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Trackwise Designs (TWD:AIM) is a UK manufacturer of innovative, specialist printed circuit products. The company was founded in 1989 and listed on the Alternative Investment Market in July 2018.

Over the past 30 years, Trackwise has developed a strong track record of manufacturing high-quality printed circuit technology, serving customers across Europe, North America, Asia and Australia. The company manufactures its printed circuit board (PCB) products under two divisions: the company’s Advanced PCBs division and Improved Harness Technology (IHT). In recent years, IHT has emerged as the most exciting growth area for the business.

Since IPO, Trackwise has made significant commercial and operational headway, and in 2022 will move into its next phase of development with the opening of a new third production facility and the first series production orders from its UK EV (electric vehicle) customer.

COMPANY OVERVIEW

The long-established Advanced PCBs division predominantly serves the telecommunications market, including production of the antennae in 4G and 5G network infrastructure. These antennae are also used in security applications, defence and aircraft radar systems, avionics and ground penetrating radars.

The IHT division manufactures flexible printed circuit boards (FPCBs), which serve as a smaller and lighter alternative to traditional wire harnesses. Historically, FPCBs were typically limited in size due to manufacturing constraints, but IHT represents a disruptive technology through the production of flexible printed circuit boards of unlimited length, saving manufacturers weight, space and time.

Because of its transformative benefits, IHT represents a highly desirable technology across a number of industries which traditionally require wire harnesses. Trackwise’s ability to manufacture length-unlimited multilayer FPCBs is unique, and IHT is patented across China, Europe, the USA and Canada, with a further impending grant expected from Brazil. However, Trackwise has identified the electric vehicles, medical devices and aerospace markets as the core near-term target markets for IHT.

ELECTRIC VEHICLES: PRIMED FOR GROWTH

Electric vehicles represent the primary scale-up opportunity in IHT in the short-medium term. In September 2020, Trackwise announced a significant commercial milestone for IHT through a major product manufacture and supply agreement with a high-profile UK manufacturer of electric vehicles for the supply of its flexible printed circuits for use in high and low voltage circuits in the manufacturer’s vehicle battery modules and battery packs.

This agreement was later extended to four years in June 2021 and came with a significant increase in expected volumes and potential value. The agreement is now worth up to £54 million, with the first material revenues from the contract expected in the first half of 2022.

To meet the growing demand for IHT, over the past 18 months Trackwise has focused on expanding its production facilities to manufacture IHT at scale. Firstly, in April 2020, Trackwise announced the acquisition of Stevenage Circuits Limited (SCL). While this diversified the Company’s revenue streams and customer base, it also enabled the transfer of the production equipment of Trackwise’s Advanced PCBs business from its original Tewkesbury location to the new Stevenage site, freeing up the former to focus exclusively on production of IHT.

However, the demand from the Company’s electric vehicle customer, alongside the growing interest from medical appliance customers, aerospace and other industrial businesses, is growing and will shortly exceed the capacity in Tewkesbury. As a result, Trackwise has entered into its next expansion phase to increase capacity.

MEETING THE DEMAND: TRACKWISE’S THIRD MANUFACTURING FACILITY

In May 2021, Trackwise announced the completion of the acquisition of a 77,000 sq. ft freehold property in Stonehouse, Gloucestershire, for £2.8 million. Following a comprehensive review process, this site was selected due to its superior layout, location and costs, and is located around 20 miles from the company’s Tewkesbury headquarters.

The Stonehouse facility is being equipped with a semi-automated, roll-to-roll IHT production line, specifically set up for high-volume, low mix volume production - as opposed to the low-volume, high mix capability developed and implemented in Tewkesbury. This site therefore very significantly increases the company’s IHT production capacity - and represents one of the largest ‘green field’ investments in UK PCB manufacturing for many years.

Importantly, the new Stonehouse site has capacity for the installation of a second line in the future, meaning Trackwise will be primed to meet this further expected demand for IHT from a range of sectors, including electric vehicles, when required. This long-term pipeline of demand has become increasingly clear in 2021. In line with the greater call for greener technologies globally, several ‘gigafactories’ - factories producing batteries for electric vehicles on a large scale - are expected to be established in the UK and Europe over the coming years.

Additionally, many of the major automotive manufacturers have responded through the electrification of their operations, including, BMW, which has reportedly ordered $24 billion worth of battery cells to support its production of electric vehicles. These manufacturers will require battery cells to be interconnected, paving the way for a significant need for Trackwise’s IHT.

The factory fit out for this site is currently underway, with factory services and clean rooms being installed. All equipment orders have been placed with a rolling program of supplier acceptance tests (delivery sign-off at the suppliers’ premises) underway. The first set of equipment are ‘on the water’ with the next step being installation and factory acceptance tests (sign-off at Stonehouse).

The company’s current Tewkesbury site will continue to manufacture IHT alongside Stonehouse, with the primary objective at this site to work with new customers on product development to the point where volume manufacture is needed. Tewkesbury will also continue to be the Group head office.

In tandem with this Stonehouse site acquisition, Trackwise has bolstered its management team through the appointment an experienced chief operating officer, Steve Hudson, who is now overseeing the installation as well as taking responsibility for the existing operations of the whole company. Steve has over 20 years’ experience in the automotive and aerospace industry, including operational, quality and programme leadership roles at Bentley Motors and Rolls Royce Aerospace. Trackwise expects this new site to be fully operational in FY22 in anticipation of increased commercial activity.

CONTINUED ACTIVITY ACROSS OTHER MARKETS

While electric vehicles remain the current focus for Trackwise, there is also a healthy level of interest in other key areas. In May 2021, Trackwise announced a seven-year supply agreement with Stockholm-based manufacturer Cathprint AB, which has developed an innovative means of catheter production supporting a semi-automatic operation process for attaching wires, electrodes and contacts. This method serves as an alternative to the small-scale manual assembly techniques typically used today, and considerably reduces manpower and costs in manufacturing. The estimated global market for this industry is expected to grow at a CAGR of 8% from 2018-2025, reaching circa $20 billion by 2025, and the company is currently working with seven active medical catheter manufacturers.

Additionally, Aerospace remains a key area of focus for Trackwise, with the company having previously announced manufacturing agreements with GKN Aerospace for the industrialisation of the GKN Aerospace Type 8 Ice Protection System. Aerospace qualification is a lengthy process, but the size of the potential end markets in this industry means the future revenue potential for IHT in this field is significant.

AN EXCITING OPPORTUNITY AHEAD

Trackwise’s operations will soon be geared to meet the expected material increase in demand for its proprietary technology next year. With a disruptive new technology; world-class production facilities and a growing demand across the company’s target markets, the future for Trackwise is as bright.

DISCLAIMER: This article was written by Trackwise and published by Shares under a commercial agreement. It is not a recommendation to buy or sell the shares. The article originally appeared in SharesSpotlight report on 25 November 2021.

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Issue Date: 14 Dec 2021