TIDMTST
RNS Number : 1397Y
Touchstar PLC
07 September 2020
7 September 2020
Touchstar plc
Interim results for the
Six months ended 30 June 2020
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 2020.
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
2020 2019
* Revenues GBP3,178,000 GBP3,635,000
* Continuing operations revenue GBP3,178,000 GBP3,369,000
* Operating profit/(loss) GBP139,000 GBP(518,000)
* Trading profit/ (loss) before exceptional items* GBP139,000 GBP(215,000)
* Profit/(loss) after tax GBP150,000 GBP(357,000)
* EPS - Basic 1.77p (4.21)p
* EPS - Adjusted * 1.77p (0.63)p
* Cash/ (Overdraft) GBP1,464,000 GBP(204,000)
* Refer to note 3 for further details
Commenting on the results, Ian Martin, Chairman of Touchstar,
said:
" Touchstar came into 2020 with momentum from a strong order
book, clear strategic plans and a solid balance sheet. In the six
months ended 30 June 2020 we have had to demonstrate resilience
under crisis conditions. It is a real achievement that Touchstar
traded profitably, generated cash, supported customers and most
importantly looked after staff in a period of a global pandemic and
the largest economic contraction in a generation - these are not
normal times.
"We continue to outperform the road map we put in place in
February to navigate the business through until 2022.
"Our motivation is not just to be a survivor of this crisis, the
ambition is to emerge with solid finances, improved products, all
our talent and renewed energy - we remain on track."
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/Chris Savidge 0117 945 3472
Corporate Broking - Jasper Berry
Information on Touchstar plc can be seen at:
www.touchstarplc.com
CHAIRMAN'S INTERIM STATEMENT 2020
Touchstar came into 2020 with momentum from a strong order book,
clear strategic plans and a solid balance sheet. In the six months
ended 30 June 2020 we have had to demonstrate resilience under
crisis conditions. It is a real achievement that Touchstar traded
profitably, generated cash, supported customers and most
importantly looked after staff in a period of a global pandemic and
the largest economic contraction in a generation - these are not
normal times.
This has been a tough time for us all. It has not been easy,
there have been many sleepless nights as we have tried to do what's
best for the Company, its staff and customers. Crucially,
management anticipated the scale and magnitude of the issues that
were coming. Putting in place that roadmap before the crisis
unfolded proved invaluable, it has maintained confidence and
enabled Touchstar to deliver a good financial performance whilst
preserving the long-term potential of the business.
We are still vigilant. No doubt at some point the world will
recover. Our expectation is that will not be anytime soon. Covid-19
("C-19") is not going away, it will continue to disturb society and
erode confidence. The UK economy is deeply scarred, with much of
that damage yet to manifest itself. We retain the cautious
disposition that has served us so well since February; we remain
focused upon looking after staff, customers and cash.
On behalf of all shareholders I would like to thank all my
colleagues at Touchstar for what was achieved in the first six
months of this year. We had to adapt the business very quickly. It
is only through the personal sacrifice and the phenomenal
collective effort across the company at all levels that this was
achieved - sometimes compressing weeks of work into days - again,
thanks it is greatly appreciated.
Financial Performance
At the start of the year Touchstar plc was defensively
positioned with cash in the bank, no net debt, a lowered cost base
and a strong order book. Throughout the C-19 crisis the Group
worked flat out to complete orders, ship to clients and invoice so
that orders could be turned into cash; however C-19 undoubtedly
caused disruption to the business and slowed our forward
momentum.
Continuing operations revenue for the six months ended 30 June
2020 declined by 5.7% to GBP3,178,000 (six months ended 30 June
2019 ("H1 2019"): GBP3,369,000). This was a creditable result in
the circumstances. Naturally, the sales process was hampered by the
impacts of the C-19 crisis as customer behavior evolved and we all
adapted to a changing environment and different ways of doing
business.
As we have previously highlighted 70% of our revenue is
generated from sectors deemed as "essential" during the UK
lockdown. This resilience was demonstrated by our largest business
which is in the Fuel Delivery market and our Warehousing &
Logistics business - both areas increased revenue over the
equivalent period last year. Access Control and Podstar, which are
more exposed to the less essential sectors of the economy, were
negatively impacted. The reduction in revenue in these areas was
predominately due to our inability to complete installations as
customers restricted movement on their sites, or in some cases went
into lockdown for three months. The majority of these orders have
been deferred, not lost.
Margins reduced to 50.1% (H1 2019: 51.9%) which reflects the
product mix of the revenue in this period, with a particularly
sizable hardware deal in the period which generated a lower margin
than our software products.
Touchstar was profitable, we achieved an operating profit of
GBP139,000 (H1 2019: loss GBP518,000). On an after-tax basis the
profit was GBP150,000 compared to a loss of GBP357,000 in the six
months ended 30 June 2019. This translated into EPS of 1.77p (H1
2019: (4.21)p). A substantial turnaround for the business.
We entered 2020 as a more streamlined business with a
significantly reduced cost base. As mentioned earlier, management
was proactive in putting in place a plan to navigate through the
C-19 crisis. This enabled us to participate in and gain assistance
from many of the "self-help' schemes made available by the UK
Government. The access to Government support, internal "self-help"
measures and the benefits of the prior year restructuring meant
costs were dramatically reduced and cash flow strengthened.
Cash controls measures included:
-- the Company drawing on the support of the Coronavirus Job
Retention Scheme (CJRS) which enabled us to retain all our
employees with 95% of those furloughed now already back in full
employment;
-- all employees earning over the UK Government's rate of pay
for furloughed staff reducing their salaries to GBP3,000 a month
for the period of lockdown;
-- Non-Executive directors drawing no salary for period of the lockdown;
-- all but essential expenditure being frozen or eliminated; and
-- rent reductions being secured for offices over the period of lockdown
Both direct and indirect expenses were reduced by GBP808,000 in
the period, of which some GBP450,000 relates to "one off self-help"
measures and GBP358,000 is the reoccurring benefit of last year's
restructuring.
We enhanced short term cashflow further by use of other
Government business support schemes. In this period, we took
advantage by:
-- a deferral of one quarter VAT until 31(st) March 2021 which totalled GBP157,000;
-- deferring payment of PAYE and NI liabilities totalling GBP114,000 (now settled); and
-- successfully securing a GBP150,000 Coronavirus Business Interruption Loan (CBIL's)
The cash less overdraft position improved by GBP610,000 over the
half year to GBP1,464,000. This compared to GBP850,000 at the start
of 2020 (H1 2019: Overdrawn GBP(204,000)).
This is an impressive outcome and is testament to our culture of
placing great importance on cash management together with the cash
generative nature of our business which contributed GBP339,000 of
free cash in the period.
2020 Outlook
We have been encouraged by the continued level of engagement of
our customers, it is not business as normal, but even those sectors
hit hardest in the crisis are returning. We have always retained
the ability to operate under social distancing guidelines and
continue to ship orders effectively. The order book which stood at
GBP519,000 on the 30 June 2020. Since the period end new orders
have continued to be secured and the order book remains at a stable
level.
It remains very difficult to predict the outlook and the exact
performance of the business. We recognise the possibility of
further lockdowns either nationally or regionally. The consistent
message we have given is that we do not expect normalisation of
trading until 2022. After prior economic shocks it has taken about
18 to 24 months for confidence to fully return.
Touchstar is well prepared to deal with the challenges we face.
Our expectation is that the second half of 2020 will be weaker than
the first six months of 2020. It will take us a while to regain
some of the momentum we lost in those "missing" three months of
lockdown. A typical new sale has a lead time of about six months.
Many of the "self-help" benefits will not repeat in the second half
of this year and the short-term improvements to cashflow from the
various Government schemes will reverse over the coming months.
We continue to outperform the road map we put in place in
February to navigate the business through until 2022. The Board at
that point not only considered the effects of the initial damage
caused by the C-19 crisis and resulting economic downturn, but also
the working capital requirements of an economic recovery to ensure
sufficient liquidity was in place. We remain comfortable with the
assumptions on which we built this plan.
Touchstar is well positioned, the events in 2020 have only
accelerated the trend to digitalise business and move to an
e-commerce model. Our customers typically facilitate the completion
of on-line transactions, using Touchstar to enable data to be
captured, moved and used - this is potentially a valuable place to
be situated.
Our motivation is not just to be a survivor of this crisis, the
ambition is to emerge with solid finances, improved products, all
our talent retained and with renewed energy - we remain on
track.
I Martin
Executive Chairman
4 September 2020
Unaudited consolidated income statement
for the six months ended 30 June 2020
Six months ended 30 June Year ended 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
------------------------------------- ------------------ ----------------------- -----------------------
Revenue 3,178 3,635 7,119
Cost of sales (1,587) (1,748) (3,277)
-------------------------------------- ------------------ ----------------------- --------------------------
Gross profit 1,591 1,887 3,842
Distribution costs (21) (26) (55)
Administrative expenses (1,544) (2,076) (4,591)
Other operating income (note 5) 113 - -
Operating profit/(loss) before
exceptional items 139 (215) (392)
Exceptional costs - (303) (412)
-------------------------------------- ------------------ ----------------------- --------------------------
Operating profit/(loss) 139 (518) (804)
Finance costs (9) (9) (25)
-------------------------------------- ------------------ ----------------------- --------------------------
Profit/(loss) before income tax 130 (527) (829)
Income tax credit (note 6) 20 170 328
-------------------------------------- ------------------ ----------------------- --------------------------
Profit/(loss) for the period
attributable to the owners of the
parent 150 (357) (501)
------------------ ----------------------- --------------------------
Profit/(loss) per ordinary share (pence) attributable to owners of the parent
during the period:
Pence per share Pence per share Pence per share
Profit/(loss) per share - Basic 1.77p (4.21)p (5.91)p
Profit/(loss) per share - Adjusted
(note 6) 1.77p (0.63)p (1.05)p
Unaudited consolidated statement of changes in equity
for the six months ended 30 June 2020
Retained
earnings/
Share premium (accumulated Total
Share capital account losses) equity
GBP'000 GBP'000 GBP'000 GBP'000
------------------------- -------------- -------------- -------------- --------
For the six months ended 30 June 2020
Balance at 31 December
2019 424 1,119 348 1,891
Profit for the period - - 150 150
Balance at 30 June 2020 424 1,119 498 2,041
------------------------- -------------- -------------- -------------- --------
For the six months ended 30 June 2019
Balance at 1 January 2019 424 1,119 849 2,392
Loss for the period - - (357) (357)
Balance at 30 June 2019 424 1,119 492 2,035
--------------------------- ---- ------ ------ ------
For the year ended 31 December 2019
Balance at 1 January 2019 424 1,119 849 2,392
Loss for the year - - (501) (501)
Balance at 31 December
2019 424 1,119 348 1,891
--------------------------- ---- ------ ------ ------
Unaudited consolidated statement of financial position
at 30 June 2020
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
------------------------------- -------- -------- ------------
Non-current assets
Intangible assets 1,375 1,429 1,499
Property, plant and equipment 141 199 175
Right of use asset 430 643 522
Deferred tax assets 111 157 111
-------------------------------- -------- -------- ------------
2,057 2,428 2,307
------------------------------- -------- -------- ------------
Current assets
Inventories 920 1,161 891
Trade and other receivables 1,276 1,895 1,317
Current tax recoverable 38 656 344
Cash and cash equivalents 2,416 1,839 3,143
-------------------------------- -------- -------- ------------
4,650 5,551 5,695
------------------------------- -------- -------- ------------
Total assets 6,707 7,979 8,002
-------------------------------- -------- -------- ------------
Current liabilities
Trade and other payables 1,530 1,743 1,465
Contract liabilities 1,090 1,071 1,322
Borrowings 952 2,043 2,293
Lease liabilities 131 160 171
-------------------------------- -------- -------- ------------
3,703 5,017 5,251
------------------------------- -------- -------- ------------
Non-current liabilities
Deferred tax liabilities 234 269 234
Contract liabilities 223 139 208
Borrowings 150 - -
Lease liabilities 356 519 418
-------------------------------- -------- -------- ------------
963 927 860
------------------------------- -------- -------- ------------
Total liabilities 4,666 5,944 6,111
-------------------------------- -------- -------- ------------
Unaudited consolidated statement of financial position
at 30 June 2020 (continued)
30 June 30 June 31 December
2020 2019 2019
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
Profit and loss account 498 492 348
------------------------------------ -------- -------------- ------------
Total equity 2,041 2,035 1,891
------------------------------------ -------- -------------- ------------
Total equity and liabilities 6,707 7,979 8,002
------------------------------------ -------- -------------- ------------
Unaudited consolidated cash flow statement
for the six months ended 30 June 2020
30 June 2020 30 June 31 December
2019 2019
GBP'000 GBP'000 GBP'000
------------------------------------------------- -------------- ------------
Cash flows from operating activities
Operating profit/(loss) 139 (518) (804)
Depreciation 108 118 264
Amortisation 299 242 498
Development loss on disposal - - 29
Gain on disposal of PPE - - (10)
Net effect of capitalised leases - 61 68
Movement in:
Inventories (28) 51 319
Trade and other receivables 41 - 647
Trade and other payables (153) (29) (36)
------------------------------------------ ------ -------------- --------------
Cash generated (used in)/from operating
activities 406 (75) 975
Interest paid (9) (9) (25)
Corporation tax received 326 - 481
------------------------------------------ ------ -------------- --------------
Net cash generated /from/ (used
in) operating activities 723 (84) 1,431
------------------------------------------ ------ -------------- --------------
Cash flows from investing activities
Purchase of intangible assets (175) (319) (674)
Purchase of property, plant and
equipment (2) (14) (26)
Proceeds from sale of property,
plant & equipment - - 10
Net cash used in investing activities (177) (333) (690)
------------------------------------------ ------ -------------- --------------
Cash flows from financing activities
Principal elements of lease payments (58) (83) (187)
Lease concessions - non-cash change (24) - -
in lease liabilities
CIBLs loan 150 - -
------------------------------------------ ------ -------------- --------------
Net cash generated from / (used
in) financing activities 68 (83) (187)
------------------------------------------ ------ -------------- --------------
Net increase/ (decrease) in cash
and cash equivalents 614 (500) 554
Cash and cash equivalents at start
of the year 850 296 296
------------------------------------------ ------ -------------- --------------
Cash and cash equivalents at end
of the year 1,464 (204) 850
------------------------------------------ ------ -------------- --------------
Cash and cash equivalents
Cash at bank and in hand 2,416 1,839 3,143
Less: bank overdraft (included
within borrowings) (952) (2,043) (2,293)
Net cash/ (debt) 1,464 (204) 850
------------------------------------------ ------ -------------- --------------
Notes to the interim report and accounts
for the six months ended 30 June 2020
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 at 30 June 2020, 30 June 2019 and the year ended
31 December 2019 along with related consolidated interim statements
of income and cash flows for the six months to 30 June 2020 and 30
June 2019 and year ended 31 December 2019 of Touchstar plc
(hereinafter referred to as 'financial information').
This financial information for the half year ended 30 June 2020
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 4September 2020.
The figures for the year ended 31 December 2019 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 2020. These are consistent with
those included in the previously published annual report and
accounts for the year ended 31 December 2019, 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.
'Trading profit/(loss)' is separately disclosed, being defined
as operating profit/(loss) adjusted to exclude restructuring costs
along with other non-recurring costs such as onerous leases and
associated costs on the early vacation of a property relating to
Onboard retail. 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/(loss) is an important measure of
the underlying performance of the Group. 'EPS - Adjusted' also
provides the earnings per share figure after removing these
exceptional costs.
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 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. Other operating income
Six months ended Year ended
30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
----------------------------------- ----------------- ------------------- ----------------
Government funding Job Retention 113 - -
Scheme
----------------------------------- ----------------- ------------------- ----------------
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.
6. Income tax credit
Six months ended Year ended
30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
---------------------------------- ----------------- ----------------- --------------
Corporation Tax
Current tax (20) (170) (326)
Adjustments in respect of prior
years - - (12)
Deferred tax - - 12
---------------------------------- ----------------- ----------------- --------------
Total current tax (20) (170) (326)
---------------------------------- ----------------- ----------------- --------------
7. 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
Earnings per share 2020 2019 2019
----------------------------------- ------------------------- ------------------------ -----------------------
Basic 1.77 p (4.21)p (5.91)p
Adjusted 1.77 p (0.63)p (1.05)p
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 for the six month period to 30 June
2019 excludes exceptional costs of GBP303,000 (31 December 2019:
GBP412,000).
Reconciliations of the earnings and weighted average number of
shares used in the calculation are set out below:
For six-month period 30 June 2020 30 June 2019
------------------------------- ----------------------------------------- ------------------------------------------
Profit Weighted average number of Profit Weighted average number of
GBP'000 shares (in thousands) GBP'000 shares (in thousands)
------------------------------- --------- ------------------------------ --------- -------------------------------
Basic EPS
Profit/(loss) attributable to
owners of the parent 150 8,475 (357) 8,475
Exceptional costs (note 8) - 303
Adjusted EPS
Profit/(loss) attributable to
owners of the parent before
exceptional items 150 8,475 (54) 8,475
------------------------------- --------- ------------------------------ --------- -------------------------------
For year ended 31 December 2019
-------------------------------------------- ----------------------------------------------------------------
Loss Weighted average number of shares (in
GBP'000 thousands)
Basic EPS
Loss attributable to owners of the parent (501) 8,475
Exceptional costs (note 8) 412
-------------------------------------------- ------------------- -------------------------------------------
Adjusted EPS
Loss attributable to owners of the parent
before exceptional items (89) 8,475
-------------------------------------------- ------------------- -------------------------------------------
8. Exceptional costs
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
----------------------------------------- -------------- ------------
Restructuring expenses:
Redundancy costs - 166 229
Onerous lease costs - 137 154
Development expenditure impairment - - 29
------------------------------------- --- -------------- --------------
- 303 412
------------------------------------- --- -------------- --------------
The exceptional costs incurred during early 2019 relate to
management's decision to significantly reduce running costs for the
Onboard product with support for the existing clients moved to the
main offices in Manchester. The Kenilworth office where the Onboard
division was situated was closed.
The development expenditure impairment for 31 December 2019
relates to the remaining write off of the carrying value for
NOVOStar - the Onboard Retail product.
The Onboard business was sold on 6 November 2019 and was
reported in the period 31 December 2019 as a discontinued
operation.
Details of the sale of the Onboard business:
31 December 2019
GBP'000
Consideration received or receivable:
Cash 10
Fair value of liabilities disposed of 75
Total disposal consideration 85
Carrying amount of net assets sold -
Gain on sale 85
9. Leases
The note provides information for leases where the group is a
lessee.
The statement of financial position shows the following amounts
relating to leases:
30 June 2020 31 December
GBP'000 2019
GBP'000
--------------------- ---- -------------- ----------------
Right-of-use assets
Buildings 388 438
Vehicles 42 84
--------------------------- -------------- ----------------
430 522
-------------------------- -------------- ----------------
Lease Liabilities
Current 131 171
Non-current 356 418
--------------------------- -------------- ----------------
487 589
-------------------------- -------------- ----------------
Under IFRS 16 the assets are presented in property, plant and
equipment and the liabilities as part of the group's
borrowings.
The Income statement shows the following amounts relating to
leases:
30 June 2020 31 December
GBP'000 2019
GBP'000
------------------------------------- --------------------- ------------------
Depreciation charge relating
to right-of-use assets
Buildings 32 74
Vehicles 39 111
-------------------------------------- --------------------- ------------------
71 185
------------------------------------- --------------------- ------------------
Interest expense (included
in finance cost) 9 19
Expense relating to short-term
leases (included in administrative
expenses) 22 23
The practical expedient for rent concessions occasioned by
Covid-19 has been applied to all rent concessions which meet the
conditions in the 6 months to 30 June 2020, leading to a credit of
GBP24,000 being recognized in the Income Statement.
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