By Scott Wright

CALNEX, the Scottish mobile network testing specialist, has overcome the continuing global shortage of components and concerns over the economic backdrop to post a big leap in first-half profits and sales – and declared it was on course to meet expectations for the current year.

The Linlithgow-based company, which was founded by chief executive Tommy Cook in 2006, reported a 34 per cent rise in pre-tax profits to £3.1 million for the six months ended September 30. That came as turnover leapt by 38% to £12.7m, driven by strong underlying growth and the impact of currency movements.

Speaking to The Herald, Mr Cook expressed satisfaction that Calnex had grown sales and profits against a backdrop of continuing supply-chain disruption, which have proved challenging to cash flow and the length of time it is taking to receive components.

While he stated that macroeconomic conditions will be tough over the next 18 months, Mr Cook said Calnex remained on track to perform “in line with market expectations”, amid early indications that supply-chain conditions are beginning to improve.

“That’s really been the biggest impact over the last period,” Mr Cook said. “It is starting to ease slightly but it is definitely not over. There definitely is a bit more predictability. The worst of the situation was probably six to nine months ago.”

However, he said improvements in the supply chain would be gradual, as manufacturers are balancing the current high demand with an expected slowdown thereafter and were concerned about being left with excess capacity once the current rush is over.

Calnex completed the acquisition of Stevenage-based iTrinegy, a developer of software-designed test networks, for £3.5 million during the first half. Mr Cook said the integration was progressing well with new contracts signed with “channel partners” in the US, currently the market offering the earliest potential for the services it provides. And he said additions had already been made to the iTrinegy team in Stevenage, including in business development roles to support the sales drive.

Asked whether Calnex was keen to make further acquisitions, Mr Cook replied: “There are not hundreds of companies out there that we can acquire. We continually look – we never really stop looking, because it is always about getting the right company with the right culture and the right product that fits in.

“We are continually in discussion with other companies to see whether there are other acquisitions we should be considering that would expand our sales footprint.”

Mr Cook has previously outlined the opportunity to win business serving the huge data centres that are developed by “hyper-scaled” technology companies such as Amazon and Meta, owner of Facebook. Mr Cook said that opportunity is still there for Calnex, despite the well-documented slowdown at several tech giants that is currently leading to tens of thousands of redundancies across the world.

“As far as we can see, the infrastructure teams, which are the ones we are selling into, don’t seem to be particularly badly affected by it,” he said. “I think it would be folly to assume that we can be immune from the macro issues in the world… I don’t think it fundamentally damages anything medium and long term. In the short term, we will need to wait and see and keep a close eye on that. So far it really hasn’t changed.”

He added that the fact such companies were looking to drive efficiency at data centres could stand to benefit Calnex.

Separately, Mr Cook said staff recruitment was proving to be a challenge for Calnex, declaring that it was “still a difficult market”. He said the company was taking steps such as providing training in a bid to encourage people to spend longer with Calnex.

The company currently employs 138 people, 90 of whom are based in Scotland.

Broker Cenkos said in a note for investors: “The growing datacentre opportunity for Calnex and the enduring transition towards 5G continues to drive requirements for its test instrumentation and network validation solutions. Calnex’s order book was very strong going into H2/23 and the order backlog is starting to unwind (easing of supply chain issues), providing confidence in current expectations for the year. We have left forecasts unchanged.”

Shares in Calnex closed up 2.9%, or 4.5p, at 159p.