Trackwise (LON:TWD)

Trackwise (LON:TWD)


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Trackwise RNS Release

Results for the year ended 31 December 2018


RNS Number : 8748V
Trackwise Designs PLC
11 April 2019
 

 

 

11 April 2019

 

 

TRACKWISE DESIGNS PLC

 

("Trackwise" or the "Company")

 

Preliminary Results for the year ended 31 December 2018

 

 

Trackwise Designs Plc (AIM: TWD), a leading provider of specialist products using printed circuit technology, is pleased to announce its audited results for the year ended 31 December 2018.

 

 

Financial Highlights

 

·    Revenues up 23% to £3.47m

 

·    IHT revenues up 217%

 

·    Adjusted Operating profit up 385% to £325k

 

·    Adjusted EBITDA rises 171% to £618k

 

·    Net cash of £2.79m

 

 

Operational Highlights

 

·    Move to new enhanced operating site successfully completed

 

·    Investment in world class flexible printed circuit board facility begun and £1,281k invested in capacity and capability

 

·    Installation of two new process lines

 

·    IHT customers and opportunities increased from 7 to 31 over the year and to 45 by end of March 2019

 

·    Delivery of first ship set for the wiring harness for High Altitude Pseudo Satellite

 

 

 

Outlook

The new year has begun steadily with revenue in line with our expectations.  There is some delay in ordering from new IHT customers and there is, inevitably, some uncertainty regarding the impact of Brexit, but we continue to experience accelerating interest and demand for the IHT technology.

The precise timing of many of these new opportunities is outside of Trackwise's control as a consequence of the development nature of the customers' needs, but the accretion of customers, which has accelerated in this current year to date gives us confidence that our strategy remains on track.

 

Commenting on the results, Chairman Ian Griffiths said:

 

"2018 was a year of significant progress for the company and the results show the benefits of the strategy for operational development and growth in the business in line with our core strategy outlined at the time of the IPO.

 

"The improved financial results reflect the hard work and achievements of 2018.

 

"The accretion of customers, which has accelerated in this current year to date gives us confidence that our outlook is that over the medium term the expectations set out at the time of flotation will be achieved."

 

Commenting on the results, Philip Johnston, Chief Executive Officer of Trackwise, added: " 

"I would like to express my thanks to all the stakeholders who contributed to this very busy and transformational year, in particular, to all of our loyal and hardworking staff, without whom none of this would have been possible, and to the customers and investors that have shown confidence in us and our technology. 

"This confidence has allowed Trackwise to plan and now to deliver a world class multi-layer flexible PCB production facility.

"In 2018 we increased revenue by 23% compared to last year at the same time increasing our adjusted operating profit by 385% to £325K."

 

 

Enquiries:

 

Trackwise Designs PLC                                                          www.trackwise.co.uk

Philip Johnston, CEO                                                               +44 (0) 1684 299930

Mark Hodgkins, CFO                                                               +44 (0) 1684 299930

 

Arden Partners plc

NOMAD and Broker

Ciaran Walsh/Steve Douglas/Dan Gee-Summons                  +44(0)20 7614 5900

 

IFC Advisory Ltd

(Financial PR and IR)

Tim Metcalfe/Miles Nolan/Zac Cohen                                   +44(0)20 3934 6635

 

 

Chairman's statement

 

BUILDING MOMENTUM

It was a transformational year for Trackwise. The IPO on 31 July 2018 provided an essential platform for the development and growth of the Company which will celebrate its 30th anniversary in 2019. 

The proceeds of the IPO are being invested to increase capacity, refine our capability for the supply of IHT products and develop opportunities and resources to implement and accelerate our growth strategy.

                                                                                                                       

Performance

I am pleased to report a year of significant performance improvement throughout the Company with encouraging operational development and growth in the business throughout 2018 in line with our core strategy outlined at the time of the IPO.  Revenues for the period show significant growth over 2017 up 23% at £3,468k (2017: £2,821k) and EBITDA from recurring business increased 171% to £618k (2017: £228k).  The impact of the flotation on 31 July 2018 is reflected in the increase in net assets from £1.23m to £5.87m.

Since becoming a public company, our corporate profile has grown, and we are experiencing increased recognition with both our existing customer base and new business potential. Our pipeline of opportunities in our chosen IHT markets has grown from 14 at the time of flotation to 45 at the end of March 2019.

In the early part of 2018, the Company's operations moved to new premises in Tewkesbury which created the space for the anticipated growth within the IHT marketplace and facilitated improved operational performance.

 

Market Review

Our view of the opportunity for IHT is unchanged. All of our chosen industry sectors are showing increasing interest in the technology and we have a developing list of customers engaged in leading-edge technology projects who are placing orders. Our challenges in the near to mid-term are in meeting growing demand and the Company is deploying the funds raised at flotation in readiness. Revenues from IHT in 2019 will comfortably exceed last year and we expect the nature of the orders to change to longer production programmes over the next two years. Our outlook is that over the medium term the expectations set out at the time of flotation will be achieved.


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 wire harnesses, particularly through weight, space and installation time savings in aerospace, defence and satellite markets as well as automotive applications through electrification of vehicles.

 

Board, Senior Management and Employees

I and my non-executive Director colleague, Lesley Jackson, were appointed to the existing Board at flotation.  We joined the Chief Executive Officer, Philip Johnston, inventor of the patented process which forms the basis of the IHT offering and Chief Financial Officer, Mark Hodgkins.

We have elected to adopt the Quoted Company Alliance Code for governance purposes.

2018 has been a year of major transformation, executed by a strong experienced management team. Following the factory move and the flotation they are now focused on implementing the growth strategy that these two events have enabled.  This includes continuing development and training of both existing employees and new recruits.  

I would like to thank the whole Trackwise team for their efforts during 2018 and the contribution that they continue to make to support and execute our growth strategy.

 

Dividend

The Directors do not recommend the payment of a dividend this year as the company is still in the process of investing in essential capability and capacity requirements. It is intended that in the future, when commercial conditions allow, then a progressive dividend policy will be implemented.

 

Outlook

The new year has begun steadily with revenue in line with our expectations.  There is some delay in ordering from new IHT customers and there is, inevitably, some uncertainty regarding the impact of Brexit, but we continue to experience accelerating interest and demand for the IHT technology.

The precise timing of many of these new opportunities is outside of Trackwise's control as a consequence of the development nature of the customers' needs, but the accretion of customers, which has accelerated in this current year to date gives us confidence that our strategy remains on track.

 

 

Chief Executive's Strategic Review

 

"2018 was a transformational year for Trackwise"  

2018 was a landmark year for the business; we moved our manufacturing facility, achieved a major shift in impetus in the development of our unique wire harness replacement technology IHT and successfully floated the business on the London AIM market.

I would like to express my thanks to all the stakeholders who contributed to this very busy and transformational year, in particular, to all of our loyal and hardworking staff, without whom none of this would have been possible, and to the customers and investors that have shown confidence in us and our technology. 

This confidence has allowed Trackwise to plan and now to deliver a world class multi-layer flexible PCB production facility.

In 2018 we increased revenue by 23% compared to last year at the same time increasing our adjusted operating profit by 385% to £325K. A more complete commentary on our financial performance in 2018 is given in the Chief Financial Officer's Report.

Our legacy RF business will continue to underpin the business, but as laid out at IPO the growth opportunity is IHT.  IHT is a unique, proprietary, patented technology.  It is not a new technology, but rather a new method of manufacturing a proven technology that opens applicability of that proven technology to a vast new range of applications.

In our first report as a listed entity I set out below some of the key tenets of our unique product offering together with some of the nascent and established markets that can benefit from our capabilities.

Unlimited length multi-layer flexible PCBs are, we believe, unique to Trackwise and represent a disruptive technological process that releases proven advantages over traditional wire harnesses to a significant total addressable market, previously excluded by historic supply chain size limits.

IHT

The opportunities for IHT are extremely diverse; wherever wire is used, IHT can potentially offer a benefit.  The main benefits of IHT are:

¨         Weight saving - up to 75%

 

¨         Space saving

 

¨         Improved precision

 

¨         Improved reliability

 

¨         Reduced installation time

 

¨         Ability to be bonded onto/into supporting structure

 

¨         Ability to integrate electronic components, changing an entirely passive interconnect into a 'smart harness'

 

We continue to develop a presence in four principal markets where there is significant opportunity for the disruptive qualities that IHT has.  These are:

 

¨         Aerospace                           

¨         Automotive

¨         Space (including Satellites and Spacecraft)

¨         Industrial and Scientific

 

We seek to work with leading industry players in each sector who can bring scale and skillset to a global delivery strategy.

 

Aerospace

The benefits of IHT and their importance to aerospace demands that this sector represents a key target market (it is worth an estimated $47.5Bn 2012-2031).  In the short to medium term the Company has exciting aerospace opportunities.

 

High Altitude Pseudo-Satellite (HAPS) and Unmanned Aerial Vehicles (UAVs) aerospace sub-sectors are entrepreneurial-driven and are not encumbered by legacy thinking and technology, with new-entrants driving change. The Company is winning work, from this market sector (30% of IHT revenues in 2018).

 

We are positioning ourselves at the forefront of these developing opportunities and our technology will have its maiden flight in 2019; we are receiving repeat orders, a vote of confidence in Trackwise technology.

 

In UAVs we aim to support distributed propulsion, distributed batteries, distributed sensing and control all of which supports an already strong case for the use of flexible printed circuits in place of conventional wire harnesses, let alone smart harnesses, rather than an entirely passive interconnect, delivering significant weight reduction a key requirement.  

 

In conventional aerospace, UK and International R&D programs allow us to introduce the benefits of flat flex wiring into multiple applications for example electro-thermal ice protection, embedded antennas, sensors and crack detection.

 

We have worked extensively with GKN Aerospace and we intend to enter into a development contract for the industrialisation of GKN's Type 8 Ice Protection System which will see the two companies building upon existing development work and so advance the manufacture of the Ice Protection System to rate production levels.

 

Trackwise has engaged the services of a US sales resource to advance the many opportunities that exist in US Aerospace for IHT.

 

Automotive

We have several developing customers in the Electric Vehicles space; in 2018 this market accounted for 19.8% of IHT revenue. This market is growing and though Brexit is clouding the future for the UK automotive sector the macro trend is unmistakable; our review of the electric vehicle market encompasses reports of one billion electric vehicles on the road globally by 2050.

 

Participation in the Faraday Challenge is ensuring that we address the needs of not only road electric vehicles but also parallel developments in electric flight (UAVs - leading into Urban Air Mobility (UAM)).  The IHT capability enables the designer to add distributed electronic components into the flexible harness itself making IHT products a compelling option for electric vehicles.

 

Space

The weight and space saving benefits offered by IHT are of particular interest to the space industry.  Trackwise is experiencing growing interest from a wide range of international space companies.

 

Initial focus in this arena is regarding spacecraft solar arrays - deployable areas of photo-voltaic cells that convert sunlight into electrical power to power the spacecraft. Current technology comprises rigid solar arrays, built from an assembly of hinged panels. 

 

Our customers are exploring an opportunity for a flexible solar array based on Trackwise flexible circuits as the power transfer assembly.  The power density of such flexible solar array solutions is much increased, enabling both missions requiring high power, such as high-power telecom and also missions with very stringent accommodation constraints, such as constellation satellites.

 

The increasing involvement of more countries and the opening up of space to private investment presents a valuable market for Trackwise.

 

Industrial and Scientific

The proven benefits of IHT also apply to a very wide range of industrial and scientific applications.  In 2018 Trackwise won customers in food processing (flow measurement), nuclear (inspection equipment), as well as contracts with CERN and other scientific facilities. 

 

2018 saw an increasing volume of IHT of 217% across an increasing number of customers and the growth of that customer base has continued in the first quarter of 2019.

 

Accreditations and Standards

As a new aerospace product category aimed primarily at aerospace, AS9100 certification was first achieved in September 2015 for IHT, with the transition to the new AS9100D standard achieved in October 2017.

 

We are working to win further accreditations e.g.:

 

·     Extending AS9100D to Design and Manufacture of Products using Printed Circuit Technology.

 

·     Nadcap (National Aerospace and Defence Contractors Accreditation Program)

 

·     ISO/TS 16949.

 

2018 saw the Company's IHT patent granted in China (previously granted in UK and US).  Application processes in EU, Brazil and Canada are proceeding.

 

RF

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 Directors believe will continue to create demand for the Company's RF products.  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.

 

Our RF business has performed well in 2018 and remains a consistent source of income.  I am pleased to say that many of the capacity and capability investments we are making for IHT will also benefit our RF business in the coming years.

 

Employees

We are committed to achieving a working environment which reflects diversity, provides equality of opportunity, ensures freedom from unlawful discrimination and our policy is to treat all employees, applicants and clients with respect and dignity giving due consideration to all.

 

We will continue to invest and develop our workforce alongside the development of our IHT technology.

 

Chief Financial Officer's Report

 

"Growth in IHT and RF enabled Trackwise to post a strong increase in profits and the best revenue performance since 2014"

 

During the year under review the Company made significant strategic progress with changes that created impetus for the development of IHT. The impetus was created, as a consequence of both our move to new premises, and the benefits of our IPO. The IPO allowed us to invest £1,281k in the facility and our capability that has enabled us to have a world class flexible multi-layer PCB production facility.

 

The success of the IPO has of course transformed the balance sheet of the Company and further investment is planned as a consequence.

 

Trading Performance

 

Overall Company Operating result

2018

2017

 

£'000

£'000

 

Revenues

 

3,468

 

2,821

Adjusted Operating profit

325

67

Adjusted EBITDA

618

228

 

 

 

 

 *An analysis of adjusted Operating Profit and adjusted EBITDA is given in note 15

 

Company revenue for the year increased by 23% from £2.82m in 2017 to £3.47m in 2018 driven by growth in both the IHT division and the RF division.

 

IHT sharply increased revenues in the year to £606k against £191k for 2017 and missed out on much higher reported revenues only due to the delay in orders in the late part of the year. The growth came principally from our lead customer in the aerospace sector, but we had increased awareness and interest in IHT giving rise to revenues from a number of new sources. Since IPO we have increased the number of active customers and opportunities from 14 (at the time of flotation) to 45 (as at 31 March 2019).

 

We were held back in our ambitions when our customers, with whom we are partnering, also had elongated adoption processes for the new technology.

 

The RF division recorded a growth of 10% in revenues year on year to £2.87m, its best performance since 2014.

 

Measuring Financial Performance

The Company uses a number of specific measures to assess its performance, which are not defined by IFRS, but are used by the Board to assess the progress of the business against its strategic plan and examines the underlying operational performance and as such these measures are important and should be considered alongside IFRS measures.

 

Reported operating profit increased by 140.3% after taking a charge in the year for share based payments of £155k and one-off move costs associated with the 20 years tenancy we vacated during the year of £45k. Before these exceptional items our operating profits rose by 385%.

 

The listing costs are a burden for a small company such as Trackwise and amounted to £1,056k or 19.2% of gross new money raised and these costs have been charged to Share Premium in accordance with accepted accounting treatment.

 

Results and dividends

Reported increased profit after taxation of £75k (2017: £8k) enabled the Company to report EPS 0.63p per share (2017: 0.084p) reflecting both the increase in profits and in the number of shares in issue from 9,534,275 in 2017 to 14,772,372 in 2018.

 

At the year end the Company demonstrated a strong balance sheet with net cash of £2.796m

 

The Company invested heavily in infrastructure during the year to rapidly advance the Company's capability. The total investment during the year in infrastructure was £214k and this was accompanied by increased development of the IHT technology where we spent a total of £1.05m. We anticipate continued investment in 2019 at similar levels to those in 2018.

 

During the year we incurred costs in relation to our previous operating facility which the Directors consider to be of a non-recurring nature and have therefore been treated as such.

 

The Company continues to develop the technology which we call IHT to enhance production processes and efficiencies in order to improve current uses for the technology and also other derivatives of the technology for exploitation commercially. In doing so the Company benefits from the UK Government's R&D tax regime. This is expected to continue for the foreseeable future but cannot be guaranteed. As a consequence, the Company not only receives credits to its P&L account, but also increases tax losses that now amount to in excess of £450k. Additionally, the Company has deferred tax liabilities of £308k.  Consequently, the Company is unlikely to pay tax on profits in the short to medium term.

 

The Company's trading activities are such that there is a natural hedge to a proportion of our currency exposure where our principal exposures are the Euro and the US Dollar. The Board monitors the exposure carefully, in accordance with its adopted treasury policy and uses limited derivatives to manage foreign currency risks when exposure is considered to be higher than normal. Transactions of a speculative nature are, and will continue to be, prohibited. At 31 December 2018 the Company had no liabilities under any foreign currency hedging arrangement.

 

On 31st July 2018 the Company was admitted to the listing of its shares on AIM market of the London Stock Exchange. As part of that process the Company placed 5,238,097 new ordinary shares at 105p such that after admission there were 14,772,372 ordinary shares of 4p each.

 

Prior to flotation the Company capitalised the credit standing to the Capital Redemption Reserve fund with a bonus issue of 367,195 shares to its existing shareholders in proportion to their shareholding on 28th June 2018. Following that capitalisation, the nominal share value of the ordinary shares was reduced from £1 to 4p increasing the number of shares to 9,534,275.

 

Trackwise Designs PLC

Preliminary Report for the year ended 31 December 2018

 

Statement of Comprehensive Income

 

 

Notes

 

2018

 

2017

 

 

 

£'000

 

£'000

 

 

 

 

 

 

Revenue

3

 

3,468

2

2,821

 

 

 

 

 

 

Cost of sales*

 

 

(2,416)

 

(1,917)

 

 

 

 

 

 

Gross profit

 

 

1,052

 

904

 

 

 

 

 

 

Other operating income

 

 

-

 

22

Administrative expenses excluding exceptional costs and share based payment

 

 

 

(727)

 

 

(859)

Exceptional premises move costs

 

 

(45)

 

-

Share based payment charge

 

 

(155)

 

-

Total administrative expenses*

 

 

(927)

 

(884)

 

 

 

 

 

 

Operating profit

4

 

125

 

67

 

 

 

 

 

 

Finance income

6

 

8

 

-

Finance costs

6

 

(65)

 

(80)

 

 

 

 

 

 

Profit/(loss) before taxation

 

 

68

 

(13)

 

 

 

 

 

 

Taxation

7

 

7

 

21

 

 

 

 

 

 

Profit and total comprehensive income for the year

 

 

75

 

8

 

 

 

 

 

 

 

Earnings per share (pence)

 

 

 

 

 

Basic

9

 

0.63

 

0.084

Diluted

9

 

0.61

 

0.084

 

 

 

 

 

 

 

 

*The cost of sales for 2017 has been restated on a basis consistent with 2018 to include an additional £166k of direct production overheads as well as direct labour and materials with a corresponding reduction in administrative expenses.

 

 

Statement of Financial Position

 

 

 

           

Notes

 

2018

 

2017

 

 

 

£'000

 

£'000

ASSETS

 

 

 

 

 

Non-current assets

 

 

 

 

 

Intangible assets

10

 

2,619

 

1,649

Property, plant and equipment

11

 

1,264

 

1,257

 

 

 

3,883

 

2,906

 

 

 

 

 

 

Current assets

 

 

 

 

 

Inventories

 

 

380

 

313

Trade and other receivables

 

 

846

 

550

Current tax receivable

 

 

156

 

95

Cash and cash equivalents

 

 

2,786

 

166

 

 

 

4,168

 

1,124

 

 

 

 

 

 

Total assets

 

 

 

4,030

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Current liabilities

 

 

 

 

 

Trade and other payables

 

 

(815)

 

(1,123)

Derivative liability

 

 

-

 

(49)

Borrowings

 

 

(161)

 

(662)

 

 

 

(976)

 

(1,834)

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

Deferred income - grants

 

 

(539)

 

(306)

Borrowings

 

 

(357)

 

(410)

Deferred tax liabilities

 

 

(308)

 

(254)

 

 

 

(1,204)

 

(970)

 

 

 

 

 

 

Total liabilities

 

 

 

(2,804)

 

 

 

 

 

 

Net assets

 

 

5,871

 

1,226

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

 

 

 

 

 

Share capital

14

 

591

 

14

Share premium account

 

 

4,234

 

-

Retained earnings

 

 

840

 

600

Revaluation reserve

 

 

206

 

245

Capital redemption reserve

 

 

-

 

367

Total equity

 

 

5,871

 

1,226

 

 

 

 

Statement of Changes in Equity

 

 

 

Share

capital

 

Share

premium account

 

Retained earnings

 

Revaluation reserve

 

Capital redemption reserve

 

Total equity

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2017

14

 

-

 

673

 

284

 

367

 

1,338

 

 

 

 

 

 

 

 

 

 

 

 

Profit and total comprehensive income for the year

-

 

-

 

8

 

-

 

-

 

8

Dividends paid

-

 

-

 

(120)

 

-

 

-

 

(120)

Revaluation realised in year

-

 

-

 

39

 

(39)

 

-

 

-

At 31 December 2017

14

 

-

 

600

 

245

 

367

 

1,226

 

 

 

 

 

 

 

 

 

 

 

 

Profit and total comprehensive income for the year

-

 

-

 

75

 

 

 

 

 

75

Bonus issue of shares

367

 

-

 

 

 

 

 

(367)

 

-

Issue of shares (net of £1,056k of issue expenses)

210

 

4,234

 

 

 

 

 

 

 

4,444

Share based payment

 

 

 

 

126

 

 

 

 

 

126

Revaluation realised in year

 

 

 

 

39

 

(39)

 

 

 

-

At 31 December 2018

591

 

4,234

 

840

 

206

 

-

 

5,871

 

 

Statement of Cash Flows

 

 

           

Notes

 

2018

 

2017

 

 

 

£'000

 

£'000

Cash flow from operating activities

 

 

 

 

 

Profit for the year before taxation

 

 

68

 

(13)

Adjustment for:

 

 

 

 

 

Employee share based payment charge

 

 

155

 

-

Depreciation of property, plant and equipment

11

 

196

 

158

Profit on sale of fixed assets

 

 

(1)

 

-

Amortisation of intangible assets

10

 

97

 

3

Finance costs

6

 

57

 

80

Changes in working capital:

 

 

 

 

 

Decrease/(increase) in inventories

 

 

(67)

 

(35)

(Increase)/decrease in trade and other receivables

 

 

 

 

(275)

 

 

88

(Decrease)/increase in trade and other payables

 

 

(337)

 

599

Cash generated from operations

 

 

(107)

 

880

Income tax received

 

 

36

 

-

Net cash from operating activities

 

 

(71)

 

880

 

 

 

 

 

 

Cash flow from investing activities

 

 

 

 

 

Purchase of property, plant and equipment

 

 

 

 

 

(214)

 

(257)

Proceeds from sale of property, plant and equipment

 

 

 

11

 

 

-

Purchase of intangible assets

(net of related grant funding)

Interest Received

 

10

 

(1,067)

127

8

 

 

(402)

-

 

Net cash used in investing activities

 

 

 

(1,134)

 

 

(659)

 

 

Cash flow from financing activities

 

 

 

 

 

Dividends paid to shareholders

8

 

-

 

(120)

Share capital issued

Expenses Relating to Share issue

 

 

5,500

(1,056)

 

 

-

Interest paid

 

 

(65)

 

(80)

Increase/(decrease) in invoice discounting

 

 

-

 

(129)

Proceeds from borrowings

 

 

-

 

515

Repayment of borrowings

 

 

(516)

 

(241)

Repayment of capital element of finance lease contracts

 

 

 

 

(39)

 

 

(122)

Net cash from/ (used in) financing activities

 

 

 

3,125

 

 

(177)

 

 

 

 

 

 

Increase in cash and cash equivalents

 

 

2,620

 

44

 

 

 

 

 

 

Net cash and cash equivalents at beginning of the year

 

 

 

166

 

 

122

 

 

 

 

 

 

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

 

 

 

2,786

 

 

166

 

 

 

 

 

 

 

 

Notes to the Financial Statements

 

1.    Corporate statements

Trackwise Designs plc is a Public Company Limited by Shares 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

2.1  Basis of preparation

Statement of compliance

These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and in accordance with the applicable provisions of the Companies Act 2006. These are the first annual financial statements prepared by the Company under IFRS and details of the transition are set out in note 24. These policies have been applied consistently to all periods presented, unless otherwise stated. In line with the transition provisions of IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers the Company has elected to apply on transition to these standards on 1 January 2018 a limited retrospective approach. Applying a limited retrospective approach on adoption of IFRS 9 and IFRS 15 in 2018 results in no restatement of comparative periods and there have been no classification, measurement or recognition adjustments relating to application of these two new standards in these financial statements. No contract balances arise under IFRS15 as income is recognised when goods are despatched, and performance of the seller's obligations is complete.

 

Basis of measurement

The financial statements have been prepared on the historical cost basis as modified for the revaluation of plant on transition to IFRS and for certain financial instruments at fair value.

Going concern

The Directors have considered the principal risks and uncertainties facing the business, along with the Company's objectives, policies and processes for managing its exposure to financial risk. In making this assessment the directors have prepared cash flows for the foreseeable future, being a period of at least 12 months from the expected date of approval of the financial statements. These forecasts show that the Company should be able to manage its working capital and existing resources to enable it to meet its liabilities as they fall due. Based on the above factors, the Directors have prepared the financial statements on a going concern basis.

 

Consolidation

The Company is exempt by virtue of Section 402 of the Companies Act 2006 from the requirement to prepare group financial statements as the Directors consider its subsidiary is not material for the purposes of giving a true and fair view.  These financial statements present information about the Company as an individual undertaking and not about its Group.

 

 

Functional and presentational currency

These financial statements are presented in Pound Sterling ("Sterling") rounded to the nearest thousand pounds.

 

Use of estimates and judgments

The preparation of the financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

 

 

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

 

The estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

 

 

Property, plant and equipment

Management have estimated the useful life of assets based upon the period that the assets are able to and expected to generate revenue.

These estimates are reviewed annually for continued appropriateness and events which may cause the estimate to be revised. (Note 11)

 

 

Share Based Payments

The Company uses the Black-Scholes option-pricing model where applicable, with inputs, in particular volatility, requiring significant judgement in application.

 

 

Intangible assets

Management have used their judgement in respect of the capitalisation of development costs.  The viability of the new technology and know-how supported by the results of testing and customer trials and by forecasts for the overall value and timing of sales supports the approach taken.  (Note 10)

Amortisation commences once management consider that the asset is available for use, i.e. when it is judged to be in the location and condition necessary for it to be capable of operating in the manner intended by management and the cost is amortised over the estimated useful life of the know-how based on expected customer product cycles and lives.

2.2       Revenue

Revenue comprises income from the sale of printed circuit boards and represents the amount receivable for the sale of goods, excluding VAT and trade discounts. Revenue is recognised when all of the following conditions have been satisfied:

I.     The Company has received and accepted the purchase order from the customer

II.    Sales prices are based on quotes for each customer's unique product and include transport which is insignificant in the context of the sale price

III.   Revenue is recognised when the goods have been despatched to the customer

 

2.3  Grants

 

Income based grants

Income based grants are recognised in other operating income based on the specific terms related to them as follows:

ー          A grant is recognised in other operating income when the grant proceeds are received (or receivable) provided that the terms of the grant do not impose future performance-related conditions.

ー          If the terms of a grant do impose performance-related conditions, then the grant is only recognised in income when the performance-related conditions are met.

ー          Any grants that are received before the revenue recognition criteria are met are recognised in the statement of financial position as another creditor within liabilities.

 

Capital grants

Grants received relating to tangible and intangible fixed assets are treated as deferred income and released to the statement of comprehensive income over the expected useful lives of the assets concerned.

 

2.4  Share based payment

 

The Company operates an equity-settled share-based compensation plan in which the Company receives services from employees as consideration for share options. The fair value of the services is recognised as an expense, determined by reference to the fair value of the options granted.

 

2.5  Income tax

Current income tax assets and/or liabilities comprise obligations to, or claims from, fiscal authorities relating to the current or prior reporting periods, that are unpaid/due at the reporting date. Current tax is payable on taxable profits, which may differ from profit or loss in the financial statements. Calculation of current tax is based on the tax rates and tax laws that have been enacted or substantively enacted at the reporting period.

Deferred taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases.

A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised, unless the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.

 

2.6  Goodwill

Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identifiable and separately recognised. After initial recognition, goodwill is measured at cost less accumulated impairment losses.

 

2.7  Research and development cost

 

An internally generated intangible asset arising from development (or the development phase) of an internal project is recognised if, and only if, all of the following have been demonstrated:

 

ー        It is technically feasible to complete the development such that it will be available for use, sale or licence;

ー        There is an intention to complete the development;

ー        There is an ability to use, sell or licence the resultant asset;

ー        The method by which probable future economic benefits will be generated is known;

ー        There are adequate technical, financial and other resources required to complete the development;

ー        There are reliable measures that can identify the expenditure directly attributable to the project during its development.

The amount recognised is the expenditure incurred from the date when the project first meets the recognition criteria listed above.  Expenses capitalised consist of employee costs incurred on development, direct costs including material or testing and an apportionment of appropriate overheads.

Where the above criteria are not met, development expenditure is charged to the Statement of Comprehensive Income in the period in which it is incurred.

Capitalised development costs are initially measured at cost. After initial recognition, they are recognised at cost less any accumulated amortisation and any accumulated impairment losses.

The depreciable amount of a development cost intangible asset with a finite basis useful life is allocated on a straight-line basis over its useful life, currently expected to be 20 years. Amortisation begins when the asset is available for use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management.

The amortisation period and the amortisation method for the assets with a finite useful life is reviewed at least each financial year-end. If the expected useful life of the asset is different from previous estimates, the amortisation period is changed accordingly.

 

2.8  Patent costs

Patent cost assets are initially measured at cost. After initial recognition, they are recognised at cost less any accumulated amortisation and any accumulated impairment losses. The costs are amortised over the 15 year life of the patent.

 

2.9  Property plant and equipment

 

Property, plant and equipment is recognised as an asset only if it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably.

 

An item of property, plant and equipment that qualifies for recognition as an asset is measured at its cost. Cost of an item of property, plant and equipment comprises the purchase price and any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. On transition to IFRS, plant and equipment was revalued and this amount has been used as the deemed cost with no further revaluations.

 

After recognition, all property, plant and equipment (including Leasehold improvements and plant and machinery) is carried at cost less any accumulated depreciation and any accumulated impairment losses.

 

Depreciation is provided at rates calculated to write down the cost of assets, less estimated residual value, over their expected useful lives on the following basis:

 

Leasehold improvements       Straight line over the period of the lease

Plant and machinery               10-33% straight line

 

The residual value and the useful life of an asset is reviewed at least at each financial year-end and if expectations differ from previous estimates, the changes are accounted for as a change in an accounting estimate in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

 

Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying value of the asset and are recognised in profit or loss.

 

2.10  Impairment of goodwill, other intangible assets and property, plant and equipment

 

For impairment assessment purposes, assets are grouped at the lowest levels for which there are largely independent cash flows. As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Company at which management monitors goodwill.

Cash-generating units to which goodwill has been allocated are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An asset or cash-generating unit is impaired when its carrying amount exceed its recoverable amount. The recoverable amount is measured as the higher of fair value less cost of disposal and value in use. The value in use is calculated as being net projected cash flows based on financial forecasts discounted back to present value.

The impairment loss is allocated to reduce the carrying amount of the asset, first against the carrying amount of any goodwill allocated to the cash-generating unit, and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An impairment loss is reversed if the asset's or cash-generating unit's recoverable amount exceeds its carrying amount (see note 10).

 

2.11   Inventories

Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value.  Cost comprises all costs of purchase, costs of conversion and an appropriate proportion of fixed and variable overheads incurred in bringing the inventories to their present location and condition. Net realisable value is calculated as the estimated selling price less costs to complete and sell. Where necessary, provision is made to reduce cost to no more than net realisable value having regard to the nature and condition of inventory, as well as its anticipated utilisation and saleability.

 

2.12   Financial instruments

 

The Company classifies all of its financial assets at amortised cost.  Financial assets do not comprise prepayments.  Management determines the classification of its financial assets at initial recognition.

 

These assets arise principally from the provision of goods and services to customers (e.g. trade receivables), but also incorporate other types of financial assets where the objective is to hold their assets in order to collect contractual cash flows and the contractual cash flows are solely payments of the principal and interest.  They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

 

The Company's financial assets held at amortised cost comprises trade and other receivables and cash and cash equivalents in the statement of financial position.

 

Financial assets

Financial assets are recognised in the statement of financial position when, and only when, the Company becomes a party to the contractual provisions of the instrument.

Financial assets are initially recognised at fair value, which is usually the cost, plus directly attributable transaction costs.

 

Financial assets are measured at amortised cost using an effective interest method and discounting is omitted where the effect is immaterial.

 

Impairment provisions are recognised based on the simplified approach within IFRS 9 using the lifetime expected credit losses.  During this process the probability of the non-payment of the trade receivables is assessed.  This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables.  For trade receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being recognised within administrative expenses in the statement of comprehensive income.  On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

A financial asset is derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and reward are transferred.

 

Financial liabilities

Financial liabilities include borrowings, trade and other payables and derivatives in respect of forward foreign exchange contracts.

Financial liabilities are obligations to pay cash or other financial assets and are recognised in the statement of financial position when, and only when, the Company becomes a party to the contractual provisions of the instrument.

Financial liabilities, other than derivatives, are initially recognised at fair value adjusted for any directly attributable transaction costs.

After initial recognition, financial liabilities, other than derivatives, are measured at amortised cost using the effective interest method, with interest-related charges recognised as an expense in finance costs. Discounting is omitted where the effect of discounting is immaterial.

Derivatives are measured at fair value through profit and loss for any movements.

A financial liability is derecognised only when the contractual obligation is extinguished, that is, when the obligation is discharged, cancelled or expires.

 

2.13   Leased assets

 

Finance leases and hire purchase obligations

The economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the risks and rewards of ownership of the leased asset. Where the Company is a lessee in this type of arrangement, the related asset is recognised at the inception of the lease at the fair value of the leased asset or, if lower, the present value of the lease or hire purchase payments plus incidental payments, if any. A corresponding amount is recognised as a finance lease or hire purchase liability.

This liability is reduced by payments net of finance charges. The interest element of lease payments represents a constant periodic rate of interest on the outstanding capital balance and is charged to profit or loss, as finance costs over the period of the lease.

 

Operating leases

All other leases are treated as operating leases. Where the Company is a lessee, payments on operating lease agreements are recognised as an expense on a straight-line basis over the lease term. Associated costs, such as maintenance and insurance, are expensed as incurred.

 

2.14   Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, together with other short term, highly liquid investments that are readily convertible into known amounts of cash and are subject to an insignificant risk of changes in value.

 

2.15   Foreign currencies

Transactions entered into by the Company in a currency other than the functional currency of sterling are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in the Statement of Comprehensive Income.

 

The Company does not apply hedge accounting in respect of forward foreign exchange contracts held to manage the cash flow exposures of forecast transactions denominated in foreign currencies. The Company utilises forward exchange contracts to mitigate the risk of adverse exchange rate movements on foreign currency denominated revenue. These derivatives are measured at the fair market value, at the reporting date, with the fair value gain or loss movements arising being recognised within administrative expenses in the Statement of Comprehensive Income.

 

2.16   Equity and reserves

Share capital represents the nominal value of shares that have been issued. Share premium represents the excess consideration received over the nominal value of share capital upon the sale of shares, less any incidental costs of issue.

Retained earnings include all current and prior period retained profits.

The revaluation reserve represents the extent to which a revaluation of plant on transition to IFRS exceeded the historical net book value. Transfers are made to retained earnings in respect of the depreciated element of the revaluation.

Capital redemption reserves are non-distributable reserves relating to the redemption or purchase of the Company's own shares.

 

2.17   Standards, amendments and interpretations in issue but not yet effective

 

The following new standards, interpretations and amendments that may or will have an effect on the Company's future financial statements are:

IFRS 16 Leases

This standard is effective for accounting periods beginning on or after 1 January 2019 and will therefore impact the results for the year ending 31 December 2019. It sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. It replaces IAS 17 Leases and IFRIC 4 Determining whether an arrangement contains a lease.

The most significant changes are in relation to lessee accounting for operating leases. Under the new standard, the concept of assessing a lease contract as either operating or financing is replaced by a single lessee accounting model. Under this new model, substantially all lease contracts will result in a lessee acquiring a right-to-use asset and obtaining financing. The lessee will be required to recognise a corresponding asset and liability. The asset will be depreciated over the term of the lease and the interest on the financing liability will be charged over the same period.

Adopting this new standard will result in a material change to the statement of financial position, with right-to-use assets and accompanying financing liabilities for the company's lease of premises being recognised for the first time. Based on the current lease in place it is estimated that an asset and corresponding liability of approximately £0.7m would be accounted for as at 31 December 2018.

There are no other new standards, interpretations and amendments which are not yet effective in these financial statements, expected to have a material effect on the Company's future financial statements.

 

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 company comprised only one operating segment until 31 December 2017 for the sale of printed circuit boards. 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 have begun to be separately reviewed and monitored. Revenue of £2.86marose from RF and £606k from IHT in the year ended 31 December 2018.

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 2018 the company had a major customer who represented 26% of revenue (2017: 2 customers representing 33% and 14%).

 

Turnover by geographical destination

 

 

 

2018

 

2017

 

 

£'000

 

£'000

UK

 

866

 

702

Europe

 

2,368

 

1,983

Other

 

234

 

136

 

 

 

 

 

 

 

3,468

2

2,821

 

 

Operating profit by geographical destination

 

 

2018

 

2017

 

 

£'000

 

£'000

UK

 

31

 

17

Europe

 

85

 

47

Other

 

9

 

3

 

 

 

 

 

 

 

125

2

67

 

4.    Operating profit

 

 

2018

 

2017

 

 

£'000

 

£'000

Operating profit is stated after charging/(crediting)

 

 

 

 

 

 

 

 

 

Amortisation of intangible assets

 

97

 

6

Depreciation of property, plant and equipment

 

196

 

155

Grant income (note 10)

 

-

 

(22)

Cost of inventory sold

 

1,331

 

1,073

Development expenditure expensed in year

 

 

 

75

Foreign exchange (gains)/loss

 

14

 

65

(Gain)/loss on fair valued derivative

 

(49)

 

49

Operating lease expenses

 

125

 

91

Costs of moving main premises

 

45

 

-

Share based payment charge

 

155

 

-

Staff payroll costs (net of capitalised development costs)

 

 

1,178

 

 

879

 

5.    Staff and key management personnel

 

 

Average monthly number of employees

 

2018

 

2017

 

 

Number

 

Number

 

 

 

 

 

Management and administration

 

13

 

10

Production

 

29

 

23

 

 

42

 

33

 

 

 

 

 

Payroll costs

 

£'000

 

£'000

Gross salaries

 

1,401

 

933

Social security costs

 

139

 

85

Share based payment

 

155

 

-

Other pension contributions

 

58

 

35

 

 

1,753

 

1,053

 

 

 

 

 

 

6.    Finance income and expense

 

 

 

 

 

 

 

2018

 

2017

 

 

£'000

 

£'000

Finance income

 

 

 

 

Interest receivable on bank deposits

 

8

 

-

 

 

 

 

 

Finance expense

 

 

 

 

Interest payable on loans and overdrafts

 

30

 

63

Interest payable on finance leases

 

35

 

17

 

 

65

 

80

 

7.    Income tax

 

 

 

 

 

 

 

2018

 

2017

 

 

£'000

 

£'000

 

 

 

 

 

Current tax:

 

 

 

 

UK corporation tax:

 

61

 

41

Total current tax credit

 

61

 

41

 

 

 

 

 

Deferred tax:

 

 

 

 

Origination and reversal of temporary differences

Effect of change in tax rate on opening

Liability

 

(39)

 

 

-

 

(20)

 

 

-

Adjustment for prior periods

 

(15)

 

-

Total deferred tax expense

 

(54)

 

(20)

 

 

 

 

 

Total tax (charge)/credit

 

7

 

21

 

 

 

 

 

The tax rate used for the reconciliation is the corporate tax rate of 19% (2017 19.25%) payable by corporate entities in the UK on taxable profits under UK tax law. Changes to reduce the corporation tax rate to 17% from 1 April 2020 have been substantively enacted. The tax rate used to calculate deferred tax is 17% (2017 17%), being the rate at which the timing differences were expected to unwind based on currently enacted UK corporate tax legislation.

 

The credit for the year can be reconciled to the profit/(loss) for the year as follows:

 

 

 

 

 

 

 

2018

 

2017

 

 

£'000

 

£'000

 

 

 

 

 

Profit/(loss) before taxation

 

68

 

(13)

 

 

 

 

 

Income tax calculated at 19%

(2017: 19.25%)

 

(14)

 

3

Disallowable expenses including share-based payment

 

(27)

 

-

Enhanced research and development allowances

 

37

 

28

Adjustment for prior periods

 

(15)

 

-

Differing deferred tax and R&D tax credit rates

 

(26)

 

(10)

 

 

Total tax (charge)/credit

 

7

 

21

 

 

In addition to the tax charge/(credit), a further development expenditure tax related credit of £35k (2017: £20k) is included in operating expenses.

 

 

 

8.    Dividends paid and proposed

 

Amounts recognised as distributions to equity holders in the period:

 

 

 

 

 

 

 

2018

 

2017

 

 

£'000

 

£'000

 

 

 

 

 

Interim ordinary dividends paid for the year ended 31 December 2018 of £nil (2017: £8.47 paid per £1 ordinary share

 

 

-

 

 

120

 

9.    Earnings per share

 

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

 

 

 

 

 

Earnings

 

2018

 

2017

 

 

£'000

 

£'000

 

 

 

 

 

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

 

 

75

 

 

8

 

 

 

 

 

 

Number of shares

 

2018

 

2017

 

 

 

 

 

 

 

 

 

 

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

 

 

11,830,427

 

 

9,534,275

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

 

 

12,370,189

 

 

9,534,275

 

 

 

 

 

Earnings per Share (pence)

 

Basic

Diluted

 

 

0.63

0.61

 

 

0.084

0.084

 

The earnings per share for both periods above is calculated from the number of £0.04 ordinary shares in issue at 30 June 2018 of 9,534,275. This reflected the 14,176 £1 shares allotted as of 31 December 2017, an issue of 367,195 £1 ordinary shares to existing shareholders utilising the capital redemption reserve on 28 June 2018 and a subdivision of £1 shares into £0.04 shares on 28 June 2018.

 

On 24 July 2018 5,238,097 £0.04 ordinary shares were issues at £1.05 per share.

 

Options over 990,015 shares (after the subdivision) were granted to employees on 15 June 2018 which are potentially dilutive shares. They are exercisable at 28.25 pence per share after a period of 3 years. The share-based payment charge of 72.25 pence per option share has been measured using the Black Scholes model applying the three-year vesting period, a volatility of 50% and annual risk-free rate of 1.5%.

 

10.  Intangible assets

 

 

 

 

 

 

 

 

Goodwill

Patent costs

Computer Software

Development costs

 

Total

 

£'000

£'000

£'000

£'000

 

£'000

Cost

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 1 January 2017

104

52

78

987

 

1,221

 

 

 

 

 

 

 

Additions

-

3

 

516

 

519

As at 31 December 2017

104

55

78

1,503

 

1,740

 

 

 

 

 

 

 

Additions

-

7

11

1,049

 

1,067

As at 31 December 2018

104

62

89

2,552

 

2,807

 

 

 

 

 

 

 

Amortisation or impairment

 

 

 

 

 

 

As at 31 January 2017

-

13

72

-

 

85

 

 

 

 

 

 

 

Charge

-

3

3

-

 

6

As at 31 December 2017

-

16

75

-

 

91

 

 

 

 

 

 

 

Charge

-

3

2

92

 

97

As at 31 December 2018

-

19

77

92

 

188

 

 

 

 

 

 

 

Carrying amount

 

 

 

 

 

 

As at 31 December 2017

3

1,503

 

1,649

As at 31 December 2018

104

43

12

2,460

 

2,619

 

 

The carrying amount of goodwill relates to the acquisition of the original RF technology based business, whilst all the capitalised development costs relate to projects in respect of the company's Improved Harness Technology ('IHT') process for unlimited length printed circuit boards and know-how which has since been developed by the company with amortisation on the initial development projects commencing in 2018.

 

To determine the values of the costs capitalised management include the actual cost of purchase for all materials which are acquired for product development purposes, they collect daily time analyses of work performed by design or product engineers which captures the time spent on development activities which is then evaluated using a labour rate appropriate for the engineer who has worked the time and finally an element of direct relevant overhead cost is incorporated to reflect the additional cost of operating the developmental department of the Company

 

Impairment tests for goodwill

The company tests goodwill annually for impairment, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The carrying values are assessed on a value in use basis for impairment purposes by calculating the net present value (NPV) of future cash flows arising from the original acquired business. The goodwill impairment review assessed whether the carrying value of goodwill was supported by the NPV of future cash flows based on management forecasts for 5 years, an assumed growth rate of 1% (2017: 1%) for the next 5 years and a discount rate of 12% (2017: 12%). There is significant headroom in the assessment from a range of reasonable sensitivities.

 

Government grants

The company has received aggregate grants from UK and European government research and development initiatives amounting to £633k (2017: £306k) which fund a proportion of development work and which have been deferred in line with the capitalised development

cost assets above that they relate to. In addition, £nil (2017: £22k) of similar government technology income related grants have been recognised in operating income there are no unfulfilled conditions or contingencies attached to the grants.

 

 

11.  Property, plant and equipment

 

Leasehold improvements

Plant and machinery

 

Total

 

£'000

£'000

 

£'000

Cost

 

 

 

 

At 1 January 2017

62

1,531

 

1,593

 

 

 

 

 

Additions

159

360

 

519

As at 31 December 2017

221

1,891

 

2,112

 

 

 

 

 

Additions

154

60

 

214

Disposals

-

(44)

 

(44)

As at 31 December 2018

375

1,907

 

2,282

 

 

 

 

 

Depreciation

 

 

 

 

At 1 January 2017

62

638

 

700

Charge

-

155

 

155

As at 31 December 2017

62

793

 

855

 

 

 

 

 

Charge

29

167

 

196

Disposals

-

(33)

 

(33)

As at 31 December 2018

91

927

 

1,018

 

 

 

 

 

Carrying amount

 

 

 

 

As at 31 December 2017

159

1,198

 

1,257

As at 31 December 2018

284

980

 

1,264

 

 

 

 

 

Included within the carrying amount of the above, are assets held under finance leases of £692k (2017: £660k) relating to plant and machinery.

 

12.  Borrowings

 

 

 

 

 

 

           

 

2018

 

2017

 

 

£'000

 

£'000

Amounts falling due within one year:

 

 

 

 

Revolving credit facility

 

-

 

515

Finance leases (note 16)

 

161

 

147

 

 

161

 

662

 

 

 

 

 

 

 

 

 

 

Amounts falling due after more than one year:

 

 

 

 

Finance leases (note 16)

 

357

 

410

 

 

357

 

410

 

 

 

 

 

Total borrowings

 

518

 

1,072

 

 

 

 

 

 

The revolving credit facility was secured by fixed and floating charges over the property and other assets of the company and bore interest at a market rate for the facility which was typically 10%. Finance leases are secured on the specific tangible fixed assets to which they relate.

 

13.     Deferred tax liabilities

 

 

 

 

 

 

 

 

 

 

 

Liability/(asset) in respect of:

Accelerated/

(decelerated) capital allowances

 

Intangible assets

 

Share Based Payment

 

Losses

 

Total

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

Debit to profit or loss

17

 

68

 

-

 

(65)

 

20

As at 31 December 2017

165

 

167

 

-

 

(78)

 

254

 

Debit to profit or loss

 

6

 

 

104

 

 

(36)

 

 

(20)

 

 

54

As at 31 December 2018

171

 

271

 

(36)

 

(98)

 

308

 

 

14.     Share capital

 

 

 

 

 

           

 

2018

 

2017

 

 

£'000

 

£'000

Allotted, called up and fully paid

 

 

 

 

14,772,572 Ordinary Shares of £0.04 each

 

591

 

-

14,175 Ordinary Shares of £1 each

 

-

 

14

1 'A' Ordinary Share of £1 each

 

-

 

-

 

 

591

 

14

 

 

 

 

 

Ordinary shares have equal rights to votes in any circumstances and are non-redeemable.  Ordinary shares have rights to receive dividends and capital distributions.

 

There was an issue of 367,195 £1 ordinary shares to existing shareholders utilising the capital redemption reserve on 28 June 2018 and a subdivision of all the £1 shares into 9,534,275 £0.04 ordinary shares on 28 June 2018. On 24 July 2018, 5,238,097 £0.04 ordinary shares were issued at £1.05 per share. This included a share premium amount of £5.290m against which £1.056m, of share issue expenses were credited resulting in a net amount of £4.234m in the share premium account

 

Analysis of Movements in Share Capital

2018

2017

 

£

£

 

1 January

 

14,176

 

14,176

Bonus Issue

367,195

-

Sub-Division

9,152,904

-

Share Issue

5,238,097

 

 

 

 

31 December

14,772,372

14,176

 

15.     Adjusted Operating Profit and EBITDA

In monitoring the performance of the business, the Directors focus on operating profit adjusted for material non- recurring or non-trading expenses and the adjustments so made are set out below:

Adjusted Operating Profit:

£

 

Operating profit

 

125,000

Add back Share based payments

155,000

Costs relating to our factory move

45,000

Adjusted operating profit

325,000

 

The measure of EBITDA is not recognised by IFRS however it remains an important performance measure for management.  The adjusted operating profit (see above) adjusted for depreciation and amortisation is calculated and set out below:

Adjusted EBITDA

£

 

Operating profits

125,000

Depreciation

196,000

Amortisation

97,000

Share based payments

155,000

Move costs

45,000

Adjusted EBITDA

618,000

Copies of this statement

 

Copies of this statement will be available on the Company's website (www.trackwise.co.uk) and from Trackwise Designs PLC, 1 Ashvale, Alexandra Way, Tewkesbury, Gloucestershire. GL20 8HB

 

Annual Report

 

The Annual Report for the year ended 31 December 2018 will be published on the Company's website at www.trackwise.co.uk and be posted to shareholders that have requested hard copies in due course. The Company will notify its shareholders once this has occurred.

 

Annual General Meeting

 

The Annual General meeting of the Company will take place on 26June 2019 at 10:00am at the Company's premises - Ashvale, Alexandra Way Tewkesbury GL20 8NB.

 

 

 

 

 

 

 

 

 

 


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 [email protected] or visit www.rns.com.
 
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