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Calnex tumbles as slower growth hits global telecoms investment

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The company, which produces an array of technology for testing network equipment, said the current outlook is “challenging” as growth across the global telecoms market has slowed in the face of economic uncertainty. Equipment manufacturers have recently reported a general softening in demand for their products and services, leading some to take a “more cautious approach” to investment decisions.

Headed by founder and chief executive Tommy Cook, Calnex has to date weathered industry-wide shortages in the supply of semiconductors that are vital to its business.

It posted a double-digit increase in revenues and profits last year, and the current financial year (FY) that ends on March 31 will reflect another “strong performance”. Calnex said it has made good progress in the development of its data centre business while the the integration of iTrinegy – which was acquired last year in a £3.5 million deal – has opened up opportunities in the applications testing sector.

However, companies in what has been a booming telecoms sector are now feeling the impact of slower economic growth.

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“In response to the macro-environment, some of Calnex’s customers are currently taking a more cautious approach to investment decisions until there is better visibility on their project development timelines,” Calnex said. “Whilst these customers remain committed to the delivery of projects which will rely on Calnex’s test instrumentation and solutions, the timing of these orders is less certain and market-driven delays are likely to have an impact on the group’s performance in FY24.

“Based on short-term order run-rates, the board believes that the financial performance in FY24 will be below that achieved in FY23, with the company’s revenues more heavily weighted to [the second half] of FY24.”

Calnex stressed that as industry spending “normalises”, it expects to see an uplift in orders from current subdued levels. An update on prospects for the coming 12 months will be provided when Calnex posts its latest year-end results in May.

“We are pleased to anticipate delivering financial results for FY23 in line with market expectations, with this solid performance demonstrating the positive response from customers to our expanding product set and our ability to successfully navigate the supply chain challenges,” Mr Cook said.

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“While the global macro-environment is influencing order growth in the short-term, our expanded offering and strong financial footing mean we are well-placed to return to a growth trajectory once market confidence returns.”

Founded by Mr Cook in 2006, Calnex floated on the Alternative Investment Market in October 2020, becoming the first Scottish company to join the London exchange in more than two years. It raised an initial £22.5 million from an over-subscribed placing priced at 48p per share.

The company has many of the world’s leading players in the telecoms market on its client roster, such as BT, China Mobile and Facebook.

Last year’s deal to take over iTrinegy gave Calnex access to the expanding market for testing software applications in real-world network environments to verify their performance before they go live.

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Based in Stevenage, Hertfordshire, iTrinegy has customers spanning the technology, financial, gaming, military and government sectors. Clients include major names such as Juniper Networks, JPMorgan Chase, Ubisoft Games, Babcock Marine, and Vodafone.

During the year to March 2022, Calnex increased revenues by 23 per cent to £22m, with pre-tax profits up 18% at £6m. For the financial year that closes at the end of this month, it again expects to report double-digit growth across both revenue and profits.

Shares in Calnex closed yesterday’s trading 54p lower at 117p, a decline of 31.6% . They reached their highest-ever level of 194.5p in January of this year.

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