TIDMTST
RNS Number : 2236W
Touchstar PLC
22 April 2021
22 April 2021
Touchstar plc
Preliminary results for the year ended 31 December 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 final results for the year ended 31 December 2020.
Key Financials:
31 December 31 December
2020 2019
GBP87,000 GBP(501,000) Return to profit
* Profit after tax
* Earnings per share (continued operations) 1.03p (4.07)p Increase 5.1p
GBP1,771,000 GBP850,000 Increase of
* Cash, net of borrowings, at year end GBP921,000
GBP5,886,000 GBP6,654,000 Decrease of
* Revenue (continued operations) GBP768,000
* Earnings per share 1.03p (5.91)p
Commenting today, Ian Martin, Chairman of Touchstar, said:
"Everyone has a plan until they get hit" - Mike Tyson
"2020 was certainly not an ordinary year. Despite the turbulent
context Touchstar rose to the challenge, demonstrated strong
operational resilience and did what we believed to be right for
staff, clients and shareholders. The business delivered an
impressive positive set of financial results, was profitable and
saw our year end cash net of borrowings figure increase by
GBP921,000 to GBP1,771,000.
Our ambition is not just to be a participant in a short-term
recovery or be a beneficiary of a temporary bounce back from the
pandemic, but to create real value. The world is at an inflection
point, and digital technology will be key to defining what comes
next. The strategy for Touchstar is to continue to extend its
digital capabilities, grow and capture more of an exciting, fast
developing and vibrant future.
We move forward with confidence, optimism and
determination."
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 2020
"Everyone has a plan until they get hit" - Mike Tyson
2020 was certainly not an ordinary year. Despite the turbulent
context Touchstar rose to the challenge, demonstrated strong
operational resilience and did what we believed to be right for
staff, clients and shareholders. The business delivered an
impressive positive set of financial results, was profitable and
saw our year end cash net of borrowings figure increase by
GBP921,000 to GBP1,771,000.
In early 2020 life abruptly changed in unimaginable ways for our
staff, customers and Touchstar as the Covid -19 (C-19) pandemic
shook the world.
Management had the foresight to realise early on the full scale
and implications of C-19 on society and the economy in general,
enabling us to take quick and decisive action.
We have sought to ensure our communication throughout has been
clear and consistent. The primary focus for the company was to look
after the health and well-being of staff, support customers and
manage cash. Our stated ambition was not just to be a survivor of
this crisis, but to emerge with solid finances, improved products,
all our talent in situ and renewed energy. We still remain on track
to achieve this.
Touchstar has made a better-than-expected start to 2021. As this
year progresses we anticipate the conduct of business to become
more straightforward, which is why we are optimistic of better
outcomes. As we have said before, we do not expect to benefit from
an entire year of ordinary levels of trading until 2022.
On behalf of all shareholders, I would like to thank all my
colleagues for what was accomplished in 2020. It was a phenomenal
collective achievement and something you should all rightly be very
proud of - it is greatly appreciated.
Financial Results
Touchstar results for the year ended 31 December 2020 (FY2020)
demonstrate the quality, and the strength of the business as well
as its resilience.
When considering this year's financial results perspective needs
to be applied. The year being reported contained only two months of
typical trading being the first two. We came into 2020 with a clear
strategy, solid balance sheet and strong order book - then the
world changed.
As expected the second half of 2020 was marginally weaker than
the first six months. Touchstar benefits from a high and growing
level of recurring revenue and repeat business as well as loyal
customers. The C -19 crisis unsurprisingly caused disruption. It
takes time to regain new sales momentum lost to those "missing
months" of lockdown, constant interruption and heightened
uncertainty. This revenue stream is now beginning to build again
and at the year end the order book stood at GBP475,000 (FY2019:
GBP1,200,000). Throughout the crisis sales have continued to be
secured and the order intake has remained relatively stable.
Revenue from continuing operations for the year declined 11.5%
to GBP5,886,000 (FY2019: GBP6,654,000). This was a creditable
result and above our expectation as we all adapted to a rapidly
evolving environment and new ways of working.
As we have previously highlighted, 70% of our revenue is
generated from sectors deemed as "essential" during the UK
lockdowns. The relative resilience of our Fuel Delivery and
Warehouse/Logistics business compensating for the Access Control
and Podstar divisions which are exposed to the less essential
sectors of the economy.
Margins improved slightly to 52% (FY2019: 51.80%).
We entered 2020 a more streamlined business with a significantly
reduced cost base. Overhead costs declined to GBP3,166,000 (FY2019:
GBP4,095,000) - a GBP929,000 decrease. This excludes the additional
savings of GBP146,000 in the form of the Coronavirus Job Retention
Scheme.
Touchstar was profitable for the year. We achieved an operating
profit of GBP39,000 (FY2019: loss (GBP648,000)). On an after-tax
basis the profit was GBP87,000 (FY2019: loss (GBP345,000)). This
translates into EPS of 1.03p (FY2019: loss (4.07p)/ EPS including
discontinued operations (5.91p)).
Cash generation was very strong. The year-end cash less
overdraft position improved by GBP1,071,000 over the year to
GBP1,920,000 (2019: GBP850,000). This impressive outcome is
testament to our culture of placing great importance on cash
management. The underlying business contributed GBP763,000 of free
cash in the period, and the year-end position benefitted further
from both a GBP150,000 Coronavirus Business Interruption Loan
(meaning cash less debt stood at GBP1,771,000 (2019: GBP850,000)),
and a deferral of one quarter VAT until March 2021 totalling
GBP157,000.
Looking Ahead - Current Trading and the Future
I am optimistic about Touchstar's future. Life has been abnormal
for so long - talk of a "return to normal" seems misplaced. C-19
has been a catalyst for profound adjustment and fundamental
reassessment, accelerating the trends already embedded in business,
transforming society, and altering aspects of human behaviour for
good.
Touchstar is well positioned as business moves to digitise and
embrace an e -commerce model. Our customers facilitate online
transactions, using Touchstar to enable data to be captured, moved
seamlessly, and used. Additionally, the Company has traditional
virtues of having no net debt, a strongly cash generative business
model and a loyal customer base - this is an enviable place to
be.
Throughout the crisis Touchstar continued to make advances,
demonstrated vividly by these results. Ironically we seem to be a
better placed business exiting this pandemic than at the point of
entry.
In 2020 we executed a simple strategy successfully, in what were
extraordinary times. I am proud that we protected our people,
supported our customers, won new orders and turned sales into
cash.
We are upbeat for 2021 and hopeful of making continued progress.
Signs of component shortages and strain are evident within our
supply chains, to date we have successfully managed this issue and
the first quarter has certainly started better than we had
expected.
The fact that social disruption continues is not a surprise to
us. The first half of the year will contain the headwinds of this
current lockdown and restrictions. One has to be confident that
scientific advancement and vaccines are overcoming this virus - the
tide is turning. After a year of being somewhat cynical at what I
saw as over optimism in high places I now feel we have a realistic
roadmap out of this crisis, within broadly achievable and
deliverable timeframes.
Our cautious approach has served us well, but we remain alert.
This is not a time to dwell on how successfully we have navigated
our way to this point, but instead to focus on Touchstar in a post
crisis world - ensuring we capitalise fully on gains made and
everyone's hard work.
The prospects for 2022 are encouraging. There are signs of
renewed activity from our customer base, confidence is returning,
decisions previously put on hold are now being made - next year
could be a time when the true value of the Touchstar business model
is validated. As this goal is achieved, we will remain disciplined.
Any capital deemed surplus to requirements that cannot produce
adequate returns within the business will be returned to
shareholders
Our ambition is not just to be a participant in a short-term
recovery or be a beneficiary of a temporary bounce back from the
pandemic, but to create real value. The world is at an inflection
point, and digital technology will be key to defining what comes
next. The strategy for Touchstar is to continue to extend its
digital capabilities, grow and capture more of an exciting, fast
developing and vibrant future.
We move forward with confidence, optimism and determination.
I Martin
Executive Chairman
21 April 2021
Consolidated income statement for the year ended 31 December
2020
2020 2019
GBP'000 GBP'000
---------------------- --------------------------------------------------------
Continuing operations Continuing Discontinued Total
operations operations
Revenue 5,886 6,654 465 7,119
Cost of sales (2,827) (3,207) (70) (3,277)
------------------------------- ---------------------- ---------------------- ---------------------- --------
Gross profit 3,059 3,447 395 3,842
Distribution costs (41) (55) - (55)
Administrative expenses (3,125) (4,040) (551) (4,591)
Other operating income 146 - - -
----------------------- ------ ---------------------- ---------------------- ---------------------- --------
Operating profit/
(loss) before
exceptional items 39 (451) 59 (392)
Exceptional costs included in
administrative expenses - (197) (215) (412)
------------------------------- ---------------------- ---------------------- ---------------------- --------
Operating profit/(loss) 39 (648) (156) (804)
Finance costs (16) (25) - (25)
------------------------------- ---------------------- ---------------------- ---------------------- --------
Profit/(loss) before income
tax 23 (673) (156) (829)
Income tax credit 64 328 - 328
------------------------------- ---------------------- ---------------------- ---------------------- --------
Profit/(loss) for the year
attributable to the owners of
the parent 87 (345) (156) (501)
------------------------------- ---------------------- ---------------------- ---------------------- --------
Earnings/(loss) per ordinary share (pence) attributable to
owners of the parent during the year (note 5):
2020 2019
---------- ------ --------------------------------------
Continuing Discontinuing Total
operations operations
---------- ------ ------------ -------------- --------
Basic 1.03P (4.07)p (1.84)p (5.91)p
Adjusted 1.03P (1.74)p 0.69p (1.05)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.
All activity in 2020 relating to continuing operations.
The Company has elected to take the exemption under section 408
of the Companies Act 2006 not to present the parent Company income
statement. The profit for the Company is detailed in the Statement
of financial position and the Company statement of changes in
shareholders' equity.
Consolidated statement of changes in equity for the year ended
31 December 2020
Share premium Retained
Share capital account earnings Total equity
GBP'000 GBP'000 GBP'000 GBP'000
--------------------- --------------------------- -------------- ---------- -------------
At 1 January 2019 424 1,119 849 2,392
Loss for the year - - (501) (501)
At 31 December 2019 424 1,119 348 1,891
Profit for the year - - 87 87
At 31 December 2020 424 1,119 435 1,978
--------------------- --------------------------- -------------- ---------- -------------
Company statement of changes in equity for the year ended 31
December 2020
Share premium Retained
Share capital account earnings Total equity
GBP'000 GBP'000 GBP'000 GBP'000
--------------------- --------------------------- -------------- ---------- -------------
At 1 January 2019 424 1,119 (2,703) (1,160)
Loss for the year - - (2) (2)
At 31 December 2019 424 1,119 (2,705) (1,162)
Profit for the year - - 3 3
--------------------- --------------------------- -------------- ---------- -------------
At 31 December 2020 424 1,119 (2,702) (1,159)
--------------------- --------------------------- -------------- ---------- -------------
Consolidated and Company statements of financial position as at
31 December 2020
Group Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ------------------ ------------------- ---------------- -----------------
Non-current assets
Intangible assets 1,350 1,499 - -
Property, plant and
equipment
EQUIPMENTEQUIPMENTEQUIPMENT
EQUIPMENTequipment 121 175 - -
Right-of-use assets 479 522 - -
Deferred tax assets 63 111 3 -
------------------------------------ ------------------ ------------------- ---------------- -----------------
2,013 2,307 3 -
----------------------------------- ------------------ ------------------- ---------------- -----------------
Current assets
Inventories 714 891 - -
Trade and other receivables 1,010 1,317 474 1,189
Corporation tax receivable 110 344 - -
Cash and cash equivalents 3,177 3,143 - -
------------------------------------ ------------------ ------------------- ---------------- -----------------
5,011 5,695 474 1,189
----------------------------------- ------------------ ------------------- ---------------- -----------------
Total assets 7,024 8,002 477 1,189
------------------------------------ ------------------ ------------------- ---------------- -----------------
Current liabilities
Trade and other payables 1,246 1,465 230 58
Contract liabilities 1,485 1,322 - -
Borrowings 1,271 2,293 1,271 2,293
Lease liabilities 163 171 - -
4,165 5,251 1,501 2,351
----------------------------------- ------------------ ------------------- ---------------- -----------------
Non-current liabilities
Deferred tax liabilities 215 234 - -
Contract liabilities 177 208 - -
Borrowings 135 - 135 -
Lease liabilities 354 418 - -
------------------------------------ ------------------ ------------------- ---------------- -----------------
881 860 135 -
----------------------------------- ------------------ ------------------- ---------------- -----------------
Total liabilities 5,046 6,111 1,636 2,351
------------------------------------ ------------------ ------------------- ---------------- -----------------
Group Company
--------------------------- ----------------------------
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Capital and reserves
attributable
to owners of the
parent
Retained earnings
at beginning of year 348 849 (2,705) (2,703)
Profit/(loss) for
the year 87 (501) 3 (2)
Retained earnings
at end of year 435 348 (2,702) (2,705)
Share capital 424 424 424 424
Share premium 1,119 1,119 1,119 1,119
------------------------------- --------------- ---------- ----------- ---------------
Total equity 1,978 1,891 (1,159) (1,162)
------------------------------- --------------- ---------- ----------- ---------------
Total equity and liabilities 7,024 8,002 477 1,189
------------------------------- --------------- ---------- ----------- ---------------
Consolidated and Company cash flow statement for the year ended
31 December 2020
Group Company
----------------------------------- ---------------------- --------------------
2020 2019 2020 2019
GBP '000 GBP '000 GBP'000 GBP'000
----------------------------------- ---------- ---------- --------- ---------
Cash flows from operating
activities
Operating Profit/(loss) 39 (804) 3 4
Depreciation 227 264 - -
Amortisation 588 498 - -
Development expenditure loss - 29 - -
on disposal
Gain on disposal of PPE - (10) - -
Net effect of capitalised - 68 - -
leases
Movement in:
Inventories 177 319 - -
Trade and other receivables 307 647 715 (483)
Trade and other payables and
contract liabilities (86) (36) 172 8
------------------------------------ ---------- ---------- --------- ---------
Cash generated from/(used
in) operations 1,252 975 890 (471)
Interest paid (16) (25) (3) (6)
Corporation tax received 326 481 - -
------------------------------------ ---------- ---------- --------- ---------
Net cash generated from/(used
in) operating activities 1,562 1,431 887 (477)
------------------------------------ ---------- ---------- --------- ---------
Cash flows from investing
activities
Addition of intangible assets (439) (674) - -
Purchase of property, plant
and equipment (20) (26) - -
Proceeds from sale of property, - 10 - -
plant & equipment
----------------------------------- ---------- ---------- --------- ---------
Net cash used in investing
activities (459) (690) - -
------------------------------------ ---------- ---------- --------- ---------
Cash flows from financing
activities
Proceeds from issue of business
loan 150 - 150 -
Principal elements of lease
payments (182) (187) -
------------------------------------ ---------- ---------- --------- ---------
Net cash generated from financing
activities (32) (187) 150 -
------------------------------------ ---------- ---------- --------- ---------
Net increase/(decrease) in
cash and cash equivalents 1,071 554 1,037 (477)
Cash and cash equivalents
at start of the year 850 296 (2,293) (1,816)
------------------------------------ ---------- ---------- --------- ---------
Cash and cash equivalents
at end of the year 1,921 850 (1,256) (2,293)
------------------------------------ ---------- ---------- --------- ---------
1 General information
Touchstar plc (the 'Company') and its subsidiaries (together
'the Group') design and build rugged mobile computing devices and
develop software solutions used in a wide variety of field-based
delivery, logistics and service applications. The Company is a
public company limited by share capital incorporated and domiciled
in the United Kingdom. The Company has its listing on the
Alternative Investment Market. The address of its registered office
is 1 George Square, Glasgow, G2 1AL.
2 Basis of preparation
The final results for the year ended 31 December 2020 have been
prepared in accordance with the accounting policies set out in the
annual report and the accounts for the year ended 31 December
2019.
The Group Financial Statements have been prepared in accordance
with the International Financial Reporting Standards ('IFRS') as
adopted by the European Union, IFRS IC interpretations and the
Companies Act 2006 applicable to companies reporting under IFRSs
and the AIM Rules for Companies. The Group Financial Statements
have been prepared under the historical cost convention.
While the financial information included in this final
announcement has been computed in accordance with IFRS, this
announcement does not itself contain sufficient information to
comply with IFRS. The accounting policies used in preparation of
this final announcement have remained unchanged from those set out
in the Group's 2019 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 2020
which have yet to be published. The final results for the year
ended 31 December 2020 were approved by the Board of Directors on
21 April 2021.
The financial information set out in this final announcement
does not constitute the Group's statutory financial statements for
the year ended 31 December 2020 but is derived from those financial
statements which were approved by the Board of Directors on 21
April 2021. The Auditors have reported on the Group's statutory
financial statements and their report was unqualified and (ii) did
not contain a statement under section 498(2) or 498(3) Companies
Act 2006. The statutory financial statements for the year ended 31
December 2020 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 2019 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.
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 of 31 December 2020, the Group
held cash of GBP1,921,000 (after taking into account overdraft
balances as presented in note 21), with unencumbered net cash of
GBP1,771,000 after taking into account the GBP150,000 Coronavirus
Business Interruption Loan. The Group also had an undrawn
GBP200,000 on demand overdraft facility as of 31 December 2020
(also GBPnil in April 2021).
The Touchstar management continues to demonstrate its ability to
proactively respond to both internal and external challenges it has
faced, non-more so than those encountered over the past twelve
months.
As with many other businesses, the Group has found itself
navigating the past year through unprecedented economic events due
to the COVID-19 pandemic.
The directors remain confident in the business, the skillset
employed in its dedicated staff, solid product set and loyal
customer base.
The C-19 pandemic, had a significant impact on 2020 Group sales
with continuing operations revenue contracting by 11.5% in
2020.
In early 2020, because of the imminent pandemic, management took
swift, decisive action and responded quickly, by reducing costs and
incorporating sweeping self-help measures in the form of a
Coronavirus Business Interruption loan, grants & funding where
possible.
A full assessment of the Group's customer base was carried out
in March 2020 where the findings concluded that a significant
proportion of the customer base was largely unaffected by the
pandemic.
During 2020 the business was not required to temporarily shut
down and there were no substantial curtailments to the entity's
activities. Customer behaviour, beyond the initial shock reaction
to the pandemic in April, was not significantly affected.
The Company continues to benefit from a supportive bank who have
provided the borrowing facility since 2005. Over the past eighteen
months the Group has significantly reduced its reliance on the
facility provided by the bank. In assessing the Company's ability
to continue as a going concern, the Board has reviewed the Group's
cash flow and profit forecasts taking account of this reduced
reliance on any facilities. The impact of potential risks and
related sensitivities to the forecasts were considered in assessing
the likelihood of additional facilities being required in the
future
The directors have at the time of approving the financial
statements, a reasonable expectation that the
company has adequate resources to continue in operational
existence for the foreseeable future. Thus
they continue to adopt the going concern basis of accounting in
preparing the financial statements.
The Group as a lessee
The Group assesses whether a contract is or contains a lease, at
inception of a contract. The Group 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 Group 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 Group uses its incremental
borrowing rate based on the rate provided by the Group's bankers,
Barclays.
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.
(c) Stock provisions
Judgement is required in relation to the appropriate provision
to be made for the write down of slow moving or obsolete inventory.
Such provisions are made based on the assessment of the Group's
prospective sale of inventories and their net realisable value,
which are subject to estimation uncertainty.
4 Income tax credit
2020 2019
GBP '000 GBP '000
--------------------------------------- ---------- ----------
Corporation tax
Current tax (92) (326)
Adjustments in respect of prior years - (13)
Deferred tax 28 11
Total tax credit (64) (328)
--------------------------------------- ---------- ----------
Corporation tax is calculated at 19% (2019: 19%) of the
estimated assessable profit for the year. This is the weighted
average tax rate applicable for the year.
Factors affecting the tax credit for the year
The tax credit for the year is same as (2019: same as) the
standard rate of corporation tax in the UK of 19% (2019: 19%). The
differences are explained below :
2020 2019
GBP '000 GBP '000
--------------------------------------------------------------------------------- ---------- ----------
Profit/(loss) before income tax 23 (829)
--------------------------------------------------------------------------------- ---------- ----------
Multiplied by the standard rate of corporation tax in the UK of 19% (2019: 19%) 4 (158)
Effects of:
Items not deductible for tax purposes 1 2
Enhanced research and development deduction (167) (248)
Adjustments in respect of prior years - (13)
Losses surrendered through R&D tax credit 29 100
Capital allowances claimed in year less than/(in excess of) depreciation 28 (11)
Adjustment to deferred tax arising from changes in tax rate 41 -
Total tax credit for the year (64) (328)
--------------------------------------------------------------------------------- ---------- ----------
Factors affecting the future tax charge
Changes to the UK corporation tax rates were substantively
enacted as part of Finance Bill 2020 (on 22 July 2020). These
include the cancellation of the reduction in the main rate to 17%
from 1 April 2020, thereby keeping the corporation tax rate at 19%
after 1 April 2020.
In March 2021, the budget announced the intention to increase
the corporation tax rate from 19% to 25%. 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 19%.
5 Earnings/(losses) per share
2020 2019
---------- ------ --------------------------------------
Continuing Discontinuing Total
operations operations
---------- ------ ------------ -------------- --------
Basic 1.03P (4.07)p (1.84)p (5.91)p
Adjusted 1.03P (1.74)p 0.69p (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 excludes exceptional costs of GBPnil
(2019: GBP412,000).
Reconciliations of the earnings and weighted average number of
shares used in the calculation are set out below:
2020 2019
Earnings Weighted average number of Earnings Weighted average number of
GBP'000 shares (in thousands) GBP'000 shares (in thousands)
------------------------------- --------- ------------------------------ --------- -------------------------------
Basic EPS
Profit/(loss) attributable to
owners of the parent 87 8,475 (501) 8,475
Exceptional costs - 412
------------------------------- --------- ------------------------------ --------- -------------------------------
Adjusted EPS
Earnings/(loss) attributable
to owners of the parent
before exceptional items 87 8,475 (89) 8,475
------------------------------- --------- ------------------------------ --------- -------------------------------
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.
6 Intangible assets
Group
--------------------- ----------------------------------------------
Goodwill Development expenditure Total
GBP'000 GBP'000 GBP'000
--------------------- --------- ------------------------ ---------
Cost
At 1 January 2019 9,904 4,135 14,039
Additions - 674 674
Disposal - (1,947) (1,947)
--------------------- --------- ------------------------ ---------
At 31 December 2019 9,904 2,862 12,766
Additions - 439 439
Disposal (1,313) - (1,313)
--------------------- --------- ------------------------ ---------
At 31 December 2020 8,591 3,301 11,892
--------------------- --------- ------------------------ ---------
Accumulated amortisation
At 1 January 2019 9,904 2,783 12,687
Amortisation charge - 498 498
Disposal - (1,918) (1,918)
At 31 December 2019 9,904 1,363 11,267
Amortisation charge - 588 588
Disposal (1,313) - (1,313)
At 31 December 2020 8,591 1,951 10,542
--------------------- --------- ------------------------ ---------
Net book value
At 31 December 2020 - 1,350 1,350
--------------------- --------- ------------------------ ---------
At 1 January 2019 - 1,352 1,352
--------------------- --------- ------------------------ ---------
At 31 December 2019 - 1,499 1,499
--------------------- --------- ------------------------ ---------
Disposal of goodwill relates to the dissolution of the three
dormant subsidiary undertakings during 2020.
Amortisation of GBP588,000 (2019: GBP498,000) is included within
administrative expenses in the income statement.
Development expenditure
The calculation of the costs incurred includes third party
developers along with the percentage of time spent by certain
employees on hardware and software development for deployment in
business operations. The decision whether to capitalise and how to
determine the period of economic benefit of a development project
requires an assessment of the commercial viability of the project
and the prospect of selling the project to new or existing
customers.
Management determined budgeted sales growth based on historic
performance and its expectations of market development via each
product set's underlying pipeline
A review of each of the product sets did not result in any
impairment.
Development expenditure has been capitalised on an ongoing basis
and therefore has a remaining useful economic life ranging from 0
to 5 years.
7 Property, plant and equipment
Fixtures, fittings, tools and
Plant and machinery equipment Total
GBP'000 GBP'000 GBP'000
-------------------------- -------------------- --------------------------------- ---------------------------------
Cost
At 1 January 2019 345 384 729
Additions 13 13 26
Disposals - (52) (52)
At 31 December 2019 358 345 703
Additions 12 8 20
Disposals (55) (5) (60)
At 31 December 2020 315 348 663
-------------------------- -------------------- --------------------------------- ---------------------------------
Accumulated depreciation
At 1 January 2019 237 264 501
Charge for the year 31 48 79
Disposals - (52) (52)
At 31 December 2019 268 260 528
Charge for the year 34 40 74
Disposals (48) (12) (60)
At 31 December 2020 254 288 542
-------------------------- -------------------- --------------------------------- ---------------------------------
Net book value
At 31 December 2020 61 61 121
-------------------------- -------------------- --------------------------------- ---------------------------------
At 1 January 2019 108 120 228
-------------------------- -------------------- --------------------------------- ---------------------------------
At 31 December 2019 90 85 175
-------------------------- -------------------- --------------------------------- ---------------------------------
Depreciation expenditure of GBP74,000 (2019: GBP79,000) is
included within administrative expenses in the income
statement.
8 IFRS 16 Right of use assets
Premises Motor vehicles
GBP'000 GBP'000 Total 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
Additions - 121 121
Disposal - (122) (122)
At 31 December 2020 579 211 790
--------------------------------------- --------- --------------- ------------------------------------
Accumulated depreciation
At 1 January 2019 - - -
Charge for the year 80 105 185
Impairment 61 23 84
--------------------------------------- --------- --------------- ------------------------------------
At 31 December 2019 141 128 269
Charge for the year 82 71 153
Disposal - (111) (111)
--------------------------------------- --------- --------------- ------------------------------------
At 31 December 2020 223 88 311
--------------------------------------- --------- --------------- ------------------------------------
Net book value
At 31 December 2020 356 123 479
--------------------------------------- --------- --------------- ------------------------------------
At 31 December 2019 438 84 522
--------------------------------------- --------- --------------- ------------------------------------
Depreciation expenditure of GBP153,000 (2019: GBP185,000) is
included within administrative expenses in the income
statement.
9 Cash and cash equivalents
Group Company
------------------------------ ------------------------ ----------------------
2020 2019 2020 2019
GBP '000 GBP '000 GBP'000 GBP'000
------------------------------ ----------- ----------- ---------- ----------
Cash at bank and in
hand 3,177 3,143 - -
Less: bank overdraft
(included within borrowings
note 10) (1,256) (2,293) (1,256) (2,293)
1,921 850 (1,256) (2,293)
------------------------------ ----------- ----------- ---------- ----------
The above balances are not offset in the Consolidated Statement
of Financial Position and are included for illustrative purposes
only.
10 Borrowings
Group Company
--------------------- ------------------------ --------------------
2020 2019 2020 2019
GBP '000 GBP '000 GBP'000 GBP'000
--------------------- ----------- ----------- --------- ---------
Current borrowings:
Bank overdraft 1,256 2,293 1,256 2,293
Other loans 15 - 15 -
1,271 2,293 1,271 2,293
--------------------- ----------- ----------- --------- ---------
Group Company
------------------------- ------------------------ --------------------
2020 2019 2020 2019
GBP '000 GBP '000 GBP'000 GBP'000
------------------------- ----------- ----------- --------- ---------
Non-current borrowings:
Bank overdraft - - - -
Other loans 135 - 135 -
135 - 135 -
------------------------- ----------- ----------- --------- ---------
The carrying amounts of borrowings approximate to their fair
value due to their short-term maturity, meaning that the impact of
discounting is not significant. The carrying amounts of the Group's
borrowings are denominated solely in sterling.
The Group bank overdraft facility is secured by a bond and
floating charge over the entire assets of the Group. At 31 December
2020, the Group had total committed undrawn facilities of
GBP350,000 (2019: GBP350,000).
The Group now operates within a GBP200,000 net overdraft
facility which takes into account both the gross cash position of
each Group entity netted off against any borrowings. As at the 31
December 2020, this represents the net cash balance of GBP1,921,000
(2019: GBP850,000) in Note 9.
The Company and its subsidiaries have given a guarantee in
relation to the overdraft facilities extended to The Group.
Other loans relate to the Coronavirus Business Interruption Loan
repayable monthly over six years; first payment to commence on the
12-month anniversary of drawdown.
The loan is guaranteed by the UK Government under the
Coronavirus Business Interruption Loan Scheme with interest payable
monthly on commencement of loan repayment. The rate of interest is
4.19% per annum above the Bank of England floating rate.
11 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:
2020 2019
Note GBP '000 GBP '000
--------------------- ------- ----------- ----------
Right-of-use assets
Buildings 356 438
Vehicles 123 84
8 479 522
--------------------- ------- ----------- ----------
2020 2019
GBP '000 GBP '000
------------------- ---------- ----------
Lease liabilities
Current 163 171
Non-current 354 418
517 589
------------------- ---------- ----------
Under IFRS 16 the assets are now presented in property, plant
and equipment and the liabilities as part of the Group's
borrowings.
ii) Amounts recognised in the statement of profit or loss
2020 2019
Notes GBP '000 GBP '000
-------------------------------------------- -------- ----------- ----------
Depreciation charge of right-of-use assets
Buildings 82 74
Vehicles 71 111
8 153 185
-------------------------------------------- -------- ----------- ----------
The statement of profit or loss shows the following amounts
relating to leases:
2020 2019
GBP '000 GBP '000
----------------------------------------------------------------------------- ---------- ----------
Interest expense (included in finance cost) 18 19
Expense relating to short-term leases (included in administrative expenses) 25 23
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