TIDMTST
RNS Number : 2640J
Touchstar PLC
26 April 2022
Touchstar plc
Preliminary results for the year ended 31 December 2021
The Board of Touchstar plc ((AIM:TST) 'Touchstar', the 'Company'
or 'the Group'), suppliers of mobile data computing solutions and
managed services to a variety of industrial sectors, is pleased to
announce its results for the year ended 31 December 2021.
Key financials
2021 2020 % increase
------------------- ------------- ------------- -----------
Revenue GBP6,104,000 GBP5,886,000 up 3.7%
EBITDA GBP1,072,000 GBP854,000 up 25.5%
Post tax profit GBP341,000 GBP87,000 up 292.0%
Net cash GBP2,380,000 GBP1,771,000 up 34.4%
Earnings per
share 4.02p 1.03p up 290.3%
Recurring revenue GBP2,322,000 GBP2,037,000 up 14.4%
Gross margin 59.5% 52.0% up 14.0%
Financial highlights
-- A strong set of results
-- Revenue growth of 3.7% to GBP6,104,000 (2020: GBP5,886,000)
-- EBITDA increased 25.5% to GBP1,072,000 (2020: GBP854,000)
-- Profit after tax grew by 292.0% to GBP341,000 (2020: GBP87,000)
-- Cash generation strong, boosting net cash to GBP GBP2,380,000
at year end, a 34.4% improvement (2020: GBP1,771,000)
-- Earnings per share rose by 290.3% to 4.02p (2020: 1.03p)
-- Recurring revenue increased 14.4% - three times the rate of
growth of total revenue to GBP2,322,000 (2020: GBP2,037,000)
-- Recurring revenues now represent 38.0% of total revenues
-- Gross margins expanded 14.0% to 59.5% (2020: 52.0%)
Commenting today, Ian Martin, Chairman of Touchstar, said:
"Touchstar has already become a much more resilient focussed,
coherent, high-quality business with true growth potential. The
Board's strategy is clear and remains consistent. We must
capitalise on the forward momentum gained, using internally
generated cash to support our rate of organic growth, innovate our
products, enhance our solutions, invest in our people, increase
returns to shareholders and become a better business."
This announcement contains inside information for the purposes
of Article 7 of the UK version of Regulation (EU) No 596/2014 which
is part of UK law by virtue of the European Union (Withdrawal) Act
2018, as amended ("MAR"). Upon the publication of this announcement
via a Regulatory Information Service, this inside information is
now considered to be in the public domain.
For further information, please contact:
Ian Martin 0161 8745050
Touchstar plc Mark Hardy 0161 874 5050
WH Ireland -
Nominated Adviser Mike Coe/
and broker Sarah Mather 0207 220 1666
Information on Touchstar plc can be seen at:
www.touchstarplc.com
CHAIRMANS STATEMENT
Introduction
I am pleased to report that Touchstar has delivered a strong set
of results, above market expectations, for the year ended 31
December 2021 ("FY2021"), against what has been a challenging
backdrop in the world's economy. Profit after tax is up 290% to
GBP341,000 (2020: GBP87,000) and there has been EBITDA growth of
GBP218,000 to GBP1,072,000 (2020: GBP854,000).
The Group has displayed its resilience in the face of the global
COVID-19 pandemic and has seen a positive change in business
strength with the new and more profitable revenue streams coming to
the fore.
The Company reports a strong year-end cash balance, net of the
Coronavirus Business Interruption Loan, of GBP2,380,000 and a
year-end order book of GBP646,000 which means the Group is well
placed to build on last year's performance, we look forward to
delivering further strategic progress.
Financial review
Revenue for FY2021 increased 3.7% to GBP6,104,000 (2020:
GBP5,886,000). Very pleasingly recurring revenue increased 14% to
GBP2,322,000 (2020: GBP2,037,000) and represented 37.4% of total
revenue (2020: 34.6%). The development of recurring revenue is a
key to our strategy and future success. As of 8 April 2022, run
rate recurring revenue had increased further to GBP2,550,000.
It was also pleasing to see the Group experience a healthy
recovery in the areas that had been most impacted by the pandemic
in 2020. Nevertheless unsurprisingly, the overall rate of growth
was held back in the early part of the year by the suspension of
awards of large projects in the petrochemical distribution sector
due to the re-emergence of the pandemic. Major projects in this
area tend to have lead times of 9-12 months, and it was only in the
second half of 2021 that new major projects began being confirmed
for 2022 and beyond, thus revenue in this sector reduced in
2021.
The order book at year end 2021 stood 36.0% higher at GBP646,000
compared to the prior year end level of GBP475,000.
Gross margins increased in 2021 to 59.5% (2020: 52.0%) driven by
a higher level of software sales and operational efficiency.
Overhead costs increased by 8.9% as expected in 2021 to GBP3.5
million (2020: GBP3.1 million). This comparison excludes the
benefits of the Coronavirus Job Retention Scheme which totalled
GBP44,000 in 2021 (2020: GBP146,000).
Total spend on research and development during the year amounted
to GBP935,000 (2020: GBP760,000), of which GBP460,000 (2020:
GBP429,000) has been capitalised, as we invested in additional
software modules in the proof of delivery product set.
The positive effects of both higher revenue and improved margins
had a dramatic effect upon profitability with earnings before
interest tax and amortisation and depreciation (EBITDA) increasing
to GBP1,072,000 (2020: GBP854,000), operating profit before share
based payments increasing to GBP233,000 (2020: GBP39,000) and
profit before tax increasing to GBP207,000 (2020: GBP23,000).
Due to our R&D expenditure we again benefitted from a tax
credit being GBP134,000 (2020: GBP64,000) such that our profit for
the year increased 292% to GBP341,000 from GBP87,000. This
translated into a similar rise in earnings per share to 4.02p
(2020: 1.03p).
As of 31 December 2021, we remained debt free and our cash, net
of overdraft and the GBP135,000 Coronavirus Business Interruption
Loan, was a very healthy GBP2,380,000 a rise of approximately
GBP609,000 from the prior year position of GBP1,771,000. This
nevertheless understates the strength of the underlying cash
generation from the business; in 2021 cash was applied to the
normalisation of trade and other payables as we unwound deferred
amounts due under the Government's support packages to
business.
Operational review
Whilst the Group and general business environment continued to
work within COVID-19 policies and restrictions, Touchstar saw a
positive change in business strength with the new and more
profitable revenue streams coming to the fore; including, increased
software licence charges and software development for bespoke work
as well as charging professional fees for services delivered. As a
result, the business experienced a growth in revenue and
profitability. Those areas of the business that had experienced the
more dramatic slowdowns in 2020, saw strong and positive recovery
during 2021, namely, product sales more associated with capital
expenditure in Logistics and the ability to commence with onsite
work in the Access Control marketplace, which otherwise had been
restricted in 2020.
During the year, the Group continued to enhance the customer
driven functionality of its software solutions. Our in-house
developed software, utilising modern cloud-based services, has
played a major part in customer gains and retention. In addition,
the Group's specialist and robust hardware, where margins continue
to be healthy, gives us a real competitive advantage in the proof
of delivery market. The TS3200 Android rugged tablet has and is
playing an important part in the continued success and adoption of
our solutions.
Retention of customers, as well as securing new clients, is a
key focus for the Group. The business is currently benefiting from
many of its existing clients going through the process of an
upgrade cycle with us - a testament to our ongoing service and
support. This provides the opportunity to increase the recurring
revenue as they adopt the latest licence-based solution. We now
have around 8 major clients operating on the new platform and
another 8 existing clients in the throes of either pilot or roll
out phase over the coming 12 to18 months.
During 2021 there were challenges in the timely supply of
product and components within the supply chain, but the Group
successfully navigated its way through. We expect these challenges
will continue in 2022 and therefore we will require the same
continued focus to mitigate and reduce any impacts that may
arise.
Alongside the software developments, we continue to enhance our
product sets within the hardware element of our solution. All
devices now designed and supplied utilise the Android operating
system - the defacto choice worldwide.
The dynamics of the team within the business evolve and change
too. The Group now has a central support team for all products,
operating out of our Manchester office and we continue to build on
our UK in-house software development and test team. These
investments are now necessary given the solution set we now own and
supply to the marketplace.
Strategy
The objective remains to execute our strategy effectively;
delivering organic growth, margin improvement, building Software as
a Service ("SaaS") revenues at an even faster rate, and achieving
higher levels of profitability.
The Board believes Touchstar has the medium-term potential of
sustaining annual double digit top line growth from our existing
businesses driven by:
a. Existing customers upgrading to mobile cloud-based solutions
b. Capture of new customers
c. Introduction of enhanced products and solutions
d. Introduction of more professional services
In addition, we expect the growth rate of recurring revenue to
continue to outpace total revenue growth, as SaaS revenues build.
Professional services and licences are predominantly annual charges
and thereby we envisage recurring revenue will continue to grow and
strengthen within the Group. The target is for recurring revenue to
account for 40% of total revenue by the end of 2022.
We expect the revenue stream will continue to strengthen in high
margin areas such as licences, professional services, and software
development - further enhancing the earnings and building the
Group's strength in the medium and long term
Current trading and prospects
We intend to build upon the considerable progress made last
year. Over the last two years the consistent message has been that
in 2022 the underlying growth rate in all the Group's businesses
should harmonise and return to normalised trading patterns.
2022 has started well, with a healthy opening order book
followed by a strong first quarter of trading. Short-term prospects
are being tempered somewhat by a level of inactivity which we
believe is a momentary reaction to the present economic and global
uncertainty, with some orders being held up, not lost. So far, we
have been able to balance the pressures on costs by increasing
prices in a targeted and appropriate manner, this will need to be
constantly assessed and reviewed during the year.
Realistically the combination of the geo-political instability,
inflationary pressures and higher interest rates will inevitability
result in hesitancy in corporate decision making. The assumption
made is that this year will see some subdued levels of
macro-economic growth and investment. Currently there has been no
material change to the business from the distressing and sad
situation in Ukraine - our thoughts and hopes are with the innocent
people caught up in that conflict.
Whilst we have tempered our enthusiasm in the short-term, the
Board believes that the steps we have taken will see growth in
revenue and EBITDA continue in 2022, driving further progress in
our financial performance.
Distributable reserves
The directors would like to have the ability to consider
returning value to shareholders either via share buybacks or the
payment of dividends. However, to be able to do this company law
requires the Company to have positive distributable reserves. At
present the Company does not have positive distributable reserves
due the deficit on its retained earning reserve which as at 31
December 2021 stood at GBP2,236,000. The Directors are consulting
with the Company's advisers over how best to eliminate this deficit
which they believe can be through a combination of dividend
payments from the Company's underlying subsidiaries and a capital
reduction.
Concluding thoughts
The Board's strategy is clear and remains consistent. We must
capitalise on the forward momentum gained, using internally
generated cash to support our rate of organic growth, innovate our
products, enhance our solutions, invest in our people, increase
returns to shareholders and become a better business.
The Company has made good progress over the last two years
despite the impacts of COVID-19. Touchstar has already become a
much more resilient focussed, coherent, high-quality business with
true growth potential. This has only happened through the
dedication, hard work and talent of the people within the Group.
Thank you to all - it is greatly appreciated.
The Board is committed to creating and delivering value that
reflects the prospects and embedded value within the business. With
the Company's cash reserves, a strong balance sheet, growing
revenues and especially recurring revenues that will allow us to
increasingly position the Company as a software business, the Board
is confident of the Company's prospects and of increasing
shareholder value.
I Martin
Executive Chairman
25 April 2022
CEO STRATEGIC REVIEW
Profitability
Whilst the business and general environment continued to work
within Covid policies and restrictions, which impacted the Group
performance, 2021 has seen a strategic change in business strength
with the new and more profitable revenue streams coming to the
fore. Despite the reduction in face-to-face meetings, the business
experienced a modest growth in sales turnover on the previous year
of around 4%. Cash generation remained healthy with the Group
year-end cash position in excess of GBP2.5 million, and the
business made GBP341,000 profit after tax, close to 300% increase
over 2020 profit of GBP87,000.
Total recurring revenue
During 2021, the decision to supply and support complete
solutions has further strengthened the Group. Recurring revenue is
now a valuable asset within the Groups business. 2020 saw total
recurring revenue increase by 6% on 2019 and this trend continues.
In 2021 recurring revenue increased 14% on 2020. This change in
strategy is making a positive impact into the performance and
underlying value of the business. In 2021, the Groups recurring
revenue equated to 38% of turnover and the Board envisage this
percentage will continue increasing.
Group recurring revenue
2018 2019 2020 2021
------------------------ ------------- ------------- ------------- -------------
Group recurring revenue GBP1,840,000 GBP1,918,000 GBP2,037,000 GBP2,322,000
by year
% Increase year on up 4.2% up 6.2% up 14.4%
year
As of 8 April 2022, run rate recurring revenue had increased
further to GBP2,550,000.
The table below demonstrates the consistent strategic
progression of building the business's recurring revenue over the
previous years:
Recurring revenue as a percentage of total Group revenue
2018 2019 2020 2021
------------------------- ----- ----- ----- -----
Group revenue other 70% 71% 65% 62%
Group recurring revenue 30% 29% 35% 38%
Software Licence Recurring Revenue
Whilst the Group enjoyed an increase of 14% in total recurring
revenue over previous years, the predominant impact in growth of
this type of profitable revenue has come from software licence, a
key strategic goal. Recurring revenue in software licences grew a
marked 18% over 2020 performance. This key area of growth will
continue to increase as the change in our business strategy takes
effect. If growth in total revenue continues as expected, we
anticipate software licence revenue to exceed hardware recurring
revenue in 2022 and grow further still in 2023 and beyond.
Group recurring revenue
2018 2019 2020 2021
---------------------- ------------- ------------- ------------- -------------
Software licences GBP659,000 GBP767,000 GBP863,000 GBP1,040,000
Increase year on year up 16.4% up 12.5% up 20.5%
Hardware maintenance GBP1,181,000 GBP1,151,000 GBP1,174,000 GBP1,282,000
Movement year on year down 2.5% up 2.0% up 9.2%
As we have now become a more focussed software and solution
orientated business, we have strengthened the technical and
professional services team to provide the best support for our
product delivery. Whilst we continue to grow sales in the solutions
area, we still recognise the continuing value that the existing
legacy product sets bring to the business, albeit we are managing
down our business reliance on these.
All the Touchstar software products we now offer, are in house
owned (IPR) which eliminates our reliance on third party suppliers
and provides maximum flexibility in growing the sales and profit
line of the Group. This move has allowed us to increase the sales
of software development as customers require tweaks and
modifications to our standard products to suit their operation. The
table below illustrates the past 4 years of software development
sales, demonstrating an increase of over 200% in this time.
Customer requested software developments
2018 2019 2020 2021
---------------------------- ---------- ----------- ----------- -----------
Customer requested software GBP83,800 GBP128,600 GBP129,200 GBP257,900
developments by year
Increase year on year up 53.5% up 0.5% up 99.6%
We continue to secure large contracts with blue chip companies
across the UK and Europe. The strategy to supply a SaaS (Software
as a Service) model to the industry has become quite widely
accepted. This now provides consistent recurring revenue greater
than in previous years. Combining increases of recurring revenue
and the above software development charges has now led to improved
gross margin, of 59% of the group turnover in 2021 (52% in 2020).
As of 8 April 2022, software development and support fees booked
and to be invoiced in 2022 stood at GBP184,000.
The Group operates under the Touchstar brand providing
consistent brand awareness of the operating companies which has
been successful in promoting a cohesive and singular business and
all can be accessed under one web site: www.touchstar.co.uk .
Consolidated income statement for the year ended 31 December
2021
2021 2020
GBP'000 GBP'000
--------
Revenue 6,104 5,886
Cost of sales (2,472) (2,827)
------------------------------------------------------------------------- -------- --------
Gross profit 3,632 3,059
Distribution costs (49) (41)
Administrative expenses (3,400) (3,125)
Other operating income 44 146
------------------------------------------------------------------------- -------- --------
Operating profit before share-based payment provision 233 39
Share-based payment provision included in administrative expenses (6) -
------------------------------------------------------------------- ---- -------- --------
Operating profit 227 39
Finance costs (20) (16)
------------------------------------------------------------------------- -------- --------
Profit before income tax 207 23
Income tax credit 134 64
------------------------------------------------------------------------- -------- --------
Profit for the year attributable to the owners of the parent 341 87
------------------------------------------------------------------------- -------- --------
Earnings per ordinary share (pence) attributable to owners of
the parent during the year:
2021 2020
------- ------
Basic 4.02p 1.03p
There is no other comprehensive income or expense in the current
year or prior year and consequently no statement of other
comprehensive income or expense has been presented.
All activity in 2021 relating to continuing operations.
The Company has elected to take the exemption under section 408
of the Companies Act 2006 not to present the parent Company income
statement. The profit for the Company is detailed in the Statement
of financial position and the Company statement of changes in
shareholders' equity.
Consolidated statement of changes in equity for the year ended
31 December 2021
Share based
Share premium payment Retained
Share capital account Reserves earnings Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- --------------------------- -------------- ------------ ---------- -------------
At 1 January
2020 424 1,119 - 348 1,891
Profit for the
year - - - 87 87
At 31 December
2020 424 1,119 - 435 1,978
Profit for the
year - - 6 341 347
At 31 December
2021 424 1,119 6 776 2,325
---------------- --------------------------- -------------- ------------ ---------- -------------
Company statement of changes in equity for the year ended 31
December 2021
Share based
Share premium payment Retained
Share capital account reserve earnings Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- --------------------------- -------------- ------------ ---------- -------------
At 1 January
2020 424 1,119 - (2,705) (1,162)
Profit for the
year - - - 3 3
At 31 December
2020 424 1,119 - (2,702) (1,159)
Profit for the
year - - 6 6 12
---------------- --------------------------- -------------- ------------ ---------- -------------
At 31 December
2021 424 1,119 6 (2,696) (1,147)
---------------- --------------------------- -------------- ------------ ---------- -------------
Consolidated and Company statements of financial position as at
31 December 2021
Group Company
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ------------------ ------------------- ---------------- -----------------
Non-current assets
Intangible assets 1,198 1,350 - -
Investments - - 5 -
Property, plant and
equipment
EQUIPMENTEQUIPMENTEQUIPMENT
EQUIPMENTequipment 94 121 - -
Right-of-use assets 399 479 - -
Deferred tax assets 81 63 3 3
------------------------------------ ------------------ ------------------- ---------------- -----------------
1,772 2,013 8 3
----------------------------------- ------------------ ------------------- ---------------- -----------------
Current assets
Inventories 865 714 - -
Trade and other receivables 1,071 1,010 462 474
Corporation tax receivable 166 110 - -
Cash and cash equivalents 3,903 3,177 - -
------------------------------------ ------------------ ------------------- ---------------- -----------------
6,005 5,011 462 474
----------------------------------- ------------------ ------------------- ---------------- -----------------
Total assets 7,777 7,024 470 477
------------------------------------ ------------------ ------------------- ---------------- -----------------
Current liabilities
Trade and other payables 1,333 1,246 94 230
Contract liabilities 1,762 1,485 - -
Borrowings 1,418 1,271 1,418 1,271
Lease liabilities 169 163 - -
4,682 4,165 1,512 1,501
----------------------------------- ------------------ ------------------- ---------------- -----------------
Non-current liabilities
Deferred tax liabilities 251 215 - -
Contract liabilities 172 177 - -
Borrowings 105 135 105 135
Lease liabilities 242 354 - -
------------------------------------ ------------------ ------------------- ---------------- -----------------
770 881 105 135
----------------------------------- ------------------ ------------------- ---------------- -----------------
Total liabilities 5,452 5,046 1,617 1,636
------------------------------------ ------------------ ------------------- ---------------- -----------------
Consolidated and Company statement of financial position as at
31 December 2021 (continued)
Group Company
--------------------------- ----------------------------
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Capital and reserves
attributable
to owners of the
parent
Retained earnings
at beginning of year 435 348 (2,702) (2,705)
Profit/(loss) for
the year 341 87 6 3
Retained earnings
at end of year 776 435 (2,696) (2,702)
Share capital 424 424 424 424
Share based payment
reserve 6 - 6 -
Share premium 1,119 1,119 1,119 1,119
------------------------------- --------------- ---------- ----------- ---------------
Total equity 2,325 1,978 (1,147) (1,159)
------------------------------- --------------- ---------- ----------- ---------------
Total equity and liabilities 7,777 7,024 470 477
------------------------------- --------------- ---------- ----------- ---------------
Consolidated and Company cash flow statement for the year ended
31 December 2021
Group Company
----------------------------------- ---------------------- --------------------
2021 2020 2021 2020
GBP '000 GBP '000 GBP'000 GBP'000
----------------------------------- ---------- ---------- --------- ---------
Cash flows from operating
activities
Operating Profit 226 39 1 3
Depreciation 233 227 - -
Amortisation 612 588 - -
Share-based payment provision 6 - 6 -
Movement in:
Inventories (151) 177 - -
Trade and other receivables (60) 307 (80) 715
Trade and other payables and
contract liabilities 358 (86) (36) 172
------------------------------------ ---------- ---------- --------- ---------
Cash generated from/(used
in) operations 1,224 1,252 (109) 890
Interest paid (20) (16) (3) (3)
Corporation tax received 97 326 - -
------------------------------------ ---------- ---------- --------- ---------
Net cash generated from operating
activities 1,301 1,562 (112) 887
------------------------------------ ---------- ---------- --------- ---------
Cash flows from investing
activities
Addition of intangible assets (460) (439) - -
Investment in subsidiaries - - (5) -
Purchase of property, plant
and equipment (50) (20) - -
Net cash used in investing
activities (510) (459) (5) -
------------------------------------ ---------- ---------- --------- ---------
Cash flows from financing
activities
Proceeds from issue of business
loan (15) 150 (15) 150
Principal elements of lease
payments (182) (182) - -
------------------------------------ ---------- ---------- --------- ---------
Net cash generated from financing
activities (197) (32) (15) 150
------------------------------------ ---------- ---------- --------- ---------
Net increase/(decrease) in
cash and cash equivalents 594 1,071 (132) 1,037
Cash and cash equivalents
at start of the year 1,921 850 (1,256) (2,293)
------------------------------------ ---------- ---------- --------- ---------
Cash and cash equivalents
at end of the year 2,515 1,921 (1,388) (1,256)
------------------------------------ ---------- ---------- --------- ---------
1 General information
Touchstar plc (the 'Company') and its subsidiaries (together
'the Group') design and build rugged mobile computing devices and
develop software solutions used in a wide variety of field-based
delivery, logistics and service applications. The Company is a
public company limited by share capital incorporated and domiciled
in the United Kingdom. The Company has its listing on the
Alternative Investment Market. The address of its registered office
is 1 George Square, Glasgow, G2 1AL.
2 Basis of preparation
The final results for the year ended 31 December 2021 have been
prepared in accordance with the accounting policies set out in the
annual report and the accounts for the year ended 31 December
2020.
The Group Financial Statements have been prepared in accordance
with the International Financial Reporting Standards ('IFRS') as
adopted by the European Union, IFRS IC interpretations and the
Companies Act 2006 applicable to companies reporting under IFRSs
and the AIM Rules for Companies. The Group Financial Statements
have been prepared under the historical cost convention.
While the financial information included in this final
announcement has been computed in accordance with IFRS, this
announcement does not itself contain sufficient information to
comply with IFRS. The accounting policies used in preparation of
this final announcement have remained unchanged from those set out
in the Group's 2020 statutory financial statements other than those
described below. They are also consistent with those in the Group's
statutory financial statements for the year ended 31 December 2021
which have yet to be published. The final results for the year
ended 31 December 2021 were approved by the Board of Directors on
25 April 2022.
The financial information set out in this final announcement
does not constitute the Group's statutory financial statements for
the year ended 31 December 2021 but is derived from those financial
statements which were approved by the Board of Directors on 25
April 2022. The Auditors have reported on the Group's statutory
financial statements and their report was unqualified and (ii) did
not contain a statement under section 498(2) or 498(3) Companies
Act 2006. The statutory financial statements for the year ended 31
December 2021 have not yet been delivered to the Registrar of
Companies and will be delivered following the Company's Annual
General Meeting.
The comparative figures are derived from the Group's statutory
financial statements for the year ended 31 December 2020 which
carried an unqualified audit report, did not contain a statement
under section 498(2) or 498(3) Companies Act 2006 and have been
filed with the Registrar of Companies.
Going Concern
These financial statements have been prepared on a going concern
basis, which assumes that the Group will be able to meet its
liabilities when they fall due. As of 31 December 2021, the Group
held cash of GBP2,515,000 (after considering overdraft balances as
presented in note 21), with unencumbered net cash of GBP2,380,000
after taking into account the GBP135,000 Coronavirus Business
Interruption Loan. The Group also had an undrawn GBP200,000 on
demand overdraft facility as of 31 December 2021 (also GBPnil in
April 2022).
The Touchstar management continues to demonstrate its ability to
proactively respond to both internal and external challenges it has
faced, non-more so than those encountered over the past two
years.
The directors remain confident in the business, the skillset
employed in its dedicated staff, solid product set and loyal
customer base.
The C-19 pandemic continued to impact business during 2021,
nonetheless, Group sales still increased on 2020 by a modest
GBP218,000, margins grew from 52% in 2020 to 59.5% in 2021 driven
by richer margin sales and operational efficiencies, along with
tight control of costs, resulted in a profit after tax of
GBP341,000.
The Group continues to benefit from a supportive bank who have
provided the borrowing facility since 2005.
Over the past eighteen months the Group has reduced its reliance
on the facility provided by the bank. In assessing the Company's
ability to continue as a going concern, the Board has reviewed the
Group's cash flow and profit forecasts removing completely reliance
on any facilities. The impact of potential risks and related
sensitivities to the forecasts were considered in assessing the
likelihood of additional facilities being required in the
future.
The directors have at the time of approving the financial
statements, a reasonable expectation that the
company has adequate resources to continue in operational
existence for the foreseeable future. Thus
they continue to adopt the going concern basis of accounting in
preparing the financial statements.
3 Critical accounting estimates and judgements
The Group and Company makes estimates and assumptions concerning
the future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and
assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year are discussed below.
(a) Development expenditure
The Group recognises costs incurred on development projects as
an intangible asset which satisfies the requirements of IAS 38. The
calculation of the costs incurred includes the percentage of time
spent by certain employees on the development project. The decision
whether to capitalise and how to determine the period of economic
benefit of a development project requires an assessment of the
commercial viability of the project and the prospect of selling the
project to new or existing customers.
(b) Impairment of intangibles
Judgement is required in the impairment of assets, notably
intangible software development costs. Recoverable amounts are
based on a calculation of expected future cash flows, which require
assumptions and estimates of future performance to be made. Cash
flows are discounted to their present value using pre-tax discount
rates based on the Directors market assessment of risks specific to
the asset.
(c) Stock provisions
Judgement is required in relation to the appropriate provision
to be made for the write down of slow moving or obsolete inventory.
Such provisions are made based on the assessment of the Group's
prospective sale of inventories and their net realisable value,
which are subject to estimation uncertainty.
4 Analysis of Revenue
2021 2020
GBP'000 GBP'000
------------------------------------------ -------- --------
Recognised at a point in time 3,782 3,788
Recognised over time (recurring revenue) 2,322 2,098
------------------------------------------ -------- --------
6,104 5,886
------------------------------------------ -------- --------
5 Share-based employee remuneration
The Touchstar plc EMI Share Option Plan (Plan) was approved by
the shareholders at the Annual 2021 AGM on 23 June 2021. It is a
share-based payment scheme for employee remuneration which will be
settled in equity.
The Plan is part of the remuneration package for Group employees
as selected by the Group's Remuneration Committee. Options under
this Plan will vest if certain performance conditions, as defined
in the Plan are met.
Participants in this Plan must be employed until the end of the
agreed vesting period unless deemed as 'good employees' by the
Group's Remuneration Committee on leaving. Upon vesting, each
option allows the holder to purchase each allocated share at the
market price determined at the grant date.
The number of options granted during the year and outstanding at
31 December 2021 was 211,000 (2020: n/a). These shares had not
vested as at 31 December 2021.
The assessed fair value at grant date of options granted during
the year ended 31 December 2021 was GBP0.35 per option (2020:
GBPn/a). The fair value at grant date is independently determined
using the Black-Scholes model that takes into account the exercise
price, the term of the option, the impact of dilution (where
material), the share price at grant date and expected price
volatility of the underlying share, the risk-free interest rate for
the term of the option, and the annualised volatility of Touchstar
plc's shares.
The model inputs for options granted during the year ended 31
December 2021 included:
Grant date 18 Nov 2021
Vesting period ends Term A 30 Jun 2023
Term B 30 Jun 2024
Share price at date of grant GBP0.85
Volatility 50%
Risk-free investment rate 1%
Fair value per option at grant date GBP0.41
Exercise price at date of grant GBP0.85
Exercise period ends Term A 30 Jun 2023/17 Nov 2031
30 Jun
Term B 30 Jun 2024/17 Nov 2031
Weighted average remaining contractual life 6.06 years
The underlying expected price volatility was determined by
reference to the historical data of Touchstar plc shares over the
past 12 months. No special features inherent to the options granted
were incorporated into measurements of fair value.
In total, GBP6,000 (2020: GBPn/a) of employee remuneration
expense (all of which related to equity-settled share-based payment
transactions) has been included in the income statement and
credited to the Share-based payment reserve.
6.1 Income tax credit
2021 2020
GBP '000 GBP '000
--------------------------------------- ---------- ----------
Corporation tax
Current tax (147) (92)
Adjustments in respect of prior years (5) -
Deferred tax 18 28
Total tax credit (134) (64)
--------------------------------------- ---------- ----------
Corporation tax is calculated at 19% (2020: 19%) of the
estimated assessable profit for the year. This is the weighted
average tax rate applicable for the year.
1
6.2 Factors affecting the tax credit for the year
The tax credit for the year is same as (2020: same as) the
standard rate of corporation tax in the UK of 19% (2020: 19%). The
differences are explained below :
2021 2020
GBP '000 GBP '000
--------------------------------------------------------------------------------- ---------- ----------
Profit before income tax 207 23
--------------------------------------------------------------------------------- ---------- ----------
Multiplied by the standard rate of corporation tax in the UK of 19% (2020: 19%) 39 4
Effects of:
Items not deductible for tax purposes 2 1
Enhanced research and development deduction (213) (167)
Adjustments in respect of prior years (5) -
Losses surrendered through R&D tax credit 46 29
Capital allowances claimed in year less than/(in excess of) depreciation 20 28
Previously unrecognised tax losses used to reduce current tax expense (71) -
Adjustment to deferred tax arising from changes in tax rate 48 41
Total tax credit for the year (134) (64)
--------------------------------------------------------------------------------- ---------- ----------
Factors affecting the future tax charge
Changes to the UK corporation tax rates were substantively
enacted as part of Finance Bill 2021 (on 2 February 2022). This
included the maintaining of the current corporation tax rate of
19%.
The budget also announced an increase in rate from 19% to 25%
from April 2023. Therefore, deferred taxes at the balance sheet
date have been measured at the enacted tax rate of 25%.
7 Earnings/(losses) per share
2021 2020
--------- ------
Basic 4.02p 1.03p
Diluted N/A N/A
--------- ------ ------------
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares in issue during the year. The Group
issued 211,000 options with an exercise price of 85p during the
year. Given the exercise price of these options, they are
considered anti-dilutive and therefore no diluted EPS is
presented.
Reconciliations of the earnings and weighted average number of
shares used in the calculation are set out below:
2021 2020
Earnings Weighted average number of Earnings Weighted average number of
GBP'000 shares (in thousands) GBP'000 shares (in thousands)
------------------------------- --------- ------------------------------ --------- -------------------------------
Basic EPS
Profit attributable to owners
of the parent 341 8,475 87 8,475
Adjusted EPS
Earnings attributable to
owners of the parent before
share-based payment provision 347 8,475 87 8,475
------------------------------- --------- ------------------------------ --------- -------------------------------
8 Intangible assets
Group
--------------------- ----------------------------------------------
Goodwill Development expenditure Total
GBP'000 GBP'000 GBP'000
--------------------- --------- ------------------------ ---------
Cost
At 1 January 2020 9,904 2,862 12,766
Additions - 439 439
Disposal (1,313) - (1,313)
--------------------- --------- ------------------------ ---------
At 31 December 2020 8,591 3,301 11,892
Additions - 460 460
Disposal - (678) (678)
--------------------- --------- ------------------------ ---------
At 31 December 2021 8,591 3,083 11,674
--------------------- --------- ------------------------ ---------
Accumulated amortisation
At 1 January 2020 9,904 1,363 11,267
Amortisation charge - 588 588
Disposal (1,313) - (1,313)
At 31 December 2020 8,591 1,951 10,542
Amortisation charge - 612 612
Disposal - (678) (678)
At 31 December 2021 8,591 1,885 10,476
--------------------- --------- ------------------------ ---------
Net book value
At 31 December 2021 - 1,198 1,198
--------------------- --------- ------------------------ ---------
At 1 January 2020 - 1,499 1,499
--------------------- --------- ------------------------ ---------
At 31 December 2020 - 1,350 1,350
--------------------- --------- ------------------------ ---------
Disposal of goodwill relates to the dissolution of the three
dormant subsidiary undertakings during 2020.
Development expenditure
The calculation of the costs incurred includes third party
developers along with the percentage of time spent by certain
employees on hardware and software development for deployment in
business operations. The decision whether to capitalise and how to
determine the period of economic benefit of a development project
requires an assessment of the commercial viability of the project
and the prospect of selling the project to new or existing
customers.
Management determined budgeted sales growth based on historic
performance and its expectations of market development via each
product set's underlying pipeline.
A review of each of the product sets did not result in any
impairment.
Development expenditure has been capitalised on an ongoing basis
and therefore has a remaining useful economic life ranging from 0
to 5 years.
9 Property, plant and equipment
Plant and machinery Fixtures, fittings, tools and equipment
GBP'000 GBP'000 Total GBP'000
-------------------------- -------------------- ---------------------------------------- --------------
Cost
At 1 January 2020 358 345 703
Additions 12 8 20
Disposals (55) (5) (60)
At 31 December 2020 315 348 663
Additions 37 13 50
Disposals (87) (49) (136)
At 31 December 2021 265 312 577
-------------------------- -------------------- ---------------------------------------- --------------
Accumulated depreciation
At 1 January 2020 268 260 528
Charge for the year 34 40 74
Disposals (48) (12) (60)
At 31 December 2020 254 288 542
Charge for the year 36 41 77
Disposals (87) (49) (136)
At 31 December 2021 203 280 483
-------------------------- -------------------- ---------------------------------------- --------------
Net book value
At 31 December 2021 62 32 94
-------------------------- -------------------- ---------------------------------------- --------------
At 1 January 2020 61 61 121
-------------------------- -------------------- ---------------------------------------- --------------
At 31 December 2020 90 85 175
-------------------------- -------------------- ---------------------------------------- --------------
10 IFRS 16 Right of use assets
Premises Motor vehicles
GBP'000 GBP'000 Total GBP'000
-------------------------- --------- --------------- ---------------
Cost
At 1 January 2020 579 212 791
Additions - 121 121
Disposal - (122) (122)
At 31 December 2020 579 211 790
Additions - 76 76
Disposal - - -
At 31 December 2021 579 287 866
-------------------------- --------- --------------- ---------------
Accumulated depreciation
At 1 January 2020 141 128 269
Charge for the year 82 71 153
Disposal - (111) (111)
At 31 December 2020 223 88 311
Charge for the year 82 74 156
Disposal - - -
-------------------------- --------- --------------- ---------------
At 31 December 2021 305 162 467
-------------------------- --------- --------------- ---------------
Net book value
At 31 December 2021 274 125 399
-------------------------- --------- --------------- ---------------
At 1 January 2020 438 84 522
-------------------------- --------- --------------- ---------------
At 31 December 2020 356 123 479
-------------------------- --------- --------------- ---------------
11 Cash and cash equivalents
Group Company
------------------------------ ------------------------ ----------------------
2021 2020 2021 2020
GBP '000 GBP '000 GBP'000 GBP'000
------------------------------ ----------- ----------- ---------- ----------
Cash at bank and in
hand 3,903 3,177 - -
Less: bank overdraft
(included within borrowings
note 12) (1,388) (1,256) (1,388) (1,256)
2,515 1,921 (1,388) (1,256)
------------------------------ ----------- ----------- ---------- ----------
The above balances are not offset in the Consolidated Statement
of Financial Position and are included for illustrative purposes
only.
12 Borrowings
Group Company
--------------------- ------------------------ --------------------
2021 2020 2021 2020
GBP '000 GBP '000 GBP'000 GBP'000
--------------------- ----------- ----------- --------- ---------
Current borrowings:
Bank overdraft 1,388 1,256 1,388 1,256
Other loans 30 15 30 15
1,418 1,271 1,418 1,271
--------------------- ----------- ----------- --------- ---------
Group Company
------------------------- ------------------------ --------------------
2021 2020 2021 2020
GBP '000 GBP '000 GBP'000 GBP'000
------------------------- ----------- ----------- --------- ---------
Non-current borrowings:
Bank overdraft - - - -
Other loans 105 135 105 135
105 135 105 135
------------------------- ----------- ----------- --------- ---------
The carrying amounts of borrowings approximate to their fair
value due to their short-term maturity, meaning that the impact of
discounting is not significant. The carrying amounts of the Group's
borrowings are denominated solely in sterling.
The Group bank overdraft facility is secured by a bond and
floating charge over the entire assets of the Group.
At 31 December 2021, the Group had total committed undrawn
facilities of GBP200,000 (2020: GBP350,000).
The Group now operates within a GBP200,000 net overdraft
facility which takes into account both the gross cash position of
each Group entity netted off against any borrowings. As at the 31
December 2021, this represents the net cash balance of GBP2,515,000
(2020: GBP1,921,000) in Note 11.
The Company and its subsidiaries have given a guarantee in
relation to the overdraft facilities extended to The Group.
Other loans relate to the Coronavirus Business Interruption Loan
repayable monthly over six years; first payment commenced on the
12-month anniversary of drawdown, July 2021.
The loan is guaranteed by the UK Government under the
Coronavirus Business Interruption Loan Scheme with interest payable
monthly on commencement of loan repayment. The rate of interest is
4.19% per annum above the Bank of England floating rate.
13 Leases
The note provides information for leases where the group is a
lessee.
i) Amounts recognised in the balance sheet
The balance sheet shows the following amounts relating to
leases:
2021 2020
GBP '000 GBP '000
--------------------- ----------- ----------
Right-of-use assets
Buildings 274 356
Vehicles 125 123
399 479
--------------------- ----------- ----------
2021 2020
GBP '000 GBP '000
------------------- ---------- ----------
Lease liabilities
Current 169 163
Non-current 242 354
411 517
------------------- ---------- ----------
Under IFRS 16 the assets are now presented in property, plant
and equipment and the liabilities as part of the group's
borrowings.
Contractual undiscounted cash flows are due as follows:
2021 2020
GBP '000 GBP '000
---------------------------------- ---------- ----------
Lease liabilities (undiscounted)
Not later than one year 171 171
Between one year and five years 240 267
412 437
---------------------------------- ---------- ----------
There is not considered to be any significant liquidity risk by
the Group in respect of leases.
ii) Amounts recognised in the statement of profit or loss
2021 2020
GBP '000 GBP '000
-------------------------------------------- ----------- ----------
Depreciation charge of right-of-use assets
Buildings 82 82
Vehicles 74 71
156 153
-------------------------------------------- ----------- ----------
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END
FR BUGDSRUDDGDU
(END) Dow Jones Newswires
April 26, 2022 02:00 ET (06:00 GMT)
Touchstar (LSE:TST)
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