TIDMTWD
RNS Number : 7849L
Trackwise Designs PLC
15 September 2021
TRACKWISE DESIGNS PLC
("Trackwise" or the "Company")
Interim Results for the six months ended 30 June 2021
Trackwise Designs (AIM: TWD), a leading provider of specialist
products using printed circuit technology, is pleased to announce
today its interim results for the six months ended 30 June
2021.
Financial highlights
-- Revenues of GBP4.1m (H1 2020: GBP2.4m)
-- IHT revenues of GBP0.58m (H1 2020: GBP0.25m)
-- Gross margin of 29% (H1 2020: 17.8%)
-- Adjusted(1) E BITDA of GBP0.45m (H1 2020: GBP0.10m)
-- Adjusted(2) o perating loss of GBP0.13m (H1 2020: GBP0.37m)
-- Reported loss after tax of GBP0.57m (H1 2020: profit
GBP0.92m) after additional deferred tax provisions to reflect the
change in Corporation Tax rate
-- Net cash(3) of GBP2.6m (GBP4.8m gross of borrowings) (31
December 2020: GBP11.4m), following investment at new Stonehouse
site; mortgage finance then in place August 2021
-- Basic EPS of (2.00) (loss) pence per share (H1 2020: 4.98 pence (profit))
(1) Before share based payments; and in addition in the prior
year before acquisition expenses, excluding a negative goodwill
(credit) arising on the acquisition of SCL and excluding a small FX
gain
(2) Prior year included the benefit of a GBP1.6 million negative
goodwill (credit) arising on the acquisition of SCL
(3) Cash less borrowings, excluding IFRS16 right of use lease
liabilities
Operational highlights
-- Acquisition of a 77,000 sq. ft. freehold property in
Stonehouse, Gloucestershire, for GBP2.8 million , to provide
additional IHT production capacity
-- Capital investment programme for the facility, aligned with
the Electric Vehicle customer's proposed OEM product delivery
schedule of early 2022
-- Further investment in people including the appointment of a
Chief Operating Officer to oversee the Group's day-to-day
operational functions, including the fit out of the Stonehouse
site
-- Growing number of enquiries, with the number of IHT total
customers and opportunities increasing to 97 at 30 June 2021 (30
June 2020: 82)
Outlook
-- While trading continues to be impacted by supply constraints
and inflation, the Group is well-positioned to manage these
pressures and is tracking in line with market expectations for the
full year
Philip Johnston, CEO of Trackwise, commented :
"The development of our third manufacturing site at Stonehouse
continues, and we expect to see this completed early in 2022 to
meet production demand from our EV OEM customer.
More widely, we are confident in the opportunities ahead in IHT
and we are seeing a fast-growing number of prospects for the
application of this technology across our chosen markets. Alongside
this, our Advanced PCBs division continues to deliver solid
revenues.
We are positive about the prospects for future growth for
Trackwise and we look forward to providing further updates on our
progress to the market."
Enquiries
Trackwise Designs plc +44 (0)1684 299 930
Philip Johnston, CEO www.trackwise.co.uk
Mark Hodgkins, CFO
finnCap Ltd +44 (0)20 7220 0500
NOMAD and Broker
Ed Frisby/Tim Harper - Corporate
Finance
Andrew Burdis/Barney Hayward - ECM
Alma PR +44 (0)20 3405 0205
Financial PR and IR
David Ison/Caroline Forde/Josh Royston/Kieran
Breheny
Notes to editors
Trackwise is a UK-based manufacturer of specialist products
using printed circuit technology.
The full suite includes: Improved Harness Technology(TM) ("IHT")
and Advanced PCBs - Microwave and Radio Frequency ("RF"), Short
Flex, Flex Rigid and Rigid Multilayer products.
IHT uses a proprietary, patented process that Trackwise has
developed to manufacture multilayer flexible printed circuits of
unlimited length. While the technology has many applications, the
directors expect that one of its primary uses will be to replace
traditional wire harness in a variety of industries.
The Company manufactures on two sites, located in Tewkesbury and
Stevenage (following the acquisition of Stevenage Circuits Ltd in
April 2020). It serves customers in Europe and North America. The
Company has acquired a third site in Stonehouse Gloucestershire
initially for its EV programme.
Trackwise Designs plc was admitted to trading on AIM in 2018
with the ticker TWD. For additional information please visit
www.trackwise.co.uk
Financial Review
Revenue for the period increased to GBP4.3m (H1 2020: GBP2.4m),
which reflects an improving level of revenue generation in 2021
compared to the Covid impacted revenue of 2020 as well as a full
contribution from Stevenage Circuits compared to last year.
Throughout H1 we have recorded a steady increase in IHT revenues
though APCB revenues have been impacted by material supply
difficulties.
Profitability was held back by supplier constraints and the
continuing impact of Covid which impacted across the Group during
the Covid lockdown in the early part of the period.
During the period we have invested heavily in capacity for the
EV OEM product manufacture and supply agreement won last September
deliveries for which begin in 2022. Capital expenditure in H1 was
GBP8.7m including GBP2.7m which relates to deposits on new
equipment, which is disclosed in the balance sheet as Other
Receivables. At 30 June 2021 the Company had net cash of GBP2.6m,
gross cash of GBP4.8m and unused facilities of up to GBP0.75m. In
August a new mortgage finance facility of GBP1.96m was completed on
the Stonehouse freehold site.
The outcome of the period is that losses per share were (2.00)p
(H1 2020 earnings per share: 4.98p)
Board Change
Mark Hodgkins has indicated his intention to step down from the
Board at the next AGM. Mark, 64, would like to reduce his full-time
work commitment and pursue a portfolio career. The Board has
commenced the search for his successor.
CEO's Statement
I am pleased to report on a period in which Trackwise has
ensured it is well positioned to meet further demand for its
proprietary technology. We performed well in the first half, seeing
an increase in demand across our target markets in our IHT and
Advanced PCBs divisions. We have progressed against our strategy
through the acquisition of a third manufacturing site. Through the
investments into production capabilities, we are significantly
better positioned to meet the anticipated uptick in demand expected
in our IHT division.
We also invested in a number of new appointments. Steve Hudson
as Chief Operating Officer brings over 20 years' experience in the
automotive and aerospace industry, having occupied operational and
programme leadership roles at Bentley Motors and Rolls Royce
Aerospace. As COO, Steve has been responsible for overseeing the
day-to-day operational functions of the Company across its three
sites and leads on the delivery of the Stonehouse site. In the
period we have made a number of senior new hires in advance of
production commencing at Stonehouse.
There remains a significant opportunity ahead for Trackwise and
the Group is seeing an increasing number of interested parties
across its target markets, particularly the automotive and medical
devices sectors. While the Group's main focus is on delivering
organic growth through the healthy pipeline we see ahead, we remain
open to the possibility of acquisition where appropriate.
Improved Harness Technology
Improved Harness Technology (IHT), the long-term growth driver
for Trackwise, is the patented technology which enables the
manufacture of length-unlimited multi-layer flexible printed
circuit boards.
IHT has delivered a strong performance in the first half, as a
result of the recovery of trading activity among our end customers
in combination with the increase in demand for this technology.
During the period, IHT revenues for the first half of 2021 were 95%
of those for the whole of 2020 and we expect these revenues to be
at record levels at the full year.
In April we completed the acquisition of a 77,000 sq. ft.
freehold property in Stonehouse, Gloucestershire, for GBP2.8
million. This site will house the high-volume, low mix, roll to
roll IHT production facility and significantly increases
Trackwise's production capacity to meet the expected demand for IHT
across its target markets.
The Company remains subject to global supply chain issues until
the full completion of machinery installation at Stonehouse, but
good progress is being made on the delivery of this site. We expect
to be in production in early 2022, in line with the revised ramp-up
in production by the Company's EV OEM customer, and we are working
increasingly closely with the customer as we progress towards this
date.
While IHT has a wide range of applications, we have set out the
three markets where we expect to see the greatest levels of growth
for this technology. These are:
1. Electric Vehicles
2. Medical
3. Aerospace
We remain confident in the applicability of our proprietary
technology to these markets and the significant revenues this has
the potential to generate.
Electric Vehicles
The Electric Vehicles market is the key area of activity for
Trackwise, and interest in IHT from this market continues to be
healthy. Following on from the EV OEM manufacturing agreement we
signed in September 2020, in July we announced an extension to the
agreement from three to four years, with a significant increase in
expected volumes and potential value. In line with the Stonehouse
site completion expected in January 2022, we expect a ramp up in
demand production and revenues from this deal in the same
month.
In line with the growing emphasis on the sustainability agenda
and an increasing legislative pressure to force the automotive
sector towards non-fossil fuel motive power, we expect to see
further interest from EV customers. During the year-to-date
progress has been made with passenger and commercial vehicle
OEMs/Tier1s, including the design, manufacture and supply of IHT
sample/development parts.
Medical
IHT's application for medical catheters represents a significant
opportunity through the provision of long, narrow flex PCBs to
replace multiple micro-wires, very small gauge wires that are
currently used to connect remote (distal) electronics through the
patient and out to the surgeon.
In May we announced a multi-year agreement with the
Stockholm-based medical device technology company CathPrint AB.
This agreement paves the way for a potential longer-term ramp up in
volume. Elsewhere, the Group has made good progress in this market
and is working with a number of other active customers in that
sector to supply parts for catheter products, and we expect to see
larger production orders placed in the not-too-distant future
Aerospace
Aerospace forms another of the target markets for Trackwise
through the application of IHT to battery management systems.
Despite the impact of COVID on the global aviation industry, the
Group is working with a number of customers in this space and, as
trading conditions and aviation activity normalises, we expect to
see further opportunities in this field.
Other IHT
The Group continues to attract interest from a number of
additional markets in which IHT is applicable. The Group continues
to explore these markets and engage with potential customers, and
this year it has successfully delivered a project to customer in
nuclear fusion, and the Group expects further demand from this
customer in due course.
Advanced PCBs
The Advanced PCBs division comprises Trackwise's legacy
radiofrequency (RF) division and the printed circuit board
manufacturer Stevenage Circuits Limited, acquired by Trackwise in
2020.
This division delivered a solid first half, despite the ongoing
impact from supply chain issues, with revenues up c. 6% from H2
2020. Our order book remains strong and there will be an additional
shift added to accommodate demand seen recently and anticipated in
future.
Current trading and outlook
The Company is making good progress with its investment into the
Stonehouse site, enabling the roll-to-roll production of IHT in the
new year in order to service our EV OEM customer and other
customers being developed.
Alongside this, IHT acceptance continues to grow, and the
Company is on track to deliver record IHT revenues in 2021. Our EV
OEM product delivery is due to begin in early 2022, aligned with
the opening of our third site at Stonehouse.
While the Company has successfully navigated the supply chain
issues around the supply of copper, we are not immune from the
ongoing uncertainty in the wider external environment. As a result,
while they will naturally ebb and flow, further supply chain issues
are likely to continue to affect the Group's end customers and
suppliers in the short term.
The Group is well-positioned to manage these pressures and, as a
result, management expects to report 2021 trading in line with
market expectations. Overall, the long-term prospects for the
Company remain as exciting as ever and we remain confident in the
Group's strategy and future growth prospects.
Interim Condensed Consolidated Statement of Comprehensive
Income
Notes Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
June 2021 June 2020 2020
GBP'000 GBP'000 GBP'000
Revenue 3 4,090 2,389 2 6,068
Cost of sales (2,904) (1,964) (4,350)
Gross profit 1,186 425 1,718
Administrative expenses
excluding
exceptional costs and share
based payment
(1,315) (790) (1,903)
Exceptional and non-recurring
costs (195) - (128)
Share based payment charges 4 (149) (112) (228)
Total administrative expenses (1,623) (902) (2,259)
Operating loss (473) (477) (541)
Negative goodwill arising
on acquisition - 1,545 1,642
Acquisition expenses - (214) (226)
Exceptional integration
costs - - (278)
Finance income - - 4
Finance costs (138) (66) (195)
(Loss)/profit before taxation (611) 788 406
Taxation 5 42 133 828
(Loss)/profit and total
comprehensive (expense)/income
for the period (569) 921 1,234
------------ ------------- -------------
(Loss)/earnings per share
(pence)
Basic 7 (2.00) 4.98 5.96
------------ ------------- -------------
Diluted 7 (2.00) 4.82 5.70
------------ ------------- -------------
Interim Condensed Consolidated Statement of Financial
Position
Notes Unaudited Unaudited Audited
30 June 30 June 31 December
2021 2020 2020
GBP'000 GBP'000 GBP'000
ASSETS
Non-current assets
Intangible assets 8 7,940 5,200 6,482
Property, plant and
equipment 11,425 8,363 8,175
19,365 13,563 14,657
---------- ---------- -------------
Current assets
Inventories 2,296 1,740 2,010
Trade and other receivables 5,498 1,585 1,752
Current tax receivable 1,146 448 804
Cash and cash equivalents 4,806 3,209 13,930
---------- ---------- -------------
13,746 6,982 18,496
---------- ---------- -------------
Total assets 33,111 20,545 33,153
---------- ---------- -------------
LIABILITIES
Current liabilities
Trade and other payables (2,501) (2,210) (1,956)
Borrowings (887) (575) (1,055)
(3,388) (2,785) (3,011)
---------- ---------- -------------
Non-current liabilities
Deferred income - grants (975) (914) (910)
Borrowings (3,714) (3,640) (4,078)
Deferred tax liabilities (506) (401) (206)
Provisions (79) (310) (79)
---------- ---------- -------------
(5,274) (5,265) (5,273)
---------- ---------- -------------
Total liabilities (8,662) (8,050) (8,284)
---------- ---------- -------------
Net assets 24,449 12,495 24,869
---------- ---------- -------------
EQUITY
Share capital 1,137 885 1,137
Share premium account 20,989 9,374 20,989
Retained earnings 2,214 2,088 2,615
Revaluation reserve 109 148 128
Total equity 24,449 12,495 24,869
---------- ---------- -------------
Interim Condensed Consolidated Statement of Changes in
Equity
Share Share premium Retained earnings Revaluation reserve Total equity
capital account
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2020 591 4,234 1,045 167 6,037
Profit and total
comprehensive
income for the
period - - 921 - 921
Issue of shares 294 5,140 - - 5,434
Share based payment - - 103 - 103
Revaluation
realised in period - - 19 (19) -
--------- -------------------- ------------------ -------------------- -------------
At 30 June 2020 885 9,374 2,088 148 12,495
--------- -------------------- ------------------ -------------------- -------------
Profit and total
comprehensive
income for the
period - - 313 - 313
Issue of shares 252 11,615 - - 11,867
Share based payment - - 160 160
Prior year tax
adjustment - - 34 - 34
Revaluation
realised in period - - 20 (20) -
At 31 December 2020
and 1 January 2021 1,137 20,989 2,615 128 24,869
--------- -------------------- ------------------ -------------------- -------------
Loss and total
comprehensive
expense for the
period - - (569) - (569)
Share based payment - - 149 - 149
Revaluation
realised in period - - 19 (19) -
-------------------- --------------------
At 30 June 2021 1,137 20,989 2,214 109 24,449
--------- -------------------- ------------------ -------------------- -------------
Interim Condensed Consolidated Statement of Cash Flows
Unaudited Six Unaudited Six Audited
months ended 30 months ended 30 Year ended 31
June 2021 June 2020 December 2020
GBP'000 GBP'000 GBP'000
Cash flow from operating activities
(Loss)/profit for the period before
taxation (611) 788 406
Adjustment for:
Employee share based payment charges 149 112 263
263
Depreciation of property, plant and
equipment 524 349 693
Amortisation of intangible assets 181 118 265
Negative goodwill credited - (1,545) (1,642)
Finance costs 138 66 191
Changes in working capital:
Increase in inventories (286) (314) (584)
(Increase)/decrease in trade and other
receivables (732) 459 374
(Decrease)/increase in trade and other
payables (221) 21 (362)
------------------- ------------------- --------------------
Cash (used in)/from operations (858) 54 (396)
Income tax received - 420 669
------------------- ------------------- --------------------
Net cash (used in)/from operating
activities (858) 474 273
------------------- ------------------- --------------------
Cash flow from investing activities
Purchase of property, plant and equipment (6,266) (359) (911)
Purchase of intangible assets (1,478) (1,036) (2,246)
Purchase of subsidiary (net of cash
acquired) - (1,629) (1,628)
Grant funding - purchase of intangible
assets 92 - 109
Interest received - - 4
(4,672)
Net cash used in investing activities (7,652) (3,024) (4,672)
------------------- ------------------- --------------------
Cash flow from financing activities
Share capital issued - 5,873 18,492
Expenses relating to share capital issue - (439) (1,191)
Interest paid (138) (66) (195)
Lease payments (106) (81) (87)
Advance of hire purchase finance against assets already purchased 135 - 1,139
Repayment of other finance (128) - -
Repayment of capital element of lease contracts (377) (95) (396)
---------- -------- ---------
Net cash (used in)/from financing activities (614) 5,192 17,762
---------- -------- ---------
(Decrease)/increase in cash and cash equivalents (9,124) 2,642 13,363
---------- -------- ---------
Net cash and cash equivalents at beginning of the period 13,930 567 567
Net cash and cash equivalents at end of period (all cash balances) 4,806 3,209 13,930
---------- -------- ---------
Notes to the Interim Financial Information
1. Corporate information
Trackwise Designs plc is a public company incorporated in the
United Kingdom. The registered address of the Company is 1 Ashvale,
Alexandra Way, Ashchurch, Tewkesbury, Gloucestershire, GL20
8NB.
The principal activity of the Company and the Group is the
development, manufacture and sale of printed circuit boards.
2. Accounting policies
Basis of preparation
This unaudited consolidated interim financial information has
been prepared in accordance with IFRS as adopted by the United
Kingdom including IAS 34 'Interim Financial Reporting'. The
principal accounting policies used in preparing the interim results
are those it expects to apply in its financial statements for the
year ending 31 December 2021. These are unchanged from those
applied in the 31 December 2020 Company financial statements
The financial information does not contain all of the
information that is required to be disclosed in a full set of IFRS
financial statements. The financial information for the six months
ended 30 June 2021 and 30 June 2020 is unreviewed and unaudited and
does not constitute the Group or Company's statutory financial
statements for those periods.
The comparative financial information for the full year ended 31
December 2020 has, however, been derived from the audited statutory
financial statements for that period. A copy of those statutory
financial statements has been delivered to the Registrar of
Companies. The auditor's report on those accounts was unqualified,
did not include references to any matters to which the auditor drew
attention by way of emphasis without qualifying its report and did
not contain a statement under section 498(2)-(3) of the Companies
Act 2006.
The financial information in the Interim Report is presented in
Sterling.
3. Segmental reporting
IFRS 8, Operating Segments, requires operating segments to be
identified on the basis of internal reports that are regularly
reviewed by the company's chief operating decision maker. The chief
operating decision maker is considered to be the Board of
Directors.
The operating segments are monitored by the chief operating
decision maker and strategic decisions are made on the basis of
adjusted segment operating results. From January 2018 the RF and
IHT activities began to be separately reviewed and monitored,
initially in respect of revenue. Since the acquisition of Stevenage
Circuits Limited in April 2020 the Company monitors separately the
IHT business and the Advanced PCB business, which comprises the
Stevenage Circuits Limited and the RF business of Trackwise Designs
plc.
All assets, liabilities and revenues are located in, or derived
in, the United Kingdom. The material assets and liabilities relate
to overall activity with the exception of the intangible
development costs and deferred grants which are solely in respect
of IHT.
In the six months ended 30 June 2021 the group had one major
customer who represented 11% of revenue (30 June 2020: two major
customers who each represented 12% of total revenue, and full year
ended 31 December 2020: 3 customers with similar revenue levels
together representing 29% of revenue).
Revenue by product and geographical destination was as
follows:
Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
June 2021 June 2020 2020
GBP'000 GBP'000 GBP'000
IHT 581 251 601
APCB 3,509 2,138 5,467
--------------- ------------ -------------
4,090 2,389 6,068
--------------- ------------ -------------
UK 3,053 1,495 3,693
Europe 732 751 1,688
Other 305 143 687
4,090 2,389 2 6,068
--------------- ------------ -------------
4. Exceptional and non-recurring items
Non recurring amounts disclosed in administrative expenses are
as follows:
Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
June 2021 June 2020 2020
GBP'000 GBP'000 GBP'000
New production site set 141 - -
up expenditure
Integration and other costs 54 - -
Set up costs for new customer - - 128
--------------- ------------ -------------
195 - 128
--------------- ------------ -------------
5. Income tax
Taxation is provided at the estimated rate of tax for the
period, applying the enacted rate of 25% (2020:19%) to deferred tax
balances as applicable to the expected reversal dates, and
including the benefit of enhanced allowances for research and
development costs in tax losses used to record a credit paid to the
group.
The credits have been impacted by both the change in deferred
tax rate following enactment of the Finance Act 2021 and by
movements in the period end share price directly affecting deferred
tax in respect of future deductions from the exercise of share
options. These non-recurring items have been analysed in the
elements of the tax credit shown below.
Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
June 2021 June 2020 2020
GBP'000 GBP'000 GBP'000
Development expenditure
tax credits 342 133 633
Deferred tax in respect
of share options (141) - 440
Deferred tax change in rate (121) - 53
Deferred tax from other
timing differences (38) - (298)
--------------- ------------ -------------
42 133 828
--------------- ------------ -------------
6. Dividends paid and proposed
No dividends have been paid or proposed in the period ended 30
June 2021 or year ended 31 December 2020.
7. Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
June 2021 June 2020 2020
GBP'000 GBP'000 GBP'000
(Loss)/earnings for the purpose
of basic and diluted earnings
per share being net (loss)/profit
attributable to the shareholders (569) 921 1,234
--------------- ------------ -------------
Number Number Number
Weighted average number of
ordinary shares for the purposes
of basic (loss)/earnings per
share 28,426,122 18,503,836 20,687,836
Weighted average number of
ordinary shares for the purposes
of diluted (loss)/earnings
per share 28,426,122 19,116,462 21,659,166
Options over 901,909 shares were granted to employees on 15 June
2018 and 984,000 on 24 June 2020 which are still exercisable and
potentially dilutive shares included in the weighted average for
the year ended 31 December 2020.
8. Intangible fixed assets
Development
costs
GBP'000
Cost
At 1 January 2020 4,368
Additions 1,024
As at 30 June 2020 5,392
Additions 1,423
As at 31 December 2020 6,815
Additions 1,548
As at 30 June 2021 8,363
------------
Amortisation or impairment
At 1 January 2020 268
Charge 113
As at 30 June 2020 381
Charge 142
As at 31 December 2020 523
Charge 175
As at 30 June 2021 698
------------
Carrying amount
As at 30 June 2020 5,011
------------
As at 31 December 2020 6,292
------------
As at 30 June 2021 7,665
------------
The capitalised development project costs relate to the
significant continuing investment in respect of the Company's
Improved Harness Technology ('IHT') process for unlimited length
printed circuit boards and know-how which is being developed by the
Company with amortisation on the initial development projects
commencing in 2018.
The remainder of intangible assets is represented by software
assets and an unchanged amount of goodwill in respect of the
initial technology.
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