TWD.L Regulatory News (TWD)

TRACKWISE DESIGNS PLC

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

Final Results

Trackwise Designs (AIM: TWD), a leading provider of specialist products using printed circuit technology, announces its audited results for the year ended 31 December 2019.

Financial highlights

Operational and strategic highlights

Post period highlights & outlook

*adjusted for share based payments, restructuring costs, and eliminating the benefit in FY20 of the one-off profit on SCL acquisition at below net asset value

Philip Johnston, CEO of Trackwise, commented: "Despite the economic headwinds faced in 2019, we made encouraging progress against our strategy, with our globally unique IHT technology gaining traction and significant capability and capacity improvements being made that position us well for the future. That momentum continued into 2020, with our first IHT production order secured in February, a successful fundraise in March and the completion of the acquisition of Stevenage Circuits Limited in April.

"While we have inevitably experienced some disruption to normal trading patterns since the outbreak of the pandemic and remain cautious about the potential impact of the uncertain global economic outlook on our performance in the second half, our pipeline of opportunities remains healthy. We continue to take steps to lay the foundations for future growth and remain confident that as soon as more normal conditions return, we will be in a strong position to capitalise on increasing demand and deliver long-term, sustainable growth."

Enquiries

Notes to editors

Trackwise is a UK-based manufacturer of specialist products using printed circuit technology.

The full suite includes: Improved Harness Technology™ ("IHT"), Microwave and Radio Frequency ("RF"), Short Flex, Flex Rigid and Rigid multilayer products.

IHT uses a proprietary, patented process that Trackwise has developed to manufacture multilayer flexible printed circuits of unlimited length. While the technology has many applications, the directors expect that one of its primary uses will be to replace traditional wire harness in a variety of industries.

The Company manufactures on two sites, located in Tewkesbury and Stevenage (following the acquisition of Stevenage Circuits Ltd in April 2020). It serves customers in Europe, North America, Asia and Australia.

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

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

Chairman's Statement

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 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 Technology, 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, 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.

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 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 for 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.

Chief Executive's Review

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.

Overall, our Growth Strategy is:

• To roll out IHT to meet demand from:

• Electric Vehicles (EV) Battery Packs

• AerospaceHAPS, 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

The fundamental proposition of 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 signaled 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.

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.

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.

Our work in 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 to complete the acquisition of Stevenage Circuits Limited on 1 April 2020. Stevenage Circuits Limited is a printed circuit board manufacturer first 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 remans 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 Generate additional customer opportunities through focused sales and marketing activities

o Successfully transition existing customer engagements from testing, through to initial orders and subsequently orders at scale

· 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 trading has shown some resilience, we have inevitably experienced some disruption to normal trading patterns since the outbreak of the pandemic and 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 and 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.

Chief Financial Officer's Report

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 £938,000, an increase of 55% 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.

 *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.

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.

Coronavirus Solvency Review

In particular management have carried out an assessment of the economic impact of Coronavirus 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 has 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.

Company Statement of Comprehensive Income

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

Company Statement of Financial Position

Company Statement of Changes in Equity

Company Statement of Cash Flows

Notes to the Company financial statements

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).

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 obligations 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:

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

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

ー Any grants that are received before the revenue recognition criteria are met are recognised in the Statement of Financial Position as another creditor within liabilities.

Capital grants

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

2.4 Share based payment

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

2.5 Income tax

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

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

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

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

2.6 Goodwill

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

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

ー There is an intention to complete the development;

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

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

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

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

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

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

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

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

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

2.8 Patent costs

Patent cost assets are initially measured at cost. After initial recognition, they are recognised at cost less any accumulated amortisation and any accumulated impairment losses. The costs are amortised in the Statement of Comprehesive Income over the 15-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.

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

Leasehold improvements Straight line over the period of the lease

Plant and machinery 10-33% straight line

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

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

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 incrementalborrowing 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 leaseterm on a straight-line basis. If the Company is reasonably certain to exercise a purchase option, theright-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.

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.

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

Operating (loss)/profit by geographical destination

4 Operating (loss)/profit

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

The Directors' and key management remuneration were as follows:

6 Finance income and expense

7. Income tax

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.

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

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:

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%.

9 Intangible assets

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.

10 Property, plant and equipment

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

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.

12 Trade and other receivables

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:

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

The Directors consider that the carrying amount of trade and other payables approximates to their fair values.

14 Borrowings

Hire purchase obligations are secured on the specific tangible fixed assets to which they relate.

16 Deferred tax liabilities

17 Share capital

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).

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:

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.]

Annual Report

The Annual Report for the year ended 31 December 2019 will be published on the Company's website today at www.trackwise.co.uk and will be posted to shareholders that have requested hard copies today.