TIDMTST
RNS Number : 1230C
Touchstar PLC
11 April 2017
Touchstar plc
(formerly Belgravium Technologies plc)
Preliminary results for the year ended 31 December 2016
The Board of Touchstar plc (formerly Belgravium Technologies
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
final results for the year ended 31 December 2016.
Key Financials:
31 December 31 December
2016 2015
* Revenues GBP7,624,000 GBP8,676,000
* Operating profit/(loss) GBP223,000 GBP(6,530,000)
* Profit/(loss) after tax GBP475,000 GBP(6,339,000)
* Basic earnings per share 7.53p (6.28)p
Commenting today, Ian Martin, Chairman of Touchstar, said:
"Even though revenue in 2016 was lower than in the prior year,
the greatly improved margins ensured that profitability was
substantially enhanced.
"I remain enthusiastic and believe we could be building
something special within the business. Life is not easy, we have to
work hard to retain our customers and fight hard to win new clients
- that is not going to change - we are however on our way and have
a real confidence in what we are trying to achieve."
For further information please contact:
Touchstar plc Ian Martin 01274 741860
Mark Hardy 01274 741860
WH Ireland - Nominated Mike Coe/Ed 0117 945
Adviser Allsopp 3472
WH Ireland - Investor 0113 394
Relations Jessica Metcalf 6623
Information on Touchstar plc can be seen at:
www.touchstar.com
CHAIRMAN'S STATEMENT 2016
I have thought long and hard about the opening line of this
year's results statement. I always intend to write in an honest and
clear manner to ensure shareholders get a fair account and
perception of the Group, its prospects and potential. I must
balance my positive view on how far we have travelled to rebuild
and reposition the Group, with the reality that although the
financial performance was very favorable in comparison with the
prior year, ultimately it didn't quite meet the expectations we had
of ourselves.
I had indicated that as we went through a period of radical and
substantive change there could be "bumps in the road" and indeed
two key factors had a negative impact upon last year's results. One
issue was due to a customer entering administration owing us
GBP57,000. The second was the slippage of expected orders into
2017, even though customer budget approval had been in 2016.
Although the short term financial performance was not helped by
these two issues the Group increased its profitability over the
previous year and there were many positive developments that
occurred last year which are shaping the Touchstar of the
future.
We have made a considerable investment in research and
development, (after a period of underinvestment), and this is
starting to come to fruition, with the new products moving from
concept to customers.
In the final quarter of 2016 we supplied our first complete
cloud based Back Office and Point of Sale System into the airline
sector - a major product development that enables us as a business
to own, supply and support the complete retail sales system. This
provides us with a powerful sales proposition to the market as well
as increasing our sales and recurring revenue line.
We also completed the development of a cloud based software
package for the Transport and Distribution market during the year,
so as to further build on our own strengths and reduce reliance on
3(rd) party suppliers. Again, this product offers a complete
solution for the planning of vehicles, drivers and product delivery
to our clients' customers. It has been well received, with an
increased acceptance partly attributable to the pricing model being
SaaS (software as a service), with a minimal set up charge followed
by monthly payment on a per vehicle basis.
Corporately, in July 2016, we announced the completion of the
capital reorganisation and consolidation of the Group giving a more
coherent financial structure (see note 8 for details). The Group
also moved to one accounting and one operating platform which is
giving us better, more timely information, and enabling us to
operate more efficiently. I believe it will also be an enabler of
future growth.
2016 also saw us reposition the Touchstar marketing proposition
where all divisions adopted a consistent brand theme now trading
under the Touchstar name. We now not only have a new name but also
a new energy and purpose.
Financial Results
Even though revenue in 2016 was lower than in the prior year,
the greatly improved margins ensured that profitability was
substantially enhanced.
Revenue for the year ended 31 December 2016 was GBP7,624,000
(2015: GBP8,676,000) a decline of 12% as we phased out older
product. Gross margins rose to 53.7% (2015: 47.6%) driven by
support contracts and recurring revenues making up a larger
percentage of our total revenue than in prior years.
Operating profit before exceptional items and goodwill
impairment almost doubled to GBP223,000 (2015: GBP107,000). More
pleasingly after-tax profits rose to GBP475,000 (2015: loss
GBP6,339,000). Taxation continued to be a positive as a result of
our continued investment into research and development
activities.
The substantial investment we made in research and development,
which increased to GBP1,026,000 (2015: GBP749,200), meant that the
Company had a small level of net borrowing at the year-end of
GBP329,000 (2015: cash balance of GBP242,000). With a continued
tight focus on cash management and cash generation within the
business, this should move closer to a surplus position by the end
of 2017. As reported last year we have an overdraft facility with
Barclays Bank plc of GBP1m.
Basic earnings per share increased substantially to 7.53p (2015:
(6.28)p post capital reorganisation).
Strategy
We are following a simple strategy, to use the disruption and
confusion in what is a fast-changing world for mobile technology to
our advantage. We work closely with our customers to produce
software, services and hardware that are relevant to them. I have
always been impressed with the quality of our client base and the
level of faith and high regard our product and services have - a
key element of our strategy is to build on this trust as we
introduce new and additional product and services. I believe that
Touchstar has the opportunity to grow organically by building upon
the foundation we now have in place, continually striving to
improve our users' experience and using this reputation to add new
customers.
Outlook for 2017
After the usual slow start to the year, the last few weeks have
seen some exciting forward steps being taken. Touchstar On Board
has seen their new cloud based back office system being ordered by
two airlines. The package incorporates, stock and pricing
management for the customer and is fully integrated to the mobile
devices on the aircraft, together with the Chip and Pin technology
necessary for payment. Touchstar Access Control has also secured a
significant contract for two Access Control Systems within UK
government departments, and another system sale within the defense
arena.
Later during 2017, we will see the launch of a rugged tablet
device for the in vehicle and logistics market, operating with a
faster processor than is currently available and using the latest
Android operating system. We will continue to spend and invest in
development and will enhance our portfolio of the logistics
products ready for more launches in 2018.
I cannot guarantee that there will be no more "bumps in the
road", precise prediction in such a fast-moving environment is
extremely difficult. However, at the very least we have
demonstrated the resilience of the business to absorb the odd
shock. I am comfortable with the current market expectations on the
Group.
People
Although I have spoken at length about the financial
performance, products and services, it is the people I work with at
Touchstar that make the difference - it is their dedication, talent
and incredible emphasis on the customer that make this business
work. This will define whether we are successful in the future -
their commitment to build a Group we are all proud of is something
one cannot purchase.
Conclusion
I remain enthusiastic and believe we could be building something
special within the business. Life is not easy, we have to work hard
to retain our customers and fight hard to win new clients - that is
not going to change - we are however on our way and have a real
confidence in what we are trying to achieve.
I Martin
Executive Chairman
11 April 2017
Consolidated income statement for the year ended 31 December
2016
2016 2015
Continuing operations GBP'000 GBP'000
----------------------------------------------------------------------------------- -------- ----------------
Revenue 7,624 8,676
Cost of sales (3,523) (4,544)
------------------------------------------------------------------------------------ -------- --------------
Gross profit 4,101 4,132
Distribution costs (72) (88)
Administration expenses (3,806) (10,574)
------------------------------------------------------------------------------------ -------- --------------
Operating profit before exceptional items 223 107
Exceptional costs included in administration expenses - (637)
Goodwill impairment - (6,000)
------------------------------------------------------------------------------------ -------- --------------
Operating profit/(loss) 223 (6,530)
Finance costs (10) (1)
------------------------------------------------------------------------------------ -------- --------------
Profit/(loss) before income tax 213 (6,531)
Income tax credit 262 192
------------------------------------------------------------------------------------ -------- --------------
Profit/(loss) for the year attributable to the owners of the parent 475 (6,339)
-------- --------------
Earnings/(loss) per ordinary share (pence) attributable to owners of the parent during the
year:
2016 2015
Basic 7.53p (6.28)p
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.
Consolidated statement of changes in equity for the year ended
31 December 2016
Retained
Share Capital earnings/
Share premium redemption (accumulated Total
capital account reserve losses) equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- ---------------------- --------- ------------ -------------- --------
At 1 January
2015 5,047 2,932 2,100 1,578 11,657
Loss for the
year - - - (6,339) (6,339)
At 31 December
2015 5,047 2,932 2,100 (4,761) 5,318
Capital reduction (4,732) (2,932) (2,100) 9,764 -
Costs of capital
reduction - - - (37) (37)
Profit for
the year - - - 475 475
At 31 December
2016 315 - - 5,441 5,756
------------------- ---------------------- --------- ------------ -------------- --------
Statement of financial position as at 31 December 2016
2016 2015
Restated
GBP'000 *
GBP'000
----------------------------------- ---------- ---------
Non-current assets
----------------------------------- ---------- ---------
Goodwill 3,824 3,824
Development expenditure 989 820
------------------------------------ ---------- ---------
Total intangible assets 4,813 4,644
Property, plant and equipment 236 182
Deferred tax assets 67 67
------------------------------------ ---------- ---------
5,116 4,893
----------------------------------- ---------- ---------
Current assets
Inventories 1,259 1,490
Trade and other receivables 2,026 2,367
Current tax recoverable 203 175
Cash and cash equivalents 2,206 3,174
------------------------------------ ---------- ---------
5,694 7,206
----------------------------------- ---------- ---------
Total assets 10,810 12,099
Current liabilities
Trade and other payables 2,295 3,514
Borrowings 2,535 2,940
4,830 6,454
----------------------------------- ---------- ---------
Non-current liabilities
Deferred tax liabilities 75 75
Deferred income 149 252
Total liabilities 5,054 6,781
------------------------------------ ---------- ---------
Capital and reserves attributable
to owners of the parent
Share capital 315 5,047
Share premium account - 2,932
Capital redemption reserve - 2,100
Profit and loss account 5,441 (4,761)
------------------------------------ ---------- ---------
Total equity 5,756 5,318
------------------------------------ ---------- ---------
Total equity and liabilities 10,810 12,099
------------------------------------ ---------- ---------
* Please see note 2
Consolidated cash flow statement for the year ended 31 December
2016
2016 2015
GBP'000 GBP'000
----------------------------------- --------- ---------
Cash flows from operating
activities
Operating profit/(loss) 223 (6,530)
Depreciation 100 117
Amortisation 370 320
Goodwill impairment - 6,000
Movement in:
Inventories 231 (55)
Trade and other receivables 341 810
Trade and other payables (1,322) (741)
------------------------------------ --------- ---------
Cash (used in)/generated
from operations (57) (79)
Interest paid (10) (1)
Corporation tax received 234 120
------------------------------------ --------- ---------
Net cash generated from operating
activities 167 40
------------------------------------ --------- ---------
Cash flows from investing
activities
Purchase of intangible assets (539) (424)
Purchase of property, plant
and equipment (154) (82)
------------------------------------ --------- ---------
Net cash used in investing
activities (693) (506)
------------------------------------ --------- ---------
Cash flows from financing
activities
Repayments of finance lease
contracts (8) (23)
Cost of capital restructure (37) -
----------------------------------- --------- ---------
Net cash used in financing
activities (45) (23)
------------------------------------ --------- ---------
Net decrease in cash and
cash equivalents (571) (489)
Cash and cash equivalents
at start of the year 242 731
------------------------------------ --------- ---------
Cash and cash equivalents
at end of the year (329) 242
------------------------------------ --------- ---------
1. General information
Touchstar plc (formerly Belgravium Technologies 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. Basis of preparation
The preliminary results for the year ended 31 December 2016 have
been prepared in accordance with the accounting policies set out in
the annual report and the accounts for the year ended 31 December
2015.
There have been no changes in accounting policies in the
year.
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 preliminary
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 preliminary announcement have remained unchanged from those
set out in the Group's 2015 statutory financial statements. They
are also consistent with those in the Group's statutory financial
statements for the year ended 31 December 2016 which have yet to be
published. The preliminary results for the year ended 31 December
2016 were approved by the Board of Directors on 5 April 2017.
The financial information set out in this preliminary
announcement does not constitute the Group's statutory financial
statements for the year ended 31 December 2016 but is derived from
those financial statements which were approved by the Board of
Directors on 5 April 2017. The Auditors have reported on the
Group's statutory financial statements and the report was
unqualified and 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 2016 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 2015 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.
Restatement
The Group operates a composite banking arrangement, under which
the Group and its bankers have a legal right to offset certain
balances which may be in a cash or overdraft position. Previously,
the Group offset these cash and overdraft balances in determining
cash and short-term deposits as presented on the Group Balance
Sheet.
In March 2016, the IFRS Interpretations Committee (IFRS IC)
issued an agenda decision regarding the treatment of offsetting and
cash-pooling arrangements in accordance with IAS 32: 'Financial
instruments: Presentation'. This provided additional guidance on
when bank overdrafts in cash-pooling arrangements would meet the
requirements for offsetting in accordance with IAS 32. Following
this additional guidance, the Group has reviewed its cash-pooling
arrangements and has revised its presentation of bank overdrafts
resulting in GBP2,535,000 of bank overdrafts being reported in
borrowings, with a corresponding increase in cash and short-term
deposits. Comparatives at 31 December 2015 have also been restated
with an additional GBP2,932,000 of bank overdrafts being reported
in borrowings with a corresponding increase in cash and short-term
deposits.
The Group has considered the requirements of IAS 8 in respect of
changes in accounting policies and the requirement to present a
balance sheet as at the start date of the comparative period. As
the change in accounting policy has no impact on the Group's
reported profit, or the net assets of the Group, the Group does not
consider the adjustment to be material to require the presentation
of an additional balance sheet. The impact on the opening
comparative period, being as at 1 January 2015, would have been to
increase both cash and short-term deposits and borrowings by
GBP2,977,000.
3. 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.
(a) Impairment of goodwill
The Group tests annually whether goodwill has suffered any
impairment, in accordance with the accounting policy. The
recoverable amounts of cash-generating units have been determined
based on value-in-use calculations. These calculations require the
use of estimates, both in arriving at the expected future cash
flows and the application of a suitable discount rate in order to
calculate the present value of these flows.
It is the opinion of the Directors, whilst taking a more
conservative view of future growth rates, no impairment of goodwill
has taken place.
(b) Development expenditure
The Group recognises costs incurred on development projects as
an intangible asset which satisfy 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.
4. Income tax credit
2016 2015
GBP'000 GBP'000
--------------------------------------- --------- ---------
Corporation tax:
Current tax (201) (175)
Adjustments in respect of prior years (61) (17)
--------------------------------------- --------- ---------
Income tax credit (262) (192)
--------------------------------------- --------- ---------
Corporation tax is calculated at 20% (2015: 20.25%) of the
estimated assessable profit for the year. This is the weighted
average tax rate applicable for the year.
5. Factors affecting the tax charge for the year
The tax charge for the year is different from the standard rate
of corporation tax in the UK of 20% (2015: 20.25%). The differences
are explained below:
2016 2015
GBP'000 GBP'000
--------------------------------------------------------------------------------------- --------- ---------
Profit/(Loss) before income tax 213 (6,531)
--------------------------------------------------------------------------------------- --------- ---------
Multiplied by the standard rate of corporation tax in the UK of 20.25% (2014: 21.50%) 42 (1,322)
Effects of:
Items not deductible for tax purposes 76 1,261
Enhanced research and development deduction (359) (284)
Adjustments in respect of prior years (61) (17)
Capitalised expense allowable for tax purposes (13) -
Losses surrendered through R&D tax credit 76 123
Utilisation of tax losses - (16)
Capital allowances in excess of depreciation (23) (8)
Tax losses carried forward - 71
Tax credit for the year (262) (192)
--------------------------------------------------------------------------------------- --------- ---------
Factors affecting the future tax charge
The standard rate of corporation tax in the UK changed from 21%
to 20% with effect from 1 April 2015. Accordingly, the Group's
profit chargeable to corporation tax for the prior accounting year
was taxed at the effective rate of 20.25% and at 20% in the current
accounting year.
The change in the corporation tax rate from 20% to 19%
(effective from 1 April 2017) was enacted in the Finance Act 2015
and, as a result, UK deferred tax balances in 2016 were measured at
the enacted rates of 20% and 19%.
The effective tax charge in future years is expected to be lower
than the main corporation tax rate due to the availability of
enhanced research and development tax credits.
A change to the UK corporation tax rate was announced in the
Chancellor's Budget on 16 March 2016. The change announced is to
reduce the main rate to 17% from 1 April 2020. This change became
substantively enacted on 15 September 2016. Changes to reduce the
UK corporation tax rate to 19% from 1 April 2017 and to 18% from 1
April 2020 had already been substantively enacted on 26 October
2015.
6. Earnings/(losses) per share
2016 2015
---------- --------- --------
Basic 7.53p (6.28)p
Adjusted 7.53p 0.30p
---------- --------- --------
Basic earnings/(loss) per share is calculated by dividing the
earnings/(loss) attributable to ordinary shareholders by the
weighted average number of ordinary shares in issue during the
year. The calculation of adjusted earnings per share excludes
exceptional costs of GBPnil (2015: GBP637,000) and goodwill
impairment of GBPnil (2015: GBP6,000,000).
Reconciliations of the earnings and weighted average number of
shares used in the calculation are set out below:
2016 2015
Earnings Weighted average number of Loss Weighted average number of
GBP'000 shares (in thousands) GBP'000 shares (in thousands)
------------------------------ ---------- ------------------------------ ---------- ------------------------------
Basic EPS
Earnings/(loss) earnings
attributable to owners of
the parent 475 6,308 (6,339) 100,937
2016 2015
GBP'000 GBP'000
Exceptional items comprising
the following:
------------------------------ ---------- ------------------------------ ---------- ------------------------------
Restructuring costs - 637
Goodwill impairment - 6,000
Deal costs - -
------------------------------ ---------- ----------
- 6,637
------------------------------ ---------- ----------
The above exceptional items in 2015 consist of goodwill
impairment, restructuring costs and compensation for loss of office
along with other non-recurring costs.
7. Intangible assets
Goodwill Development expenditure Total
GBP'000 GBP'000 GBP'000
------------------------------ ------------ ------------------------ ---------
Cost
At 1 January 2015 9,904 2,048 11,952
Additions - 424 424
At 31 December 2015 9,904 2,472 12,376
Additions - 539 539
At 31 December 2016 9,904 3,011 12,915
------------------------------ ------------ ------------------------ ---------
Accumulated amortisation and impairment
At 1 January 2015 80 1,332 1,412
Impairment 6,000 - 6,000
Amortisation charge - 320 320
------------------------------ ------------ ------------------------ ---------
At 31 December 2015 6,080 1,652 7,732
Amortisation charge - 370 370
------------------------------ ------------ ------------------------ ---------
At 31 December 2016 6,080 2,022 8,102
------------------------------ ------------ ------------------------ ---------
Net book value
At 1 January 2015 9,824 716 10,540
------------------------------ ------------ ------------------------ ---------
At 31 December 2015 3,824 820 4,644
------------------------------ ------------ ------------------------ ---------
At 31 December 2016 3,824 989 4,813
------------------------------ ------------ ------------------------ ---------
Amortisation of GBP370,000 (2015: GBP320,000) is included within
administration expenses in the income statement.
(a) Impairment tests for goodwill
Goodwill arose in relation to the Group's acquisition of
Touchstar Technologies Limited, Access Fire & Security Limited
and Touchstar ATC Limited (formerly Feedback Data Limited). An
impairment test has been performed on the carrying value of
goodwill based on value-in-use calculations.
The carrying amount of the goodwill held in regard to Touchstar
Technologies Limited was impaired in 2015 by GBP6,000,000 to its
recoverable amount. This loss was included in 'administration
expenses' in the income statement in 2015. The impairment charge
arose following a review and introduction of a more reasonable view
of future growth rates.
The value-in-use calculations have used pre-tax cash flow
projections based on the financial budgets approved by management
covering a five-year period. Revenue growth for 2017 is benchmarked
against 2016 actuals, with growth up to 2021 forecast. Cash flows
beyond the five-year period are extrapolated using a growth rate of
2% (2015: 3%), which does not exceed the long-term average growth
rate for the business. The other key assumptions used in the value
in use calculations are the discount rate, which has been
determined at 10% (2015: 11%), and an annualised sales growth of 2%
(2015: 3%), over the five-year period.
If the budgeted gross margin used in the value-in-use
calculation for Touchstar Technologies Limited had been 2% lower
than management's estimates at 31 December 2016 (for example, 66%
instead of 68%), the Group would have experienced an impairment of
goodwill of GBP344,000.
If the estimated cost of capital used in determining the pre-tax
discount rate for Touchstar Technologies Limited had been 1% higher
than management's estimates (for example, 11% instead of 10%),
there would be no further impairment required.
For Access Fire & Security Limited and Touchstar ATC Limited
(formerly Feedback Data Limited), no reasonably possible changes in
any assumptions would be expected to give rise to an impairment of
the goodwill at 31 December 2016.
(b) Development expenditure
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.
Management determined budgeted sales growth based on historic
performance and its expectations of market development. The
discount rates are pre-tax and reflect the specific risks relating
to the business.
These calculations did not result in impairment. The following
sensitivity analysis was performed:
-- Increase the discount rate by 1.5%; and
-- Reduce the growth rate by 1% beyond the first five years.
In each of these scenarios no impairment was identified.
8. Capital reorganisation and reduction
On 24 May 2016, the company issued 3,453 ordinary shares at
GBP0.05 each to bring the total number of shares in issue to
100,940,000; at which time the company consolidated every 4,000
existing ordinary shares of GBP0.05 each into one new consolidated
ordinary share of GBP200.00 each. A subdivision of each new
consolidated ordinary share was undertaken; the resultant split
being 3,750 deferred shares of GBP0.05 each and 250 ordinary shares
of GBP0.05 each. The rights to the new ordinary shares are
identical in all respects to those of the original ordinary shares.
These transactions did not have any impact on retained
earnings.
On 8 July 2016 under a Capital Reduction Scheme, the company, by
Special Resolution, reduced both its share premium account and
capital redemption reserve along with a cancellation of the
deferred shares. This resulted in an increase in retained earnings
amounting to GBP9,764,000. This element of the retained earnings
balance is not available for distribution by way of dividend to
shareholders until 31 December 2018.
This process was confirmed by an Order of the Court of Session
Scotland on 8 July 2016 and certified on 12 July 2016 by The
Registrar of Companies for Scotland.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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