Trackwise Designs plc
1 Ashvale | Alexandra Way | Tewkesbury | Gloucestershire GL20 8NB | UK
T: +44 (0)1684 299930 | E: enquiries@trackwise.co.uk | W: www.trackwise.co.uk
ANNUAL REPORT AND
FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2019
HEADLINES
TRACKWISE secures
first production order for Improved Harness TechnologyTM
for electric vehicle manufacturer
TRACKWISE delivers
the world’s longest multilayer flexible printed circuit
Our Vision
TRACKWISE signs
Collaboration Agreement with GKN Aerospace
To be the pre-eminent interconnect partner
of the world’s leading innovators
TRACKWISE responds
to medical sector ‘s demands for flexible printed circuits
for increased functionality in smaller and lighter packages
s
TRACKWISE commission
new vertical continuous plating capability
TRACKWISE signs
28 new NDAs with IHT prospects
Trackwise Designs plc
Annual Report and Financial Statements
For the period ended 31 December 2019
1
Contents
Highlights
Chairman’s Statement
Chief Executive’s Strategic Review
Chief Financial Officer’s Report
Corporate Governance Review
Directors’ Remuneration Report
Directors’ Report
Independent Auditor’s Report to the members of Trackwise Designs plc
Company Statement of Comprehensive Income
Company Statement of Financial Position
Company Statement of Changes in Equity
Company Statement of Cash Flows
Notes to the Financial Statements
Company Information Officers and Professional Advisers
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3
5
12
15
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27
30
35
36
37
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57
Registered in England and Wales, Registration no: 3959572
Registered office: 1 Ashvale, Alexandra Way, Ashchurch, Tewkesbury, Gloucestershire, England GL20 8NB
Trackwise Designs plc 2
2
Main page title
Highlights
CONNECTED TECHNOLOGY
Operating & Strategic Highlights
Broad growth of our IHT technology offset by challenging
macro-economic environment in our RF division
IHT technical abilities have advanced, customer interest
continued to grow and series production now evident
Medical Appliances sector has emerged as our second sector
for customer accretion
Signed collaboration agreement with GKN Aerospace the
world’s leading multi-technology tier 1 aerospace supplier
Capacity and capability further enhanced towards roll to roll
IHT production
Financial Highlights
Revenue of £2.9M, decreased by 16% (note 24)
Adjusted profit before tax of £231K down 14% (note 24)
Earnings per share down (0.32p) (2018: 0.63p)
Capital expenditure on plant and equipment £702K
(2018: £60K)
Net debt of £300K (2018: net cash £2.27M) (excludes IFRS16
lease liabilities)
Adjusted EBITDA of £573K (2018: £618K) (note 24)
Post Period
Significant order from Electric Vehicle manufacturer
Acquisition of Stevenage Circuits Limited to enable IHT series
production of Electric Vehicles
Post year end equity raise of £5.87M
Trackwise Designs plc Chairman’s Statement
Ian Griffiths
Non-Executive Chairman
3
Dear Shareholders
STEADY PROGRESS
The period under review in this financial report has been characterised by great changes from Brexit, through increased
challenges of global warming and now the threat to the world’s economies from Covid-19. The uncertainty has increased
dramatically. The Company has reacted to these challenges well with our recent placing ensuring the continued
development of the business. We have ensured that we are keeping our staff as safe as we can and have enacted all the
guidelines that the Government has set down.
Inevitably the next trading period will be difficult given the enforced slowdown in economic activity, but post these
restrictions, which will come eventually, the changes brought about by this jolt could be of benefit to the Company as our
technology addresses a key sustainability need and revised supply chains will favour shorter more automated suppliers
which is the development path that the Company is embarked upon.
We look forward to the medium term with confidence and in the meantime, we will continue to develop our markets which
are increasingly looking to our Company to meet their interconnector needs. To achieve this, we will continue to invest in
our team’s resources and welfare. Our team’s response in the Covid-19 crisis has been first class.
2019 Performance
While market headwinds impacted our long-standing Radio Frequency (RF) division during the year, overall the Group
made steady progress towards our vision and strategic goals in this, our first full year as a listed company.
We have made important progress in the development of our Improved Harness TechnologyTM (IHT), the technology
that we aim to make the interconnect of choice for the world’s innovators across a focussed spread of industries, being
aerospace, electric vehicles, science and medical appliances. We saw enquiries and initial engagements increase in all
these industries over the year. Of note was the signing in August 2019 of a collaboration agreement with GKN Aerospace
(“GKN”) the world’s leading multi-technology tier 1 aerospace supplier, taking us a step closer to aerospace production
at scale.
Our progress was further demonstrated with the announcement, post year end, of a first production order from a UK
based manufacturer of electric vehicles for our IHT flexible printed circuit technology applied to battery harnesses of
their rapidly growing fleet of electric vans which follows successful funded development activities during the past year.
The electric vehicle industry is one of several growth industries for Trackwise and we were delighted to be selected by
an innovator in this field.
Our overall financial progress in the year was held back by global economic factors that impacted our RF business in
particular. These included the trade challenges between China and the USA, the pressure from Huawei on our customer
base and the enduring disputes over the merger between T-Mobile and Sprint in the USA. Nonetheless, the depth of our
customer base provided us with a level of resilience and new opportunities presented themselves during the year. The
investments made in new equipment are of benefit to both IHT and non-IHT revenue streams.
Board, Senior Management and Employees
The Board has overseen a significant step-up in engagement with our employees in the past year as part of a continuing
programme to ensure we harness all the talents across our business. We have initiated better communication and dialogue
on a team basis and individually and we have increased the level of resource for training and education.
As we completed our first full financial year as a listed business, and in accordance with our governance code adopted
at the time of our flotation, reviews of Board performance were carried out and areas of perceived need for improvement,
to meet the growing needs of the business, were identified and will be part of my ongoing leadership hereafter.
Trackwise Designs plc Chairman’s Statement continued
4
Dividend
The Board does not recommend the payment of a dividend and in line with the previously stated policy and reaffirms the
intention to pay a progressive dividend only once the Company has demonstrated the establishment of the interconnector
technology as a stable revenue generator.
Acquisition
The successful completion of the acquisition of Stevenage Circuits Limited (SCL) post year end has increased the
technical and operational expertise and sales resource of the business. It provides an extended customer base into
which we can cross-sell IHT but most importantly, it enables an increase in manufacturing capacity.
We are grateful for the support of our shareholders in enabling this positive development for the business and look
forward to working with the Stevenage team.
Whilst organic growth will be the main driver of value, the Board will continue to selectively evaluate opportunities to
support it through acquisitions where a business adds value and is a good strategic fit.
Outlook
The impact of Covid-19 creates significant uncertainty for the economic prospects across the globe. The Board continues
to have confidence that the benefits of IHT will deliver strong growth in the medium term. The impact of the pandemic
internally and with our customers and suppliers has inevitably led to some slower growth in the short term but our
longer-term prospects continue to support the Board’s view that the revenue generation from our IHT interconnect
technology will manifest itself strongly once the current difficulties are behind us.
Ian Griffiths
Non-Executive Chairman
22 June 2020
Trackwise Designs plc Chief Executive’s
Strategic Review
Philip Johnston
Chief Executive Officer
5
TRANSITION
The year under review presented us with economic
headwinds not expected at the end of 2018 and the
impact of Coronavirus will only make the near-term
future trading environment more difficult. Despite these
headwinds the Company maintains its focus on its primary
objective which is to establish our IHT technology as the
pre-eminent selection for global innovators when choosing
the interconnect that meets their technical objectives.
Growth Strategy and Market overview
Overall, our Growth Strategy is:
• To roll out IHT to meet demand from:
Electric Vehicles (EV)
Battery Packs
•
•
•
Aerospace
HAPS, Urban Air Mobility (UAM)
Civil aviation
Industrial
Medical catheters
•
Based on the sustained foundation of profitable supply of
RF products in support of 4G and 5G network deployment
fundamental proposition of
The
Improved Harness
Technology™ is length-unlimited; our investments in roll to
roll flex PCB manufacture, in order to enable the production
of length-unlimited, also enable delivery of shorter length
products in volume and the same manufacturing assets
and methods will serve these diverse growth markets
and applications.
Our Ashvale site was established as an engineering-led,
product development, new product introduction facility;
capable of early series ramp-up support, into which we
have been making investments to increase capability and
capacity. At the time of our IPO in 2018, we signalled our
intention to establish a dedicated scale-up supply capability
when we had visibility over market adoption of IHT. As
expected, electric vehicles are emerging as the first scale-up
opportunity. The first production order, placed by an electric
vehicle manufacturer post year end, provided us with that
visibility and prompted the acquisition of Stevenage Circuits
Limited, completed post year end. As we move through 2020
we intend to transfer the majority of our RF related activities to
the Stevenage site, which will be primarily responsible for the
majority of our short flex, flex rigid and rigid PCB production,
including RF; releasing capacity from our Ashvale site to
deliver IHT production at scale.
The automotive operational excellence necessary to serve
the rapidly emerging electric vehicles market, developed
in parallel with ongoing aerospace qualification, will in turn
equip Trackwise and IHT to serve the emerging UAM sector
(aerospace products at near-automotive volumes), in turn
leading to the large volume and long-term opportunity of
mainstream civil aerospace. The diverse products and
customers in the industrial market sector, notably medical
catheters, are also emerging as a significant growth opportunity.
Trackwise Designs plc
Chief Executive’s Strategic Review continued
6
The baseline growth plan is scale-up, but if necessary,
consideration will be given to capability and market delivery
by further acquisition if necessary, partnership, or licensing.
Capacity improvements and
technological development
We have continued to invest in all aspects of our capability
and capacity, including equipment to enable flex PCB roll to
roll production, quality control and capability enhancement,
as well as expanding our training programme and technical
skills through selective recruitment. Whilst we have further
improvements to make in the year ahead we are now able
to begin scale-up production of IHT, as envisaged at the
time of flotation.
We continue to push the boundaries of flexible circuit
innovation – for example by investing in a state-of-the-
art Vertical Continuous Plating (VCP) line at our Ashvale
factory. Operational since June 2019, this fully automated
manufacturing process is uniquely capable of plating roll
to roll flexible substrates and rigid panels of any length.
This new capability means that we can address a broad
range of requirements for both our IHT and RF customers,
guaranteeing best-in-class results for both volume and
niche plated products. This new VCP line, the first of its
kind in Europe, significantly increases our plating capacity
and offers total flexibility regarding customer specification
and volume requirements. Leveraging the latest Industry
4.0 technologies will enable us to continue to deliver
exceptional products using a more cost-and-time-efficient
manufacturing process.
Our increased sales and marketing activity in the year has
resulted in a growing number of customers and potential
customers across a diverse range of industries. We
have increased our development team to assimilate new
processes as quickly as possible into our capabilities,
providing us with confidence in the applicability of the IHT
process across a range of markets.
The investments we have made over the last eighteen months
and the recent acquisition of Stevenage Circuits Limited
(SCL), covered in more detail below, will make it increasingly
within our grasp to achieve our volume ambitions.
Electric Vehicles
During the year we have been seeking to broaden the
applications of IHT beyond Aerospace, the market for
IHT that gave rise to the initial innovation some years ago.
Consequently, we have been pleased by the reception our
disruptive technology has received both in the electric
vehicle market as well as in the medical appliances sector.
Post year end, in February 2020 we announced a significant
order for the supply of high voltage battery module (HVBM)
flex PCBs to an electric vehicle manufacturer and whilst
this is a developing relationship we are excited by the
possible applications for our technology within this sector.
We are in discussions with other HVBM manufacturers
and anticipate further profitable revenues as this market
grows, as a consequence of the sustainability agenda and
the increasing legislative pressure to force the automotive
sector towards non-fossil fuel motive power.
Trackwise Designs plc Chief Executive’s Strategic Review continued
7
Civil Aerospace – GKN collaboration
We are delighted to have signed a Collaboration Agreement
with GKN Aerospace, the world’s leading multi-technology
tier 1 aerospace supplier, for the industrialisation of GKN
Aerospace Type 8 Ice Protection System. The Collaboration
Agreement will see GKN Aerospace and Trackwise build upon
existing development work by advancing the manufacture of
Ice Protection Systems – for both wing and air inlet scoop
applications – to rate production level capability.
Following nearly two years of joint product development,
this is a significant milestone in our engagement with
GKN, taking us a step closer to aerospace production at
scale. The capabilities involved are wholly aligned with
those being developed by Trackwise for IHT and while
aerospace qualification is a lengthy process, the size of
the potential end markets means that the future revenue
potential for our technology is significant.
in
Our work
the wider aerospace sector and our
ability to drive revenue growth has been hampered by
developments in the industry which has led to a general
“risk off” approach to the adoption of new technology.
However, we continue to work with a growing number of
companies in mainstream civil aerospace as well as with
emerging HAPS and UAM OEMs and remain confident of
the applicability of our technology to the benefits they are
seeking – principally weight and space saving.
The Improved Harness Technology™ patent is now granted
in the UK, EU, US, China and with the post year-end
notification of intent to grant in Canada, now only leaves
Brazil as a pending application. These jurisdictions cover
all of the main civil aerospace manufacturing locations.
Coronavirus is clearly having a significant impact upon the
global airline industry. It remains to be seen how this plays out
over time, but it will certainly not diminish the sustainability
agenda already firmly ‘in play’ in civil aerospace, addressed
by both GKN’s electro-thermal ice protection systems, and
Trackwise’s Improved Harness Technology™.
Industrial – Medical Catheters
The accretion of a number of customers (both US and
EU) in the medical appliances sector in the middle part of
the year under review was a direct result of our marketing
efforts in this industry. Whilst there is a period of approval
that we have to complete in association with our customers,
we are hopeful that these approvals will be in place in 2020,
prompting the receipt of mass production orders. Should
this be the case, then we expect a significant increase in
revenues from this sector in 2021.
The fact that two large US Medical OEMs have sought out
Trackwise for manufacturing long (c.2m) thin (c.2mm), fine
feature flex PCBs, provides credibility as to the cross-sectoral
applicability of the capability that we are developing.
The wide Industrial group of customers and applications
includes opportunities in the space industry. Whilst this
revenue stream is likely to be smaller than automotive
and aerospace as volumes will be lower, we have some
developing work streams that have the potential to lead to
significant profits in the longer-term.
Acquisitive Growth
We were delighted
the acquisition of
to complete
Stevenage Circuits Limited on 1 April 2020. Stevenage
Circuits Limited is a printed circuit board manufacturer first
Trackwise Designs plc Chief Executive’s Strategic Review continued
8
established in 1972 which produces and sells bespoke
PCBs from rigid to multi-layer and flexi-rigid to short-flex
solutions to various markets which Trackwise is targeting
with its IHT product. The acquisition of SCL extends our
manufacturing capabilities, liberating our capacity at
Ashvale to deliver IHT series production, while diversifying
our revenue streams and customer base. The SCL team
brings significant additional depth to our technical, sales
and operational expertise and we are very pleased to
welcome them to Trackwise.
The acquisition is a significant step forward for Trackwise
and allows us to re-organise production across the two
sites, releasing Ashvale in Tewkesbury to become a
dedicated IHT production unit with focus on increasing
activity for series production from IHT customers.
Coronavirus response
As a supplier of essential parts, our priority has been
protecting the health and wellbeing of our staff, suppliers
and customers while continuing to serve customers in as
near normal a manner as is practicable. The majority of our
office-based staff have been working from home since March
and we have implemented a wide range of social distancing
measures and safety protocols at our manufacturing facilities
in line with current Government guidance.
These include stopping non-essential third party visits to
the site; changing shift patterns where possible to minimise
person to person contact; provision of enhanced PPE
and the employment of a temporary worker to disinfect all
commonly touched surfaces on a near-continual basis. At
the time of writing these measures appear to have been
effective; although of course this remains a rapidly changing
situation which we are continuing to monitor closely.
The Group has also updated its business continuity plans
accordingly and in order to protect the business from any
prolonged measures, discretionary investment plans have
been temporarily held, as has the recruitment of new staff
and pay-rises.
The Coronavirus has been, and continues to be, a testing
time for us all. I would like to pay personal tribute to all of
our staff who have adapted to this stressful situation with
professionalism and good humour, and continued to work
with commitment, despite inevitable concerns regarding
personal safety and the safety of their loved ones.
Strategic focus for the year ahead
The support of our shareholders, both those who came
in at the time of the flotation and also those who have
supported us since, and the great efforts of the entire
team at Trackwise have enabled the considerable progress
detailed above to be achieved.
Our focus for the year ahead remains to deliver against the
three core elements of our strategy:
•
•
•
Customers
o
o
Generate additional customer opportunities
through focused sales and marketing activities
customer
Successfully
engagements from testing, through to initial
orders and subsequently orders at scale
transition
existing
Operations
o
Ensure we have the capability and capacity to
deliver orders at scale
Innovation
o
Continue to develop the applicability of IHT for
our identified target industries
Current trading and outlook
While we have inevitably experienced disruption to normal
trading patterns since the outbreak of the pandemic,
trading has shown some resilience but there has been
some impact on the timing of revenues and order intake.
We have continued to make progress with our first IHT
production order as announced in February, and while the
timing of further production orders is hard to predict, our
pipeline of opportunities for the technology remains healthy.
Sales in our RF and SCL business units have been steady –
in the first five months of the year we signed new business
with Leonardo, Qualcomm and Kappa Sense. The transfer
of RF production to Stevenage is underway; this will result
in increased operational efficiencies at Stevenage and
allow greater focus on, and capacity for, IHT at Tewkesbury.
We are pleased with the momentum we are seeing in SCL,
the integration is progressing well.
The Group is in a strong financial position, benefitting
from a well-funded balance sheet, with £3.2m cash as at
22 June 2020 following the recent fundraise.
Notwithstanding the inherent uncertainties associated
with the current trading environment, we continue to make
good progress against our strategy, the fundamentals of
the business remain sound and the Board sees no reason
to believe the effects of the virus will have a negative
impact on Trackwise’s long-term value proposition.
Trackwise Designs plc
Chief Executive’s Strategic Review continued
9
The Directors of the Company, as those of all UK companies, must act in accordance with a set of general duties as
detailed in Section 172 of the Companies Act 2006. This is summarised as follows:
A director of a company must act in the way they consider, in good faith, would be most likely to promote the success of
the company for the benefit of its members as a whole and, in doing so have regard (amongst other matters) to:
(a) the likely consequences of any decision in the long term;
(b) the interests of the company’s employees;
(c) the need to foster the company’s business relationships with suppliers, customers and others;
(d) the impact of the company’s operations on the community and the environment;
(e) the desirability of the company maintaining a reputation for high standards of business conduct; and
(f) the need to act fairly as between members of the company.
The board of directors (“the Board”) of Trackwise Designs plc consider, both individually and collectively, that they have
acted in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit
of its members as a whole in decisions taken during the year-ending 31 December 2019.
Section 172
requirement
Examples of how the Board's discussions and decision making
have taken this into account
Investing in significant capability and capacity to promote the success of IHT as a
product which has benefit for our customers, our suppliers and for the environment.
Focussing on every area of cost to ensure maximum return to our shareholders.
Referenced in the
Directors /Strategic
Report
Page 5 – CEO
Strategic Report
(a) the likely
consequences of
any decision in the
long term;
(b) the interests
of the Company’s
employees;
(c) the need to foster
the Company’s
business
relationships
with suppliers,
customers and
others;
(d) the impact of
the Company’s
operations on the
community and the
environment;
(e) the desirability
of the Company
maintaining a
reputation for
high standards
of business
conduct; and
(f) the need to act
fairly as between
members of the
Company.
Philip Johnston
Chief Executive Officer
22 June 2020
We have introduced enhanced employee responsiveness and commitment to training
which benefits the individuals within our team as well as benefitting the overall
efficiency of the Company.
Engaging in regular employee surveys to assess employee engagement and well-being.
Page 10 – ESG
report
We promote strong relationships with our customers through a interactive key account
programme and focus closely on quality to ensure that the customer has a high regard
for the Company.
We manage our supplier base closely to promote levels of business that meet our quality
standards and gives the supplier a chance to interact with the company to be able to
expand his business with us if it is mutually suitable.
We have a strong record of managing successfully our waste processes which have
been effective and audited for many years.
Our product IHT has the potential to significantly enhance energy conservation and
carbon usage by reducing weight and size in a variety of industries.
Our aims for growth are locally focussed and it is our aim to provide well-paid
interesting and challenging employment to our local community.
The Company’s environmental policies recognise the protection of the environment and
natural resources as one of the principal business responsibilities;
Page 10 – ESG
report
The Board is committed to complying with all applicable regulations and provides
training and monitoring across the company to all employees to encourage and ensure
compliance.
Page 15 –
Corporate
Governance
Review
The company is quoted on the London AIM market and interacts regularly with
its members. The Board is committed to enhance that dialogue with a developing
programme of investor related communications and events.
Trackwise Designs plc
ESG Engagement Report
10
The Company’s awareness of the
challenges presented by global
warming is at the core of the benefits
that IHT, as a product, offers to many
of its customers.
The application of IHT within Aerospace, EV Automotive
and Urban Air Mobility in particular contributes to a
significant reduction in weight that will enhance the
efficiency of aircraft, EVs and UAMs thereby offering a
compelling carbon footprint reduction. Our product used
in aircraft has provided evidence of a 65% reduction in the
weight of the wire harness which, if replicated across the
entire craft, would lead to a substantial weight saving and
carbon emission reduction.
Additionally, in all EVs, battery efficiency is critical to the
battery life between each recharge. IHT, as a substitute for
traditional wire harnesses with its consequent reduction in
weight, contributes to the efficiency of the battery powered
EV and therefore contributes to a lower carbon footprint.
In non-motive applications of IHT the reduction in copper
content, compared to the traditional wire harness, reduces
the quantum of copper that is required which, if replicated
in large scale, would assist and support a reduction in
copper that has to be mined.
The processes that we adopt in the manufacture of IHT
and RF products require a number of chemical reactions
and processes which cause potentially harmful waste
products and the satisfactory neutralisation and disposal
of these products has been central to the Company’s daily
routines for 30 years. The Company has a proud record of
maintaining satisfactory treatment of waste products and
we take very seriously our responsibility to ensure that this
remains so.
The Board is continuing to develop its focus on our
performance and the progress the Company is making in
the areas of reduced energy consumption, reducing water
usage, the recycling of packaging materials and treatment
of toxic by-products.
All our staff are briefed, informed and where appropriate
trained, to ensure that we maintain the standards we have
set ourselves with regard to care for the environment. The
Company has a management system that addresses the
commitment to operating its business responsibly and in
compliance with all environmental regulations, legislation
and approved codes of practice relating to its industry
and activities.
The culture of the Company strives for openness,
supportiveness, team orientation, friendship and drive and
we encourage team members to contribute their ideas
and thoughts as to how we can improve our operations
constantly.
We promote this contribution by having regular feedback
opportunities with the whole team as well as a regular
programme of reviews for individuals and tailored training
to assist them in meeting the standards we require and to
push them to consistently improve.
We ask our staff, in surveys, to score our achievements
with regard to environment, workplace and culture which
broadly give us a positive report, though the management
recognise that there is more to be done and that the
agenda is in a state of change and enlargement.
It is necessary to ensure that the Company maintains
this effort and level of achievement which is targeted
through a range of internal governance routines enacted
by management and overseen by the Board of Directors.
A more complete review of the governance routines of the
company is given on page 15.
It is part of the Company’s
programme to continue its
contribution to a more carbon free
environment by promoting the use
of IHT in its chosen target industries
and we are proud that this technology
is capable of being a substitute for a
host of wiring applications all of which
would have a positive benefit for the
environment.
The Company has had for many years’ accreditation of
AS9100D, ISO9001:2015 and ISO14001:2015, all of
which support our quality and environmental standards to
achieve the objectives we have.
Trackwise Designs plc ESG Engagement Report continued
11
The Company pays close attention to ensuring the health &
safety of everyone involved in the business.
Employees are encouraged to take an active role in ensuring
that our working environment is a safe place to work and
visit, reporting all safety observations and incidents, being
involved in safety audits, risk assessments and regular
awareness training sessions. During the Covid-19 period,
we have followed guidelines which has included measures
to enable working from home and employee involvement in
ensuring safe working practices.
We have reconfigured our premises to promote a safe
working environment that provides social distancing
and reduces the possibility of airborne transmission of
Covid-19.
The Company operates non-discriminatory policies
regarding age, disability, gender reassignment, marriage
and civil partnership, pregnancy and maternity, race,
religion or belief, sex and sexual orientation and is
committed to openness about how it deals with these
requirements.
It is the Company’s declared policy to carry out all
measures reasonably practicable to meet, exceed
or develop necessary or desirable requirements to
continually improve environmental performance, in
particular:
•
•
•
•
•
•
•
•
•
•
Assess and regularly re-assess the environmental
effects of the organisation’s activities
Assess and regularly re-assess the organisation’s
environment objectives and targets
Training of employees in environmental issues
Minimise the production of waste
Minimise material wastage
Minimise energy wastage
Promote the use of recyclable and renewable
materials
Reduce and/or limit the production of pollutants to
water, land and air
Control noise emissions from operations
Minimise the risk to the general public and
employees from operations and activities undertaken
by the organisation
Trackwise Designs plc
12
Chief Financial Officer’s
Report
Mark Hodgkins
Chief Financial Officer
Investment In Capacity, Know-how and markets
The financial performance of the Company during 2019 was adversely impacted by a number of negatives which were
outside the control of the directors. In particular, Brexit had an impact upon the European customer base of the RF
business as did the ongoing legal disagreements in the merger between Sprint and T Mobile in the United States where
Sprint is a key end customer of the Company. Globally, the difficulties between the United States and China which
particularly drew in Huawei, created difficulties for our core RF market which experienced reduced activity and heavy
pressure on margins as a consequence.
However, despite these headwinds we were able to press on with our plans for IHT and were able to report revenues for
IHT of £968,000, an increase of 46% on the prior year. The much-increased customer base for IHT provides a higher base
of opportunities for future years. The relative strength of IHT compared to our legacy RF business enabled us to increase
our margins for the business overall to 37.8% compared to 2018 of 30.3% and this is in line with our objectives.
Trading Performance
Despite the loss of revenues within the legacy RF business it remained a profitable and cash generative business and the
improving IHT revenues and associated margins have enabled the Company to report an adjusted operating profit for the
year of £258,000 (2018: £325,000) and an adjusted EBITDA of £516,000 (2018: £618,000). Additionally, the Company
suffered an exchange loss on conversion as a consequence of the impact of the political impasse on the value of sterling
over the year.
Overall Company Operating result
Revenues
Adjusted Operating profit*
Adjusted EBITDA*
2019
£’000
2,906
258
573
2018
£’000
3,468
325
618
*An analysis of adjusted Operating Profit and adjusted EBITDA is given in note 24 of these financial statements
The growing number of IHT customers drove an increasing level of development of the IHT product technology as we
began the development of products for both the EV market and medical appliance companies. This has added to our
knowledge and technical abilities across a range of applications and provides a base for revenue generation across a
range of industries in the future. This investment will contribute to our ability to not only serve the existing customer base
but also enable our delivery of product in volume terms to customers across a range of industries.
Our investment in IHT capability in the year amounted to £3.44m (2018: £1.281m) which was made up of capital expenditure
on capacity and capability of £790,000 (2018 £214,000), capitalised development cost of £1.836m (2018: £1.067m).
Measuring Financial Performance
In these uncertain times we have placed even more focus on short term planning routines and focussed on tight control
of all costs; in response to the difficulties of the last two quarters of 2019 we took a number of cost-cutting measures
including the reduction in Board employment costs. We closely monitor our usage of cash and have restricted some of
the plans we had at the time of flotation until we have more certainty over the outlook for trading.
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. As our IHT business moves from the developmental stage to the
production phase then we will add to these measures to enhance our control and will be reported upon in future years
as results become available.
Adjusted operating profit, as set out in note 24, declined by 20% in the year as a direct consequence of the reduction in
the revenues in the RF market due to the impact of Brexit fears and the US trade stand-off with China.
Trackwise Designs plc Chief Financial Officer’s Report continued
13
For some years, the Company has benefited from the provisions of 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 receives credits to
its P&L account and accumulates tax losses that are created in the process. Consequently, the Company is unlikely to
pay corporate tax in the short term. In 2019, the Company received a tax credit of £134,000 and also benefited from
adjustments to prior years of £40,000 giving a total credit for the year of £174,000 (2018: £61,000). The large increase
on previous years reflects the significantly increased investment in IHT development which was made possible as a
consequence of the flotation of the Company.
In total the Company has invested £1.8m in IP, know-how and associated IP fees which has allowed the Company to begin
to ready itself for the ramp-up in production that is anticipated.
The Company’s trading activities are such that there is a built-in 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 and uses currency
hedging contracts to manage foreign currency risks when exposure is considered to be medium or higher. Transactions
of a speculative nature are and will continue to be, prohibited. In the course of the year the Company was affected by the
differing swings in sentiment as to the likely impact of Brexit. In order to protect the buying power of our foreign currencies
at a time when the UK feared a hard Brexit as at 31 March 2019 we sought to protect our position. The subsequent
negotiated settlement and changes in perception as a consequence led to a loss of £57,000 on our holdings of foreign
currency. We do not consider this loss to be a normal trading expense and adjusted accordingly for it (see note 24).
Stevenage Circuits Limited
After the year end we completed the purchase of Stevenage Circuits Limited as detailed in the Chief Executive Officer’s
Strategic report on page 5. To complete this purchase as well as to fund the capacity and capability requirements of the
growing series production for our EV customers on 31 March 2020 we raised £5.87m with the issue of 7,341,250 new
shares at a price of 80p. The placing represents a 49.6% increase in the equity base of the Company and the number
of shares now in issue is now 22,113,662 (previously 14,772,372) ordinary shares of £0.04 each. Additionally, there are
options over 901,909 shares giving a fully diluted number of shares of 23,015,571.
In the year to 30 September 2019, Stevenage Circuits Limited had revenues of £6.486m (2018: £6.739m) and adjusted
EBITDA of £352,000 (2018: £495,000). Audited net assets at 30 September 2019 were £3.537m (2018: £3.368m).
Trackwise paid a total price of up to £2.457m for the acquisition of Stevenage Circuits Limited, which comprised a
payment of £2m in cash on completion, a further £200,000 in cash on the first anniversary of completion and a contingent
£257,000 payable 2 years after completion provided the business generates an EBITDA of £457,000 on a like for like
basis in the first 12 months of trading immediately following completion.
The full set of disclosures required by IFRS3 in relation to this acquisition will be finalised and presented in the 31 December
2020 annual report.
Following completion, the reporting routines and internal controls at Trackwise are being applied across the Stevenage
business, and the performance management criteria in use at Trackwise has been made common across the whole group.
The equity raise at the end of March 2020 was sufficient not only to complete the purchase of Stevenage Circuit Limited
but also to ensure sufficient working capital for the integration of Stevenage and further investment in capacity and
capability at Trackwise in anticipation of the increasing series production revenues implicit in the production estimates of
our EV customers. As part of this process, management have made sure that there is sufficient working capital headroom
to withstand a number of simultaneous challenges any of or all of which could manifest themselves over the forthcoming
period as a consequence of global economic deterioration which might occur as a consequence of either the impact of
Covid-19 or Brexit, which could yet be a hard no-deal outcome.
The Company faces a range of challenges from a growing order book, acquisition integration and economic uncertainty
and the Board consider that they have secured sufficient working capital to withstand those challenges.
Trackwise Designs plc Chief Financial Officer’s Report continued
14
Corona Virus Solvency Review
In particular management have carried out an assessment of the economic impact of Corona Virus upon the near-term
results and the suitability of the assumption that the business remains a going concern.
In the immediate short term the group have orders to support the trading plans to the end of July and we have maintained
our plans for this period. The significant risk to that assumption is that material supplies become unavailable, though there
is no evidence of this at the time of the review. Any shortage of supply would impact August through October.
We have therefore modelled the assumption that we will not be able to make any revenues through September and
October and that in August and November and December we will only achieve 50% of our plan.
As a worse case outlook, we have further assumed that the Government schemes for furloughing are not available and
we retain all our labour expense and that we are ineligible for Government backed CBILS’s facility. Furthermore, we have
assumed a reduction of 50% of revenues in all other months through to June 2021.
As a consequence of applying these stresses, management remain confident that the Company has sufficient working
capital resources to meet its commitments with a satisfactory level of headroom.
Management also modelled an additional stress test, reducing all revenues in the period to 30 June 2021 by 50% whilst
holding all other stress conditions in place. Management are confident at this level of trading that the Company has
sufficient working capital resources to meet all its commitments with a satisfactory level of headroom.
Results and Dividends
Reported Loss after taxation of £48,000 (2018: Profit After Taxation £75,000) means the Company is reporting a Diluted
Earnings per Share (loss) of (0.32) pence (2018: Diluted Earnings per Share of 0.61 pence). The Company set out its
dividend policy last year which has not changed. It is the Company’s intention that when commercial conditions allow,
a progressive dividend policy will be adopted, consequently there will be no dividend paid for 2019.
Mark Hodgkins
Chief Financial Officer
22 June 2020
Trackwise Designs plc 15
The business of the Company is under the control of the Board of Directors who are responsible for running the Company
for the benefit of its Shareholders in accordance with their fiduciary and statutory duties.
The Directors acknowledge the importance of and the requirement for companies whose shares are admitted to trading
on AIM to apply a recognised corporate governance code and explain compliance with that code.
The Directors have chosen to comply with the QCA Corporate Governance Code for Small and Mid-Size companies which
has become a widely recognised benchmark for corporate governance of smaller quoted companies, particularly AIM
companies. In accordance with Rule 26 of the AIM Rules for Companies, details of how the Company complies with the
QCA Code are provided on the Company’s website: www.trackwise.co.uk/investors/corporate-governance
The Board meets at least nine times a year to review, formulate and approve the Company’s strategy, budgets, corporate
actions and oversee the Company’s progress towards its goals. It has established an Audit Committee, a Remuneration
Committee and Nomination Committee with formally delegated duties and responsibilities and with written terms of
reference. From time to time, separate committees may be set up by the Board to consider specific issues when the need
arises.
Board and Committee Independence
The Company’s Board consists of two independent non-executive Directors (including the Chairman) and two executive
Directors. The Company regards the non-executive Directors as “independent non-executive Directors” within the
meaning of the UK Corporate Governance Code and free from any relationship that could materially interfere with the
exercise of their independent judgement.
Audit Committee Report
The Audit Committee is chaired by Lesley Jackson, a Chartered Accountant. The Committee also comprises Ian Griffiths
and Philip Johnston and is considered to have had an appropriate balance between those individuals with finance or
accounting training and those from a general business background.
At the invitation of the Committee, representatives of the external auditors, Mazars LLP meet with the Committee at least
twice a year. The Committee also seeks to meet with the external auditor without the Executive Directors in attendance.
In the year, the Committee met once with representatives from Mazars LLP without others being present.
The role and responsibilities of the Committee are set out in its terms of reference, which are available on the Company’s
website and from the Company Secretary on request. The terms of reference are reviewed annually by the Committee.
The principal responsibilities of the Committee are:
•
•
Reviewing the effectiveness of the Company’s financial reporting, internal control policies and procedures for the
identification, assessment and reporting of risk;
Advising the Board on whether the Committee believes the Annual Report taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to assess the Company’s performance,
business model and strategy;
•
Considering and making recommendations to the Board as to the appointment, reappointment or removal of the
external auditors and the approval of their remuneration and terms of engagement;
• Assessing the external auditors’ independence and objectivity and the effectiveness of the audit process;
• Reviewing the policy on the engagement of the external auditors to supply non-audit services.
During the year, the Committee reviewed the appropriateness of the Group’s interim and full year financial reporting,
including the consideration of significant financial reporting judgements made by management taking into account
Corporate Governance ReviewTrackwise Designs plc 16
reports from management and the external auditors.
The main area of focus considered by the Committee during the year were as follows:
Area of focus
Adoption of IFRS16
The Capitalisation of IHT development activities
The Amortisation of accumulated development costs
Goodwill and Intangible Asset Impairment assessment
Conclusion
IFRS 16 applied to the Company’s financial statements
for the first time in the year to 31 December 2019. This
is a complex standard which seeks to disclose certain
commitments as financial commitments and to be
treated as a debt like instrument.
The policies adopted are appropriate and have been
consistently applied.
The polices are consistently applied with previous
years and are considered appropriate for the industry
timescales that the company is addressing.
impairment
reviews are based on
These
future
cashflows and therefore are inherently judgemental.
The Audit Committee considered the key judgements
underpinning the impairment reviews performed. The
Committee is satisfied that the impairments recognised
in the year are appropriate and the remaining carrying
value of Goodwill is appropriate.
Management carry out annual impairment reviews of
the carrying value of the Intangible Assets.
The Committee has reviewed the sensitivity disclosures in note 2.1 and concluded that they are appropriate.
Inventory
The Audit Committee reviewed management’s estimates in relation to inventory ageing and obsolescence. The Committee
was satisfied that the presentation of adjusted profit before tax provides a reasonable view of the underlying performance
of the Group and that there was transparent and consistent disclosure of items shown separately as non-underlying
items. This was based on a review of the items added back in arriving at underlying profit.
Fair, Balanced, Understandable and Comprehensive Reporting
The Audit Committee has provided advice to the Board on whether the Annual Report and Accounts, taken as a whole, is
fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s financial
position and performance, business model and strategy. Each Director was also asked to provide this confirmation.
Under its terms of reference, the Committee is responsible for assessing the scope, fee, objectivity and effectiveness of
external audits and for making a recommendation to the Board regarding the appointment, reappointment or removal of
the auditors on an annual basis.
The Committee also regularly reviews the nature, extent, objectivity and cost of non-audit services provided by the
auditors. In doing this the Committee does not approve any non-audit expenditure. The Company has a policy that the
auditors will not perform any other work for the Company and thus do not compromise their independence. To ensure
compliance with this policy, the Audit Committee reviewed and approved the remuneration received by Mazars LLP for
the audit service.
Corporate Governance Review continuedTrackwise Designs plc 17
The Remuneration Committee
The Remuneration Committee is chaired by Lesley Jackson and its other members are Ian Griffiths and Mark Hodgkins. The
Remuneration Committee is expected to meet at least twice each year. It will have responsibility for determining, within the
agreed terms of reference, the Company’s policy on remuneration packages of the Company’s Chairman, the Executive
Directors, Senior Managers and such other members of the executive management as it is designated to consider. The
Remuneration Committee will also have responsibility for determining (within the terms of the Company’s policy and in
consultation with the Chairman of the Board and/or the Chief Executive officer) the total individual remuneration package
for each Executive Director and other designated senior executives (including bonuses, incentive payments and share
options or other share awards). The remuneration of Non-Executive Directors will be a matter for the Chairman and
Executive Directors of the Board. No Director or Manager will be allowed to partake in any discussions as to their own
remuneration. In addition, the Remuneration Committee will have the responsibility for reviewing the structure, size and
composition (including the skills, knowledge and experience) of the Board and giving full consideration to succession
planning. It will also have responsibility for recommending new appointments to the Board.
The Nomination Committee
The Nomination Committee is chaired by Ian Griffiths and its other members are Lesley Jackson and Philip Johnston.
The Nomination Committee is responsible for considering and making recommendations to the Board in respect of
appointments to the Board, the Board committees and the chairmanship of the Board committees. It is also responsible
for keeping the structure, size and composition of the Board under regular review, and for making recommendations to
the Board with regard to any changes necessary, taking into account the skills and expertise that will be needed on the
Board in the future. The Nomination Committee will meet as and when required but at least once a year.
The Committees met during the year as part of its standard schedule and attendance at those meetings is summarised below:
I Griffiths
P Johnston
M Hodgkins
L Jackson
Board Effectiveness Review
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
11
11
11
11
3
2
3
3
3
2
3
3
1
1
1
1
The Chairman carries out an annual review of the effectiveness of the Board. Results of a Board circulated questionnaire
and other feedback are discussed and evaluated by the Board as a whole and areas requiring improvement are addressed
with actions agreed to promote increased effectiveness. During the year the first Board effectiveness review was carried
out and the results are being actioned.
Corporate Governance Review continuedTrackwise Designs plc 18
Internal Controls and Financial Management
The Board has responsibility for establishing and monitoring the maintenance of the Company’s internal financial and
non-financial controls. The Board is cognisant that whilst internal controls reduce risk it cannot eliminate the risk entirely.
The key procedures which the Directors have established to enable them to have confidence that the controls are working
and minimising risk are set out below.
•
The Board sets policies which are regularly reviewed both by executive management and the Audit Committee
and gains assurance that these policies are appropriate to address the key financial, operational, compliance and
reputational risks.
• Authorisation limits are in place:
–
–
The Board ensures that appropriately qualified people are in place to exercise the controls that are in place;
Company performance is measured against diligently prepared budgets and variations are reviewed on a
monthly basis;
–
The business has appropriate segregation of duties and limits to individual’s ability to authorise transactions;
• Financial planning and monitoring:
–
The Company sets annual budgets which cover operating performance and balance sheet management
including working capital;
–
The Board reviews the performance monthly and re-evaluates future performance;
• Policies, procedures and authorisation limits:
–
The Company has sufficient authorisation limits in place which cover the key areas for the business.
Quality and Integrity of Personnel
The Company aims to recruit the highest calibre employees that it is able to do with high recruitment standards. Employees
with integrity and strong workplace ethics are considered essential to the operation of the control environment.
Identification of business risks
The Directors are responsible for identifying the significant business risks and their execution for this task is monitored by
the Audit Committee as well as the main Board.
Going Concern
The Directors have prepared the financial statements on a going concern basis as explained in note 2.1 to the financial
statements. As at 31 December 2019 the Company had cash deposits of £0.567m. In particular management have
carried out an assessment of the economic impact of Corona Virus upon the near-term results and the suitability of the
assumption that the business remains a going concern with a conclusion that affirms the appropriateness of preparing
the financial statements on a going concern basis.
Corporate Governance Review continuedTrackwise Designs plc
19
Principal Risks and Uncertainties Report
KEY: l High risk l Medium risk l Low risk
RISK
The impact of
Covid-19
Potential to change
t
INCREASED
Effect:
Loss of market,
staff reduced
sales volumes and
profitability over a
long period.
DESCRIPTION AND POTENTIAL IMPACT MITIGATION
The rapid spread of the Covid-19 virus in
early 2020 together with the lockdown of
many economies in the world has led to
an unprecedented increase in business
risk and uncertainty which could
potentially have a significant impact on
the company.
The negative impact will be felt as a
consequence of delayed
investment
decisions, customer downsizing, margin
pressure as customers seek to protect
their own business and maybe the loss
of customers completely.
IHT; medical
However, it is possible that the outcomes
of the pandemic are that behaviours
might change such that new trends
might gain favour. There could be an
increased positivity for the adoption
of new technologies that would reflect
on
innovations might
increase which would be a positive for
the Company in the medical markets
which are already showing
interest.
It’s quite possible that one trend that
will gain favour is the recast of global
supply chains and this would enable
opportunities for the company’s skills
and IP. Customers could well want supply
chains that are less reliant on labour and
have more automation and Trackwise’s
technology roadmap is to move to a
much more automated platform.
have
followed
Management
the
to our
Government guidelines as
response to the Virus but this does
not reduce risk. As a manufacturing
business, many staff are largely unable
to ‘work from home’ and, supported by
several letters from customers who deem
Trackwise to be an essential supplier to
their defence and critical product lines,
have focused as much as possible on
keeping the manufacturing team safe
and healthy in the work place – so as to
continue to serve our customers in as a
near-normal manner as possible.
Those who can work from home have
done so and, with VPN keys and
Microsoft Teams, have adapted well to a
new way of working.
For the production site we have followed
best practice identified by Public Health
England; avoided non-essential
third
party visitors to the site; changed shift
patterns where possible to minimise
person
to person contact; provided
enhanced PPE; employed a temporary
worker to disinfect all commonly touched
surfaces on a near-continual basis.
Management have carried out an
assessment of the economic impact of
Corona Virus upon the near-term results
and the suitability of the assumption that
the business remains a going concern.
In the immediate short term, the group
have orders to support the trading
plans to the end of July and we have
maintained our plans for this period. The
significant risk to that assumption is that
material supplies become unavailable,
though there is no evidence of this at
the time of the review. Any shortage of
supply would impact August through
October.
therefore modelled
the
We have
assumption that we will not be able
to achieve any
through
September and October and that in
August and November we will only
achieve 50% of our plan.
revenues
As a worse case outlook, we have
assumed that the Government schemes
for furloughing is not available and we
retain all our labour expense and also
that we are ineligible for the Government
backed CBILS’s facility. Furthermore, we
have assumed we might be subjected to
credit losses of 10% of revenues.
Corporate Governance Review continuedTrackwise Designs plc 20
RISK
DESCRIPTION AND POTENTIAL IMPACT MITIGATION
As a consequence of applying these
stresses, management are confident
that
the Company has sufficient
working capital resources to meet its
commitments with a satisfactory level of
headroom.
test,
also modelled
an
Management
additional stress
reducing all
revenues in the period to 30 June 2021
by 50% and holding all other stress
conditions in place and management
have confidence that the company has
sufficient working capital
resources
to meet all its commitments with a
satisfactory level of headroom.
The Company remains vigilant as to
whether others are adopting processes
that infringe our IPR.
This review is applied regularly, and any
potential infringement is pursued.
Protection of
intellectual
property
Potential to change
t
INCREASED
Effect:
The cost of IPR
infringement
could lead to lost
revenues, reduced
profits & possibly
significant legal
costs.
technology
includes
The Company’s
specific manufacturing
techniques
for IHT manufacture. The process has
been developed and is owned by the
Company.
Trademarks of
registered and unregistered.
the Company are
to
is dependent on
The Company
proprietary rights
this
in relation
technology process, which relies on
laws governing copyrights, trademarks
and confidentiality. The Company is also
dependent on contractual provisions
regarding
property
intellectual
ownership and licensing. These laws
enable the Company to protect and/
or enforce intellectual property rights,
including the ability to restrict use of
the manufacturing process to those who
have obtained relevant authorisation.
If the Company cannot successfully
enforce its intellectual property rights,
this could have a material adverse effect
on the Company’s business, financial
condition and prospects.
increases
the Company
its
As
penetration of the various markets which
it is addressing, then there is risk that
others may seek to copy and or imitate
the Company’s technology which could
lead to the loss of market share.
Corporate Governance Review continuedTrackwise Designs plc 21
DESCRIPTION AND POTENTIAL IMPACT MITIGATION
RISK
Attraction and
retention of key
employees
Potential to change
t
INCREASED
Effect:
Will lead to
increased capital
expenditure to
reduce reliance
on labour
resource which
in turn over time
should enhance
margins.
the
Like many other companies
Company seeks to recruit skilled, trained
team members and like those other
companies the demand for those scarce
resources is intense.
the
The Company depends upon
continued service and performance
of its key employees and whilst it has
entered into contractual arrangements
with them to secure their services, the
demand for this type of labour resource
ensures that it cannot be guaranteed
that they can all be retained.
The loss of key employees and the
failure or difficulty in attracting new team
members will impact the efficiencies of
the company’s business and will lead to
sub-optimal profitability.
Cybersecurity
Potential to change
t
INCREASED
Effect:
Exposure, hacking
or DOS could
impact adversely on
profitability & cash
generation.
Potential to change
t
UNCHANGED
Effect:
Loss of market
share, reduced
sales volumes &
profitability.
Failing to
successfully
implement our
growth strategies
to
threats
Global cybersecurity
the
Company could lead to unauthorised
access to the Company’s information
products,
technology
systems,
third-party
customers, suppliers and
service
Cybersecurity
incidents could potentially result in the
disruption of our business operations
and the misappropriation, destruction,
or corruption of critical data and
confidential or proprietary technological
information.
providers.
During the current Covid-19 lockdown
a significant number of our staff are
working from home.
The future success of the Company
is dependent upon
the effective
implementation of our growth strategy.
This success may be adversely impacted
by factors that the Company cannot
currently foresee, such as unanticipated
market forces, costs and expenses or
technological developments. Failure to
implement its strategy or the eventuality
that it takes longer than expected to
achieve implementation could adversely
impact future financial results.
have
renewed
and
Management
improved the environment within which
a labour force is engaged and have
increased communication
in both
directions with the workforce to improve
motivation, integration and remuneration.
Company-wide surveys have become
part of the culture with a focus on support
and mentoring alongside training to
encourage engagement, motivation and
effectiveness.
Management will continue to increase
these engagement processes and be
vigilant to ensure all things possible are
enacted to reduce the impact of labour
resource scarcity.
The Company implements preventative
security measures to prevent, detect,
address to mitigate these threats.
The Company has increased its spend
on IT cybersecurity, have carried out an
audit of threats and have upgraded all
aspects of their IT security.
The Company retains its Cyber Security
Certification (1744727378687299) which
is an industry leading accreditation.
All access to our server from these
remote locations are managed through
a secure Virtual Private Network facility.
Management focus efforts to address the
Company’s strategic goals on a regular
basis and has clear actions focussed on
their achievement.
Management regularly monitors their
capacity as well as the progress towards
achievement reviewing consistently the
changes in the market place and their
impact on our strategy.
The
achievement on a quarterly basis.
monitors
Board
strategic
Corporate Governance Review continuedTrackwise Designs plc 22
RISK
Customer
concentration
The Company is
dependent on the
communications
industry, the
aerospace industry
and the automotive
industry
Potential to change
t
UNCHANGED
Effect:
As the Company
moves to service
IHT customers
with the attendant
adoption timescale
the Company could
be at risk of loss of
significant revenues
compared to
expectations.
Potential to change
t
UNCHANGED
Effect:
Loss of market
share, reduced
sales volumes &
profitability.
DESCRIPTION AND POTENTIAL IMPACT MITIGATION
historical
increasing acceptance of
IHT
The
removes
concentration.
Management continues to broaden the
customer base of IHT.
Furthermore we pay good attention to
monitoring our relationship with our key
customers to moderate any adverse
reaction from these customers.
The Company seeks to balance its
exposure to these industries such that
overall risk is reduced, whilst at the same
time recognising that from time to time
one or other industry might become
more dominant within the Company’s
portfolio or less active.
The Company will continue to adopt a
balanced approach to the servicing of
these different industries.
to 4 customers. The
The Company has historically had a
concentrated customer base which
in 2018 saw 44% of revenues being
attributed
top
4 customers in 2019 accounted for
only 27% of revenues reflecting the
much larger number of IHT customers.
However, the Company remains exposed
to the loss of any one of a number of
customers.
As the adoption of IHT gathers pace it
will be inevitable in the short-term that
early adopting customers could initially
be responsible
for concentration of
revenues.
the Company’s
Any deterioration of
relationship with any one of
their
key customers, or the loss of orders
from any one of them, would have a
potentially material adverse impact on
the Company’s business and financial
position.
for
the Company as
The Company has traditionally been
dependent on
the communications
industry.
The development and market penetration
of IHT have added Aerospace and
Automotive as two industries that the
company is exposed to.
The Communications industry is highly
competitive and is particularly impacted
by the dominance of Chinese operators
the
who aggressively compete with
Company’s customers.
The Automotive industry is a significant
opportunity
it
struggles with the move from carbon-
based combustion motorisation
to
the
electric motorisation however,
Automotive industry is highly competitive
and
is extremely challenging. The
Aerospace industry will benefit greatly
from the new technology of IHT but the
adoption of the product by the industry
will inevitably be on a longer timescale
due to approval processes which are
extended. In particular, the risk appetite
for new products in the Aerospace
sector is at a relative low.
With
the
Company needs to ensure a balance of
the risks within these industries.
industry
these
three
foci
Exposure to
exchange rate
fluctuations
Potential to change
t
UNCHANGED
Effect:
Loss of market
share, reduced
sales volumes &
profitability.
The Company is exposed to exchange
rate fluctuations, principally the GBP, the
US$ and the Euro.
Changes in foreign currency exchange
rates may affect
the Company’s
pricing of products sold and materials
purchased in foreign currencies.
The Directors believe that its use of
certain derivative financial instruments,
forward
foreign currency
including
contracts
sale
to
used
commitments denominated in foreign
currencies,
the Company’s
exposure to this risk.
reduces
hedge
Corporate Governance Review continuedTrackwise Designs plc RISK
DESCRIPTION AND POTENTIAL IMPACT MITIGATION
23
Competition
Potential to change
t
UNCHANGED
Effect:
Loss of market
share, reduced
sales volumes &
profitability.
Potential to change
t
UNCHANGED
Effect:
Loss of market
share, reduced
sales volumes &
profitability.
Potential to change
t
DECREASED
Effect:
The impact
of BREXIT
IHT market
adoption
The economic environment within
which we all work has become one
that is constantly tested by disruptive
technologies.
Indeed, IHT itself is such a technology
but it is recognised that it is possible for
new competitive products, designs or
solutions to enter the market which might
bring different benefits.
It is possible that competitors may also
be able to devote greater resources to
the promotion and sale of their products,
designs and solutions than the Company
can compete with.
Whilst the UK has now left the European
Union the economic impact remains
totally unknowable and still presents
significant risk to the Company.
The Company’s product, IHT, has a wide
range of applications in a large number
of disruptive industries and provides an
environmentally sensitive contribution to
our customers challenges.
The Company will continue to explore,
research and develop new applications
for the IHT technology to meet the
competitive challenges as well as
the ever-changing demands of
its
customers.
The Company has a globally unique
product and will continue to demonstrate
the applicability of that technology to
industry groupings making
various
and
existing
obsolete.
redundant
solutions
The company continues
to provide
resources with the aim of improving each
generation of products it develops. If the
Group is unable to compete successfully
with existing or new competitors, it may
have to reduce prices on products,
which would lead to reduced profits
The risk of a “No Deal” Brexit is now a
strong possibility, the consequences of
which cannot be known.
The Company has incorporated an Irish
subsidiary (details below) to manage
the import/export of material which may
prevent disruption but in this uncertain
time we cannot predict its efficacy.
Trackwise Europe Limited
Company no: 635429
Date of Incorporation: 9.10.2018
The Company is growing its IHT business
steadily but remains at a relatively early
stage of engagement with IHT market
participants.
The Company depends upon increasing
adoption by market participants and
increasing orders from them over the
medium-term.
The Company has accelerated
its
marketing and communications activities
to develop existing customers and
potential new ones giving rise to a
constant increase in the number of IHT
customers.
This process gradually reduces the risk
of a lack of market adoption.
Could lead to
under-achievement
of revenues &
profitability.
The Directors have confidence that the
developments in our know how made to
date ensures that the applications for the
technology are wide and varied.
However, it is possible that IHT market
development could be slower
than
anticipated and the financial results of
the Company negatively impacted.
Corporate Governance Review continuedTrackwise Designs plc 24
Trackwise Board
Ian Griffiths
Non-Executive Chairman
Ian brings wide-ranging international experience of the engineering business-to-business
sector at both strategic and operational levels, having spent nearly 30 years with GKN plc.
He is currently Non-Executive Director of AIM listed Autins Group plc and was previously on the
Boards of Ultra Electronics Holdings plc, Renolds plc and Hydro International Limited.
Philip Johnston
Chief Executive Officer
Philip’s early career was in the space industry which included a key management role in the Prime
Contractor team for Envisat, a large European satellite.
Philip joined Trackwise in 1999 and acquired the Company in 2000.
Philip is named inventor on several UK and international patents including Improved Harness
TechnologyTM. As well as fulfilling the CEO function, Philip leads the company’s research and
development activities, managing Trackwise’s participation in UK and International Government
supported R&D consortiums.
Mark Hodgkins
Chief Financial Officer & Company Secretary
Mark is a member of the Institute of Chartered Accountants and a former partner with both
Grant Thornton and Ernst & Young. In the last fifteen years he has served as CFO of a large
private business as well as CEO of several engineering businesses and a private industrial
holding company.
As well as his role with the Company which began in May 2016, Mark is a Non-Executive Director
of EnSilica Limited a growing private fabless chip design business where he is responsible for
overseeing the management’s delivery of its growth strategy.
Lesley Jackson
Non-Executive Director
Lesley is the former CFO and Executive Director of Stock Spirits Group plc a position which she
had held since 2011.
Before Stocks Spirit Group plc, Lesley was the CFO of United Breweries Ltd from 2005 to 2008
and the group Finance Director of William Grant & Sons Distillers Limited from 2008 to 2011.
Lesley is a Chartered Accountant and a Non-Executive Director of Aberforth Split Level Trust
PLC and a Non-Executive Director and Chair of the Audit Committee of Devro PLC.
Corporate Governance Review continuedTrackwise Designs plc Directors’ Remuneration Report
25
The remuneration of senior executives is subject to the approval and oversight of the Remuneration Committee which is
chaired by Lesley Jackson.
The remuneration policy of the Company is designed to promote steady development towards its strategic goals with
regard to exploiting the IHT technology and maintaining the underpinning RF revenue stream.
In setting the measurement of executive performance careful observation is given to the risk profile of the business to
reward solid dependable progress. The committee believe that the executive team should be rewarded for growth that
endures and provides a good long-term growth path for investor returns.
Fixed pay is based on a market-based approach which takes into account the size of the Company, peer review of
compensation packages and the experience and qualifications of the executive in question. Variable pay is designed to
promote out-performance, which is both achievable, repeatable and sustainable.
During the final quarter the directors took a voluntary pay cut of 10% to reflect the difficult trading conditions the company
was experiencing.
Directors
The Directors of the Company are:
Philip Johnston
Mark Hodgkins
Ian Griffiths
Lesley Jackson
The appointments of both Ian Griffiths and Lesley Jackson expire at the end of the 2020 Annual General Meeting which
is to be held on 16 July 2020.
Directors’ Interests – Interests in shares (audited)
Philip Johnston
Mark Hodgkins
Ian Griffiths
Lesley Jackson
Holding
Balance at
31 December
2019
Percentage
of Share
Capital at
31 December
2019
Holding
Balance at
31 December
2018
Percentage
of Share
Capital at
31 December
2018
4,815,775
32.60%
4,815,775
32.60%
56,619
14,286
28,571
0.33%
0.10%
0.19%
47,619
14,286
28,571
0.38%
0.10%
0.19%
Directors’ Interests – Interests in share options (audited)
Details of options held by Directors who were in office at 31 December 2019 are set out below. Details of the Company’s
option schemes are set out in note 21 to the financial statements.
The market price of the Company’s shares at 31 December 2019 was 88.5 pence. The range of market prices during the
year was 60.5 pence to 150 pence.
M Hodgkins
Contracts of service
Date of Grant
15 June 2018
Number Exercise Price
Expiry Date
78,690
£0.28 15 June 2028
The Executive Directors, Philip Johnston and Mark Hodgkins each have a service agreement containing one year’s notice
and claw back and malus clauses with regard to any paid or unpaid bonuses.
The Non-Executive Directors, Ian Griffiths and Lesley Jackson, have a service agreement with a three-month notice
period.
Directors’ Remuneration ReportTrackwise Designs plc
26
Salaries and benefits
The Remuneration Committee meets at least once a year in order to consider and set the remuneration packages for
Executive Directors. The remuneration packages are benchmarked annually to ensure comparability with companies of a
similar size and complexity. Remuneration comprises basic salary, pension contributions and benefits in kind. In addition,
certain Directors are paid a car allowance or receive a contribution to their travel expenses.
Remuneration also includes share options as detailed above.
P Johnston
M Hodgkins
I Griffiths
L Jackson
Salary
£
184,812
145,875
43,875
34,125
Bonus
£
Benefits &
Car Allowance
£
-
-
-
-
21,571
15,000
-
-
Pension
£
7,200
-
-
-
Total
2019
£
213,583
160,875
43,875
34,125
Total
2018
£
187,777
*198,243
18.750
14,583
*included in the remuneration of M Hodgkins are payments made to his personal services company of £112,238. M Hodgkins was appointed a director of
the company on the 23 December 2017 and became an employee on 1 June 2018. His salary since 1 August 2018, the day after flotation, as disclosed in
the Company’s admission document, is £150,000 per annum and there have been no alterations to that since flotation.
On behalf of the Board
Mark Hodgkins
Company Secretary
22 June 2020
Directors’ Remuneration Report continuedTrackwise Designs plc Directors’ Report
27
Principal Activities
The principal activity of the Company is the design and manufacture of a full suite of advanced PCB’s including the
Company’s patented technology Improved Harness Technology™, Microwave and RF, short flex, flex rigid and rigid multi-
layer boards.
The Directors have set out their update on strategy and its development in the Chief Executive’s Strategic Review on
page 5 and that includes a review of the markets that the Company is addressing as well as the actions being taken to
meet the strategic goals of the Company.
The Directors of the Company are:
Ian Griffiths
Philip Johnston
Mark Hodgkins
Lesley Jackson
Non-Executive Chairman
Chief Executive Officer
Chief Financial Officer and Company Secretary
Non-Executive Director
Trackwise Designs plc Directors’ Report continued
28
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Directors’ Report and the Financial Statements in accordance with
applicable law and regulations.
The Directors are required to prepare Financial Statements for each financial year. The Directors have elected to prepare
the Company Financial Statements in compliance with IFRSs as adopted by the European Union as it applies to the
Financial Statements of the Company for the year ended 31 December 2019.
The Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of
the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these Financial
Statements the Directors are required to:
• Select suitable accounting policies and then apply them consistently;
• Make judgements and estimates that are reasonable and prudent;
• State whether the Financial Statements have been prepared in accordance with IFRS;
•
•
Provide additional disclosures when compliance with specific requirements in IFRS is insufficient to enable users to
understand the impact of particular transactions, other events and conditions on the entity’s financial position and
financial performance; and
Prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company
will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company. They
are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Each of the persons who is a Director at the date of approval of this Annual Report confirms that:
• so far as the Director is aware, there is no relevant audit information of which the Company’s Auditor is unaware; and
•
the Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of any
relevant audit information and to establish that the Company’s Auditor is aware of that information.
Dividends
The Company’s ability to pay dividends in the future is affected by a number of factors, principally the generation of
distributable profits within the Company. The Board has adopted a progressive dividend policy for the Company subject
to the availability of sufficient distributable profits. The Directors intend to commence the payment of dividends when it
becomes commercially prudent to do so and expect to pay interim and final dividends in the approximate ration of 1/3
interim and 2/3 final.
Research and Development
The Company continues to develop their products to ensure that they remain at the forefront of their markets. The detail
and cost of those developments are set out in the Chief Executive’s Strategic Review and Chief Financial Officer’s Report.
Trackwise Designs plc Directors’ Report continued
29
Director’s indemnity
The Company’s Articles of Association provide, subject to the provisions of United Kingdom legislation, for an indemnity
for Directors and Officers of the Company with regard to liabilities that they may incur in the discharge of their duties or in
the exercise of their powers, including any liability relating to proceedings brought against them which relates to anything
done, or omitted, or anything alleged to have been done or omitted by them as officers or employees of the Company or
Group.
Directors’ Liability Insurance is in place in respect of all the Company’s Directors.
Donations
The Company made no charitable or political donations during the year.
Independent Auditor
The Auditor, Mazars LLP, has indicated its willingness under section 489 of the Companies Act 2006 to continue in office
and a resolution that they be re-appointed will be proposed at the Annual General Meeting.
Annual General Meeting
The Company’s Annual General Meeting will be held at the Company premises – 1 Ashvale, Alexandra Way, Tewkesbury,
Gloucestershire GL20 8NB on 16 July 2020 at 11.00am.
Matters covered elsewhere
As permitted by Paragraph 1A of Schedule 7 to the large and medium sized companies and groups (Accounts and
Reports) Regulations 2008 certain matters that are required to be disclosed in the Directors’ Report have been omitted
as they have been included in either the Chief Executive’s Strategic Review or the Chief Financial Officer’s Report or the
Principal Risks and Uncertainties Report. These matters relate to the business review, principle risks and uncertainties,
key performance indicators, future developments and research and development activity.
Other Information
Each of the persons who is a Director at the date of approval of this Annual Report confirms that:
•
•
In so far as the Directors are aware there is no relevant audit information of which the Company’s Auditor is unaware;
The Director has taken all the steps that he/she ought to have taken as a Director in order to make himself/herself
aware of relevant audit information and to establish that the Company’s Auditor is aware of that information. This
confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies
Act 2006.
By order of the Board
Mark Hodgkins
Company Secretary
22 June 2020
Trackwise Designs plc 30
Independent Auditor’s Report
to the members of Trackwise Designs plc
Opinion
We have audited the financial statements of Trackwise Designs plc (the ‘Company’) for the year ended 31 December 2019
which comprise the Company Statement of Comprehensive Income, the Company Statement of Financial Position, the
Company Statement of Changes in Equity, the Company Statement of Cash Flows and notes to the financial statements,
including a summary of significant accounting policies. The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
In our opinion, the financial statements:
•
give a true and fair view of the state of the Company’s affairs as at 31 December 2019 and of its profit for the year
then ended;
•
have been properly prepared in accordance with IFRSs as adopted by the European Union;
• and have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the Company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, as applied to SME
listed entities and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you
where:
–
–
the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or
the Directors have not disclosed in the financial statements any identified material uncertainties that may cast
significant doubt about the Company’s ability to continue to adopt the going concern basis of accounting for a period
of at least twelve months from the date when the financial statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the
allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in
the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Trackwise Designs plc Independent Auditor’s Report to the members of Trackwise Designs plc continued
31
Area of focus
How our audit addressed the area of focus
Revenue recognition:
The Company’s accounting policy for revenue
recognition is set out in the accounting policy
notes on “Revenue” on page 40.
Revenue is a material balance for Trackwise
Designs Plc and represents the largest balance
in the Statement of Comprehensive Income. An
error in this balance could significantly affect
users’ interpretation of the financial statements.
Due to the potential to inappropriately record
revenue in the incorrect period, we consider
cut-off to be a key audit matter.
Going Concern assessment including the
impact of COVID-19
During the early months of 2020, there has been
a global pandemic resulting from the outbreak
of COVID-19. The impact of COVID-19 on the
global economy quickly became significant and
has caused widespread disruption to normal
patterns of daily life, including in the UK.
The directors’ consideration of the impact
of COVID-19 on Trackwise Designs PLC is
disclosed in the strategic report on page 8 and
the going concern assessment on page 14.
Whilst the situation is still evolving, based on
the information available at this point in time,
the directors have assessed the impact of
COVID-19 on the business and have concluded
that adopting the going concern basis of
preparation is appropriate. They have also
concluded that COVID-19 is a non-adjusting
post balance sheet event as set out in note 23.
Our procedures performed over revenue recognition included, but
were not limited to:
–
–
–
Review and walkthrough of the systems and controls in place
surrounding revenue recognition, in particular cut-off;
Testing a sample of revenue transactions around the year end to
ensure they were accounted for in the appropriate period; and
Reviewing post year end credit notes that may reverse revenue
previously reported during the year.
No material misstatements were identified in cut-off as a result of the
audit procedures performed.
We assessed the directors’ conclusion that the going concern basis
for preparation of the financial statements is appropriate. We consider:
–
–
–
The timing of the development of the outbreak across the world
and in the UK,
How the business operations of the group might be impacted by
the disruption; and
How the Directors have disclosed these matters in the financial
statements.
In forming our conclusions over the above matters, we evaluated how
management’s going concern assessment considered the impacts
arising from COVID-19 as follows:
–
–
–
–
We reviewed management’s revised going concern assessment
including COVID-19 implications based on a ‘reverse stress check
scenario’ (worst case) as approved by the Audit Committee. We
made enquiries of management to understand the completeness
of the criteria taken into account and implication of those when
assessing the ‘worst case scenario’ on the group’s forecast
financial performance;
We evaluated the key assumptions in the worst case forecast and
considered whether these appeared reasonable.
We examined the available working capital under the revised
monthly cash flow forecasts and evaluated whether the directors’
conclusion that sufficient working capital remained in all but the
most remote of events was reasonable; and
We evaluated the adequacy and appropriateness of the directors’
disclosure in respect of COVID-19 implications, in particular
disclosures within principal risks & uncertainties, post balance
sheet events and going concern.
Key observations
Based on the work performed, we are satisfied that the matter
has been appropriately reflected in the financial statements. Our
conclusions on going concern are set out above.
Trackwise Designs plc Independent Auditor’s Report to the members of Trackwise Designs plc continued
32
Area of focus
How our audit addressed the area of focus
Capitalisation and recoverability of research
and development expenditure:
The Company has a significant intangible asset
arising from the capitalisation of expenditure
in respect of the development of its Improved
Harness Technology
(‘IHT’) product. The
carrying value at 31 December 2019 was £4.3m.
Management exercise significant judgement
when assessing the apportionment of costs to
the development of the IHT product, and the
expected future economic benefits through sale
of the product. An error in the carrying value
due to applying inappropriate judgement has
the potential to have a material impact on the
financial statements.
Therefore capitalisation of capitalised development
cost is considered a key audit matter.
Our application of materiality
Our procedures performed over capitalisation of research and
development expenditure included, but were not limited to:
–
–
Testing a sample of additions to ensure they meet the recognition
criteria of IAS 38. This included reviewing and challenging the
apportionment of overhead costs;
Reviewing the level of sales in the period relating to the capitalised
asset and the forecasted IHT revenue and cashflows to help
assess the technical and commercial feasibility of the product
and the overall recoverability of the intangible asset.
Key observations
No material misstatements in capitalised costs or the recoverability
thereof were identified as a result of the audit procedures performed.
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and
extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect
of misstatements, both individually and on the financial statements as a whole. Based on our professional judgement, we
determined materiality for the financial statements as a whole as follows:
Overall materiality
How we determined it
Rationale for benchmark applied
£52,300
This has been calculated with reference to the Company’s revenue, of
which it represents approximately 1.8%.
Revenue has been identified as the most relevant measure of the
underlying performance of the Company and is considered to be the
focus of the shareholders and therefore has been selected as the
materiality benchmark.
Performance materiality
£40,800 calculated as 78% of overall materiality.
Reporting threshold
We agreed with the Audit Committee that we would report to the
Committee all audit differences in excess of £1,600 as well as differences
below that threshold that, in our view, warranted reporting on qualitative
grounds. We also report to the Audit Committee on disclosure matters
that we identified during the course of assessing the overall presentation
of the financial statements.
An overview of the scope of our audit
As part of designing our audit, we determined materiality and assessed the risk of material misstatement in the financial
statements. In particular, we looked at where the directors made subjective judgements such as making assumptions on
significant accounting estimates.
Trackwise Designs plc Independent Auditor’s Report to the members of Trackwise Designs plc continued
33
We gained an understanding of the legal and regulatory framework applicable to the group and company, the structure
of the company and the industry in which it operates. We considered the risk of acts by the company which were contrary
to the applicable laws and regulations including fraud. We designed our audit procedures to respond to those identified
risks, including non-compliance with laws and regulations (irregularities) that are material to the financial statements.
We focused on laws and regulations that could give rise to a material misstatement in the financial statements, including,
but not limited to, the Companies Act 2006.
We tailored the scope of our audit to ensure that we performed sufficient work to be able to give an opinion on the financial
statements as a whole. We used the outputs of a risk assessment, our understanding of the Company’s accounting
processes and controls and its environment and considered qualitative factors in order to ensure that we obtained
sufficient coverage across all financial statement line items.
Our tests included, but were not limited to, obtaining evidence about the amounts and disclosures in the financial statements
sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused
by irregularities including fraud or error, review of minutes of directors’ meetings in the year and enquiries of management.
The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and
effort, are discussed under “Key audit matters” within this report.
Other information
The directors are responsible for the other information. The other information comprises the information included in the
annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements
does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express
any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained
in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether there is a material misstatement in the financial statements
or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
•
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we
have not identified material misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
–
adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been
received from branches not visited by us; or
Trackwise Designs plc Independent Auditor’s Report to the members of Trackwise Designs plc continued
34
–
the Company financial statements are not in agreement with the accounting records and returns; or
– certain disclosures of directors’ remuneration specified by law are not made; or
– we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the directors’ responsibilities statement set out on page 28, the directors are responsible for
the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of the audit report
This report is made solely to the company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company and the company’s members as a body for our audit
work, for this report, or for the opinions we have formed.
Louis Burns (Senior Statutory Auditor) for and on behalf of Mazars LLP
Chartered Accountants and Statutory Auditor
45 Church Street
Birmingham
B3 2RT
22 June 2020
Trackwise Designs plc Company Statement of Comprehensive Income
For the year ended 31 December 2019
35
Revenue
Cost of sales
Gross profit
Administrative expenses excluding
exceptional costs and share based payment
Exceptional severance and move costs
Share based payment charge
Total administrative expenses
Operating (loss)/profit
Finance income
Finance costs
(Loss)/profit before taxation
Taxation
(Loss)/profit and total comprehensive income for the year
Earnings per share (pence)
Basic
Diluted
Notes
3
4
4
6
6
7
8
8
2019
£’000
2,906
(1,805)
1,101
(900)
(28)
(224)
(1,152)
(51)
5
(83)
(129)
81
(48)
(0.32)
(0.32)
2018
£’000
3,468
(2,416)
1,052
(727)
(45)
(155)
(927)
125
8
(65)
68
7
75
0.63
0.61
IFRS 16 was adopted on 1 January 2019 for statutory reporting, without restating prior year figures. As a result, the primary
statements are shown on an IFRS 16 basis for 2019 and an IAS 17 basis for 2018. Note 2.14 explains the change and the impact of
the two measures.
The notes on pages 19 to 56 form part of these financial statements.
Trackwise Designs plc
36
Company Statement of Financial Position
For the year ended 31 December 2019
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Current assets
Inventories
Trade and other receivables
Current tax receivable
Cash and cash equivalents
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Non-current liabilities
Deferred income – grants
Borrowings
Deferred tax liabilities
Total liabilities
Net assets
EQUITY
Share capital
Share premium account
Retained earnings
Revaluation reserve
Total equity
Notes
2019
£’000
2018
£’000
9
10
11
12
13
14
13
14
16
18
4,268
2,547
6,815
555
1,657
338
567
3,117
9,932
(1,046)
(339)
(1,385)
(856)
(1,253)
(401)
(2,510)
(3,895)
6,037
591
4,234
1,045
167
6,037
2,619
1,264
3,883
380
846
156
2,786
4,168
8,051
(815)
(161)
(976)
(539)
(357)
(308)
(1,204)
(2,180)
5,871
591
4,234
840
206
5,871
The financial statements on pages 35 to 38 were approved and authorised for issue by the Board and were signed on its behalf by:
Mark Hodgkins
Director
22 June 2020
Trackwise Designs plc
Company Statement of Changes in Equity
For the year ended December 2019
37
Share
capital
£’000
Share
premium
account
£’000
Retained Revaluation
reserve
earnings
£’000
£’000
Capital
redemption
reserve
£’000
600
245
367
At 1 January 2018
Profit and total comprehensive
income for the year
Bonus issue of shares
Issue of shares
(net of £1,056,000 of issue expenses)
Share based payment
Revaluation realised in year
14
–
367
210
–
–
–
–
–
4,234
–
–
At 31 December 2018
591
4,234
Loss and total comprehensive
income for the year
Share based payment
Revaluation realised in year
–
–
–
–
–
–
At 31 December 2019
591
4,234
1,045
75
–
–
126
39
840
(48)
214
39
–
–
–
–
(39)
206
–
–
(39)
167
–
(367)
–
–
–
–
–
–
–
–
Total
equity
£’000
1,226
75
–
4,444
126
–
5,871
(48)
214
–
6,037
Trackwise Designs plc
38
Company Statement of Cash Flows
For the year ended December 2019
Cash flow from operating activities
(Loss)/profit for the year before taxation
Adjustment for:
Employee share based payment charge
Depreciation of property, plant & equipment
Profit on sale of fixed assets
Amortisation of intangible assets
Net finance costs
Changes in working capital:
(Increase) in inventories
(Increase) in trade and other receivables
Increase in trade and other payables
Cash generated from/(used in) operations
Income tax received
Net cash from/(used in) operating activities
Cash flow from investing activities
Purchase of property, plant and equipment
Proceeds from sale of property, plant & equipment
Notes
4
9
6
11
2019
£’000
(129)
224
225
–
183
78
(175)
(268)
496
634
21
655
(951)
–
2018
£’000
68
155
196
(1)
97
57
(67)
(275)
(337)
(107)
36
(71)
(214)
11
Purchase of intangible assets
9
(1,736)
(1,067)
Grant received
Interest received
Net cash used in investing activities
Cash flow from financing activities
Share capital issued
Expenses relating to share capital issue
Interest paid
Repayment of borrowings
Lease payments
Repayment of capital element of hire purchase contracts
Net cash from financing activities
(Decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of year (all cash balances)
175
5
128
8
(2,507)
(1,134)
–
–
(83)
–
(89)
(195)
(367)
(2,219)
2,786
567
5,500
(1,056)
(65)
(515)
–
(39)
3,825
2,620
166
2,786
14
14
14
The cash outflow in respect of purchase of property, plant and equipment include the payment of any related deposits included in
prepayments until the asset is acquired.
Trackwise Designs plc
Notes to the Company Financial Statements
For the year ended December 2019
39
1 Corporate information
Trackwise Designs Plc (“the Company”) 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 design and manufacture of a full suite of advanced PCB’s including the Company’s patented
technology Improved Harness Technology™, Microwave and RF, short flex, flex rigid and rigid multi-layer 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 policies have been applied
consistently to all periods presented, unless otherwise stated. IFRS 16 ‘Leases’ has been adopted in these financial statements as set
out in note 2.14.
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, together 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. These forecasts have incorporated elevated stress tests to meet the impacts of Covid 19 as set out in the CFO report on page 12.
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 dormant subsidiary which has not yet traded 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 10)
Share Based Payments
The Company uses the Black-Scholes option-pricing model where applicable, with inputs, in particular volatility, requiring significant
judgement in application. (Note 8)
Notes to the Company Financial StatementsTrackwise Designs plc 40
Right of use assets
The application of IFRS16 Involves a degree of judgement in respect of the applicable discount rate and in respect of any lease options
or variable payments. The discount rate is reviewed in conjunction with the rates on similar borrowings and lease extension periods by
reference to business plans and the most likely outcome. (Note 2.14)
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 9)
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 the following steps 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. The sales price is determined after submission of a quote to each customer for their unique product and which has
been agreed with them and includes transport which is also agreed with the customer.
III. All performance obligations are met which is at a point in time when the goods have been despatched to the customer.
IV. Invoicing typically occurs once performance obligations are met. On occasion, customers are invoiced in advance and these
amounts are included in deferred income as contract liabilities. Contract liabilities held at the balance sheet date are expected to be
released in the following period when the performance obligation is satisfied.
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:
–
–
–
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.
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.
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.
Notes to the Company Financial Statements continuedFor the year ended December 2019Trackwise Designs plc 41
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. See
note 2.11 for a description of impairment testing procedures.
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:
–
It is technically feasible to complete the development such that it will be available for use, sale or licence;
– There is an intention to complete the development;
– There is an ability to use, sell or licence the resultant asset;
– The method by which probable future economic benefits will be generated is known;
– There are adequate technical, financial and other resources required to complete the development;
– 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 in the Statement of Comprehensive Income over the15-year life of the patent.
2.9 Software
Software assets are capitalised at the purchase cost. Subsequent to initial recognition it is stated at cost less accumulated amortisation
and accumulated impairment. Software is amortised in the Statement of Comprehensive Income on a straight line basis over its estimated
useful life of five years. These costs are recognised in Cost of Sales.
2.10 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.
Notes to the Company Financial Statements continuedFor the year ended December 2019Trackwise Designs plc 42
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
Plant and machinery
Straight line over the period of the lease
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.
Until the end of the 2018 financial year, leases of property, plant and equipment were classified as either finance leases or operating
leases. From 1 January 2019, under IFRS 16, leases are recognised as right-of-use assets and a corresponding liability at the date at
which the leased asset is available for use by the company. Assets and liabilities arising from a lease are initially measured at the present
value of the lease payments and payments to be made under reasonably certain extension options are also included in the measurement
of the liability. The lease payments are discounted using the interest rate implicit in the lease or the incremental borrowing rate that
the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a
similar economic environment with similar terms, security and conditions. Lease payments are allocated between principal, presented
as a separate category within borrowings, and finance cost. The finance cost is charged to profit or loss over the lease period so as to
produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right-of-use assets are measured
at cost comprising the amount of the initial measurement of lease liability, any lease payments made at or before the commencement
date less any lease incentives received and any initial direct costs and are presented as a separate category within tangible fixed assets.
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. If the
company is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life.
Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised on a straight-
line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.
On transition to IFRS 16 at 1 January 2019, the company has adopted the modified approach whereby the net present value of the
remaining property lease payments at this date are recognised as the opening liability with an equal right to use asset of £814,000
depreciated over the remaining lease period. This represents the full 10-year length of the lease amounting to £1,050,000 discounted
by £236,000 at the assessed incremental borrowing rate of 6% and assumes a break option will not be exercised (note 21 discloses the
minimum commitment at 31 December 2018 of £438,000 with the benefit of a break option after 5 years). Depreciation of £93,000 has
been charged in respect of the asset for the year and finance charges of £51,000 compared with £120,000 of rent that would have been
charged under the previous basis, an increase of £24,000 in the total charges included in the income statement. The comparatives for
the year ended 31 December 2018 have not been adjusted and are prepared in accordance with IAS17.
2.11 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 exceeds 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.
2.12 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.
Notes to the Company Financial Statements continuedFor the year ended December 2019Trackwise Designs plc 43
2.13 Financial instruments
The Company classifies all its financial assets at amortised cost. Financial assets do not include 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.
2.14 Leased assets
The following policies were applied for periods to 31 December 2018. From 1 January 2019 IFRS 16 was applied with additional right of
use assets and related liabilities recognised as set out in note 2.9. Hire purchase and finance lease liabilities were previously combined
but as the agreements all relate to hire purchase terms where loans are advanced or used to finance specific tangible fixed assets, these
have now been presented as hire purchase obligations within borrowings.
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.
Notes to the Company Financial Statements continuedFor the year ended December 2019Trackwise Designs plc 44
Operating leases
All other leases were treated as operating leases for periods ending 31 December 2018. Where the Company was a lessee, payments
on operating lease agreements were recognised as an expense on a straight-line basis over the lease term. Associated costs, such as
maintenance and insurance, were expensed as incurred.
2.15 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.
2.16 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.
2.17 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.
2.18 Standards, amendments and interpretations in issue but not yet effective
There are no new standards, interpretations and amendments that are in issue but not yet effective which are 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. Since January 2018
the RF and IHT activities have begun to be separately reviewed and monitored. Revenue of £1,968,000 (2018: £2,862,000) arose from
RF and £938,000 (2018: £606,000) from IHT in the year ended 31 December 2019. The operating segments are monitored by the chief
operating decision maker and strategic decisions are made on the basis of adjusted segment operating results.
All assets, liabilities and revenues are located in, or derived from, 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 no customer representing in excess of 10% of revenue (2018: one major customer represented 26% of
revenue reported in the Europe segment).
Turnover by geographical destination
UK
Europe
Other
2019
£’000
1,046
1,332
528
2,906
2018
£’000
866
2,368
234
3,468
Notes to the Company Financial Statements continuedFor the year ended December 2019Trackwise Designs plc
Operating (loss)/profit by geographical destination
UK
Europe
Other
4 Operating (loss)/profit
Operating (loss)/profit is stated after charging/(crediting):
Amortisation of intangible assets
Depreciation of property, plant and equipment
(net of £100,000 of capitalised development costs in 2019)
Depreciation of right of use assets
Cost of inventory sold
Foreign exchange loss
(Gain) on fair valued derivative
Operating lease expenses
Severance costs
Costs of moving main premises
Share based payment charges
Staff payroll costs (net of capitalised development costs)
45
2019
£’000
(18)
(23)
(10)
(51)
2019
£’000
183
132
93
937
57
–
–
28
–
224
1,431
2018
£’000
31
85
9
125
2018
£’000
97
196
–
1,331
14
(49)
125
–
45
155
1,178
The Auditors remuneration for audit services was £30,000 (2018: £31,000) and £nil for non-audit services (2018: £132,423 of which
£120,000 was related to the flotation of the company on AIM).
5 Staff and key management personnel
Average monthly number of employees
Management and administration
Production
Payroll costs
Gross salaries
Social security costs
Share based payment
Other pension contributions
2019
Number
2018
Number
14
34
48
£’000
1,775
174
224
63
13
29
42
£’000
1,401
139
155
58
2,236
1,753
Notes to the Company Financial Statements continuedFor the year ended December 2019Trackwise Designs plc
46
The Directors’ and key management remuneration were as follows:
Year ended 31 December 2019
P Johnston
M Hodgkins
I Griffiths
L Jackson
Year ended 31 December 2018
P Johnston
M Hodgkins
I Griffiths
L Jackson
6 Finance income and Expense
Finance income
Interest receivable on bank deposits
Finance expense
Interest payable on loans and overdrafts
Interest payable on hire purchase obligations
Interest payable in respect of right of use assets
7
Income tax
Current tax:
UK corporation tax:
Adjustment for prior periods
Total current tax credit
Deferred tax:
Origination and reversal of temporary differences
Adjustment for prior periods
Total deferred tax expense
Total tax credit
Salary
£’000
Benefits
£’000
Pension
£’000
Total
£’000
185
146
44
34
409
22
15
–
–
37
7
–
–
–
7
214
161
44
34
453
Salary
£’000
Benefits
£’000
Pension
£’000
Total
£’000
156
186
19
15
376
19
6
–
–
25
12
6
–
–
18
187
198
19
15
419
2019
£’000
2018
£’000
5
–
32
51
83
8
30
35
–
65
2019
£’000
2018
£’000
134
40
174
(68)
(25)
(93)
81
61
61
(39)
(15)
(54)
7
The tax rate used for the reconciliation is the corporate tax rate of 19% (2018: 19%) 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% (2018: 17%), being the rate at which the timing differences are expected to unwind based on
currently enacted UK corporate tax legislation.
Notes to the Company Financial Statements continuedFor the year ended December 2019Trackwise Designs plc
The credit for the year can be reconciled to the (loss)/profit for the year as follows:
(Loss)/profit before taxation
Income tax calculated at 19% (2018: 19%)
Disallowable expenses including share-based payment
Enhanced research and development allowances
Adjustment for prior periods
Differing deferred tax and R&D tax credit rates
Total tax credit
47
2019
£’000
(129)
25
(20)
94
15
(33)
81
2018
£’000
68
(13)
(27)
37
(15)
25
7
In addition to the tax credit, a further development expenditure tax related credit of £29,000 (2018: £35,000) is included in operating
expenses.
8 Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
Earnings
Earnings for the purpose of basic and diluted earnings per share being net
profit attributable to the shareholders
Number of shares
2019
£’000
2018
£’000
(48)
75
2019
2018
Weighted average number of ordinary shares for the purposes of basic earnings
per share
14,772,372
11,830,427
Weighted average number of ordinary shares for the purposes of diluted earnings
per share
14,772,372
12,370,189
Earnings per Share (pence)
Basic
Diluted
(0.32)
(0.32)
0.63
0.61
The earnings per share is calculated from the number of £0.04 ordinary shares in issue. 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
issued at £1.05 per share.
Options over 990,015 shares were granted to employees on 15 June 2018 which are included in the calculation of potentially dilutive
shares in respect of a profit. 915,360 remained exercisable as at 31 December 2019. 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%.
Notes to the Company Financial Statements continuedFor the year ended December 2019Trackwise Designs plc
48
9
Intangible assets
Cost
As at 1 January 2018
Additions
As at 31 December 2018
Additions
Reclassification
As at 31 December 2019
Amortisation or Impairment
As at 1 January 2018
Charge
As at 31 December 2018
Charge
Reclassification
As at 31 December 2019
Carrying amount
As at 31 December 2018
As at 31 December 2019
Goodwill
£’000
Patent costs
£’000
Computer Development
costs
£’000
Software
£’000
104
–
104
–
–
104
–
–
–
–
–
–
104
104
55
7
62
14
–
76
16
3
19
5
–
24
43
52
78
11
89
6
(18)
77
75
2
77
2
(14)
65
12
12
1,503
1,049
2,552
1,816
–
4,368
–
92
92
176
–
268
Total
£’000
1,740
1,067
2,807
1,836
(18)
4,625
91
97
188
183
(14)
357
2,460
4,100
2,619
4,268
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 TechnologyTM (‘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% (2018: 1%) for the next 5 years and a discount rate of 12% (2018: 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
£908,547 (2018: £633,000) 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. They are released to profit and loss in line with the amortisation of the costs. There are
no unfulfilled conditions or contingencies attached to the grants.
Notes to the Company Financial Statements continuedFor the year ended December 2019Trackwise Designs plc
10 Property, plant and equipment
Leasehold
improvements
£’000
Plant and
machinery
£’000
Right of
use asset –
buildings
£’000
Cost
As at 1 January 2018
Additions
Disposals
Additions
On transition to IFRS 16
Reclassification
As at 31 December 2019
Depreciation
At 1 January 2018
Charge
Disposals
As at 31 December 2018
Charge
Reclassification
As at 31 December 2019
Carrying amount
As at 31 December 2018
As at 31 December 2019
221
154
–
375
88
–
–
1,891
60
(44)
1,907
702
–
18
463
2,627
62
29
–
91
32
–
793
167
(33)
927
200
14
123
1,141
284
340
980
1,486
–
–
–
–
–
814
–
814
–
–
–
–
93
–
93
–
721
49
Total
£’000
2,112
214
(44)
2,282
790
814
18
3,904
855
196
(33)
1,018
325
14
1,357
1,264
2,547
Included within the carrying amount of the above, are assets held subject to hire purchase contracts of £1,184,000 (2018: £692,000)
relating to plant and machinery.
11 Inventories
Raw materials
Work in progress
Finished goods
2019
£’000
364
142
49
555
2018
£’000
222
58
100
380
There is no material difference between the value of inventories stated and their replacement cost. There are no material stock provisions
at any period end, neither have material amounts of stock been written off in any of the periods presented.
Notes to the Company Financial Statements continuedFor the year ended December 2019Trackwise Designs plc
Notes to the Company Financial Statements continued
50
For the year ended December 2019
12 Trade and other receivables
Trade receivables
Other receivables
Prepayments
2019
£’000
831
7
819
1,657
2018
£’000
524
26
296
846
Trade receivables are stated net of impairment for estimated irrecoverable amounts of £1,000 (2018: £nil). There has been no material
write off or change in impairment throughout the periods covered nor in the continuing assessment of the credit risk in the customer
base and as a result no expected credit loss provision is made for these. The Directors consider that the carrying amount of trade and
other receivables approximates to their fair value. Prepayments includes £743,000 (2018: £200,000) in respect of deposits for capital
equipment.
Trade receivables past their due dates but not impaired were:
31 December 2018
31 December 2019
Less than
60 days
overdue
£’000
15
22
60 to
120 days
overdue
£’000
12
60
More than
120 days
overdue
£’000
–
104
The Directors consider the credit quality of trade and other receivables that are neither past due nor impaired to be of good quality.
Substantially all overdue amounts have been collected since the year end.
13 Trade and other payables
Amounts falling due within one year:
Trade payables
Taxes and social security costs
Other payables
Accruals and deferred income
Amounts falling due after more than one year:
Deferred income – grants
2019
£’000
652
52
51
291
1,046
856
2018
£’000
332
49
44
390
815
539
The Directors consider that the carrying amount of trade and other payables approximates to their fair values. Accruals and deffered
income include Contract Liabilities totalling £139k (2018: £nil) in relation to customer payments received in advance.
Trackwise Designs plc
14 Borrowings
Amounts falling due within one year:
Lease liabilities
Hire purchase contract obligations
Amounts falling due between one and five years:
Lease liabilities
Hire purchase contract obligations
Amounts falling due in more than five years:
Lease liabilities
Total borrowings
Hire purchase obligations are secured on the specific tangible fixed assets to which they relate.
Financing activities and movements in total borrowings
As at 1 January 2018
Cash movements:
Repayment of revolving loan
Hire purchase contract payments
Interest paid
Non-cash movements:
Interest accrued
New hire purchase contracts
As at 31 December 2018
Cash movements:
Lease payments in respect of right of use assets
Hire purchase contract payments
Interest paid
Non-cash movements:
Interest accrued
Lease liability on transition to IFRS 16
New hire purchase contracts
As at 31 December 2019
Payments due under lease liabilities are as follows:
In one year or less
Between one and five years
Over five years
Future finance charges
Present value of liabilities
51
2019
£’000
2018
£’000
73
266
339
364
601
965
288
1,592
2019
£’000
434
1,179
1,613
335
(356)
1,592
–
161
161
–
357
357
–
518
£’000
1,072
(515)
(164)
(65)
65
125
518
(89)
(195)
(83)
83
814
544
1,592
2018
£’000
185
414
599
0
(81)
518
Notes to the Company Financial Statements continuedFor the year ended December 2019Trackwise Designs plc
52
15 Financial instruments and capital management
Risk management
The Board has overall responsibility for the determination of the Company’s risk management objectives and policies. The overall
objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Company’s innovation
and flexibility. All funding requirements and financial risks are managed based on policies and procedures adopted by the Board of
Directors. The Company is exposed to financial risks in respect of market, credit, foreign exchange, liquidity and interest rate risk.
Capital management
The Company’s capital comprises all components of equity which includes share capital, retained earnings and other reserves as
indicated in the Statement of Financial Position.
The Company’s objectives when maintaining capital are to safeguard the entity’s ability to continue as a going concern, so that it can
continue to provide returns for Shareholders and benefits for other stakeholders, and to provide an adequate return to Shareholders by
pricing products and services commensurately with the level of risk.
The capital structure of the Company consists of Shareholders equity with all working capital requirements financed from cash and
revolving credit facilities and capital expenditure utilising term hire purchase contracts.
The Company sets the amount of capital it requires in proportion to risk. It manages its capital structure and makes adjustments to it
in the light of changes in economic conditions, terms of borrowing facilities and the risk characteristics of the underlying assets and
activity. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to Shareholders, return
capital to Shareholders, issue new shares, or sell assets to reduce debt.
Market risks
These arise from the nature and location of the customer markets, foreign exchange and interest rate risks.
The Company trades within the UK, European and US aeronautical and communications markets, and accordingly there is a risk relating
to the underlying performance of these markets. The Directors monitor this and the foreign exchange risk closely with the intention to
foresee downturns in trade or changes in the use of technology.
Foreign exchange risk
The Company trades in overseas markets and, whilst it has net foreign currency balances, has forward contracts in place with an option
to sell sufficient foreign currency receipts at a fixed rate which it uses to manage pricing and the exposure to currency risks. There has
therefore been limited sensitivity to exchange rate risks. It is not considered to be a material sensitivity to the range of fluctuations in
exchange rates experienced within the last year..
The Company had the following net cash, sales ledger and purchase ledger balances denominated in foreign currencies:
Euro denominated
US dollar denominated
Interest rate risk
2019
£’000
178
222
2018
£’000
92
11
The Company entered into a revolving credit facility with Growth Street in 2017, in order to finance development of the key technology,
upon which interest was charged at a variable market rate for facilities of this nature. The outstanding value of this facility at 31 December
2017 was £515,000 on which the variable interest charged has typically been at a rate of 10%. This was fully repaid in 2018 and the
Company now holds cash balances. The Directors do not consider that the Company is exposed to a material risk from fluctuations in
these interest rates;
The Company makes use of fixed rate finance lease or hire purchase agreements to acquire property, plant and equipment; this ensures
that the Company maintains its existing working capital and ensures certainty of costs at the point of acquisition of those assets. The
Directors therefore do not consider that the Company is exposed to a material risk or sensitivity from fluctuations in interest rates as all
lease liabilities have fixed interest rates. These liabilities are set out in note 14.
Notes to the Company Financial Statements continuedFor the year ended December 2019Trackwise Designs plc
53
Credit risk
Credit risk is the risk of financial loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The
Company is mainly exposed to credit risk from credit sales and attempts to mitigate credit risk by assessing the creditworthiness of
customers and closely monitoring payments history. Given the long experience of the Company with its customers and in view of the
systems and relations with customers that the Company has, the Directors do not consider there is any significant risk at the balance
sheet date.
The ageing of debtors is included in note 12. There have been no material impairments to trade or other receivables invoiced within the
3 years included within these financial statements.
Credit risk on cash and cash equivalents is considered to be minimal as the counterparties are all substantial banks with high credit
ratings.
Liquidity risk
The maturity of the Company’s financial liabilities including borrowing facilities detailed above is as set out below. Current liabilities were
payable on demand or to normal trade credit terms with the exception of hire purchase contract obligations payable monthly and leases
payable quarterly.
Liquidity risk of the business is managed by the preparation of and monitoring of a rolling weekly cash forecast which is integrated with
a regular review of credit risk exposure (as detailed above) and the Board level review of three-month rolling finance facility headroom.
At 31 December 2018
Trade and other payables
Hire purchase contracts (including interest)
At 31 December 2019
Trade and other payables
Lease liabilities
Hire purchase contracts (including interest)
Up to 1 year
£’000
1-2 years
£’000
2-5 years
£’000
543
185
728
–
180
180
–
234
234
Up to 1 year
£’000
1-2 years
£’000
2-5 years
£’000
855
118
316
1,289
–
120
288
408
–
672
405
1,077
Classification of financial instruments
All financial assets are held at amortised cost and all financial liabilities have been classified as other financial liabilities measured at
amortised cost with the exception of any forward currency contracts that exist which are measured at fair value as a derivative instrument.
Financial assets
Trade and other receivables
Cash and cash equivalents
Financial liabilities
At amortised cost
Trade and other payables
Lease liabilities
Hire purchase contracts
2019
£’000
838
567
1,405
2019
£’000
855
725
867
2018
£’000
550
2,786
3,336
2018
£’000
543
–
518
2,447
1,061
Notes to the Company Financial Statements continuedFor the year ended December 2019Trackwise Designs plc
54
16 Deferred tax liabilities
Liability/(asset) in respect of:
As at 31 December 2018
Debit to profit or loss
As at 31 December 2019
Accelerated
capital
allowances
£’000
171
71
242
Intangible
assets
£’000
Share Based
Payment
£’000
271
136
407
(36)
(12)
(48)
Losses
£’000
(98)
(102)
(200)
Total
£’000
308
93
401
17 Defined contribution scheme
The Company contributes to personal pension plans for the benefit of certain employees. The pension cost charge represents
contributions payable by the Company to the fund.
Contributions payable by the Company for the year
18 Share capital
Allotted, called up and fully paid
14,772,372 Ordinary Shares of £0.04 each
Ordinary shares have equal rights to votes in any circumstances and are non-redeemable.
Ordinary shares have rights to receive dividends and capital distributions.
No dividends have been declared or are proposed in respect of the year (2018: £nil).
Analysis of Movements of Shares in Issue
1 January
Bonus Issue
Sub-division
Share Issue
31 December
19 Contingent liabilities
At 31 December 2019, the Company had no contingent liabilities (2018: none).
2019
£’000
63
2019
£’000
2018
£’000
58
2018
£’000
591
591
2019
2018
14,772,372
–
–
–
14,176
367,195
9,152,904
5,238,097
14,772,372
14,772,372
Notes to the Company Financial Statements continuedFor the year ended December 2019Trackwise Designs plc
20 Financial commitments
The Company’s future minimum rentals payable under non-cancellable operating leases were as follows:
Land and buildings
In one year or less
Between one and five years
Total financial commitments
55
2019
£’000
2018
£’000
–
–
–
110
328
438
The Company leases its premises under a 10-year lease with a break option available after 5 years. Following the adoption of IFRS16
these commitments are now included in lease liabilities at 31 December 2019.
The Company had capital commitments of £706,000 at 31 December 2019 in respect of new plant with the majority to be financed under
hire purchase agreements.
21 Share Option Plan
Introduction
The Company established the EMI Share Option Plan on 15 June 2018 which allows for the grant of enterprise management incentive
share options which qualify for favourable tax treatment under the provisions of Schedule 5 to Income Tax (Earnings and Pensions) Act
2003 (ITEPA) (EMI Options) and awards of non-qualifying options (together Awards).
The awards are not transferable. Only the person to whom an Award is granted or his or her personal representatives may acquire
Ordinary Shares pursuant to an Award
The Board and Remuneration Committee has overall responsibility for the operation and administration of the Share Option Plan and
discretion to select the persons to whom Awards are to be granted.
Size of EMI Options grants/plan limits
The Company will grant EMI Options for as long as the Company satisfies the qualifying conditions set out in the EMI Code.
Under the EMI Code, an employee may hold EMI Options over Ordinary Shares with a value (as at the date of grant) up to £250,000.
Where this threshold is exceeded, the employee may not receive EMI Options for three years. He may, however, receive non-qualifying
Awards, subject to the limit as set out below.
Unless the Remuneration Committee otherwise determines, the aggregate number of Ordinary Shares over which Awards may be
granted under the Share Option Plan on any date shall be limited so that the total number of Ordinary Shares issued and issuable
pursuant to Awards granted under the Share Option Plan and any other share scheme operated by the Company in any rolling 10-year
period will be restricted to 10% of the Company’s issued Ordinary Share capital from time to time calculated at the relevant time.
Rights to attaching to shares
Ordinary Shares issued in connection with the exercise of Awards will rank equally with Ordinary Shares of the same class then in issue.
Application will be made for admission to trading on AIM of new Ordinary Shares issued.
Malus and Clawback
The Remuneration Committee may apply clawback where at any time before or within a year of vesting it determines that the final results
of the Company were misstated. The Remuneration Committee may also apply the clawback at any time if it is discovered that the
participant engaged in fraudulent or dishonest conduct prior to vesting that justified, or would have justified, summary dismissal from
office or employment.
Awards
Included in the awards are options over 78,690 Ordinary Shares granted to Mark Hodgkins, one of the Directors.
Notes to the Company Financial Statements continuedFor the year ended December 2019Trackwise Designs plc
56
22 Ultimate controlling party and related party transactions
There was no individual controlling party as at 31 December 2019.
The key management personnel are considered to be the Directors. Please refer to Note 5 for details of key management personnel
remuneration. M Hodgkins, a Director of the Company, holds options over 78,690 ordinary shares in the Company (see note 8).
A company controlled by M Hodgkins, Manumit Strategies Limited, invoiced £nil of fees and expenses to the Company (2018: £75,420
in respect of consultancy services relating to the AIM listing).
A motor vehicle was sold to P Johnston, a Director of the Company, for £13,425 during the prior year.
23 Post Balance Sheet Event
On the 1 April 2020 the Company completed the acquisition of Stevenage Circuits Limited for a maximum consideration of £2.457m. On
the 30 March 2020 the Company passed Ordinary and Special Resolutions increasing the issued share capital of the Company from
14,772,372 shares to 22,113,622 by the issuance of 7,341,250 ordinary shares at 80p raising £5.87m.
Stevenage Circuits Limited is well-established founded in 1972 focused on the manufacture of rigid multi-layer and flexi-rigid PCBs. The
main market segments served by the Company include Aerospace, Space, Medical and Industrial Controls. In the year to 30 September
2019 the Company generated turnover of £6.5m and an adjusted EBITDA of £0.36m and reported a PBT of £0.38m.
Since the year end the economic environment has changed significantly as a consequence of the Corona Virus pandemic. Whilst the
impact from the pandemic is difficult to be confident about the directors do not think that any adjustment is necessary to these financial
statements. The liquidity and solvency of the Company has been stress tested and are set out in the CFO’s report on page 12.
24 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 (loss)/ profit:
Operating (loss)/profit
Add back share based payments
Severance costs
Costs relating to factory move
Brexit protection exchange loss
Adjusted operating profit
Finance income and expense
Adjusted Profit before taxation
2019
£’000
(51)
224
28
–
57
258
(27)
231
2018
£’000
125
155
–
45
–
325
(57)
268
The measure of EBITDA is not recognised by IFRS however it remains an important performance measure for management. [The
adjusted operating profit in this measure as set out below excludes net depreciation and amortisation charged to the profit and loss with
the exception of the 2019 depreciation charge of £93,000 in respect of right of use assets. If IFRS16 had not been adopted the measure
would have been £27,000 lower from the inclusion of the property rent charge.]
Adjusted EBITDA:
Operating (loss)/profit
Depreciation (net of development cost capitalisation)
Amortisation
Share based payments
Severance costs
Costs relating to factory move
Brexit Protection cost
Adjusted EBITDA
2019
£’000
2018
£’000
(51)
132
183
224
28
–
57
573
125
196
97
155
–
45
–
618
Notes to the Company Financial Statements continuedFor the year ended December 2019Trackwise Designs plc
Officers and Professional Advisers
57
DIRECTORS:
SECRETARY:
NOMINATED ADVISOR
& BROKER:
AUDITOR:
REGISTERED OFFICES:
LAWYER:
REGISTRARS:
Non-Executive Chairman
Chief Executive Officer
Chief Financial Officer
Non-Executive Director
Ian Griffiths
Philip Johnston
Mark Hodgkins
Lesley Jackson
Mark Hodgkins
finnCap Limited
60 New Broad Street
London
EC2M 1JJ
Mazars LLP
45 Church Street
Birmingham
B3 2RT
Trackwise Designs plc
1 Ashvale
Alexandra Way
Tewkesbury
Gloucestershire
GL20 8NB
Registered in England/Wales
Company no. 3959572
Trackwise Europe Limited
The Black Church
St. Mary’s Place
Dublin 7 Ireland
Registered in Ireland
Company no: 635429
Gateley Plc
111 Edmund Street
Birmingham
B3 2HJ
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Trackwise Designs plc
58
Perivan 257691
Trackwise Designs plc HEADLINES
TRACKWISE secures
first production order for Improved Harness TechnologyTM
for electric vehicle manufacturer
TRACKWISE delivers
the world’s longest multilayer flexible printed circuit
Our Vision
TRACKWISE signs
Collaboration Agreement with GKN Aerospace
To be the pre-eminent interconnect partner
of the world’s leading innovators
TRACKWISE responds
to medical sector ‘s demands for flexible printed circuits
for increased functionality in smaller and lighter packages
s
TRACKWISE commission
new vertical continuous plating capability
TRACKWISE signs
28 new NDAs with IHT prospects
Trackwise Designs plc
1 Ashvale | Alexandra Way | Tewkesbury | Gloucestershire GL20 8NB | UK
T: +44 (0)1684 299930 | E: enquiries@trackwise.co.uk | W: www.trackwise.co.uk
ANNUAL REPORT AND
FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2019