RNS Number : 6599Z
Touchstone Group PLC
23 July 2008
Date: 23rd July 2008
On behalf of: Touchstone Group plc ("Touchstone" or the "Group")
Embargoed until: 0700hrs
Touchstone Group plc
Preliminary Results for the year ending 31st March 2008
Touchstone Group plc, the AIM-listed provider of business software solutions and consultancy services, announces preliminary results for
the year to 31 March 2008.
Highlights:
* Turnover growth of 4% to �31.4m (2007:�30.2m), 7% growth on a like-for-like basis
* Adjusted Operating Profits* �2.5m (2007:�3.1m)
* Profit before taxation �1.7m (2007:�2.6m)
* Adjusted Basic Earnings per Share* 17.31p (2007: 20.38p)
* Basic Earnings per Share 11.52p (2007: 15.63p). Fully diluted Basic Earnings per Share 11.43p (2007:15.42p)
* Professional fee income growth of 11% to �14.5m (2007:�13.1m) representing 46% of total operations (2007: 44%)
* Microsoft Dynamics growth of 19% representing 67% of total turnover (2007:57%)
* Revenue from clients using Group-owned software has grown by 45% representing 29% of total operations (2007:21%)
* A final dividend of 1.7p to make a total of 3.2p per share for the year (2007:4.2p)
* Before depreciation, amortisation, share based payments and exceptional professional costs
Commenting, Keith Birch, Chief Executive Officer, said:
"Whilst, the Board is suitably cautious in the light of emerging macro-economic factors, the Group has had a positive start to the
current year which is ahead of last year and is broadly in-line with management expectations.
The Board can also confirm that in recent weeks the Group has secured a number of significant projects for blue-chip clients with a
value of more than �1.7m which will contribute to both revenues and profits in the current year."
Enquiries to:
Keith Birch, Chief Executive Officer
Touchstone Group plc 020 7121 4700
Matt Davis / Alison Barrow
Brewin Dolphin Investment Banking 0845 270 8600
Chairman's Statement
Results
During the year, the Group generated turnover of �31.4m (2007: �30.2m) representing overall growth of 4%.
Adjusted operating profit for the year before depreciation, amortisation, share based payments and exceptional professional costs was
�2.5m (2007: �3.1m). Profit before tax was �1.7m (2007: �2.6m). Adjusted Earnings per Share were 17.31p (2007: 20.38p). Basic Earnings per
Share were 11.52p (2007:15.63p) and Fully diluted Earnings per Share were 11.43p (2007:15.42p).
These are the first full year results reported under IFRS.
Cash and Dividends
The Group had net cash balances at the end of the period of �1.29m (2007: �1.87m). The Board is recommending a final dividend of 1.7p
per share (2007: 2.72p) to be paid on 26th September 2008 to shareholders registered at close of business on 29th August 2008. This makes a
total dividend of 3.2p and is adequately covered by adjusted earnings.
Operations
As previously announced the year started slowly with project delays and ends against a background of more cautious macro economic
conditions. Notwithstanding this, the Group can report its 26th year of consecutive growth with turnover increasing to �31.4m (2007: �30.1m)
reflecting top-level growth on last year of 4%.
In early 2007 the Group closed its SalesLogix CRM unit in order to provide greater focus and talent to the Group's faster growing
Microsoft CRM unit. Adjusting for the closure of this unit (2008: nil, 2007:�730k), overall Group turnover grew on a like-for-like basis by
almost 7%.
Costs of sales have shown a substantial increase on the prior year due in part to a reallocation of salary costs from administrative
expenses. Following a review of the different businesses, the Directors are of the view that all consulting salary costs should be included
within cost of sales, rather than split between cost of sales and administrative expenses as in the prior year. If this practice had been
applied in the prior year, cost of sales would have been �15,954k resulting in a gross profit of �14,211k.
Gross margins at 43% (2007:47%) on a like-for-like basis are lower due to lower chargeable utilisations caused by the slow start to the
year and a more prudent view of the costs to complete on a small number of less profitable contracts. Increasing focus on high margin
Group-owned IP solutions and improved utilisations will give scope for a return to higher margin levels in the future.
Despite good top-line growth, operating margins (before amortisation, share-based payments and exceptional professional costs) have
decreased during the year to 8% (2007:10%). This margin reduction is disappointing and a review of Group-wide overheads has recently been
implemented.
However, the Board recognises that an important and growing component of overall Group overheads attaches to establishing new markets or
bidding for projects based upon Group-owned Intellectual Property (IP). These costs often precede the eventual revenue and can dampen
short-term trading margins. As an example, one of the Group's divisions incurred over �200k of costs researching market potential and then
bidding for opportunities in a number of new territories. Whilst, these costs were prudently written off during the year, it is pleasing to
report that inaugural new project work valued at over �1.2m has been secured in these new territories which will benefit the current
financial year.
During the year the Group generated �21.1m of turnover from clients whose business solutions are principally based upon Microsoft
Dynamics (2007: �17.8m). This has grown by nearly 19% on the previous year and now represents 67% of overall operations (2007: 59%).
The Group's own Intellectual Property (IP) is being used by clients in a number of specialist markets with total turnover from these
clients now representing 29% of total operations (2007:21%). This underpins the Group's enthusiasm for specialist markets and its decision
in the last few years to fund appropriate investment in R&D.
The Group's traditional focus on broader market sectors generated turnover of over �22.3m during the year (2007: �23.7m). Of this, 39%
(2007:35%) has been generated from clients using Infor SunSystems FMS software which continues to be a strategically important element of
overall Group operations.
Total service revenues (including fee-income and annual support revenue) have increased by 7% during the year to �24.1m (2007: �22.6m).
Of this, fee-income alone has grown by 11% to �14.5m (2007: �13.1m) and at 46% (2007: 44%), represents the largest element of overall Group
turnover.
During the year, new Group-wide communications and call-logging systems have enabled more flexible and efficient working practices for
all staff. This investment has, in turn, prompted a full review of the Group's office requirements. Negotiations are currently in progress
for more cost effective office space to house certain functions currently based out of central London offices.
In the recent past, the Company has received a number of unsolicited approaches for a trade sale of all or part of the business. Such
approaches did not, in the Board's view, adequately reflect the intrinsic value of the Company. Whilst the Board will continue to keep an
open mind about such options, all such discussions are currently closed. The Board will continue to pursue organic development initiatives
and invest in its products and services to secure new contracts and drive growth.
Current Trading
Whilst, the Board is suitably cautious in the light of emerging macro-economic factors, the Group has had a positive start to the
current year which is ahead of last year and is broadly in-line with management expectations.
The Board can also confirm that in recent weeks the Group has secured a number of significant projects for blue-chip clients with a
value of more than �1.7m which will contribute to both revenues and profits in the current year.
David RT Thompson
Chairman
23 July 2008
Consolidated Income Statement
for the year ended 31 March 2008
For year ended For year ended
31st March 31st March
2008 2007
Note �000 �000
Revenue 3 31,374 30,165
________ ________
Cost of sales (17,952) (14,354)
________ ________
Gross profit 13,422 15,811
________ ________
Administration expenses before (10,948) (12,752)
depreciation, amortisation, share
based payments and one off
professional costs
Depreciation (212) (229)
Amortisation of intangibles (372) (290)
Share based payment costs (24) (24)
One off legal and professional Costs (87) -
________ ________
Total administrative expenses (11,643) (13,295)
Operating Profit before depreciation, 2,474 3,059
amortisation, share based payments
and one off legal and professional
costs
Depreciation (212) (229)
Amortisation of intangibles (372) (290)
Share based payment costs (24) (24)
One off legal and professional Costs (87) -
________ _______
Operating profit 1,779 2,516
Financial income 82 57
Financial expenses (162) (19)
________ _______
Profit on ordinary activities before 1,699 2,554
taxation
Income tax expense 4 (317) (765)
_______ _______
Profit for the year attributable to 1,382 1,789
equity shareholders of parent
______ ______
Earnings per share
Basic 6 11.52p 15.63p
Diluted 6 11.43p 15.42p
All of the above results are from continuing operations.
Consolidated balance sheet
at 31 March 2008
31 March 2008 31 March 2007
Note �000 �000
Assets
Non - Current
Property, plant and equipment 342 417
Goodwill 6,368 5,874
Other Intangible assets 2,539 2,541
Investments 53 145
______
9,302 8,977
Current assets
Inventories 26 117
Trade and Other Receivables 12,742 11,918
Cash and cash equivalents 1,723 2,522
_______
14,491 14,557
_______
Total Assets 23,793 23,534
______
EQUITY AND LIABILITIES
Equity attributable to the equity
holders of the parent
Share Capital 7 (1,249) (1,232)
Share premium reserve (3,440) (3,210)
Capital Reserve (19) (19)
Retained earnings (5,121) (4,312)
_______ _______
(9,829) (8,773)
Non- current Liabilities
Interest bearing loans and borrowings (217) (433)
Deferred tax liabilities (311) (334)
Trade and other payables (219) (200)
_______ _______
(747) (967)
Current Liabilities
Interest bearing loans and borrowings (217) (217)
Trade and other payables (12,479) (12,649)
Tax payable (461) (928)
Provisions for liabilities (60) -
_______ _______
(13,217) (13,794)
_______ _______
Total Equity and Liabilities (23,793) (23,534)
_______ _______
Consolidated cash flow statement
for the period ended 31 March 2008
Note Year Ended Year Ended
31 March 31 March
2008 2007
Note �000 �000
Profit for the year 1,382 1,789
Amortisation of intangible assets 372 290
Depreciation 212 229
Share option cost 24 24
Decrease/ (Increase) in stock 91 (82)
Decrease / (Increase) in debtors (909) (929)
(Decrease) in creditors (138) (814)
Profit on disposal of fixed assets - 5
Net finance cost 80 (38)
Income tax expense 317 765
Increase in provisions 152 -
Cash flow from operating activities
Cash generated from operations 1,583 1,239
Interest paid (70) (19)
Income taxes paid (778) (523)
Net cash generated from operating activities 735 697
Cashflows from investing activities
Acquisitions of subsidiaries (net of cash (453) (1,358)
acquired)
Purchase of minority interests in subsidiaries - (196)
Purchase of property, plant and equipment (137) (261)
Proceeds from sale of property, plant and - 5
equipment
Purchase of available for sale investments - (50)
Proceeds from sale of available for sale - 21
investments
Interest received 82 57
Development costs (320) -
Net cash used in investing activities (828) (1,782)
Cashflows from financing activities
Proceeds from the issue of share capital - 238
Proceeds from the exercise of share options 20 57
(Repayments) from long term borrowings (217) -
Proceeds from long term borrowings - 650
Dividends paid (509) (465)
Net cash (used in) / generated from financing (706) 480
activities
Net cash (decrease) in cash and cash (799) (605)
equivalents
Cash and cash equivalents at the beginning of 2,522 3,127
the period
Cash and cash equivalents at the end of the 1,723 2,522
period
Notes to the consolidated financial information
1 Financial Information
The financial information set out above does not constitute the Company's statutory financial statements for the year ended 31 March
2008, but is derived from those statements. Statutory financial statements for 2008 will be delivered to the Registrar of Companies
following the Annual General Meeting. The auditors have reported on the financial statements to 31 March 2008. Their report was unqualified
and did not contain statements under section 237(2) of the Companies Act 1985.
2 Annual Report
The Annual Report will be posted to shareholders, it will also be available from the Company's head office at 1 Triton Square, London
NW1 3DX and to download from the Company's website www.touchstonegroupplc.com. The Annual General Meeting will be held at the Triton Square
offices of Touchstone Group on 24th September 2008 at 11am.
3 Segmental information
The Group's turnover and profits before tax principally arise from its activities in the UK and Ireland. Turnover and profits before tax
arising in Ireland are not material. The Group has one principal class of business, the provision of integrated business software and
consulting services associated with these solutions.
4 Taxation
2008 2007
�000 �000
Recognised in the income statement
* current year 491 800
* adjustment to tax charge in respect (63) -
of previous period ________
________
800
428
Current tax expense
(35)
(111)
* Deferred Tax movement
(Origination and reversal of
temporary differences)
________ ________
Total tax expense 317 765
Factors affecting the tax charge for the current period
The current tax charge for the period is lower (2007: lower) than the standard rate of corporation tax in the UK of 30% (2007: 30%). The
differences are explained below:
2008 2007
�000 �000
Current tax reconciliation
Profit / (Loss) on ordinary activities before tax 1,699 2,554
Current tax at 30 % (2007: 30%) 510 766
Effects of:
Expenses not deductible for tax purposes and other adjustments 8 95
Effect of depreciation in excess of capital allowances (19) 22
Utilisation of tax losses - -
Other timing differences (8) (33)
Adjustments to tax charge in respect of previous periods (63) -
Relief for Development costs - (50)
Deferred Tax movement (111) (35)
(origination and reversal of temporary tax differences)
Total current tax charge (see above) 317 765
5 Dividends
2008 2007
�000 �000
Equity shares:
Interim dividend paid in respect of current 182 175
year (2008:1.5p per share, 2007: 1.5p per
share)
Final dividend paid in respect of prior year 327 290
but not recognised as liabilities in that
year (2008: 2.7p per share, 2007: 2.6p per
share)
509 465
The company waived the dividend due on the shares held by the Employee share ownership trust and those held in treasury
A final dividend of 1.7 pence per share, totalling �219,000 has been proposed after the balance sheet date in respect of the year ended
31 March 2008 (2007: 2.7p).
6 Earnings per share
2008 2007
�000 �000
Profit/(loss) for the financial year 1,382 1,789
attributable to shareholders
Depreciation 212 229
Amortisation of intangibles 372 290
Share based payment costs 24 24
One off legal and professional Costs 87 -
Profit for the financial year before
depreciation, amortisation of intangibles, 2,077 2,332
share based payments and one off legal and
professional costs
Weighted average number of shares in issue 11,999,500 11,444,042
Dilutive potential ordinary shares 93,575 154,675
Weighted average number of shares in issue 12,093,075 11,598,717
after dilution
Basic earnings per share year before
depreciation, amortisation of intangibles, 17.31p 20.38p
share based payments and one off legal and
professional costs
(Loss) per ordinary share on adjustments (5.79)p (4.75)p
for depreciation, amortisation of
intangibles, share based and One off legal
costs
Basic earnings per ordinary share 11.52p 15.63p
Diluted earnings per ordinary share
11.43p 15.42p
Basic earnings per share year before
depreciation, amortisation of intangibles, 17.31p 20.38p
share based payments and one off legal and
professional costs
Diluted Earnings per share year before
depreciation, amortisation of intangibles, 17.18p 20.11p
share based payments and one off legal and
professional costs
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, excluding those held in employee benefit trusts which are treated as cancelled.
As at 31 March 2008, there were 214,347 (2007 - 234,347) share options in issue under an approved employee option scheme and 485,219
(2007 - 485,219) in an unapproved scheme. The options first became exercisable in 2001 dependant on the achievement of certain performance
targets. The conversion of potential ordinary shares to ordinary shares would decrease net basic earnings per share, and so they are
dilutive (2007: - also dilutive).
7 Called up share capital
2008 2007
�000 �000
Authorised
16,000,000 ordinary shares of 10p each 1,600 1,600
(2007:16,000,000)
Allotted, called up and fully paid
12,490,787 ordinary shares of 10p each (2007: 1,249 1,232
12,320,189)
The number of shares allotted during the year was 170,598 with a nominal value of �17,060. The proceeds from this share issue were
�246,500.
8 Reconciliation of UK GAAP to IFRS
These are the Group's first audited consolidated financial statements prepared in accordance with Adopted IFRSs. The last financial
statements under UK GAAP were for the year ended 31 March 2007 and the date of transitions was therefore 1 April 2007.
In preparing its opening IFRS balance sheet, the Group has adjusted amounts reported previously in financial statements prepared in
accordance with its old basis of accounting (UK GAAP). An explanation of how the transition from UK GAAP to Adopted IFRSs has affected the
Group's financial position, financial performance and cash flows is set out in the following tables and the notes that accompany the
tables.
Main changes in the basis of preparation between IFRS and UK GAAP
In accordance with the requirements of IFRS 3, goodwill has been frozen at its brought forward net book value at the date of transition,
and amortisation charged under UK GAAP for the period ended 31 March 2007 has been reversed.
In addition, under the requirements of IFRS 3, the fair values of customer relationships and software acquired with the business
combinations arising during the period ended 31 March 2007 have been recognised separately from goodwill and classified as intangible assets
to be amortised over their expected useful economic lives of 10 years and 5 years respectively.
The adoption of IFRS has not had an impact on the amount of cash previously disclosed under UK GAAP in any of the periods of account in
the financial statements.
Consolidated balance sheet reconciliation at 1 April 2006 (Transition date)
Effect of
UK GAAP in transition Reported
IFRS format to IFRS under IFRS
Adjustments �'000 �'000 �'000
ASSETS
Non-current assets
Property, plant and equipment 318 - 318
Goodwill 4,501 - 4,501
Other intangible assets 1,300 - 1,300
Deferred tax a - 53 53
Investments 118 - 118
_______ _______ _______
6,237 53 6,290
Current assets
Inventories 33 - 33
Trade and other receivables 10,094 - 10,094
Cash and cash equivalents 3,127 - 3,127
_______ _______ _______
13,254 - 13,254
_______ _______ _______
TOTAL ASSETS 19,491 53 19,544
====== ====== ======
EQUITY AND LIABILITIES
Equity attributable to the
equity holders of the parent
Share capital (1,164) - (1,164)
Share premium reserve (2,264) - (2,264)
Capital and other reserves a (738) - (738)
Retained earnings (2,678) (53) (2,731)
_______ _______ _______
(6,844) (53) (6,897)
Minority interest (196) - (196)
_______ _______ _______
Total equity (7,040) (53) (7,093)
Non-current liabilities
Trade and other payables (194) - (194)
_______ _______ _______
(194) - (194)
Current liabilities
Trade and other payables (11,606) - (11,606)
Current tax liabilities (651) - (651)
_______ _______ _______
(12,257) - (12,257)
_______ _______ _______
TOTAL EQUITY AND LIABILITIES (19,491) (53) (19,544)
====== ====== ======
Adjustments:
* Deferred tax asset recognised on share options.
Consolidated balance sheet
reconciliation at 31 March
2007
Effect of
UK GAAP in transition Reported
IFRS format to IFRS under IFRS
Adjustments �'000 �'000 �'000
ASSETS
Non-current assets
Property, plant and equipment 417 - 417
Goodwill a,c 5,379 495 5,874
Other intangible assets b 1,136 1,405 2,541
Investments 145 - 145
_______ _______ _______
7,077 1,900 8,977
Current assets
Inventories 117 - 117
Trade and other receivables 11,918 - 11,918
Cash and cash equivalents 2,522 - 2,522
_______ _______ _______
14,557 - 14,557
_______ _______ _______
TOTAL ASSETS 21,634 1,900 23,534
====== ====== ======
EQUITY AND LIABILITIES
Equity attributable to the
equity holders of the parent
Share capital (1,232) - (1,232)
Share premium reserve (3,210) - (3,210)
Capital reserves (19) - (19)
Retained earnings a,b,d,e (2,746) (1,566) (4,312)
_______ _______ _______
(7,207) (1,566) (8,773)
Non-current liabilities
Long-term borrowings (433) - (433)
Deferred tax d,e - (334) (334)
Trade and other payables (200) - (200)
_______ _______ _______
(633) (334) (967)
Current liabilities
Current portion of long-term (217) - (217)
borrowings
Trade and other payables (12,649) - (12,649)
Current tax liabilities (928) - (928)
_______ _______ _______
(13,794) - (13,794)
_______ _______ _______
TOTAL EQUITY AND LIABILITIES (21,634) (1,900) (23,534)
====== ====== ======
Adjustments:
a. Reversing amortisation charged in the period on goodwill (�1,567,000) and reclassifying amounts previously included in the value
of goodwill (�1,311,000).
b. Recognition of customer relationships and software as separately identifiable intangible assets (�1,531,000) and the amortisation
thereon for the year (�126,000).
c. Goodwill arising on acquisition (�239,000).
d. Deferred tax liability recognised in respect of customer relationships and software (�459,000) and reduction in liability during
the year (�37,000).
e. Deferred tax asset recognised on share options (�88,000) and allocated between retained earnings (�90,000) and income statement
(�2,000) in accordance with IAS 12.
Reconciliation of the
consolidated income statement
for the year ended 31 March
2007
Effect of
UK GAAP in transition Reported
IFRS format to IFRS under IFRS
Adjustments �'000 �'000 �'000
REVENUE 30,165 - 30,165
Cost of sales (14,354) - (14,354)
_______ _______ _______
GROSS PROFIT 15,811 - 15,811
Administration expenses before (12,752) - (12,752)
depreciation, amortisation
costs etc
_______ _______ _______
RESULT FROM OPERATING ACTIVITIES BEFORE
DEPRECIATION, AMORTISATION AND SHARE BASED
PAYMENT and ONE OFF PROFESSIONAL COSTS
3,059 - 3,059
Depreciation (229) - (229)
Amortisation of intangibles a (1,731) 1,441 (290)
Share based payment costs (24) - (24)
_______ _______ _______
OPERATING PROFIT 1,075 1,441 2,516
Financial income 57 - 57
Finance costs (19) - (19)
_______ _______ _______
PROFIT BEFORE TAX 1,113 1,441 2,554
Income tax expense b (800) 35 (765)
_______ _______ _______
PROFIT FOR THE YEAR 313 1,476 1,789
====== ====== ======
Earnings per share:
Basic 2.73p 12.90p 15.63p
====== ====== ======
Diluted 2.69p 12.73p 15.42p
====== ====== ======
Adjustments:
a. Reversing amortisation charged in the year on goodwill (�1,567,000) and recognising the amortisation on customer relationships and
software (�126,000).
b. Movement in deferred tax liability (�37,000) and movement in deferred tax asset recognised in income statement (�2,000).
There were no adjustments required to the consolidated cash flow statement for the year ended 31st March 2007.
END
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