Concurrent Technologies Plc

Good afternoon and welcome to the Concurrent Technologies Plc investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time via the Q&A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Myles Adcock, CEO. Good afternoon, sir.

Hello. Thank you all for joining us today for the results for the first half of 2026 for Concurrent Technologies Plc. Next slide, please. So we have myself, Chief Executive Officer, and Kim, our CFO. For those of you that might not know, Kim is retiring after four excellent years. So this is her last session. In addition to this presentation, we have now also commissioned research from Equity Development. So you can find their research paper on their or our website. Next slide, please. So as a reminder, Concurrent Technologies is a business that has been trading for more than 40 years, one of the longest listed stocks on AIM. We are now over 200 people based in the United Kingdom and the United States, although we sell all around the world with something over half our revenue going into America. We design and make embedded computer system products. For a long time, we just did computer boards, typically postcard sized boards, but we now do a much wider array of systems and related services. Next slide, please. So the market that we address is absolutely enormous. There's some substantial figures on this slide with America spending more than a trillion dollars on defense, NATO as a group spending around 1.8 trillion dollars the defense electronics market globally is itself over 190 billion dollars these are all absolutely enormous numbers and generally speaking when we win work we're displacing very large competitors next slide please so our first half has been very good on pretty much every metric our best ever with revenue at 23.2 million pounds and profit at 3.2 million pounds excellent standout figure is the order intake at 46.9 million pounds So that's in line with the entirety of last year's order intake, which was itself a record. So that's very pleasing. We have said for many years that it would be 2026 where we start to see the order intake associated with design wins that we secured now many years earlier. That is starting to happen. So of that 46.9, very roughly about two-thirds of that is associated with prior design wins including the substantial 17 million pounds order which was actually a design win from many many years ago clearly going strong worth knowing on the order intake is that a lot of that most of it happened in Q2 and of that a lot of it happened in June so our order intake whilst large very back-end loaded in the half that did constrain our ability somewhat to generate revenue so revenue would have been stronger if the order intake profile had been more skewed towards the first half two primary reasons why it did come in a little later than otherwise planned we saw a continued hiatus of order placement activity out of the united states so similar to q4 last year q1 was very slow that's picked up again now although note america goes back into its budgeting cycle in the next few weeks so let's see what happens there And then we were expecting a fairly substantial order at the beginning of the year for one year's worth of supply of a particular product of ours. But Intel launched a last time buy for the processor associated with our product. That's unheard of for Intel to cut life short. They cut life short by about six years. They normally guarantee 15 years. They end of life this product at, I think, nine. So we had to put our corresponding product into last time buy. And so our customer, who didn't have time to redesign their own solution to accommodate a different computer, did the work to assess how many units they had to buy for four years worth of supply. And that was the 17 million pounds order that we closed in June. So we closed 17 million in June rather than some other significant but smaller number at the beginning of the year. Just a note on that contract, substantially our largest ever. We've designed that to be a milestone based performance contract. So the upfront milestone is the purchase of parts for which we've been paid the cash. We're now purchasing those components, roughly six million pounds worth. And as we do, we can recognize the revenue on those parts, which is good. We recognize a relatively modest profit on those components and instead recognize the bulk of the profit as we deliver finished goods in years two, three, and four. So for this year, that slightly dilutes our gross profit for the year, but will be very good in our years. That's why the expectations in the market which increased at the beginning of this week went up more in revenue terms than it did in profit terms. In terms of design wins, we've been designed into programs that are currently assessed by our customers to have an aggregate value of £129 million to us. It's not a contract, but it is as a metric, let's say a bright green flashing light for our next many years. That's typically revenue that won't start flying for another three or four years, but is an excellent indicator for our continued growth. That's substantially our largest LTV for design wins that we've published to date, partly because we're now starting to see systems work come into that number where the systems into which our cards go the systems are a much higher unit price than the computer cards alone and therefore the potential value of programs for systems is substantially higher other things that we've done as of now rather than the end of the half but as of now we have doubled the capacity of our factory in colchester those machines are up and running and thank goodness they are because the size the quanta of the order intake and the fact that it has come in late in this late in the half means that our quarter four is going to be exceptionally busy so that doubling of capacity is going to be going flat out at the back end of the year but the machines are commissioned we've got the staff we've got the plan so that should be fine next slide please So a little bit of a case study to just illustrate a little bit how the business works, how it takes a long time, but how the scale of opportunity can exponentially grow with that time. So back in 21, 22, which is after I started we were able to launch some products into the market that were first to market really excited people and in particular it excited this distributor that I'm highlighting here in a country in Asia Pac so we started to do work with them in 23 we bought a very small business in Los Angeles Phillips Aerospace as the catalyst for our startup systems business and in 24 we brought every distributor from around the world to Colchester for two days to educate them that the concurrent they knew for 30 plus years was now capable of doing very much more and in particular here's what we can do with systems that excited these guys a lot and relatively quickly after that conference they came to us with a potential opportunity in their country with an in-country prime and the opportunity was to displace an incumbent supplier to that prime so we set about sending some of our best people to that country and we worked up a solution with our distributor but then also the prime contractor which resulted in a 3.7 million dollar order which we communicated in January 25 We've now successfully been working on that order to design and then deliver 15 units. These units go into an amphibious vehicle for trials. So the end customer, the government is trialing these vehicles to see if they like what these computers do in them. and during that period our prime contractor customer has been very pleased and our distributor has introduced us to three other prime contractors also involved in vehicle upgrades in that country and so we're now in discussions not the same thing as an order yet not the same thing as a design win yet but since we're the incumbent supplier of this system that customer money has funded to develop we're in exceptionally good position and we're in discussions about potentially fitting two computers per vehicle for 300 vehicles and at a unit price of very approximately 150 000 that's a good size program this is not unique we're in these sorts of discussions uh many times over so this is one of maybe 10 or a dozen similar discussions with similar sized opportunities now coming into view. Another way of expressing that is all the hard work we've done to get to this point starts to give us permission and credibility to be allowed access to what is the next level of prize in terms of volume and value of work, which will become increasingly real over the coming years. Next slide, please.

Thank you. Good afternoon, everybody. So Miles has touched on a few of these numbers, but strong growth in all areas. Point to note on the gross profit, we have held gross profit the same level as last year. That's actually really good considering we're in a period of getting more difficult supply constraints. So we've all known about the DRAM pricing. But actually, that's affecting quite across the board now of most of the electronics components industry. And it's both pricing and availability. We're working very hard to hold on to that gross profit. And we've got a very good procurement team that we're continuing to strengthen. Profit before tax at 3.2 million was after charging 114K of exceptionals. and the other key number on this slide is closing cash which we'll talk about in a minute but it was 24% up on prior year even though we've invested quite a lot of money in the first half. Order intake amazing at 46.9 and actually at the 1st of September that's now sitting at 68 million. Next please. Revenue split. This is just to show that we're still key in all major regions. They do fluctuate a bit between regions, between halves, simply because of how we deliver our projects. You know, it depends on when the program requirement is for the customer. So Asia pack dominated by the top customer there. And then many of the other customers were actually concentrated in Europe. But that's, again, just a pattern that just moves around because our customers deliver at all different times. Next, please. Business units. I'm delighted to say systems is now profitable. Compared to last year, it was about a four or five hundred K loss last year. We're in a really good place. So even though the revenue hasn't gone up massively, it's up nine percent. It's actually because of the mix of revenue, which we've all said. So in this business, you need to win the design work first to then build up the production orders that come off the back of those designs. That's starting to happen. And that's shown by the gross margin going up 13 points from 13.3% to 26.3%. That will continue to evolve over the next few years as we get that mix bigger. on production side against a bigger revenue. Design work will always be there. That's how you live and breathe and move through the rest of the company. Headcount about 25 people in systems. That will simply grow now through more work. So we will hire more engineers as we win more work. Most of the functional people are in place. So it would just be business as usual in terms of further recruitment there. and pipeline of opportunity remains really, really strong in the systems business as it does in the products business. So products business, a good first half at 19.8 million, 11% up. But as Miles has alluded to, that was actually probably quite restrained by the orders being quite late in the half. We will have a very strong half in the systems business and the products business and the systems business. There's a slight downturn on the profit margin against last year. That's solely because this side of the business carries all the cost of the whole group, basically that's non-systems. And therefore there's some additional costs in the first half that we just didn't get revenue up quite high enough to cover off. Some of those are one-off costs in terms of recruitment. As you'll see my replacement, we had another senior recruitment earlier in the year and they will wash through in the second half where profit will be really strong. Next, please. Cash. So just to show on cash, we have gone down about 4 million since year end, as I say, up against last half. That's very much because of the facility upgrades. And that's represented there by the 3.3 million purchase of PPE. We also did a large amount of capitalized R&D. That is 3 million. And that's our product development. That will probably run right at six million this year and probably beyond this year. So products, it depends on our roadmap, what we're doing. Some products are bigger than others. And at the moment, we're working on five very key products that should go across to manufacturing in early end of this year, early next year. In terms of there's two big chunks there, increasing trade payables and increasing receivables. They are dominated by the same thing. So the increase in receivables includes a 6.7 million pound invoice, which was against that 17 million pound order that was raised in June and paid in July. So that dominates that number. And the increase in trade payables should say and liabilities, because in that side of it, there's a 6.7 million deferred revenue, which we will be working through most of that in the second half of the year. The other key point to note on this slide, net cash from operating activities was actually positive in this half. Last half, it was significantly negative last year. So really good cash performance. We are still in a very strong position and we still remain with no debt, even though we have a debt facility of 5 million RCF, which rolls for about another two years. Next, please. This is just to show the five-year performance on the right there and the left is just saying we're doing what we said we'd do. The strategy model set out in 2021 and we've sort of developed into 2022-23. We're absolutely doing it and we're staying very focused on it. And you can see by the numbers their revenues up three times, over three times since 2022. Profit margin is coming up. We've always said that we want to get to mid to high teens. We're currently sitting at 13.8% for the year, for the half year. Next please.