TAND Tan Delta Systems Plc

Tan Delta Systems plc

("Tan Delta", or the "Company")

Trading Update

Tan Delta (AIM:TAND), a leading provider of intelligent monitoring and maintenance systems for commercial and industrial equipment, announces an update on its trading for the six months to 30 June 2024 ("H1-24") as well as its outlook for the six months to 31 December 2024 ("H2-24").

The Board is pleased with progress achieved in H1-24, with investment completed to increase production capacity, which alongside increased sales activity which has resulted in a significant pipeline of prospects with an aggregate value of over £14.0m, up from £2.5m at the end of December 2023. We look forward to commercialising these prospects during H2-24 and beyond and note the Company is currently in active negotiations with prospects valued at nearly £6.0m (of the £14.0m).

The Company expects to report unaudited revenues of £0.65m in H1-24, with gross margin of 61%, generating operating losses of approximately £0.5m. Cash remained healthy with £3.6m as at 30 June 2024. Increasing levels of trading, together with the substantially increased pipeline of prospects, provide the Board confidence to reaffirm market expectations for FY-24, including revenue of £2.8m.

Operationally, our primary focus has been to complete the expansion of our existing production facility, a process which is now complete and enables us to manufacture and supply up to 1,500 units per month, translating into revenue in excess of £12.0m. Additionally, we have started on the path to migrate production to a much larger external sub-contract facility which will allow us to assemble much larger volumes as well as support the production of new high-volume sensors in the future, targeting smaller equipment in both industrial and automotive markets.

Management has purposely kept marketing lean during the period, as the Company continues to organically generate a very healthy level of enquiries as knowledge and reputation of our systems has spread alongside pre-existing opportunities under discussion and/or testing. However, we have continued to expand our sales resources and activities, resulting in the increased pipeline of over £14.0m. The value of individual opportunities within this pipeline range from £20k up to £3.0m, and include:

·      a leading, large ship engine manufacturer with approximately 15,000 engines in the field, each with at least 10 cylinders, and each cylinder requiring a sensor;

·      a significant global oil major who is promoting our sensors to their customers and has provided an initial sales pipeline forecast of £8.0m across 15 projects, over the next 2 years; and

·      a global logistics company with a fleet of critical conveyor gearboxes with a potential initial requirement valued at nearly £3.0m.

In addition to these original equipment manufacturers and end user opportunities, Tan Delta has an active value added reseller program, adding 17 new distributors and resellers during H1-24, bringing the total to 208. This network of distributors and resellers are promoting and selling our products to smaller local businesses as well as giving us a global installation capability.

The nature of the large commercial and industrial markets are that they are cautious adopters of new technologies and thus sales cycles are extended and at this early market maturity stage, difficult to accurately forecast. However, many of our opportunities have been in progress for some months and in some cases well over a year, and are now at or nearing their conclusion. Accordingly, whilst precise timings remain challenging we expect to see a trend of growing conversion of these opportunities into revenues as well as growth in the prospect pipeline itself. This is all supported by our increased production capacity, sales and customer support resources.

Chris Greenwood, CEO of Tan Delta said: "We have experienced a considerable increase in enquiries and the size and quality of our new prospects pipeline during the period. This is indicative of the global trend to actively monitor and manage commercial and industrial equipment to reduce cost. The advent of AI also means that with the right data the possibilities for these benefits are even greater. Given the capabilities of our core oil analysis technologies, our blue-chip customer references, and quality of our current pipeline of prospects, we look forward with confidence to the remainder of this financial year and the years ahead."

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Notes to editors:

Tan Delta Systems PLC provides equipment monitoring technologies and solutions that use real time oil analysis to enable material reductions in maintenance costs, improve reliability and reduce carbon footprint.