Concurrent Technologies shares up after 'step-change' in 2023

In January, Concurrent Technologies (CNC) released a trading update detailing “record financial performance” on the back of “significant design-in wins, new product releases and investment made in the Systems business”. A $1.57mn (£1.26mn) contract with a major global US contractor duly followed, capping a year in which cash profits increased to £6mn, from £2.1mn in 2022.

The Colchester-based business, a manufacturer and supplier of high-end computer boards and related technology, secured its first substantial systems contract in June 2023 with a FTSE 250 constituent within the defence sector. Capability in this segment of the business has been enhanced by the acquisition of Phillips Aerospace in September 2023. The defence sector accounts for 85 per cent of group sales, but management has been successfully working to reduce previous over-concentration in the customer base.

The group has been pursuing a more aggressive approach to growing the business, but expansion through M&A and organic channels comes at a cost. During 2023, the group headcount increased by 17.8 per cent, so salary-related costs increased by 43 per cent to £10.9mn. Nevertheless, the gross margin held firm and Concurrent Technologies exited 2023 with £11.1mn in net cash with another of £5.4mn of FY2023 revenue to be collected as cash in the first quarter of FY2024.

Problems linked to component availability have eased to a large extent, and it’s worth noting that sales growth has been achieved at a time when many IT customers have been delaying buying decisions following the pandemic-linked surge. The group’s strategic R&D investments amount to a “step-change”, according to group chief executive Miles Adcock. Receivables and trade liabilities certainly reflect the turnaround in sales volumes, so we will monitor the balance sheet to see how efficiently the group manages working capital during this expansionary phase. Hold.

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