TIDMTWD
RNS Number : 5241M
Trackwise Designs PLC
17 September 2019
17 September 2019
TRACKWISE DESIGNS PLC
("Trackwise" or the "Company")
Interim Results for the six months ended 30 June 2019
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
2019.
Financial highlights
-- Revenues GBP1.547m (H1 2018: GBP1.846m)
-- IHT Revenues up 65% to GBP547k (H1 2018: GBP331k)
-- Gross margin 38% (H1 2018: 39%)
-- EBITDA of GBP237K (H1 2018: GBP347k)
-- Adjusted operating profit of GBP61k (H1 2018: GBP113k)
-- Net cash* of GBP1.41m (31 December 2018: GBP2.79m)
-- Basic EPS of (0.43) pence per share
* Excludes IFRS 16 lease liabilities
Operational Highlights
-- Strong growth in IHT in the first half; revenue up 65%
-- Total IHT customers and opportunities increased to 57 at the
end of the period (H1 2018: 14), increasing to 65 at mid-September
2019, several of which indicate production volumes in the near
term, underlining our confidence in the potential for IHT
-- Growing interest from our target markets for IHT: aviation,
automotive, medical, space and industrial markets
-- Successful delivery of the second ship set for the wiring
harness of a UAV/High Altitude Pseudo Satellite for a US aerospace
OEM
-- Continued enhancements to the productivity and efficiency of our manufacturing capabilities
-- Delivery of a 50m long multilayer flex for a new customer in
the science field, demonstrating the unique manufacturing
capabilities being developed by Trackwise
-- Challenging macro and market conditions impacted revenue in
the RF division within the first half
Outlook
-- Positive customer developments within the IHT division
provide increased visibility of revenues for FY20, including a
collaboration agreement with GKN Aerospace, the world's leading
multi-technology tier 1 aerospace supplier; a significant supply
contract with Arrival Ltd, the electric van manufacturer; and
initial development contracts with two global medical supplies
businesses
-- Increasing IHT customers and orders require the completion of
the scale plans adopted after the IPO
-- Market conditions have not improved since the half year and
the Board now anticipates a material reduction in revenue and
operating profit for the year in comparison to market expectations.
While IHT revenues are expected to grow strongly in FY20, the Board
expects next year to also be behind market expectations
Philip Johnston, CEO of Trackwise commented:
"We are seeing strong growth in interest in our proprietary IHT
technology from many businesses around the world. Our manufacturing
capabilities are now considerably more advanced than they were
prior to IPO and this increase in our capability and capacity,
combined with the size of the prospects being presented to us, give
the Board confidence that Trackwise is at the beginning of a
long-term, profitable growth trajectory.
"While the challenging market environment for manufacturing
businesses has had a detrimental impact on customer orders, with
macro and market conditions affecting our RF business, the
medium-term outlook for Trackwise remains extremely positive,
driven by IHT growth."
Enquiries:
Trackwise Designs PLC www.trackwise.co.uk
Philip Johnston, CEO +44 (0) 1684 299930
Mark Hodgkins, CFO
Arden Partners plc +44(0)20 7614 5900
NOMAD and Broker
Corporate Finance: Ciaran Walsh/Steve Douglas/
Dan Gee-Summons
Equity Sales: Matt Groves
Alma PR +44(0)20 3405 0212
Financial PR and IR
Josh Royston/Caroline Forde/
Kieran Breheny
Notes to editors
Trackwise is an established business that manufactures
specialist products using printed circuit technology. The Company
consists of two divisions Radio Frequency ("RF") and Improved
Harness Technology ("IHT").
The RF business unit manufactures specialist printed circuits
which are primarily used in the antenna infrastructure to support
the 4G/5G mobile phone networks. However, the technology has a
number of other applications which render the RF business a stable
revenue generator.
The IHT division utilises the Company's unique proprietary
technology, a patented process that Trackwise has developed to
manufacture unlimited length multilayer flexible printed circuits.
The Directors believe that the technology has many applications but
believe one of its primary uses could be to replace traditional
wire harness used in a variety of industries.
Trackwise Designs plc was admitted to trading on AIM on 31 July
2018 with the ticker TWD.
For additional information please visit: www.trackwise.co.uk
Chairman's Statement
Trackwise has made solid progress against its strategic
objectives in the first half of the year. We continue to feel the
positive impact of the IPO across the business, providing the
funding to increase our production capacity and efficiency, while
expanding our sales and marketing activities to capture our
considerable market opportunity.
The Radio Frequency ("RF") division continues to provide a
profitable base for the business, albeit within a challenging
current market environment, and the management team are making good
progress with the introduction of the Company's proprietary
Improved Harness Technology ("IHT") to the broader market.
Revenues for the period show a reduction over the comparable
half, due to a decrease in RF revenues, partially offset by strong
growth in IHT. Macro conditions, (Brexit, USA/China) as well as the
ongoing delay in the resolution of the T Mobile / Sprint merger in
the US, have impacted the RF division, particularly a major
customer who supply Sprint.
While this is frustrating and beyond our immediate control, we
continue to manage the resources of the business prudently, and the
considerable growth in interest for IHT provides the Board with
confidence in the long-term prospects for Trackwise.
Operational Review
IHT division
The Company's proprietary and patented flexible printed circuit
technology, IHT has significant applications in multi-billion-pound
global high technology markets, where traditional wire harnesses
are currently incumbent. IHT has material benefits over a wire
harness, particularly through weight, space and installation time
savings in aerospace, space and satellite markets, automotive
applications through electrification of vehicles and increasingly
the medical equipment markets
IHT revenues grew by 65% over the same period last year and
importantly the total number of customer opportunities in the
pipeline has grown from 14 at the end of H1 2018, to 57 at the end
of H1 2019 and 65 at the date of this report, underlining our
confidence in the potential for this part of the business. Of note
in the period has been the successful delivery of the second ship
set for the wiring harness of a UAV/High Altitude Pseudo Satellite
for a US aerospace OEM and the expansion of our customer
opportunities within the medical sector, where we now have four
active development opportunities.
Various of our contract discussions have evolved into revenue
generating development projects following the close of the period,
however the delay in signing will mean they contribute only small
amounts of revenue to the full year. They do however provide a
strong basis for revenue growth in FY20. These include the signing
of a Collaboration Agreement with GKN Aerospace, ("GKN"), the
world's leading multi-technology tier 1 aerospace supplier, for the
industrialisation of GKN Aerospace Type 8 Ice Protection System.
The Collaboration Agreement builds upon existing development work
by advancing the manufacture of Ice Protection Systems to rate
production level capability. Following nearly two years of joint
product development, this is a significant milestone in our
engagement with GKN, taking us a step closer to aerospace
production at scale.
We are also pleased to announce the first order from a new
customer, Arrival Ltd, a designer and manufacturer of electric
vans. The initial order is in excess of GBP100k, with the potential
to expand significantly as Arrival products enter into service.
We have also commenced development projects for two separate
global medical supplies businesses.
As we have noted previously, the new business being won and
developed within the IHT division is by its nature lumpy in its
quantum and drawn out in its adoption, due to the need to configure
technical aspects of the product in conjunction with our customers'
technology. However, each new project has the potential to generate
significant revenue over the long-term due to the size of the end
markets. With many such projects currently in negotiation, the
Board is confident the medium and long-term prospects for the
business continue to be extremely exciting.
The step forward the Company has taken over the past 12 months
in terms of manufacturing capabilities has been considerable. We
completed the installation of our vertical plating line in the
first half of the year. This leading-edge plating process line is
unique in Europe and has increased our productivity within this
aspect of production by 300%. We now have the capability to
manufacture flexible harness in excess of 50 metres. Investment
continues in both fixed assets and in the development of the
technology, where we continue to develop IHT into related uses and
further breakthrough applications.
RF division
We are well established in the manufacture of antennas for
cellular telephone networks, our legacy business with a global
footprint. The forthcoming roll out of 5G technology is a
re-equipment opportunity which the Board believe will create demand
for the Company's RF products, once the global macro environment
stabilises.
The RF division has traded below the Board's expectations for
the first half of the year, as we have seen some customer
disruption due, we believe, to factors such as Brexit, the US China
trade war and certain corporate activity within key customers. We
have adjusted our budget for the division for the year to reflect
these factors. It continues to be a profitable basis for the IHT
division, adding value to the Group as a whole.
The Company's manufacturing assets serve both the IHT and RF
divisions and with the IPO-funding investment is ensuring that its
offering to the market remains relevant and up-to-date.
Financial Review
The impact of Brexit, the US China trade disagreements and the
slowing of the world economy have all had an impact on results and
the weakness of sterling during the period also led to some
difficulties although our hedging contracts in Euro's have limited
our exposure. We secured sufficient Euros to cover the deposit we
need to pay for capital expenditure before the worst of the
currency depreciation.
Revenue for the period decreased to GBP1.547M (H1 2018:
GBP1.846M), with a decline in RF revenues offsetting growth of 65%
in IHT revenues, to GBP547K (H1 2018: GBP331K). The growth came
principally from our lead customer in the aerospace sector, and we
had increased awareness and interest in IHT giving rise to revenues
from a number of new sources.
As previously outlined the gross margins from our IHT revenue
streams are proving to be stronger than the traditional RF business
and the change in sales mix between IHT and RF mitigates the impact
on profits that the reduced RF turnover would imply. As volumes of
IHT improve we expect to see gradual further improvement in overall
margins due to the forecast favourable mix between RF and IHT.
In spite of IHT revenue growth and good cost control, we have
been unable to offset the profit impact of RF revenue decline. As a
consequence reported profits and EBITDA are lower than the
comparable period last year.
Earnings per share are (0.43)p (H1 2018: 0.74p).
Outlook
Positive customer developments within the IHT division provide
increased visibility of revenues for FY20, including a
collaboration agreement with GKN Aerospace, the world's leading
multi-technology tier 1 aerospace supplier; a significant supply
contract with Arrival Ltd, the electric van manufacturer; and
initial development contracts with two global medical supplies
businesses.
Market conditions have not improved since the half year and the
Board now anticipates a material reduction in revenue and operating
profit for the year in comparison to market expectations. While IHT
revenues are expected to grow strongly in FY20, the Board expects
next year to also be behind market expectations.
The precise timing of many of the new IHT opportunities is
outside of Trackwise's control, but the continued accretion of
customer interest gives us confidence that Trackwise is at the
beginning of a long-term, profitable growth trajectory.
Interim Statement of Comprehensive Income
for the six months ended 30 June 2019
Notes Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
GBP'000 GBP'000 GBP'000
Revenue 3 1,547 1,846 3,468
Cost of sales (961) (1,117) (2,416)
Gross profit 586 729 1,052
Other operating income - 25 -
Administrative expenses
excluding (518) (600) (727)
exceptional costs and share
based payment - (41) (45)
(127) - (155)
Exceptional premises move
costs
Share based payment charges
Total administrative expenses (645) (641) (927)
Operating (loss)/profit (59) 113 125
Finance income 4 - 8
Finance costs (32) (42) (65)
Profit before taxation (87) 71 68
Taxation 4 23 - 7
(Loss)/profit and total
comprehensive (expense)/income
for the period (64) 71 75
------------ ------------- -------------
Earnings per share (pence)
Basic 6 (0.43) 0.74 0.63
------------ ------------- -------------
Diluted 6 (0.43) 0.74 0.61
------------ ------------- -------------
Interim Condensed Statement of Financial Position
At 30 June 2019
Notes Unaudited Unaudited Audited
30 June 30 June 31 December
2019 2018 2018
GBP'000 GBP'000 GBP'000
ASSETS
Non-current assets
Intangible assets 7 3,389 1,913 2,619
Property, plant and
equipment 2 3,004 1,323 1,264
6,393 3,236 3,883
---------- ---------- -------------
Current assets
Inventories 468 357 380
Trade and other receivables 879 1,011 846
Current tax receivable 156 60 156
Cash and cash equivalents 1,565 80 2,786
---------- ---------- -------------
3,068 1,508 4,168
---------- ---------- -------------
Total assets 9,461 4,744 8,051
---------- ---------- -------------
LIABILITIES
Current liabilities
Trade and other payables (1,262) (1,127) (815)
Derivative liability - (49) -
Borrowings 2 (237) (1,173) (161)
(1,499) (2,349) (976)
---------- ---------- -------------
Non-current liabilities
Deferred income - grants (763) (418) (539)
Borrowings 2 (999) (426) (357)
Deferred tax liabilities (285) (254) (308)
---------- ---------- -------------
(2,047) (1,098) (1,204)
---------- ---------- -------------
Total liabilities (3,546) (3,447) (2,180)
---------- ---------- -------------
Net assets 5,915 1,297 5,871
---------- ---------- -------------
EQUITY
Share capital 591 381 591
Share premium account 4,234 - 4,234
Retained earnings 903 690 840
Revaluation reserve 187 226 206
Total equity 5,915 1,297 5,871
---------- ---------- -------------
Interim Condensed Statement of Changes in Equity
Share Share Retained Revaluation Capital Total
capital premium earnings reserve redemption equity
account reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2018 14 - 600 245 367 1,226
Profit and total
comprehensive income
for the period - - 71 - - 71
Bonus issue from
reserves 367 - - (367) -
Revaluation realised
in period - - 19 (19) -
--------- --------- ---------- ------------ ------------ --------
At 30 June 2018
and 1 July 2018 381 - 690 226 - 1,297
--------- --------- ---------- ------------ ------------ --------
Profit and total
comprehensive income
for the period - - 4 - - 4
Issue of shares
(net of GBP1,056,000
of issue expenses) 210 4,234 - - - 4,444
Share based payment - - 126 - 126
Revaluation realised
in period - - 20 (20) - -
At 31 December 2018
and 1 January 2019 591 4,234 840 206 - 5,871
--------- --------- ---------- ------------ ------------ --------
Profit and total
comprehensive income
for the period - (64) - - (64)
Share based payment - 108 - - 108
Revaluation realised
in period - 19 (19) - -
--------- ------------
At 30 June 2019 591 4,234 903 187 - 5,915
--------- --------- ---------- ------------ ------------ --------
Interim Condensed Statement of Cash Flows
Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
GBP'000 GBP'000 GBP'000
Cash flow from operating
activities
(Loss)/profit for the period
before taxation (87) 71 68
Adjustment for:
Employee share based payment
charges 127 - 155
Depreciation of property,
plant and equipment 127 94 196
Profit on disposal of property,
plant and equipment - (1) (1)
Amortisation of intangible
assets 84 57 97
Finance costs 28 42 57
Changes in working capital:
Increase in inventories (88) (44) (67)
Increase in trade and other
receivables (287) (461) (275)
Increase/(decreases) in trade
and other payables 257 116 (337)
--------------- ------------ -------------
Cash generated from operations 161 (126) (107)
Income tax received - 35 36
--------------- ------------ -------------
Net cash (used in)/from operating
activities 161 (91) (71)
--------------- ------------ -------------
Cash flow from investing
activities
Purchase of property, plant
and equipment (net of new
leases) (547) (47) (214)
Proceeds from sale of property,
plant and equipment - 1 11
Purchase of intangible assets (854) (324) (1,067)
Grant funding - purchase
of intangible assets 159 - 128
Interest received 4 8
Net cash used in investing
activities (1,238) (370) (1,134)
--------------- ------------ -------------
Cash flow from financing activities
Share capital issued - - 5,500
Expenses relating to share
capital issue - - (1,056)
Interest paid (32) (42) (65)
Proceeds from borrowings - 493 -
Repayment of borrowings - - (515)
Repayment of capital element
of lease contracts (112) (76) (39)
--------- ------ --------
Net cash (used in)/from financing
activities (144) 375 3,825
--------- ------ --------
(Decrease)/increase in cash
and cash equivalents (1,221) (86) 2,620
--------- ------ --------
Net cash and cash equivalents
at beginning of the period 2,786 166 166
Net cash and cash equivalents
at end of period (all cash
balances) 1,565 80 2,786
--------- ------ --------
Notes to the Financial Statements
1. Corporate information
Trackwise Designs Limited is a 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 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 European
Union 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 2019. These are unchanged from those applied in the 31
December 2018 financial statements with the exception of the new
standard for leases IFRS 16.
Under IFRS16, lease contracts previously treated as an operating
lease now result in the lessee acquiring and recognising a
right-to-use asset and financing liabilities. The asset is
depreciated over the term of the lease and the interest on the
financing liability charged over the same period. The company is
using the modified approach to transition from 1 January 2019 with
a right to use asset for the property lease of GBP808,000 included
in property, plant and equipment and a lease liability of
GBP796,000 included in borrowings recognised at 30 June 2019
(GBP857,000 asset and GBP830,000 liability net of the prepaid rent
recorded on transition as at 1 January 2019). The cash flow
reflects the payments in the period only and excludes the increase
in tangible assets and in liabilities.
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 2019 and 30 June 2018 is unreviewed and unaudited and
does not constitute the Company's statutory financial statements
for those periods.
The comparative financial information for the full year ended 31
December 2018 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.
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 2019 the company had two major
customers who represented 11% and 10% of total revenue (six months
ended 30 June 2018: 28% and 9% of revenue, full year ended 31
December 2018: one major customer in Europe representing 26% 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 2019 June 2018 2018
GBP'000 GBP'000 GBP'000
IHT 547 331 606
RF 1,000 1,515 2,862
--------------- ------------ -------------
1,547 1,846 3,468
--------------- ------------ -------------
UK 485 536 866
Europe 758 1,230 2,368
Other 304 80 234
1,547 1,846 3,468
--------------- ------------ -------------
4. Income tax
Taxation is provided at the estimated rate of tax for the
period, applying 17% to deferred tax balances, and including the
benefit of enhanced allowances for research and development
costs.
5. Dividends paid and proposed
No dividends have been paid or proposed in the period ended 30
June 2019 or year ended 31 December 2018.
6. Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
Earnings Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
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 (64) 71 75
--------------- ------------ -------------
Number Number Number
Weighted average number
of ordinary shares for the
purposes of basic earnings
per share 14,772,372 9,534,275 11,830,427
Weighted average number
of ordinary shares for the
purposes of diluted earnings
per share 14,772,372 9,534,275 12,370,189
The earnings per share is calculated from the number of GBP0.04
ordinary shares in issue, allowing for the subdivision of GBP1
shares into GBP0.04 shares on 28 June 2018.
Options over 990,015 shares (after the subdivision) were granted
to employees on 15 June 2018 which are potentially dilutive shares,
but which were not considered to have any significant impact on the
period to 30 June 2018.
7. Intangible fixed assets
Development
costs
GBP'000
Cost
At 1 January 2018 1,503
Additions 319
As at 30 June 2018 1,822
Additions 730
As at 31 December 2018 2,552
Additions 850
As at 30 June 2019 3,402
------------
Amortisation or impairment
At 1 January 2018 -
Charge 56
As at 30 June 2018 56
Charge 36
As at 31 December 2018 92
Charge 82
As at 30 June 2019 174
------------
Carrying amount
As at 30 June 2018 1,766
------------
As at 31 December 2018 2,460
------------
As at 30 June 2019 3,228
------------
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.
8. Post balance sheet events
Tangible fixed assets purchases made in the six months ended 30
June 2019 were subsequently funded by a new finance lease amounting
to GBP531K after the period end.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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