REG - Touchstar PLC - Interim Results
15/09/2022 07:00
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RNS Number : 5113Z Touchstar PLC 15 September 2022
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.
15 September 2022
Touchstar plc
Interim results for the
Six months ended 30 June 2022
Strong start to the year
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 interim results
for the six months ended 30 June 2022 ("H1 2022" and "Period").
Key Financials:
6 months 30 June 2022 6 months 30 June 2021
Increase
· Revenue £3,102,000 £2,895,000 up 7%
· Margin 59.8% 56.5% up 6%
· EBITDA* £571,000 £464,000 up 23%
· Trading profit after tax* £164,000 £79,000 up 108%
· Adjusted Earnings Per Share (EPS)* 1.93p 0.93p up 108%
· Cash net of overdraft and CBILs** £1,602,000 £1,301,000 up 23%
· Order book £1,061,000 £621,000 up 71%
· Recurring revenue £1,311,000 £1,115,000 up 18%
Statutory Results:
· Profit after tax £164,000 £112,000 up 46%
· Basic EPS 1.93p 1.32p up 46%
H1 2022 Highlights
· Revenue growth of 7% to £3,102,000 (H1 2021: £2,895,000 )
· Recurring revenue growth accelerated increasing by 18% to £1,311,000
(H1 2021: £1,115,000)
· 330 basis point improvement in gross margin to 59.8% (H1 2021: 56.5%)
· 108% increase in trading profit after tax and adjusted EPS*
· Continued upward trend in EBITDA which grew by 23% to £571,000 (H1
2021: £464,000)
· Order book rose 71% to £1,061,000 (H1 2021: £621,000)
· The positive trends in trading and customer activity within the
business continued in the Period. Progress was made in profitability, cash
generation and continued innovation of our products and services.
· As expected, growth in recurring revenue continued, rising by 18% to
£1,311,000 in the Period, representing 42% of total revenue for H1 2022.
· Well controlled costs and enhanced margins have also helped to
improve profitability.
Outlook
· Order book as of the 13 September 2022, stood at £1,022,000 an
increase of £186,000 on 13 September 2021 which was £836,000.
· Confidence in the medium term is driven by a significant uptick in
the level of activity in our largest market of petrochemical distribution.
· Current trading is in line with expectations for the year as whole.
* Refer to note 3 for details
** CBILs Coronavirus Business Interruption Loan
Commenting on the results, Ian Martin, Chairman of Touchstar, said:
''I am pleased to report that the Group has delivered a strong first half
performance as a result of solid market demand enhanced by sound management
and a focused strategy.
Current trading is in line with expectations, and we are pleased to report
that our order book at 12 September 2022 is ahead of this time last year. We
are mindful of the uncertainty in the economic outlook but have confidence we
are well positioned to navigate the short-term challenges and capitalise on
the exciting growth opportunities ahead. We expect current trends within the
Group to continue into 2023.''
For further information, please contact:
Touchstar plc www.touchstarplc.com (http://www.touchstarplc.com)
Ian Martin 0161 874 5050
Mark Hardy 0161 874 5050
WH Ireland - Nominated Adviser & Broker www.whirelandcb.com (http://www.whirelandplc.com)
Corporate Finance - Mike Coe/Sarah Mather 020 7220 1666
Information on Touchstar plc can be seen at: www.touchstarplc.com
(http://www.belgravium-technologies.com)
CHAIRMAN'S INTERIM STATEMENT 2022
Touchstar strong first half performance is a result of solid market demand,
enhanced by sound management and a focused strategy. We have again delivered
organic growth, margin improvement and cash generation all feeding into
positive trends in profitability. We are seeing revenue growth by adding new
customers and as encouragingly, from major existing clients prepared to invest
and upgrade to Touchstar's current products and solutions.
During the Period we continued to make progress with our strategic priorities;
continue to make investment in our technology, build recurring revenues and
accelerate the transition to a more software orientated business.
We are mindful of the uncertainty in the economic outlook but have confidence
we are well positioned to navigate the short-term challenges and capitalise on
the exciting growth opportunities ahead.
We remain comfortable of delivering the expectations we have set.
Operational Review
The Group has a comprehensive suite of software which serve the sectors we
operate in. The Period has seen further enhancements to our offering which
will maintain our strong position and future value.
During the Period, around 70% of the turnover came from the Transport and
Logistics operation, around 30% from the Access Control marketplace. We
continued to build on enhancing our recurring revenue income and sales of more
margin rich services and as a result during the Period recurring revenue
accounted for 42% of total sales (H1 2021: 38.5%) and we saw an over 300 basis
point increase in gross margins.
Activity in the market remains strong and the project pipeline remains
healthy. The challenges over the past 12 months of managing the supply chain
has been successful, with a handful of smaller orders experiencing some delay
in shipment. Inflationary pressures are playing a part too and again we are
managing this stealthily and with success.
Whilst as a Group we are moving into offering more software solutions,
hardware still plays an effective part in the success of the Group. We are
in the process of launching our latest rugged android tablet for the transport
sector for in vehicle solution. This product will be utilised in the
petrochemical marketplace and it has just been safety approved for use in the
hazardous areas involved in this aspect of distribution.
In summary, the Group is now in good shape with an effective team delivering
the solutions to the customer efficiently and effectively. Thanks goes to
all employees who continue to give 110% of effort to build the business,
product range and customer base
Financial Performance
Revenue grew 7% in the Period to £3,102,000 (H1 2021: £2,895,000).
The order book on 30 June 2022 stood 71% higher at £1,061,000 (H1 2021:
£621,000). These improvements are driven by major projects in the
petrochemical sector returning to normal levels having been halted by the
pandemic.
As we had indicated recurring revenue growth accelerated, increasing by 18% to
£1,311,000 (H1 2021: £1,115,000) and represented 42% of total revenues (H1
2021: 39%). Development of recurring revenue remains key to our strategy and
future success.
The increasing level of software sales and continued operation efficiency
drove further improvement in gross margins which increased to 59.8% in the
Period (H1 2021: 56.5%).
Overhead costs were £1,721,000 an increase of 8.5% compared to H1 2021 of
£1,586,000. The prior year financial results included a benefit from
temporary / one off factors through limited use of the Coronavirus Job
Retention Scheme (CJRS) which totalled £33,000. This Period contained no such
items.
As witnessed in recent periods the positive effects of both higher revenue and
improved margins led to further improvements in profitability with EBITDA
increasing 23% to £571,000 in the Period (H1 2021: £464,000), operating
profit rose by 90% to £114,000 (H1 2021: £60,000 inclusive of £33,000
benefit from CJRS).
Spend on research and development continued and amounted to £499,000 in the
Period of which £283,000 was capitalised as we invested in further enhancing
our solutions.
This strategy of investing further in the business meant we again benefitted
from a tax credit of £60,000 in the Period (H1 2021: £60,000). In the Period
both trading profit after tax and earnings per share increased by 108% to
£164,000 and 1.93p respectively (H1 2021: £79,000 and 0.93p).
As at the 30 June 2022, we remained debt free and our cash, net of overdraft
and the £135,000 Coronavirus Business Interruption Loan (CBIL), was
£1,602,000 (H1 2021: £1,301,000). In the Period we normalised all trade and
payables and unwound all deferred amounts due under the Government's support
packages to business. Since the Period ended, we have repaid the CBIL in full.
Distributable Reserves
The directors continue to work to enable Touchstar to have the option and
ability to consider returning value to shareholders either via share buybacks
or the payment of dividends. We have yet to progress with the capital
reduction process that was approved at the AGM on the 20 June 2022. The
Directors are still consulting with the Company's advisers. The directors
having an increased level of confidence in the profitability and improved
performance of the business being sustained could mean a natural elimination
of this deficit over the medium term, thus save shareholders the costs of a
court process.
Whichever option we pursue the Company may be able to return cash to
shareholders in respect of 2023.
Current Trading and Prospects
The Directors believe that current trading remains on track to meet market
expectations.
The prospects for 2022 are enhanced by the better levels of customer activity
now translating into orders and as of the 12 September 2022 the order book
maintained its levels standing at £1,022,000. As a result, the Directors
believe that current trading remains on track to meet market expectations.
Management continues to seek to balance the inflationary pressures on the
business with progress on efficiency together with raising prices. Thus, we
expect to be able to maintain margins around their current level.
The board believes that 2022 will see both growth in revenue and EBITDA
driving further progress in our financial performance.
Conclusion
Looking ahead we expect current trends within the business to continue into
2023, despite the broader economic issues. The hard work and investment made
in Touchstar over the last few years has made the business better. We remain
focussed upon delivery of excellent service to our customers, meeting the
market's expectations, and creating a vibrant environment for our employees.
The strong balance sheet, growing revenue prospects, recurring revenues
forecast to become an ever-increasing part of our revenue base all give the
board confidence of increasing embedded value in the business. The challenge
is to see that becoming properly reflected to shareholders.
I Martin
Executive Chairman
14 September 2022
Unaudited consolidated income statement for the six months ended 30 June 2022
30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
Revenue 3,102 2,895 6,104
Cost of sales (1,246) (1,259) (2,472)
Gross profit 1,856 1,636 3,632
Distribution costs (21) (23) (49)
Administrative expenses (1,721) (1,586) (3,400)
Other operating income (note 6) - 33 44
Operating profit 114 60 227
Finance costs (10) (8) (20)
Profit before income tax 104 52 207
Income tax credit (note 7) 60 60 134
Profit for the period attributable to the owners of the parent 164 112 341
Profit per ordinary share (pence) attributable to owners of the parent during
the period:
Pence per share Pence per share Pence per share
Earnings per share (note 8)
Basic 1.93p 1.32p 4.02p
Adjusted 1.93p 0.93p 3.50p
Unaudited consolidated statement of changes in equity for the six months ended 30 June 2022
Share capital Share premium account Share based payment reserves Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000
For the six months ended 30 June 2022
Balance at 1 January 2022 424 1,119 6 776 2,325
Profit for the period - - 21 164 185
Balance at 30 June 2022 424 1,119 27 940 2,510
For the six months ended 30 June 2021
Balance at 1 January 2021 424 1,119 - 435 1,978
Profit for the period - - - 112 112
Balance at 30 June 2021 424 1,119 - 547 2,090
For the year ended 31 December 2021
Balance at 1 January 2021 424 1,119 - 435 1,978
Profit for the year - - 6 341 347
Balance at 31 December 2021 424 1,119 6 776 2,325
Unaudited consolidated statement of financial position at 30 June 2022
30 June 30 June 31 December 2021
2022 2021
£'000 £'000 £'000
Non-current assets
Intangible assets 1,143 1,272 1,198
Property, plant, and equipment 113 95 94
Right of use asset 320 442 399
Deferred tax assets 81 63 81
1,657 1,872 1,772
Current assets
Inventories 815 831 865
Trade and other receivables 1,410 1,181 1,071
Current tax recoverable 226 73 166
Cash and cash equivalents 2,831 2,481 3,903
5,282 4,566 6,005
Total assets 6,939 6,438 7,777
Current liabilities
Trade and other payables 1,091 1,112 1,333
Contract liabilities 1,363 1,165 1,762
Borrowings 1,229 1,060 1,418
Lease liabilities 158 171 169
3,841 3,508 4,682
Non-current liabilities
Deferred tax liabilities 251 215 251
Contract liabilities 174 208 172
Borrowings - 120 105
Lease liabilities 163 297 242
588 840 770
Total liabilities 4,429 4,348 5,452
Unaudited consolidated statement of financial position at 30 June 2022 (continued)
30 June 30 June 31 December 2021
2022 2021
£'000 £'000 £'000
Capital and reserves attributable
to owners of the parent
Share capital 424 424 424
Share premium account 1,119 1,119 1,119
Share-based payment reserve 27 - 6
Profit and loss account 940 547 776
Total equity 2,510 2,090 2,325
Total equity and liabilities 6,939 6,438 7,777
Unaudited consolidated cash flow statement for the six months ended 30 June 2022
30 June 30 June 31 December
2022 2021 2021
£'000 £'000 £'000
Cash flows from operating activities
Operating profit 114 60 226
Depreciation 110 110 233
Amortisation 336 294 612
Share-based payment provision 21 - 6
Movement in:
Inventories 50 (117) (151)
Trade and other receivables (339) (171) (60)
Trade and other payables (638) (424) 358
Cash (used in)/ generated from operating activities (346) (248) 1,224
Interest paid (10) (8) (20)
Corporation tax received - 97 97
Net cash (used in)/ generated from operating activities (356) (159) 1,301
Cash flows from investing activities
Purchase of intangible assets (281) (217) (460)
Purchase of property, plant, and equipment (50) (10) (50)
Net cash used in investing activities (331) (227) (510)
Cash flows from financing activities
Principal elements of lease payments (91) (85) (182)
Business loan repayments (15) - (15)
Net cash (used in)/ generated from financing activities (106) (84) (197)
Net (decrease)/ increase in cash and cash equivalents (793) (470) 594
Cash and cash equivalents at start of the year 2,515 1,921 1,921
Cash and cash equivalents at end of the year 1,722 1,451 2,515
Cash and cash equivalents
Cash at bank and in hand 2,831 2,481 3,903
Less: bank overdraft (included within borrowings) (1,109) (1,030) (1,388)
Net cash 1,722 1,451 2,515
Notes to the interim report and accounts for the six months ended 30 June 2022
1. General information
Touchstar plc is a public company limited by share capital incorporated and
domiciled in the United Kingdom. The Company has its listing on AIM. The
address of its registered office is 1 George Square, Glasgow, G2 1AL.
2. Status of interim report and accounts
The financial information comprises the consolidated interim balance sheet as
of 30 June 2022, 30 June 2021 and the year ended 31 December 2021 along with
related consolidated interim statements of income and cash flows for the six
months to 30 June 2022 and 30 June 2021 and year ended 31 December 2021 of
Touchstar plc (hereinafter referred to as 'financial information').
This financial information for the half year ended 30 June 2022 has neither
been audited nor reviewed and does not comprise statutory accounts within the
meaning of section 434 of the Companies Act 2006. This financial information
was approved by the Board on 13 September 2022.
The figures for the year ended 31 December 2021 have been extracted from the
audited annual report and accounts that have been delivered to the Registrar
of Companies. The auditors, Haysmacintyre LLP, reported on those accounts
under section 495 of the Companies Act 2006. Their report was unqualified and
did not contain a statement under section 498 of that Act.
3. Basis of preparation
The interim report and accounts have been prepared, in accordance with IAS 34
Interim Financial Reporting, using accounting policies to be applied in the
annual report and accounts for the year ended 31 December 2022. These are
consistent with those included in the previously published annual report and
accounts for the year ended 31 December 2021, which have been prepared in
accordance with IFRS as adopted by the European Union.
Non - GAAP financial measures
For the purposes of this interim announcement and annual report and accounts,
the Group uses alternative non-Generally Accepted Accounting Practice
('non-GAAP') financial measures which are not defined within IFRS. The
Directors use the measures in order to assess the underlying operational
performance of the Group and as such, these measures are important and should
be considered alongside the IFRS measures.
The following non-GAAP measure referred to in the interim announcement relates
to Trading profit/(loss) after tax, adjusted EBITDA and adjusted EPS.
'Trading profit/(loss) after tax', 'adjusted EBITDA' and 'adjusted EPS' are
separately disclosed, being defined as Profit/(loss) after tax, EBITDA and EPS
all adjusted to exclude the savings generated as a result of the Covid-19
pandemic. These savings relate to items which the management believe did not
accurately reflect the underlying trading performance of the business in the
period. These savings relate to government support via the Coronavirus Job
Retention Scheme (CJRS). The Directors believe that the trading
profit/(loss) after tax is an important measure of the underlying performance
of the Group.
Going concern
The directors have a reasonable expectation that the Group has adequate
resources to continue operating for the foreseeable future, and for this
reason they have adopted the going concern basis of preparation in the
consolidated interim financial statements. The financial statements may be
obtained from Touchstar plc, 7 Commerce Way, Trafford Park, Manchester, M17
1HW or online at www.touchstarplc.com (http://www.touchstarplc.com) .
4. Critical accounting estimates and assumptions
The Group 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.
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 also 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.
5. Share-based employee remuneration
The number of options granted during the period was nil (30 June 2021 : nil)
(31 December 2021 : 211,000) and outstanding at 30 June 2022 was 211,000 (30
June 2021 : nil) (31 December 2021 : 211,000). These shares had not vested as
at 30 June 2022.
For the period ended 30 June 2022 in total £21,000 of employee remuneration
expense (all of which related to equity-settled share-based payment
transactions) has been included in the income statement (30 June 2021: nil)
(year to 31 December 2021 - £6,000) and credited to the share-based payment
reserve.
6. Other operating income
30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
Exceptional savings as a result of C-19 pandemic
Government funding Job Retention Scheme - 33 44
This income is deemed to be operational in nature as it relates to government
funding received towards the Group's salary costs in a bid to secure
longer-term employment as a result of the COVID-19 pandemic.
7. Income tax credit
30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
Corporation tax
Current tax (60) (60) (147)
Adjustments in respect of prior years - - (5)
Deferred tax - - 18
Total current tax (60) (60) (134)
The current tax credit relates to losses surrendered through R&D tax
credit.
8. Earnings per share
Earnings per ordinary share (pence) attributable to owners of the parent
during the period:
Earnings per share 30 June 2022 30 June 2021 31 December 2021
Basic 1.93p 1.32p 4.02p
Adjusted 1.93p 0.93p 3.50p
Diluted n/a 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. During the year 31 December 2021 the Group issued
211,000 options with an exercise price of 85p. 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:
For six-month period 30 June 2022 30 June 2021
Profit Weighted average number of shares (in thousands) Profit Weighted average number of shares (in thousands)
£'000 £'000
Basic EPS
Profit attributable to owners of the parent 164 8,475 112 8,475
Exceptional saving (note 6) - (33)
Adjusted EPS
Profit/(loss) attributable to owners of the parent before exceptional savings 164 8,475 79 8,475
For year ended 31 December 2021
Profit Weighted average number of shares (in thousands)
£'000
Basic EPS
Profit attributable to owners of the parent 341 8,475
Exceptional savings (note 6) (44)
Adjusted EPS
Profit/(loss) attributable to owners of the parent before exceptional savings 297 8,475
9. 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:
30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
Right-of-use assets
Buildings 224 306 274
Vehicles 96 136 125
320 442 399
30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
Lease liabilities
Buildings 158 171 169
Vehicles 163 297 242
321 468 411
ii) Amounts recognised in the statement of profit or loss
30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
Depreciation charge relating to right-of-use assets
Buildings 41 41 82
Vehicles 38 32 74
79 73 156
Interest expense (included in finance cost) 10 8 17
Expense relating to short-term leases (included in administrative expenses) 13 17 18
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