Transense Technologies Plc (LON:TRT), the provider of sensor systems for the transportation and industrial markets, is pleased to report positive results for the six months ended 31 December 2015.
The Group has achieved commercial progress in each of its continuing business activities, although revenue growth has been constrained by tough market conditions in the mining sector. The sale of the intelliSAW division (with associated licensing income) in October 2015 has both transformed the financial position of the Group and validated the high value potential for our core technology across a wide range of major global applications in the longer term.
· Adjusted revenues* up 33% to £1.04m (Dec 2014: £0.78m)
· Adjusted loss* from continuing operations of £0.62m (Dec 2014 loss of £1.15m)
· Sale of intelliSAW division to Emerson for £2.96m (including associated licence income of £2.74m) in October 2015
· Net profit for the period of £1.70m (Dec 2014 loss of £1.72m)
· Net cash generated from operations of £1.43m (Dec 2014: £1.43m net cash consumed)
· Net cash at end of period of £4.56m (Jun 2015: £0.47m)
· Further engagement with world class partners in commercialising SAW technology
· Increased penetration of iTrack system in tough market conditions
* from continuing operations and adjusted to exclude licence fee income associated with the disposal of intelliSAW.
Executive Chairman of Transense Technologies, David Ford, said: “The sale of the IntelliSAW division to Emerson last October increased the resources available to the Company. More importantly, this transaction has signalled to the industrial marketplace that SAW (Surface Acoustic Wave) sensing is not only a mature technology, but also a valuable one.
Reasonable progress has been made in commercialising products and services sold through our Translogik division, although this has been constrained to an extent by ongoing difficulties experienced by our customers in the mining sector.
We continue to be optimistic about prospects for each of our current business streams, although our approach to the short-term outlook is more cautious whilst these conditions prevail.”
The financial results for the six months ended 31 December 2015 show that reasonable progress has been made in commercialising products and services sold through our Translogik division, although this has been constrained to an extent by ongoing difficulties experienced by our customers in the mining sector.
The sale of the IntelliSAW division to Emerson last October increased the resources available to the Company. More importantly, this transaction has signalled to the industrial marketplace that SAW (Surface Acoustic Wave) sensing is not only a mature technology, but also a valuable one. SAWSense has seen an increase in the number of live projects in conjunction with major global industrial companies, building confidence in the prospects of these leading to successful commercialisation in the longer term.
Revenues for the six months increased to £3.77m (Dec 2014 : £0.78m) and included a one-off license fee received from Emerson for use of the intellectual property required by IntelliSAW. Excluding the effects of this license fee, the adjusted revenue was £1.04m, representing an increase of 33%.
The adjusted net loss before taxation from continuing operations, also excluding the license fee, was £0.61m, an improvement of 47% compared with the corresponding period (Dec 2014: £1.15m). Total comprehensive income for the period was £1.70m (Dec 2014: loss of £1.72m) and earnings were 0.38 pence per share and adjusted to exclude IntelliSAW a loss of 0.13 pence, (Dec 2014: loss of 0.39 pence).
Financial position and cash flow
Net cash generated from operations was £1.43m (Dec 2014: £1.43m used by operations). This includes net cash received in respect of the license fee of £2.45m. The balance of the license fee of £0.26m is held in Escrow until the first anniversary of the transaction in October 2016 and is reflected in the Company’s Balance Sheet under other receivables.
Taken together with the proceeds of the issue of equity of £2.46m earlier in the period, the company is now in a strong financial position with net cash and cash equivalents at the end of the period of £4.56m (30 June 2015: £0.47m).
As at 31 December 2015 Shareholders’ funds totalled £7.53m which included an accumulated deficit in reserves of £21.24m. The board is considering the steps that may be taken to eliminate this deficit, and will provide further information in due course.
The business strategy of the Group is to develop innovative sensing solutions across a range of applications, which are commercialised either through 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.
SAWSense is a leader in the development of Surface Acoustic Wave (“SAW”) wireless, battery-less, sensor systems that offer significant advantages over legacy systems in common use. It has engaged with a select group of world class companies to develop applications to full commercialisation; a process that is ongoing and can take many years to bring to realisation.
Technical and commercial activities are continuing to move ahead. The signing of a Memorandum of Understating (MOU) in May 2015 with GE, a provider of products to the global Power and Water, Oil and Gas, Energy Management, Aviation, Healthcare, and Transportation industries, has provided a catalyst for new developments and an excellent working relationship is developing between the respective technical teams, bringing together SAWSense’s SAW technology expertise with GE’s proficiency in large-scale production and product delivery. The transfer of technology continues with the qualification and industrialisation process ongoing between several sites and locations. We are increasingly positive about the commercial prospects of this collaboration and have already seen both a deepening and widening of the potential adoption of our technology in GE applications.
We are also working with another major global partner, based in Europe, which following the transfer from their R & D facilities has placed orders for initial low volume production.
Projects continue with major US automotive OEMs for both new project developments and repeat evaluation orders following successful initial technology trials. Motorsport continues to provide a modest revenue stream via the sale of product and provision of royalties, and the division overall is moving towards a point whereby customer funded projects will cover attributable costs.
Translogik has developed and markets a range of products and services for tyre pressure and temperature monitoring of mining haul vehicles under the name, iTrack. The division also markets a range of probes and associated monitoring systems for use in passenger car, bus and truck sectors. Our short-term aim is to generate revenues and margins in this business sufficient to enable the Group to be profitable and self-sustaining.
Translogik – iTrack
It is evident that the mining sector has come under increasingly severe financial pressure in recent months as a result of unprecedented reductions in the prices of most major commodities. Our customers, amongst the largest global players in this field, are suffering abnormally high levels of volatility, uncertainty and cost cutting.
Our products and services to this sector are proven to reduce operating costs and increase productivity. In field trials, we have a consistent track record of outperforming alternative providers, with regard to product features, support services and reliability. We have been able to offer more flexible financing terms such as operating lease rentals, to facilitate buying decisions to be made more easily. Despite these benefits, there is an inevitable adverse effect as current market conditions extend the decision making cycle.
Until global conditions improve, we have continued to focus on our key target markets in Chile and Australia, and we have deepened our presence in these regions. In Chile, we now have three full-time staff based in Antofagasta, both to support the live iTrack systems and new sales efforts both in Chile, and in the wider South American market. They all have previous experience of working within the Chilean mining industry, understand the needs of our customers and are able to deliver considerable value to mine operators through regular meetings where insights gained through the system can be used to drive efficiency gains and cost savings. The increasing amount of live data that is being gathered and analysed provides a compelling body of evidence regarding the commercial value of the system. Specific studies carried out by Translogik Chile, have allowed mine vehicles to operate faster within the existing operating constraints of the tyres, which is a major benefit to operators in the current cost-conscious economic climate.
In Australia, several trials are continuing and commencing shortly, and we now have a full-time employee, with many years’ experience managing the tyres of large mining vehicle fleets, running our new dedicated iTrack control room. This is a new service that provides live support for our iTrack fleets, and allows us to offer real-time alerts and communications on individual vehicle performance.
The Board continues to monitor developments closely, but is maintaining a cautious stance towards increasing our footprint further until there are clear signs of improved conditions. Whilst this may be viewed as a short-term setback, we continue to have confidence in our offering and our channel partners, and in the medium to longer-term prospects.
Translogik – probes
In December 2015, we announced an agreement with Continental Reifen Deutschland GmbH, to supply its ContiTrade unit with the new iOS compatible version of our TL-G1 Tyre Inspection Probe. Deployment has commenced, with further orders anticipated in due course.
The tyre inspection probes will be used as part of ContiTrade’s tyre management system, “FleetFox”. This customer-focused system provides accurate, real-time information on tyre pressure, tread depth and overall tyre condition, including any potential damage, to provide recommendations on optimal usage and estimates for remaining tyre life and anticipated replacement dates.
With several major tyre companies now employing Translogik tyre inspection probes within the new breed of electronic diagnostic reporting systems, it is becoming recognised as an industry standard.
Our probe offerings, while continuing to sell steadily, have not yet achieved the market traction that we were anticipating. We have established channel relationships with major players in the various regional marketplaces and are well positioned to benefit when end user adoption starts to accelerate.
We continue to make solid progress in developing valuable intellectual property, and moving from application towards commercial success. The rate of conversion to revenue has been somewhat constrained, especially in the current unprecedented climate in mining; one of our key sectors in which short-term success has been beckoning.
The realisation of our investment in IntelliSAW has demonstrated the inherent worth of our core technology, and provided the additional financial resources to take the business forward.
We continue to be optimistic about prospects for each of our current business streams, although our approach to the short-term outlook is more cautious whilst these conditions prevail.
David M Ford
Chairman Transense Technologies Plc
2 March 2016