REG - Touchstar PLC - Final Results
17/04/2024 07:01
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RNS Number : 8667K Touchstar PLC 17 April 2024
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
Touchstar plc
Results for the year ended 31 December 2023
Strong operational delivery in 2023 has resulted in another period of improved
financial performance
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
twelve months ended 31 December 2023 ("FY23" and "Period").
Key financials
FY23 FY22 Change
Total revenue £7,224,000 £6,743,000 +7.1%
Recurring revenue £2,921,000 £2,687,000 +8.7%
Pre - tax profit £675,000 £422,000 +60.0%
Profit after tax £639,000 £558,000 +14.5%
Basic earnings per share 7.63p 6.58p +16.0%
Total dividend per share 2.5p 0.0p +2.5p
EBITDA £1,336,000 £1,334,000 +0.15%
FY23 financial highlights
· Total revenue up 7.1% driven by recurring revenue growth of 8.7%.
· Pre-tax profits increased by 60% as margins normalised.
· Profit after tax improved by 14.5% as the Group became tax
paying.
· Earnings per share, enhanced by the share buyback programme, rose
16% to 7.63p.
· Robust cash position maintained with year-end cash of £3.0m
(FY22: £3.4m) equivalent to 36.6p per share (FY22: 41.0p per share)
· Return of surplus cash to shareholders by way of dividend and
purchasing 275,000 Ordinary Shares via share buybacks.
· Final dividend of 1.5p per share recommended (FY22: nil),
bringing total dividends for the period to 2.5p per share for FY23 (FY22:
nil).
Outlook and strategic progress
· The Board's expectation for 2024 remains unchanged. 2024 has
started to plan and if it continues sets up another year of:
o growth in revenue;
o recurring revenue growth outpacing total revenue growth;
o margins at a healthy level;
o cash to be generated by the operations;
o investment in future growth prospects;
o preservation of a solid balance sheet; and
o progressive dividend to shareholders.
· The Board aim to build upon the foundations of another successful
year to create a meaningful overseas business. Overseas revenue accounted for
9.8% of total revenue in FY23 (FY22: 1.3%).
· Certified Cyber Essentials Plus has been achieved and we are
working towards ISO 27001.
· The breakthrough in artificial intelligence ("AI") means we are
fast approaching another time of transition. The Company is working to
position its future solutions to embrace this change and take advantage of
what AI presents in improving our solutions and our productivity.
· Cross selling product sets to existing customers across the
company.
Ian Martin, Chairman of Touchstar commented: "2023 has resulted in another
period of improved financial performance. To build on this progress we remain
committed to providing the best customer service we can to our customers,
investing into our products, services and platforms and continue to work to
gain operational efficiency, aligning our cost structure with our revenue
growth."
For further information, please contact:
Touchstar plc Ian Martin/ Mark Hardy 0161 874 5050
WH Ireland - Nominated adviser and broker Mike Coe/ Sarah Mather 0207 220 1666
Information on Touchstar plc can be seen at: www.touchstarplc.com
(http://www.touchstarplc.com/)
CHAIRMANS STATEMENT
The progress that Touchstar has made in the last few years ensures that the
business continues to evolve with a clear strategy to drive organic growth and
enhance our long-term market position. Strong operational delivery in 2023 has
resulted in another period of improved financial performance. To build on this
progress we remain committed to three things that run through the whole
business. First, we will maintain the best customer service we can to our
customers. Second, we will invest into our products, services and platforms to
keep Touchstar relevant into the future. Finally, we will continue to work to
gain operational efficiency, aligning our cost structure with our revenue
growth.
Capital Management - Dividend and Share Buybacks
The Board recommends a final ordinary dividend of 1.5p per share (FY22: nil).
Together with the interim dividend of 1.0p (FY22: nil) paid in December 2023,
this makes a total ordinary dividend for the year of 2.5p (FY22: nil). This
is covered just over three times by underlying basic earnings per share and
our aim is to increase the dividend in line with growth in earnings per share.
Subject to the approval of shareholders at the Annual General Meeting, the
final ordinary dividend of 1.5p per share will be paid on 19 July 2024 to
shareholders on the register on 21 June 2024. The ex-dividend date will be 20
June 2024.
The Company intends to continue purchasing its own shares. The Company has
again budgeted for up to £300,000 for share buybacks in 2024 although the
exact level will be dependent upon availability of shares and the price. The
maximum price payable must not exceed 105% of the average of the closing
middle market price per ordinary share for the previous five days.
The Board
As previously reported, I have informed the board of my wish to stand down
as a director and chairman of the Company during 2024. Progress has been made
to identify and recruit the right person to lead the next stage of development
of the Company and to ensure a seamless transition.
People
It is the people within the business that are central in the progress we
continue to make, and I would like to thank them not just for their
contribution this year but throughout my time as Chairman. It has been a
pleasure and a privilege.
Looking Ahead
2023 was not a straightforward year and in some ways that makes it even more
satisfying that we achieved the objectives we set ourselves. It gives us more
confidence that the plans we have put in place will deliver in the future. Our
strategy has clarity, we are in robust financial health, have good market
positioning providing an opportunity for long term growth.
Business review
The Group's operations remain focused on the logistics, transport distribution
and secure access control markets. 2023 saw healthy activity levels in the
business areas we operate in. This was largely due to customer adoption of the
latest technologies and a consolidated push into cross selling between
customers of all the products we supply. The fact that we offer a complete
package within our areas means we can provide cost effective solutions whilst
maintaining our margins.
We had some marked successes in our strategic plans. Sales outside of the UK
showed a marked improvement over 2022. Sales in this market achieved just
over £712,000, 9.8% of turnover (FY22: £89,000, 1.3% of turnover) and was
all associated with the Proof of Delivery solutions we supply. The sales
were a mix of new and existing customers. We have a number of export
opportunities in 2024 too.
2023 also saw the start of our planned expansion in the Access Control
world. The marketing and supplying of fire alarm systems, and increased
activity in promoting CCTV systems, helped to secure a large £250,000
installation of a CCTV system in the period at an existing client's
factory. We continue to build on accessing Government department
requirements and have recently signed up to a government backed portal that
provides access to tenders within the national and local government.
For several years, Touchstar has adopted AI in its effort to increase
capability and efficiency. Primarily utilised in the marketing department
for content creation and blogging, we are now seeing AI evolving with big
improvements in machine learning to provide a positive contribution to
speedier product development. Whilst AI is not fool proof and can still
produce challenges, it is envisaged productivity will be increased as it
upskills our developers. The Microsoft engine we are adopting will allow
us to maintain our IPR and operates within the cyber security of 27001
certification, as it utilises the Azure platform security policies. Post the
period end, Touchstar independently gained full Cyber Essentials plus
certification, something demanded by customers and imperative for a software
organisation.
Financial results
Touchstar delivered a solid set of results in 2023. It was a year in which the
business continued to make progress despite a benign economic background.
Further improvement was made in financial performance highlighting the
resilience of the business model our strategy has developed.
FY23 FY22 Variance
Revenue £7,224,000 £6,743,000 +7.1%
Operating profit £599,000 £438,000 +36.8%
Interest and finance costs Received £76,000 Cost (£16,000) +£92,000
Profit before tax £675,000 £422,000 +60%
Tax Charge (£36,000) Credit £136,000 (£172,000)
Profit after tax £639,000 £558,000 +14.5%
Basic earnings per share 7.63p 6.58p +16.0%
Dividend per share 2.5p nil +2.5p
Revenue increased 7.1% to £7,224,000 (FY22: £6,743,000). Growth was driven
by new customers gains and upgrading by the existing customer base. The larger
petrochemical distribution installations were predominately weighted in the
first half of 2023, a change from the prior year.
FY23 FY22 % Change
Recurring revenue £2,921,000 £2,687,000 +8.7%
Growth in recurring revenue, as expected, outpaced the overall rate of growth
in total sales. For 2023 recurring revenue represented 40.4% of total sales
(FY22: 39.8%). The business strategy is to continue to build the level of
recurring revenues in both absolute terms and in relation to total sales.
H1 23 H2 23 FY23 H1 22 H2 22 FY22 FY23 on FY22 Change
Gross margin 55.4 % 63.6% 59.3% 59.8% 63.3% 61.7% (240 basis points)
Gross margins regularised in the second half of 2023 as the distorting effects
of the low margin sale previously reported in H1 23, which flattered revenue
in H1 23 but reduced overall margin, worked through the financials. It is
pleasing to report that, as expected, gross margins returned to a trend of
underlying improvement, rising to 63.6% in H2 23 ( H2 22 : 63.3%).
FY23 FY22 % Change
Administrative expenses £3,637,000 £3,676,000 (1.1%)
A tight control was kept on overheads as the business realised productivity
improvement and managed higher revenues from a lower expense base.
Profitability accelerated in the second half of 2023 as margins regularised
and expenses were controlled, allowing revenue growth to flow to the bottom
line. Pre-tax profits rose by 60% to £675,000 (FY22: £422,000).
After a long period of receiving the benefits of tax credits, Touchstar became
a tax paying entity in 2023. A tax charge of £36,000 (FY22: tax credit
£136,000) resulted in a more modest rise in FY23 post-tax profits of 14.5% to
£639,000 (FY22: £558,000).
Earnings per share rose by 16.0% to 7.63p in FY23 (FY22: 6.58p) driven by
principally by improved profitability and further enhanced by the positive
effects of our share buyback programme. The Company bought back a total of
275,000 shares in 2023 (FY22: nil) at a total cost of £252,000 (average cost
per share of 91p). The total number of shares with voting rights was therefore
reduced to 8,200,277(FY22: 8,475,277)
EBITDA remained stable in 2023 at £1,336,000 (FY22: £1,334,000) as the
increase in operating profit of £161,000 was negated by the decrease in
depreciation and amortisation.
FY23 FY22 Change
Operating profit before interest and tax £599,000 £438,000 +£161,000
Amortisation £532,000 £677,000 (£145,000)
Depreciation - owned assets £46,000 £60,000 (£14,000)
Depreciation - leased assets £159,000 £159,000 nil
Spend on Research and Development (R&D) £972,000 £1,029,000 (£57,000)
R & D Capitalisation £583,000 £565,000 +£18,000
Amortisation and depreciation release in 2023 was £737,000, a much lower
level than the £896,000 in 2022 as historical high CAPEX spend in 2018 on
subcontracted services and in the ERP system has all been fully depreciated.
CAPEX spending on R & D is expected to increase again but not to return to
FY 18 levels.
FY23 FY22 Change
Cash net of overdraft £3,005,000 £3,476,000 (£471,000)
Cash per Share 36.6p 41.0p (4.4p)
Cash returned to shareholders £334,000 nil +£334,000
The balance sheet remains strong. Cash and cash per share at year end was
lower than the prior year due to three reasons. First, in 2023 the Company
spent £334,000(FY22: nil) to enhance shareholder value through share
buybacks costing £252,000 and a dividend paid costing £82,000. Secondly, a
delayed customer go-live date deferred until 2024 and therefore delay in
recognising recurring revenue, and thirdly some customer payments received in
early January 2024 rather than December 2023.
The order book, which we now report inclusive of recurring revenues due in the
forthcoming year, stood at £3,611,000 at the year end (FY22: £4,441,000) .
This is made up of contracted recurring revenue due of £2,917,000 (FY22:
£2,823,000) and new orders of £694,000 (FY22: £1,618,000). We have noticed
that customers have returned to more of a "just in time" behaviour rather than
a more aggressive order placement strategy seen in the period of heightened
supply chain concerns.
Current trading and outlook
The Board's expectation for 2024 remains unchanged. The year has started to
plan and if it continues, 2024 should be another year of:
o growth in revenue;
o recurring revenue growth outpacing total revenue growth;
o margins at a healthy level;
o project sales to be second half weighted;
o cash to be generated by the operations;
o investment in future growth prospects;
o preservation of a solid balance sheet; and
o progressive dividend to shareholders.
In addition, the Board aims to continue to build its overseas business.
Overseas revenue accounted for 9.8% of total revenue in FY23 (FY22: 1.3%).
Our strong financial position continues to support our organic growth plans.
We will maintain the discipline that has delivered profitable growth and good
capital returns to date. We remain confident in the future prospects of the
Group.
I Martin
Chairman
16 April 2024
CEO STRATEGIC REVIEW
Turnover & profitability
A year-on-year steady improvement in sales & profitability. This bodes
well for the future of the business, with more profitable revenue streams
replacing lesser margin revenue types.
The business sales turnover grew at 7.1% over 2022. Cash generation also
continues to remain healthy with the Group's year-end cash position a little
over £3.0 million, after paying a dividend in the year and transacting share
buy backs. The business made £675,000 profit before tax, a 60% increase
over the 2022 pre-tax profit of £422,000. EBITDA remained at a similar level
to 2022, largely due to movement in depreciation and amortisation.
Turnover, EBITDA & PBT
FY19* FY20 FY21 FY22 FY23
Group turnover £6,654,000 £5,886,000 £6,104,000 £6,743,000 £7,224,000
EBITDA £85,000 £854,000 £1,072,000 £1,334,000 £1,336,000
Profit before tax £(345,000) £87,000 £341,000 £558,000 £675,000
(* continuing operations)
Recurring revenue
Recurring revenue is now the valuable asset we all envisaged, following our
strategic review in 2018. 2023 saw total recurring revenue increase by an
additional 9% a continuing and positive trend. This success is making a
positive impact into the performance and underlying value of the business. In
2023, the Group's recurring revenue equated to 40% of turnover.
Group recurring revenue
FY19 FY20 FY21 FY22 FY23
Group recurring revenue by year £1,918,000 £2,037,000 £2,322,000 £2,688,000 £2,921,000
% Increase year on year Up 4.2% up 6.2% up 14.0% Up 15.8% up 8.7%
Whilst the Group enjoyed an increase of 8.7% in total recurring revenue over
the previous year, the predominant impact in growth of this type of profitable
revenue continues to be in the form of software licences, a key strategic
objective. Importantly, it is positive that both forms of revenue remain
steady and growing healthily - the embodiment of a total managed serviced
offering.
Group recurring revenue
FY19 FY20 FY21 FY22 FY23
Software licences £767,000 £863,000 £1,040,000 £1,361,000 £1,495,000
Increase year on year Up 16.4% up 12.5% up 20.5% up 30.9% up 9.8%
Hardware maintenance £1,151,000 £1,174,000 £1,282,000 £1,327,000 £1,426,000
Movement year on year down 2.5% Up 2.0% up 9.2% up 3.5% up 7.5%
Software development and configuration services
As we embrace in house IPR owned solutions, the product evolves as we add more
customers. This allows us to control our own direction and develop the product
and modules to be a more powerful product set for the marketplace. The move to
in house development has allowed us to continue increasing the sales of
bespoke software development and support services, as customers require tweaks
and modifications to our standard products to suit their operation. The chart
below illustrates the increases in chargeable software development and support
over previous years.
Customer requested software developments
FY19 FY20 FY21 FY22 FY23
Customer requested software developments by year £128,600 £129,200 £257,900 £341,400 £380,200
Increase year on year Up 53.5% up 0.5% up 99.6% up 32.4% up 11.4%
Gross Margin
The combination of the increases in recurring and the above software
development revenues continues to provide a healthy gross margin for the
Company, of 59.3% % of Group turnover in FY23 up from a little over 51% five
years ago.
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) .
Shareholder value
As our stock is openly traded on the London Stock Exchange, and enhancing
shareholder value is a key element within the Company's strategy. EPS
increased to 7.63 pence, up from 6.58 pence in FY22, a continued positive
trend from five years ago when the EPS was in a negative position.
This increasing valuation of the businesses KPIs, has allowed the Touchstar
share price to continue to outperform its peers on the London Stock Exchange
(AIM). The share price movement during the trading year of FY23 increased a
modest 9% up again from the 13% gain in the previous year. The price at the
end of the year settled at 92.5 pence a share having peaked at over £1.10
during the year.
Consolidated income statement for the year ended 31 December 2023
2023 2022
£'000 £'000
Revenue 7,224 6,743
Cost of sales (2,937) (2,583)
Gross profit 4,287 4,160
Distribution costs (51) (46)
Administrative expenses (3,637) (3,676)
Operating profit before share-based payment provision 658 490
Share-based payment provision included in administrative expenses (59) (52)
Operating profit 599 438
Finance income 85 -
Finance costs (9) (16)
Profit before income tax 675 422
Income tax (charge)/credit (36) 136
Profit for the year attributable to the owners of the parent 639 558
Earnings per ordinary share (pence) attributable to owners of the parent
during the year:
2023 2022
Basic 7.63p 6.58p
Diluted 7.58p n/ a
The exercise price of all share options granted at 31 December 2023 were below
the average market share of ordinary shares during the period to 31 December
2023 and therefore deemed dilutive. During 2022 the exercise price was higher
than the average market share price and therefore deemed to be anti-dilutive
(n/a).
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 2023 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 2023
Share capital Treasury shares Share premium account Share based payment Reserves Retained earnings Total
£'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2022 424 - 1,119 6 776 2,325
Cost of capital reduction in subsidiary - - - - (2) (2)
Total Comprehensive income (profit for the year) - - - 52 558 610
At 31 December 2022 424 - 1,119 58 1,332 2,933
Dividend - - - - (82) (82)
Purchase of own shares - (252) - - - (252)
Cost of capital reduction - - - - (34) (34)
Share based payment charge - - - 59 - 59
Transactions with shareholders - (252) - 59 (116) (309)
Total Comprehensive income (profit for the year) - - - - 639 639
Capital reduction - - (1,119) - 1,119 -
At 31 December 2023 424 (252) - 117 2,974 3,263
Company statement of changes in equity for the year ended 31 December 2023
Share capital Treasury shares Share premium account Share based payment Reserves Retained earnings Total
£'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2022 424 - 1,119 6 (2,696) (1,147)
Total Comprehensive income (profit for the year) - - - 52 320 372
At 31 December 2022 424 - 1,119 58 (2,376) (775)
Dividend - - - - (82) (82)
Purchase of own shares - (252) - - - (252)
Cost of capital reduction - - - - (34) (34)
Share based payment charge - - - 59 - 59
Transactions with shareholders - (252) - 59 (116) (309)
Total Comprehensive income (profit for the year) - - - - 1,591 1,591
Capital reduction - - (1,119) - 1,119 -
At 31 December 2023 424 (252) - 117 218 507
Consolidated and Company statements of financial position as at 31 December 2022
Group Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Non-current assets
Intangible assets 1,137 1,087 - -
Investments - - 95 47
Property, plant and equipment 66 94 - -
Right-of-use assets 225 299 - -
Deferred tax assets 20 46 2 3
1,448 1,526 97 50
Current assets
Inventories 1,153 967 - -
Trade and other receivables 1,199 975 239 415
Corporation tax receivable 18 18 - -
Cash and cash equivalents 3,005 4,461 292 -
5,375 6,421 531 415
Total assets 6,823 7,947 628 465
Current liabilities
Trade and other payables 1,191 1,491 121 255
Contract liabilities 1,938 2,022 - -
Borrowings - 985 - 985
Lease liabilities 149 157 - -
3,278 4,655 121 1,240
Non-current liabilities
Deferred tax liabilities 19 90 80 - -
Contract liabilities 24 130 144 - -
Lease liabilities 26 62 135 - -
282 359 - -
Total liabilities 3,560 5,014 121 1,240
Consolidated and Company statement of financial position as at 31 December 2023 (continued)
Group Company
2023 2022 2023 2022
Note £'000 £'000 £'000 £'000
Capital and reserves attributable
to owners of the parent
Retained earnings 2,974 1,332 218 (2,376)
Share capital 28 424 424 424 424
Treasury shares 27 (252) - (252) -
Share based payment reserve 27 117 58 117 58
Share premium 27 - 1,119 - 1,119
Total equity 3,263 2,933 507 (775)
Total equity and liabilities 6,823 7,947 628 465
Consolidated and Company cash flow statement for the year ended 31 December 2023
Group Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Operating activities
Operating Profit/(loss) 599 438 (8) (1)
Adjustments for:
Depreciation 205 218 - -
Amortisation 532 677 - -
Share-based payment provision 59 52 11 10
Movement in:
Inventories (187) (92) - -
Trade and other receivables (224) 86 176 47
Trade and other payables and contract liabilities (398) 390 (134) 160
Cash generated from/(used in) operations 586 1,769 45 216
Interest received 85 - - -
Interest paid (9) (16) - (4)
Corporation tax received - 148 - -
Net cash generated from operating activities 662 1,901 45 212
Investing activities
Addition of intangible assets (583) (565) - -
Purchase of property, plant and equipment (17) (60) - -
Net cash used in investing activities (600) (625) - -
Financing activities
Dividend paid (82) - (82) -
Purchase of own shares (252) - (252) -
Cost of capital reduction (34) (2) (34) -
Dividend received from subsidiary - - 1,600 326
Repayment of business loan - (135) - (135)
Principal elements of lease payments (165) (178) - -
Net cash generated from financing activities (533) (315) 1,232 191
Net (decrease)/increase in cash and cash equivalents (471) 961 1,277 403
Cash and cash equivalents at start of the year 3,476 2,515 (985) (1,388)
Cash and cash equivalents at end of the year 3,005 3,476 292 (985)
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 AIM. 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 2023 have been prepared in
accordance with the accounting policies set out in the annual report and the
accounts for the year ended 31 December 2022.
The Group Financial Statements have been prepared in accordance with the
International Financial Reporting Standards ('IFRS') as adopted by the United
Kingdom, 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 2021 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 2023 which have
yet to be published. The final results for the year ended 31 December 2023
were approved by the Board of Directors on 16 April 2024.
The financial information set out in this final announcement does not
constitute the Group's statutory financial statements for the year ended 31
December 2023 but is derived from those financial statements which were
approved by the Board of Directors on 16 April 2024. 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 2022 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 2023 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 2023, the Group held unencumbered cash of £3,005,000
(2022: £3,476,000), after considering overdraft balances as presented in note
22. In July 2022 the company fully repaid Coronavirus Business Interruption
Loan as the management deciding this funding was no longer required. The Group
still holds an undrawn £200,000 on demand overdraft facility as of 31
December 2023 (also £nil in April 2024).
The directors remain confident in the business, the skillset employed in its
dedicated staff, solid product set and loyal customer base.
External global economic challenges continue to impact business during 2023,
nonetheless, Group sales increased on 2022 by 7.1%, margins decreased slightly
from 61.7% in 2022 to 59.5%, in 2023 due to product mix, however the increase
in sales along with tight control of costs resulted in a profit after tax of
£639,000 (2022: £558,000).
The Group continues to benefit from a supportive bank who have provided the
borrowing facility since 2005. The Group has reduced its reliance on the
facility provided by the bank and since early 2023 has an average of
£1,600,000 placed on deposit thereby generating cash via receivable interest.
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 determining both the useful economic life of the
asset along with any impairment, notably intangible software development
costs. Useful economic life is based on the life expectancy of software
licences and 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.
(d) Allowance for expected credit losses
The allowance for expected credit losses assessment requires a degree of
estimation and judgement. It is based on the lifetime expected credit loss,
grouped based on days overdue, and makes assumptions to allocate an overall
expected credit loss rate for each group. These assumptions include recent
sales experience, historical collection rates, the impact of the Coronavirus
(COVID-19) pandemic and forward-looking information that is available.
After due consideration of the assumptions detailed above, no credit loss
provision was considered necessary for the year ended 31 December 2023 (2022:
nil).
4 Analysis of revenue
2023 2022
£'000 £'000
Recognised at a point in time 4,303 4,055
Recognised over time (recurring revenue) 2,921 2,688
7,224 6,743
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
performance conditions, are met pertaining to profit after tax and recurring
revenue growth as defined in the Plan.
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
2023:
Group
2023 2022
Number Number
At 1 January 422,000 211,000
Granted during the year - 211,000
At 31 December 422,000 422,000
On 4 January 2024 the Group issued a further 211,000 share options.
6.1 Income tax
2023 2022
£'000 £'000
Corporation tax
Deferred tax charged/(released) 36 (136)
Corporation tax is calculated at a hybrid rate of 23.5% (2022: 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 charge for the year can be reconciled to the reported profit as follows:
2023 2022
£'000 £'000
Profit before income tax 675 422
Multiplied by the calculated hybrid rate of corporation tax in the UK of 159 80
23.52% (2022: standard rate 19%)
Effects of:
Items not deductible for tax purposes 14 12
Enhanced research and development deduction (214) (225)
Tax losses for current year unrecognised 66 -
Difference between writing-down allowances and depreciation (8) 20
Release of previously unrecognised tax losses 19 5
Adjustment to deferred tax arising from changes in tax rate - (28)
Total tax credit for the year 36 (136)
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 2023). 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 Dividends
During the year an interim dividend of 1p per share was paid (2022: nil). The
board recommends a final dividend of 1.5p per share (2022: nil). Together with
the interim dividend of 1p, paid in December 2023, gives a total dividend for
the year of 2.5p (2022: nil).
8 Earnings per share
The calculation of earnings per share is based on profit attributable to
owners of the parent and the weighted average number of ordinary shares in
issue during the year.
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all dilutive potential ordinary
shares arising from share options granted to employees where the exercise
price is less than the market price of the Company's ordinary shares at the
year end.
No options were issued during 2023 (2022: 211,000 options with an exercise
price of 77.5p).
2023 2022
Basic 7.63p 6.58p
Diluted 7.58p n/a
Reconciliations of the earnings and weighted average number of shares used in
the calculation are set out below:
2023 2022
£'000 £'000
Earnings attributable to owners of the parent 639 558
2023 2022
Number Number
Basic weighted average number of shares, excluding own shares, in issue 8,371,477 8,475,077
Dilutive effect of share options 54,108 -
Dilutive weighted average number of shares, excluding own shares, in issue 8,425,555 8,475,077
9 Intangible assets
Group
Goodwill Development expenditure Total
£'000 £'000 £'000
Cost
At 1 January 2022 8,591 3,083 11,674
Additions - 565 565
Disposal - (33) (33)
At 31 December 2022 8,591 3,615 12,206
Additions - 583 583
Disposal - (16) (16)
At 31 December 2023 8,591 4,182 12,773
Accumulated amortisation
At 1 January 2022 8,591 1,885 10,476
Amortisation charge - 677 677
Disposal - (34) (34)
At 31 December 2022 8,591 2,528 11,119
Amortisation charge - 532 532
Disposal - (15) (15)
At 31 December 2023 8,591 3,045 11,636
Net book value
At 31 December 2023 - 1,137 1,137
At 31 December 2022 - 1,087 1,087
At 1 January 2022 - 1,198 1,198
Amortisation of £532,000 (2022: £677,000) is included within administrative
expenses in the income statement.
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 future cashflows for 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.
10 Property, plant and equipment
Plant and machinery Fixtures, fittings, tools and equipment Total
£'000 £'000 £'000
Cost
At 1 January 2022 265 312 577
Additions 29 31 60
Disposals (39) (5) (44)
At 31 December 2022 255 338 593
Additions 9 8 17
Disposals (21) - (21)
At 31 December 2023 243 346 589
Accumulated depreciation
At 1 January 2022 203 280 542
Charge for the year 41 19 60
Disposals (39) (5) (44)
At 31 December 2022 205 294 499
Charge for the year 26 20 46
Disposals (22) - (22)
At 31 December 2023 209 314 523
Net book value
At 31 December 2023 34 32 66
At 31 December 2022 50 44 94
At 1 January 2022 62 32 94
Depreciation expenditure of £46,000 (2022: £60,000) is included within
administrative expenses in the income statement.
11 IFRS 16 Right of use assets
Premises Motor vehicles Total £'000
£'000 £'000
Cost
At 1 January 2022 577 289 866
Additions - 59 59
Disposals (67) (38) (38)
At 31 December 2022 510 310 820
Additions - 86 86
Disposal - (38) (38)
At 31 December 2023 510 358 868
Accumulated depreciation
At 1 January 2022 312 155 467
Charge for the year 82 77 159
Disposal (67) (38) (105)
At 31 December 2022 327 194 521
Charge for the year 82 77 159
Disposal - (37) (37)
At 31 December 2023 409 234 643
Net book value
At 31 December 2023 101 124 225
At 31 December 2022 183 116 299
At 1 January 2022 265 134 399
Depreciation expenditure of £159,000 (2022: £159,000) is included within
administrative expenses in the income statement.
12 Cash and cash equivalents
Group Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Cash at bank and in hand 3,005 4,461 292 -
Less: bank overdraft - (985) - (985)
3,005 3,476 292 (985)
The above balances are not offset in the Consolidated Statement of Financial
Position and are included for illustrative purposes only.
The Company holds cash on deposit included as cash and cash equivalents. The
amount held on 95-day notice deposit at 31 December 2023 was £1,563,000
(2022: £nil) earning interest at a rate of 3.55% per annum over base.
13 Borrowings
Group Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Current borrowings:
Bank overdraft - 985 - 985
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 2023, the Group had total committed undrawn facilities of
£200,000 (2022: £200,000).
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 2023, this represents the net
cash and cash equivalents balance of £3,005,000 (2022: £3,476,000) in Note
12.
The Company and its subsidiaries have given a guarantee in relation to the
overdraft facilities extended to The Group.
14 Reserves
i) The following describes the nature of each reserve within
equity:
Reserve Description and purpose
Share premium Amount subscribed for share capital in excess of nominal value.
Share-based payment reserve Provision for options granted under the Group Enterprise Management Incentive
Scheme.
Retained earnings All other net gains and losses and transactions with owners (e.g. dividends)
not recognised elsewhere.
Treasury shares Weighted average cost of own shares held in treasury.
ii) The following describes the nature of each transaction
within equity:
Reserve transactions Description and purpose
Purchase of own shares During the year the Group purchased 275,000 of its own shares with a fair
value of £252,000, these are being held in treasury (2022: Nil).
Capital reduction On 19 April 2023, under a Capital Reduction Scheme, the Company by Special
Resolution reduced its share premium account. This resulted in an increase in
retained earnings amounting to £1,119,000. This process was confirmed by
Order of the Board of Touchstar plc and certified by the Registrar of
Companies.
The costs in relation to the capital reduction amounted to £34,000. These
costs have not been included in the Income statement. Based on CA2006 s641,
these costs have been charged directly to equity via the retained earnings
reserve.
15 Share capital
Group and Company
2023 2023 2022 2022
Number £'000 Number £'000
Ordinary shares of 5p each 8,475,077 424 8,475,077 424
All shares are authorised, issued and fully paid up.
16 Post balance sheet event
On 4 January 2024 211,000 share options were granted with an exercise price of 95p per share. This is the third part of a four-year plan approved by shareholders at the AGM held on 23 June 2021.
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