Interim Results

RNS Number : 2333M

Concurrent Technologies PLC

22 August 2013

 



22 August 2013

CONCURRENT TECHNOLOGIES PLC

Interim Results for the six months ended 30 June 2013

Concurrent Technologies Plc (the "Company"), a world leading specialist in the design and manufacture of high-end embedded computer products, for critical applications in the defence, aerospace, transportation, telecommunications, scientific and industrial markets, announces interim results for the six months to 30 June 2013.

Highlights:

·      Turnover £5.3m (H1 2012: £6.1m)

·      EBITDA £1.1m (H1 2012: £1.7m)

·      Profit before tax £0.4m (H1 2012: £1.0m)

·      Earnings per share for the period 0.66p (H1 2012: 1.46p)

·      Interim dividend 0.65p per share (H1 2012: 0.65p)

·      Net cash, including cash deposits £5.3m (H1 2012: £5.0m); no borrowings

Operational Highlights:

·      Introduction of 4th generation Intel^® Core™ i7 processor product

·      Continuing investment in R&D

·      Export licencing issues for products with encryption technology

Michael Collins, Chairman, commented:

"The impact of UK export licensing regulations on our financial performance remains difficult to assess at this time, but it will have a negative effect on the financial results for 2013. However, our order book for unaffected products is good and our cash position is strong. The Board is confident that the more flexible licensing system that we need from the UK Government will be introduced soon and that the diversity of the Company's product range and customer base will then continue to generate solid results."

Enquiries:

Concurrent Technologies Plc Glen Fawcett, Managing Director	[phone]
Newgate Threadneedle (Financial PR) Caroline Evans-Jones Robyn McConnachie	[phone]
Cenkos Securities plc (NOMAD) Ken Fleming  Neil McDonald	[phone] [phone]

CHAIRMAN'S STATEMENT

Financial Summary

In a challenging market environment, the Group delivered a profitable first half of the year while continuing to invest in the development of its expanding product ranges. Turnover for the period was £5,319,772 (H1 2012: £6,067,169), reflecting the continued tough global economic conditions as well as delays associated with the previously announced export licensing issues.

EBITDA for the six months to 30 June 2013 was £1,110,784 (H1 2012: £1,714,687). The Group achieved a profit before tax for the period of £370,528 (H1 2012: £1,038,605) which includes the amortisation of capitalised R&D expenditure. The associated earnings per share were 0.66p (H1 2012: 1.46p).

We continue to exert strong financial controls within the business and our cash balances (including cash deposits) at 30 June 2013 were £5,331,742 (H1 2012: £4,990,026), having grown by approximately £1m since 31 December 2012 when the cash balances were £4,316,928. This improvement has been achieved despite another increased dividend payment and continued R&D expenditure at the same levels as the first half of 2012.

Review of Operations

During the first half of this financial year, we announced our first processor board based on the quad-core 4th generation Intel^® Core™ i7 processor, providing further enhanced graphics and compute intensive performance, particularly appropriate for image processing applications. We have also continued to develop our AMC computer boards combined with a Serial RapidIO^® interface. These processor boards are particularly well suited for MicroTCA™ based telecommunications applications such as IPTV, digital media servers, media gateways, broadband, Long Term Evolution (LTE) or LTE-Advanced, wireless base stations as well as in test systems for wireline and wireless networks.

Our sales performance during the first half of 2013 was close to budget although exports, which were slightly lower than expected, have remained at a similar level to last year at 72.3% (H1 2012: 72.1%) of total sales revenue. However, some of the advanced components used in our products now incorporate encryption technologies, and the necessary inclusion of these vital components has resulted in unexpected exporting issues. In emerging markets, where we have been anticipating increased sales growth, we have recently encountered a number of problems in satisfying customer demand due to the application of UK Government Export Control Regulations. These exporting issues have been raised with the Secretary of State for Business, Innovation and Skills (BIS) and the Company is now working closely with BIS officials who are reviewing the current system of control to determine whether the affected products may be moved to a more flexible export licensing system such as that which exists in the USA. We will continue to keep shareholders updated on progress with this matter.

In light of the export licensing issues and the associated concerns of our customers in the emerging markets, the Board has reviewed the internal sales projections that underpin the amount of R&D we capitalise. As a consequence of the expected reduction in projected orders and new business opportunities from these customers, the Board has determined that the value of certain designs will be written down by a total of approximately £1.3m; the exact amount will be finalised at year end and incorporated into the results for the full year ending 31 December 2013.

Future Plans

The export licensing issues will continue to have a negative impact on our financial performance for the remainder of this year. BIS expects to be able to report on the review of its export licensing system in October 2013. We will continue to work closely with them and are confident that these problems will be resolved.

We strongly believe that continuing to expand our range of products is essential to our future success and we will maintain our investment in our engineering design teams in the UK and India. Our strategy is to focus on developing products for the VPX™, VME, AMC and CompactPCI^® bus architectures in complex, high technology, low to medium volume and high margin applications, together with versions for use in harsh environments. The development of new and complementary software and middleware packages will further enhance the capabilities of these products.

Dividend

The Board has declared a first interim dividend that will be maintained at the same level as that for last year, 0.65p per share (H1 2012: 0.65p). The total cost of this dividend will amount to £464,363. The ex-dividend date for the interim dividend is 11 September 2013, the record date is 13 September 2013 and the payment date is 27 September 2013.

Outlook

The impact of UK export licensing regulations on our financial performance remains difficult to assess at this time, but it will have a negative effect on the financial results for 2013. However, our order book for unaffected products is good and our cash position is strong. The Board is confident that the more flexible licensing system that we need from the UK Government will be introduced soon and that the diversity of the Company's product range and customer base will then continue to generate solid results.

Michael Collins

Chairman

21 August 2013

All companies and product names are trademarks of their respective organisations.

CONDENSED CONSOLIDATED STATEMENT OF

COMPREHENSIVE INCOME

unaudited interim results to 30 June 2013

	Note	Six months ended 30/06/13		Six months ended 30/06/12		Year ended 31/12/12
		£		£		£
CONTINUING OPERATIONS
Revenue		5,319,772		6,067,169		12,794,380
Cost of sales		2,611,202		2,791,051		6,183,357
Gross profit		2,708,570		3,276,118		6,611,023
Net operating expenses		2,369,420		2,264,497		4,666,346
Group operating profit		339,150		1,011,621		1,944,677
Finance income		31,378		26,984		56,727
Profit before tax		370,528		1,038,605		2,001,404
Tax		(102,822)		(7,546)		34,749
Profit for the period		473,350		1,046,151		1,966,655
Other Comprehensive Income
Exchange differences on translating foreign operations		127,433		(55,332)		(131,051)
Tax relating to components of other comprehensive income		-		-		-
Other Comprehensive Income for the period, net of tax		127,433		(55,332)		(131,051)
Total Comprehensive Income for the period		600,783		990,819		1,835,604
Profit for the period attributable to:
Equity holders of the parent		473,350		1,046,151		1,966,655
Total Comprehensive Income attributable to:
Equity holders of the parent		600,783		990,819		1,835,604
Earnings per share
Basic earnings per share	4	0.66p		1.46p		2.75p
Diluted earnings per share	4	0.66p		1.45p		2.73p

CONDENSED CONSOLIDATED BALANCE SHEET

unaudited interim results to 30 June 2013

		As at		As at		As at
		30/06/13		30/06/12		31/12/12
ASSETS		£		£		£
Non-current assets
Property, plant and equipment		393,125		430,438		437,851
Intangible assets		6,262,359		5,810,405		5,948,660
Deferred tax assets		190,303		158,251		188,323
Other financial assets		1,000,000		1,000,000		1,000,000
		7,845,787		7,399,094		7,574,834
Current assets
Inventories		2,828,830		3,212,019		2,967,690
Trade and other receivables		2,092,746		2,504,371		3,274,665
Current tax assets		186,933		148,350		123,696
Other financial assets		1,000,000		1,000,000		1,000,000
Cash and cash equivalents		3,331,742		2,990,026		2,316,928
		9,440,251		9,854,766		9,682,979
Total assets		17,286,038		17,253,860		17,257,813
LIABILITIES
Non-current liabilities
Deferred tax liabilities		1,315,342		1,373,669		1,404,686
Long term provisions		-		42,726		-
		1,315,342		1,416,395		1,404,686
Current liabilities
Trade and other payables		1,751,526		1,932,911		1,511,755
Short term provisions		39,746		41,956		39,746
Current tax liabilities		26,196		1,346		-
		1,817,468		1,976,213		1,551,501
Total liabilities		3,132,810		3,392,608		2,956,187
Net assets		14,153,228		13,861,252		14,301,626
EQUITY
Capital and reserves
Share capital		727,000		727,000		727,000
Share premium account		3,405,817		3,405,817		3,405,817
Capital redemption reserve		256,976		256,976		256,976
Cumulative translation reserve		177,254		125,540		49,821
Profit and loss account		9,586,181		9,345,919		9,862,012
Equity attributable to equity holders of the parent		14,153,228		13,861,252		14,301,626
Total equity		14,153,228		13,861,252		14,301,626

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

unaudited interim results to 30 June 2013

		Six months ended 30/06/13		Six months ended 30/06/12		Year ended 31/12/12
		£		£		£
Cash flows from operating activities
Profit before tax for the period		370,528		1,038,605		2,001,404
Adjustments for:
Finance income		(31,378)		(26,984)		(56,727)
Depreciation		84,320		101,564		206,286
Amortisation		687,446		601,502		1,328,131
Impairment loss		-		-		236,733
Loss on disposal of property, plant and equipment		-		4,789		5,714
Share-based payment		5,553		6,259		11,941
Exchange differences		69,188		(49,790)		(45,511)
(Increase) in inventories		138,860		(585,359)		(341,030)
(Increase)/decrease in trade and other receivables		1,181,919		(113,994)		(884,288)
Increase/(decrease) in trade and other payables		239,771		236,032		(230,060)
Cash generated from operations		2,746,207		1,212,624		2,232,593
Tax received/(paid)		(30,154)		(14,443)		19,622
Net cash generated from operating activities		2,716,053		1,198,181		2,252,215
Cash flows from investing activities
Interest received		31,378		26,984		56,727
Purchases of property, plant and equipment		(40,676)		(65,353)		(181,263)
Purchases of intangible assets		(1,001,051)		(1,034,167)		(2,136,090)
Net cash used in investing activities		(1,010,349)		(1,072,536)		(2,260,626)
Cash flows from financing activities
Equity dividends paid		(750,123)		(714,755)		(1,179,051)
Sale/(Purchase) of treasury shares		-		(19,134)		(17,038)
Net cash used in financing activities		(750,123)		(733,889)		(1,196,089)
Effects of exchange rate changes on cash and cash equivalents		59,233		4,139		(72,703)
Net increase/(decrease) in cash		1,014,814		(604,105)		(1,277,203)
Cash at beginning of period		2,316,928		3,594,131		3,594,131
Cash at the end of the period		3,331,742		2,990,026		2,316,928

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

unaudited interim results to 30 June 2013

	Share capital	Share Premium	Capital redemption reserve	Cumulative translation reserve	Profit and loss account	Total equity
	£	£	£	£	£	£
Balance at 1 January 2012	727,000	3,405,817	256,976	180,872	9,052,951	13,623,616
Profit for the period	-	-	-	-	1,046,151	1,046,151
Exchange differences on translating foreign operations	-	-	-	(55,332)	-	(55,332)
Total recognised comprehensive income for the period	-	-	-	(55,332)	1,046,151	990,819
Share-based payment	-	-	-	-	6,259	6,259
Deferred tax on share based payment	-	-	-	-	(25,553)	(25,553)
Dividends paid	-	-	-	-	(714,755)	(714,755)
Sale of treasury shares	-	-	-	-	(19,134)	(19,134)
Balance at 30 June 2012	727,000	3,405,817	256,976	125,540	9,345,919	13,861,252
Profit for the period	-	-	-	-	920,504	920,504
Exchange differences on translating foreign operations	-	-	-	(75,719)	-	(75,719)
Total recognised comprehensive income for the period	-	-	-	(75,719)	920,504	844,785
Share-based payment	-	-	-	-	5,682	5,682
Deferred tax on share based payment	-	-	-	-	52,107	52,107
Dividends paid	-	-	-	-	(464,296)	(464,296)
Sale of  treasury shares	-	-	-	-	2,096	2,096
Balance at 31 December 2012	727,000	3,405,817	256,976	49,821	9,862,012	14,301,626
Profit for the period	-	-	-	-	473,350	473,350
Exchange differences on translating foreign operations	-	-	-	127,433	-	127,433
Total recognised comprehensive income for the period	-	-	-	127,433	473,350	600,783
Share-based payment	-	-	-	-	5,553	5,553
Deferred tax on share based payment	-	-	-	-	(4,611)	(4,611)
Dividends paid	-	-	-	-	(750,123)	(750,123)
Purchase of  treasury shares	-	-	-	-	-	-
Balance at 30 June 2013	727,000	3,405,817	256,976	177,254	9,586,181	14,153,228

NOTES TO THE INTERIM REPORT

1.	General information
	The principal activity of Concurrent Technologies Plc and its subsidiaries ("the Group") is the design, development, manufacture and marketing of single board computers for system integrators and original equipment manufacturers. Concurrent Technologies Plc ("the Company") is the Group's ultimate parent company.  It is incorporated and domiciled in Great Britain. Concurrent Technologies Plc shares are listed on the Alternative Investment Market of the London Stock Exchange. The Group's condensed consolidated interim financial statements are presented in pounds sterling (£), which is also the functional currency of the parent company. These condensed consolidated interim financial statements, which are unaudited, have been approved for issue by the Board of Directors on 21 August 2013. The information relating to the six months ended 30 June 2013 and 30 June 2012 is unaudited and does not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006. The statutory accounts for the year ended 31 December 2012, prepared under adopted IFRS (International Financial Reporting Standards), have been reported on by the Group's auditors and delivered to the Registrar of Companies. The auditors' report in accordance with Chapter 3 of Part 16 of the Companies Act 2006 in relation to those accounts was unqualified.
2.	Summary of significant accounting policies
2.1	Basis of preparation
	These condensed consolidated interim financial statements are for the six months ended 30 June 2013. They have been prepared in accordance with IAS 34 "Interim Financial Reporting". They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2012, which have been prepared in accordance with IFRSs. The accounting policies applied and methods of computation are consistent with those of the annual financial statements for the year ended 31 December 2012, as described in those financial statements. The accounting policies have been consistently applied to all the periods presented. There are no new IFRSs or IFRIC interpretations that are effective for the first time for the financial period beginning on or after 1 January 2013 that would be expected to have a material impact on the results or financial position of the Group.
2.2	Taxation
	Current tax expense is recognised in these condensed consolidated interim financial statements based on estimated effective tax rates for the full year.
3.	Segmental reporting
	The Directors consider that the Group is engaged in a single segment of business, being design, manufacture and supply of high-end embedded computer products, and that therefore the Company has only a single operating segment. The key measure of performance used by the Board to assess the Group's performance is the Group's profit before tax, as calculated under IFRS, and therefore no reconciliation is required between the measure of profit or loss used by the Board and that contained in the condensed consolidated interim financial statements.
4.	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 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, share options. The inputs to the earnings per share calculation are shown below:
			Six months ended 30/06/13		Six months ended 30/06/12		Year ended 31/12/12
			£		£		£
	Profit attributable to ordinary equity holders		473,350		1,046,151		1,966,655
			Six months ended 30/06/13		Six months ended 30/06/12		Year ended 31/12/12
			No		No		No
	Weighted average number of ordinary shares for basic earnings per share		71,440,490		71,469,006		71,451,883
	Adjustment for share options		653,499		539,623		534,454
	Weighted average number of ordinary shares for diluted earnings per share		72,093,989		72,008,629		71,986,337
5.	Events occurring after the balance sheet date
	A gradually increasing number of our customers in emerging markets have recently indicated their frustration with the application of UK Government Export Control Regulations to those products that contain encryption technology. The Company has raised the matter with the Government and is now working closely with the Department for Business, Innovation and Skills who are reviewing the system of control to determine whether the affected products may be moved to a more flexible export licencing system. However, this will take some time to resolve and future sales of some products are likely to be affected. The Board have therefore reviewed the sales projections that underpin the capitalisation of the R&D part of the Company's intangible assets and have determined that the value of certain designs will need to be written-down as a consequence of the expected reduction in orders from these customers. The value of this impairment is estimated to be around £1.3m. As a non-adjusting event, as per IAS 10, this impairment has not been included in these 2013 interim financial statements.
6.	Copies of this report will be sent to shareholders and are available at the Company's Registered Office.

 

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