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 £4.1m (H1 2020: £2.4m)

·    IHT revenues of £0.58m (H1 2020: £0.25m)

·    Gross margin of 29% (H1 2020: 17.8%)

·    Adjusted¹ EBITDA of £0.45m (H1 2020: £0.10m)

·    Adjusted² operating loss of £0.13m (H1 2020: £0.37m)

·    Reported loss after tax of £0.57m (H1 2020: profit £0.92m) after additional deferred tax provisions to reflect the change in Corporation Tax rate

·    Net cash³ of £2.6m (£4.8m gross of borrowings) (31 December 2020: £11.4m), 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 £1.6 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 £2.8 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

Notes to editors

Trackwise is a UK-based manufacturer of specialist products using printed circuit technology.

The full suite includes: Improved Harness Technology™ ("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 £4.3m (H1 2020: £2.4m), 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 £8.7m including £2.7m 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 £2.6m, gross cash of £4.8m and unused facilities of up to £0.75m. In August a new mortgage finance facility of £1.96m 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 £2.8 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

Interim Condensed Consolidated Statement of Financial Position