REG - Transense Technlgy - Interim Results
20/02/2020 07:00
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RNS Number : 5336D Transense Technologies PLC 20 February 2020
20 February 2020
Transense Technologies plc
("Transense", the "Company" or the "Group")
Interim results for six months ended 31 December 2019
Transense Technologies plc, the provider of sensor systems for the industrial,
mining and transportation markets, reports the results for the six months
ended 31 December 2019.
Highlights:
• Group revenues of £0.97m (Dec 2018: £0.93m)
• iTrack subscription revenue up 50% to £0.66m (Dec 2018: £0.44m)
• iTrack subscription revenue run rate at period end up 24% to
£1.40m (Jun 2019: £1.12m, Dec 2018: £0.87m)
• Joint Collaboration Agreement ("JCA") signed with Bridgestone
Corporation in August 2019 by which the iTrack system is offered exclusively
by Bridgestone to their customers for large mine haul trucks
• Significant working capital, R&D and overhead investment made
in preparation for strong growth potential, funded partly by drawdown of
US$0.75m (£0.58m) loan under the JCA
• Net loss after taxation for the period of £1.19m (Dec 2018:
£0.78m) reflecting additional overhead spend
• Cash used in operations of £0.54m (Dec 2018: £0.50m)
• Net Cash* at end of period of £1.52m (30 June 2019: £2.65m)
• Minimum duration of JCA extended post period end until 12 February
2022 at the earliest
* Excludes the impact of IFRS 16 and the Bridgestone Loan of $0.75m
Non Executive Chairman of Transense Technologies, Nigel Rogers, said:
"I am pleased to be taking responsibility as Chairman of Transense at a
pivotal time in the commercialisation of our leading technologies. The
results for the first half of the financial year reflect the substantial
investment in infrastructure, working capital and overhead costs required to
take full advantage of our technical excellence, with the financial and
commercial support of market leading partners.
There has been a transformational change in the scope and commercial reach of
the iTrack system, and the business has the potential to deliver a significant
breakthrough in market penetration. Our relationships with Bridgestone are
strong at all levels, and we anticipate that our collaboration will continue
to provide a firm basis for mutual success.
As this success becomes apparent, our leading technologies in Surface Acoustic
Wave and tyre tread depth probes will increasingly come into focus, as we
evaluate investment priorities. There are clear opportunities for technology
led growth in each of these areas, and accordingly we look forward with
growing confidence."
For further information please visit www.transense.co.uk
(http://www.transense.co.uk) or contact:
Transense Technologies plc Tel: +44 (0) 1869 238380
Nigel Rogers, Chairman
Melvyn Segal, Finance Director
finnCap (Nomad and Joint Broker) Tel: +44 (0)20 7220 0500
Ed Frisby, Giles Rolls (Corporate Finance)
Tim Redfern, Tim Harper (ECM)
About iTrack
The iTrack Mining system provides real-time data on the condition of the
tyres, combined with live tracking of vehicle location and status. Our 24/7
Control Room monitors the pressures and temperatures live, and this
information can, for example, be used to ensure tyres do not exceed critical
heat thresholds, to detect incorrect load distributions, predict suspension
failures and eliminate manual tyre pressure checks. The Directors believe that
these benefits maximise the hours a truck is working (Truck Uptime) and
improve productivity by minimising maintenance requirements and using data to
identify underperforming trucks. www.trans-logik.com/itrack-2/
(http://www.trans-logik.com/itrack-2/)
About Transense Technologies
Based in Oxfordshire, UK, Transense has developed patent-protected sensor
systems and supporting technology for use in a variety of diverse high growth
markets. The Directors believe that Transense's Surface Acoustic Wave (SAW),
wireless, battery-less, sensor systems offer advantages over legacy wireless
sensor systems. Transense is targeting the transport and mining industries,
and the global torque, temperature and pressure sensing markets, via its
trading divisions, Translogik and SAWSense. www.transense.co.uk
(http://www.transense.co.uk)
Transense's shares are admitted to trading on AIM (AIM: TRT).
The information communicated in this announcement is inside information for
the purposes of Article 7 of Regulation 596/2014.
Transense Technologies plc
Chairman's Statement
I am pleased to be taking responsibility as Chairman of Transense at a pivotal
time in the commercialisation of our leading technologies in iTrack and
Surface Acoustic Wave sensing. The results for the first half of the
financial year reflect the substantial investment in infrastructure, working
capital and overhead costs required to take full advantage of our technical
excellence, with the financial and commercial support of market leading
partners.
Business strategy
The business strategy of the Group remains to develop innovative sensing
solutions across a range of applications, which are commercialised either
through the launch of products and services to customers or by forming
strategic alliances with partner organisations. Value is realised through a
combination of commercial income, royalties, licensing income and capital
gains on disposals.
Operational review
SAWSense
SAWSense is a leader in the development of Surface Acoustic Wave ("SAW")
wireless, batteryless, sensor systems that offer significant advantages over
legacy systems in common use.
In July 2016, SAWSense entered into a significant licensing agreement with
General Electric Company ("GE") for the use of patented, wireless, passive SAW
technology in GE Aviation's T901-GE-900 engine. This has been selected by
the U.S. Army for the Engineering and Manufacturing Development ("EMD") phase
of the Improved Turbine Engine Program ("ITEP"), the U.S. Army's programme to
replace more than 6,000 engines in its current fleet of Boeing AH-64 Apache
and Sikorsky UH60 Black Hawk helicopters, expected to commence around 2023
reaching full volume in 2026.
This project has now been extended into the GE supply chain, where we are
engaged with first tier global manufacturing partners of GE to support the
production process, and this work is progressing on schedule.
Our relationship with GE continues to develop, with several new applications
under review in co-operation with GE Research in Niskayuna, New York. These
extend beyond avionics into marine, industrial and power generation
technologies.
The agreement we have with GE is not exclusive and we have the opportunity to
enter into other similar relationships. During the period under review, work
continued in partnership with the Electronic Materials and Devices Group of
the University of Southampton to develop SAW technology for the real time
monitoring of temperature and strain on the inner and outer shells of Liquid
Nitrogen Gas tanks in situ. This project is funded by Lloyd's Register
Foundation, and is intended to pave the way towards providing early warnings
of structural defects, predicting failures, and thus obviating unnecessary dry
dock inspections that are both costly and dangerous. The project is
anticipated to have a duration of two and a half years, and during the period
grant funding of £0.12m was received to support this activity.
During the period there was further activity on projects in the automotive
field, covering recreational vehicles, Indy car and Formula 1, although no
significant breakthrough into full production vehicles is evident at the
current time.
Translogik
Translogik has developed a range of products and services for tyre pressure
and temperature monitoring of mining haul trucks marketed under the name
iTrack. The division also markets a range of tread depth probes and associated
monitoring systems for use in the passenger car, bus, truck and OTR sectors.
Translogik - iTrack
iTrack has continued to achieve increased market penetration as a stand alone
system in the period, with a 50% increase in monthly subscription revenues
compared with the first half of last year.
Even more significant, however, was the signing of the Joint Collaboration
Agreement ("JCA") with Bridgestone Corporation ("Bridgestone") in August 2019,
for an initial eighteen month period. Bridgestone is the world's largest
producer of tyres and other rubber products with annual revenues in excess of
£24bn and is the global market leader in the manufacture and sale of tyres.
Under the JCA, Bridgestone has agreed to offer the iTrack system exclusively
as a mining tyre monitoring system for the largest mine haul trucks, and the
Company has agreed that it will not contract with any other tyre manufacturer
for this category of tyres.
Since the commencement of the JCA, Bridgestone affiliate agreements have been
signed in many key territories, facilitating pre-sales engagement with major
clients worldwide. This activity has produced sales opportunities at an
unprecedented level, and many new trials are underway. The typical sales cycle
in this marketplace extends for a number of months prior to adoption, and
accordingly the JCA has not yet generated significant subscription income.
There are considerable costs associated with the generation of client
engagement, however, including building our sales, customer support and
technical teams, opening a new London office to co-ordinate these activities,
and extensive overseas travel. These additional costs have been part funded by
direct support and loans from Bridgestone under the terms of the JCA, and the
impact on reported earnings in the current period was approximately £0.40m.
Customer reaction has been very positive, indicating scope to increase iTrack
adoption significantly in the second half of the year and beyond. Furthermore,
the minimum term of the JCA was recently extended by a further twelve months
until not earlier than February 2022.
The JCA also contains an undertaking by Transense not to have discussions with
any other party in relation to any transaction of a merger, acquisition or
joint venture nature in respect of the iTrack business and this undertaking
was recently extended to expire on 30 April 2020.
Translogik - probes
Our range of tyre tread depth probes is compatible with the tyre management
systems of a number of the world's leading tyre producers. Revenues from
this range reduced in the second half of the last financial year, which was
believed to have been a consequence of reduced marketing activity at that
time. This was addressed in the early months of this financial year, and a
return to modest growth is evident, with revenues of £0.25m recovering to a
similar level as the first half of last year, and importantly a noticeable
increase in enquiries.
Work is ongoing to make further enhancements to the current probes and provide
a modular version.
Financial results
Revenues for the six months were broadly in line with the corresponding period
last year at £0.97m (Dec 2018: £0.93m), with subscription revenues generated
by users of the iTrack system increased by 50% to £0.66m (Dec 2018: £0.44m).
The annualised subscription run rate at the end of the period was £1.4m
representing an increase of 24% since the financial year end and a 60%
increase compared with the run rate at last year's H1 period end (Jun 19:
£1.1m and Dec 18: £0.9m). There were further units in the field awaiting
deployment by customers and with all units deployed the annualised run rate
increases to £1.7m.
We anticipate these revenues have the potential to grow strongly over the
remainder of 2020 and throughout 2021 as the iTrack installed base expands,
especially as a result of the JCA.
Operating expenses in the period were £2.08m (Dec 2018: £1.69m) as a
consequence of the incremental overheads associated with the ramp up of
iTrack. The resulting net loss before taxation from continuing operations
was slightly higher than the comparative period at £1.19m (Dec 2018:
£0.91m).
The total comprehensive loss for the period amounted to £1.19m (Dec 2018:
£0.78m), reflecting a tax credit of £nil (Dec 2018: £0.12m).
The board continues to keep under careful review the expected outturn for the
financial year ending 30 June 2020, and, in particular, the likely timing of
conversion of an unprecedented level of customer enquires into deployed units
that will be the subject of sale or subscription agreements. It is
increasingly likely that units will be deployed solely on a subscription
model, with significant longer term benefits, but to the detriment of short
term income recognition. Furthermore, the directors consider that it would be
inappropriate to cut back overhead expenditure at an expected inflexion point
in the conversion of customer demand.
Accordingly, the board has revised downwards its expectations for the current
financial year to reflect these market dynamics, whilst being committed to
delivering increases in the future growth trajectory in the following
financial periods.
Financial position and cash flow
Operating cash outflow before movements in working capital increased slightly
to £0.76m compared to the corresponding period in the last financial year
(Dec 2018: £0.52m). Cash used in operations for the period increased
marginally to £0.54m (Dec 2018: £0.50m).
The net investment in fixed assets for iTrack contracts in the period amounted
to £0.26m (December 2018: £0.20m) and as the iTrack installed base increases
there will continue to be a need to invest in fixed assets. During the
period there was further fixed asset investment of £0.06m in the fit out and
equipping of a new London office to co-ordinate worldwide activities on
iTrack.
The Company also capitalised ongoing development expenditure on iTrack
totaling £0.18m (Dec 2018: £0.11m).
The Company closed the period with net cash of £1.52m (30 June 2019: £2.65m)
which excludes the impact of IFRS 16 and the Bridgestone Loan of $0.75m.
The board has assessed the financial and operational needs of the business
over the forthcoming twelve months covering a broad range of potential outcome
scenarios. In each case, the directors are satisfied that the Company has
access to adequate sources of finance.
Accordingly, the Board consider we will have sufficient resources to continue
in operational existence for the foreseeable future.
Outlook and prospects
The financial year thus far has seen transformational change in the scope and
commercial reach of the iTrack system, and the business has the potential to
deliver a significant breakthrough in market penetration. Whilst the board
has revised downwards its expectations for the current financial year to
reflect our current market dynamics, the board remains committed to delivering
increases in growth trajectory in the following financial periods. Our
relationships with Bridgestone are strong at all levels, and we anticipate
that our collaboration will continue to provide a firm basis for mutual
success.
As this success becomes apparent, our leading technologies in Surface
Acoustic Wave and tyre tread depth probes will increasingly come into focus,
as we evaluate investment priorities. There are clear opportunities for
technology led growth in each of these areas, and accordingly we look forward
with growing confidence.
Nigel Rogers
Chairman
20 February 2020
Transense Technologies plc
Condensed Consolidated Statement of Comprehensive Income
Half year to Half year to Full Year
31 Dec 19 31 Dec 18 30 Jun 19
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Continuing operations
Revenue 965 933 2,226
Cost of sales (193) (202) (435)
Gross profit 772 731 1,791
Administrative expenses (2,080) (1,686) (3,603)
Operating loss (1,308) (955) (1,812)
Interest receivable 4 - 2
Interest payable (4) - -
Other income 118 49 79
Loss before taxation (1,190) (906) (1,731)
Taxation - 124 266
Loss for the year (1,190) (782) (1,465)
Other comprehensive income:
Exchange difference on translating foreign operations 18 2 2
Other comprehensive income for the year 18 2 2
Total comprehensive income for the year attributable to the equity holders of (1,172) (780) (1,463)
the parent
Transense Technologies plc
Condensed Consolidated Statement of Financial Position
31 Dec 19 31 Dec 18 30 Jun 19
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Non current assets
Property, plant and equipment 909 510 529
Intangible assets 1,033 860 946
1,942 1,370 1,475
Current assets
Inventory 730 575 566
Corporation tax receivable - 129 -
Trade and other receivables 988 729 789
Cash and cash equivalents 1,519 843 2,647
3,237 2,276 4,002
Total assets 5,179 3,646 5,477
Current liabilities
Trade and other payables (1,286) (412) (604)
Current tax liabilities (63) (68) (55)
Provisions (50) (70) (70)
Total liabilities (1,399) (550) (729)
Non current liabilities (204) - -
Net assets 3,576 3,096 4,748
Capital and reserves
Share capital 5,451 5,025 5,451
Share premium 2,591 682 2,591
Share based payments 41 41 41
Translation reserve 41 23 23
Accumulated reserve/(deficit) (4,548) (2,675) (3,358)
Shareholders' funds 3,576 3,096 4,748
Transense Technologies plc
Condensed Consolidated Statement of Changes in Equity (Unaudited)
Issued share capital Share premium account Translation Reserve Share based payments Accumulated deficit Total equity
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 July 2018 5,025 682 21 41 (1,893) 3,876
Comprehensive income for the year:
Loss for the period - - - - (1,465) (1,465)
Other comprehensive income for the year:
Currency movement on subsidiary reserves - - 2 - - 2
Total Comprehensive income for the year: - - 2 - (1,465) (1,463)
Shares issued and share premium 426 1,909 - - - 2,335
Balance at 30 June 2019 5,451 2,591 23 41 (3,358) 4,748
Comprehensive income for the period:
Loss for the period - - - (1,190) (1,190)
Other comprehensive income for the period:
Translation of foreign entity - - 18 - 18
Total Comprehensive income for the period: - - 18 - - 1,172
Balance at 31 December 2019 5,451 2,591 41 41 (4,548) 3,576
Transense Technologies plc
Condensed Consolidated Statement of Cash Flows
Half year to Half year to Full year to
31 Dec 19 31 Dec 18 30 Jun 19
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Cash flow from operating activities
Loss for the period (1,190) (782) (1,465)
Adjustments for
Taxation - (124) (266)
Interest receivable (4) - (2)
Interest payable 4 - -
Depreciation of property, plant and equipment 211 178 369
Amortisation and impairment of intangible assets 216 211 396
Share based payments - - -
Operating cash flows before movements in working capital (763) (517) (968)
Change in receivables (199) (160) (91)
Change in payables 583 68 247
Change in inventories (164) 110 119
Cash used in operations (543) (499) (693)
Taxation recovered - 124 266
Net cash used in operations (543) (375) (427)
Cash flows from investing activities
Interest received 4 - 2
Interest paid (4) - -
Acquisition of property, plant & equipment (300) (215) (424)
Acquisition of intangible assets (303) (161) (433)
Net cash used in investing activities (603) (376) (855)
Cash flows from financing activities
Proceeds from issue of equity share capital - - 2,335
Net cash used for financing activities - - 2,335
Net (decrease)/increase in cash and cash equivalents (1,146) (751) 1,053
Unrealised currency translation gain 18 2 2
Cash and cash equivalents at beginning of period 2,647 1,592 1,592
Cash and cash equivalents at end of period 1,519 843 2,647
Notes to the Interim results for the six months to 31 December 2019
1 Reporting Entity
Transense Technologies plc ("the Company") is a company incorporated in the
United Kingdom under the Companies Act 2006. These condensed consolidated
interim financial statements of the Company as at and for the six months ended
30 December 2019 comprises the Company and its subsidiaries (together referred
to as "the Group" and individually as "Group entities"). These condensed
consolidated interim financial statements are presented in pounds sterling,
rounded to the nearest thousand.
The consolidated financial statements of the Group are available upon request
from the Company's registered office or at www.transense.co.uk
(http://www.transense.co.uk)
These condensed consolidated interim financial statements are unaudited.
2 Accounting policies
The Condensed Consolidated Financial Statements for the half yearly report for
the 6 months ended 31 December 2019 have been prepared using accounting
policies and methods of computation consistent with those set in Transense
Technologies plc's Annual Report and Financial Statements for the year ended
30 June 2019. There has been no change to any accounting policy from the
date of that repot, except for the Group has now implemented IFRS 16 - Leases.
The Group has transitioned to IFRS 16 as at 1 July 2019 and it has
transitioned the leases previously accounted for as operating leases under IAS
17 using the Modified Retrospective Approach.
The Group has assessed its leases that were previously accounted for under IAS
17, recognising the discounted asset at the date of transition as a Right of
Use asset within tangible fixed assets and the associated liability within
trade and other payables.
Following the transition to IFRS 16, a right of use asset (and associated
liability) of £0.29m (£0.20m in non current liabilities and £0.09m in
current liabilities) was recognised. In H1 2020, there has been £0.03m of
depreciation against the assets and approximately £4,000 of interest incurred
associated with the unwind of the discount on the liability.
3 Earnings per share
31 December 2019 31 December 2018 30 June 2019
Shares Shares Shares
Weighted average number of shares
Issued at start of period 16,307,282 12,048,948 12,048,948
Effect of shares issued in period - - 1,135,633
Weighted average number of shares at end of period 16,307,282 12,048,948 13,184,581
Basic Earnings per share (7.30p) (6.49p) (11.11p)
4 Revenue
Revenue Half year to Half year to Full year to
31 Dec 19 31 Dec 18 30 Jun 19
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Chile 325 373 670
Australia 237 186 398
Rest of the World 212 76 192
North America 129 203 743
UK & Europe 62 95 192
Japan - - 31
Total 965 933 2,226
5 Trade and other payables
Included in trade and other payables is a loan from Bridgestone of $0.75m
(£0.58) which could become repayable in the next 12 months.
6 Going concern
The interim financial information has been prepared on a going concern basis,
which assumes that the Company will have adequate resources to continue in
operational existence for the foreseeable future.
7 Corporation tax and deferred tax
The Company is entitled to a Corporation Tax credit in respect of expenditure
on Research and Development and this is recognised in the accounts on the
basis that the credit is received before finalising the accounts.
The Group has tax losses, in the sum of £22m which, subject to agreement by
HM Revenue and Customs, are available for offset against future profits of the
same trade. There is no expiry date for tax losses however there is an annual
restriction of £5m plus half of the surplus above £5m. An appropriate asset
will be recognised when the Group can demonstrate a reasonable expectation of
sufficient taxable profits to utilise the temporary differences.
Accordingly, no deferred tax asset is recognised in these financial statements
in respect of trading losses to date.
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