TIDMTST
RNS Number : 0200S
Touchstar PLC
28 September 2017
28 September 2017
Touchstar plc
Interim results for the
Six months ended 30 June 2017
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
2017.
This announcement includes inside information as defined in
Article 7 of the Market Abuse Regulation No. 596/2014 and is
disclosed in accordance with the Company's obligations under
Article 17 of those obligations.
Key Financials:
30 June
30 June 2017 2016
* Revenues GBP3,981,000 GBP4,146,000
* Operating profit before exceptional costs GBP39,000 GBP219,000
* Profit before exceptional costs (after tax) GBP133,000 GBP296,000
* Adjusted EPS 2.11p 4.69p
* Exceptional costs GBP128,000 GBPnil
* Operating (loss)/profit GBP (89,000) GBP219,000
* Profit (after tax) GBP5,000 GBP296,000
* Basic EPS 0.08p 4.69p
* Net borrowings GBP(168,000) GBP(201,000)
Commenting on the results, Ian Martin, Chairman of Touchstar,
said:
"The Company is now at a point to begin the most exciting,
challenging and unpredictable phase of its transformation. We are
actively introducing newer more relevant solutions, whilst
deliberately phasing out older, less profitable products. That
said, the current economic climate of uncertainty and modest growth
has understandably led some customers to delay their investment
decisions as long as possible, and, as such, our initial timelines
have proven to be slightly optimistic, but we are firmly on our
way. To get the business to a proper scale we now need a step
change in the growth of sales. This will only come with investment
into supporting sales, marketing and project management, and which,
if targeted correctly, should ensure the opportunity that has
presented itself is taken.
The short term remains difficult to predict accurately, but
underneath the reporting of historical financial performance there
are numerous moving parts, many of which are showing very positive
signs. I remain realistic to the current challenges but optimistic
to the potential I can see."
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
Information on Touchstar plc can be seen at:
www.touchstarplc.com
CHAIRMAN'S INTERIM STATEMENT 2017
The Company is now at a point to begin the most exciting,
challenging and unpredictable phase of its transformation. Having
moved through the repair phase of our plan to restore Touchstar to
is core capability of specialists in data capture and mobile
computing solutions, we are now preparing to execute a more growth
orientated strategy. We are actively introducing newer more
relevant solutions, whilst deliberately phasing out older, less
profitable products. Substantial progress has been made in this
regard, with tangible signs of progress; new products have been
developed, moved through concept and beta testing, and are now
being successfully used by clients. An example of this would be
Touchstar On Board, our new software solution. It incorporates
stock and pricing management for customers, is fully integrated to
mobile devices on the aircraft, and incorporates the technology
necessary for payments to be taken in flight. This system is now
installed on aircraft of two regional airlines, and one national
flagship carrier. All three are new customers to Touchstar. These
provide much-needed reference customers whom are now in place,
opening the door to wider industry adoption.
That said, the current economic climate of uncertainty and
modest growth has understandably led some customers to delay their
investment decisions as long as possible. In my last communication,
I highlighted the slippage of two large orders (both now fulfilled)
that moved sales from 2016 to 2017, and we are still experiencing
the lengthening lead times that make forecasting even more
difficult.
I have consistently cautioned to the unpredictable nature of
turning around a business - it is sometimes foolhardy to give both
prediction and timing. When we started on this journey we had
ambitious plans of what Touchstar could become, and that enthusiasm
is still there. Our initial timelines have proven to be slightly
optimistic, but we are firmly on our way.
Group Operating Results
Revenue for the six months ended the 30 June 2017 declined by 4%
to GBP3,981,000 (six months ended 30 June 2016: GBP4,146,000) as we
phased out older product. It should be noted that the rate of
decline in revenue has slowed which could suggest we are
approaching the tipping point as we work through this transitional
phase.
Operating profit before exceptional items declined to GBP39,000
(six months ended 30 June 2016: GBP216,000) reflecting the slower
than expected start to the year and highlighting our current
experience of order flow, which is becoming more and more weighted
towards the second half of the year. Taxation continues to be a
positive as a result of our continued investment in research and
development. After tax profits before exceptional items reflected
the trend in operating profit and declined to GBP133,000 (six
months ended 30 June 2016: GBP296,000).
We continue to develop and optimise the Group's organisational
structure which led to an exceptional charge of GBP128,000 being
taken in the six months ending 30 June 2017 (six months ended 30
June 2016: nil). After this item, the Group produced a before tax
operating loss of GBP89,000 (six months ended 30 June 2016: profit
GBP219,000) and on an after-tax basis, a profit of GBP5,000 (six
months ended 30 June 2016: GBP296,000).
Basic earnings per share decreased to 0.08p (six months ended 30
June 2016: 4.69p) and adjusted earnings per share before the
exceptional charge were 2.11p.
On a more positive note, even allowing for the cash costs
associated with the exceptional items and continued investment in
new products, the company generated cash of over GBP160,000 in the
six months' period ending 30 June 2017. This resulted in the
Company having a smaller level of net borrowing at the period end
of only GBP168,000, which compares favorably to the year-end 31
December 2016 position of GBP329,000 (30 June 2016: net borrowing
GBP201,000).
Overall the Group's financial position remains robust.
Strategy
Over the last year we have invested a lot of time in meetings
and discussions with our customers. We now have greater clarity on
the current market dynamics, where Touchstar sits in these market
segments and where the opportunities lie. We are finalising our
definitive plans, the intention of which is now to drive the
business forward at a more rapid pace. The foundations and
structure are in place and many growth oriented strategies have
already been implemented. To get the business to a proper scale we
now need a step change in the growth of sales. This will only come
with investment into supporting sales, marketing and project
management, and which, if targeted correctly, should ensure the
opportunity that has presented itself is taken.
It is likely that we will experience lower margins in the short
term, compressed by the additional costs that are required to
accelerate growth in the top line. If achieved this should result
in long-term value being created. We now need to be brave as we
have the prospect to organically grow the business considerably -
such scale, if forthcoming, would bring significant benefits to
Touchstar and give us a platform from which to continue to build.
Even in the light of such a forward shift we will maintain our
conservative appetite to leverage, retain a robust balance sheet
and ensure modest levels of borrowing.
Outlook for 2017
I would expect trading conditions in the second half to remain
challenging, we will fall below the expectations we had at the
beginning of the year, but we continue to work hard to achieve the
best and most profitable outcome we can in both the second half and
for the year overall. We will see the continuation in the trend of
sales of new products recording substantial growth, as they gain
further adoption by our clients. The headwind in the short term
will continue as older products reach the end of their life cycle
and we phase them out completely. At the end of 2017 all of the
company's products and services will be on an upgrade path. This is
quite an achievement in itself.
People
Ultimately our people and our culture will set us apart. Two
years ago, when I looked around the business it was the passion of
everyone I now work with that was a deciding factor for me; they
collectively give us every chance to make Touchstar the business it
can be.
Conclusion.
The short term remains difficult to predict accurately,
underneath the reporting of historical financial performance there
are numerous moving parts, many of which are showing very positive
signs. I remain realistic to the current challenges but optimistic
to the potential I can see. The question is how best to take that
opportunity. I cannot guarantee success, we can however commit to
giving it our best shot.
I Martin
Executive Chairman
28 September 2017
Unaudited consolidated income statement for the six months ended
30 June 2017
Six months ended 30 June Year ended 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
-------------------------------------- ------------------- ----------------------- -----------------------
Revenue 3,981 4,146 7,624
Operating profit before exceptional
items 39 219 223
Exceptional costs (128) - -
-------------------------------------- ------------------- ----------------------- --------------------------
Operating (loss)/profit (89) 219 223
Finance costs (6) (3) (10)
--------------------------------------- ------------------- ----------------------- --------------------------
(Loss)/profit before income tax (95) 216 213
Income tax credit 100 80 262
--------------------------------------- ------------------- ----------------------- --------------------------
Profit for the period attributable to
the owners of the parent 5 296 475
------------------- ----------------------- --------------------------
Earnings per ordinary share (pence) attributable to owners of the parent during the
period:
Pence per share Pence per share Pence per share
Adjusted 2.11p 4.69p 7.53p
Basic 0.08p 4.69p 7.53p
Unaudited consolidated statement of changes in equity
for the six months ended 30 June 2017
Retained
Share Capital earnings/
Share premium redemption (accumulated Total
capital account reserve losses) equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- --------- --------- ------------ -------------- --------
For the six months ended 30 June 2017
------------------------------------------------------------------------------
Balance at 1
January 2017 315 - - 5,441 5,756
Profit for the
period - - - 5 5
Balance at 30
June 2017 315 - - 5,446 5,761
---------------- --------- --------- ------------ -------------- --------
For the six months ended 30 June 2016
----------------------------------------------------------
Balance at 1
January 2016 5,047 2,932 2,100 (4,761) 5,318
Profit for the
period - - - 296 296
Balance at 30
June 2016 5,047 2,932 2,100 (4,465) 5,614
---------------- ------ ------ ------ -------- ------
For the year ended 31 December 2016
-------------------------------------------------------------------
Balance at 1
January 2016 5,047 2,932 2,100 (4,761) 5,318
Capital reduction (4,732) (2,932) (2,100) 9,764 -
Cost of capital
reduction - - - (37) (37)
Profit for the
year - - - 475 475
Balance at 31
December 2016 315 - - 5,441 5,756
------------------- -------- -------- -------- -------- ------
Unaudited consolidated statement of financial position
at 30 June 2017
30 June 30 June 31 December
2017 2016 2016
* Restated
GBP'000 GBP'000 GBP'000
---------------------------------------- -------- ------------ ------------
Non-current assets
---------------------------------------- -------- ------------ ------------
Goodwill 3,824 3,824 3,824
Development expenditure 1,042 872 989
----------------------------------------- -------- ------------ ------------
Total intangible assets 4,866 4,696 4,813
Property, plant and
equipment EQUIPMENTEQUIPMENTEQUIPMENT
EQUIPMENTequipment 224 192 236
Deferred tax assets 67 67 67
----------------------------------------- -------- ------------ ------------
5,157 4,955 5,116
---------------------------------------- -------- ------------ ------------
Current assets
Inventories 1,265 1,211 1,259
Trade and other receivables 1,950 2,192 2,026
Current tax recoverable 72 257 203
Cash and cash equivalents 2,398 1,925 2,206
----------------------------------------- -------- ------------ ------------
5,685 5,585 5,694
---------------------------------------- -------- ------------ ------------
Total assets 10,842 10,540 10,810
----------------------------------------- -------- ------------ ------------
Current liabilities
Trade and other payables 2,309 2,649 2,295
Borrowings 2,566 2,126 2,535
----------------------------------------- -------- ------------ ------------
4,875 4,775 4,830
Non-current liabilities
Deferred tax liabilities 75 75 75
Deferred income 131 76 149
Total liabilities 5,081 4,926 5,054
----------------------------------------- -------- ------------ ------------
* Please see note 3.
Unaudited consolidated statement of financial position
at 30 June 2017 (continued)
30 June 30 June 31 December
2017 2016 2016
* Restated
GBP'000 GBP'000 GBP'000
Capital and reserves
attributable
to owners of the parent
Share capital 315 5,047 315
Share premium account - 2,932 -
Capital redemption - 2,100 -
reserve
Profit and loss account 5,446 (4,465) 5,441
------------------------------- -------- -------------- ------------
Total equity 5,761 5,614 5,756
------------------------------- -------- -------------- ------------
Total equity and liabilities 10,842 10,540 10,810
------------------------------- -------- -------------- ------------
* Please see note 3.
Consolidated cash flow statement for the six months ended 30
June 2017
30 June 30 June 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
----------------------------------------- -------------- ------------
Cash flows from operating
activities
Operating (loss)/profit (89) 219 223
Depreciation 41 44 100
Amortisation 196 181 370
Movement in:
Inventories (6) 278 231
Trade and other receivables 76 174 341
Trade and other payables (4) (1,041) (1,322)
---------------------------------- ------ -------------- ------------
Cash generated from/ (used
in) operating activities 214 (145) (57)
Interest paid (6) (3) (10)
Corporation tax received 231 - 234
---------------------------------- ------ -------------- ------------
Net cash generated from/
(used in) operating activities 439 (148) 167
---------------------------------- ------ -------------- ------------
Cash flows from investing
activities
Purchase of intangible
assets (249) (233) (539)
Purchase of property, plant
and equipment (29) (54) (154)
---------------------------------- ------ -------------- ------------
Net cash used in investing
activities (278) (287) (693)
---------------------------------- ------ -------------- ------------
Cash flows from financing
activities
Repayments of finance lease
contracts - (8) (8)
Cost of capital restructure - - (37)
Net cash used in financing
activities - (8) (45)
---------------------------------- ------ -------------- ------------
Net increase/ (decrease)
in cash and cash equivalents 161 (443) (571)
Cash and cash equivalents
at start of the year (329) 242 242
---------------------------------- ------ -------------- ------------
Cash and cash equivalents
at end of the year (168) (201) (329)
---------------------------------- ------ -------------- ------------
Notes to the interim report and accounts
for the six months ended 30 June 2017
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 condensed consolidated
interim balance sheet as at 30 June 2017, 30 June 2016 and the year
ended 31 December 2016 along with related consolidated interim
statements of income and cash flows for the six months to 30 June
2017 and 30 June 2016 and year ended 31 December 2016 of Touchstar
plc (hereinafter referred to as 'financial information').
This financial information for the half year ended 30 June 2017
has neither been audited nor reviewed and does not comprise
statutory accounts within the meaning of the section 434 of the
Companies Act 2006. This financial information was approved by the
Board on 27 September 2017.
The figures for the year ended 31 December 2016 have been
extracted from the audited annual report and accounts that have
been delivered to the Registrar of Companies. The auditors,
PricewaterhouseCoopers 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 using
accounting policies to be applied in the annual report and accounts
for the year ended 31 December 2017. These are consistent with
those included in the previously published annual report and
accounts for the year ended 31 December 2016, which have been
prepared in accordance with IFRS as adopted by the European
Union.
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.
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.
'Trading profit' is separately disclosed, being defined as
operating profit adjusted to exclude restructuring costs and
compensation for loss of office along with other non-recurring
costs such as onerous leases and associated costs on the early
vacation of two properties. These exceptional costs related to
items which the management believe did not accurately reflect the
underlying trading performance of the business in the period. The
Directors believe that the trading profit is an important measure
of the underlying performance of the Group.
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 GBP2,566,000 of bank overdrafts being reported in
borrowings, with a corresponding increase in cash and short-term
deposits. Comparatives at 30 June 2016 have also been restated with
an additional GBP2,126,000 of bank overdrafts being reported in
borrowings with a corresponding increase in cash and short-term
deposits.
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.
(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.
A detailed impairment review will be carried out at the year
end.
(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.
5. Income tax credit
Six months ended Year ended
30June 31 December
2017 2016 2016
GBP'000 GBP'000
---------------------------- -------- -------- -------------
Corporation Tax
Current tax (70) (80) (201)
Adjustments in respect of
prior years (30) - (61)
---------------------------- -------- -------- -------------
Total current tax (100) (80) (262)
---------------------------- -------- -------- -------------
6. Earnings per share
Earnings per ordinary share (pence) attributable to owners of the parent during the
period:
Year ended 31 December
Six months ended 30 June
2017 2016 2016
---------------------------- ---------------------------- ---------------------------- -----------------------
Basic 0.08 p 4.69 p 7.53 p
Adjusted 2.11 p 4.69 p 7.53 p
Reconciliations of the earnings and weighted average number of
shares used in the calculation are set out below:
For six-month period 30 June 2016 30 June 2016
-------------------------------- ----------------------------------------- -----------------------------------------
Weighted average number of
Earnings Weighted average number of Earnings shares (in thousands)
GBP'000 shares (in thousands) GBP'000 Restated
-------------------------------- --------- ------------------------------ --------- ------------------------------
Basic EPS
Earnings attributable to owners
of the parent 5 6,309 296 6,309
Exceptional items comprising of the
following:
Restructuring costs and onerous 128 -
leases
-------------------------------- --------- ------------------------------ --------- ------------------------------
Exceptional costs relate to extra costs incurred on onerous
lease contracts and further restructuring costs.
For year ended 31 December 2016
----------------------------------------------- ------------------------------------------------------------
Earnings
GBP'000 Weighted average number of shares (in thousands)
----------------------------------------------- --------- -------------------------------------------------
Basic EPS
Earnings attributable to owners of the parent 475 6,309
----------------------------------------------- --------- -------------------------------------------------
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 calculation
of adjusted earnings per share excludes exceptional costs of
GBP128,000 (2016: GBPnil)
This information is provided by RNS
The company news service from the London Stock Exchange
END
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