
Net cash generated/(used in) from operating activities			5,634,877		(890,341)
Cash flows from investing activities
Interest received			68,145		546
Purchases of property, plant and equipment (PPE)			(495,973)		(1,480,394)
Payment of acquisition of subsidiary net of cash acquired			(685,767)		-
Capitalisation of development costs and purchases of intangible assets			(3,977,839)		(3,711,617)
Net cash used in investing activities			(5,091,434)		(5,191,465)
Cash flows from financing activities
Equity dividends paid			-		(1,027,088)
Repayment of leasing liabilities			(215,209)		(94,842)
Interest paid			(86,010)		(104,505)
Issue of ordinary shares net of issue costs			6,355,741		-
Sale of treasury shares			-		2,425
Net cash generated/(used) in financing activities			6,054,522		(1,224,010)
Effects of exchange-rate changes on cash and cash equivalents			8,043		(21,222)
Net increase/(decrease) in cash			6,606,008		(7,327,038)
Cash at beginning of period			4,512,720		11,839,758
Cash at the end of the period			11,118,728		4,512,720

 

This statement should be read in conjunction with accompanying notes.

 

Consolidated Statement of Changes in Equity for the year ended 31 December 2023

					Capital	Cumulative	Profit-
		Share	Share	Merger	redemption	translation	and-loss	Total
		capital	premium	reserve	reserve	reserve	account	equity
		£	£	£	£	£	£	£
Balance at 1 January 2022		739,000	3,699,105	-	256,976	(97,399)	18,082,077	22,679,759
Profit for the period		-	-	-	-	-	987,025	987,025
Exchange differences on translating foreign operations		-	-	-	-	69,463	-	69,463
Total comprehensive income for the period (restated)		-	-	-	-	69,463	987,025	1,056,488
Share-based payment		-	-	-	-	-	219,363	219,363
Deferred tax on share-based payment		-	-	-	-	-	245,555	245,555
Dividends paid		-	-	-	-	-	(1,027,088)	(1,027,088)
Sale/purchase of treasury shares		-	-	-	-	-	2,425	2,425
Issue of ordinary shares		-	-	-	-	-	-	-
Balance at 31 December 2022		739,000	3,699,105	-	256,976	(27,936)	18,509,357	23,176,502
Profit for the period		-	-	-	-	-	3,873,136	3,873,136
Exchange differences on translating foreign operations		-	-	-	-	(101,340)	-	(101,340)
Total comprehensive income for the period		-	-	-	-	(101,340)	3,873,136	3,771,796
Share-based payment		-	-	-	-	-	430,854	430,854
Deferred tax on share-based payment		-	-	-	-	-	-	-
Dividends paid		-	-	-	-	-	0	0
Sale/purchase of treasury shares		-	-		-	-	-	-
Merger reserve		18,077		1,283,457	-	-	-	1,301,534
Shares issued during the year		104,615	6,251,126	-	-	-	-	6,355,741
Balance at 31 December 2023		861,692	9,950,231	1,283,457	256,976	(129,276)	22,813,347	35,036,427

 

This statement should be read in conjunction with accompanying notes.

 

Company Statement of Changes in Equity for the year ended 31 December 2023

 

						Capital	Profit-
			Share	Share	Merger	redemption	and-loss	Total
			capital	premium	reserve	reserve	account	equity
			£	£	£	£	£	£
Balance at 1 January 2022			739,000	3,699,105	-	256,976	17,493,403	22,188,484
Total profit and comprehensive income for the period			-	-	-	-	1,086,851	1,086,851
Share-based payment			-	-	-	-	221,450	221,450
Deferred tax on share-based payment			-	-	-	-	245,555	245,555
Dividends paid			-	-	-	-	(1,027,088)	(1,027,088)
Sale/purchase of treasury shares			-	-	-	-	2,425	2,425
Issue of ordinary shares			-	-	-	-	-	-
Balance at 31 December 2022			739,000	3,699,105	-	256,976	18,022,596	22,717,677
Total profit and comprehensive income for the period			-	-	-	-	3,632,774	3,632,774
Share-based payment			-	-	-	-	430,854	430,854
Deferred tax on share-based payment			-	-	-	-	-	-
Dividends received			-	-	-	-	258,670	258,670
Sale/purchase of treasury shares			-	-	-	-	-	-
Merger reserve			18,077		1,283,457	-	-	1,301,534
Shares issued during the year			104,615	6,251,126	-	-	-	6,355,741
Balance at 31 December 2023			861,692	9,950,231	1,283,457	256,976	22,344,894	34,697,250

 

This statement should be read in conjunction with accompanying notes.

 

Notes to the Financial Statements

 

 

 

Note 1	GENERAL INFORMATION
	The principal activity of Concurrent Technologies plc ('the Company') and its subsidiaries (together 'the Group') is the design, development, manufacture and marketing of single-board computers for system integrators and original equipment manufacturers.   On 6 September 2023, the Group acquired 100% of the voting shares of Phillips Aerospace Limited. Please refer to Note 27 for further details.
	Concurrent Technologies plc is the Group's ultimate Parent Company. It is incorporated and domiciled in the United Kingdom. Concurrent Technologies plc's shares are listed on the Alternative Investment Market of the London Stock Exchange.
	The Group's financial statements are presented in pounds sterling (£), which is also the functional currency of the Parent Company. They have been approved for issue by the Board of Directors on 30 April 2024.
Note 2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

 

Basis of preparation	These financial statements are for the year ended 31 December 2023. They have been prepared in accordance with UK-adopted international accounting standards and with the requirements of the Companies Act 2006. These financial statements have been prepared under the historical cost convention.   New and amended IFRS accounting standards that are effective for the current year   In the current year, the Company has applied a number of amendments to IFRS accounting standards issued by the International Accounting Standards Board (IASB) that are mandatorily effective for an accounting period that begins on or after 1 January 2023. Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements.   ·      IAS 1: Classifications of Liabilities as Current or Non-Current (effective for periods commencing on or after 1 January 2023) ·      IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting Policies (effective for periods commencing on or after 1 January 2023) ·      IAS 8: Definition of Accounting Estimates (effective for periods commencing on or after 1 January 2023) ·      IAS 12: Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction (effective for periods commencing on or after 1 January 2023)     New and revised IFRS accounting standards in issue but not yet effective   Certain standards, amendments to and interpretations of published standards have been published that are mandatory for the Group's accounting years beginning on or after 1 January 2024, or later years, and which the Group has decided not to adopt early:   ·      IFRS 7 and IAS 7: Supplier Finance Arrangements (effective for periods commencing on or after 1 January 2024) ·      IAS 1: Non-Current Liabilities with Covenants (effective for periods commencing on or after 1 January 2024)   None of the above listed changes are anticipated to have a material impact on the Group's financial statements.
	Changes in significant accounting policies   There have been no changes in the year to significant accounting policies in the period.
	The Parent Company has relied on the exemption conferred by Section 408 of the Companies Act 2006 in not publishing its own profit-and-loss account. The Parent Company retained profit for the year was £3,632,774 (2022: £1,086,850).
	The policies set out below have been consistently applied to all the years presented, except where stated.
Basis of presentation	The consolidated financial statements are presented in accordance with IAS 1: Presentation of Financial Statements. The Group has elected to present the 'Income Statement' and 'Statement of Other Comprehensive Income' in one statement.   The basis of presentation is the UK-adopted international accounting standards to FRS 101 for the Parent Company information. This has been prepared using the adapted format of the balance sheet. Disclosure exemptions taken include no cash flow statement for the Company, reduced disclosures for financial instruments, financial risk management, related party transactions, share-based payment, key management personnel and other relevant exemptions.

 

Note 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Going concern	The Directors have reviewed the approved budget and projections sensitised for different scenarios through to December 2025, considering general and specific market conditions, status of suppliers, liquidity and funding requirements and the needs of subsidiary companies.   The Directors have assessed the viability of the Group using extreme assumptions to reverse stress test the cash forecast. Assumptions include extreme reduction in sales, decrease in gross margin and a reduction in stock levels (as anticipated in 2024 to reduce working capital). Additionally, within these scenarios we have excluded any potential beneficial impacts such as tighter management of working capital and cost reduction measures. These have been excluded to retain headroom in the forecast and to provide a worst expected case scenario. The forecast cash balances within the Group show that there is no borrowing requirement or going concern issues, enabling the Directors to be confident the Group will be able to meet its obligations.
Basis of consolidation	The consolidated financial statements incorporate the financial statements of the Company and its subsidiary undertakings. A subsidiary is a company controlled directly by the Group. Control is achieved where the Group has the power over the investee, rights to variable returns and the ability to use the power to affect the investee's returns.   The acquisition method views a business combination from the perspective of the combining entity that is identified as the acquirer. The acquirer recognises the assets acquired and liabilities and contingent liabilities assumed, including those not previously recognised by the acquiree, where recognition criteria are met. Measurement of these items is generally at fair value at acquisition date. The measurement of the acquirer's assets and liabilities is not affected by the transaction, nor are any additional assets or liabilities of the acquirer recognised as a result of the transaction, because they are not the subjects of the transaction. All subsidiaries are 100% wholly owned and are fully controlled by the Group. All intra-Group transactions, balances, income and expenses are eliminated on consolidation.
Revenue recognition	Revenue is recognised by the Group using the five-step process outlined in IFRS 15: ·      Identification of a contract with a customer ·      Identification of the performance obligations ·      Determination of the transaction price ·      Allocation of the transaction price to the performance obligations ·      Recognise revenue when the performance obligations are satisfied
	The Group's principal source of revenue is from the sale of single-board computers and associated products (which could include software products that are required by the customer to be added to the boards sold - for example, security software). Revenue from the sale of products, including any added software (this is so interlinked with the single-board computer that they are considered one performance obligation under IFRS 15) is recognised when the Group satisfies its performance obligations by transferring the promised goods to its customers. Control is considered to transfer, at the point in time when the customer takes undisputed responsibility for the goods. This depends on the terms and conditions of sale with the customer. There are three main terms for delivery: 1) The Group are responsible for the goods until delivered at the stated delivery address under the contract; 2) Free on board contract terms means the goods remain the Group's responsibility until they are placed onboard the vehicle for shipping, with export duty being the Group's responsibility as well. The customer is responsible post this point; 3) Ex-works contract terms, where the customer is responsible from the point the goods leave the factory or appropriate site, often under control of the customer's defined shipping arrangement.   The Group provides a basic warranty on its products but does offer customers the opportunity to purchase an extended warranty of one, two or three years for their boards. As the customer has the option of purchasing the additional warranty separately, this is accounted for as a separate performance obligation under IFRS 15 where the Group will repair or replace faulty boards at no additional charge to the customer. Contract liabilities on these extended warranties are recognised and released to income over the warranty period until the performance obligation is satisfied. During the 12 months to 31 December 2023, £28,235 was released to profit and loss.
	Revenue recognised for systems contracts, under IFRS 15, was £1.1m (including Phillips Aerospace) for 2023 financial statements. Systems revenue will continue into 2024 and beyond. Revenue will normally be recognised over time, in accordance with IFRS 15, based on the stage of completion of the relevant performance obligations, and will be dependent on the conditions of each specific contract.

 

Revenue recognition (continued)	For our single-board business, invoices are raised on despatch and payment terms are usually 30 days from date of invoice. For the systems business, payment terms will be based on negotiations and could include pro-forma and 30-day payment terms, but will be subject to negotiated positions.
Cost of sales	Cost of sales consists of external purchases and stock used on delivering specific contracts, plus the direct workforce (predominantly manufacturing) related to the fulfilment of the specific contracts and direct ancillary costs such as shipping.
Administrative expenses   Exceptional items	This includes all non-direct costs (e.g. general overheads such as rent, rates, sales and indirect functions.) This also includes non-direct engineering expenses.   This is made up of costs incurred as a result of the acquisition of Phillips Aerospace. The Company considers these to be outside of the normal course of business so have treated these as exceptional expenses.
Foreign currencies	The functional and presentational currency of the Company is pounds sterling (GBP). Transactions in currencies other than the functional currency of the individual entities within the Group are recorded at the rates of exchange prevailing on the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the re-measurement of monetary items at year-end exchange rates are recognised in profit or loss.
	In the Group's financial statements, all assets, liabilities and transactions of Group entities with a functional currency other than GBP are translated into pounds sterling upon consolidation. The functional currencies of the entities in the Group have remained unchanged during the reporting period.
	On consolidation, assets and liabilities have been translated into GBP at the closing rate at the reporting date. Foreign exchange differences arising for intercompany transactions are charged within profit and loss. Income and expenses have been translated into GBP at the rates of exchange prevailing on the dates of the transactions over the reporting period. In line with IAS 21, an average rate is used for the period unless exchange rates fluctuate significantly and then the weighted average rate is used. Exchange differences are charged/credited to other comprehensive income and recognised in the cumulative translation reserve in equity. On disposal of a foreign operation, the cumulative translation differences recognised in equity are reclassified to profit or loss and recognised as part of the gain or loss on disposal. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated into GBP at the closing rate.
Inventories	Inventories are stated at the lower of cost and net realisable value on a first-in first-out basis. Cost includes materials, direct labour and an attributable proportion of manufacturing overheads based on normal levels of activity. Net realisable value represents the estimated selling price after allowing for the costs of realisation and, where appropriate, the cost of conversion from their existing state into a finished condition. Provision is made where necessary for obsolete, slow-moving or defective inventories.
Leases	A lease is defined as a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration. To apply this definition, the Group assesses whether the contract meets three key evaluations, which are whether the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Group; the Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract; and the Group has the right to direct the use of the identified asset throughout the period of use.   At lease commencement, the Group recognises a right of use asset and a lease liability on the balance sheet. The right of use asset is measured at cost and initial direct costs incurred by the Group. The right of use asset is then depreciated on a straight-line basis over the term of the lease or the estimated useful life of the asset if shorter. At commencement date, the Group measures the lease liability at the present value of the future lease payments, discounted using the Group's incremental borrowing rate.   The Group has elected to account for short-term leases and leases of low-value assets using the recognition exemptions of IFRS 16, and payments in relation to these are recognised as an expense in the appropriate period.   Right of use assets have been included in property, plant and equipment and the corresponding lease liability included in trade and other payables. Detailed lease liability information is included in Notes 17 and 20.

 

 

Property, plant and equipment	Property, plant, and equipment is stated at original historical cost, net of depreciation and any provision for impairment. Depreciation is charged so as to write off the cost of assets together with any cost directly attributable with bringing the asset into use, less estimated residual value, on a straight-line basis over their estimated useful lives in accordance with the table below:   Plant and machinery                                                5-15 years on a straight-line basis Fixtures, fittings and equipment                            3-7 years on a straight-line basis Computer equipment                                              3-5 years on a straight-line basis Improvements to short leasehold property          5-10 years on a straight-line basis   The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the statement of comprehensive income.   The residual values and useful economic lives of property, plant and equipment are reviewed annually.
Intangible assets	All intangible assets are stated at cost less accumulated amortisation and any accumulated impairment losses.   Goodwill   Goodwill has arisen upon the acquisition of Phillips Aerospace made on 6 September 2023, which is defined as a single cash-generating unit (CGU). The assets acquired are not capable of individually generating revenue on their own, so they are deemed combined within the business as a whole to generate revenue, and therefore the business (Phillips Aerospace) is defined as a single CGU.   The goodwill is the amount attributable to the excess of consideration over the fair value of the net assets acquired, including expected synergies, future growth, critical accreditations and technical knowledge of the employee, and is recorded in accordance with IFRS 3 'Business Combinations'.   Goodwill is reviewed and tested annually for impairment.   Research costs   Research costs are charged directly to administrative expense in the statement of comprehensive income as incurred.   Development costs   Development costs are capitalised as intangible assets if the asset can be separately identified; it is in the control of the Group; future economic benefits will accrue to Group; it is technically feasible, the Group has adequate resources to complete the development of the asset and the costs can be reliably determined.   Capitalised development costs comprise all directly attributable costs necessary to create, produce and prepare the asset to be capable of operating in the manner intended by management, including development-related overheads. Amortisation commences upon completion of the development or when the asset becomes available for commercial production. Capitalised development costs are amortised on a straight-line basis, over the estimated product life, which is generally five to seven years. The asset will be reviewed annually for indicators of impairment, and whenever indicators suggest that the carrying amount may not be recovered throughout the period in which it is being used, the asset will be subject to a full impairment review. All intangible assets, including those not yet available for use, will be reviewed for indicators of impairment.
	All other development costs are recorded under administrative expense in the statement of comprehensive income in the period they are incurred. The table below shows products with an NBV of £500,000 or more:

 

Product	NBV	Remaining amortisation period
Board A	2,128,699	84 months
Board B	1,393,825	84 months
Board C	1,085,150	70 months
Board D	806,608	84 months
Board E	576,782	84 months

 

	Customer relationships   Customer relationships were acquired as part of the acquisition of Phillips Aerospace on 6 September 2023 and have applied an income approach valuation using the multi-period excess earning method with a useful economic life of ten years.   Other intangible assets   Intangible assets purchased separately, such as software licences that do not form an integral part of hardware, are capitalised at cost and amortised over their useful lives of three to seven years.   The carrying values of intangible assets with finite lives are reviewed for impairment when events or changes in circumstance indicate the carrying value may be impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of impairment loss.   The recoverable amount of the asset will be used as for all other intangible assets (e.g. backlog and pipeline opportunities), except where the asset does not generate independent cash flows, i.e. additional software packages sold as an add-on to a board.   This also contains the AS9110C licence obtained as part of the acquisition of Phillips Aerospace. This has been valued using an income approach based upon the 'relief from royalty' method with a useful economic life of ten years.
Impairment of property, plant and equipment, and intangible assets		At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss.   Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows (using both backlog and weighted pipeline) are discounted (8.1% rate used) to their present value. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is immediately recognised as an expense in the statement of comprehensive income.   Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as a credit to expenses immediately.
Taxation		Current tax is the tax currently payable based on taxable profit for the year. Current tax for current and prior periods shall, to the extent unpaid, be recognised as a liability. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess shall be recognised as an asset.   The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income, or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.   The Group takes advantage of the small and medium enterprise tax scheme in respect of R&D tax credits. These are included in the taxation line and are accounted for on a receivable basis. This means the Group applies certain assumptions based on previous R&D claims and any changes to the business and applicable legislation to record a credit through profit or loss and an associated receivable on the balance sheet in the accounting period in question.   Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases.  However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit.  Deferred tax on temporary differences associated with shares in subsidiaries is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.
		Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the year-end date.
Financial instruments		Financial assets and financial liabilities are recognised in the balance sheet when the Group becomes a party to the contractual provisions of the instrument.
		(i)    Financial assets Financial assets are held at amortised cost if the assets are held with the objective to collect contractual cash flows and where the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding. After initial recognition at transaction price being the amount of consideration that is unconditional, receivable balances are measured at amortised cost using the effective interest method, less loss allowance for expected credit losses. The Group's cash and cash equivalents, other financial assets (fixed-term deposits), trade and most other receivables fall into this category of financial instruments. The Group applies the IFRS 9 simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for all trade receivables.

 

Financial instruments (continued)	(i)    Financial liabilities Trade and other payables are not interest bearing and are initially recognised at fair value plus transaction costs directly attributable to their acquisition and then subsequently measured at amortised cost.   (ii)   Financial liabilities and equity Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to the contractual provisions of the instrument. They are initially recognised at fair value plus transaction costs directly attributable to their acquisition and subsequently measured at amortised cost using the effective interest method. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.
Investments in subsidiaries	Investments in subsidiaries, as reported in the Parent Company financial statements, are included at cost less provision for impairment.
Finance income	Finance income comprises interest income accrued on a time basis, by reference to the principal outstanding at the effective interest rate applicable.
Dividends	Dividends to the Company's shareholders are recognised as a liability and deducted from shareholders' equity in the period in which the shareholders' right to receive payment is established.
Employee benefits	Retirement benefits The Company operates a defined contribution retirement benefit plan. The cost of the defined contribution plan is charged to administrative expenses in the statement of comprehensive income on the basis of contributions payable by the Company during the year.   Share-based payments The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value at the date of grant. In the consolidated financial statements, the fair value determined at the grant date of equity-settled share-based payments is expensed on a straight-line basis over the vesting period based on the Group's estimate of shares, which will eventually vest, together with a corresponding increase in equity. In the financial statements of the Company, equity-settled share-based payments issued to employees of the Company are treated in the same manner as in the consolidated financial statements. Equity-settled share-based payments issued to employees of subsidiary undertakings are treated in the financial statements of the Company as an increase in investment in subsidiary companies, together with a corresponding increase in equity, over the vesting period based on the Group's estimate of shares, which will eventually vest.   Fair value is measured by use of a binomial option pricing model and has been adjusted for the estimated effect of non-transferability, exercise restrictions and behavioural considerations.   For options that have non-market vesting conditions, such as EPS growth, the award has been valued using the Black-Scholes model. This type of model is typically used where no market conditions are associated with the awards.   Options granted from November 2021 have been valued using the Black-Scholes model. Option pre-November 2021 used the binomial option pricing model.
Treasury shares	The Company's shares that have been purchased and not cancelled are held as treasury shares and deducted from shareholders' equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the shares.
Reserves	Share premium account represents the difference between the price received on the sale of shares and their par value.   Capital redemption reserve arose from the purchase of shares and represents their nominal value.   Cumulative translation reserve arises from the consolidation of foreign subsidiaries.   Share capital represents the nominal value of shares that have been issued.   Merger reserve represents the difference between the price of the shares issued on acquisition of Phillips Aerospace and their par value.   Profit-and-loss account includes all current and prior period retained profits and share-based payments less treasury shares held at the balance sheet date.
Provisions	Provisions are recognised when present obligations resulting from a past event will probably lead to an outflow of economic resources from the Group and amounts can be estimated reliably. Provisions reported are for non-purchased warranties (all additional purchased warranties are accounted for under contract liabilities). The obligation under IFRS 15 is for the Group to repair or replace faulty boards at no additional charge to the customer.
EPS       DEPS	Basic earnings per share is calculated by dividing the profit attributable to the owners of Concurrent Technologies plc, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year.   Diluted earnings per share is calculated by dividing the profit attributable to the owners of Concurrent Technologies plc, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares and share options outstanding during the financial year.
Key judgements and estimates	In applying the Group's accounting policies, the Directors are required to make judgements (other than those involving estimations) that have a significant impact on the amounts recognised and to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. Estimates and judgements are continually evaluated.   Estimates The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of creating a material adjustment to the carrying amounts of assets and liabilities are discussed below.   Development costs To substantiate the carrying value of the capitalised development costs, management have applied the criteria of IAS 36 'Impairment of Assets' and have projected the future economic benefits. They are reviewed against current backlog and estimated weighted (based on probability factors, predominantly driven by stage of the opportunity), future pipeline opportunities, which will be achieved from this investment, using an estimated useful life of seven years and a value in use calculation. Management considers the review to be sufficiently robust regarding reasonable movements in discount rates (current rate used: 8.1%).   A 1% increase in the discount rate would not lead to a material increase in impairment so, therefore, the discount rate is not considered to be the key source of estimation uncertainty, but it is the assumptions made around conversion of future sales that is key to the estimate. Where indicators exist, management then records judgement-based impairment charges that consider project-specific technical issues, customer feedback, opportunity for product substitution and other market factors. Estimation uncertainty relates to assumptions about future results.   The Group has reviewed revenue sensitivity against our top five boards in terms of NBV. Revenue forecast would need to reduce by between 75% and 90% for the discounted cash flow to reach a breakeven position. This provides the Directors with comfort in respect of headroom in the impairment calculations.   Inventory A slow-moving stock provision has been made, where necessary, where inventory has had no movement in three years or more as per our accounting policy. Items that are provided for, should they start being used again, will have the provision removed/reversed.
	R&D tax credits The Group takes advantage of the small and medium enterprise tax scheme in respect of R&D tax credits. These are included in the taxation line and are accounted for on a receivable basis. This means that the Group applies certain assumptions based on previous R&D claims and any changes to the business and applicable legislation to record a credit through profit or loss and an associated receivable on the balance sheet in the accounting period in question.   Goodwill and intangible assets on acquisition   Application of IFRS 3 During the year, the Group acquired Phillips Aerospace and accordingly reviewed the acquisition of the entity in accordance with IFRS 3 'Business Combinations'. Any assets that were identified as being separately identifiable assets have been valued using appropriate valuation techniques in order to determine the fair value of intangible assets acquired as part of the business combination aside from any goodwill arising as a result of the transaction.   These are accordingly recorded as separate intangible assets in Note 12 and have been reviewed for impairment as noted in Note 12.   CGU   The classification of Phillips Aerospace as a single CGU is a key judgement based on the understanding of the elements that have been purchased. The assets purchased (e.g. accreditation, customer relationships, working capital etc.) are not capable of generating revenue in their own right, individually, and, therefore, they are judged to be intrinsically linked as one to define the business of Phillips Aerospace to be one single CGU. Accordingly, any goodwill arising as a result of this acquisition has been allocated to the CGU identified.   The subsequent impairment and amortisation of the goodwill and assets are based on key estimates and judgements, reviewing the capability of the business from key forecasts of revenue and orders. These are tested for impairment in the same way as development costs (i.e. the use of a discounted cash flow forecast to determine the value in use of the CGU, which has been prepared in accordance with IAS 36).

 

Key judgements and estimates (continued)

Capitalisation of development costs IAS 38 - Intangible Assets Judgement is required when distinguishing the research and development phases of new projects and determining whether the recognition requirements for capitalisation of the development costs are met under IAS 38. Research covers pre-solution options often through feasibility studies of various technologies. Development is the application of research findings or other knowledge to plan or design for the production of new or substantially improved products before the start of commercial production. Development costs are capitalised as an intangible asset if all the following criteria are met: there is technical feasibility of completing the asset so that it will be available for use or sale; the intention is to complete the asset and use or sell it; there is an ability to use or sell the asset; the asset will generate future economic benefits and demonstrate the existence of a market or the usefulness of the asset if it is to be used internally; the availability of adequate technical, financial and other resources to complete the development and to use or sell it; and the ability to measure reliably the expenditure attributable to the intangible asset.

 

 

Note 3

SEGMENT REPORTING

 

The Directors consider that there is only one operating segment: design, manufacture and supply of high-end embedded computer products. The disclosures for this operating segment have already been provided in these financial statements. The Company's products can be supplied to more than one business sector and are sold on a global basis. All manufacturing is undertaken in the UK.   While looking at sales by business sectors, the Executive Board members of the Company, as the Chief Operating Decision Maker, does not make decisions regarding allocation of Group resources on such a basis. The Board in its entirety, i.e. including Non-Executive members, is not involved in making operational decisions. Further, Group profits are not categorised for internal reporting purposes by sectors or geography. The historical and anticipated performance of the Group is therefore reported to the Board of Concurrent Technologies plc as a single entity. Thus, the Directors consider that there are no additional segments required to be disclosed under IFRS 8 'Operating Segments' but have provided the following geographic sales analysis. No geographical analysis of non-current assets is provided as non-current assets outside of the UK are immaterial.

During 2023, £3.49m or 11.0% of Group revenue depended on a single customer. In 2022, £3.17m or 17.3% of Group revenue depended on a single customer.   All board revenue is recognised at a point in time in relation to the terms and conditions of each contract, with systems and warranty (immaterial) revenue recognised over time.

 

 

Revenue						Year to		Year to
						31 December		31 December
						2023		2022
						£		£
				United States		13,060,691		6,564,816
				Malaysia		392,850		3,047,798
				Germany		6,450,372		-
				United Kingdom		2,148,568		1,167,266
				Other Europe		4,178,401		4,003,849
				Rest of the World		5,425,434		3,491,042
						31,656,316		18,274,771

 

 

 

 

 

 

 

 

 

Note 4		GROUP OPERATING PROFIT
					Year to 31 December 2023		Year to 31 December 2022
					£		£
			Group operating profit is stated after charging to cost of sales:
			Cost of inventories recognised as expense		14,884,586		8,229,285
			Staff costs (see Note 10)		1,133,781		815,915
			Group operating profit is stated after charging/(crediting) to operating expenses:
			Net foreign exchange losses/(gains)		279,491		(462,900)
			Total expensed research and development costs		1,930,389		1,096,657
			Amortisation of intangible assets		1,509,167		1,197,972
			Impairment of intangible assets		31,557		327,526
			Depreciation of owned property, plant and equipment		686,403		244,648
			Depreciation of ROU Asset		203,870		177,399
			Staff costs (see Note 10)		9,002,640		6,712,098
			Group principal auditor's remuneration:
			Audit of Group financial statements pursuant to legislation		150,000		232,443
			Other non-auditor remuneration relating to taxation compliance		25,000		6,026

 

 

 

Note 5

FINANCE INCOME

 

				Year to 31 December 2023		Year to 31 December 2022
				£		£
		Interest earned on bank deposits		68,145		546

 

 

Note 6

TAX

 

				Year to 31 December 2023		Year to 31 December 2022
				£		£
		Current tax expense		-		(723,737)
		Current deferred tax		401,271		393,695
		Prior year tax expense		(4,970)		(41,142)
		Prior year deferred tax		(826,969)		(111,835)
		Current overseas tax charge		30,420		(121,325)
				(400,248)		(604,344)

 

 

The tax assessed on the Group's profit before tax for the year is less than the standard rate of corporation tax in the UK. The applicable rate of corporation tax for the year to 31 December 2023 was 23.52% (2022: 19.00%). Within the deferred tax charge for the year is an amount of £23,747 to reflect the effect of change in the UK tax rate. The differences are explained below:

 

 

 

 

Note 6

TAX (CONTINUED)

 

				Year to		Year to
				31 December		31 December
				2023		2022
				£		£
		Profit before tax		3,472,888		382,681
		Corporation tax on profit before tax at standard rate		816,823		72,710
		Expenses not deductible for tax purposes		282,141		22,632
		UK tax credits		(486,705)		(502,248)
		Effect of change in UK tax rate		23,747		87,757
		Share options		-		(5,746)
		Effects of other reliefs		-		(25,062)
		Difference in overseas effective tax rates		(24,150)		(38,264)
		Adjustment in respect of previous years		(1,012,104)		(216,123)
		Tax (credit)/charge		(400,248)		(604,344)

 

Factors that may affect future tax charges are as follows:   UK tax rates and any changes to R&D tax credits would have an impact on the tax position of the Group and Parent Company.   The current tax asset balance on the statement of financial position is made up of £708,057 current year and £784,564 historic repayment due.

 

 

Note 7

DIVIDEND

 

				2023   £		2022   £			2023 pence per share		2022 pence per share
		Second interim (for the previous year)		-		1,027,088			-		1.40
		Interim		-		-			-		-
				-		1,027,088			-		1.40

 

Interim dividends are recognised in the financial statements in the period they are paid. The Directors have proposed a 1p dividend for the year ended 31 December 2023 as a resolution for the AGM. (Total dividend for 2022 was nil.)

 

 

Note 8

EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the profit attributable to ordinary equity holders for the period by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all contracted dilutive potential ordinary shares. The Company only has one category of dilutive potential ordinary shares, namely the share options.   The inputs to the earnings per share calculation are shown below:

 

 

 

 

 

 

	2023				2022
	Earnings	Weighted average number of shares	Per share amount		Earnings	Weighted average number of shares	Per share amount
Earnings attributable to ordinary shareholders on continuing operations after tax	3,873,136	77,833,759	4.98		987,025	73,363,490	1.35
Dilutive effect of share options	-	2,069,974	-		-	-	-
Diluted earnings per share	3,873,136	79,903,733	4.85		987,025	73,363,490	1.35

 

The diluted EPS figure reflects the impact of historic grants of share options and is calculated by reference to the number of options granted for which the average share price for the year was in excess of the option exercise price.

 

Note 9

DIRECTORS' EMOLUMENTS

 

				Year to 31 December 2023		Year to 31 December 2022
				£		£
		Fees and emoluments		1,182,172		769,650
		Pension contributions		18,632		20,697
				1,200,804		790,347
		The emoluments of Directors disclosed above include in respect of the highest paid Director:
		Fees and emoluments		571,029		334,961
		Pension contributions		9,847		13,812
		The number of Directors to whom retirement benefits are accruing under a defined contribution scheme is:		2		2

 

Detailed information concerning Directors' emoluments, shareholdings and options is provided in the Report of the Remuneration Committee.

 

 

 

Note 10

STAFF COSTS

 

STAFF COSTS			Group		Company		Group		Company
			Year to		Year to		Year to		Year to
			31 December		31 December		31 December		31 December
			2023		2023		2022		2022
			£		£		£		£
	Wages and salaries		8,501,442		7,055,210		6,218,053		5,190,752
	Social security costs		958,837		867,527		704,416		637,174
	Defined contribution pension costs		438,431		418,231		386,181		370,846
	Share-based payment		430,854		283,761		219,363		169,859
			10,329,564		8,624,729		7,528,013		6,368,631
Average number of employees:			No		No		No		No
	Production		39		38		34		34
	Other		103		88		87		78
			142		126		121		112

 

Direct employment costs capitalised for the year to 31 December 2023: £2,389,672 (2022: £1,959,447).

 

Note 11

PROPERTY, PLANT AND EQUIPMENT

 

GROUP		Improvements to short leasehold property					Plant, fixtures and computer equipment
					Right of use asset				Total
			£		£		£		£
	COST
	At 1 January 2022		293,556		850,707		4,034,955		5,179,218
	Foreign exchange movement				11,202		16,102		27,304
	Additions		490,613		635,248		354,533		1,480,394
	At 31 December 2022		784,169		1,497,157		4,405,590		6,686,916
	Foreign exchange movement		(6,251)				(8,624)		(14,875)
	Additions		227,733				523,184		750,917
	Modification and amendment				(234,905)				(234,905)
	Transfer from intangibles						75,045		75,045
	At 31 December 2023		1,005,651		1,262,252		4,995,195		7,263,098
	ACCUMULATED DEPRECIATION
	At 1 January 2022		210,371		269,834		3,080,550		3,560,755
	Foreign exchange movement				4,595		14,412		19,007
	Charge for the year		49,657		177,399		194,991		422,047
	At 31 December 2022		260,028		451,828		3,289,953		4,001,809
	Foreign exchange movement		(5,193)		1,651		(7,288)		(10,830)
	Charge for the year		252,370		203,870		434,033		890,273
	Modification and amendment				(84,037)				(84,037)
	At 31 December 2023		507,205		573,312		3,716,698		4,797,215
	NET BOOK VALUE
	At 31 December 2022		524,141		1,045,329		1,115,637		2,685,107
	At 31 December 2023		498,446		688,940		1,278,497		2,465,883

 

Note 11

PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

 

 

COMPANY		Improvements to short leasehold property					Plant, fixtures and computer equipment
					Right of use
					asset				Total
			£		£		£		£
	COST
	At 1 January 2022		289,738		764,917		3,907,981		4,962,636
	Transfer to intangibles								-
	Additions		490,613		635,248		347,607		1,473,468
	At 31 December 2022		780,351		1,400,165		4,255,588		6,436,104
	Additions		60,672		-		303,337		364,009
	Modification and amendment				(234,905)				(234,905)
	Transfer from intangibles						75,045		75,045
	At 31 December 2023		841,023		1,165,260		4,633,970		6,640,253
	ACCUMULATED DEPRECIATION
	At 1 January 2022		206,552		241,554		2,969,017		3,417,123
	Charge for the year		49,657		159,924		180,900		390,481
	At 31 December 2022		256,209		401,478		3,149,917		3,807,604
	Charge for the year		94,546		186,393		261,538		542,477
	Modification and amendment				(84,037)				(84,037)
	At 31 December 2023		350,755		503,834		3,411,455		4,266,044
	NET BOOK VALUE
	At 31 December 2022		524,142		998,687		1,105,671		2,628,500
	At 31 December 2023		490,268		661,426		1,222,515		2,374,209

 

 

 

 

Note 12

INTANGIBLE ASSETS INCLUDING GOODWILL

 

GROUP
			Development				Customer
			costs		Goodwill		relationships		Other		Total
			£		£		£		£		£
	COST
	At 1 January 2022		27,374,092						1,079,817		28,453,909
	Foreign exchange movement		-						5,378		5,378
	Additions		3,687,351						24,266		3,711,617
	At 31 December 2022		31,061,443		-		-		1,109,461		32,170,904
	Foreign exchange movement								(1,106)		(1,106)
	Additions		3,939,539						38,300		3,977,839
	Additions on acquisition				1,230,594		1,130,851		383,593		2,745,038
	Transfer between classes		(64,413)						64,413		-
	Transfer to tangibles		(75,046)								(75,046)
	At 31 December 2023		34,861,523		1,230,594		1,130,851		1,594,661		38,817,629
	AMORTISATION
	At 1 January 2022		21,056,492						776,251		21,832,743
	Foreign exchange movement		-						5,373		5,373
	Charge for the year		1,093,820						104,152		1,197,972
	Impairment loss		327,526								327,526
	At 31 December 2022		22,477,838		-		-		885,776		23,363,614
	Foreign exchange movement								(1,106)		(1,106)
	Charge for the year		1,349,203				36,248		123,716		1,509,167
	Impairment loss		31,557								31,557
	At 31 December 2023		23,858,598		-		36,248		1,008,386		24,903,232
	31st December 2022		8,583,605		-		-		223,685		8,807,290
	At 31 December 2023		11,002,925		1,230,594		1,094,603		586,275		13,914,397

 

 

 

COMPANY
			Development
			costs		Other		Total
			£		£		£
	COST
	At 1 January 2022		27,374,092		1,079,817		28,453,909
	Foreign exchange movement		-		5,378		5,378
	Additions		3,687,351		24,266		3,711,617
	Disposals						-
	At 31 December 2022		31,061,443		1,109,461		32,170,904
	Additions		3,939,539		38,300		3,977,839
	Transfer between classes		(64,413)		64,413		-
	Transfer to tangibles		(75,046)		-		(75,046)
	At 31 December 2023		34,861,523		1,212,174		36,073,697
	AMORTISATION
	At 1 January 2022		21,056,492		776,251		21,832,743
	Foreign exchange movement		-		5,373		5,373
	Charge for the year		1,093,820		104,152		1,197,972
	Disposals						-
	Impairment loss		327,526				327,526
	At 31 December 2022		22,477,838		885,776		23,363,614
	Charge for the year		1,349,203		111,420		1,460,623
	Disposals						-
	Impairment loss		31,557				31,557
	At 31 December 2023		23,858,598		997,196		24,855,794
	31 December 2022		8,583,605		223,685		8,807,290
	At 31 December 2023		11,002,925		214,978		11,217,903

 

 

 

 

Development costs can be broken down as assets under development (based on original cost): £7,428,960 (2022: £4,652,822) and assets available for use (based on original cost): £27,432,563 (2022: £26,343,643). The cost of assets transferred from assets under development to available for use in the year was £1,088,920 (2022: £2,609,098).   Other intangible assets comprise purchased software used within the business and software licences. All amortisation and impairment charges (or reversals if any) are included within 'Administrative Expenses'.

 

Note 12

INTANGIBLE ASSETS (CONTINUED)

Impairment Loss   At the end of the year, the Directors reviewed the development projects. Each project is treated as a separate CGU. Expected future cash flows ('value in use' calculation, the discount rate and cash flows were calculated on a pre-tax basis) attributable to these projects are calculated over the lower of seven years or the remaining life of the project, discounted at the applied rate of 8.1%. Where indicators for impairment exist, management considers pipeline sales volume and the relevant margin of the product along with project-specific technical issues, customer feedback, opportunity for product substitution and other market factors.   Following full review of all projects, the Company impaired a number of projects totalling £112,028. These products are all older products and all costs now impaired refer to historical costs. One previously impaired project had an impairment reversal upon further review in 2023; future revenue streams have become apparent and the impairment of £80,471 was reversed.   Goodwill has arisen in FY23 due to the acquisition of Phillips Aerospace on 6 September 2023, which is a single CGU. The Group has undertaken an impairment review of the carrying value of the goodwill, using detailed forecasts of revenue (based on forecast orders and contracted backlog), costs of delivery and resulting profitability. The Group has reviewed using a discounted cash flow, with a discount rate of 8.1%. A number of sensitivities have been performed against the performance, especially against revenue (which drives the profitability) and the Directors are comfortable that there is sufficient headroom to strongly support the goodwill carried on the balance and, therefore, no impairment is necessary. Revenue would need to reduce by 67% for the headroom to be nil.

 

 

Note 13

DEFERRED TAX LIABILITY

 

			Share-		Accelerated
			based		capital		Tax
			payments		allowances		losses		Other		Total
			£		£		£		£		£
	GROUP
	At 1 January 2022		24,139		(1,826,126)		(54,026)		6,903		(1,849,110)
	Credited/(charged) to statement of comprehensive income		81,059		(345,221)		91,825		57		(172,280)
	Credited to equity		245,555		-		-		-		245,555
	At 31 December 2022		350,753		(2,171,347)		37,799		6,960		(1,775,835)
	Credited/(charged) to statement of comprehensive income		-81,889		529,429		(185,619)		-		425,699
	Deferred tax acquired and arising from acquisition								(311,317)		(311,317)
	At 31 December 2023		432,642		(1,641,918)		147,820		(304,357)		(1,661,453)

 

COMPANY
At 1 January 2022		24,139		(1,815,715)		-		-		(1,791,576)
Credited/(charged) to statement of comprehensive income		81,059		(362,918)		-		-		(281,859)
(Charged) to equity		245,555		-		-		-		245,555
At 31 December 2022		350,753		(2,178,633)		-		-		(1,827,880)
Credited/(charged) to statement of comprehensive income		81,889		529,429		(185,619)      -		-		425,699
At 31 December 2023		432,642		(1,649,204)		(185,619)        -		-		(1,402,181)

 

 

Note 14

INVESTMENTS

 

COMPANY		31 December 2023 £		31 December 2022 £
Investment in subsidiary companies
Shares at cost		19,705		19,705
Capital contribution		1,361,656		1,361,656
Equity-settled share-based payment		191,278		65,591
Total investment in subsidiary companies		1,572,639		1,446,952

 

The Group has closed the R&D facility located in India. The investment in the subsidiary company has not been impaired during 2023. This will be impaired in 2024 upon formal dissolution. The investment carried in the financial statements is £12,994.   Subsidiary undertakings included in these financial statements, which are all wholly owned, at 31 December 2023 are:

 

		Place of		Class of	Percentage		Nature
Name		incorporation		share	held		of business
By Company:
Concurrent Tech		Bangalore,		Ordinary	100%		Non-trading
India Private Ltd		India					Company
Concurrent		California,		Ordinary	100%		Sale and service of Company products
Technologies, Inc.		USA					and R&D services for the Company
By Concurrent Technologies, Inc.:
Omnibyte		Illinois,		Ordinary	100%		Dormant
Corporation		USA
Phillips Machine & Welding Co., Inc.		California,		Ordinary	100%		Developer and manufacturer of industrial
		USA					products and associated services

 

 

Note 15

INVENTORIES

 

		Group 31 Dec 2023		Company 31 Dec 2023		Group 31 Dec 2022		Company 31 Dec 2022
		£		£		£		£
Raw materials		8,357,855		8,153,919		6,637,883		6,637,883
Work in progress		3,407,901		3,407,901		3,193,400		3,193,400
Finished goods		192,744		192,744		259,154		259,154
		11,958,500		11,754,564		10,090,437		10,090,437

 

During 2023, the provision for obsolete and slow-moving inventories has been increased by £543,686 (2022: decreased by £241,310). In accordance with IAS 2, inventories are measured at the lower of cost and net realisable value.   The inventory balance movement includes an obsolescence provision, which has decreased by £80,509 in the period. £236,767 has been reversed due to these items of inventory not being considered obsolete any longer and £156,257 added to the provision. This comprises obsolete stock following an in-depth analysis of the Group's inventory.   In 2023, a total of £14.8m (2022: £7.4m) of inventories was included in the Consolidated Statement of Comprehensive Income as an expense.

Note 16

TRADE AND OTHER RECEIVABLES

 

			Group		Company		Group		Company
			2023		2023		2022		2022
			£		£		£		£
	Trade receivables		5,430,181		2,667,667		4,755,594		3,056,417
	Prepayments and accrued income		687,535		577,182		684,318		606,061
	Other debtors		325,111		325,111		-		-
	Loan to subsidiary		-		2,786,644		-		-
	Amounts due from subsidiary undertakings		-		2,178,391		-		2,207,599
			6,442,827		8,534,995		5,439,912		5,870,077

 

 

The Group applies the IFRS 9 simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for all trade receivables. Trade receivables have been grouped based on shared credit risk characteristics. The expected loss rates are based on historic performance, as well as current macroeconomic conditions. The Company has assessed the recoverability of intercompany balances and deem no issues in terms of credit losses, with all amounts being repayable on demand. There have been no previous write-offs of intercompany balances and there are sufficient cash and other current assets to cover the amount.

 

 

ECL provision matrix

31 December 2023	Current	More than 30 days past due	More than 60 days past due	More than 90 days past due	Total
Expected loss rate	-	-	-	0.001%
Gross carrying amount	5,282,708	18,712	128,551	210	5,430,181
Lifetime expected credit loss	-	-	-	210	210

 

 

As a Group, we don't have a significant amount of bad debt, and historically bad debts have been very close to nil; due to the recurring nature of orders, our customers pay what is owed so it is not necessary for us to provide for any balances as bad debt, and when considering current and future macroeconomic conditions, the anticipated loss rate is expected to remain close to nil.

 

 

 

		Group  2023 £				Group 2022 £
At 1 January		210				1,188
Charged/(credited) to statement of comprehensive income		-				(978)
At 31 December		210				210

 

 

		Group  2023 £		Company 2023 £		Group 2022 £		Company 2022 £
More than 30 days		18,712		17,998		76,881		76,881
More than 60 days		128,551		128,448		73,086		49,336
More than 90 days		125,876		125,096		8,150		5,934
		273,139		271,542		158,117		132,151

 

 

Notes to the Financial Statements (continued)

 

Note 17

TRADE AND OTHER PAYABLES

 

 

Current		Group 2023 £		Company 2023 £		Group 2022 £		Company 2022 £
Trade payables		5,707,674		5,608,259		2,977,750		2,880,305
Contract liabilities		1,030,449		1,030,449		681,044		681,044
Other payables		355,549		46,329		233,990		55,159
Current right of use lease liability		294,662		268,472		202,287		180,044
Other taxes and social security costs		207,385		202,605		188,986		185,557
Accruals		2,070,693		1,733,933		1,500,205		1,189,197
		9,666,412		8,890,047		5,784,262		5,171,306

 

Non-Current			Group 2023 £		Company 2023 £		Group 2022 £		Company 2022 £
	Right of use lease liability		695,272		677,607		1,257,820		1,211,405
			695,272		677,607		1,257,820		1,211,405

 

 

Contract liabilities have been disaggregated from other payables in the current and prior years to provide more detailed information to the reader of the accounts as to the nature of other payables.

 

 

Contract liabilities		Warranty		End of		End of		Non-		Total
(Group and Company)				life		life		recurring
						service		engineering
						charge
B/fwd as 1 January 2022		94,556		445,592		6,941		133,955		681,044
Addition		42,174		266,676		-		389,685		698,535
Release		(87,486)		(121,332 )		(6,357)		(133,955)		(349,130)
Closing at 31 December 2023		49,244		590,936		584		389,685		1,030,449

 

 

 

 

 

 

 

 

Note 18

FINANCIAL INSTRUMENTS

 

 

Financial Instruments by category

 

				Financial assets measured at amortised cost £
GROUP
2022		Non-current:
2022		Current:
		Trade and other receivables		4,755,594
		Cash and cash equivalents		4,512,720
		Total for category		9,268,314
2023		Non-current:
2023		Current:
		Trade and other receivables		5,430,181
		Cash and cash equivalents		11,118,728
		Total for category		16,548,909

 

				Financial liabilities measured at amortised cost £
GROUP
2022		Current:
		Trade and other payables		4,895,232
2023		Current:
		Trade and other payables		8,428,578

 

 

Included in the above are trade payables, other payables, accruals and lease liabilities. All non-current liabilities, as displayed in Note 17, relate to lease liabilities, which are financial liabilities measured at amortised cost.

 

 

Note 19

PROVISIONS

 

 

		GROUP AND COMPANY		Dilapidation £		Product warranty £
		Carrying amount at 1 January 2023		286,080		36,512
		Increase in provisions		10,799		-
		Amount utilised		-		-
		Carrying amount at 31 December 2023		296,879		36,512
		Provisions have been analysed between current and non-current as follows:
		Current				18,256
		Non-current				315,135

 

Warranties are provided for on the basis of management's best estimate of the Group's liability under 24-month warranties granted on its hardware products, based on past experience.   Dilapidations are provided for on the basis of management's best estimate for both the Colchester and Theale office. This is recognised over the life of each lease.

 

 

 

Note 20	LEASES AND COMMITMENTS
	The Group leases properties for its operations in the UK and US, and the information is presented below; all leases relate to property.

 

 

			Reconciliation of lease Group Company Group Company liabilities 2023 2023 2022 2022   £ £  £  £ Opening        1,460,107        1,391,449        910,210         834,274 Additions                     -                       -          635,248         635,248 Modification and amendment         (265,325)         (265,325)                  -                    -   Payments         (301,219)         (269,641)       (199,347)       (165,927) Interest           103,008             89,596        104,469           87,854 FX             (6,636) -            9,527 - Closing           989,935           946,079     1,460,107      1,391,449       Non-current (Note 17)         (695,273)         (677,607)    (1,257,820)    (1,211,405) Current (Note 17)         (294,662)         (268,472)       (202,287)       (180,044)         (989,935)         (946,079)    (1,460,107)    (1,391,449)
				Group 2023 £   Company 2023 £ Opening balance 1,045,328 998,687 Modification & amendment (150,868) (150,868) Depreciation (203,870) (186,393) Foreign exchange (1,651) - Closing balance 688,939 661,426       The right of use in relation to leasehold property are disclosed as PPE (Note 11).   Leases are made up of three properties, with the terms as follows: UK office (Colchester) has no remaining break clauses; UK office (Theale) has a break clause of 1 April 2028; US office has an annual automatic one-year extension unless notice is given.
Amounts payable under lease arrangements						Group		Company		Group		Company
						2023		2023		2022		2022
						£		£		£		£
Within one year						(357,040)		(325,462)		(303,061)		(269,641)
Within two to six years						(757,806)		(739,386)		(1,433,763)		(1,380,848)
Add unearned interest						124,911		118,769		276,717		259,040
						(989,935)		(946,079)		(1,460,107)		(1,391,449)

 

At 31 December 2023, the Group was committed to a short-term lease for the Phillips Aerospace office lease (2022: None).   The Group has elected not to recognise a lease liability for short-term leases or for leases of low-value assets. Payments made on these leases are expensed on a straight-line basis and the value of these expenses in the year was £49,606.   Amounts recognised in the Consolidated Statement of Comprehensive Income.

 

 

 

Note 20

LEASES AND COMMITMENTS (CONTINUED)

 

 

	Group 2023 £		Group 2022 £
Short-term and low-value lease expense	49,606		-
Depreciation charge	203,870		195,254
Interest expense	103,008		111,941

 

 

Amounts recognised in the Consolidated Statement of Cash Flows.

 

	Group 2023 £		Group 2022 £
Short-term and low-value lease expense	-		-
Payment of lease liabilities	301,219		94,842

 

 

Capital commitments   At the end of the year, the capital expenditure commitment (for a machine for the factory) was £142,008 (2022: £nil).

 

 

Note 21

SHARE CAPITAL, SHARE PREMIUM, MERGER RESERVE AND CAPITAL REDEMPTION RESERVE

 

	31 Dec 2023 £		31 Dec 2022 £
Allotted, issued and fully paid share capital:
Ordinary shares (86,169,236 of 1p each)	861,692		739,000

 

                                                         Share capital

Balance as at 1 January 2023		739,000
Shares issued for equity raise		104,615
Shares issued for acquisition		18,077
Balance as at 31 December 2023		861,692

 

Share premium
Balance as at 1  January 2023				3,699,105
Shares issued for equity raise less issue costs				6,251,126
Balance as at 31 December 2023				9,950,231

 

Merger reserve
Balance as at 1 January 2023			-
Shares issued for acquisition			1,283,457
Balance as at 31 December 2023			1,283,457

 

Capital redemption reserve
Balance as at 1 January 2023			256976
			-
Balance as at 31 December 2023			256,976

 

 

 

 

 

During the year, 10,461,538 shares were issued as part of an equity raise for the Company. A further 1,807,686 were issued as part of the acquisition of Phillips Aerospace.

 

 

 

 

At 31 December 2023, the Company held 531,522 ordinary shares (2022: 531,522) with an aggregate nominal value of £5,315 (2022: £5,315) in treasury.

 

 

 

				Treasury shares
Balance as at 1 January 2023				531,522
Shares sold				-
Balance as at 31 December 2023				531,522

 

 

Note 22

PENSION SCHEME

 

The Company operates a group personal pension scheme, which all permanent employees may join. The scheme, which is a defined contribution scheme, is independent of the Company's finances. The Company's contributions are based on between 5.5% and 13.5% of members' gross salaries, dependent upon the length of service of the individual. The Company has also chosen NEST (National Employment Savings Trust) as its workplace pension scheme to meet its employer duties under the auto-enrolment rules. Contributions to the NEST scheme are at the minimum rates. The total charge to administrative expenses in the statement of comprehensive income is disclosed in Note 10 'Staff Costs'. Pension contributions payable to the schemes at the end of the year were £63,681 (2022: £55,160).

 

Note 23

FINANCIAL RISK MANAGEMENT

 

	The Group is exposed to various risks in relation to financial instruments. The Group's financial assets and liabilities by category are summarised in Note 18. The main types of risks are market risk, credit risk and liquidity risk. The Group's policy in respect of financial risk management is referred to in the report on corporate governance.   The Group does not actively engage in the trading or holding of financial assets for speculative purposes. The most significant financial risks to which the Group is exposed are described below.
	Market risk analysis The Group is exposed to market risk through its use of financial instruments and specifically to currency risk that results from its operating activities.
	Foreign currency sensitivity A number of transactions are conducted by companies in the Group in currencies other than their functional currency, which give rise to monetary assets and liabilities denominated in other currencies. The Group's exposure to foreign currency exchange risk is mitigated to a large extent by natural hedging, as assets in currency are matched by liabilities in the same currency. The value of monetary assets and liabilities of the Group and Company not held in functional currencies at the balance sheet date were as follows:

 

 

 

 

 

 

Net foreign currency monetary assets/(liabilities)

2023 US dollar £

2022 US dollar £

Group

(447,522)

(175,103)

 

				2023 US dollar £		2022 US dollar £
		If sterling had strengthened by 5% against US dollar:
		Impact on net Group result and equity for the year		21,312		8,338
		If sterling had weakened by 5% against US dollar:
		Impact on net Group result and equity for the year		(23,555)		(9,216)

 

 

Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to be representative of the exposure to currency risk.

 

 

Credit risk analysis   Credit risk is the risk that a counterparty fails to discharge an obligation to the Group. The Group is exposed to this risk from cash and cash equivalents and outstanding receivables.   The Group applies the IFRS 9 simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for all trade receivables.   To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the days past due.   On that basis, the loss allowance as at 31 December 2023 and 31 December 2022 was determined as follows:

 

 

 

 

 

 

 

Note 23

FINANCIAL RISK MANAGEMENT (CONTINUED)

 

 

Group

 

31 December 2023	Current	More than 30 days past due	More than 60 days past due	More than 90 days past due	Total
Expected loss rate	-	-	-	100%
Gross carrying amount	5,282,708	18,712	128,551	210	5,430,181
Lifetime expected credit loss	-	-	-	210	210

 

31 December 2022	Current	More than 30 days past due	More than 60 days past due	More than 90 days past due	Total
Expected loss rate	-	-	-	100%
Gross carrying amount	4,605,417	76,881	73,086	210	4,755,594
Lifetime expected credit loss	-	-	-	210	210

 

 

The Group loss allowances for trade receivables as at 31 December reconcile to the opening loss allowances as follows:

 

	2023	2022
	£	£
Opening loss allowance at 1 January	210	1,188
Loss allowance recognised during the year	-	(978)
Closing loss allowance at 31 December	210	210

 

 

The credit risk for cash and cash equivalents and fixed-term cash deposits is considered negligible since the counterparties are reputable banks with high-quality external credit ratings.

 

 

Liquidity risk analysis

 

2023	Current	More than 30 days past due	More than 60 days past due	More than 90 days past due	Total
Trade payables	4,747,497	673,864	154,861	131,452	5,707,674
Accruals	2,070,693				2,070,693

 

 

2022	Current	More than 30 days past due	More than 60 days past due	More than 90 days past due	Total
Trade payables	1,446,455	1,331,839	120,802	78,654	2,977,750
Accruals	1,500,205				1,500,205

 

Liquidity risk is that the Group might be unable to meet its obligations. The Group manages its liquidity needs by monitoring forecast cash inflows and outflows due in day-to-day business. Liquidity needs are monitored in various time bands, on a week-to-week basis and by monthly forecasting.

 

The Group's objective is to maintain cash to meet its liquidity requirements for the foreseeable future. This objective was met for the reporting periods. Funding for long-term liquidity needs is assessed by the Board on a regular basis.   The Group considers expected cash flows from financial assets in assessing and managing liquidity risk, in particular its cash resources and trade receivables. The Group's existing cash resources and trade receivables (see Note 16) exceed the current cash outflow requirements. Cash flows from trade and other receivables are all contractually due within three months.

 

 

 

 

Note 24

CAPITAL MANAGEMENT

 

The Group's objectives when managing capital are:   (i)    to ensure the Group's ability to continue as a going concern, and (ii)   to provide an adequate return to shareholders   by pricing products and services commensurately with the level of risk.

The Group monitors capital on the basis of the carrying amount of equity less cash and cash equivalents as presented on the face of the Consolidated Balance Sheet.   The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the number of dividends paid to shareholders, return capital to shareholders, purchase its own shares to hold in treasury, issue new shares or sell assets. 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.   Capital for the reporting periods under review is summarised as follows:

 

		Group		Group
		2023		2022
		£		£
Total equity		35,036,427		23,176,502
Cash and cash equivalents		(11,118,728)		(4,512,720)
Capital		23,917,699		18,663,782
Total equity and overall financing		35,036,427		23,176,502
Capital to overall financing ratio		0.68		0.81

 

 

 

Note 25

RELATED PARTY TRANSACTIONS

 

The Company has taken the FRS 101 exemption given that transactions are only with other wholly owned Group companies. The are no transactions for the Group to report on under IAS 24. All intra-Group transactions are removed on consolidation.

 

Dividends paid to Directors during the year amounted to:                                          -                               280

 

			Transactions with key management personnel during the period:   Key management personnel are the Company's Board. Key management personnel remuneration includes the following expenses:
					Group 2023 £		Group 2022 £
		Short-term employee benefits			1,305,205		869,717
		Post-employment benefits			18,632		20,697
		Share-based payment (IFRS 2)			287,773		161,114
					1,611,610		1,051,528

 

 

 

 

 

Note 26

SHARE-BASED PAYMENT

 

At the beginning of 2021, the Company operated an enterprise management incentive share option scheme. During 2021, an LTIP was introduced.   The LTIP scheme provides for a grant price equal to the nominal value of the Company's shares on the date of grant. Options cannot be vested until three years after grant date and vesting is conditional upon the Group achieving a compound percentage growth of the Group average basic earnings per ordinary share, for the complete years commencing 1 January of the year of grant and ending with the year most immediately prior to the vesting of the option. The latest date for exercising options is ten years after grant date and vesting of options is subject to continued employment with the Group.

 

 

				2023 Options     No		2023 Weighted average price pence		2022 Options     No		2022 Weighted average price pence
		Outstanding at 1 January		2,289,797		31.14		1,467,205		47.29
		Granted		2,300,209		1.00		991,357		1.00
		Exercised		-		-		(5,000)		48.50
		Forfeited/Lapsed		(35,804)		1.00		(163,765)		70.20
		Outstanding at 31 December		4,554,202		16.15		2,289,797		31.14
		Weighted average share price at date of exercise		-		-		5,000		48.50
		Exercisable at 31 December 2023		Nil		-		Nil		-

 

 

Options outstanding at 31 December 2023 had exercise prices ranging from 1.0 pence to 101.50 pence and a weighted average remaining contractual life of 2.49 years (2022: 3.97 years).   The inputs to the Black-Scholes model for options granted over the period were as follows:

 

 

Grant date		23 Oct 2023		20 Nov 2023
Share price at grant date		£0.67		£0.71
Exercise price		£0.01		£0.01
Dividend yield		2.85%		2.85%
Risk-free interest rate		4.50%		4.17%
Volatility		36.00%		36.10%

 

                                 The share-based payment charge for 2023 was £430,854 (2022: £219,363).

 

 

 

Note 27

BUSINESS COMBINATIONS

 

Acquisition in 2023

Acquisition of Phillips Aerospace

During the year, on 6 September 2023, the Group acquired 100% of the voting shares of Phillips Aerospace Limited, a non-listed company based in the US and specialising in the development and manufacture of industrial products and associated services, in exchange for the Company's shares and cash. The Group acquired Phillips Aerospace Limited because its strategy was to use the Phillips business and diversify it into actual systems, offering it additionally to the Group's customer base, as well as gaining Phillips' customer relationships. These expansion, growth and export opportunities provide an established presence in North America.

Assets acquired and liabilities assumed

The fair values of the identifiable assets and liabilities of Phillips Aerospace Limited as at the date of acquisition were:

	At acquisition
	£
Tangible fixed assets	20,039
Trade and other receivables	251,984
Cash acquired	146,660
Current liabilities	(111,377)
Long-term liabilities	(1,007,336)
Net assets on acquisition	(700,030)
Separately identifiable intangible assets on acquisition	1,538,429
Goodwill on acquisition	1,269,443
Total investment in subsidiary	2,107,843
Initial consideration - cash	832,427
Share consideration	1,301,534
Escrow	(26,118)
Total investment in subsidiary	2,107,843

 

 

The deferred tax liability comprises the tax effect of the accelerated depreciation for tax purposes of tangible and intangible assets.

There was additional cash transferred as part of the acquisition of £667,347 to pay off outstanding loan balances within Phillips Aerospace.

Separately identifiable intangible assets comprise customer relationships £1,148,761 and licences £389,668.

The goodwill of £1,294,255 comprises the value of expected synergies arising from the acquisition, the assembled workforce and technological know-how, which is not separately recognised. 

From the date of acquisition, Phillips Aerospace Limited contributed £819,500 of revenue and £201,000 to profit before tax from continuing operations of the Group.

 

Phillips Aerospace revenue for the year was £1,584,587 and £36,680 profit before tax.

 

£195,881 of exceptional acquisition expenses were incurred as a direct result of the Group acquiring Phillips Aerospace.

 

The creation of a merger reserve of £1,283,457 is a result of acquiring Phillips Aerospace in accordance with s612 CA06. In total 1,807,686 shares were issued in relation to the acquisition.

 

Note 28

ULTIMATE CONTROLLING PARTY

 

The Directors have assessed that there is no ultimate controlling party.

 

 

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