Last checked at 26 Mar 2008 07:00
CONCURRENT TECHNOLOGIES PLC
Preliminary results for the year ended 31 December 2007
Concurrent Technologies Plc, ("Concurrent", "Company" or "Group") which manufactures high-end embedded computer products for critical applications in the defence, transportation, communications and industrial markets, announces preliminary results for the year to 31 December 2007.
Financial Highlights
* Profit before tax of ‚£2,433,000 (2006: ‚£2,295,000) * 91% increase in H2 profit before tax to ‚£1,598,000 (H1 2007: ‚£835,000) * Gross margins for the year strengthened to 49.4% up from 46.6% * End of year cash and cash equivalents of ‚£4.80m (2006 - ‚£4.81m) and no borrowings * Earnings per share for the period were increased to 2.62p (2006: 2.42p) * Proposed Final Dividend: 0.8p per share making 1.2p for the year (2006: 1.0p)
Operational Highlights
* Successful transition of existing and new clients to RoHS compliant products, as well as new dual-core processor boards * Launched 15 new products, the result of increased focus on development and design innovation * Sales demands have increased, most notably in India and the USA, resulting in new sales channels being established * Plans to open an engineering design facility in Bangalore, India to tap into regional talent as well as capitalise on sales opportunities * Expenditure on development has enabled the Group to continue to grow and attract new customers
Michael Collins, Chairman, commented:
"The number of sales opportunities we have been following up recently has been higher than ever and this has been putting pressure on our engineering team for some time. Our top priority has become the swift expansion of our engineering capability. We have been investing substantially more in development in the last 2 years and we are budgeting for a further significant increase in 2008. We are very enthusiastic about the prospects for our new activities in India and intend to press ahead as fast as we can to build a significant design capability there during 2008."
"In recent months, the number of sales requests emanating from India has increased and so the Group has established a sales channel in the sub-continent. In the coming months, a further sales channel will be established there to address the defence and telecommunications markets in particular. Sales opportunities in the USA have also increased. In 2008 so far we have not seen any lessening of customer interest in our products due to the economic downturn affecting many parts of the developed world. We believe this to be because our primary focus now is telecommunications and defence where our experience indicates that demand for innovation continues to be high."
"We have announced some important new product launches this year already and we expect that the release of even more new products based on the latest multi-core Intel‚® processors should ensure that we are in an excellent position to take advantage of these sales opportunities."
26 March 2008Enquiries:Concurrent Technologies Plc 01206 752 626 Glen Fawcett, Managing Director Nexus Financial Ltd 020 7451 7050 Nicholas Nelson/Kathy Boate Nominated Adviser Brewin Dolphin Investment Banking 0845 213 1120 Alan Stewart CONCURRENT TECHNOLOGIES PLCCHAIRMAN'S STATEMENTFinancial Summary
I am pleased to report a profit before tax for 2007, calculated after capitalisation of certain development costs incurred in 2007, of ‚£2,432,973. In earlier reports I have advised you that the introduction of environmental regulations (Restriction on the use of Hazardous Substances "RoHS" Regulations) requiring us to remove lead from our products had caused some customers to advance product purchases into 2006, which would normally have arisen in 2007. These customers were making "last time buy" purchases of products containing leaded components. Consequently, turnover and profits for the first half of 2007 were both lower than they would have been but for this exceptional event. We saw a very good recovery in the second half of 2007 as customers who had waited for our unleaded products resumed ordering. In many cases customers were also waiting to purchase our new dual-core processor based products rather than their single-core predecessors. Profit before tax in the second half of the year was ‚£1,597,775 which was an increase of 91% when compared to the first half of 2007 (H1 2007: ‚£835,198). Sales in the second half of 2007 improved, with turnover at ‚£5.81m compared with ‚£4.76m in the first half.
Gross margins for the year strengthened again to 49.4% up from 46.6% last year.
We ended the year with cash and cash equivalents of ‚£4.80m (2006 - ‚£4.81m) and no borrowings, while our earnings per share for the period were increased to 2.62p (2006: 2.42p).
In preparing the figures for 2007 we have made the transition from UK GAAP to IFRS (International Financial Reporting Standards).
Business Summary
Concurrent Technologies designs, builds and supplies high-end embedded computer products for the defence, telecommunication, aerospace, transportation, scientific and industrial markets. Our range of products includes central processing unit ("CPU") boards, computer inter-connections and computer systems. These computer products are integrated into a variety of applications which require very high levels of processing power and great degrees of reliability. Typical applications include military systems, communications, networking, industrial automation and scientific research.
The Group's product range, which is mainly based on long life-cycle components produced by Intel‚®, includes single and dual processor boards, many of which are using dual-core processors. Components requiring a low level of electrical power are now common in our products. Designed for the CompactPCI‚®, VME, AMC (Advanced Mezzanine Card) and Multibus II open architecture standards, the majority of the products are for use in standard operating conditions with some extended temperature range and ruggedized versions for use in more extreme environments.
In addition to hardware design capability, our engineering teams undertake a significant amount of software and firmware development to provide interoperability between products, allowing customers to smoothly transition when new updates or designs are available. They also generate software for both on-board and production test purposes, while also providing support for leading embedded and real-time operating systems.
Review of 2007 Operations
During the first half of 2007 the Group focussed on the introduction of new products, in particular transitioning existing customers to our latest ranges of RoHS compliant boards. By the second half of 2007 this process was largely complete. We are continuing to market these products world-wide, primarily targeting the defence and telecommunication industries, and the take-up from both existing and new customers is extremely positive.
The Group's focus on innovation and design has resulted in numerous new products incorporating significant technological developments, ensuring that this period became one of the most productive in our history. In addition to our new processor boards, we have now introduced boards which use multi-channel switches operating at gigabit data transfer rates that can be used in high-speed switched fabric VME and CompactPCI‚® systems.
In 2007 we released 15 new products, including several ranges of boards designed according to the 3U CompactPCI‚® standard. 3U CompactPCI‚® products are smaller than our traditional 6U CompactPCI‚® products and are becoming widely used in applications within industrial control, transportation and more recently in defence. In addition, we released a new family of single slot VME single board computers and a number of AMC boards, as well as several high performance 6U CompactPCI‚® boards.
All these products support the Intel‚® Core¢â€ž¢ 2 Duo range of processors. These processors enable the Group to offer products which provide enhanced processing capabilities without a significant increase in power consumption - an important attribute for the end users. Low power consumption also leads to higher reliability, which is a characteristic demanded by users of embedded computer products.
A new range of extended temperature capability boards was launched in July 2007. Following this in October 2007 the TP 402/351-RC (a 3U CompactPCI‚® board especially designed for use in rugged environments) was launched - it can be used in a wide range of temperatures and altitudes, and is able to sustain high levels of shock and vibration. We believe that this will be well suited for a number of defence, telecommunications, security, telemetry, aerospace and scientific applications.
Last year also saw the introduction of an additional product that featured two dual-core Intel‚® Xeon‚® processors on a single standard format CompactPCI‚® board. The board is ideal for intensive processing applications where the four processor cores can access up to 8 Gbytes of onboard memory. These computers are ideally suited to intensive input/output or data applications as they offer high performance data processing combined with superior I/O flexibility.
We have also expanded our offering of products suitable for the commercial and defence markets with the release of a dual video/graphics PCI Mezzanine Card which supports a variety of Digital Flat Panel and CRT devices in single or dual display configurations. This product can be used to expand the capabilities of many of our own processor boards and those of third parties.
The Group's standing within the marketplace was further enhanced during 2007 by an independent global market analysis research report. The Group was awarded a top vendor rating based on user feedback, which placed it within the top 5% of embedded board vendors. This was particularly encouraging as this was a positive reflection of our service, products and support as seen through the eyes of embedded board consumers, and helped provide recognition within the sector.
In February 2008 we announced support for the QNX‚® Neutrino‚® real time software Operating System on our range of hardware. This Operating System has built in multi-processing capabilities to harness the power of the latest multi-core processors. We believe supporting this Operating System will enable us to address new market opportunities as we will be able to tap into additional applications.
Since I reported to you last year we have identified many new customers and have seen our products incorporated and designed into a number of new development programmes, particularly within the defence market. Most of these programmes have yet to enter the production stage, but we are confident that many of these will generate continual business for the next several years.
Future Plans
As stated in March 2007, with the Group's strong financial base and market positioning, we maintain a proactive policy of exploring value enhancing acquisition opportunities as they arise. We have looked at a number of such opportunities in the last year but none of these has proceeded to a conclusion. We remain committed to dynamic growth and will place more emphasis on organic growth in the coming year, whilst continuing our search for value enhancing acquisitions.
We continue with our policy of recruiting talented design engineers in the UK, but consider it important to explore other geographical areas in our continual search for staff resource. In this regard, the decision was made to open an engineering design facility in Bangalore, India, which enjoys a concentration of high technology design skills suited to our needs. We established a subsidiary company in India in January 2008 and expect to have a facility set up in April 2008. Early indications are that we will have direct access to a large pool of talent, which will supplement the main engineering operations in the UK. Shareholders should expect us to be moving quickly to make India another product development centre although we currently have no plans to manufacture there.
It is key to the future success of the business that we continue to expand our range of products targeted primarily at the CompactPCI‚® bus architecture, including the newer smaller sized 3U version, together with the VME and AMC architectures. We will continue to design products for complex, high technology, low to medium volume and high margin applications, and in an increasing number of cases these products will also be targeted for use in harsh environments.
The Company has used its authority to buy back its own shares and the Directors will continue to do this when they consider it appropriate.
Dividend
The Board will recommend a final dividend of 0.80 pence per share (2006: 0.65 pence) which when added to the interim dividend of 0.40 pence per share will make a total of 1.20 pence per share for the year. The total cost of this final dividend will amount to ‚£574,000. The ex-dividend date for the final dividend is 28 May 2008, the record date is 30 May 2008 and the payment date is 13 June 2008.
Change of Auditors
Following a recommendation from the Audit Committee, the Board decided during 2007 to change the auditors and accordingly Baker Tilly UK Group LLP resigned their position and Grant Thornton UK LLP was appointed. Grant Thornton UK LLP has completed the audit of the Report and Accounts for the year ended 31 December 2007. Shareholders will be invited to confirm the appointment at this year's Annual General Meeting.
Move to International Financial Reporting Standards
The Report and Accounts for 2007 is the first set produced fully in accordance with IFRS in succession to UK GAAP. The date of transition was 1 January 2006. The comparative figures in respect of 2006 appearing in the 2007 Report and Accounts are restated to reflect changes in accounting policies as a result of adoption of IFRS. The major change in policy has been that some development costs which were previously expensed are now capitalised as intangible fixed assets if it is probable that the project concerned will be a commercial success and technically feasible and the costs can be reliably determined. The intangible assets so created will be amortised over the estimated product life, generally expected to be 5 years. There will be regular impairment reviews.
Outlook
The number of sales opportunities we have been following up recently has been higher than ever and this has been putting pressure on our engineering team for some time. Our top priority has become the swift expansion of our engineering capability. We have been investing substantially more in development in the last 2 years and we are budgeting for a further significant increase in 2008. We are very enthusiastic about the prospects for our new activities in India and intend to press ahead as fast as we can to build a significant design capability there during 2008.
In recent months, the number of sales requests emanating from India has increased and so the Group has established a sales channel in the sub-continent. In the coming months, a further sales channel will be established there to address the defence and telecommunications markets in particular. Sales opportunities in the USA have also increased. In 2008 so far we have not seen any lessening of customer interest in our products due to the economic downturn affecting many parts of the developed world. We believe this to be because our primary focus now is telecommunications and defence where our experience indicates that demand for innovation continues to be high.
We have announced some important new product launches this year already and we expect that the release of even more new products based on the latest multi-core Intel‚® processors should ensure that we are in an excellent position to take advantage of these sales opportunities.
Corporate Governance
As an AIM listed company Concurrent Technologies Plc is not obliged to comply with the Combined Code on Corporate Governance. We do however acknowledge the overall importance of the guidelines and apply as many of the principles therein as are appropriate to a company of our size and nature.
Annual General Meeting
The Annual General Meeting this year will be held on 22 May 2008.
Michael CollinsChairman26 March 2008
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Consolidated Income Statement
Year to Year to 31 December 31 December 2007 2006 CONTINUING OPERATIONS ‚£ ‚£ Revenue 10,565,278 12,507,280 Cost of sales 5,346,961 6,683,124 Gross profit 5,218,317 5,824,156 Net operating expenses 2,986,864 3,716,999 Group operating profit 2,231,453 2,107,157 Finance income 201,520 187,501 Profit before tax 2,432,973 2,294,658 Tax 541,919 539,515 Profit for the period 1,891,054 1,755,143 Basic earnings per share 2.62p 2.42p Diluted earnings per share 2.60p 2.41pConsolidated Balance Sheet 31 December 31 December 2007 2006 ‚£ ‚£ ASSETS Non-current assets Property, plant and equipment 468,074 467,244 Intangible assets 1,209,480 131,289 Deferred tax assets 89,698 119,706 1,767,252 718,239 Current assets Inventories 1,097,133 1,279,465 Trade and other receivables 2,104,733 2,047,454 Cash and cash equivalents 4,797,233 4,813,022 7,999,099 8,139,941 Total assets 9,766,351 8,858,180 LIABILITIES Non-current liabilities Deferred tax liabilities 331,371 - Long term provisions 26,243 32,889 357,614 32,889 Current liabilities Trade and other payables 1,516,090 1,628,905 Short term provisions 34,390 27,236 Current tax liabilities 103,957 299,029 1,654,437 1,955,170 Total liabilities 2,012,051 1,988,059 Net assets 7,754,300 6,870,121 EQUITY Capital and reserves Share capital 727,000 727,000 Share premium account 3,405,817 3,405,817 Capital redemption reserve 256,976 256,976 Cumulative translation reserve (182,972) (165,969) Profit and loss account 3,547,479 2,646,297 Equity attributable to equity 7,754,300 6,870,121holders of the parent Total equity 7,754,300 6,870,121
Consolidated Cash Flow Statement
Year to Year to 31 December 31 December 2007 2006 ‚£ ‚£ Cash flows from operating activities Profit for the period 1,891,054 1,755,143 Adjustments for: Finance income (201,520) (187,501) Tax 541,919 539,515 Depreciation 123,508 143,546 Amortisation 64,443 33,302 P/(L) on disposal of property, plant and - 1,331equipment (PPE) Share-based payments 15,597 29,311 Exchange differences (16,909) (160,310) Decrease in inventories 182,332 222,089
Increase in trade and other receivables (57,279) (354,163)
(Decrease)/increase in trade and other (112,307) 48,803 payables
Cash generated from operations 2,430,838 2,071,066 Tax paid (407,426) (429,903) Net cash generated from operating 2,023,412 1,641,163activities Cash flows from investing activities Interest received 201,520 187,501 Purchases of property, plant and (124,376) (180,334)equipment (PPE) Purchases of intangible assets (101,005) (55,341) Proceeds from sale of PPE - 587 Payment in respect of development costs (1,041,685) -
Net cash used in investing activities (1,065,546) (47,587)
Cash flows from financing activities Equity dividends paid (758,091) (617,950) Purchase of treasury shares (215,564) (140,743)
Net cash used in financing activities (973,655) (758,693)
Net increase/(decrease) in cash (15,789) 834,883 Cash at beginning of period 4,813,022 3,978,139 Cash at the end of the period 4,797,233 4,813,022
NOTES
1. The financial information set out above does not constitute the Group's
statutory accounts for the years ended 31 December 2007 or 2006, but is derived from those accounts. Statutory accounts for 2006 have been delivered to the Registrar of Companies and those for 2007 will be delivered following the Annual General Meeting. The auditors have reported on those accounts; their reports were unmodified and did not contain a statement under s237(2) or (3) Companies Act 1985.
2. Transition to IFRS: The Group's transition date for IFRS is 1 January 2006.
The consolidated results for the year ended 31 December 2006 have been restated following the transition. The effect of this restatement has been to reduce reported profit by ‚£6,066 in the year ended 31 December 2006 and to increase the profit and loss account in equity at 1 January 2006 by ‚£ 6,550 due to the treatment of deferred tax on share-based payments under IAS 12 as compared to FRS 19.
3. The calculation of basic earnings per share is based on the weighted
average number of Ordinary Shares in issue during 2007 of 72,193,691 (2006: 72,657,889) allowing for an adjustment made as a consequence of the Company having purchased at various times during the year 596,000 (2006: 390,000) Ordinary Shares and on the profit after tax for 2007 of ‚£1,891,054 (2006: ‚£ 1,755,143). The calculation of diluted earnings per share incorporates 623,064 Ordinary Shares (2006: 250,083) in respect of performance related employee share options. The profit after tax is the same as for basic earnings per share.
Copies of the Annual Report will be sent to Shareholders and will also be available from the Company's Registered Office: 4, Gilberd Court, Newcomen Way, Colchester, Essex CO4 9WN.
CONCURRENT TECHNOLOGIES PLC