TIDMTST
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 6 months
30 June 2022 30 June 2021 Increase
GBP3,102,000 GBP2,895,000 up 7%
* Revenue
* Margin 59.8% 56.5% up 6%
GBP571,000 GBP464,000 up 23%
* EBITDA*
GBP164,000 GBP79,000 up 108%
* Trading profit after tax*
* Adjusted Earnings Per Share (EPS)* 1.93p 0.93p up 108%
GBP1,602,000 GBP1,301,000 up 23%
* Cash net of overdraft and CBILs**
GBP1,061,000 GBP621,000 up 71%
* Order book
GBP1,311,000 GBP1,115,000 up 18%
* Recurring revenue
Statutory Results:
up 46%
* Profit after tax GBP164,000 GBP112,000
* Basic EPS 1.93p 1.32p up 46%
H1 2022 Highlights
-- Revenue growth of 7% to GBP 3,102,000 (H1 2021: GBP 2,895,000 )
-- Recurring revenue growth accelerated increasing by 18% to GBP
1,311,000 (H1 2021: GBP 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 GBP571,000 (H1 2021: GBP464,000)
-- Order book rose 71% to GBP 1,061,000 (H1 2021: GBP 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 GBP 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 GBP1,022,000
an increase of GBP186,000 on 13 September 2021 which was
GBP836,000.
-- 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
Ian Martin 0161 874 5050
Mark Hardy 0161 874 5050
WH Ireland - Nominated Adviser & Broker www.whirelandcb.com
Corporate Finance - Mike Coe/Sarah Mather 020 7220 1666
Information on Touchstar plc can be seen at:
www.touchstarplc.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 GBP3,102,000 (H1 2021:
GBP2,895,000).
The order book on 30 June 2022 stood 71% higher at GBP1,061,000
(H1 2021: GBP621,000). 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 GBP 1,311,000 (H1 2021: GBP 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 GBP1,721,000 an increase of 8.5% compared to
H1 2021 of GBP1,586,000. 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
GBP33,000. 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 GBP571,000 in the
Period (H1 2021: GBP464,000), operating profit rose by 90% to
GBP114,000 (H1 2021: GBP60,000 inclusive of GBP33,000 benefit from
CJRS).
Spend on research and development continued and amounted to
GBP499,000 in the Period of which GBP283,000 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 GBP60,000 in the Period (H1
2021: GBP60,000). In the Period both trading profit after tax and
earnings per share increased by 108% to GBP164,000 and 1.93p
respectively (H1 2021: GBP79,000 and 0.93p).
As at the 30 June 2022, we remained debt free and our cash, net
of overdraft and the GBP135,000 Coronavirus Business Interruption
Loan (CBIL), was GBP1,602,000 (H1 2021: GBP1,301,000). 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
GBP1,022,000. 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
GBP'000 GBP'000 GBP'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 based
Share premium payment Retained
Share capital account reserves earnings Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
2022 2021 2021
GBP'000 GBP'000 GBP'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
2022 2021 2021
GBP'000 GBP'000 GBP'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
GBP'000 GBP'000 GBP'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 .
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 GBP21,000 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 - GBP6,000)
and credited to the share-based payment reserve.
6. Other operating income
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'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 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'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 Profit Weighted average number of
GBP'000 shares (in thousands) GBP'000 shares (in thousands)
------------------------------- ---------- ------------------------------ --------- ------------------------------
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
GBP'000 Weighted average number of shares (in thousands)
---------------------------------------------------- ----------- ---------------------------------------------------
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
GBP'000 GBP'000 GBP'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
GBP'000 GBP'000 GBP'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
GBP'000 GBP'000 GBP'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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