Calnex Solutions chief executive Tommy Cook is about as down-to-Earth as they come, so today’s confirmation that the company has flatlined into trading at break-even hasn’t sent him into a spiral of hyperbole.
There will be minimal profits this year – Cavendish has slashed its forecast from £4 million to £100,000 for the 12 months to the end of March – after the telecoms testing specialist chalked up a loss of £600,000 in the first half as revenues slumped by more than a third.
Spending on the build-out of 5G networks has slowed as interest rates in major markets around the globe have been raised to combat high inflation. This has made network operators reluctant to take on fresh borrowing to fund the expansion of wireless connectivity.
READ MORE: Calnex looks to growth in new markets as sales soften
Companies like Calnex, which last year generated 78% of its revenues from the telecoms sector, can’t possibly body swerve such market conditions.
“They are at the front of the food chain, so when the operators slow down the [equipment] vendors go easier on the capital spend, and then we are at the back end of all that,” Mr Cook said. “At the moment I don’t see any structural problems in the industry, it’s just that wider macroeconomic effect [on] spending patterns.”
However, the current situation is not on the same scale as “torrid” period in 2001 when the telecoms crash followed hard on the heels of the dotcom bust. Nor or things as difficult as in 2010 in the wake of the banking crisis.
“It’s hard to compare because we were such a small company at the time,” Mr Cook said. “We had one product line, and it froze on us. I guess we had two or three months where we didn’t get a single order, but we were only closing two or three deals a month at that time.”
READ MORE: Calnex says confidence still intact despite disruptions
Today Calnex has four product programmes and while telecom remains the dominant driver, the Scottish firm is selling into other markets such as the data centre, rail, power and defence sectors. Inventory levels are strong, staff levels are being maintained, and R&D spending remains intact.
“It’s not the greatest of times, but there’s a lot of reason to be hopeful,” Mr Cook said. “We’ve got some good programmes coming through and we’ve got some interesting new opportunities – we’re still shakin’ them trees.”
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