Concurrent Technologies Regulatory News (CNC)

This announcement contains inside information

23 April 2020

Concurrent Technologies Plc

Results for the year ended 31 December 2019

Concurrent Technologies Plc (AIM: CNC), a world leading specialist in the design and manufacture of high-end embedded computer boards for critical applications, announces results for the year to 31 December 2019.

Financial Highlights 

· Revenue for the year increased to £19.4m (2018: £16.6m)

· Gross profit was £10.2m (2018: £8.7m)

· Gross margin was 52.7% (2018: 52.2%)

· EBITDA increased by 10.9% to £5.1m (2018: £4.6m)

· Profit before Tax was £4.1m (2018: £3.0m) - including other, non-recurring income of £1.0m

· Profit after Tax increased to £4.0m (2018: £3.0)

· Dividend increased by 8.7% to 2.50 pence per share for the year (2018: 2.30 pence)

· Cash in the business increased to £10.5m (2018: £7.7m)

During the year the Group's longstanding Managing Director, Glen Fawcett, passed away after a brief illness. He is a sad loss for the Group and his energy, experience and quick wit will be missed by everyone at the Group.

The Commercial Director, Jane Annear, was appointed as Managing Director in May 2019.

Operational Highlights

· During 2019, the Group introduced several new high-performance embedded computer boards and accessory modules. These included products based on the 9th generation embedded Intel® Xeon® processor for use in VME, CompactPCI® and OpenVPX™ architectures.

· The Group also announced its first Artificial Intelligence board, primarily aimed at the military market.

· During 2019 the Group made two appointments to the Senior Management Team and made changes to the Company's organisational structure.

· The Group's UK manufacturing line was enhanced through the addition of an automatic optical inspection machine and a new surface mount machine providing additional production capacity and capability.

Post Balance Sheet Event

Over the last few weeks the world-wide situation caused by the outbreak of COVID-19 has deteriorated. The Group has been monitoring and following the guidelines relevant to the jurisdictions in which it operates. The greatest current short-term risk to the business is assessed as being the situation at its UK headquarters, in particular the Group's manufacturing operations which are based there. The Group invested early in additional stocks of components in order to meet the demands of a strong order book at the end of 2019. Currently manufacturing has not been interrupted and supply chains, in particular for items originating from Asia, appear generally secure although there are longer lead times for some items. 

The Group is a supplier to some of the world's major defence companies. We have received notification from a UK customer that as part of their supply chain we are directed by the UK Government to remain open to ensure that we are able to continue to supply products to key projects whilst at the same time respecting government guidelines to prevent the widespread transmission of the virus. We have received a similar notification from a major US account and provided we can maintain a mix of skills in the production group, management estimate that we could maintain operations with approximately one third of our production staff, albeit with reduced output.

The Directors have examined different potential scenarios using extreme assumptions including a significant period of delayed shipments, bad debts, and decreased sales. While the impact of COVID-19 cannot be entirely quantified, the Directors are confident that the risks to the Group are manageable to minimise any adverse future impact.

Michael Collins, Chairman of Concurrent Technologies Plc, commented:

"The new financial year of 2020 has started with a strong order book giving the Board confidence in the Group's continuing solid performance. There is uncertainty caused by the COVID-19 outbreak which may have some impact on the results of the Group in the second half of 2020. New and existing customers continue to require increasing levels of processing performance and additional product features including, in particular, increased security capabilities and encrypted storage. Our increasing capability to provide development systems and the release of our first product for Artificial Intelligence applications are attracting new opportunities.

The Group plans to maintain its policy of investing in R&D to expand the Group's current range of advanced technology products with a particular focus on the OpenVPX™ bus architecture. In addition to boards and associated software the Group will increase its range of development systems, using both its own products and complementary products from third party partners. These ready to use development systems enable customers to reduce their product development times by focussing on their own areas of expertise to develop specialised applications.

The Board sees many opportunities to grow the business organically into new market areas by widening our product ranges and further developing relationships with key hardware and software partners. We continue to look for worldwide acquisition opportunities which may present themselves in the present uncertain climate."

Annual General Meeting

Due to the COVID-19 crisis and social distancing requirements the date and arrangements for the AGM will be announced separately.

Enquiries:

Extracts from the Strategic Report

Review of Operations

The Group generated record Revenue for the year of £19.38m (2018: £16.62m). This converted into Gross Profit of £10.21m (2018: £8.67m) while the gross margin remained fairly constant at 52.7% (2018: 52.2%).

Profit before tax was £4.06m (2018: £2.97m) including other, non-recurring income of £1.0m (2018: £nil). Earnings per share increased to 5.51 pence (2018: 4.08 pence) while earnings per share on continuing activities, adjusted to remove the impact of Other Income, was 4.38 pence (2018: 4.08 pence). EBITDA (measured as Operating Profit plus Depreciation and Amortisation) for the Group in 2019 also increased to £5.07m (2018: £4.65m).

The Group continued its long-term commitment to R&D by investing £3.51m in 2019 (2018: £3.31m), of which £2.26m was capitalised (2018: £2.44m). As a consequence of the continual assessment of the Group's intangible assets, an impairment charge of £483,630 (2018: £303,030) was included during the year to reflect the cash generating expectations of itemised projects.

A further investment of £250,000 was made within manufacturing to install an Automatic Optical Inspection machine along with a second new surface mount production line. This new production line mirrors the installation made in 2018. It increases production capacity and introduces more flexibility into the production process to meet increasing demands from our customers.

The Group continues to have no borrowings and again paid increased dividends during the year. Its cash balances plus short to medium term cash deposits at the year-end were £10.49m (2018: £7.68m).

Operational Highlights 

During 2019, the Group introduced several new high-performance embedded computer boards and accessory modules. These included products based on the 9th generation embedded Intel® Xeon® processor for use in VME, CompactPCI® and OpenVPX™ architectures. The Group also announced its first Artificial Intelligence board, primarily aimed at the military market. As required by many applications, these new products offer support for enhanced security features and most are suitable for both commercial and harsh environments. In addition, support for additional partner software and hardware products and systems was announced to broaden the Group's product range. The Group's UK manufacturing line was enhanced through the addition of an automatic optical inspection machine and a new surface mount machine providing additional production capacity and capability.

Future Plans

The new financial year of 2020 has started with a strong order book giving the Board confidence in the Group's continuing solid performance. There is uncertainty caused by the COVID-19 outbreak which may have some impact on the results of the Group in the second half of 2020. New and existing customers continue to require increasing levels of processing performance and additional product features including, in particular, increased security capabilities and encrypted storage. Our increasing capability to provide development systems and the release of our first product for Artificial Intelligence applications are attracting new opportunities.

The Group plans to maintain its policy of investing in R&D to expand the Group's current range of advanced technology products with a particular focus on the OpenVPX™ bus architecture. In addition to boards and associated software the Group will increase its range of development systems, using both its own products and complementary products from third party partners. These ready to use development systems enable customers to reduce their product development times by focussing on their own areas of expertise to develop specialised applications.

The Board sees many opportunities to grow the business organically into new market areas by widening our product ranges and further developing relationships with key hardware and software partners. We continue to look for worldwide acquisition opportunities which may present themselves in the present uncertain climate.

Dividend

The Board has declared a second interim dividend of 1.45 pence per share (2018: 1.35 pence) which when added to the first interim dividend of 1.05 pence per share (2018: 0.95 pence) will make a total of 2.50 pence per share for the year (2018: 2.30 pence). This is an increase of 8.7% on dividends paid for 2018. The total cost of this second interim dividend amounts to £1,054,563. As in previous years, the Directors do not intend to recommend a final dividend.

Annual General Meeting

Due to the COVID-19 crisis and social distancing requirements the date and arrangements for the AGM will be announced separately.

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

Consolidated Statement of Comprehensive Income

Consolidated Balance Sheet

Consolidated Cash Flow Statement

Consolidated Statement of Changes in Equity

NOTES

1. The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the 'Group'). The financial information set out in these preliminary results has been prepared in accordance with International Financial Reporting Standards ('IFRSs') as adopted by European Union. The accounting policies, except for IFRS 16, adopted in this results announcement have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the statutory accounts for the period ended 31 December 2018. The Group applied IFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 January 2019. the impact on the Profit and loss account is £278,321.The consolidated financial information is presented in sterling (£), which is the Company's functional and the Group's presentation currency.

2. The financial information set out above does not constitute the Group's statutory accounts for the years ended 31 December 2019 or 2018, but is derived from those accounts. Statutory accounts for 2018 have been delivered to the Registrar of Companies and those for 2019 will be delivered following the Annual General Meeting. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not contain statements under section 498(2) or (3) of the Companies Act 2006 in respect of 2018 or 2019 and (iii) did not draw attention to any matters by way of emphasis.

3. The calculation of basic earnings per share is based on the weighted average number of Ordinary Shares in issue during 2019 of 72,724,271 (2018: 72,718,490) after adjustment for treasury shares on the profit after tax for 2019 of £4,007,999 (2018: £2,967,861). The calculation of diluted earnings per share incorporates 574,542 Ordinary Shares (2018: 2,457) in respect of performance related employee share options. The profit after tax is the same as for basic earnings per share.

4. Due to the COVID-19 crisis and social distancing requirements the date and arrangements for the AGM will be announced separately.

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, UK, and on the Company's website: www.gocct.com.