Final Results

20 May 2025

Calnex Solutions plc

("Calnex", the "Company" or the "Group")

Final Results

Calnex Solutions plc (AIM: CLX), a leading provider of test and measurement solutions for the global telecommunications and cloud computing markets, announces its Final Results for the year ended 31 March 2025 ("FY25" or the "Year").

Highlights 

1 Refer to note 32 for explanation of the alternative performance measures calculations. A full reconciliation between Underlying EBITDA and profit before tax is also shown in the Financial Review below.

Financial Highlights

Operational Highlights

Outlook

Tommy Cook, Chief Executive Officer and founder of Calnex, said:

"We have made strong progress this year across key sectors, despite the ongoing challenging telecoms market. Both the implementation of our sales network and our product expansion strategy have progressed materially this year, with healthy uptake of the 800Gb/s synchronisation testing solutions and increased demand for our NAA products driving the return to growth.

We enter FY26 with a healthy order backlog, strong cash balance and increasing customer engagement. Momentum from product development is building into FY26, which, with stabilised trading in the telecoms market, longstanding customer relationships across all territories and a widening footprint in a variety of end markets, leaves us well-positioned to convert our sales pipeline and deliver another year of growth and FY26 performance in line with market expectations. 

While macro uncertainty remains, particularly with geopolitical developments, the telecoms industry's continued innovation around 1.6Tb/s and high-speed application testing presents further long-term growth opportunity for Calnex. Our strategy remains focused on scaling in cloud and defence markets, maximising momentum behind Paragon-neo, and continuing to enhance our NAA platform capabilities. With strong foundations and an experienced team in place, we are confident in our ability to deliver sustained long-term growth."

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Overview of Calnex

Calnex Solutions designs, produces and markets test and measurement instrumentation and solutions for the telecoms and cloud computing industries. Calnex's portfolio enables R&D, pre-deployment and in-service testing for network technologies and networked applications, enabling its customers to validate the performance of the critical infrastructure associated with telecoms and cloud computing networks and the applications that run on it.

To date, Calnex has secured and delivered orders in 68 countries across the world. Customers include BT, China Mobile, NTT, Ericsson, Nokia, Intel, Qualcomm, IBM, Nvidia and Meta.

Founded in 2006, Calnex is headquartered in Linlithgow, Scotland, with additional locations in Belfast, Northern Ireland, Stevenage, England and California in the US, supported by sales teams in China and India. Calnex has a global network of partners, providing a worldwide distribution capability.

Chair's Statement

Overview

FY25 marked a return to growth for Calnex, in line with market expectations, despite the ongoing challenges faced across the telecoms market. The resilience and agility of the Calnex team have yet again come to the fore and have been demonstrated by the diligent response to trading conditions, with a continued focus on areas of the telecoms, cloud computing and defence markets showing the most near-term growth opportunity.

A return to growth in FY25

Revenue for the year grew by 13% to £18.4m (FY24: £16.3m) and the business returned to profitability, delivering PBT of £0.7m. Financial performance steadily improved throughout the year and the positive momentum which built across H2 was underpinned by demand for the newly launched 800Gb/s synchronisation testing solutions across both the telecoms and data centre markets, as well as increased orders from the Network and Application Assurance (NAA) business in the cloud computing, defence and satellite markets.

Cost control measures implemented through the year have also contributed to the Group's return to profit, while strong cash generation in H2 contributed to a year-end cash position of £10.9m, £2.3m ahead of the cash position at the half year. A large part of this balance was received the following month, taking the cash balance up to £12.7m at the end of April 2025.

Following the review of Calnex's sales channels, the transition to a new multichannel model has been successfully implemented during the year. The onboarding of new partners across key territories has expanded the Group's global coverage, and I am pleased to report that the transition has been well managed, with minimal disruption to the business. The new model positions Calnex to drive future growth, whilst also enabling more direct engagement with customers and greater control over sales operations.

As always, I would like to thank our people across the business for their continued efforts and expertise. They have been fundamental to the return to growth delivered this year and they are key to Calnex's future ambitions.

ESG

Calnex remains committed to upholding high standards of environmental awareness, social responsibility, and governance. Our "people first" ethos is foundational to the company, which is built on trust and respect for each other, for the environment, and for the local communities of our employees across the globe.

Calnex enjoys and thrives in a diverse workforce where collaboration is encouraged and inclusion is key to building high performing, engaged and successful teams. Our strong values are promoted through a variety of employee engagement and learning and development programmes. In addition, our employee-led environmental, social, and charity group continues to thrive, reflecting strong levels of engagement across the company. This is reflected in the high staff retention rate of 94% over FY25.

Both Calnex's operational processes and products have a low environmental impact, and the senior leadership team and wider staff remain committed to further reducing our environmental footprint. Our software-first approach enables us to significantly reduce the impact our products have on the environment, driving increased product longevity.

Outlook

Despite geopolitical uncertainties and continuing sluggishness in certain markets, trading this year has started well and we are confident of meeting market expectations. Looking further ahead, the Board believes Calnex is very well positioned to capitalise on the long-term structural drivers and deliver long-term growth.

Stephen DavidsonNon-Executive Chair19 May 2025

CEO Statement and Operational Review

Overview

Against a backdrop of persisting telecoms market challenges, we achieved a return to growth, driven by the execution of our product expansion strategy and increased demand in areas across both established and newer markets showing near-term potential. The improvement in performance was most evident in the second half, supported by strong uptake of our new 800Gb/s synchronisation testing solutions, growth in other sectors such as cloud computing and defence, and early success in operating under our new multichannel sales model.

Customer Metrics

The number of customers who ordered from us in FY25 was 275 (FY24: 274). The proportion of orders from customers in the cloud computing market continued to grow, increasing to 43% (FY24: 39%), reflecting the ongoing momentum behind NAA product sales and the broader adoption of our offerings beyond the telecoms sector.

Our top 10 customers accounted for 45% of orders (FY24: 52%) on a 3-year average basis, and 77% of orders were from repeat customers (FY24: 76%) on a 3-year average basis. Over the last few years we have seen a shift in our customer dynamics, with our top customers now including hyperscalers, government departments and vendors supplying equipment for the data centre infrastructure. Simultaneously, robust levels of repeat business are testament to the strength of Calnex's customer relationships.

Our regional revenue split for FY25 was: Americas 40% (FY24: 31%), North Asia 18% (FY24: 21%), and ROW 42% (FY24: 48%). The uptick in Americas revenue reflects renewed spending in the US market for our synchronisation testing solutions as well as the NAA platforms, whilst the performance in the ROW region was primarily driven by Lab Sync and Network Sync order growth. The performance in North Asia was driven by growth in China, albeit with the backdrop of continued challenges in that market.

Market Backdrop

The telecoms sector remained subdued through the year, but there are now cautious signs of recovery, including improved customer engagement and an increase in quality of interactions regarding near-term purchases. The telecoms industry has historically been through shocks and turbulent periods and has always bounced back. Having endured sustained pressures over the past two years and having had to adapt processes and cost structures accordingly, it appears that telecoms providers may be more financially resilient at this moment in time and better placed to withstand future macroeconomic shocks in the context of the current uncertain climate.

Crucially, the significant growth potential in the telecoms market remains intact, as the need for test instrumentation accelerates in line with the inevitable evolution of network infrastructure and customer needs. The global network infrastructure market has been predicted to grow by 2.1% CAGR from 2023-2028, despite the recent downturn.1

Elsewhere, growth in cloud, AI and data centre infrastructure continues to create strong demand for our test and emulation platforms. Reliable test equipment for verifying networks and application performance is increasingly important in the context of the rapid advancement in AI and the build-out of data centres, and demand will only continue to grow as the speed of advancement accelerates.

The defence sector has recently demonstrated strong growth potential. Here we have seen increasing demand for our NAA products, driven by the need to ensure reliable application performance in the military environment. This is an exciting new opportunity for Calnex, as investment into test equipment in the defence sector is increasing within an already substantial growth market. To support the expansion of this customer segment we have hired a US-based Business Development resource with the remit to expand the Group's US federal customer base.

The Board is monitoring the effects of proposed US tariff arrangements and will work with our customers and partners to navigate the new landscape effectively.

Product Innovation

FY25 marked a continuation of our strategy to align R&D spend and product innovation with opportunities showing the most near-term resilience and potential within the established telecoms market and in the newer cloud computing and data centre markets.

Paragon-neo supporting telecoms and data centre expansion

Paragon neo-S, our 800Gb/s synchronisation testing solution launched in H2 FY25, plays a pivotal role in addressing the industry's shift towards ultra-high-speed interfaces. Originally developed to support higher speeds within the telecoms industry, its relevance has quickly extended beyond telecoms, also gaining traction across adjacent markets such as data centres and vendors supplying equipment for deployment in data centres, reflecting broader demand for high speed synchronisation.

Paragon neo-S has been well received by customers and contributed meaningfully to revenue in H2, with orders to date demonstrating strong early uptake across the telecoms and data centre markets.

In line with our product innovation strategy, investment continues to focus on high-speed test innovation and enhancing application-specific functionality across our platforms. With customers already engaging with us on future 1.6Tb/s synchronisation testing requirements, we have identified technology which we believe will enable delivery of 1.6Tb/s synchronisation testing within calendar year 2027, underlining Calnex's position at the forefront of synchronisation testing innovation.

NAA platforms driving growth in Cloud Computing and Data Centre Markets

Our NAA platforms - SNE-X, supporting 400GbE interfaces, and NE-ONE - delivered strong performance in FY25, particularly in the US defence and enterprise sectors. Our products targeting these markets are now increasingly contributing to revenue and our ongoing go-to-market strategy into wider end markets continues. Regionally, we saw particular strength in the US, and while conditions in China remain challenging, we trialled a Paragon enhancement in the year that could contribute to growth in FY26 in that region.

In the data centre market, we are working directly with leading data centre companies to tailor solutions, such as a first-to-market 400 GbE Ethernet network emulation product for specific customer-driven performance needs. In defence and space, our products are used as part of large-scale technology solutions for defence contracts, and we have established partnerships on government and academic projects for satellite and non-terrestrial networks, collaborations that have informed our product roadmap and resulted in uptake from other companies within this ecosystem.

In H2 we were pleased to also secure a repeat order from a major hyperscaler that is investing in its data centre operations, highlighting the relevance of our solutions in a rapidly scaling cloud environment. As we look to the future, we are focused on enhancing our high-speed capabilities and extending the application reach of our NAA platforms, ensuring continued alignment with evolving customer requirements.

1  Frost and Sullivan, "Global 5G Network Infrastructure Growth Opportunities", Feb 2024.

Financial performance

We report revenue of £18.4m (FY24: £16.3m) and profit before tax of £0.7m (FY24: loss of £0.4m). Revenue and gross margin performance improved notably in the second half of the year, driven by a higher proportion of high-value sales and increasing demand across cloud computing, defence and data centre end markets.

The business delivered positive cash generation in H2 and continues to benefit from a strong cash position, with year-end cash of £10.9m (FY24: £11.9m). Cash increased to £12.7m at the end of April 2025.

People

Our team continues to be central to our identity. Headcount remained broadly flat year-on-year at 155, with targeted graduate and specialist hires offset by natural attrition and a small number of retirements. Hires in the period have supported new initiatives, including enhanced partner management and expansion of our US federal customer base. Retention remains strong, and our culture of inclusion and development continues to attract high-calibre talent.

Sales Channel Review

FY25 marked the first year operating under our new sales channel strategy, following the planned transition away from Spirent. We are pleased with the results so far, having successfully onboarded new partners across North America, Europe, India, and Asia-Pacific, which has broadened our partner base and expanded our sales coverage beyond what was previously achieved with Spirent.

The transition has served as a catalyst for internal enhancements. We have appointed dedicated channel managers, separate from the direct sales team, to improve partner engagement. Additionally, we have implemented clearer KPIs and improved onboarding and performance management processes. While we anticipated some transitional impact, particularly in the first half, the year concluded with a significantly reduced proportion of orders via Spirent compared to FY24 with order flow successfully transitioning to new partners. Second-half trading reflected the success of the new model, contributing to revenue growth.

Outlook

We enter FY26 with a healthy order backlog, strong cash balance and increasing customer engagement. Momentum from product development is building into FY26, which, with stabilised trading in the telecoms market, longstanding customer relationships across all territories and a widening footprint in a variety of end markets, leaves us well-positioned to convert our sales pipeline and deliver another year of growth and FY26 performance in line with market expectations. 

Longer term, while macro uncertainty remains, particularly with geopolitical developments, the telecoms industry's continued innovation around 1.6Tb/s and high speed application testing presents further long-term growth opportunity for Calnex. Our strategy remains focused on scaling in cloud and defence markets, maximising momentum behind Paragon-neo, and continuing to enhance our NAA platform capabilities. With strong foundations and an experienced team in place, we are confident in our ability to deliver sustained long-term growth.

Tommy Cook Chief Executive Officer 19 May 2025

Chief Financial Officer's Statement 

The results for the year are an encouraging return to growth for revenue, profit and margins, despite the continuing challenges in our end markets. Gross margins have improved in the year, and we continue to benefit from a strong balance sheet, cash balance and robust customer relationships.

Amongst our three regions, the Americas was the most impacted by the telecoms slow down in prior years and, as a result, our focus in FY25 was on cloud-based infrastructure and applications and on government sector opportunities, whilst the telecoms sector was subdued. The Americas revenues increased significantly year on year as this approach has proved successful. 

Rest of World (EMEA, India, South East Asia, Australasia) was the least affected by the slow-down in prior years. Although revenues in the year fell very slightly in relation to the prior year, orders grew year on year and the timing of orders to shipments in Q4 meant that some of the growth will translate to revenues in early FY26. The ROW region benefits from a diverse range of end customer sectors, helping to mitigate trading risks within any one sector.

Within North Asia, revenues have remained flat year on year despite China remaining a challenging environment for trading due to the impact of US restrictions. We continue our focus on business in the other countries in the region as a priority. 

From a product line perspective, Lab Sync (Paragon-neo and Paragon-X) experienced a year on year growth in orders as a result of the release of the Paragon neo-S, the new 800Gb/s synchronisation testing solution, with timing on orders received in Q4 pushing some of the revenue from this order growth into opening backlog for FY26. Our Network Sync product revenues grew in the year, predominantly driven by a repeat order from a major hyperscaler that is investing in its data centre operations.

Our NAA network emulation product for infrastructure testing, SNE, also experienced revenue growth after a difficult year of trading in FY24, as a result of growing demand for our newly launched SNE-X & SNE-Ignite product, particularly in the Americas and North Asia regions. NE-ONE, our NAA network emulation for testing of applications product, experienced a reduction in revenue in the year impacted by a shift in marketing focus to our new SNE and Paragon releases in FY25. Focus is on returning this product line to growth in FY26 with our plans for further expansion of the sales channel and supporting marketing activity for our NAA products. 

Financial KPIs 

1 Refer to note 32 for explanation of the alternative performance measures calculations. A full reconciliation between Underlying EBITDA and the statutory measures is also shown below.

Revenue

Revenue growth returned in the year with growth of 13% on the prior year to 18.4m (FY24: £16.3m), as a result of strong demand for the newly released Paragon neo-S and increased demand across other sectors such as cloud computing and defence. Order bookings increased in both the Sync and NAA product families and across all regions in the year.

Revenue growth was most evident in the Americas region, with revenues increasing 44% year on year. Americas accounted for 40% of total revenues (FY24: 31%), ROW 42% (FY24: 48%), and North Asia 18% (FY24: 21%) in the year.

Revenue model

Calnex generates revenues through the sale of bundled hardware and software, alongside the provision of software support and extended warranty programmes.

The Group's core sales model is bundled hardware and software. Sales pricing is dependent on the product type and the complexity of the software configuration built into the product package. Calnex also sells stand-alone software upgrades under licence.

Each of Calnex's units comes with a standard warranty period including maintenance and software upgrade cover in the event of any software upgrades being released for the options purchased. Calnex also sells software support programmes which provide customers with access to future software upgrades which are not included as part of the standard warranty. The Group also offers extended warranty programmes to cover repairs falling outside of the standard warranty period.

Bundled hardware and software revenues are recognised when the product is delivered to the customer, with stand-alone software revenues recognised in line with the length of the licence period. Revenues from software support and extended warranty programmes are typically recognised on a straight-line basis over the term of the contract.

Many of the products and services developed and deployed by Calnex's customers are interlinked and need to be tested independently, such as the individual components which are then built into the equipment used in telecoms networks. Calnex's test products can be used by a combination of equipment vendors, component manufacturers and network operators, to carry out testing during a new product development cycle. Products verified utilising Calnex's test solutions can be used in the knowledge that they will deliver consistent performance.

Sources of Revenue

Revenue streams

In FY25, 79% (FY24:77%) of the Group's revenues were generated from the sale of bundled hardware and software products, with 21% (FY24: 23%) from software support and extended warranty programmes.

As bundled hardware and software revenues grew 15% on the prior year in line with increased demand for our products, revenues from software support and extended warranty programmes also increased 5% on prior year revenues, demonstrating the value our customers place on ensuring they can continue to receive support on our offerings. 

Geographical split (revenues)

The Group's customers are located across the world. Our global customer base and distributor network enables the Group to spread risk across our three key regions: the Americas, North Asia and Rest of the World (ROW).

On a three-year average basis, the split of revenues across the three key regions was 44% for ROW (FY24: 42%), 35% for Americas (FY24: 33%) and 21% (FY24: 25%) for North Asia. The Americas region was the most impacted by the telecoms slow down in prior years and our FY25 focus on cloud-based infrastructure and applications and on government sector opportunities, plus the release of the Paragon neo-S, has resulted in a return to growth in that region. North Asia has been experiencing a steady decrease since FY20 reflecting the ongoing US-China geopolitical tensions, although FY25 revenues in the region remained steady compared with the prior year, despite the trading challenges.

Top 10 customer orders (3 year order average)

In FY25, Calnex received orders from 275 customers, with the number of customers remaining relatively flat on the prior year (FY24: 274 customers) and the order value per customer increasing in the year.

The Group's top ten customers in FY25 accounted for 46% of total orders (FY24: 51%) and 45% of total orders on average over the last three years (FY24: 52%).

In FY25, no underlying customer accounted for more than 17 % of Calnex's total orders.

Repeat customers (3 year order average)

The average length of customer relationship across the top ten customers in FY25 is 10 years (FY24: 11 years), demonstrating our high levels of repeat demand from our customers, whilst a number of new customers are also being added to the top ten list. In addition, the Group typically experiences a high level of repeat business from its total customer base. In FY25, using a three-year order average, 77% of orders were generated from existing customers (FY24: 76%).

Telecoms v cloud computing markets customers (3 year order average)

Calnex's sales have previously been predominantly derived from telecoms customers where the end-application is a telecoms (fixed and mobile) network. More recently, Calnex has seen an increase in customers from the cloud computing markets which include hyperscale/data centre providers, defence and enterprise customers. FY25 saw the proportion of total orders from cloud computing customers increase from 39% in FY24 to 43% in FY25. Equipment vendors who initially developed product for use in telecom applications are now selling the same products into other data network applications where the same technology is implemented, and these new applications are becoming the primary market opportunity for our customer's products, which is contributing to the increase in the proportion of Calnex's business attributed to the cloud computing market.

Gross Profit

Gross profit grew by 16% to £13.8m (FY24: £11.9m) driven by the growth in revenue and a 2 percentage point improvement in gross margin. Gross margin, which is calculated after discounts to channel partners are applied, improved to 75% from 73% in the prior year. Gross margin is net of commissions payable to our channel partners and can fluctuate by 1-2% through the year depending on the mix and timing of the hardware and software bundles shipped. 

Underlying EBITDA

Underlying EBITDA, which includes R&D amortisation, increased to £1.2m in the year (FY24: £0.1m) as a result of the improvement in revenue volumes and gross margin.

Administrative expenses (excluding depreciation & amortisation) were £9.2m in FY25 (FY24: £8.9m). Excluding non-capitalised and impaired R&D costs, administrative costs were in line with the prior year, including inflationary cost increases, as a result of tight cost management across all categories including headcount, recruitment, legal and professional and travel costs. The share-based payments charge also reduced by £0.3m on prior year levels as a result of a release and forfeiture of options in the year.

In line with the prior year, no performance bonuses or profit share was accrued at the end of the current year due to Group FY25 budgeted profit targets not being achieved.

Amortisation of R&D costs increased by £0.5m to £4.3m (FY24: £3.8m) due to increased R&D investment in the current and previous years to support the product roadmap. R&D spend is capitalised and amortised to the P&L over five years. 

Underlying EBITDA margin was 6% in FY25 (FY24: nil%), with positive operational gearing aiding the drop through of higher revenue volumes, improved gross margin and the relatively fixed cost base.

Profit before tax

The Group returned to profitability, generating a profit before tax of £0.7m in the year (FY24: loss of £0.4m) with the improvement in profitability attributable to growth in revenue performance and tight cost control management. Profit before tax margin was 4% in the year (FY24: loss of 2%).

Tax

The tax charge in the year was £0.4m (FY24: credit of £0.4m), representing an effective tax rate of 53% (FY24: 111% credit), principally driven by one off prior year adjustments. The normalised run rate range for the business' effective tax rate going forward will be closer to the applicable tax rate, which is currently 25%.

The difference between the applicable rate of tax of 25% and the effective rate in FY25 is largely due to the following:

The new merged R&D expenditure credit (RDEC) scheme combines the previous RDEC and the SME R&D tax reliefs into a single scheme for accounting periods beginning on or after 1 April 2024. The merged scheme provides a 20% expenditure credit on qualifying expenditure, which is allocated to 'other income' in the profit and loss account and is taxable. The 86% rate on qualifying expenditure under the previous SME scheme is no longer available. In FY25, the RDEC earned within other income was £0.7m (FY24: £0.5m RDEC in other income, £0.5m SME credit within the tax credit).

Earnings per share

Basic earnings per share was 0.38 pence in the year (FY24: 0.05 pence) and diluted earnings per share was 0.36 pence (FY24: 0.04 pence), with the increases in both metrics reflecting the improved profitability in the year.

Cashflows

Closing cash at 31 March 2024 was £10.9m (31 March 2024: £11.9m). The Group experienced an outflow of total cash and fixed term deposits of £1.0m in the year (FY24: £5.7m) with the overall improved trading performance being offset slightly by timing of trade receivables receipts at the end of the year. 

Net cash from operating activities was £4.6m (FY24: net cash absorbed by operations of £0.7m) reflecting the increased trading levels in the year and lower working capital movements compared to the prior year.

Working capital in the year increased by £1.8m (FY24: £3.7m increase) driven predominantly by increases in trade receivables in the period as a result of the increased trading in Q4 and the timing of shipments towards the year end.

Cash used in investing activities is principally cash spent on R&D activities, which is capitalised and amortised over five years. Investment in R&D in the year was £4.9m (FY23: £5.6m). This reduction in spend was mainly as a result of lower equipment purchases in the year as the majority of the equipment spend for the Paragon neo-S, the 800 Gb/s project was made in FY24.

There is currently no debt on the balance sheet, leading to no borrowings related cashflows in the current or prior periods. Closing cash at 31 March 2025 was £10.9m (31 March 2024: £11.9m). The closing cash balance at the end of April 2025 was £12.7m after a significant number of trade receivables were collected post year end.

Dividend

The directors are proposing a final dividend with respect to the financial year ended 31 March 2025 of 0.62p per share. The final dividend will be proposed for approval at the Annual General Meeting in August 2025 and, if approved, will be paid on 29 August 2025 to all shareholders on the register as at close of business on 25 July 2025, the record date. The ex-dividend date will be 24 July 2025.

Ashleigh Greenan Chief Financial Officer 19 May 2025

Consolidated Statement of Comprehensive Income

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Consolidated and Company Statement of Financial Position 

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The profit for the financial year of the parent company is £527,721 (2024: £75,267). As provided for by section 408 of the Companies Act 2006, no income statement is presented in respect of the parent company.

The accounts were approved by the Board of Directors and authorised for issue on 19 May 2025. The accounts are signed on their behalf by:

Consolidated Statement of Changes in Equity 

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 Company Statement of Changes in Equity 

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Consolidated and Company Cash Flow Statement 

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Notes to the Financial Statements 

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1 General information

Calnex Solutions plc ("the Company") is a public limited company, limited by shares, domiciled and incorporated in Scotland. The registered office is Oracle Campus, Linlithgow, West Lothian, EH49 7LR.

The Company (together with its subsidiary, the "Group") was under the control of the directors throughout the period covered in the financial statements. The list of the subsidiaries consolidated in the financial statements is shown in Note 26.

The principal activity of the Group is the design, production and marketing of test instrumentation and solutions for network synchronisation and network emulation, enabling its customers to validate the performance of critical infrastructure associated with telecoms networks, enterprise networks and data centres.

The financial statements were authorised for issue, in accordance with a resolution of directors, on 20 May 2025. The directors have the power to amend and reissue the financial statements.

2 Basis of preparation

(a) Statement of compliance

The financial reporting framework that has been applied in their preparation is applicable law and UK-adopted International Accounting Standards and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

The financial information does not include all information required for full annual financial statements and therefore does not constitute statutory accounts within the meaning of section 435(1) and (2) of the Companies Act 2006 or contain sufficient information to comply with the disclosure requirements of UK-adopted International Accounting Standards. These should be read in conjunction with the Financial Statements of the Company for the year ended 31 March 2025 which were approved by the Board of Directors on 19 May 2025. The report of the auditors for the year ended 31 March 2025 was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

(b) Basis of accounting

The financial statements have been prepared under the historical cost convention, except for certain financial assets and liabilities including financial instruments, which are stated at their fair values.

The preparation of the financial statements in conformity with UK-adopted IAS requires the directors to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expense. The estimates and judgements are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented.

(c) Functional and presentation currency

The financial statements are presented in pounds Sterling, which is the functional and presentation currency of the Group. Results in these financial statements have been prepared to the nearest thousand.

(d) Basis of consolidation

The consolidated financial statements incorporate those of Calnex Solutions plc, and all its subsidiaries. A subsidiary is an entity controlled by the Group, i.e. the Group is exposed to, or has the rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its current ability to direct the entity's relevant activities (power over the investee). All intra-Group transactions, balances, and unrealised gains on transactions between Group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The total comprehensive income, assets and liabilities of the entities are amended, where necessary, to align the accounting policies.

The Group applies the acquisition method to account for all acquired businesses, whereby the identifiable assets acquired and the liabilities assumed are measured at their acquisition date fair values (with a few exceptions as required by IFRS 3 Business Combinations).

The cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the business combination. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities is recognised as goodwill.

The acquisition of assets that falls outside the scope of IFRS 3 are accounted for by bringing the assets and liabilities of the acquired entity into the financial statements at their nominal value from the date of acquisition. Comparative information is not restated.

(e) Going Concern

The financial information for the year to 31 March 2025 has been prepared on the basis that the Group and the Company will continue as a going concern.

The Board has approved financial forecasts for the current and succeeding financial years to 31 March 2027. Based on this review, along with regular oversight of the Company's risk management framework the Board has concluded that given the Company's cash reserves available of £10.9m, the Company will continue to trade as a going concern.

3 Significant accounting policies

(a) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of sales related taxes and discounts and is recognised at the point in time when the relevant performance obligation is satisfied.

Where revenue contracts have multiple elements, all aspects of the transaction are considered to determine whether these elements can be separately identified. Where transaction elements can be separately identified and revenue can be allocated between them on a fair and reliable basis, revenue for each element is accounted for according to the relevant policy below. Where transaction elements cannot be separately identified, revenue is recognised over the contract period.

The Group recognises revenue from the following major sources:

Hardware & software revenue

Revenue from the sale of bundled hardware and software, is recognised when the Group transfers the risk and rewards to the customer, and the bundled product is delivered to the customer. Each unit sale comes with a standard warranty period during which the Group agrees to provide warranty cover, maintenance cover and software upgrade cover in the event of any software upgrades being released. This is recognised as a separately identifiable obligation from the provision of the hardware and is recognised over the life of the cover provided, being a year.

For the sale of stand-alone software, the licence period and therefore the revenue recognition, commences upon delivery.

Extended warranty programme

The Group enters into agreements with purchasers of its equipment to perform necessary repairs falling outside the Group's standard warranty period. As this service involves an indeterminate number of acts, the Group is required to 'stand ready' to perform whenever a request falling within the scope of the program is made by a customer. Revenue is recognised on a straight-line basis over the term of the contract.

This method best depicts the transfer of services to the customer as:

Software support programme

The Group enters into agreements with purchasers of its equipment to provide software support and access to future software updates. Revenue is recognised on a straight-line basis over the term of the contract.

Grant income

The Group has obtained grant funding from the Scottish Government in prior years in the form of reimbursement for research and development costs eligible for reclaim under the grant agreement. Costs were incurred before they were reclaimed under the grant agreement and revenue only recognised after receipt of the funds from the government. Grant funds received are recognised over five years, in line with the amortisation policy on capitalised research and development costs.

(b) Retirement benefit costs

Payments to defined contribution schemes are charged to the Statement of Comprehensive Income as an expense as they fall due.

(c) Share-based payments

Equity-settled and cash settled share-based compensation benefits are provided to some employees. Equity-settled transactions are awards of shares, or options over shares that are provided to employees in exchange for the rendering of services. 

The cost of equity-settled transactions is measured at fair value on grant date. Fair value is independently determined using the Black-Scholes option pricing model, or a Monte-Carlo analysis that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the Group receives the services that entitle the employees to receive payment. There are no other vesting conditions.

The cost of equity-settled transactions is recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods.

The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying the Black-Scholes option pricing model, taking into consideration the terms and conditions on which the award was granted. The cumulative charge to profit or loss until settlement of the liability is calculated as follows:

All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the cash paid to settle the liability.

If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification.

If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the Group or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited.

If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when the relevant requirements of IAS 12 are satisfied.

(d) Taxation

The tax expense represents the sum of the current tax and deferred tax charge for the year. The tax currently payable is based on taxable profit for the year. The Group's liability for current tax is calculated using the tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is measured on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases, as used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of financial assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

(e) Business Combinations

The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired.

The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the Group to former owners of the acquirer. All acquisition costs are expensed as incurred to profit or loss. On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the Group's operating or accounting policies and other pertinent conditions in existence at the acquisition-date.

Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss.

The difference between the acquisition-date fair value of assets acquired and liabilities assumed and the fair value of the consideration transferred is recognised as goodwill. If the consideration transferred is less than the fair value of the identifiable net assets acquired, a bargain purchase is recognised as a gain directly in profit or loss by the Group on the acquisition-date.

Business combinations are initially accounted for on a provisional basis. The Group retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value.

(f) Intangible assets

Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period.

Research costs are expensed in the period in which they are incurred. Development costs are capitalised when it is probable that the project will be a success considering its commercial and technical feasibility; the Group is able to use or sell the asset; the Group has sufficient resources and intent to complete the development; and its costs can be measured reliably. Capitalised development costs are amortised on a straight-line basis over the period of their expected benefit, being their finite life of 5 years.

Significant costs associated with patents and trademarks are deferred and amortised on a straight-line basis over the period of their expected benefit, being their finite life of 10 years. Amortisation is charged to administrative expenses in the Statement of Comprehensive Income.

Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit.

(g) Financial assets

Where there is no publicly quoted market value, other investments, including subsidiaries, are shown at cost less provisions for impairment.

(h) Plant and equipment

Plant and equipment are shown at cost, net of depreciation and any provision for impairment. Depreciation is provided on all property, plant and equipment at varying rates calculated to write off cost less residual value over the useful lives. Depreciation is charged to administrative expenses in the Statement of Comprehensive Income. The principal rates employed are:

Plant and machinery 25-33% straight line

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate these values may not be recoverable. If there is an indication that impairment does exist, the carrying values are compared to the estimated recoverable amounts of the assets concerned.

The recoverable amount is the greater of an asset's value in use and its fair value less the cost of selling it. Value in use is calculated by discounting the future cash flows expected to be derived from the asset. Where the carrying value of an asset exceeds its recoverable amount, the asset is considered impaired and is written down through the income statement to its recoverable amount. 

An item of property, plant and equipment is written off either on disposal or when there is no expected future economic benefit from its continued use. Any gain or loss (calculated as the difference between the net disposal proceeds and the carrying value of the asset) is included in the income statement in the year.

(i) Right-of-use assets

A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset.

Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any re-measurement of lease liabilities.

(j) Inventories

Inventories are valued at the lower of cost and net realisable value. In determining the cost of raw materials, consumables and goods for resale, the average purchase price is used. For work in progress and finished goods, cost is taken as production cost which includes an appropriate proportion of overheads.

Inventories are assessed for indicators of impairment at each year end and where a provision is required the income statement is charged directly.

(k) Trade and other receivables

Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses.

The simplified approach to measuring expected credit losses has been applied, this uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue.

Other receivables are recognised at amortised cost, less any allowance for expected credit losses.

(l) Cash and cash equivalents

Cash at bank and in hand are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of 95 days or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

(m) Short term investments

Cash at bank on fixed term deposit, and other liquid investments with maturities of greater than 95 days, but less than 12 months at the reporting date.

(n) Borrowings

Interest-bearing loans and bank overdrafts are initially recorded at the fair value of proceeds received and are subsequently stated at amortised cost. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis in the income statement using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

(o) Trade and other payables

Trade payables are non-interest-bearing and are measured at amortised cost.

(p) Provisions

Provisions are recognised when the Group has a present legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Provisions are measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as an interest expense.

(q) Financial liabilities

Financial liabilities are recognised on the Group's Statement of financial position when the Group becomes a party to the contractual provisions of that instrument.

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value at each reporting date. The changes in fair value are recorded in the statement of comprehensive income.

(r) Lease liabilities

A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. The lease term is the non-cancellable period of the lease plus extension periods that the group is reasonably certain to exercise and termination periods that the group is reasonably certain not to exercise. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred.

Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are re-measured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is re-measured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down.

The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred.

(s) Foreign currency

In preparing the financial statements, transactions in currencies other than pounds sterling are recorded at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to sterling at the foreign exchange rate ruling at that date. Exchange differences arising on translation are recognised in the consolidated Statement of comprehensive income for the period.

Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated at the rates prevailing at the dates when the fair value was determined. Non-monetary assets and liabilities that are measured at historical cost in a foreign currency (e.g. property, plant and equipment purchased in a foreign currency) are translated using the exchange rate prevailing at the date of the transaction. Exchange differences arising on the translation of net assets are affected through the Statement of Comprehensive Income.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period and recognised in the Statement of Comprehensive Income. 

(t) Dividends

Dividends are recognised when declared during the financial year. The declaration of dividends is at the discretion of the directors.

(u) Value Added Tax

Revenues, expenses and assets are recognised net of the amount of associated VAT, unless the VAT incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of VAT receivable or payable. The net amount of VAT recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position.

Commitments and contingencies are disclosed net of the amount of VAT recoverable from, or payable to, the tax authority.

(v) Earnings per share

Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to the shareholders, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.

Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

(w) Critical judgements in applying the Groups accounting estimates

In the process of applying the Group's accounting policies, the directors have made the following estimates that have the most significant effect on the amounts recognised in the financial statements.

Share-based payment transactions

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using the Black-Scholes model or a Monte-Carlo analysis taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity.

Useful lives

The Group uses forecast cash flow information and estimates of future growth to assess whether goodwill and other intangible fixed assets are impaired, and to determine the useful economic lives of its intangible assets. If the results of operations in a future period are adverse to the estimates used a reduction in useful economic life may be required.

Intangible assets

Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period.

Research costs are expensed in the period in which they are incurred. Development costs are capitalised when it is probable that the project will be a success considering its commercial and technical feasibility; the Group is able to use or sell the asset; the Group has sufficient resources and intent to complete the development; and its costs can be measured reliably. Capitalised development costs are amortised on a straight-line basis over the period of their expected benefit, being their finite life of 5 years.

Significant costs associated with patents and trademarks are deferred and amortised on a straight-line basis over the period of their expected benefit, being their finite life of 10 years. Amortisation is charged to administrative expenses in the Statement of Comprehensive Income.

Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit.

(x) New accounting standards

There have been no applicable new standards, amendments to standards and interpretations effective from 1 April 2023 that have been applied by the Group which have or are expected to result in a significant impact on its consolidated results or financial position.

4 Operating Segments

Operating segments are based on the internal reports that are reviewed and used by the Board (who are identified as the Chief Operating Decision Makers) in assessing performance and determining the allocation of resources. As the Group has a central cost structure and a central pool of assets and liabilities, the Board does not consider segmentation in their review of costs or the statement of financial position. The only operating segment information reviewed, and therefore disclosed, are the revenues derived from different geographies.

5 Revenue