Half-year Results

Tan Delta (AIM:TAND), a leading provider of intelligent monitoring and maintenance systems for commercial and industrial equipment is pleased to report its financial results for the six months ended 30 June 2024 ('H1 2024' or 'the Period').

Financial highlights:

• H1 revenue of £0.66m (H1 2023: £0.96m)
• Gross profit margin of 61% (H1 2023: £61%)
• Loss before tax of £0.53m (H1 2023: loss of £0.30m)
• £3.62m cash as at 30 June 2024(H1 2023: £0.33m)

Commenting on the results, Chris Greenwood, Tan Delta CEO said:

"The year to date has been an exciting and fast-moving period of operational and sales development. The Company ends the period with £3.62m of cash, a significant and growing pipeline of new customers and contracts. Despite some frustration with the speed of conversion, included in our pipeline are four specific pending contracts worth £4.5m of which I am optimistic that at least £1.85m will close and be shipped during the current year."

Chairman statement The Board is pleased with the progress made by the Company during H1. Due to the timing of conclusion of certain projects, revenue for H1 2024 was £0.66m which underpins the expected second half increase in conversion of pending sales opportunities. In particular, we are actively working to conclude four potential contracts with new customers with an aggregate value of up to £4.5m. These are expected to progress following completion of ongoing trials during H2 and as such the Board remains cautiously optimistic about achieving full year market expectations despite the slower H1. The high level of standardisation of our product offer across different market segments (application & geographic) has enabled us to grow our capacities (production, deployment support and sales) more efficiently than anticipated which is reflected in our lower than expected overheads and thus a loss of £0.53m for the period despite the lower revenues during the Period. In anticipation of the forthcoming closure and delivery of some of our sales pipeline we have increased our stock of product during H1, with a specific focus on being able to achieve customer supply time expectations. Cash balances remains healthy at £3.62m as at 30 June 2024. Operational During the Period, we have completed our investment to increase production capacity which has expanded our ability to support an annual revenue run rate of £12m; a further doubling of this capacity is achievable within four months with additional investment of only £50k which we expect to execute during 2025 to support anticipated demand. This increase in production capacity was achieved alongside our investments in product support that has included simplified sensor configuration and improved documentation which enables more efficient and quicker installations by customers. Sales We are engaged with a substantial and growing number of customers across multiple application and geographic segments. From Biogas genset operators in Germany, to ports in the USA, mines in Chile, engine manufacturers in Europe and one of the world's largest global retail and distribution business. All have common objectives: to reduce their oil use; maintenance costs; and improve reliability and the regard our sensor as a reliable and effective route to achieve these ambitions. We have good visibility on contract orders worth approximately £25m, of which two, valued at £1.85m (in aggregate) are expected to convert into sales during the current year following the successful completion of trials. These specific opportunities are mostly in the Middle East and focused on power generation and other engine-based applications. In addition to these defined contract opportunities we also have a growing raft of strategic ones. These include applications such as large Port Cranes, where we have recently kicked off a trial with The Georgia Ports Authority in USA where they have 90 cranes, each of which would require 6 sensors. Separately, we have recently started a trial with one of the world's largest retail distribution businesses to help them enhance reliability and maintenance planning of automated conveyor systems in their logistics centres. We have no shortage of opportunities and are systematically engaging with customers to learn about their specific needs and develop implementation plans, this all bodes extremely well for the future. Outlook The Board is pleased with progress made to develop the business and is looking forward to seeing this groundwork reflected in the forecasted sales in H2 and beyond. We see a growing array of opportunities across real time oil analysis-based equipment monitoring and management which is where our core technology delivers valuable data and insight. The Company has built a substantial pipeline of opportunities, which is continuing to grow, and includes a mix of substantial near term contract opportunities and longer-term strategic ones which could be of exceptional value. Of course, the immediate focus of the management team are the £1.85m of pending contracts which we hope to close and ship in the current financial year. As such the outlook for the future of the Company remains very positive.

Statement of profit or loss and other comprehensive income

Notes to the condensed interim financial statements

General information

The interim financial statements were approved by the Board of Directors on the 27th of September 2024.

Basis of preparation

The interim financial statements of the Company are for the six months ended 30 June 2024.

The financial statements were prepared under International Financial Reporting Standards ('IFRS'). The comparative figures were audited and prepared in accordance to International Financial Reporting Standards ('IFRS') and the provisions of the Companies Act 2006.

The condensed interim financial statements for H1 2024 do not include all the information and disclosures required in the annual financial statements and have not been audited or reviewed by an auditor pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information. However, selected explanatory notes are included to explain events and transactions that are significant for an understanding of the changes in the Company's financial position and performance in the period.

The condensed interim financial statements for H1 2024 have been prepared based on the accounting policies expected to be adopted for the year ending 31 December 2024. These accounting policies are drawn up in accordance with adopted International Accounting Standards ('IAS') and International Financial Reporting Standards ('IFRS') as issued by the International Accounting Standards Board and adopted by the EU.

Revenue from contract customers

IPO costs

On Admission to AIM on 18 August 2023, the Company issued 23,074,000 new ordinary shares, taking the number of ordinary shares in issue to 73,223,800. Total proceeds amounted to circa £6.0m. The costs associated with the IPO, which were committed at 30 June 2023 amounted to £0.47m and at 30 December 2023 £0.74m. The costs were recognised as non-underlying expenses in the income statement.

Finance expenses and income

Income tax expense

No income has yet been recognised in H1 2024 in relation to R&D tax credits available from HMRC through the SME R&D relief scheme.

Earnings per share

Earnings per share are as follows:

The calculations of basic and diluted earnings per share are based upon:

During the period ended 30 June 2023, the Company completed a 110 for 1 bonus share issue and a subdivision of shares. Prior to the bonus issue there were 451,800 shares at £0.001, after the bonus issue there are 50,149,800 shares at £0.001. On Admission to AIM on 18 August 2023, the Company issued 23,074,000 new ordinary shares, taking the number of ordinary shares in issue to 73,223,800.

Trade and other receivables

Banks loans comprise a Coronavirus Business Interruption Loan provided by Lloyds. The loan was taken out in August 2021 and fully repaid in August 2023.

Share capital

Called up share capital

Called up share capital represents the nominal value of shares that have been issued.

All classes of shares have full voting, dividends, and capital distribution rights.

On 1 June 2023, the ordinary shares were subdivided from £0.01 to £0.001 (45,180 shares to 451,800 shares). Subsequently a bonus issue was made for all the shareholders holding 451,800 shares at that date. The bonus issue offered 110 ordinary shares for every 1 ordinary share in issue, with a nominal value of £0.001 per share. This increased the number of ordinary shares in issue by 49,698,000 to 50,149,800.

On Admission to AIM on 18 August 2023, the Company issued 23,074,000 new ordinary shares, taking the number of ordinary shares in issue to 73,223,800 from 50,149,800.

Reserves

In anticipation of re-registering the Company as a public limited company ('plc'), at a general meeting of the Company on 1 June 2023, it was resolved that the Company would reduce its share premium account by an amount of £1.52m by crediting the Profit and Loss Account.

Share premium account.

This represents the excess value recognised from the issue of ordinary shares above nominal value.

Retained earnings.

This represents cumulative net gains and losses less distributions made.

Post balance sheet events

No adjusting events have occurred between reporting date and the date of authorisation of the condensed interim report.

Availability

Further copies of this interim announcement are available on the Tan Delta Systems plc website,