Concurrent Technologies (LSE:CNC) — Results for the year ended 31 December 2023

0:00 Good morning and welcome to the CONCURRENT TECHNOLOGIES PLC investor presentation. Throughout this quarter presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the Q and A tab situated in the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question it receives in the meeting itself. Have the company can review all the 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 morning to you, sir.

0:28 Thank you. Good morning. Welcome to CONCURRENT TECHNOLOGIES. Next slide, please. Quick introduction of myself and Kim. So I've been with the business almost three years now. Prior to that, I was with Teledyne for four years running their space imaging business in The UK. Big transformation of that business. Prior to that, I had nine years with Kinetic, part of their executive team running much of their technology interests in The UK. Twenty five years in defense and aerospace. Kim? Good morning. My name's Kim Garrett. I'm the chief financial officer of CONCURRENT TECHNOLOGIES. I've actually been with the business two years today. Pre prior to that, I was with Kinetic and its predecessor organizations in the finance area. And with my last role being the finance director of the international business.

1:16 Thank you. Next slide, please.

1:20 So concurrent technologies designs and manufacturers in our factory in Colchester in England. Designs and manufacturers high end, high performance computer products for use with many of the world's largest OEMs, original equipment manufacturers. Typically large defence prime contractors. Next, please.

1:43 So draw your eye to the left hand side of this chart. What we have done since 1985 is make single board computers. We in 1985, Intel launched the three eighty six chip. You might remember that. That three eighty six chip had 132 pins on it. And back then, we designed a printed circuit board to connect a 132 pins to all of the other components that would turn that processor into a fully functioning embedded computer, which then plugs into somebody else's system, and sits alongside other cards that do other things in that system. Roll forward almost four decades, and that's what we do today. Except now the latest Intel chips have more than 2,000 pins on them. We connect those 2,000 pins to thousands of components on a printed circuit board, which is roughly the size of a postcard.

2:36 So part of our core know how is managing the complexities of so much technology in such a small space, such that it works extremely reliably. For the last two and a half years, in the middle of this chart, we've increasingly sought to provide system level. So if our plug in cards plug into systems, system level services to customers as a stepping stone towards being a fully fledged systems integrator. On the right hand side then, post the acquisition of Philips Aerospace based in Los Angeles, a company with all of the credentials and track records for systems integration. We are now able to authentically position ourselves as a system integrator, as well as a provider of really top quality computer cards.

3:31 Next, please. So 2023 was a landmark year for us. Record financial performance. Yes. Record number of major design wins secured, and I will talk to that. But great progress there. Our acquisition of Philips Aerospace is going very well. I will talk to that. Good progress in our home markets of The UK and United States. A home market is somewhere where we are physically present in both an engineering sense, not just a selling sense. That's going very well. And we continue to invest in the capability and capacity of our people and operations. Next. In terms of markets we sell to, last year 85% of our revenue was into defence.

4:18 That follows the previous year, which was 73%. So defence is growing by proportion in this business. That is a trend that will continue. Most other sectors most of the time can fulfil their computing requirements with lower cost, more commoditized solutions. Whereas defence and aerospace by definition wants to be at the very cutting edge, having greater capability than the competition. So that will continue to grow. The total addressable market that you see in the bottom left is not just a consequence of defence markets growing some, but it's primarily driven by the fact we are now in the world of offering systems, not just cards. And relative to our size, that is a vast market.

5:04 Next. So last year I said we did well for design wins. In fact, we won eight what we call major design wins. Our selling process is if you're the customer and you are upgrading a vehicle, say upgrading the technology on a vehicle, you will want to see products like ours and evaluate our product compared perhaps to competitors' products. And then you'll down select the product that you wish to use in your main programme, which might not start in earnest for two or three years later.

5:40 So us getting the very latest technology into your hands at the time that you make that evaluation assessment is absolutely critical. And it's perhaps the most important thing that we focus on in this business. By virtue of having the latest technology in customers hands throughout last year, and having invested in the upgraded sales force, we were able to secure eight major design wins. Historically, securing one major design win would have perhaps been the norm. So consider this to be a real step up. What we have here is an example of one of the actual design wins from last year. So the Department of Defense in The United States operates programmes of record.

6:27 That means they publicly declare their intent, in this case, to do a technology upgrade on an AIR platform. They publicly declare their intent, the base budget, and the options to do more of that that they may wish to exercise at a later date. Therefore, you know pretty well what the plan is. We won. We got down selected. We won with our customer. That customer has bought some £330,000 worth of product, two of our products, which will play a key role in upgrading the mission computer on this airframe. And we can be pretty confident that from '26 onwards, year on year on year for a number of years, we should be in receipt of between two and five million dollars depending on the options the customer takes, 2 and $5,000,000 of purchase orders for our product.

7:19 That clearly represents a healthy lifetime value for that one opportunity. What we've declared is that those eight design wins conservative conservatively, and it's appropriate to be conservative, conservatively equate to a £100,000,000 lifetime value. Our intent this year is to do at least as well. So should that be the case, and should that be the case in an enduring sense, you can see that you get a layering effect on the benefit of these major design wins. Albeit, it doesn't start for two or three years after you secure that design win. To

7:56 be clear, we don't have contracts for this work. We know we're designed in. Customers likely place contact contracts on an annualised basis as they require the product. Next, please. Good morning. So over to the FY '23 financial results. So a couple to pull out of this slide here. So revenue 31,700,000, the best year the company's ever had by far. So against last year, that's a 73% increase. And against its best year ever, which was 2020, it's a 50% increase. Very much tailored to halves. So the first half was still significantly components constrained because of the components crisis across the world. And the second half was freer from components challenges and actually included an element of Bellwave from backlog that we'd created during that period, an exceptional year for revenue.

8:58 EBITDA 6,000,000, underneath that is 3,700,000 of operating profit before exceptionals of 200 ks. That's the best year this company's ever seen. It's about 6% higher than FY 2021, which was the higher year this company's ever had. Gross profit, 15,600,000, that's about 49.4% against 48.5% the year before. There's still an element of components issues underneath that in terms of pricing, and we believe we'll start to see that price flatten out into FY24. Next slide please. In here is a consolidated statement of comprehensive income. Of course, you can see all our financials in the annual report that's on our website.

9:47 We've talked about a few of these numbers, but one to bring out is the admin expenses because I know everybody spots it. We're about 3,000,000 up on cost. Most of that is in the people area. So in salaries, bonuses and commissions, and that comes from headcount, exceptional performance and changing our commissions basis to make it much more efficient and effective for the business. So it has a one off charge in there about 300 ks. Next, please. This is a five year performance view of the company with some of the key metrics. We've talked about revenue. Order intake is 28,200,000, which looks a bit lower than some of the previous years. That's a good number.

10:33 However, we had a handful of opportunities that slipped across into 2024. None of them lost. It's just timing in the defence sector. Next, please. So, cash flow. We're very keen to show people how we're managing our cash. We went through FY 2022 was quite a tough year with cash because of the components challenges. We were limited on revenue that we could get outside the factory door. And also, we made a conscious decision to continue investing in this business so that we were absolutely ready for the potential growth that this business could have. As you can see there in FY 2023, we returned to being cash generative. There's a few key points to note in here. So stock, we did invest a bit more in stock.

11:23 That was driven very much by the components challenges still, but also by we did a one off end of life purchase of components that bought us about five years worth. This component is used on practically every single one of our boards, and therefore we wanted to be in control of when we designed that component out across the boards. You'll see that it also in trade payables. That's because even though we bought these components at the beginning of the second half of last year, there was a fantastic payment profile which meant we didn't need to pay for it until April. That's now cleared off our books. Trade receivables, that's solely due down to timing. We had quite a good second half of the year, and especially the fourth quarter.

12:12 Nothing problematic underneath there. Thank you. Next slide. So in terms of where we sell, a couple of trends here. So The UK and The US will grow. You'll see in our annual report that actually Germany was our second biggest country last year. So doing doing very well in Europe and specifically in Germany. The design wins I talked about are all in The United States. So we will certainly see The US grow by proportion quite significantly. In The UK, we typically win historically around a million pounds of work a year. Last year we took more than £5,000,000 order intake in The UK. This is a consequence of hiring people that really understand the ecosystems of defence in both The UK and The United States.

13:03 Really important that we have that. In terms of customer concentration, we're seeing the top 10 customers represent a little less of the total overall revenue.

13:14 And we're also seeing the top 10 customers much more uniform in terms of being a similar size. So I remember two and a half, three years ago, a very common question was, how will you protect yourselves from the dependency you have on your single largest customer, which is a customer worth around 2.5 to £3,000,000 per annum to us? To which the answer is secure more larger customers regularly, and assume that every year one or two might drop out. Indeed, that's what's happened. That customer does not feature in our top 10 list, despite having been there for a number of years. They're a communications customer, and they're seeing a slowdown in their end market. So that's our customer concentration. Next.

14:02 So this is a little wordy, but these four pillars absolutely reflect the strategic objectives that we set ourselves within the business. Every person and every team has objectives that relate to these four pillars. First and foremost, on the left, is getting new technology in the hands of customers as quickly as possible. Some of you might recall that in 2021, some 80% of our order intake was for last time by an end of life product. That's a product portfolio rapidly running out of steam because it is not putting the latest technology in customers' hands. '22 2023 then and '22, that flipped to 80% new and current product in our order intake.

14:50 Okay. So we've really transformed the business in terms of being much quicker to market. Some two thirds of colleagues have started after I did. That transformation being primarily focused on being even better at designing product with pace, and transforming our approach in sales. The next main pillar of our strategy then is to progress into the world of systems. Broadly speaking, our systems business should have the ability to grow to be a commensurate size to our boards business. That will take many years. Our sales cycles are quite long. Clearly, the acquisition of Philips Aerospace is a important move here for us. We had been working with them for some eighteen months before the acquisition happened. And therefore, we've had a lot of time planning what it is we intend to bid for, what it is we expect to win and execute.

15:43 And during the course of this year, I'm optimistic that we will have a handful of announcements of work that we've won that neither Philips in isolation nor ourselves in isolation historically could have won and prosecuted. So look forward to that during the course of this year. Progress in our home markets is exactly as I have said. In The UK, really understanding the defence ecosystem and leaning into that. That's yielded an almost immediate step up in order intake. Very pleasing. The US is all about getting in amongst the prime contractors

16:19 that are likely to be winning work in the future, particularly these programmes of record, and having a much more strategic relationship with them from a technology point of view, and build those relationships rather than the alternative being just to wait for customers to contact you because they're interested in purchasing your products. That's going extremely well. We've got a very good team in The US. For people then, it's all about talent. What we say to people in this business is every year should be the most developmental year of your career. Generally speaking, for the last two years, I believe that's been largely true.

16:55 We're proud to be members of the five percent club. For people that don't know what the five percent club is, a lot of PLCs and government organisations, particularly in engineering, are members. It was founded by the current chief executive of Balfour Beatty. And we were awarded gold because we have more than 10% of our employees in earn as you learn schemes. So development and talent very important to us. Next.

17:22 So our M and A strategy. We are acquisitive. We did the first one for many many years last year. On the left hand side of this chart is the business that we have been for some thirty five years. Designing and building processor based cards, computer cards, and storage cards. Then for the last three years, we've sought to project more elements of a system into our customers, primarily through partnership. We've got some very good quality partners, but really weren't in a position to authentically be systems integrators with track record. Now having acquired Philips Aerospace, we are authentically systems integrators, really steps us up into a much more intimate dialogue with customers.

18:09 These systems will often be custom to the customer's requirement. And that was why it's so important that we had a facility in The United States. Whereas we can project boards from The UK to The US, really to be a credible systems provider in The US, you need American people in an American facility with track record of having done business locally so that customers are confident they can have their sensitive discussions with the organisation. Any acquisition we do in the future then will clearly fit into this

18:42 systems logic diagram, whether it's an element shown at this level or whether it's some cross cutting system level capability like heat management or security software or whatever. But we're in no hurry to do the next acquisition. It's really important that we take the time to deliver the benefit, the value creating that we know will come from having acquired Philips Aerospace. Next.

19:11 So we have a number of growth initiatives, some of which are listed here. Whether it's getting technology to market more quickly, whether it's having partners through whom we can project more capability into our customers, whether it's better relationships with prime contractors, and indeed whether it's acquiring other businesses. These are no longer just items of intent. These are things that we now have demonstrable track record in, delivered quite strongly over the last twenty four months. So we're really proud of that progress. These things really matter to us. Next. In summary then, last year 2023, very strong year. Optimistic that we've got the momentum coming into 2024 in terms of both customer demand and operational capacity to continue to grow the business.

20:00 My discussion earlier on design wins should give a sense of confidence that in the medium term, say '26 onwards, we should see a real step up in what this business is capable of. Clearly, we're in the thick of capacity planning so that we can seize that opportunity as it crystallises over the coming months and years. So reasons to be optimistic, albeit hard work ahead, but we're in great shape.

20:28 Thank you. That ends the presentation. Perfect. Miles, Kim, thank you very much for the presentation. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab, which is situated on the top right hand corner of your screen. We have received a number of questions both pre submitted and live and I want to start off the Q and A session with this one here which reads as follows: Could you please update us on your negotiations for a debt facility? Yes absolutely, so that is at a really early stage. We have no immediate need for a debt facility, so I'm taking it very slowly in terms of that conversations. They have started and we will work towards putting something in place. Perfect. Thank you very much, Kim. Kim, the next question is also addressed to you and says, Kim, the results have come out two months earlier than last year. Should we expect them to come out earlier than the May 1 next year? So I'm absolutely delighted they were two months earlier than last year, which was a bit of a ride.

21:24 Absolutely, we will try to do the most efficient and effective give the most efficient and effective audit and get it out as quick as we possibly can. I'm not gonna promise to anything earlier than we have done this year. We do have a new set of auditors, which went very well this year.

21:43 There was so so we have had a first year learning curve. Next year, we will have a new ERP system in place in terms of FY '24. So will be an element of learning from that as well. So yes, we'll absolutely try. We'll always try, but the April 30 is a good date and I'm not going to promise anything at the moment. Thank you very much. Next question here. Congratulations to all of the team on such a brilliant outlook. Do you expect to make boards in America at the Philips facility in the future? No. So Philips is a systems integration facility, which is very different to doing PCB assembly and boards. So we'll continue to do that in a factory in Colchester in The UK. We may also bring online third party manufacturers.

22:30 There are plenty of low volume, mix electronics manufacturing partners. So that may well form part of our capacity solution. That could be in America.

22:40 Thank you very much, Myles. Could you talk about the competitive edges that CONCURRENT is building?

22:46 Yeah. One one source of advantage to us was actually the components shortages. It's true to say that the majority of our competitors slashed costs in order to protect short term profit. I'm absolutely confident that we did the right thing in not doing that. Our size can become a competitive advantage. It is true that a smaller business can be flexible in terms of decision making and prioritisation. The fact that we own our own factory

23:16 is a differentiator. Quite a lot of people in this market don't. And when you have to reprioritize work quickly, for example, because components are in short supply, it's a huge advantage to have your own facility. Perfect. Turning to the next question. The company has expanded rapidly over the last few years. What assurances can you give private investors that in the event of future acquisition, this will not be funded by a placing therefore diluting their holding? I can't. And to that point, we believe quite strongly that being members of the AIMER market is all about access to funding. But crucially, that funding has to be value generating. So, we're clearly pleased with the share price performance in recent months. May that long continue.

24:03 But anytime we come to the market to raise funds to support an acquisition, should that happen, first and foremost, we would want to have a compelling value generating proposition so that it does not in any way feel dilutive to you the investors. Thanks very much, Miles. To what extent is having a major focus on the defence industry deterrent for both private and institutional investors? I've not yet had anybody raise it as a negative point. That isn't to say it is an issue for some people who may not be current holders or maybe even for some current holders. But it hasn't thus far featured as a negative topic at all in any the meetings that I've had. So I'm optimistic that it's not really an issue for the majority of investors.

24:49 Perfect. The next question here. Please, can you discuss the decision making process to reinstate a dividend after only relatively recently sought funding through replacing?

25:00 Yeah. That's we we communicated a policy of paying dividend out of India cash and profit. Last year was clearly profitable and cash generative. Now the dividend in an absolute sense and relative sense is set at a much lower level than previous years, albeit there's none the year before, with four to five times cover. Clearly, our range of investors have very different views, including quite a lot of people at both extremes. So we sought to propose, and it's a proposal, propose a dividend that was least confrontational to as many of our current holders as possible. Perfect. Next question here. Given a year end cash balance of 11,120,000, was a capital raise of 6,800,000 necessary?

25:52 So, it absolutely was. It was all about timing. So we had been in conversation with Philips Aerospace for a long time. We had to go through lots of regulatory processes, obviously, to buy an American company, but we've sort of held off a bit as well to get our performance starting to come back on track because of the components challenges. Cash was at a really low position in the middle of FY twenty three before that. So we really did, in terms of timing and making this acquisition, we didn't have enough money to do both that and have enough working capital. So it was absolutely necessary. And under the 11,100,000 is still a significant amount of that cash from the equity raise, which is earmarked for the investment in the systems business.

26:46 Yeah. For example, we we intend to move to a new facility in Los Angeles, one that is much more fit for purpose for us moving forwards. We've got a planning assumption that will use roughly £1,000,000 of that raise.

27:00 Perfect. Thank you very much. Turning to the next question. What specific work will COODA Associates undertake? And could this not be accomplished in house? They're specialists with decades of experience in developing individuals and leadership teams. This business will transform itself regularly. It's a different business now to the one it was three years ago. It'd be a very different business again in three years time. No, we could not do that internally, and generate the same kind of outcome in terms of the leadership of this business going forwards. Perfect. Well, concludes the pre submitted questions. We have had a number of questions live. So I'll start the question, the live questions now. Can you give some examples of customer end user applications? Yeah. So the design win that I shared earlier was for a mission computer in an aircraft.

27:51 A mission computer does pretty much what it says on the tin, which is it it understands the specific mission you're engaging in that day And gives you all the information and feedback live as you progress through that mission. That would be quite common. A lot of what we sell into is customers who have sensors and they're analysing the data for that from those sensors. Whether it's detecting threats, detecting communications, whatever it might be. There's a there's a theme, there's a trend in defence called computing at the edge. So increasingly, customers want as much computing capability as possible in frontline vehicles in order to maximise keeping the vehicle safe, communicating cyber security, responsiveness, all of that stuff. So any vehicle may have quite a significant number of computers on board, actually.

28:48 We also sell into air platforms, helicopters, aircraft, ships, radars, all sorts of stuff in the defense footprint really. Perfect. Next question here. Are there any plans for further small bolt on acquisitions? Would you ever consider a larger one? Philips was very much a capability buyer. Very small business, but the credentials it gave us as well as the expertise of the relatively small team is a great catalyst from which we can nurture and grow a systems business potentially of some size. Let's see what the next one looks like. It will almost certainly be in either The United Kingdom or United States. Our default preference might be something somewhat larger, which is more attractive from an accretive financial perspective on day one.

29:43 But let's see. It takes a lot of effort to manage a pipeline of m and a. And the ones that finally make it through, it's very hard to predict well in advance. Perfect. Next question here asks, are there any new third party design or technology software packages that you're using? Yes. So there are there's a small number of such things as part of our product offering, particularly with regards to security. We of course use a lot in terms of our own design process. And it would be true to say that we've invested a lot in having tools for the trade that are much more fit for purpose for the design work that we do.

30:29 We come from a background of being primarily hardware. So, you know, for us growing a software team, is what we are doing for managing BIOS and security and other things is is relatively new and something that we are looking to expand going forward. Perfect. Turn to the next question. How much of the backlog has been completed as a percentage in the FY twenty three revenues FY '24 level? So to answer that quite simply, we had we had something like it was about just under 27,000,000 coming into FY '23. We went out of FY '23 and into FY '24 with about 23,000,000. And obviously there's a mixture as we go through the year of what becomes in year and what goes out to future years.

31:20 Perfect. Thank you very much, Kim. The next question, what the last caused the very big increase in German revenues? Actually, we've always done good business in Germany, but the way it's presented, I understand some people think it's gone from zero to its current current number. It was within a Europe number before we split it out. Germany has been very good for us in the last year or two. We've been developed in particular two or three key relationships in Germany. They are seeing an intense period of vehicle upgrade programs primarily as a result of the conflict, which is geographically very close to them. Perfect. Thanks very much, Miles. To what extent do you expect the business to be self financing over the next few years for which you've estimated revenues?

32:06 So I'm not quite sure what's meant by that. But actually if it's we we will absolutely be cash generative over the next few years. The only reason we would not be self financing is for an acquisition. Thank you very much. Yeah. We certainly never fought we would certainly not want any market expectations for the future to include revenues associated with either acquisitions that haven't been done or or or capacity which was somehow beyond our own capability to provide cash for it ourselves. Perfect. The next question is around r and d and asks, capitalised r and d was 4,000,000 in 2023.

32:52 Will this grow in '24 and what are the main areas of development? So if I take the first part of that Miles, so yes, it's circa 4,000,000 in 2023. It it probably won't grow. It might, you know, grow a little bit with the odd piece of the team growing, but actually our internal r and d, which is our r and d on our own products, which is really important to this business because that enables us to do get these design wins. We'll stay around the $44,500,000 mark. What we will do probably in R and D is grow as we get more projects, grow the team in terms of customer funded r and d. That doesn't get capitalized. That's a customer project related cost, but it is it is part of the way we're going forward with the more intimacy with the customer.

33:41 Yeah, we as you might expect, we have a multi year roadmap for products. It's driven by a number of things. Clearly, particular launches of Intel product. We don't make a product around every single Intel product. We are very selective as to where that makes a difference. But also form fit and function. So you can make choices about architectures. For example, a lot of our products are VPX. VPX literally relates to the connector, but also some of the architectural principles of the product. And its size, three u VPX is a postcard sized product. There are older standards, one called VME. And we launched a product recently for VME because a lot of the big vendors are pulling out because it's older.

34:27 But actually a lot of customers want to be able to put the latest technology in through an old interface. So we see real market there for us as a small company, picking up business that the larger companies are perhaps moving away from. And then there are game changing technologies such as new approaches to thermal management, for example, which really prompt you to want to have a new product in that product roadmap. We review that roadmap all of the time, and we absolutely expect there to be a lead customer for any product that we develop. So what we don't do is sit in isolation and try and work out what we think the market wants. We're extremely collaborative externally with that progress process. Perfect. Thank you very much for that. The next question asks, how will you fund future acquisitions? I think we've covered that. So default is from the AIM market.

35:19 Perfect. Thanks very much. What's your current sales pipeline and what's your average conversion ratio? Yeah. I earlier talked about eight design wins. In fact, there are four others where customers have down selected us, but they themselves have not won the work. So we haven't included that particularly. We were pursuing around 20. So the conversion on those big opportunities was was approximately 50%, which is very good. It's very strong. In fact, it tells us that we could perhaps lean more, in more to secure work that perhaps we haven't been considering thus far. We look to do better than that this year. Of course, the overall pipeline includes a lot of opportunities that aren't major design wins. And I would say between 50% is probably not untypical.

36:09 By the time it makes an opportunity makes its way through a particular level of maturity in our pipeline, then it's 50% is a reasonable assumption. Perfect. Thank you very much. That's great. The next question is, what is the current order book in revenues? So I think we touched on this a bit earlier, but actually we've came we've come into f y twenty four with 20 circa 23,000,000 of contracted backlog. That's not all for f y twenty four. Some of it will be out to f y twenty five and beyond, which is an important point to note. Yeah. Clearly, we're not updating in terms of numbers for where we are at the moment, but suffice to say, we've had a solid start to '24. Perfect. Thank you very much.

36:56 Can management give an idea of how much value is tied up in slow moving inventory? How long would this take to shift? So slow slow moving inventory is quite important to us, which sounds very odd, but it is. One of our unique points is that we hold stock for quite a long time to support our customers for many years. So if you think about a life cycle of a product, maybe seven years or a contract seven years. As they get to the end of the seven years, customer often wants more boards, so we use that inventory. The slow moving inventory is roughly one to 2,000,000 of our total number. Perfect. Thanks very much, Kim. Next question here.

37:41 Well done on your recent progress. When thinking about new business wins, how should we think about the margin structure? Are the new opportunities dilutive or accretive? Any pointers as to the likely capex requirements? Do you want me to take this one, Myles? Yeah? Sure. So going forward, we're gonna we're gonna look different. So our board's business is pretty solid and will continue around the, you know, 50% margin, give or take. In terms of the systems business, very different. So the systems business will vary depending on the the specific projects that we engage with customers on and that we're contracted for. And that's because the systems will either be they could be high concurrent 10 content. So it's not only the system, but the boards that go into the systems could be concurrent. Or it could be low concurrent content in that the the systems undertaken by concurrent, but actually the boards that go into it might come from third party providers depending on what the customer wants.

38:39 We're very new in the systems business. So, know, we've always said that we believe the systems could be around 35% blended margin. Time will tell on that. But, you know, that's that's where we're looking at the moment. Worth also noting that typically there's upfront design engineering work for custom systems with customers that gets paid for by the customer. That gets paid for by the customer. And and how much margin we take on that work, of course, depends on the nature of the overall deal. Perfect. Thank you both. How will Brexit impact your defence business in Europe in coming years? We have not seen a detrimental impact certainly yet.

39:27 And again, it's not a conversation that's featured with our distributors. We sell exclusively through distributors into Europe. We consider that's by far the best model. So, I'm going to say it hasn't done yet and I don't see any indicators why it will going forwards, but let's hope that's the case. Perfect. Thanks very much. Got another question here. You currently need to pay very little tax. Is this for ongoing reasons, e. G. R and D? Or is it utilising losses which might soon run out? So it is very much around R and D. So we get quite large R and D tax credits. We are also utilising some losses, which will eventually run out. As we get bigger and more profitable, the gap will close between what we pay and what we get credit for.

40:18 We are managing our tax affairs very efficiently and effective. We have a third party advisor we are carrying forward some losses so that that helps us with some of the future early profits. But as I say, eventually, we hope to be so profitable that our r and d doesn't quite balance it out. That's a great position to be. Perfect. Next question here. Miles, you're a key employee and have the expertise for transformational change. Once this transformation in concurrent is largely complete, will you be sufficiently fulfilled in this role? Yes. Well, it's my default answer. I mean, the the ambition of me and the team is just to keep going and see how far we can take this fantastic business. And for as long as that's fulfilling, there is no end to that particular journey.

41:09 Perfect. What do you expect to be the rough h one, h two split of revenues based on analyst forecast of 34,000,000 for the year? This means that this is likely to be reduction in h one twenty four revenues from h two twenty three. Is there any seasonality in the business? I'll take this. There's not really any seasonality. What does affect q one revenues is is typically you optimize the factory in q four, the prior year, to maximize revenue, which means you usually are starting more or less from scratch again in January. So typically q one is less than any other typical month. Other than that, there's not particularly any seasonality. It's just human nature that people tend to lean in even more in q four than perhaps they do during q one. I don't think we're in a position to talk about the splits that we expect this year.

42:02 Perfect. Thank you very much, Miles. Given your exposure to the defense industry, are you at risk of any protests that other suppliers to the sector face? I hope not. Perfect. Thank you very much. Where are you now in terms of becoming concurrent with Intel's product release cycle? Perhaps in terms of months and how much further to go? Also does the significant investment by Intel in new geometries and associated chips act as a tailwind? Very good question. So, for the Intel products that we choose to build our own products around, we are within days typically concurrent with announcing our products at the same time as Intel announces theirs. That's not the same thing as having a product finished and ready.

42:50 So therefore, it's incumbent on us to make sure the gap between announcing and actually having product in customers hands is not too long. And so far, as testament to our design wins, we're doing quite well at that. Now the end to end process of designing and getting a board that is functional and working and fully qualified is quite long. It's many, many months. It's the thick end of a year for sure. There are some very long poles in the tent there. For example, manufacturing the first off very complex PCBs can take many weeks. Clearly, if the first time you assemble that border around that PCB, you find there's some minor error in the design or some improvement that's necessary, then albeit it's a minor change to make in design, it can cost you another many, many weeks during the initial PCB manufacturing process.

43:43 So there will be a limit to how good we can get it. The final thing I'd say there is it's largely significantly a new team. We've got a number of long term experts in the business in that team, but lots of new people who've joined the business. Two thirds people joined since I did. So it takes two or three cycles of working together to design products to get really flying. So, you know, we're mid flight. We're mid flight on where we would like to get to, but I think the evidence is that the market is responding well to the progress that we have made. Perfect. Thank you very much. Just got a couple of questions left. Please comment on your capitalisation and amortisation of r and d. Should we expect cash from ops to significantly lag reported profitability? So, capitalisation of R and D is very much around the development of the products and not the early stage research. It's all about the development.

44:38 We look at our investment cases very carefully. There is always a bit of a lag in cash because obviously development takes place. We haven't sold much product. There is some sale of product as we get towards end of developments in terms of early stage evaluation boards that might not have the full capability on them. So we do receive some cash early on. In terms of amortisation, we work on a seven year amortisation policy, which is in line very much in line with a lot of our design win projects, going forward contracted work. And that's been looked at quite heavily by the auditors, our new auditors. What was the second half of the question?

45:25 Sorry. Capitalisation, amortisation, and you said something else. One moment. Let me just get that for you. Sorry. It's capitalization. What was the second part of the project question? Give me one moment. Sorry. I just removed it. Oh, sorry. Please comment on your capitalization and amortization of r and d. Should we expect cash from ops to significantly lag reported profitability? That's okay. I think I've answered the question then. Thank you. Perfect. The next question here. Any plans for production capacity increase in UK to meet future demand?

46:13 Possibly. So I think we said earlier, we're in the middle of making that assessment. We could we have two production lines at the moment in our Colchester facility. That facility is full. We don't have any enough toilets and car parking spaces to employ more people. So and we've got a lease renewal in 2026. So we need to decide how big we want our internal capacity to be versus how much do we want to lean on third party manufacturers. We're right in the middle of that assessment at the moment. I'm not concerned about it. There's a series of good options, but we will have a specific answer to that within months. Perfect. Can you give examples of AI use in product development, please? AI use in product development.

47:00 We are not using AI in earnest during product development. Some of the individual engineers, I'm sure, are utilizing some AI tools as part of what they do. But AI does not yet feature prominently in what we do as a business. Perfect. Sorry. We just had a few more that have come in. Are you involved in military train work? Our products are physically quite large and demanding typically of quite a lot of power. So anytime we are in an unmanned aerial vehicle, it would be quite a large one. Perfect. And and the final question, if you do come to the market for further funds, will retail investors be given the option to be included in the fundraise? Yes. Absolutely. And the the opportunity for retail to be involved heavily in the last fundraise was significantly constrained by the requirements of one or two of the much larger institutions at that time, given it was a relatively small raise.

48:04 One would be hopeful the opportunity would be greater next time. Perfect. Miles, Kim, thank you very much for answering all of those questions for investors. And of course, the company can review all the questions submitted today. And we'll publish those responses on the Investor Meet company platform. But just before redirecting investors, provide you with their feedback, which is important to you both. Miles, can I just ask you for a few closing comments? Yeah. Just to say thank you to everybody that's taken the time to be with us today and thank you for your interest in the company. It really matters. And thank you very much for the questions. They were interesting to consider. Thank you. Perfect. Myles, Kim, thank you very much for updating investors today. Could I please ask investors not to close the session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations?

48:52 This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of CONCURRENT TECHNOLOGIES PLC, we'd like to thank you for attending today's presentation, and good morning to you all. Thank you very much. Thank you.