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Trackwise Designs (TWD)

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Wednesday 23 September, 2020

Trackwise Designs

Interim Results

RNS Number : 7976Z
Trackwise Designs PLC
23 September 2020
 

23 September 2020

 

TRACKWISE DESIGNS PLC

("Trackwise", the "Company" or the "Group")

Interim Results for the six months ended 30 June 2020

 

Trackwise Designs (AIM: TWD), a leading provider of specialist products using printed circuit technology, is pleased to announce its interim results for the six months ended 30 June 2020.

 

Financial highlights

· Revenues £2.39m (H1 2019: £1.547m)

· Improved Harness Technology™ ("IHT") revenues of £252k (H1 2019: £547k)

· Gross margin 17.8% (H1 2019: 38%)

· Adjusted E BITDA of £102k (H1 2019: £237k)

· Adjusted o perating loss of £365k (profit H1 2019: £61k)

· Reported profit after taxation of £921k (loss H1 2019: £(64k))

· Net cash* of £1.612m (31 December 2019: net debt £0.302m)

· Basic EPS of 4.98 pence per share

* Excludes IFRS 16 lease liabilities

 

Operational highlights

· Trading performance impacted by COVID-19

·   Gross margin reflects increased capacity investment prior to anticipated increased business and the impacts of COVID-19

· Acquisition of Stevenage Circuits Ltd ("SCL"), for an adjusted total consideration of £1.8m

strengthening manufacturing capabilities and customer base

SCL has traded cash positively since acquisition

· Deepened relationships with key customers in our target IHT markets: electric vehicles ("EV"), medical   and aerospace, including first production order for IHT in EV

increased IHT total customers and opportunities to 82 (H1 2019: 57)

10 NDAs signed in period to commence design phase of potential new customer orders; (14 including post-period NDAs); building a pipeline of future revenue opportunities

 

Post period highlights

 

· Significant manufacturing agreement signed with UK EV OEM worth up to £38m

· Commissioning of Direct Imaging machine to facilitate increased IHT production efficiency and capacity at Tewkesbury site

· Continued investment in capabilities to support series production

 

Outlook

Looking ahead, while the Company's full year performance will reflect the difficult economic trading conditions, the EV manufacturing contract win and progress in our two other core target markets, medical and aerospace, support our convictions of IHT's merit and its potential to be a catalyst for transformation in these markets, with our innovation enabling the global technology of the future. We are excited about the near and long-term prospects for Trackwise with growing visibility of an increasing number of opportunities.

 

 

Philip Johnston, CEO of Trackwise, commented : "While the business remained open and safely operational throughout the period, like many businesses we were not immune from the impacts of COVID-19. Nevertheless we have made excellent progress strategically with the acquisition of Stevenage Circuits, which has extended our product range, our expertise and customer base and increased our production capabilities, enabling us to move towards the facility in Tewkesbury becoming dedicated to IHT production.

 

Since the period end, we completed the commissioning of the critical roll to roll direct imaging machine, which represents the final investment of our IPO proceeds and we secured the highly significant three-year contract to manufacture IHT for electric vehicles.

 

Looking ahead, while the Company's full year performance will reflect the difficult economic trading conditions, the EV manufacturing contract win and progress in our two other core target markets, medical and aerospace, support our convictions of IHT's merit and its potential to be a catalyst for transformation in these markets, with our innovation enabling the global technology of the future.

 

With a growing customer base and pipeline, and a net cash position, we are confident in our ability to deliver on these growth opportunities as trading conditions normalise."

 

 

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/Matthew Radley - Corporate Finance 

Andrew Burdis/Manasa Patil - ECM

 

 

 

Alma PR

+44 (0)20 3405 0205

Financial PR and IR

 

Caroline Forde/Josh Royston/David Ison/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™ ("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, North America, Asia and Australia.

 

Trackwise Designs plc was admitted to trading on AIM in 2018 with the ticker TWD. For additional information please visit www.trackwise.co.uk .

 

The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.

 

 

 

Chairman's Statement

 

While we acknowledge the impact of COVID-19 on the short-term trading environment, which impeded our ability to complete our investment into new equipment and has prolonged sales cycles, we remain excited about the near and long-term prospects for Trackwise and have visibility of a growing number of opportunities.

 

The wellbeing of our staff has remained our top priority throughout. We have maintained our strict adherence to all UK Government safety guidelines and focused on working from home where possible, while implementing strict social distancing and additional hygiene measures in our facilities. Our teams responded well to the challenges and I would like to thank them for their efforts.

CEO's Statement

 

Despite COVID-related headwinds affecting our trading performance, we are pleased to report on excellent strategic progress for the Company during the period. Major achievements have been made in both our production capabilities and our reach into target markets.

 

The key highlight in the period was the acquisition of SCL in April 2020. This acquisition represents a transformational step forward for Trackwise, extending our manufacturing capabilities and providing capacity at Tewkesbury to deliver IHT series production, while diversifying our revenue streams and customer base.

 

Post period, the announcement of our first series production order from a UK based manufacturer of electric vehicles signified the next stage of progress for our IHT flexible printed circuit technology and was a key step into one of our strategic markets.

 

 

Impact of COVID-19

COVID-19 has impacted much of the manufacturing industry and, despite good progress against our strategic objectives, trading remains challenging across our business. Much of our typical run rate business has continued, but we have seen a slow-down in new orders. A number of new opportunities across our product range remain in discussion with associated revenues now predominantly expected in the following financial year.

Revenues from the medical sector were impacted by the delayed commissioning of new machinery due to lockdown restrictions and this impacted deliveries to a customer. This has now been rectified and the product has been supplied to our customer. We were not alone in experiencing delays in the arrival of manufacturing machinery, with anticipated follow-on orders from customers impacted by delays due to the lockdowns in Europe. We will continue to monitor the situation across our end markets and track our expectations against the sector-wide performance of these industries .

Upgrades to Flexible Printed Circuit ("FPC") manufacturing operations

We continued to strengthen our production capability and capacity by investing in new equipment, installing and commissioning an advanced roll-to-roll direct imaging system and a roll-to-roll flexible circuit laser drilling system. This investment, alongside the acquisition of SCL, will enable Trackwise to significantly boost its operational throughput and address growing customer interest in FPCs based on proprietary IHT technology. We are now much better positioned to serve future market opportunities as they arise, supporting greater volume demands, as well as providing enhanced levels of quality.

IHT

Our IHT technology remains the growth driver for Trackwise and we are confident in the applicability of this proprietary technology to our chosen markets and the significant revenues this has the potential to generate.

We have set out the three markets where we expect to see the greatest levels of growth for IHT. These are:

1.  Electric vehicles

2.  Medical

3.  Aerospace

We have seen positive developments across these markets during this period. IHT customers and opportunities grew to 82 by the end of the period (31 December 2019: 72).

Most significantly, in February we announced an order for the supply of flex PCBs to a UK EV OEM, with a follow-on manufacturing agreement signed earlier this month that could be worth up to £38m over three years subject to annual pricing reviews. This deal is Trackwise's first order for full series production of IHT and is a strong validation of the application of our technology to this market and delivery capability.

We remain active in looking for further opportunities within EVs and expect to benefit from the growing emphasis on the sustainability agenda and an increasing legislative pressure to force the automotive sector towards non-fossil fuel motive power.

There continues to be encouraging levels of interest in IHT from the medical industry and we continue to work closely with prospective customers on trials of our technology with a view to securing a meaningful uptick in revenues in FY21.

In aerospace, our developments with GKN of next generation systems continue despite the well-documented industry-wide slowdown.

In the near-term, revenue opportunities will likely continue to be hindered by COVID-19 disruption, but we remain confident in the applicability of IHT to all our chosen market sectors.

SCL Acquisition and integration

We completed the transformational acquisition of Stevenage Circuits Ltd in April 2020, funded through the support of existing and new investors in a £5.87m placing, significantly increasing our production capabilities. Our focus since completion of the acquisition has been to ensure the integration of SCL is as seamless as possible. SCL has been cash generative since the acquisition, providing a valuable base of largely recurring revenue. SCL has continued to win new contracts with key accounts, though these new projects and associated revenues are expected to be delivered in H2, principally because of COVID-19 related disruption.

RF

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, now part of the Advanced PCB division. However, RF continues to be impacted by factors such as Brexit and the US-China trade war, and continues to be compounded by the uncertainty caused by COVID-19. We have adjusted our budget for RF for the year to reflect these factors. RF continues to be profitable, adding value to the Group as a whole.

Financial Review

Revenue for the period increased to £2.389m (H1 2019: £1.547m), benefitting from the inclusion of SCL for Q2. These numbers were disappointing and were the result of the impacts of COVID-19. The issue of new equity at the time of the SCL acquisition strengthened the balance sheet, with net cash of £ 1.564m at the end of June 2020.

 

We have continued to invest in our know-how and technical capability which will support the increasing amount of IHT business that we will have throughout the coming years.

 

Our acquisition of SCL was attractively priced and we acquired the business at a discount to stated net assets, and this gave rise to a credit to the Group P&L account of £1.54m which has bolstered distributable reserves and net assets accordingly. We were able to enforce our rights under the acquisition agreement to have restitution of funds to make good premises and equipment deficiencies that were agreed post acquisition.

 

The outcome of the period is that earnings per share are   4.98p (H1 2019: (0.43) p) .

 

Summary & Outlook

 

While COVID-19 impacted revenues in the first half of the year, delaying both the receipt of new orders and the ability to complete our investment in our production facilities, it was nonetheless a period of excellent strategic progress, underpinned by a base of recurring revenues and profit generation in the Advanced PCB business, incorporating RF. The acquisition of SCL has transformed our production capabilities, paving the way for IHT production at scale, while bringing additional expertise and customer base. We have been pleased with the integration and performance of the business to date.

 

Looking ahead, we are confident the recent IHT manufacturing agreement with a UK manufacturer of EVs will be the catalyst for a step change in Trackwise's revenue and a solid platform on which to build. This, alongside the progress we are making elsewhere in the sector and with partners and prospective customers in medical and aerospace, clearly illustrates the merits of IHT and its potential.

 

While the Company's full year performance will reflect the difficult economic trading conditions, we expect some improvement in elements of our Advanced PCB business and the growing pipeline for IHT gives us confidence in our ability to deliver meaningful IHT revenue growth in FY21.

 

The macro-economic backdrop will remain uncertain due to both Brexit and as the pandemic continues to play out, but Trackwise's long-term value proposition remains unchanged. We will continue to carefully monitor and respond to the situation, and supported by net cash on our balance sheet, a stable customer base and growing pipeline, we are confident in our ability to deliver on these growth opportunities as trading conditions normalise.

 

 

 

Interim Condensed Consolidated Statement of Comprehensive Income

 

Notes

Unaudited Six months ended 30 June 2020

 

Unaudited Six months ended 30 June 2019

 

Audited

Year ended 31 December 2019

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

Revenue

3

2,389

 

1,547

2

2,906

 

 

 

 

 

 

 

Cost of sales

 

(1,964)

 

(961)

 

(1,805)

 

 

 

 

 

 

 

Gross profit

 

425

 

586

 

1,101

 

 

 

 

 

 

 

Administrative expenses excluding

exceptional costs and share based payment

 

Exceptional severance costs

 

Share based payment charges

 

 

(790)

 

-

 

(112)

 

 

 

(518)

 

-

 

(127)

 

 

(900)

 

(28)

 

(224)

 

 

 

 

 

 

 

Total administrative expenses

 

(902)

 

(645)

 

(1,152)

 

 

 

 

 

 

 

Operating loss

 

(477)

 

(59)

 

(51)

 

 

 

 

 

 

 

Negative goodwill arising on acquisition

9

1,545

 

-

 

-

Acquisition expenses

9

(214)

 

-

 

-

Finance income

 

-

 

4

 

5

Finance costs

 

(66)

 

(32)

 

(83)

 

 

 

 

 

 

 

Profit/(loss) before taxation

 

788

 

(87)

 

(129)

 

 

 

 

 

 

 

Taxation

4

133

 

23

 

81

 

 

 

 

 

 

 

Profit/(loss) and total comprehensive income/(expense) for the period

 

 

921

 

 

(64)

 

 

(48)

 

 

 

 

 

 

 

 

Earnings per share (pence)

 

 

 

 

 

 

Basic

6

4.98

 

(0.43)

 

(0.32)

Diluted

6

4.82

 

(0.43)

 

(0.32)

 

 

 

 

 

 

 

 

 

Interim Condensed Consolidated Statement of Financial Position

 

Notes

Unaudited 30 June 2020

 

Unaudited 30 June 2019

 

Audited

31 December 2019

 

 

£'000

 

£'000

 

£'000

ASSETS

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

Intangible assets

7

5,200

 

3,389

 

4,268

Property, plant and equipment

9

8,363

 

3,004

 

2,547

 

 

13,563

 

6,393

 

6,815

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Inventories

 

1,740

 

468

 

555

Trade and other receivables

 

1,585

 

879

 

1,657

Current tax receivable

 

448

 

156

 

338

Cash and cash equivalents

 

3,209

 

1,565

 

567

 

 

6,982

 

3,068

 

3,117

 

 

 

 

 

 

 

Total assets

 

20,545

 

9,461

 

9,932

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Trade and other payables

 

(2,210)

 

(1,262)

 

(1,046)

Borrowings

 

(575)

 

(237)

 

(339)

 

 

(2,785)

 

(1,499)

 

(1,385)

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

Deferred income - grants

 

(914)

 

(763)

 

(856)

Borrowings

9

(3,640)

 

(999)

 

(1,253)

Provisions

 

(310)

 

-

 

-

Deferred tax liabilities

 

(401)

 

(285)

 

(401)

 

 

(5,265)

 

(2,047)

 

(2,510)

 

 

 

 

 

 

 

Total liabilities

 

(8,050)

 

(3,546)

 

(3,895)

 

 

 

 

 

 

 

Net assets

 

12,495

 

5,915

 

6,037

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

Share capital

8

885

 

591

 

591

Share premium account

8

9,374

 

4,234

 

4,234

Retained earnings

 

2,088

 

903

 

1,045

Revaluation reserve

 

148

 

187

 

167

Total equity

 

12,495

 

5,915

 

6,037

 

Interim Condensed Consolidated Statement of Changes in Equity

 

Share

capital

 

Share premium account

 

Retained earnings

 

Revaluation reserve

 

Total equity

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

At 1 January 2019

591

 

4,234

 

840

 

206

 

5,871

 

 

 

 

 

 

 

 

 

 

Loss and total comprehensive income for the period

-

 

-

 

(64)

 

-

 

(64)

Share based payment

-

 

-

 

108

 

-

 

108

Revaluation realised in period

-

 

-

 

19

 

(19)

 

-

At 30 June 2019 and 1 July 2019

591

 

4,234

 

903

 

187

 

5,915

 

 

 

 

 

 

 

 

 

 

Profit and total comprehensive income for the period

-

 

-

 

16

 

-

 

16

Share based payment

-

 

-

 

106

 

-

 

106

Revaluation realised in period

-

 

-

 

20

 

(20)

 

-

At 31 December 2019 and 1 January 2020

591

 

4,234

 

1,045

 

167

 

6,037

 

 

 

 

 

 

 

 

 

 

Profit and total comprehensive income for the period

-

 

-

 

921

 

-

 

921

Issue of shares (net of £439,000 of issue expenses)

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

 

 

 

Interim Condensed Consolidated Statement of Cash Flows

 

 

Unaudited Six months ended 30 June 2020

 

Unaudited Six months ended 30 June 2019

 

Audited

Year ended 31 December 2019

 

 

  £'000

 

£'000

 

£'000

Cash flow from operating activities

 

 

 

 

 

 

Profit/(loss) for the period before taxation

 

788

 

(87)

 

(129)

Adjustment for:

 

 

 

 

 

 

Employee share based payment charges

 

112

 

127

 

224

Depreciation of property, plant and equipment

 

 

349

 

 

127

 

 

225

Amortisation of intangible assets

 

118

 

84

 

183

Negative goodwill credited

 

(1,545)

 

-

 

-

Finance costs

 

66

 

28

 

78

Changes in working capital:

 

 

 

 

 

 

Increase in inventories

 

(314)

 

(88)

 

(175)

Decrease/(increase) in trade and other receivables

 

 

459

 

 

(287)

 

 

(268)

Increase/(decrease) in trade and other payables

 

 

21

 

 

257

 

 

(496)

Cash generated from operations

 

54

 

161

 

634

Income tax received

 

420

 

-

 

21

Net cash from operating activities

 

474

 

161

 

655

 

 

 

 

 

 

 

Cash flow from investing activities

 

 

 

 

 

 

Purchase of property, plant and equipment (net of new leases)

 

 

(359)

 

(47)

 

 

(951)

Purchase of intangible assets

 

(1,036)

 

(854)

 

(1,736)

Purchase of subsidiary (net of cash acquired)

 

 

(1,629)

 

 

-

 

 

-

Grant funding - purchase of intangible assets

 

 

-

 

 

159

 

 

175

Interest received

 

-

 

-

 

5

Net cash used in investing activities

 

(3,024)

 

(1,238)

 

(2,507)

 

Cash flow from financing activities

 

 

 

 

 

 

Share capital issued

 

5,873

 

-

 

-

Expenses relating to share capital issue

 

(439)

 

-

 

-

Interest paid

 

(66)

 

(32)

 

(83)

Lease payments

 

(81)

 

-

 

(89)

Repayment of capital element of lease contracts

 

 

(95)

 

 

(112)

 

 

(195)

Net cash from/(used in) financing activities

 

 

5,192

 

 

(144)

 

 

(367)

 

 

 

 

 

 

 

Increase/(decrease) in cash and cash equivalents

 

 

2,642

 

 

(1,221)

 

 

(2,219)

 

 

 

 

 

 

 

Net cash and cash equivalents at beginning of the period

 

 

567

 

2,786

 

 

2,786

 

 

 

 

 

 

 

Net cash and cash equivalents at end of period (all cash balances)

 

 

3,209

 

1,565

 

 

567

 

 

 

 

 

 

 

 

 

1.  Corporate information

Trackwise Designs plc 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 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 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 2020. These are unchanged from those applied in the 31 December 2019 Company financial statements except for the addition of the application of Group policies which are now relevant following the acquisition of a material subsidiary from April 2020 and the consolidation of its results and financial position with those of the Company. In particular, IFRS 3 Business Combinations and IFRS 10 Consolidated Financial Statements have been applied.

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 2020 and 30 June 2019 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 2019 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 (now part of Advanced PCB) 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 2020 the Group had two major customers who each represented 12% of revenue (30 June 2019: two major customers who represented 11% and 10% of total revenue, and full year ended 31 December 2019: no major customer representing in excess of 10% of revenue).

 

Revenue by product and geographical destination was as follows:

 

 

Unaudited Six months ended 30 June 2020

 

Unaudited Six months ended 30 June 2019

 

Audited

Year ended 31 December 2019

 

  £'000

 

£'000

 

£'000

 

 

 

 

 

 

IHT

251

 

547

 

938

Advanced PCB

2,138

 

1,000

 

1,968

 

2,389

 

1,547

 

2,906

 

 

 

 

 

 

UK

1,495

 

485

 

1,046

Europe

751

 

758

 

1,332

Other

143

 

304

 

528

 

2,389

 

1,547

2

2,906

 

4.  Income tax

Taxation is provided at the estimated rate of tax for the period, applying 19% (2019:17%) 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 2020 or year ended 31 December 2019.

 

6.  Earnings per share

 

The calculation of the basic and diluted earnings per share is based on the following data:

 

 

 

 

 

 

Earnings

Unaudited

Six months ended 30 June 2020

 

Unaudited Six months ended 30 June 2019

 

Audited

Year ended 31 December 2019

 

  £'000

 

£'000

 

£'000

Earnings/(loss) for the purpose of basic and diluted earnings per share being net profit/(loss) attributable to the shareholders

921

 

(64)

 

 

(48)

 

 

 

 

 

 

 

Number

 

Number

 

Number

Weighted average number of ordinary shares for the purposes of basic earnings per share

18,503,836

 

14,772,372

 

14,772,372

Weighted average number of ordinary shares for the purposes of diluted earnings per share

19,116,462

 

14,772,372

 

14,772,372

 

 

 

 

 

 

Options over 901,909 shares were granted to employees on 15 June 2018 which are still exercisable and potentially dilutive shares included in the weighted average for the period to 30 June 2020. The 1,009,000 of additional options issued on 24 June 2020 are not considered to be dilutive on the period to 30 June 2020.

 

7.  Intangible fixed assets

 

 

 

 

 

 

Development costs

 

 

 

£'000

 

 

Cost

 

 

 

At 1 January 2019

2,552

 

 

Additions

850

 

 

As at 30 June 2019

3,402

 

 

Additions

966

 

 

As at 31 December 2018

4,368

 

 

Additions

1,024

 

 

As at 30 June 2020

5,392

 

 

 

 

 

 

Amortisation or impairment

 

 

 

At 1 January 2019

92

 

 

Charge

82

 

 

As at 30 June 2019

174

 

 

Charge

94

 

 

As at 31 December 2019

268

 

 

Charge

113

 

 

As at 30 June 2020

381

 

 

 

 

 

 

Carrying amount

 

 

 

As at 30 June 2019

3,228

 

 

As at 31 December 2019

4,100

 

 

As at 30 June 2020

5,011

 

 

 

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.  Share capital

 

7,341,250 £0.04 ordinary shares were issued on 31 March 2020 at £0.80 each for cash in order to provided funds for the acquisition made in the period and continuing investment in the business. This increased nominal share capital by £294,000 and share premium by £5,579,000. Share issue costs of £439,000 were charged against the share premium account resulting in a net increase of £5,140,000.

 

9.  Acquisition of Stevenage Circuits Ltd

 

The Company acquired all of the share capital of Stevenage Circuits Ltd ("SCL"), a UK-based designer and manufacturer of short flex and rigid printed circuit boards, on 1 April 2020. The acquisition primarily adds further manufacturing capacity to enable the demand-led ramp up of Trackwise Design's Improved Harness Technology production, as well as customers and technical, sales and operational expertise.

 

The assets were acquired at a discount to their provisional fair value resulting in negative goodwill of £1,545,000 which has been credited to the income statement in accordance with IFRS 3 and represents an exceptional item in the period. This relates to the ability of the combined Group to fully utilise the manufacturing capacity of SCL and enhance earnings from the specialist plant and equipment. The consolidated negative goodwill credit is not expected to be taxable.

 

The provisional fair values of the assets and liabilities acquired are as follows:

 

 

 

Fair value

 

 

£'000

Property, plant and equipment

 

2,969

Right of use property assets

 

1,915

Intangible assets

 

14

Inventories

 

872

Trade receivables and prepayments

 

1,136

Tax

 

396

Cash

 

543

Trade and other payables

 

(1,370)

Lease liabilities

 

(1,915)

Hire purchase liabilities

 

(533)

Provisions

 

(310)

 

 

 

 

 

3,717

 

 

 

Negative goodwill arising

 

(1,545)

 

Consideration was paid in cash and there is no deferred or contingent consideration payable. Gross trade receivables acquired were £903,000 all of which were expected to be recovered. Right of use property assets are included in property, plant and equipment and lease liabilities within borrowings in the consolidated statement of financial position.

 

Acquisition related expenses of £214,000 have been charged as an exceptional item in the consolidated income statement. The negative goodwill and acquisition expenses are both considered highly material and significant non-recurring items. They are therefore presented below operating loss in the consolidated income statement.

 

SCL has contributed £1,224,000 of revenue and incurred a loss of £47,000 included in the consolidated income statement from 1 April 2020 to 30 June 2020 (excluding acquisition expenses and negative goodwill). Had SCL been consolidated from 1 January 2020 it would have contributed another £1,284,000 of revenue and a loss of £23,000 to the six-month period.

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