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Interview with the CEO about the IPO process (45 meetings in 9 days and "significantly oversubscribed") - confirmation that COVID-19 had absolutely no effect on the business, and that CLX are benefiting from the boom in homeworking and telecoms in general.
Plus there's emphasis on acquisitions to come and making CLX "a lot bigger":
Https://www.ii.co.uk/analysis-commentary/floating-company-aim-calnex-solutions-plc-ii513716
Excellent new summary just out from the respected Private Punter - a couple of extracts in particular point to the value here at a £46m m/cap:
Https://martinflitton1.wixsite.com/privatepunter/post/catching-up-with-calnex-23-10
"These include Cisco, Nokia, Samsung and Verizon who are just a few of the many customers that have contributed to strong growth which delivered full year 2020 revenue numbers of £13.7m which in turn returned a notable pre-tax profit of £2.9m."
"The evidence to that end is clear to see, as revenues have moved from £8.4m in 2018, to £10.5m the following year to last years £13.7m. Adjusted EBITDA after development and amortisation costs has seen a movement from £1.3m in 2018, followed by £3.1m and £4.1m in the subsequent years, providing for a glimpse of the potential of future earnings as things scale up."
This is a very interesting article about why BGF became cornerstone investors in CLX in this month's IPO - particularly BGF's own comments at the foot of the article:
Https://www.privateequitywire.co.uk/2020/09/22/289945/bgf-become-cornerstone-investor-calnex-solutions
"BGF to become cornerstone investor in Calnex Solutions
Submitted
22/09/2020 - 4:13pm
BGF is investing in Calnex Solutions plc, an established provider of test and measurement solutions for the global telecommunications sector, as part of its proposed admission to trading on AIM.
Headquartered in Linlithgow and founded in 2006, Calnex designs and makes equipment that tests the performance of telecom network infrastructure for customers including BT, Ericsson, Nokia and Facebook. To date, Calnex has secured and delivered orders from over 600 customer sites in 68 countries across the world. The telecoms industry is currently experiencing unprecedented levels of change because of major trends including the migration of the mobile networks to 5G, the emergence of the Internet of Things and the shift to using cloud computing.
Calnex has a strong financial track record, delivering historical revenue CAGR since FY15 of approximately 16 per cent. The company is profitable and cash generative, with a record order backlog going into FY21 and a strong sales pipeline.
The funds raised through the IPO, along with the company’s existing cash resources, will allow Calnex to invest in business development and R&D resource, repay its existing debt facility and evaluate opportunities to acquire complementary technologies or businesses to accelerate the company’s growth.
Paddy Graham, head of BGF’s Edinburgh office, says: “This investment into Calnex illustrates the strength of BGF’s regional presence and breadth of offering, with our Scottish investors working closely alongside BGF’s Quoted team in London to support the proposed listing. We have built a relationship with Tommy and the management team over a number of years and have watched the significant progress they have made, particularly around international expansion, R&D and successful bolt on acquisitions. We are very much looking forward to partnering with the company and supporting its growth ambitions.”
Paul Stevens, a member of BGF’s Quoted team, says: “We are delighted to be a cornerstone investor in Calnex at such an exciting time for the company. Having first met the business a number of years ago, BGF has followed the exceptional progress achieved by an innovative and entrepreneurial management team. The proposed listing and admission to AIM is a significant milestone for the company as it enters the next phase of its growth journey.”
Interesting article which strongly suggests that the new (and much cheaper) Barclays facilities will soon be used for expansion via acquisitions:
Https://www.heraldscotland.com/business_hq/18805704.calnex-tops-flotation-proceeds-3m/
Extracts:
"Scotland’s newest listed company has bolstered its expansion firepower via a £3 million banking agreement to top up proceeds from its listing on the Alternative Investment Market (AIM) earlier this month.
Telecoms technology specialist Calnex Solutions has secured the revolving credit facility with Barclays on the heels of its oversubscribed placing in which it became the first Scottish company to achieve a London listing in more than two years."
“We are in an exciting period of growth and development for the business and we needed a banking partner supportive of our ambitions,” Mr Cook said.
“Like many technology-based sectors, the telecommunications industry is seeing fast-paced change and a wealth of innovation. Our deal with Barclays offers us flexible access to capital to take advantage of opportunities like acquisitions that will help us grow our market share.”
As well as the confident trading statement for this year, CLX also benefit from a tailwind, as they've paid off borrowings which were charging (from memory) 8%-11% with the IPO proceeds and arranged much cheaper loan facilities. This should substantially reduce last year's interest charges of around £340,000.
Plus CLX have generally had large non-cash amortisation charges, so as good value as CLX looks on the headline profit figures, the adjusted EPS figures excluding amortisation would look even better.
Calnex Solutions PLC floated on AIM at 48p per share on 5th October 2020 with a £42m m/cap from 87.5m shares, raising £6m to pay off borrowings and enable acquisitions plus £16.5m for existing shareholders.
CLX is highly profitable and has impressive repeat revenues:
year to 31/3/20 : £2.98m PBT, £2.29m PAT
year to 31/3/19 : £2.51m PBT, £2.14m PAT
year to 31/3/18 : £0.91m PBT, £0.75m PAT
Current trading is highly encouraging:
"Calnex’s strong financial performance in FY20 has continued into FY21. The Group ’s order book and sales pipeline have continued to grow since the year end and the Board is encouraged by the performance in the year to date . Whilst the Board recognises that the performance of the Group may yet be impacted by the ongoing COVID-19 pandemic, the Group’s operations have been largely unaffected by COVID-19 to date and the procedures implemented by management have enabled the employees of the Group to carry out their work remotely."
It's a long-established provider of test and measurement solutions for many of the world's leading Telecoms Network Operators, Equipment Vendors and Component Manufacturers, as well as with Hyperscale companies (operating large data centres) and Large Enterprises (operating their own networks):
"Calnex designs, produces and markets test instrumentation and solutions for network synchronization and network emulation, enabling its customers to validate the performance of the critical infrastructure associated with telecoms networks. To date, Calnex has secured and delivered orders to over 600 customer sites in 68 countries across the world. Customers include BT, China Mobile, NTT, Ericsson, Nokia, Intel, Qualcomm, IBM and Facebook.
Founded in 2006, Calnex is headquartered in Linlithgow, Scotland, with additional locations in Belfast, Northern Ireland and California in the US, supported by sales teams in China and India. Calnex has a global network of partners, providing a worldwide distribution capability."
Calnex benefits from high levels of repeat revenues, "with over 80 per cent. of its revenue over the last three years coming from repeat customers and an average length of engagement with its top ten customers in FY20 of nine years. The Company's top ten customers accounted for over 50 per cent. of revenues in FY20. In recent years the Company's top ten customers have included Non-Telecoms customers. In FY20, these Non-Telecoms customers represented 14 per cent. of the top ten customer revenue."
And 5G is beginning its global roll out....
"Calnex has a range of test and measurement solutions ready to meet the early requirements of 5G market participants. The Company is well placed to evolve its current products, alongside the introduction of new products, to meet its customers' future requirements as the roll out of 5G progresses."