TIDMTST
RNS Number : 1322O
Touchstar PLC
28 May 2020
28 May 2020
Touchstar plc
Preliminary results for the year ended 31 December 2019
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 final results for the year ended 31 December 2019.
Key Financials:
31 December 31 December
2019 2018
GBP7,119,000 GBP6,898,000 Increase 3.2%
* Revenue (including discontinued operations)
GBP(89,000) GBP(582,000) Reduction 85%
* 'Trading loss after tax before exceptional costs *
GBP1,200,000 GBP254,000 Increase 372%
* Order book at year end
Improvement
* Adjusted earnings per share (1.05)p (6.95)p 85%
GBP850,000 GBP296,000 Increase GBP554,000
* Net cash at year end
GBP412,000 GBP334,000
* Exceptional costs
GBP(501,000) GBP(916,000)
* Loss after tax
* Basic earnings per share (5.91)p (10.94)p
* Refer to note 6 for definition
Commenting today, Ian Martin, Chairman of Touchstar, said:
"Our achievements in 2019 - increasing the order book (at the
year-end by 372%), generating GBP554,000 of free cash, selling
Onboard (our loss-making airline business) and lowering the cost
base by over GBP500,000 - all had outcomes that brought benefits to
the longer term, and in this C-19 crisis they are vital factors
assisting us to survive and then prosper.
At the start of the C-19 event Touchstar plc was defensively
positioned with cash in the bank, no net debt, a lowered cost base,
a strong order book. We traded profitably in the first quarter of
2020, in what is historically a weak quarter for the Group.
That trend continued into April, our current expectation is the
momentum we had in place going into the crisis should enable a
favourable outcome at the half year.
How this ultimately plays out is candidly impossible to predict.
We are working tirelessly to navigate a path through the C-19
crisis. We are blessed with many positive factors which are
currently keeping us on track."
This announcement contains 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 Regulations.
For further information please contact:
Touchstar plc Ian Martin 0161 8745050
0161 874
Mark Hardy 5050
WH Ireland - Nominated Mike Coe/ Chris 0117 945
Adviser Savidge 3472
Information on Touchstar plc can be seen at:
www.touchstarplc.com
CHAIRMAN'S STATEMENT 2019
I hope everyone is all right in what are uncertain, strange and
troubling times for many people.
I am breaking with convention in this statement. I will cover
both the statutory reporting on the results for the year ended 31
December 2019 ("FY2019") and the impact of the current Covid C-19
("C-19") crisis on Touchstar.
Shareholders will probably be as interested in the shape of
Touchstar today as in the results for FY2019, in what is a
radically changed world - 2019 feels a long time ago.
Our achievements in 2019 - increasing the order book (at the
year-end by 372%), generating GBP554,000 of free cash, selling
Onboard (our loss-making airline business) and lowering the cost
base by over GBP500,000 - all had outcomes that brought benefits to
the longer term, and in this C-19 crisis they are vital factors
assisting us to survive and then prosper.
In outlining our response to the C -19 crisis I will not
speculate about the macro issues of this pandemic as I am not
qualified to do so, but I will focus on the actions we have taken
and summarise what we are expecting.
At Touchstar we are very determined to navigate through what are
very challenging times.
Financial Results 2019
The Group's results for FY2019 show a top line revenue growth of
3.2% to GBP7.1 million (FY 2018: GBP6.9 million). If one focuses on
continuing operations (that is excluding Onboard) the growth rate
was even more impressive at 7.2%, with revenue rising to GBP6.7
million (FY2018: GBP6.2 million).
Sales growth was driven by Touchstar's new products and services
as they became established. The year-end order book was up 372% to
GBP1.2 million compared with GBP0.25 million at the end of
2018.
Margins continued to rise to 53.9% (FY2018: 51.1%) reflecting a
continuation of the move to a more software and solution orientated
sale.
Improved margins, combined with the revenue growth, resulted in
the after-tax loss before exceptional costs being reduced by 85% to
GBP89,000 (FY2018: loss GBP582,000). The adjusted loss per share
was 1.05p (FY2018: loss 6.95p).
As of 31 December 2019, the Group had net cash of GBP850,000
(FY2018: GBP296,000).
I have often referenced the cash generative nature of our
business. In 2019 we generated GBP554,000 of free cash. This was
achieved even after a further GBP1.1 million was invested in new
product development and a sizeable cash outflow arising from
exceptional costs of GBP412,000 (FY2018: GBP334,000) associated
with the restructuring and the well-timed sale of our loss-making
airline business. We entered 2020 with a cost base lowered by
GBP571,000.
In the last quarter of 2019 Jon Hall stepped down as a director
of the company. Jon had been with Touchstar for many years and I
would like to wish him all the best and thank him again for his
contribution.
Broadly, 2019 was a year of progress and we began the new year
with a record order book and feeling very optimistic for 2020.
Covid -19 Crisis (C-19)
At the start of the C-19 crisis Touchstar plc was defensively
positioned with cash in the bank, no net debt, a lowered cost base,
a strong order book. We traded profitably in the first quarter of
2020, in what is historically a weak quarter for the Group,
achieving revenue growth of 49% on continuing business compared to
Q1 2019, as the healthy order book flowed into revenue. The whole
Group worked flat out to complete orders, ship to clients and
invoice, so that orders could be turned into cash.
When the official UK lockdown began on the 23 March 2020, we
began work to ensure that Touchstar got through the crisis with its
workforce and business intact.
To this we are focussed upon three factors. First, looking after
our employees; second, to continue to support our existing
customers; and thirdly, cash.
History would suggest that even after the lifting of the
lockdown it will take at least 18 months for trading levels to
normalise. We therefore launched a series of self-help measures.
The self-help measures we have taken include reductions in staff
costs, property rentals and software development, as well as
utilising UK government schemes such as the Coronavirus Job
Retention Scheme, and taken the opportunity to delay the payment of
PAYE, NI and VAT.
Shareholders should note that all employees have made a large
collective sacrifice in this time of C-19 crisis by agreeing to
take substantially lower salaries for the duration of lockdown -
whether furloughed or working.
This shows how much we all believe in this business. It is that
spirit which gives me confidence and additional resolve to drive
forward and through this difficult time.
We made an application on 14th April through Barclays Bank to
participate in the UK Government's Coronavirus Business
Interruption Loan Scheme (CBILS), as yet we have not had a reply.
Even without this loan the balance sheet remains robust, we have no
net debt and cash in the bank of a similar level to just before the
C-19 crisis impacted the UK economy.
Touchstar serves sectors classified by the UK government as
"essential services". Revenues from these organisations comprised
70% of Group sales in 2019 and included NHS hospitals, care homes,
food factories, food distribution, schools, government buildings,
petrol forecourt deliveries, and oil and gas transportation and
throughout the crisis we have received new orders. To date we have
outperformed the roadmap we put in place as this crisis unfolded,
the short-term effect on Touchstar has been less severe than we had
planned to expect.
Trading in the first quarter was profitable. That trend
continued into April, our current expectation is the momentum we
had in place going into the crisis should enable a favourable
outcome at the half year.
How this ultimately plays out is candidly impossible to predict.
We are working tirelessly to navigate a path through the C-19
crisis. We are blessed with many positive factors which are
currently keeping us on track.
Take care, keep safe and I truly hope that my next communication
is in a happier time.
I Martin
Executive Chairman
28 May 2020
Consolidated income statement for the year ended 31 December
2019
2019 2018
GBP'000 GBP'000
------------ ------------- -------- ------------ ------------- ---------
Continuing Discontinued TOTAL Continuing Discontinued TOTAL
operations operations operations operations
Revenue 6,654 465 7,119 6,203 695 6,898
Cost of sales (3,207) (70) (3,277) (3,113) (257) (3,370)
------------------------- ------------ ------------- -------- ------------ ------------- ---------
Gross profit 3,447 395 3,842 3,090 438 3,528
Distribution costs (55) - (55) (63) (3) (66)
Administrative expenses (4,040) (551) (4,591) (3,752) (1,026) (4,778)
------------------------- ------------ ------------- -------- ------------ ------------- ---------
Operating (loss)/profit
before exceptional
items (451) 59 (392) (725) (257) (982)
Exceptional costs
included in admin
expenses (197) (215) (412) - (334) (334)
------------------------- ------------ ------------- -------- ------------ ------------- ---------
Operating loss (648) (156) (804) (725) (591) (1,316)
Finance costs (25) - (25) (4) - (4)
------------------------- ------------ ------------- -------- ------------ ------------- ---------
Loss before income
tax (673) (156) (829) (729) (591) (1,320)
Income tax credit 328 - 328 404 - 404
------------------------- ------------ ------------- -------- ------------ ------------- ---------
Loss for the year
attributable to
the owners of the
parent (345) (156) (501) (325) (591) (916)
------------------------- ------------ ------------- -------- ------------ ------------- ---------
(Loss)/earnings per ordinary share (pence) attributable to owners
of the parent during the year:
2019 2018
------------------------- ------------ ------------- -------- ------------ ------------- ---------
Basic (5.91)p (10.94)p
Adjusted (1.05)p (6.95)p
There is no other comprehensive income or expense in the current
year or prior year and consequently no statement of other
comprehensive income or expense has been presented.
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 loss 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 2019
Share Share premium Retained
capital account earnings Total equity
GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ---------------------- -------------- ---------- -------------
At 1 January 2018 315 - 1,765 2,080
Share Issue 109 1,191 - 1,300
Cost of share issue - (72) - (72)
Loss for the year - - (916) (916)
At 31 December 2018 424 1,119 849 2,392
Loss for the year - - (501) (501)
At 31 December 2019 424 1,119 348 1,891
--------------------- ---------------------- -------------- ---------- -------------
Company statement of changes in equity for the year ended 31
December 2019
Share Share premium Retained
capital account earnings Total equity
GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ---------------------- -------------- ---------- -------------
At 1 January 2018 315 - 773 1,088
Share Issue 109 1,191 - 1,300
Cost of share issue - (72) - (72)
Loss for the year - - (3,476) (3,476)
At 31 December 2018 424 1,119 (2,703) (1,160)
Loss for the year - - (2) (2)
--------------------- ---------------------- -------------- ---------- -------------
At 31 December 2019 424 1,119 (2,705) (1,162)
--------------------- ---------------------- -------------- ---------- -------------
Consolidated and Company statements of financial position as at
31 December 2019
Group Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------------------ ------------------- ---------------- -----------------
Non-current assets
Intangible assets 1,499 1,352 - -
Property, plant and
equipment 175 228 - -
Right-of-use assets 522 - - -
Deferred tax assets 111 157 - -
------------------------------ ------------------ ------------------- ---------------- -----------------
2,307 1,737 - -
----------------------------- ------------------ ------------------- ---------------- -----------------
Current assets
Inventories 891 1,210 - -
Trade and other receivables 1,317 1,928 1,189 706
Corporation tax receivable 344 487 - -
Cash and cash equivalents 3,143 2,112 - -
------------------------------ ------------------ ------------------- ---------------- -----------------
5,695 5,737 1,189 706
----------------------------- ------------------ ------------------- ---------------- -----------------
Total assets 8,002 7,474 1,189 706
------------------------------ ------------------ ------------------- ---------------- -----------------
Current liabilities
Trade and other payables 1,465 1,444 58 50
Contract liabilities 1,322 1,365 - -
Borrowings 2,293 1,816 2,293 1,816
Lease liabilities 171 - - -
5,251 4,625 2,351 1,866
----------------------------- ------------------ ------------------- ---------------- -----------------
Non-current liabilities
Deferred tax liabilities 234 269 - -
Contract liabilities 208 188 - -
Lease liabilities 418 - - -
----------------------------- ------------------ ------------------- ---------------- -----------------
860 457 - -
----------------------------- ------------------ ------------------- ---------------- -----------------
Total liabilities 6,111 5,082 2,351 1,866
------------------------------ ------------------ ------------------- ---------------- -----------------
Group Company
--------------------------- ----------------------------
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
Capital and reserves
attributable
to owners of the parent
Retained earnings at
31 December 2018/2017 849 1,856 (2,703) 773
Effect of IFRS 15 adjustment - (91) - -
Loss for the year (501) (916) (2) (3,476)
Retained earnings at
31 December 2019/2018 348 849 (2,705) (2,703)
Share capital 424 424 424 424
Share premium 1,119 1,119 1,119 1,119
------------------------------- --------------- ---------- ----------- ---------------
Total equity 1,891 2,392 (1,162) (1,160)
------------------------------- --------------- ---------- ----------- ---------------
Total equity and liabilities 8,002 7,474 1,189 706
------------------------------- --------------- ---------- ----------- ---------------
Consolidated and Company cash flow statement for the year ended
31 December 2019
Group Company
--------------------------------------- ---------------------- --------------------
2019 2018 2019 2018
GBP '000 GBP '000 GBP'000 GBP'000
--------------------------------------- ---------- ---------- --------- ---------
Cash flows from operating activities
Operating loss (804) (1,316) 4 (3,465)
Depreciation 264 70 - -
Amortisation 498 379 - -
Development expenditure impairment - 334 -
Development expenditure loss 29 - - -
on disposal
Gain on disposal of PPE (10)
Net effect of capitalised leases 68 - - -
Investment impairment - - - 3,474
Movement in:
Inventories 319 177 - -
Trade and other receivables 647 328 (483) (479)
Trade and other payables and
contract liabilities (36) 136 8 (75)
---------------------------------------- ---------- ---------- --------- ---------
Cash generated from/(used in)
operations 975 108 (471) (545)
Interest paid (25) (4) (6) (4)
Corporation tax received/(paid) 481 290 - -
---------------------------------------- ---------- ---------- --------- ---------
Net cash generated from/(used
in) operating activities 1,431 394 (477) (549)
---------------------------------------- ---------- ---------- --------- ---------
Cash flows from investing activities
Purchase of intangible assets (674) (929) - -
Purchase of property, plant
and equipment (26) (61) - -
Proceeds from sale of property, 10 - - -
plant & equipment
--------------------------------------- ---------- ---------- --------- ---------
Net cash used in investing activities (690) (990) - -
---------------------------------------- ---------- ---------- --------- ---------
Cash flows from financing activities
Proceeds from issue of shares - 1,300 - 1,300
Costs of issue of shares - (72) - (72)
Principal elements of lease (187) -
payments
--------------------------------------- ---------- ---------- --------- ---------
Net cash generated from financing
activities (187) 1,228 - 1,228
---------------------------------------- ---------- ---------- --------- ---------
Net increase/(decrease) in cash
and cash equivalents 554 632 (477) 679
Cash and cash equivalents at
start of the year 296 (336) (1,816) (2,495)
---------------------------------------- ---------- ---------- --------- ---------
Cash and cash equivalents at
end of the year 850 296 (2,293) (1,816)
---------------------------------------- ---------- ---------- --------- ---------
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 preliminary results for the year ended 31 December 2019 have
been prepared in accordance with the accounting policies set out in
the annual report and the accounts for the year ended 31 December
2018.
The Group Financial Statements have been prepared in accordance
with the International Financial Reporting Standards ('IFRS') as
adopted by the European Union, IFRS IC interpretations and the
Companies Act 2006 applicable to companies reporting under IFRSs
and the AIM Rules for Companies. The Group Financial Statements
have been prepared under the historical cost convention.
While the financial information included in this preliminary
announcement has been computed in accordance with IFRS, this
announcement does not itself contain sufficient information to
comply with IFRS. The accounting policies used in preparation of
this preliminary announcement have remained unchanged from those
set out in the Group's 2018 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 2019 which have yet to be published. The preliminary
results for the year ended 31 December 2019 were approved by the
Board of Directors on 27 May 2020.
The financial information set out in this preliminary
announcement does not constitute the Group's statutory financial
statements for the year ended 31 December 2019 but is derived from
those financial statements which were approved by the Board of
Directors on 27 May 2020. The Auditors have reported on the Group's
statutory financial statements and their report was (i) unqualified
(ii) did include a material uncertainty in relation to going
concern without qualifying their report and (iii) 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 2019
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 2018 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.
Changes in accounting policy
New and amended Standards and Interpretations adopted by the
Group and Company
In these financial statements, the Group has changed its
accounting policies in the following areas:
-- Lease recognition
The Group has adopted the following IFRSs in these financial
statements:
-- IFRS 16 Leases
Effective 1 January 2019, IFRS 16 Leases has replaced IAS 17
Leases and IFRIC 4 Determining Whether an Arrangement Contains a
Lease. The standard eliminates the classification of leases as
either operating or finance leases and introduces a single
accounting model. Lessees are required to recognise a right-of-use
asset and related lease liability for their operating leases and
show depreciation of leased assets and interest on lease
liabilities separately in their income statement. IFRS 16 requires
the Company to recognise substantially all of its operating leases
on the balance sheet with options to exclude leases where the lease
term is 12 months or less, or where the underlying asset is of low
value. See note 11 for additional information.
Non - GAAP financial measures
For the purposes of the annual report and financial statements,
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 Chairman's
statement relates to trading loss or profit.
'Trading loss after tax before exceptional costs' is separately
disclosed, being defined as loss or profit after tax adjusted to
exclude exceptional costs such as development expenditure
impairment, goodwill impairment and restructuring costs. These
exceptional costs relate to items which the management believe do
not accurately reflect the underlying trading performance of the
business in the period. The Directors believe that the trading loss
or profit is an important measure of the underlying performance of
the Group.
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 at 31 December 2019, a total of
GBPNil was drawn down from the GBP300,000 on demand overdraft
facility (GBPnil in May 2020).
The Group benefits from a supportive bank who have provided the
borrowing facility since 2005. In assessing the Group's ability to
continue as a going concern, the Board has reviewed the Group's
cash flow and profit forecasts against this facility. The impact of
potential risks and related sensitivities to the forecasts were
considered in assessing the likelihood of additional facilities
being required, whilst identifying what mitigating actions are
available to the Group to avoid additional facilities and the
potential withdrawal of the facility by the bank (as it is
repayable upon demand). Specifically, a range of assumptions
underpin the profit and cash flow forecasts for the period to June
2021, including:
-- growth of the sales pipeline in 2020 and 2021 in the context of the COVID-19 pandemic; and
-- mitigation of the potential impact of not achieving the growth by implementing cost savings
Failure to achieve one or more of the above would result in
lower EBITDA with a consequent negative impact on cash generation.
The COVID-19 pandemic has reduced the Group's revenue in the short
term but the directors expect a return to trend in 2021. If the
Group's forecast is not achieved, there is a risk that the Group
will require additional facilities that it has not secured or the
bank withdraws the existing facility. Without the support of the
bank, the Group and Parent Company would be unable to meet their
liabilities as they fall due.
Given the timing and execution risks associated with achieving
the forecast and therefore remaining within the facility, the
directors have concluded that it is necessary to draw attention to
this as a material uncertainty which may cast significant doubt
about the Group's and the Parent Company's ability to continue as a
going concern in the basis of preparation to the financial
statements. The directors have confirmed that, after due
consideration, they have a reasonable expectation that the Company
and the Group have adequate resources to continue in operational
existence for the foreseeable future. For this reason, they
continue to adopt the going concern basis in preparing the
financial statements.
The Company as a lessee
The Company assesses whether a contract is or contains a lease,
at inception of a contract. The Company recognises a right-of-use
asset and a corresponding lease liability with respect to all lease
agreements in which it is the lessee, except for short-term leases
(defined as leases with a lease term of 12 months or less) and
leases of low value assets. For these leases, the Company
recognises the lease payments as an operating expense on a
straight-line basis over the term of the lease unless another
systematic basis is more representative of the time pattern in
which economic benefits from the leased asset are consumed.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted by using the rate implicit in the lease. If this rate
cannot be readily determined, the Company uses its incremental
borrowing rate based on the rate provided by the Group's bankers,
Barclays.
The lease liability is included in 'Creditors' on the Statement
of Financial Position.
The lease liability is subsequently measured by increasing the
carrying amount to reflect interest on the lease liability (using
the effective interest method) and by reducing the carrying amount
to reflect the lease payments made.
The right-of-use assets comprise the initial measurement of the
corresponding lease liability, lease payments made at or before the
commencement day and any initial direct costs. They are
subsequently measured at cost less accumulated depreciation and
impairment losses.
Right-of-use assets are depreciated over the shorter period of
lease term and useful life of the underlying asset. If a lease
transfers ownership of the underlying asset or the cost of the
right-of-use asset reflects that the Company expects to exercise a
purchase option, the related right-of-use asset is depreciated over
the useful life of the underlying asset. The depreciation starts at
the commencement date of the lease.
The right-of-use assets are included in the 'Intangible Assets',
'Tangible Fixed Assets' and 'Investment Property' lines, as
applicable, in the Statement of Financial Position.
The Company applies IAS 36 to determine whether a right-of-use
asset is impaired and accounts for any identified impairment loss
in accordance with that standard.
As a practical expedient, IFRS 16 permits a lessee not to
separate non-lease components, and instead account for any lease
and associated non-lease components as a single arrangement. The
Company has used this practical expedient.
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.
4 Exceptional costs 2019 2018
GBP '000 GBP '000
--------------------------------------------- ---------- ----------
Restructuring expenses:
Redundancy costs 229 -
Onerous lease costs 154 -
Development expenditure impairment (note 7) 29 334
--------------------------------------------- ---------- ----------
412 334
--------------------------------------------- ---------- ----------
5.1 Income tax credit
2019 2018
GBP '000 GBP '000
--------------------------------------- ---------- ----------
Corporation tax
Current tax (326) (468)
Deferred tax 12 101
Adjustments in respect of prior years (13) (37)
--------------------------------------- ---------- ----------
Total tax credit (327) (404)
--------------------------------------- ---------- ----------
Corporation tax is calculated at 19% (2018: 19%) of the
estimated assessable profit for the year. This is the weighted
average tax rate applicable for the year.
5.2 Factors affecting the tax credit for the year
The tax credit for the year is different (2018: different) from
the standard rate of corporation tax in the UK of 19% (2018: 19%).
The differences are explained below :
2018 2018
GBP '000 GBP '000
--------------------------------------------------------------------------------- ---------- ----------
Loss before income tax (829) (1,320)
--------------------------------------------------------------------------------- ---------- ----------
Multiplied by the standard rate of corporation tax in the UK of 19% (2018: 19%) (158) (251)
Effects of:
Items not deductible for tax purposes 3 68
Enhanced research and development deduction (248) (368)
Adjustments in respect of prior years (13) (37)
Losses surrendered through R&D tax credit 100 150
Capital allowances claimed in year (in excess of)/ less than depreciation (11) 20
Adjustment to deferred tax arising from changes in tax rate - 14
Total tax credit for the year (327) (404)
--------------------------------------------------------------------------------- ---------- ----------
Factors affecting the future tax charge
The Chancellor's budget of March 2016 announced that corporation
tax rates will ultimately fall to 17% on 1 April 2020.
Consequently, deferred taxation has been calculated with reference
to this ultimate tax rate of 17%. The Directors do not expect
timing differences arising in the intervening period, when higher
taxation rates apply, to have a significant effect on the Group's
future tax charge.
In March 2020, the budget announced the intention to cancel the
future reduction in corporation tax rate from 19% to 17%. This
announcement does not constitute substantive enactment and
therefore deferred taxes at the balance sheet date continue to be
measured at the enacted tax rate of 17%. However, the corporation
tax rate will now remain at 19% after 1 April 2020.
6 (Losses)/earnings per share
2019 2018
---------- --------- ---------
Basic (5.91)p (10.94)p
Adjusted (1.05)p (6.95)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 excludes exceptional costs of
GBP412,000 (2018: GBP334,000).
Reconciliations of the earnings and weighted average number of
shares used in the calculation are set out below:
2019 2018
Earnings Weighted average number of Earnings Weighted average number of
GBP'000 shares (in thousands) GBP'000 shares (in thousands)
------------------------------- --------- ------------------------------ --------- -------------------------------
Basic EPS
Loss attributable to owners of
the parent (501) 8,374 (916) 8,374
Exceptional costs (note 4) 412 334
------------------------------- --------- ------------------------------ --------- -------------------------------
Adjusted EPS
(Loss)/earnings attributable
to owners of the parent
before exceptional items (89) 8,374 (582) 8,374
------------------------------- --------- ------------------------------ --------- -------------------------------
The Group does not operate a share option scheme and as a result diluted earnings per share
are not presented.
Non - GAAP financial measures
For the purposes of the annual report and financial statements, 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 Chairman's statement relates to trading
loss or profit.
'Trading loss or profit' is separately disclosed, being defined as loss or profit after tax
adjusted to exclude exceptional costs such as development expenditure impairment, goodwill
impairment and restructuring costs. These exceptional costs relate to items which the management
believe do not accurately reflect the underlying trading performance of the business in the
period. The Directors believe that the trading loss or profit is an important measure of the
underlying performance of the Group.
7 Intangible assets
Group
------------------------ ----------------------------------------------
Goodwill Development expenditure Total
GBP'000 GBP'000 GBP'000
------------------------ --------- ------------------------ ---------
Cost
At 1 January 2018 9,904 3,558 13,462
Additions - 929 929
Disposals - (352) (352)
At 31 December 2018 9,904 4,135 14,039
Additions - 674 674
At 31 December 2019 9,904 4,809 14,713
------------------------ --------- ------------------------ ---------
Accumulated amortisation
At 1 January 2018 9,904 2,422 12,326
Amortisation charge - 379 379
Impairment 334 334
Eliminated on disposal - (352) (352)
------------------------ --------- ------------------------ ---------
At 31 December 2018 9,904 2,783 12,687
Amortisation charge - 498 498
Impairment - 29 29
At 31 December 2019 9,904 3,310 13,214
------------------------ --------- ------------------------ ---------
Net book value
At 1 January 2018 - 1,136 1,136
------------------------ --------- ------------------------ ---------
At 31 December 2018 - 1,352 1,352
------------------------ --------- ------------------------ ---------
At 31 December 2019 - 1,499 1,499
------------------------ --------- ------------------------ ---------
Amortisation of GBP498,000 (2017: GBP379,000) is included within
administrative expenses in the income statement.
Development expenditure
The calculation of the costs incurred includes the percentage of
time spent by certain employees on the development project. The
decision whether to capitalise and how to determine the period of
economic benefit of a development project requires an assessment of
the commercial viability of the project and the prospect of selling
the project to new or existing customers.
Management determined budgeted sales growth based on historic
performance and its expectations of market development 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.
8 IFRS 16 Right of use assets
Premises Motor vehicles Total
GBP'000 GBP'000 GBP'000
--------------------------------------- --------- --------------- -------------------------------
Cost
At 1 January 2019 - - -
Impact of change in accounting policy 579 148 727
At 1 January 2019 (adjusted balance) 579 148 727
Additions - 64 64
At 31 December 2019 579 212 791
--------------------------------------- --------- --------------- -------------------------------
Accumulated depreciation
At 1 January 2019 - - -
Charge for the year 80 105 185
Impairment 61 23 84
At 31 December 2019 141 128 269
--------------------------------------- --------- --------------- -------------------------------
Net book value
At 31 December 2018 - - -
--------------------------------------- --------- --------------- -------------------------------
At 31 December 2019 438 84 522
--------------------------------------- --------- --------------- -------------------------------
Depreciation expenditure of GBP185,000 (2018: GBPNil) is
included within administrative expenses in the income
statement.
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:
2019 1 January
GBP'000 2019
GBP'000 *
--------------------- ---- --------- -----------
Right-of-use assets
Buildings 438 579
Vehicles 84 148
--------------------------- --------- -----------
522 727
-------------------------- --------- -----------
Lease Liabilities
Current 171 176
Non-current 418 529
--------------------------- --------- -----------
589 705
-------------------------- --------- -----------
*In the previous year, the group only recognised lease assets
and lease liabilities in relation to leases that were classified as
'finance leases' under IAS 17 'Leases'.
Under IFRS 16 the assets are now presented in property, plant
and equipment and the liabilities as part of the group's
borrowings. For adjustments recognised on adoption of IFRS 16 on 1
January 2019 see note 11.
ii) Amounts recognised in the statement of profit or loss
The statement of profit or loss shows the following amounts
relating to leases:
2019 2018
GBP'000 GBP'000 *
------------------------------------ --------- -----------
Depreciation charge of right-of-use
assets
Buildings 74 -
Vehicles 111 -
------------------------------------ --------- -----------
185 -
------------------------------------ --------- -----------
Interest expense (included 19 -
in finance cost)
Expense relating to short-term 23 -
leases (included in administrative
expenses)
------------------------------------ --------- -----------
10 Discontinued operation
The Onboard business was sold on 6 November 2019 and is reported
in the current period as a discontinued operation. Financial
information relating to the discontinued operation for the period
to the date of disposal is set out below and on the face of the
Income Statement.
2019 2018
GBP '000 GBP '000
------------------------------------------------------------------------------------------- ---------- ----------
Net cash inflow from operating activities (174) (472)
Net cash inflow/(outflow) from investing activities (2019 includes an inflow of GBP10,000
from the sale of the division) 10 (271)
Net increase in cash generated by the subsidiary (164) (743)
------------------------------------------------------------------------------------------- ---------- ----------
Details of the sale of the subsidiary:
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
----------------------------------------------- ----------
Earnings per share:
31 December 2019 31 December 2018
GBP '000 GBP '000
------------------------------------------------------------------------------ ------------------ ------------------
From continuing operations attributable to the ordinary equity holders of the
company (4.07) (3.89)
From discontinued operation (1.84) (7.05)
Total basic earnings per share attributable to the ordinary equity
holders of the company (5.91) (10.94)
------------------------------------------------------------------------------ ------------------ ------------------
11 Changes in accounting policies
This note explains the impact of the adoption of IFRS 16
'Leases' on the group's financial statements.
As indicated in note 9 above, the group has adopted IFRS 16
'Leases' retrospectively from 1
January 2019, but has not restated comparatives for the 2018
reporting period, as permitted under the
specific transition provisions in the standard. The
reclassifications and the adjustments arising from
the new leasing rules are therefore recognised in the opening
balance sheet on 1 January 2019.
On adoption of IFRS 16, the group recognised lease liabilities
in relation to leases which had
previously been classified as 'operating leases' under the
principles of IAS 17 'Leases'. These
liabilities were measured at the present value of the remaining
lease payments, discounted using the
lessee's incremental borrowing rate as of 1 January 2019. The
weighted average lessee's incremental
borrowing rate applied to the lease liabilities on 1 January
2019 was 3.5%.
For leases previously classified as finance leases the entity
recognised the carrying amount of the
lease asset and lease liability immediately before transition as
the carrying amount of the right of use
asset and the lease liability at the date of initial
application. The measurement principles of IFRS 16
are only applied after that date.
(i) Practical expedients applied
In applying IFRS 16 for the first time, the group has used the
following practical expedients permitted by the standard:
-- applying a single discount rate to a portfolio of leases with
reasonably similar characteristics;
-- accounting for operating leases with a remaining lease term
of less than 12 months as at 1
January 2019 as short-term leases;
-- excluding initial direct costs for the measurement of the
right-of-use asset at the date of initial
application; and
-- using hindsight in determining the lease term where the
contract contains options to extend or
terminate the lease.
The group has also elected not to reassess whether a contract
is, or contains a lease at the date of
initial application. Instead, for contracts entered into before
the transition date the group relied on its
assessment made applying IAS 17 and Interpretation 4 Determining
whether an Arrangement contains
a Lease .
(ii) Measurement of lease liabilities
2019
GBP '000
--------------------------------------------------------------------------------------------- ----------
Operating lease commitments disclosed as at 31 December 2018 896
Discounted using the lessee's incremental borrowing rate at the date of initial application (69)
(Less): short-term leases not recognised as a liability (58)
Lease incentives and prepaid rent relating to commitments formerly classified as operating
leases (64)
Lease liability recognised as at 1 January 2019 705
Of which are:
Current lease liabilities 176
Non-current lease liabilities 529
----------
(iii) Measurement of right-of-use assets
The associated right-of-use assets for property leases were
measured on a retrospective basis as if the
new rules had always been applied. Other right-of use assets
were measured at the amount equal to
the lease liability, adjusted by the amount of any prepaid or
accrued lease payments relating to that
lease recognised in the balance sheet as at 31 December
2018.
(iv) Adjustments recognised in the balance sheet on 1 January
2019
The change in accounting policy affected the following items in
the balance sheet on
1 January 2019:
-- right-of-use assets - increase by GBP727,000
-- lease liabilities - increase by GBP705,000
-- prepayments - decrease by GBP22,000
The net impact on retained earnings at 1 January 2019 was
GBPnil.
12 Post balance sheet events
COVID-19
The outbreak of COVID-19 creates a new and highly unpredictable
challenge and constitutes a non-adjusting post balance sheet event.
We have tested our business continuity plans which have been
successfully activated. The investment in technology over recent
years has resulted in the business being well placed to continue
delivering services to our clients with minimal disruption.
Management do not consider it possible to quantify the true impact
of COVID-19 on the business at this time but remain confident that
the business can adjust to the challenges it presents.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR BLGDUDBDDGGR
(END) Dow Jones Newswires
May 28, 2020 02:00 ET (06:00 GMT)
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