Interim results for six months ended 30 June 2023

Tan Delta Systems PLC

29 September 2023

 

Tan Delta Systems plc

("Tan Delta", or the "Company")

Interim results for the six months ended 30 June 2023

Tan Delta, a provider of advanced industrial and commercial monitoring systems, is pleased to report its first set of financial results for the six months ended 30 June 2023 ("H1 2023" or the "Period"), since its admission to AIM in August 2023.

Financial highlights:            

·      Revenue increased by 54% to £0.96m (H1 2022: £0.62m)

·      Gross profit increased by 52% to £0.61m at 63% margin (H1 2022: gross profit of £0.4m at 64% margin)

·      Profit from operations (excluding non-underlying items relating to the IPO) of £0.18m (H1 2022: £0.03m)

·      Strengthened balance sheet following receipt of net proceeds of £4.8 million, from successful AIM IPO

For further enquiries:

Tan Delta Systems plc	Tel: [phone]
Chris Greenwood, CEO
Steve Johnson, CFO
Zeus (Nominated Adviser & Broker)	Tel: [phone]
David Foreman, James Hornigold, Ed Beddows (Investment Banking)
Nick Searle (Sales)
Chairmans Statement It gives me great pleasure to present my first chairman's statement since the Company's successful IPO in August 2023. Whilst we are a relatively small team at present, all members of the Board and employees went above and beyond, to ensure the continuing commercialisation of our products and services, alongside the IPO, which necessarily requires huge time and focus. In terms of financial performance, the management team have performed well during H1 2023 achieving 54% year on year revenue growth whilst also preparing the business for rapid scaling. Our target markets are large commercial and industrial operators and manufacturers of any equipment with an engine, gearbox or hydraulics which thus relies on lubrication oil for reliable and efficient operation. In these days of intense global competition, high oil prices and a drive to decarbonise, our proposition of reduced operating costs, reduced break downs and oil consumption through waste reduction, resonates loudly and provides Tan Delta with a very significant global opportunity. In anticipation of a successful IPO, the management undertook significant planning during the period to commence sales and marketing in the second half of the year ("H2 2023") with an initial focus on European and North American markets, expanding later on in 2024 to the Middle East, Asia, Africa and South America. The Company is now in a strategically advantageous situation with an innovative and proven product addressing a significant global market with a compelling proposition. Furthermore, as a result of our IPO we now have the cash to commence material and sustained sales activities and execution of the Board's long-term strategy. In order to provide further support and governance strength during H2 2023 we will add a new independent Non-Executive Director to our Board. This will complete the Board of Directors and provide the Company with the management depth and governance to maximise its opportunities and deliver shareholder growth. Finally, I would like to take this opportunity to thank our staff, advisers and investors who supported us through and at IPO.
Chief Executive Review We are pleased to have achieved our targets for H1 2023. Following our successful IPO in August 2023 we are now well placed to continue performing in line with expectations in H2 2023 and beyond, as the business continues to grow and benefit from the ability to invest in product evolution and global sales and marketing. Revenue increased by 54% to £0.96m (H1 2022: £0.62m) whilst broadly maintaining gross margin which slightly fell to 63% (H1: 2022 64%) as a result of a change in product sales mix. Underlying operating profits, excluding one-off IPO related costs, also increased by 608% to £0.18m (H2 2022: £0.03m) as our cost base growth is not directly coupled to revenue growth. During the Period revenue was primarily driven by a small number of prospects who commenced implementations following their evaluation period, and by a number of small sales to new customers commencing their evaluations. In the second half we expect more customers to enter and commence implementation on their equipment fleets, as well as contribution from our off the shelf SENSE-2 and MOT products. During the Period, we had three main operational objectives. Firstly, we continued to progress and grow existing customer evaluations and adoption planning for our sensor systems. Secondly, we planned and prepared for the acceleration of our business post IPO, so that we were ready to immediately start expanding sales, increasing marketing activities and upscaling production. Thirdly, was the successful completion of our IPO and securing significant capital to fund the execution of our global expansion plans. Moving into H2 2023, we are focused on the implementation of our sales and marketing plan which is primarily focussed on our off the shelf SENSE-2 and MOT products, both of which can be immediately installed and used by equipment owners/operators. Our marketing program will see these products actively promoted to specific market verticals including power generation, manufacturing and transportation in Europe, North America, Middle East, Asia and South America. In parallel we have commenced increased production to fulfil expected demand. A major operational focus for H2 2023 will be the increase of our human resources to support and enable our rapid scaling plans with a particular focus on sales, customer support and production. I am pleased to report that we are making good progress. In 2024 we will turn our attention to our technology and product development team which we will further develop to meet the needs of our next generation of technology and product development targeting the global automotive segment.

Notes to editors

Tan Delta Systems plc has developed innovative technologies, products and services that enable operators of rotating equipment, from trucks and ships to generators and wind turbines, to reduce oil consumption, maintenance costs, breakdowns and carbon footprint.

Tan Delta's products offer customers a compelling proposition of being able to reduce operating costs whilst improving reliability. This is achieved through equipment operators gaining a better understanding of the actual real time maintenance status of their active equipment through the real time analysis of lubrication oil used within engine, gearboxes and hydraulic systems. Tan Delta's data analytics, enables the following benefits:

·      Reduced oil consumption by approximately 30 per cent, by ensuring oil is not changed before it has reached the end of its life;

·      Reduced breakdowns and associated costs by detecting issues before damage or failure occurs;

·      Increased equipment operating times by enabling intervals between maintenance to be extended and;

·      Reduced carbon footprint through a reduction in oil use and prolonged equipment life.

The Company currently offers four main products built around its core oil condition analysis sensor technology, all of which target primarily large commercial and industrial equipment market segments. 

Tan Delta was admitted to trading on AIM in August 2023 with the ticker TAND.  For additional information please visit www.tandeltasystems.com.

LinkedIn: http://www.tandeltasystems.com

Twitter: https://x.com/Tandeltasysyems

Unaudited statement of profit or loss and other comprehensive income

For the six months ended 30 June 2023

	Note	(Unaudited)	(Unaudited)	(Unaudited)
		Six months ended	Six months ended	Year ended
		30 June 2023 £000	30 June 2022 £000	31 Dec 2022 £000
Revenue	3	959	621	1,575
Cost of sales		(351)	(222)	(585)
Gross profit		608	399	990
Other operating income		0	0	1
Distribution costs		(22)	(17)	(44)
Administrative expenses		(409)	(357)	(665)
Non-underlying items	4	(471)	0	0
Profit from operations
- Excluding non-underlying items		177	25	282
- Non-underlying items	4	(471)	0	0
(Loss) / Profit from operations		(294)	25	282
Interest expense	5	(4)	(4)	(4)
Interest Income		0	0	0
Profit /(Loss) before tax
- Excluding non-underlying items		173	21	278
- Non-underlying items	4	(471)	0	0
(Loss) /Profit before tax		(298)	21	278
Taxation	6	0	0	4
(Loss) / Profit for the period attributable to equity holders of the Company		(298)	21	282
Other comprehensive income
Total other comprehensive income		0	0	0
Total comprehensive (loss) / profit for the period attributable to equity holders of the Company		(298)	21	282
Basic and diluted earnings per share (£)	7	(0.01)	0.00	0.01

Unaudited statement of financial position

As at 30 June 2023

	Note	(Unaudited)	(Unaudited)	(Unaudited)
		As at	As at	As at
		30 June 2023 £000	30 June 2022 £000	31 Dec 2022 £000
Non-current assets
Intangible assets		141	26	121
Right of use asset		107	134	120
Property, plant and equipment		61	70	64
		309	230	305
Current assets
Inventories		229	193	240
Trade and other receivables	8	277	248	320
Cash and cash equivalents	9	332	458	186
		838	899	746
Total assets		1,147	1,129	1,051
Current liabilities
Trade and other payables	10	(786)	(682)	(367)
Short term borrowings	11	(24)	(24)	(24)
Short term lease liability	11	(27)	(26)	(27)
		(837)	(732)	(418)
Non-current liabilities
Long term borrowings	11	(26)	(49)	(38)
Long term lease liability	11	(86)	(113)	(99)
		(112)	(162)	(137)
Total liabilities		(949)	(894)	(555)
Net assets		198	235	496
Equity attributable to equity holders of the Company
Ordinary share capital	12	50	0	0
Share premium account	13	0	1,565	1,565
Retained earnings/(accumulated losses)	13	148	(1,330)	(1,069)
Total equity		198	235	496

Unaudited statement of changes in equity

For the six months ended 30 June 2023

	Share capital £000	Share premium account £000	Retained earnings / (accumulated losses) £000	Total equity £000
Balance at 1 January 2022	0	1,565	(1,351)	214
Ordinary share capital	0	0	0	(0)
Comprehensive income:
Profit for the period	0	0	21	21
Balance at 30 June 2022	0	1,565	(1,330)	235
Balance at 30 June 2022	0	1,565	(1,330)	235
Ordinary share capital	0	0	0	0
Comprehensive income:
Profit for the period	0	0	261	261
Balance at 31 December 2022	0	1,565	(1,069)	496
Balance at 31 December 2022	0	1,565	(1,069)	496
Ordinary share capital	0	0	0	0
Comprehensive income:
Loss for the period	0	0	(298)	(298)
Bonus issue of shares	50	(50)	0	0
Cancellation of share premium	0	(1,515)	1,515	0
Balance at 30 June 2023	50	0	148	198

Unaudited statement of cash flows

For the six months ended 30 June 2023

		(Unaudited)	(Unaudited)	(Unaudited)
		Six months ended	Six months ended	Year ended
	Note	30 June 2023 £000	30 June 2022 £000	31 Dec 2022 £000
Cash flows from operating activities
(Loss) / Profit before Tax		(298)	21	278
Adjustments for non-cash/non-operating items:
Depreciation		5	4	11
Amortisation of intangible assets		5	0	0
Amortisation of right of use assets		13	13	27
Taxation		0	0	4
Loss on disposal of plant and equipment		0	0	4
Interest income		0	0	0
Interest expense		4	4	4
Operating cash flows before movements in working capital		(271)	42	328
(Increase)/decrease in inventories		11	(140)	(187)
(Increase)/decrease in trade and other receivables		43	41	(31)
Increase/(decrease) in trade and other payables		419	412	97
Net cash generated from operating activities		202	355	207
Cash flows from investing activities
Purchase of property, plant and equipment		(2)	(34)	(39)
Purchase of intangibles assets		(25)	(26)	(121)
Net cash used in investing activities		(27)	(60)	(160)
Cash flows from financing activities
Borrowings and finance lease obligations		(29)	(29)	(53)
Net cash used in financing activities		(29)	(29)	(53)
Net decrease in cash and cash equivalents		146	266	(6)
Cash and cash equivalents at the beginning of the period		186	192	192
Cash and cash equivalents at the end of the period	9	332	458	186

Notes to the unaudited condensed interim financial statements.

1.      General information

The interim financial statements were approved by the Board of Directors on the 28 September 2023.

2.      Basis of preparation

The interim financial statements of the Company are for the six months ended 30 June 2023.

The comparative figures for the financial year ended 31 December 2022 are not the Company's statutory accounts for that financial year.  The comparative figures were prepared under International Financial Reporting Standards ('IFRS') for the purposes of presentation in the Company's AIM Admission Document published on 11 August 2023 ('Admission Document').  The statutory accounts filed at Companies House were prepared under the historical cost convention and in accordance with Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' including the provisions of Section 1A 'Small Entities' and the Companies Act 2006.  The financial statements were audited and prepared in accordance with the provisions applicable to companies subject to the small companies' regime even though they were exempt from audit under Section 477 of the Companies Act 2006.

The condensed interim financial statements for H1 2023 do not include all the information and disclosures required in the annual financial statements and have not been audited or reviewed by an auditor pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information.  However, selected explanatory notes are included to explain events and transactions that are significant for an understanding of the changes in the Company's financial position and performance in the period.

The condensed interim financial statements for H1 2023 have been prepared based on the accounting policies adopted within the Admission Document, and those expected to be adopted for the year ending 31 December 2023.  These accounting policies are drawn up in accordance with adopted International Accounting Standards ('IAS') and International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board and adopted by the EU.

AIM-listed companies are not required to comply with IAS 34 'Interim Financial Reporting' and accordingly the Company has taken advantage of this exemption.

3.      Revenue from contract customers
Geographical reporting	(Unaudited)	(Unaudited)	(Unaudited)
	Six months ended	Six months ended	Year ended
	30 June 2023 £000	30 June 2022 £000	31 Dec 2022 £000
United Kingdom	526	325	956
Europe	191	161	270
Rest of the World	242	135	349
	959	621	1,575

4.      Non-underlying items
	(Unaudited)	(Unaudited)	(Unaudited)
	Six months ended	Six months ended	Year ended
	30 June 2023 £000	30 June 2022 £000	31 Dec 2022 £000
IPO costs	(471)	0	0
	(471)	0	0

IPO costs

On Admission to AIM on 18 August 2023, the Company issued 23,074,000 new ordinary shares, taking the number of ordinary shares in issue to 73,223,800. Total proceeds amounted to circa £6.0m.  The costs associated with the IPO, which were committed at 30 June 2023, amounted to £0.47m and they have been recognised as non-underlying expenses in the income statement in H1 2023.

5.      Finance expense
	(Unaudited)	(Unaudited)	(Unaudited)
	Six months ended	Six months ended	Year ended
	30 June 2023 £000	30 June 2022 £000	31 Dec 2022 £000
Interest on bank loans	(2)	(2)	0
Interest on finance leases	(2)	(2)	(4)
	(4)	(4)	(4)

6.      Income tax expense

No income has yet been recognised in H1 2023 in relation to R&D tax credits available from HMRC through the SME R&D relief scheme.

7.    Earnings per share
Earnings per share are as follows:
	Six months ended		Six months ended	Year ended
	30 June 2023		30 June 2022	31 Dec 2022
	£ per share		£ per share	£ per share
Basic and diluted earnings per share	(0.01)		0.00	0.01
The calculations of basic and diluted earnings per share are based upon:
	£000		£000	£000
(Loss) / Profit for the period attributable to the owners	(298)		21	282
	Number		Number	Number
Number of ordinary shares at the end of the period	50,149,800		50,149,800	50,149,800

The calculation of basic earnings per share is based on the results attributable to ordinary shareholders divided by the number of ordinary shares outstanding as if the bonus issue and share split had occurred at the beginning of the earliest period presented. The earnings per share calculations for the period and prior period presented are based on the new number of shares.

The number of shares in issue at the end of the period is used as the denominator in calculating basic earnings per share.  As the Company is loss making the effect of instruments that convert into ordinary shares is considered anti-dilutive, hence there is no difference between the diluted and non-diluted loss per share.

During the period ended 30 June 2023, the Company completed a 110 for 1 bonus share issue and a subdivision of shares. Prior to the bonus issue there were 451,800 shares at £0.001, after the bonus issue there are 50,149,800 shares at £0.001

8.    Trade and other receivables
	(Unaudited)		(Unaudited)	(Unaudited)
	As at		As at	As at
	30 June 2023 £000		30 June 2022 £000	31 Dec 2022 £000
Amounts falling due within one year:
Trade receivables	162		193	277
Other receivables	58		20	19
Prepayments	53		17	20
Tax recoverable	4		18	4
	277		248	320
9.  Cash and cash equivalents
		(Unaudited)	(Unaudited)	(Unaudited)
		As at	As at	As at
		30 June 2023 £000	30 June 2022 £000	31 Dec 2022 £000
Cash at bank available on demand		332	458	186
		332	458	186

10.  Trade and other payables
	(Unaudited)	(Unaudited)	(Unaudited)
	As at	As at	As at
	30 June 2023 £000	30 June 2022 £000	31 Dec 2022 £000
Trade payables	(389)	(195)	(284)
Other payables	(16)	(50)	(15)
Other taxation and social security	(15)	(20)	(12)
Accruals	(295)	(11)	(19)
Deferred income	(71)	(406)	(37)
	(786)	(682)	(367)

11.  Borrowings and lease liabilities
	(Unaudited)	(Unaudited)	(Unaudited)
	As at	As at	As at
	30 June 2023 £'000	30 June 2022 £'000	31 Dec 2022 £'000
Current:
Bank loans	(24)	(24)	(24)
Lease liability	(27)	(26)	(27)
	(51)	(50)	(51)
Non-current:
Bank loans	(26)	(49)	(38)
Lease liability	(86)	(113)	(99)
Total borrowings	(112)	(162)	(137)

Banks loans comprise a Coronavirus Business Interruption Loan provided by Lloyds. The loan was taken out in July 2020 and matures five years after this date.

12.  Share capital
	(Unaudited)	(Unaudited)	(Unaudited)
	As at	As at	As at
	30 June 2023 £'000	30 June 2022 £'000	31 Dec 2022 £'000
Allotted, called up and fully paid
Ordinary shares of 45,180 @ £0.01 each		0	0
Ordinary shares of 50,149,800 @ £0.001 each	50
	50	0	0

Called up share capital

Called up share capital represents the nominal value of shares that have been issued.

All classes of shares have full voting, dividends, and capital distribution rights.

On 1 June 2023, the ordinary shares were subdivided from £0.01 to £0.001 (45,180 shares to 451,800 shares). Subsequently a bonus issue was made for all the shareholders holding 451,800 shares at that date.  The bonus issue offered 110 ordinary shares for every 1 ordinary share in issue, with a nominal value of £0.001 per share.  This increased the number of ordinary shares in issue by 49,698,000 to 50,149,800.

13.  Reserves

In anticipation of re-registering the Company as a public limited company, at a general meeting of the Company on 1 June 2023, it was resolved that the Company would reduce its share premium account by an amount of £1.52m by crediting the Profit and Loss Account.

Share premium account

This represents the excess value recognised from the issue of ordinary shares above nominal value.

Retained earnings

This represents cumulative net gains and losses less distributions made.

14.  Post balance sheet events

No adjusting events have occurred between reporting date and the date of authorisation of the condensed interim report. The Company listed on AIM on 18 August 2023 raising circa £6.0m. The Company issued 23,074,000 ordinary shares thus taking the total number of ordinary shares in issue to 73,223,800 from 50,149,800. The costs associated with the issue amounted to approximately £1.2m. £0.47m was recognised in H1 2023 and £0.73m will be recognised in H2 2023.

On 18 August 2023, 1,253,745 share options were granted to those eligible under the scheme in line with the disclosures made in the Company's admission document dated on 18 August 2023. The options have an exercise price of £0.26.

 15.  Availability

 Further copies of this interim announcement are available on the Tan Delta Systems plc website, www.tandeltasystems.com.

 

END