Calnex shares fall back to earth amid ‘challenges’

Calnex CEO Tommy Cook

Shares of Linlithgow-based telecoms testing and measurement firm Calnex Solutions plc fell about 5% after it published an update on trading for the year to March 31, 2024, and outlook for FY25.

Calnex said its performance “has been affected by the well documented ongoing challenges in the telecoms sector.”

Calnex’s customers include BT, China Mobile, NTT, Ericsson, Nokia, Intel, Qualcomm, IBM and Meta.

Calnex went public at 48p per share in October 2020 and its shares soared as high as £1.95 in January 2023. However, the Linlithgow firm’s shares have since fallen to around 55p, reducing its stock market value to about £49 million.

“Calnex anticipates the results for FY24 will be broadly in line with market expectations, with revenues of approximately £16.3 million and margins maintained,” said the firm.

“The company’s cost base has been adjusted, maintaining and focusing R&D spend to capitalise on the opportunities available to Calnex whilst controlling other costs.

“The group’s balance sheet remains strong, with cash as at 31 March 2024 of £11.9 million after investment in working capital in H2.

“While the group’s performance has been affected by the well documented ongoing challenges in the telecoms sector, customer engagement levels have remained high, providing confidence that improvement in the telecoms market outlook will result in projects recommencing and customer spending resuming.

“Calnex is well placed to fulfil orders relating to these projects once activity levels increase.

“The board is encouraged by the level of positive engagement with customers on the group’s new product programmes and in particular expects that continued order growth from the defence and cloud computing sectors will enable Calnex to return to growth in FY25 …

“Management has focused the group’s engineering programmes on opportunities showing the most near-term resilience and potential within the group’s established telecoms market and in the newer markets of cloud computing and defence …

“Within the telecoms market, the engineering programme is focused on the area of 800Gb/s synchronisation testing, an unmet need where there is growing customer demand. The group anticipates a major new release in H2 FY25 to support leading edge 800Gb/s interface testing.

“Looking ahead, while the current challenges faced by the telecoms market are anticipated to continue throughout 2024, the board is confident the transition to 5G and further development of O-RAN will drive a long-term transformation of the global telecoms infrastructure and demand for our lab synchronisation products …

“Calnex’s newly marketed products focused on the cloud computing and data centre markets, SNE-X, SNE Ignite and NE-ONE, have seen encouraging levels of interest and initial orders.

“Over the medium term, the cloud computing market represents a significant additional opportunity for Calnex, given the investment into this market to support high growth in Artificial Intelligence (AI), virtual reality and increasing data centre demand. Measurement and testing is critical to performance in these areas.

“New opportunities are being assessed in network time monitoring, as well as data centre efficiency and effectiveness.

“The group has also experienced good order levels for its application assurance offering, NE-ONE, in the defence, government and satellite markets and anticipates this will continue in FY25.

“To maximise these opportunities, the company is optimising its market approach for its suite of cloud focused offerings, bringing together its cloud infrastructure and cloud application teams, with a view to developing a consistent additional revenue stream.”

Calnex CEO Tommy Cook said: “In the face of a challenging telecoms market we have successfully adjusted the focus of our engineering programmes towards the markets showing the most resilience and opportunity, with positive customer conversations taking place across each of our new product programmes.

“The cloud computing market in particular represents an increasingly exciting opportunity and with the long-term growth drivers in the telecoms market remaining intact, we are well placed to return to growth in FY25 and beyond.”