REG - Touchstar PLC - Final Results
26/04/2022 07:00
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RNS Number : 2640J Touchstar PLC 26 April 2022
Touchstar plc
Preliminary results for the year ended 31 December 2021
The Board of Touchstar plc ((AIM:TST) 'Touchstar', the 'Company' or 'the
Group'), suppliers of mobile data computing solutions and managed services to
a variety of industrial sectors, is pleased to announce its results for the
year ended 31 December 2021.
Key financials
2021 2020 % increase
Revenue £6,104,000 £5,886,000 up 3.7%
EBITDA £1,072,000 £854,000 up 25.5%
Post tax profit £341,000 £87,000 up 292.0%
Net cash £2,380,000 £1,771,000 up 34.4%
Earnings per share 4.02p 1.03p up 290.3%
Recurring revenue £2,322,000 £2,037,000 up 14.4%
Gross margin 59.5% 52.0% up 14.0%
Financial highlights
· A strong set of results
· Revenue growth of 3.7% to £6,104,000 (2020: £5,886,000)
· EBITDA increased 25.5% to £1,072,000 (2020: £854,000)
· Profit after tax grew by 292.0% to £341,000 (2020: £87,000)
· Cash generation strong, boosting net cash to ££2,380,000 at
year end, a 34.4% improvement (2020: £1,771,000)
· Earnings per share rose by 290.3% to 4.02p (2020: 1.03p)
· Recurring revenue increased 14.4% - three times the rate of
growth of total revenue to £2,322,000 (2020: £2,037,000)
· Recurring revenues now represent 38.0% of total revenues
· Gross margins expanded 14.0% to 59.5% (2020: 52.0%)
Commenting today, Ian Martin, Chairman of Touchstar, said:
"Touchstar has already become a much more resilient focussed, coherent,
high-quality business with true growth potential. The Board's strategy is
clear and remains consistent. We must capitalise on the forward momentum
gained, using internally generated cash to support our rate of organic growth,
innovate our products, enhance our solutions, invest in our people, increase
returns to shareholders and become a better business."
This announcement contains inside information for the purposes of Article 7 of
the UK version of Regulation (EU) No 596/2014 which is part of UK law by
virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR"). Upon
the publication of this announcement via a Regulatory Information Service,
this inside information is now considered to be in the public domain.
For further information, please contact:
Touchstar plc Ian Martin 0161 8745050
Mark Hardy 0161 874 5050
WH Ireland - Mike Coe/ Sarah Mather 0207 220 1666
Nominated Adviser and broker
Information on Touchstar plc can be seen at: www.touchstarplc.com
(http://www.touchstarplc.com)
CHAIRMANS STATEMENT
Introduction
I am pleased to report that Touchstar has delivered a strong set of results,
above market expectations, for the year ended 31 December 2021 ("FY2021"),
against what has been a challenging backdrop in the world's economy. Profit
after tax is up 290% to £341,000 (2020: £87,000) and there has been EBITDA
growth of £218,000 to £1,072,000 (2020: £854,000).
The Group has displayed its resilience in the face of the global COVID-19
pandemic and has seen a positive change in business strength with the new and
more profitable revenue streams coming to the fore.
The Company reports a strong year-end cash balance, net of the Coronavirus
Business Interruption Loan, of £2,380,000 and a year-end order book of
£646,000 which means the Group is well placed to build on last year's
performance, we look forward to delivering further strategic progress.
Financial review
Revenue for FY2021 increased 3.7% to £6,104,000 (2020: £5,886,000). Very
pleasingly recurring revenue increased 14% to £2,322,000 (2020: £2,037,000)
and represented 37.4% of total revenue (2020: 34.6%). The development of
recurring revenue is a key to our strategy and future success. As of 8 April
2022, run rate recurring revenue had increased further to £2,550,000.
It was also pleasing to see the Group experience a healthy recovery in the
areas that had been most impacted by the pandemic in 2020. Nevertheless
unsurprisingly, the overall rate of growth was held back in the early part of
the year by the suspension of awards of large projects in the petrochemical
distribution sector due to the re-emergence of the pandemic. Major projects in
this area tend to have lead times of 9-12 months, and it was only in the
second half of 2021 that new major projects began being confirmed for 2022 and
beyond, thus revenue in this sector reduced in 2021.
The order book at year end 2021 stood 36.0% higher at £646,000 compared to
the prior year end level of £475,000.
Gross margins increased in 2021 to 59.5% (2020: 52.0%) driven by a higher
level of software sales and operational efficiency.
Overhead costs increased by 8.9% as expected in 2021 to £3.5 million (2020:
£3.1 million). This comparison excludes the benefits of the Coronavirus Job
Retention Scheme which totalled £44,000 in 2021 (2020: £146,000).
Total spend on research and development during the year amounted to £935,000
(2020: £760,000), of which £460,000 (2020: £429,000) has been capitalised,
as we invested in additional software modules in the proof of delivery product
set.
The positive effects of both higher revenue and improved margins had a
dramatic effect upon profitability with earnings before interest tax and
amortisation and depreciation (EBITDA) increasing to £1,072,000 (2020:
£854,000), operating profit before share based payments increasing to
£233,000 (2020: £39,000) and profit before tax increasing to £207,000
(2020: £23,000).
Due to our R&D expenditure we again benefitted from a tax credit being
£134,000 (2020: £64,000) such that our profit for the year increased 292% to
£341,000 from £87,000. This translated into a similar rise in earnings per
share to 4.02p (2020: 1.03p).
As of 31 December 2021, we remained debt free and our cash, net of overdraft
and the £135,000 Coronavirus Business Interruption Loan, was a very healthy
£2,380,000 a rise of approximately £609,000 from the prior year position of
£1,771,000. This nevertheless understates the strength of the underlying cash
generation from the business; in 2021 cash was applied to the normalisation of
trade and other payables as we unwound deferred amounts due under the
Government's support packages to business.
Operational review
Whilst the Group and general business environment continued to work within
COVID-19 policies and restrictions, Touchstar saw a positive change in
business strength with the new and more profitable revenue streams coming to
the fore; including, increased software licence charges and software
development for bespoke work as well as charging professional fees for
services delivered. As a result, the business experienced a growth in
revenue and profitability. Those areas of the business that had experienced
the more dramatic slowdowns in 2020, saw strong and positive recovery during
2021, namely, product sales more associated with capital expenditure in
Logistics and the ability to commence with onsite work in the Access Control
marketplace, which otherwise had been restricted in 2020.
During the year, the Group continued to enhance the customer driven
functionality of its software solutions. Our in-house developed software,
utilising modern cloud-based services, has played a major part in customer
gains and retention. In addition, the Group's specialist and robust
hardware, where margins continue to be healthy, gives us a real competitive
advantage in the proof of delivery market. The TS3200 Android rugged tablet
has and is playing an important part in the continued success and adoption of
our solutions.
Retention of customers, as well as securing new clients, is a key focus for
the Group. The business is currently benefiting from many of its existing
clients going through the process of an upgrade cycle with us - a testament to
our ongoing service and support. This provides the opportunity to increase the
recurring revenue as they adopt the latest licence-based solution. We now
have around 8 major clients operating on the new platform and another 8
existing clients in the throes of either pilot or roll out phase over the
coming 12 to18 months.
During 2021 there were challenges in the timely supply of product and
components within the supply chain, but the Group successfully navigated its
way through. We expect these challenges will continue in 2022 and therefore we
will require the same continued focus to mitigate and reduce any impacts that
may arise.
Alongside the software developments, we continue to enhance our product sets
within the hardware element of our solution. All devices now designed and
supplied utilise the Android operating system - the defacto choice
worldwide.
The dynamics of the team within the business evolve and change too. The
Group now has a central support team for all products, operating out of our
Manchester office and we continue to build on our UK in-house software
development and test team. These investments are now necessary given the
solution set we now own and supply to the marketplace.
Strategy
The objective remains to execute our strategy effectively; delivering organic
growth, margin improvement, building Software as a Service ("SaaS") revenues
at an even faster rate, and achieving higher levels of profitability.
The Board believes Touchstar has the medium-term potential of sustaining
annual double digit top line growth from our existing businesses driven by:
a. Existing customers upgrading to mobile cloud-based solutions
b. Capture of new customers
c. Introduction of enhanced products and solutions
d. Introduction of more professional services
In addition, we expect the growth rate of recurring revenue to continue to
outpace total revenue growth, as SaaS revenues build. Professional services
and licences are predominantly annual charges and thereby we envisage
recurring revenue will continue to grow and strengthen within the Group. The
target is for recurring revenue to account for 40% of total revenue by the end
of 2022.
We expect the revenue stream will continue to strengthen in high margin areas
such as licences, professional services, and software development - further
enhancing the earnings and building the Group's strength in the medium and
long term
Current trading and prospects
We intend to build upon the considerable progress made last year. Over the
last two years the consistent message has been that in 2022 the underlying
growth rate in all the Group's businesses should harmonise and return to
normalised trading patterns.
2022 has started well, with a healthy opening order book followed by a strong
first quarter of trading. Short-term prospects are being tempered somewhat by
a level of inactivity which we believe is a momentary reaction to the present
economic and global uncertainty, with some orders being held up, not lost. So
far, we have been able to balance the pressures on costs by increasing prices
in a targeted and appropriate manner, this will need to be constantly assessed
and reviewed during the year.
Realistically the combination of the geo-political instability, inflationary
pressures and higher interest rates will inevitability result in hesitancy in
corporate decision making. The assumption made is that this year will see some
subdued levels of macro-economic growth and investment. Currently there has
been no material change to the business from the distressing and sad situation
in Ukraine - our thoughts and hopes are with the innocent people caught up in
that conflict.
Whilst we have tempered our enthusiasm in the short-term, the Board believes
that the steps we have taken will see growth in revenue and EBITDA continue in
2022, driving further progress in our financial performance.
Distributable reserves
The directors would like to have the ability to consider returning value to
shareholders either via share buybacks or the payment of dividends. However,
to be able to do this company law requires the Company to have positive
distributable reserves. At present the Company does not have positive
distributable reserves due the deficit on its retained earning reserve which
as at 31 December 2021 stood at £2,236,000. The Directors are consulting with
the Company's advisers over how best to eliminate this deficit which they
believe can be through a combination of dividend payments from the Company's
underlying subsidiaries and a capital reduction.
Concluding thoughts
The Board's strategy is clear and remains consistent. We must capitalise on
the forward momentum gained, using internally generated cash to support our
rate of organic growth, innovate our products, enhance our solutions, invest
in our people, increase returns to shareholders and become a better business.
The Company has made good progress over the last two years despite the impacts
of COVID-19. Touchstar has already become a much more resilient focussed,
coherent, high-quality business with true growth potential. This has only
happened through the dedication, hard work and talent of the people within the
Group. Thank you to all - it is greatly appreciated.
The Board is committed to creating and delivering value that reflects the
prospects and embedded value within the business. With the Company's cash
reserves, a strong balance sheet, growing revenues and especially recurring
revenues that will allow us to increasingly position the Company as a software
business, the Board is confident of the Company's prospects and of increasing
shareholder value.
I Martin
Executive Chairman
25 April 2022
CEO STRATEGIC REVIEW
Profitability
Whilst the business and general environment continued to work within Covid
policies and restrictions, which impacted the Group performance, 2021 has seen
a strategic change in business strength with the new and more profitable
revenue streams coming to the fore. Despite the reduction in face-to-face
meetings, the business experienced a modest growth in sales turnover on the
previous year of around 4%. Cash generation remained healthy with the Group
year-end cash position in excess of £2.5 million, and the business made
£341,000 profit after tax, close to 300% increase over 2020 profit of
£87,000.
Total recurring revenue
During 2021, the decision to supply and support complete solutions has further
strengthened the Group. Recurring revenue is now a valuable asset within the
Groups business. 2020 saw total recurring revenue increase by 6% on 2019 and
this trend continues. In 2021 recurring revenue increased 14% on 2020.
This change in strategy is making a positive impact into the performance and
underlying value of the business. In 2021, the Groups recurring revenue
equated to 38% of turnover and the Board envisage this percentage will
continue increasing.
Group recurring revenue
2018 2019 2020 2021
Group recurring revenue by year £1,840,000 £1,918,000 £2,037,000 £2,322,000
% Increase year on year up 4.2% up 6.2% up 14.4%
As of 8 April 2022, run rate recurring revenue had increased further to
£2,550,000.
The table below demonstrates the consistent strategic progression of building
the business's recurring revenue over the previous years:
Recurring revenue as a percentage of total Group revenue
2018 2019 2020 2021
Group revenue other 70% 71% 65% 62%
Group recurring revenue 30% 29% 35% 38%
Software Licence Recurring Revenue
Whilst the Group enjoyed an increase of 14% in total recurring revenue over
previous years, the predominant impact in growth of this type of profitable
revenue has come from software licence, a key strategic goal. Recurring
revenue in software licences grew a marked 18% over 2020 performance. This
key area of growth will continue to increase as the change in our business
strategy takes effect. If growth in total revenue continues as expected, we
anticipate software licence revenue to exceed hardware recurring revenue in
2022 and grow further still in 2023 and beyond.
Group recurring revenue
2018 2019 2020 2021
Software licences £659,000 £767,000 £863,000 £1,040,000
Increase year on year up 16.4% up 12.5% up 20.5%
Hardware maintenance £1,181,000 £1,151,000 £1,174,000 £1,282,000
Movement year on year down 2.5% up 2.0% up 9.2%
As we have now become a more focussed software and solution orientated
business, we have strengthened the technical and professional services team to
provide the best support for our product delivery. Whilst we continue to
grow sales in the solutions area, we still recognise the continuing value that
the existing legacy product sets bring to the business, albeit we are managing
down our business reliance on these.
All the Touchstar software products we now offer, are in house owned (IPR)
which eliminates our reliance on third party suppliers and provides maximum
flexibility in growing the sales and profit line of the Group. This move has
allowed us to increase the sales of software development as customers require
tweaks and modifications to our standard products to suit their operation.
The table below illustrates the past 4 years of software development sales,
demonstrating an increase of over 200% in this time.
Customer requested software developments
2018 2019 2020 2021
Customer requested software developments by year £83,800 £128,600 £129,200 £257,900
Increase year on year up 53.5% up 0.5% up 99.6%
We continue to secure large contracts with blue chip companies across the UK
and Europe. The strategy to supply a SaaS (Software as a Service) model to
the industry has become quite widely accepted. This now provides consistent
recurring revenue greater than in previous years. Combining increases of
recurring revenue and the above software development charges has now led to
improved gross margin, of 59% of the group turnover in 2021 (52% in 2020). As
of 8 April 2022, software development and support fees booked and to be
invoiced in 2022 stood at £184,000.
The Group operates under the Touchstar brand providing consistent brand
awareness of the operating companies which has been successful in promoting a
cohesive and singular business and all can be accessed under one web site:
www.touchstar.co.uk (http://www.touchstar.co.uk) .
Consolidated income statement for the year ended 31 December 2021
2021 2020
£'000 £'000
Revenue 6,104 5,886
Cost of sales (2,472) (2,827)
Gross profit 3,632 3,059
Distribution costs (49) (41)
Administrative expenses (3,400) (3,125)
Other operating income 44 146
Operating profit before share-based payment provision 233 39
Share-based payment provision included in administrative expenses (6) -
Operating profit 227 39
Finance costs (20) (16)
Profit before income tax 207 23
Income tax credit 134 64
Profit for the year attributable to the owners of the parent 341 87
Earnings per ordinary share (pence) attributable to owners of the parent
during the year:
2021 2020
Basic 4.02p 1.03p
There is no other comprehensive income or expense in the current year or prior
year and consequently no statement of other comprehensive income or expense
has been presented.
All activity in 2021 relating to continuing operations.
The Company has elected to take the exemption under section 408 of the
Companies Act 2006 not to present the parent Company income statement. The
profit for the Company is detailed in the Statement of financial position and
the Company statement of changes in shareholders' equity.
Consolidated statement of changes in equity for the year ended 31 December 2021
Share capital Share premium account Share based payment Reserves Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000
At 1 January 2020 424 1,119 - 348 1,891
Profit for the year - - - 87 87
At 31 December 2020 424 1,119 - 435 1,978
Profit for the year - - 6 341 347
At 31 December 2021 424 1,119 6 776 2,325
Company statement of changes in equity for the year ended 31 December 2021
Share capital Share premium account Share based payment reserve Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000
At 1 January 2020 424 1,119 - (2,705) (1,162)
Profit for the year - - - 3 3
At 31 December 2020 424 1,119 - (2,702) (1,159)
Profit for the year - - 6 6 12
At 31 December 2021 424 1,119 6 (2,696) (1,147)
Consolidated and Company statements of financial position as at 31 December 2021
Group Company
2021 2020 2021 2020
£'000 £'000 £'000 £'000
Non-current assets
Intangible assets 1,198 1,350 - -
Investments - - 5 -
Property, plant and equipment EQUIPMENTEQUIPMENTEQUIPMENT 94 121 - -
EQUIPMENTequipment
Right-of-use assets 399 479 - -
Deferred tax assets 81 63 3 3
1,772 2,013 8 3
Current assets
Inventories 865 714 - -
Trade and other receivables 1,071 1,010 462 474
Corporation tax receivable 166 110 - -
Cash and cash equivalents 3,903 3,177 - -
6,005 5,011 462 474
Total assets 7,777 7,024 470 477
Current liabilities
Trade and other payables 1,333 1,246 94 230
Contract liabilities 1,762 1,485 - -
Borrowings 1,418 1,271 1,418 1,271
Lease liabilities 169 163 - -
4,682 4,165 1,512 1,501
Non-current liabilities
Deferred tax liabilities 251 215 - -
Contract liabilities 172 177 - -
Borrowings 105 135 105 135
Lease liabilities 242 354 - -
770 881 105 135
Total liabilities 5,452 5,046 1,617 1,636
Consolidated and Company statement of financial position as at 31 December 2021 (continued)
Group Company
2021 2020 2021 2020
£'000 £'000 £'000 £'000
Capital and reserves attributable
to owners of the parent
Retained earnings at beginning of year 435 348 (2,702) (2,705)
Profit/(loss) for the year 341 87 6 3
Retained earnings at end of year 776 435 (2,696) (2,702)
Share capital 424 424 424 424
Share based payment reserve 6 - 6 -
Share premium 1,119 1,119 1,119 1,119
Total equity 2,325 1,978 (1,147) (1,159)
Total equity and liabilities 7,777 7,024 470 477
Consolidated and Company cash flow statement for the year ended 31 December 2021
Group Company
2021 2020 2021 2020
£'000 £'000 £'000 £'000
Cash flows from operating activities
Operating Profit 226 39 1 3
Depreciation 233 227 - -
Amortisation 612 588 - -
Share-based payment provision 6 - 6 -
Movement in:
Inventories (151) 177 - -
Trade and other receivables (60) 307 (80) 715
Trade and other payables and contract liabilities 358 (86) (36) 172
Cash generated from/(used in) operations 1,224 1,252 (109) 890
Interest paid (20) (16) (3) (3)
Corporation tax received 97 326 - -
Net cash generated from operating activities 1,301 1,562 (112) 887
Cash flows from investing activities
Addition of intangible assets (460) (439) - -
Investment in subsidiaries - - (5) -
Purchase of property, plant and equipment (50) (20) - -
Net cash used in investing activities (510) (459) (5) -
Cash flows from financing activities
Proceeds from issue of business loan (15) 150 (15) 150
Principal elements of lease payments (182) (182) - -
Net cash generated from financing activities (197) (32) (15) 150
Net increase/(decrease) in cash and cash equivalents 594 1,071 (132) 1,037
Cash and cash equivalents at start of the year 1,921 850 (1,256) (2,293)
Cash and cash equivalents at end of the year 2,515 1,921 (1,388) (1,256)
1 General information
Touchstar plc (the 'Company') and its subsidiaries (together 'the Group')
design and build rugged mobile computing devices and develop software
solutions used in a wide variety of field-based delivery, logistics and
service applications. The Company is a public company limited by share capital
incorporated and domiciled in the United Kingdom. The Company has its listing
on the Alternative Investment Market. The address of its registered office is
1 George Square, Glasgow, G2 1AL.
2 Basis of preparation
The final results for the year ended 31 December 2021 have been prepared in
accordance with the accounting policies set out in the annual report and the
accounts for the year ended 31 December 2020.
The Group Financial Statements have been prepared in accordance with the
International Financial Reporting Standards ('IFRS') as adopted by the
European Union, IFRS IC interpretations and the Companies Act 2006 applicable
to companies reporting under IFRSs and the AIM Rules for Companies. The Group
Financial Statements have been prepared under the historical cost convention.
While the financial information included in this final announcement has been
computed in accordance with IFRS, this announcement does not itself contain
sufficient information to comply with IFRS. The accounting policies used in
preparation of this final announcement have remained unchanged from those set
out in the Group's 2020 statutory financial statements other than those
described below. They are also consistent with those in the Group's
statutory financial statements for the year ended 31 December 2021 which have
yet to be published. The final results for the year ended 31 December 2021
were approved by the Board of Directors on 25 April 2022.
The financial information set out in this final announcement does not
constitute the Group's statutory financial statements for the year ended 31
December 2021 but is derived from those financial statements which were
approved by the Board of Directors on 25 April 2022. The Auditors have
reported on the Group's statutory financial statements and their report was
unqualified and (ii) did not contain a statement under section 498(2) or
498(3) Companies Act 2006. The statutory financial statements for the year
ended 31 December 2021 have not yet been delivered to the Registrar of
Companies and will be delivered following the Company's Annual General
Meeting.
The comparative figures are derived from the Group's statutory financial
statements for the year ended 31 December 2020 which carried an unqualified
audit report, did not contain a statement under section 498(2) or 498(3)
Companies Act 2006 and have been filed with the Registrar of Companies.
Going Concern
These financial statements have been prepared on a going concern basis, which
assumes that the Group will be able to meet its liabilities when they fall
due. As of 31 December 2021, the Group held cash of £2,515,000 (after
considering overdraft balances as presented in note 21), with unencumbered net
cash of £2,380,000 after taking into account the £135,000 Coronavirus
Business Interruption Loan. The Group also had an undrawn £200,000 on demand
overdraft facility as of 31 December 2021 (also £nil in April 2022).
The Touchstar management continues to demonstrate its ability to proactively
respond to both internal and external challenges it has faced, non-more so
than those encountered over the past two years.
The directors remain confident in the business, the skillset employed in its
dedicated staff, solid product set and loyal customer base.
The C-19 pandemic continued to impact business during 2021, nonetheless, Group
sales still increased on 2020 by a modest £218,000, margins grew from 52% in
2020 to 59.5% in 2021 driven by richer margin sales and operational
efficiencies, along with tight control of costs, resulted in a profit after
tax of £341,000.
The Group continues to benefit from a supportive bank who have provided the
borrowing facility since 2005.
Over the past eighteen months the Group has reduced its reliance on the
facility provided by the bank. In assessing the Company's ability to continue
as a going concern, the Board has reviewed the Group's cash flow and profit
forecasts removing completely reliance on any facilities. The impact of
potential risks and related sensitivities to the forecasts were considered in
assessing the likelihood of additional facilities being required in the
future.
The directors have at the time of approving the financial statements, a
reasonable expectation that the
company has adequate resources to continue in operational existence for the
foreseeable future. Thus
they continue to adopt the going concern basis of accounting in preparing the
financial statements.
3 Critical accounting estimates and judgements
The Group and Company makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom equal the
related actual results. The estimates and assumptions 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.
(a) Development expenditure
The Group recognises costs incurred on development projects as an intangible
asset which satisfies the requirements of IAS 38. The calculation of the costs
incurred includes the percentage of time spent by certain employees on the
development project. The decision whether to capitalise and how to determine
the period of economic benefit of a development project requires an assessment
of the commercial viability of the project and the prospect of selling the
project to new or existing customers.
(b) Impairment of intangibles
Judgement is required in the impairment of assets, notably intangible software
development costs. Recoverable amounts are based on a calculation of expected
future cash flows, which require assumptions and estimates of future
performance to be made. Cash flows are discounted to their present value using
pre-tax discount rates based on the Directors market assessment of risks
specific to the asset.
(c) Stock provisions
Judgement is required in relation to the appropriate provision to be made for
the write down of slow moving or obsolete inventory. Such provisions are made
based on the assessment of the Group's prospective sale of inventories and
their net realisable value, which are subject to estimation uncertainty.
4 Analysis of Revenue
2021 2020
£'000 £'000
Recognised at a point in time 3,782 3,788
Recognised over time (recurring revenue) 2,322 2,098
6,104 5,886
5 Share-based employee remuneration
The Touchstar plc EMI Share Option Plan (Plan) was approved by the
shareholders at the Annual 2021 AGM on 23 June 2021. It is a share-based
payment scheme for employee remuneration which will be settled in equity.
The Plan is part of the remuneration package for Group employees as selected
by the Group's Remuneration Committee. Options under this Plan will vest if
certain performance conditions, as defined in the Plan are met.
Participants in this Plan must be employed until the end of the agreed vesting
period unless deemed as 'good employees' by the Group's Remuneration Committee
on leaving. Upon vesting, each option allows the holder to purchase each
allocated share at the market price determined at the grant date.
The number of options granted during the year and outstanding at 31 December
2021 was 211,000 (2020: n/a). These shares had not vested as at 31 December
2021.
The assessed fair value at grant date of options granted during the year ended
31 December 2021 was £0.35 per option (2020: £n/a). The fair value at grant
date is independently determined using the Black-Scholes model that takes into
account the exercise price, the term of the option, the impact of dilution
(where material), the share price at grant date and expected price volatility
of the underlying share, the risk-free interest rate for the term of the
option, and the annualised volatility of Touchstar plc's shares.
The model inputs for options granted during the year ended 31 December 2021
included:
Grant date 18 Nov 2021
Vesting period ends Term A 30 Jun 2023
Term B 30 Jun 2024
Share price at date of grant £0.85
Volatility 50%
Risk-free investment rate 1%
Fair value per option at grant date £0.41
Exercise price at date of grant £0.85
Exercise period ends Term A 30 Jun 2023/17 Nov 2031
30 Jun
Term B 30 Jun 2024/17 Nov 2031
Weighted average remaining contractual life 6.06 years
The underlying expected price volatility was determined by reference to the
historical data of Touchstar plc shares over the past 12 months. No special
features inherent to the options granted were incorporated into measurements
of fair value.
In total, £6,000 (2020: £n/a) of employee remuneration expense (all of which
related to equity-settled share-based payment transactions) has been included
in the income statement and credited to the Share-based payment reserve.
6.1 Income tax credit
2021 2020
£'000 £'000
Corporation tax
Current tax (147) (92)
Adjustments in respect of prior years (5) -
Deferred tax 18 28
Total tax credit (134) (64)
Corporation tax is calculated at 19% (2020: 19%) of the estimated assessable
profit for the year. This is the weighted average tax rate applicable for
the year.
1
6.2 Factors affecting the tax credit for the year
The tax credit for the year is same as (2020: same as) the standard rate of
corporation tax in the UK of 19% (2020: 19%). The differences are explained
below:
2021 2020
£'000 £'000
Profit before income tax 207 23
Multiplied by the standard rate of corporation tax in the UK of 19% (2020: 39 4
19%)
Effects of:
Items not deductible for tax purposes 2 1
Enhanced research and development deduction (213) (167)
Adjustments in respect of prior years (5) -
Losses surrendered through R&D tax credit 46 29
Capital allowances claimed in year less than/(in excess of) depreciation
20 28
Previously unrecognised tax losses used to reduce current tax expense (71) -
Adjustment to deferred tax arising from changes in tax rate 48 41
Total tax credit for the year (134) (64)
Factors affecting the future tax charge
Changes to the UK corporation tax rates were substantively enacted as part of
Finance Bill 2021 (on 2 February 2022). This included the maintaining of the
current corporation tax rate of 19%.
The budget also announced an increase in rate from 19% to 25% from April 2023.
Therefore, deferred taxes at the balance sheet date have been measured at the
enacted tax rate of 25%.
7 Earnings/(losses) per share
2021 2020
Basic 4.02p 1.03p
Diluted N/A N/A
Basic earnings per share is calculated by dividing the earnings attributable
to ordinary shareholders by the weighted average number of ordinary shares in
issue during the year. The Group issued 211,000 options with an exercise price
of 85p during the year. Given the exercise price of these options, they are
considered anti-dilutive and therefore no diluted EPS is presented.
Reconciliations of the earnings and weighted average number of shares used in
the calculation are set out below:
2021 2020
Earnings Weighted average number of shares (in thousands) Earnings Weighted average number of shares (in thousands)
£'000 £'000
Basic EPS
Profit attributable to owners of the parent 341 8,475 87 8,475
Adjusted EPS
Earnings attributable to owners of the parent before share-based payment 347 8,475 87 8,475
provision
8 Intangible assets
Group
Goodwill Development expenditure Total
£'000 £'000 £'000
Cost
At 1 January 2020 9,904 2,862 12,766
Additions - 439 439
Disposal (1,313) - (1,313)
At 31 December 2020 8,591 3,301 11,892
Additions - 460 460
Disposal - (678) (678)
At 31 December 2021 8,591 3,083 11,674
Accumulated amortisation
At 1 January 2020 9,904 1,363 11,267
Amortisation charge - 588 588
Disposal (1,313) - (1,313)
At 31 December 2020 8,591 1,951 10,542
Amortisation charge - 612 612
Disposal - (678) (678)
At 31 December 2021 8,591 1,885 10,476
Net book value
At 31 December 2021 - 1,198 1,198
At 1 January 2020 - 1,499 1,499
At 31 December 2020 - 1,350 1,350
Disposal of goodwill relates to the dissolution of the three dormant
subsidiary undertakings during 2020.
Development expenditure
The calculation of the costs incurred includes third party developers along
with the percentage of time spent by certain employees on hardware and
software development for deployment in business operations. The decision
whether to capitalise and how to determine the period of economic benefit of a
development project requires an assessment of the commercial viability of the
project and the prospect of selling the project to new or existing customers.
Management determined budgeted sales growth based on historic performance and
its expectations of market development via each product set's underlying
pipeline.
A review of each of the product sets did not result in any impairment.
Development expenditure has been capitalised on an ongoing basis and therefore
has a remaining useful economic life ranging from 0 to 5 years.
9 Property, plant and equipment
Plant and machinery Fixtures, fittings, tools and equipment Total £'000
£'000 £'000
Cost
At 1 January 2020 358 345 703
Additions 12 8 20
Disposals (55) (5) (60)
At 31 December 2020 315 348 663
Additions 37 13 50
Disposals (87) (49) (136)
At 31 December 2021 265 312 577
Accumulated depreciation
At 1 January 2020 268 260 528
Charge for the year 34 40 74
Disposals (48) (12) (60)
At 31 December 2020 254 288 542
Charge for the year 36 41 77
Disposals (87) (49) (136)
At 31 December 2021 203 280 483
Net book value
At 31 December 2021 62 32 94
At 1 January 2020 61 61 121
At 31 December 2020 90 85 175
10 IFRS 16 Right of use assets
Premises Motor vehicles Total £'000
£'000 £'000
Cost
At 1 January 2020 579 212 791
Additions - 121 121
Disposal - (122) (122)
At 31 December 2020 579 211 790
Additions - 76 76
Disposal - - -
At 31 December 2021 579 287 866
Accumulated depreciation
At 1 January 2020 141 128 269
Charge for the year 82 71 153
Disposal - (111) (111)
At 31 December 2020 223 88 311
Charge for the year 82 74 156
Disposal - - -
At 31 December 2021 305 162 467
Net book value
At 31 December 2021 274 125 399
At 1 January 2020 438 84 522
At 31 December 2020 356 123 479
11 Cash and cash equivalents
Group Company
2021 2020 2021 2020
£'000 £'000 £'000 £'000
Cash at bank and in hand 3,903 3,177 - -
Less: bank overdraft (included within borrowings note 12)
(1,388) (1,256) (1,388) (1,256)
2,515 1,921 (1,388) (1,256)
The above balances are not offset in the Consolidated Statement of Financial
Position and are included for illustrative purposes only.
12 Borrowings
Group Company
2021 2020 2021 2020
£'000 £'000 £'000 £'000
Current borrowings:
Bank overdraft 1,388 1,256 1,388 1,256
Other loans 30 15 30 15
1,418 1,271 1,418 1,271
Group Company
2021 2020 2021 2020
£'000 £'000 £'000 £'000
Non-current borrowings:
Bank overdraft - - - -
Other loans 105 135 105 135
105 135 105 135
The carrying amounts of borrowings approximate to their fair value due to
their short-term maturity, meaning that the impact of discounting is not
significant. The carrying amounts of the Group's borrowings are denominated
solely in sterling.
The Group bank overdraft facility is secured by a bond and floating charge
over the entire assets of the Group.
At 31 December 2021, the Group had total committed undrawn facilities of
£200,000 (2020: £350,000).
The Group now operates within a £200,000 net overdraft facility which takes
into account both the gross cash position of each Group entity netted off
against any borrowings. As at the 31 December 2021, this represents the net
cash balance of £2,515,000 (2020: £1,921,000) in Note 11.
The Company and its subsidiaries have given a guarantee in relation to the
overdraft facilities extended to The Group.
Other loans relate to the Coronavirus Business Interruption Loan repayable
monthly over six years; first payment commenced on the 12-month anniversary of
drawdown, July 2021.
The loan is guaranteed by the UK Government under the Coronavirus Business
Interruption Loan Scheme with interest payable monthly on commencement of loan
repayment. The rate of interest is 4.19% per annum above the Bank of England
floating rate.
13 Leases
The note provides information for leases where the group is a lessee.
i) Amounts recognised in the balance sheet
The balance sheet shows the following amounts relating to leases:
2021 2020
£'000 £'000
Right-of-use assets
Buildings 274 356
Vehicles 125 123
399 479
2021 2020
£'000 £'000
Lease liabilities
Current 169 163
Non-current 242 354
411 517
Under IFRS 16 the assets are now presented in property, plant and equipment
and the liabilities as part of the group's borrowings.
Contractual undiscounted cash flows are due as follows:
2021 2020
£'000 £'000
Lease liabilities (undiscounted)
Not later than one year 171 171
Between one year and five years 240 267
412 437
There is not considered to be any significant liquidity risk by the Group in
respect of leases.
ii) Amounts recognised in the statement of profit or
loss
2021 2020
£'000 £'000
Depreciation charge of right-of-use assets
Buildings 82 82
Vehicles 74 71
156 153
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