By Kristy Dorsey
The founder of tech testing specialist Calnex Solution is among those set for a multi-million pound payday following what will be the first listing of a Scottish-based company in more than two years.
Tommy Cook, who set up Linlithgow-based Calnex in 2006, will receive £2.8 million from selling down part of his stake in the business when it joins the Alternative Investment Market (AIM) on October 5. The oversubscribed placing will value Calnex at £42m on admission, with the shares priced at 48p each.
Scottish Enterprise, whose Scottish Co-Investment Fund supported a 2007 private funding round by Calnex, is in line for a £3.8m pay-out. Hearts FC chair Ann Budge, a member of the board at Calnex, will receive £800,000 as she reduces her stake from 5.9 to 3 per cent.
Following admission, Mr Cook will own 21% of the equity, followed by BGF Investment Management with a 15% stake. Scottish Enterprise will be on 9%.
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The placing will raise a total of £22.5m before expenses, with £16.5m going to existing shareholders and £6m to the company.
Mr Cook said part of the company’s proceeds will be used to pay down debts. Companies House accounts for the year to the end of March 2020 show Calex had nearly £3.9m due to be paid in the coming 12 months.
Revenues in that year rose to £13.7m against £10.3m previously, but a substantial rise in administrative expenses meant that pre-tax profits fell to £1.7m from £2.4m the preceding 12 months.
In addition to paying down debts, the company will also explore opportunities for further niche acquisitions such as last year’s deal to take over Luceo Technologies of Berlin. That followed the purchase of JAR Technologies of Belfast in 2018.
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Calnex, which employs 95 people, specialises in the production of testing equipment for telecoms networks to ensure the robustness of their infrastructure. To date, the company has delivered orders from more than 600 customer sites in 68 countries around the world, including clients such as BT, China Mobile, NTT, Ericsson, Nokia, Intel, Qualcomm, IBM and Facebook.
“The telecommunications industry is going through unprecedented levels of change, presenting exciting opportunities for the expansion of the business,” Mr Cook said.
“Having demonstrated sustained growth since inception, the move onto the public markets will provide us with new capital, a raised profile and enhanced ability to executive acquisitions as we seek to capture an increased share of the growing market for telecoms solutions.”
The company said more than 80% of its revenue during the past three years has come from repeat customers, with its top 10 clients accounting for more than half of sales during the year to March. Non-telecoms customers represent 14% of top 10 customer revenue.
Asked about current trading, Mr Cook said the company has a record order book and a strong sales pipeline.
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“We have been really fortunate,” he said. “Of course there are a lot of companies and industries that are finding it very difficult during this pandemic, but our sector has been virtually untouched.”
Business is being driven in large part by the migration of mobile networks to 5G, which will allow far more devices to access the mobile internet at the same time. This, together with the emergence of the Internet of Things and the widespread use of cloud computing, is shifting the structure of telecoms networks in ways which Calnex believes will generate sustainable growth for the company.
Upon its admission to AIM, Calnex will be the first Scottish-based company to achieve a successful flotation since the July 2018 listing of technology group Nucleus Financial.
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