FST.L Regulatory News (FST)

31 March 2014

Toumaz Limited

Full year results

Toumaz Limited (AIM: TMZ, 'Toumaz', or 'the Group'), a pioneer in ultra-low power wireless semiconductor technology, has published its results for the year ended 31 December 2013.

Highlights

· £17.2m raised in November 2013, now funded to break-even in H2 2015

· Wireless Healthcare

o Successful pilot of SensiumVitals® completed in April 2013

o New distribution agreement signed with North American partner and first commercial orders received from US

o CE Mark for SensiumVitals® received and first UK installation completed

o Direct sales force operational in UK, France and Germany

o Since period end, distributors appointed in Scandinavia, Portugal, Middle East, Australia and New Zealand

· Digital Audio

o Connected Audio agreements signed with Spotify and Imagination Technologies

o Retained 80% market share in consumer DAB/DAB+

o Development of new Digital Radio and Connected Audio chips progressing well - first revenues expected in 2014 and 2015 respectively.

· Full year revenues of £21.9m (2012 pro forma: £22.3m)

· Cash at year end: £21.5m

· EBITDA loss was £9.4m (2012 pro forma: £11.2m)

· Loss per share of 0.88p (2012: 2.19p loss)

Anthony Sethill, Chief Executive of Toumaz, commented,

"2013 has been a key year in the Group's development and the building blocks for growth are now firmly in place. Our ultra-low power connectivity solutions are well positioned to address opportunities within the Internet of Things, the first being in healthcare monitoring and digital audio.

"In Wireless Healthcare, we have now started to market SensiumVitals® internationally. Through our direct sales force and distributors we are now addressing markets accounting for 60% of global healthcare spend.

"In Connected Audio, we achieved several important design wins, and our relationships with Spotify and Imagination Technologies provide a valuable boost to our developing position in this sector.

"We have retained our leadership position in Digital Radio and our next generation Digital Radio and Connected Audio chips are progressing well. Launching this year and next, these will provide a significant boost to our Digital Audio business."

Enquiries:

About Toumaz (www.toumaz.com)

Toumaz is a pioneer in low cost, ultra-low power wireless technologies for a wide range of markets including medical monitoring and internet connected consumer devices. The 2012 acquisition of Frontier Silicon has brought operational scale and expertise together with a leadership position in digital and connected audio markets.

Overview

2013 was an important year in establishing the foundations for the Toumaz Group's future growth. The Group's financial performance was in line with the Board's expectations. Revenues were £21.9m (2012 pro forma: £22.3m), with a 13% increase in Digital Audio volumes offset by lower average prices, due largely to existing chip sets approaching their end of life. EBITDA loss improved to £9.4m (2012: pro forma loss of £11.2m). Following the fundraising, completed in November 2013, cash at the end of the year was £21.5m.

Within the operating businesses, good progress was made within both the Wireless Healthcare and Digital Audio divisions.

Wireless Healthcare saw the successful pilot of its wireless healthcare monitoring system, SensiumVitals®, completed in the US in April 2013. This was followed by a new distribution agreement signed with its North American partner and first commercial orders from the US. CE marking was also received for SensiumVitals® and its first UK installation has been completed. A direct sales force is now operational in UK, France and Germany and since the period end, distributors have been appointed in Scandinavia, Portugal, Middle East, Australia and New Zealand. Sensium Healthcare is expected to begin generating significant revenues in 2014. Hospitals and medical institutions are showing strong interest in the potential of SensiumVitals® to improve patient safety, shorten hospital stays and reduce healthcare costs. By the end of the year, several deployments are expected to be under way.

In Connected Audio, agreements were signed with Spotify and Imagination Technologies to provide connected solutions for their direct music streaming services. The Group's existing solutions will continue to be enhanced and several new design wins should result in 2014. Another major development focus is on the Symphony programme, a next generation Wi-Fi Connected Audio solution. Working closely with Imagination Technologies, this should start generating revenues in 2015.

The Digital Radio business retained its 80% market share in consumer DAB / DAB+ during 2013. The Group expects to see continued market growth, particularly in the UK and Germany, and its priority will be the introduction of the next generation digital radio chip, Chorus 4. Discussions with customers have already begun, with strong interest being shown by leading digital audio manufacturers.

Current trading and outlook

The Group is trading in line with the Board's expectations. Revenue is underpinned by strong recurring revenues in the Digital Radio sector where the Group enjoys a significant market share. The Digital Radio market is expected to expand over the coming years and although there is likely to be some price erosion on sales, the new chip development will lead to significantly lower costs.

Connected Audio revenues are also performing as expected and as the business develops in the next two years, in particular with the introduction of its next generation chip, strong growth is anticipated.

In Wireless Healthcare, following the signing of the new North American distribution agreement in October 2013, the business recorded its first commercial orders and this is expected to become a key driver of growth of Group revenues.

The Group aims to become cash flow positive in 2015 and to have increased revenues fivefold by 2017.

The Group's underlying ultra-low power connectivity solutions have the potential to enable much functionality within the Internet of Things, focusing at first on healthcare monitoring and digital audio.

The Group's immediate priority is to ensure that the timetables for the chip developments currently underway are adhered to, existing markets are maintained and that the commercial potential within the Healthcare and Connected Audio market is realised.

OPERATIONAL REVIEW

Wireless Healthcare

2013 saw the first meaningful steps towards the commercialisation of the SensiumVitals® wireless vital signs monitoring system. The first pilot of SensiumVitals® was completed in the US in April 2013. The results of the six month study at Saint John's Health Center were highly encouraging. On average, patients who received early warning alerts stayed in hospital four days fewer than would have normally been expected, resulting in average savings for each of these patients of $5,500*.

In October 2013, the Group announced a new distribution agreement with its North American partner, Nant Health. SensiumVitals® is being deployed at Hurley Medical Center in Flint, Michigan, where the system is being used in an Accident & Emergency department for the first time. It will be used to monitor patients who, post-triage, may need to sit in a waiting area for extended periods. The system is scheduled to go live in May 2014.

Also in October 2013, SensiumVitals® received its CE Mark, enabling the system to be sold across the European Union. The first UK deployment, at private hospital group Spire Healthcare's Montefiore Hospital, was installed and tested in Q1 2014. Full deployment is expected in May 2014 once the system has been wholly integrated with the hospital's existing IT networks.

At the beginning of 2014, the Toumaz Healthcare business was renamed as Sensium Healthcare, in order to build awareness and recognition of the Sensium brand. The Group has also appointed a Medical Advisor, Dr Ian Jackson, Chief Information Officer and Patient Safety Officer for York Teaching Hospitals NHS Trust and President of the International Association for Ambulatory Surgery.

Sensium Healthcare is rapidly developing its commercial infrastructure with the appointment of management with extensive medical device industry experience, and a direct salesforce for SensiumVitals® in the UK, Germany and France. In addition to the Nant Health distribution partnership in North America, further distributors are being appointed throughout Europe and the Middle East. Agreements have been signed in Australia, New Zealand, Scandinavia, Portugal and Bahrain.

SensiumVitals® also received regulatory approval from the Therapeutics Goods Administration (TGA) during the first quarter of 2014, enabling the system to be commercialised in Australia. This now means that SensiumVitals® is being marketed to countries collectively accounting for 60% of the world's healthcare expenditure.

The focus for Sensium Healthcare is now to ensure the successful roll-out of SensiumVitals® in several territories around the world. There have been positive indications from public and private hospitals in North America, the UK, France, Germany, Sweden, Australia and the Middle East and the Group hopes to start deployment in these geographies during 2014. There is currently a pipeline of 60 potential customers, in addition to advanced discussions with potential distribution partners in Italy, Poland, Finland, Saudi Arabia and Qatar. The Group is also seeking regulatory approval for SensiumVitals® in Japan.

The Group plans to undertake at least one additional health economic study in 2014 in order to provide further clear, robust evidence of the benefits that SensiumVitals® offers to both patients and healthcare providers. In parallel, the company has a product roadmap for future enhancements to SensiumVitals®; this will bring new features, improved functionality and lower costs.

The Group is also assessing potential longer term opportunities in the home health sector. Opportunities may exist to introduce tailored SensiumVitals® solutions for patients recently discharged from hospital or those with chronic conditions such as congestive heart failure (CHF), chronic obstructive pulmonary disease (COPD) or diabetes. However, the short term focus remains on building the SensiumVitals® business in the hospital market.

*Health economic study by Analysis Group Inc, in which monitored patients were matched, by diagnosis and age, against a control group of 18,279 patients sourced from OptimumCare & Medicare databases. For a sub-group of the patients receiving early warning of deterioration (65% of total), average savings were $9,000.

Digital Audio

Connected Audio

2013 has been a significant year for Connected Audio as its focus has shifted towards Wi-Fi enabled wireless speakers and other connected audio devices.

The Group achieved a number of notable design wins and established a strong working relationship with Spotify, with the Group's Venice 6.5 Connected Audio solution supporting Spotify Connect. The first devices based on this solution, from a range of international consumer electronics brands, came to market in Q4 2013. Further enhancements to Venice 6.5 will be implemented in the next few months.

The Group is currently working on the Symphony programme, its next generation Wi-Fi Connected Audio solution, in partnership with Imagination Technologies. This new chipset will offer increased functionality, greater processing power and lower costs and is expected to launch in 2015. Symphony will target a wide range of connected audio devices, such as wireless speakers, internet radios and soundbars.

The Connected Audio market made strong progress in 2013, with wireless speakers rapidly becoming a mainstream consumer sector. The key driver of this trend has been the growing penetration of smartphones and tablets, coupled with the rise of cloud-based music streaming services.

Currently, the Connected Audio market is based mainly on Bluetooth-enabled devices and proprietary systems. Over the next four years, the market is expected to shift significantly towards Wi-Fi enabled devices (as Wi-Fi's superior functionality becomes available at lower price points). By 2017, global sales of Wi-Fi connected audio devices are expected to reach 37m - with the market for Wi-Fi connected audio technology solutions to grow from $100m in 2013 to $350m in 2017**.

The Group's technology also has the potential to provide solutions for the Internet of Things, or Machine-to-Machine applications, particularly in areas such as home automation, healthcare monitoring, energy management, security and connected/intelligent toys. In the longer term, Symphony will offer a platform from which to address these growing markets.

** Source: Parks Associates, Frontier Silicon analysis

Digital Radio

In 2013, the consumer DAB/DAB+ market saw volume growth of 20%. Key drivers were a 52% increase in volumes in Germany*** following the launch of DAB+ in August 2011, and a 148% increase in sales in Norway as it prepares for Digital Switchover in 2017. In the other established markets (UK, Australia, Denmark and Switzerland), sales were broadly flat year on year.

Further growth can be expected as additional countries adopt digital radio:

· In September 2013, the Netherlands launched national DAB+ services

· In October 2013, Poland launched DAB+ services in Warsaw and Katowice

· In December 2013, France confirmed that services will launch in Paris, Nice and Marseille in June 2014

· In December 2013, the UK Government confirmed the roll-out of 351 new Digital Radio transmitters and announced the building of a second national commercial multiplex.

The Group successfully maintained its leadership position within digital radio, continuing to account for 80% of worldwide consumer DAB/DAB+ shipments. Key clients in the last year include Bose, Grundig, Philips, Pure, Roberts and Sony.

In 2014, Frontier intends to enter the US digital radio market for the first time, where the HD Radio™ standard is used. In partnership with HD Radio developers, iBiquity Digital, the Group is creating a tailored solution for the US market. To date, HD Radio has been primarily focused on the line-fit automotive sector. This new initiative will target the market for domestic receivers.

For the last 18 months, development focus has been on the next generation digital radio chip, Chorus 4, an integrated solution which will deliver enhanced functionality and power consumption savings for customers and margin improvements for the business. The integrated nature of the chip also offers the potential for it to be incorporated into smartphones and tablets. Working samples of the chip were delivered in December, testing with customers is taking place from March of this year and first revenues are expected in Q4 2014.

***Source GfK

FINANCIAL REVIEW

Revenue

Group revenue for the year increased from £8.8m to £21.9m due to the full year consolidation of Frontier Silicon. On a pro-forma basis, revenue was broadly static at £21.9m (2012 pro forma: £22.3m). Overall unit shipments increased from 3.1m to 3.5m offset by declining average selling price.

Revenue was primarily derived from the Digital Audio division (Digital Radio and Connected Audio) in 2013. Against a difficult economic background the division performed well with a 12.9% increase in unit sales year on year.

The Wireless Healthcare division recorded its first commercial sales in 2013 following the signing of a new distribution agreement in October.

Gross profit margin for the Group was 44.4% (2012: 45.6%) representing a change in product mix and certain of the older chipsets nearing end of life.

Retained loss

Full year retained comprehensive losses in 2013 were £10.8m (2012: loss £20.4m). The reduced loss is due primarily to the one-off impairment charge taken in 2012 in respect of intangible assets. The company continues to be in an investment phase and has spent over £9.1m on Research and Development in 2013 (2012:£6.4m)

*on pro forma basis

Group EBITDA loss (loss from continuing operations less depreciation, amortisation and impairment and share based payment costs) in 2013 was £9.4m (2012: loss £9.2m). On a pro-forma basis, the EBITDA loss in 2012 was £11.2m. During 2012 an impairment review was carried out on the Group's intangible assets and a charge of £10.2m was taken, to reflect the end of life of certain of the intellectual property previously recognised on the balance sheet, due to technological advances in the industry.

Pre-tax loss

The Group reported a pre-tax loss of £13.3m for the year (2012: loss £21.6m) reflecting the fact that it is still in a developmental phase, which should start to drive further revenues from 2015 onwards.

Taxation

The Group has historically applied for and received tax credits in respect of its research and development expenditure. In 2013, the tax credits amounted to £2.5m (2012: £1.3m). It is expected that similar claims will be made in the future.

As at 31 December 2013 the Group has unutilised tax losses of £41m that may be utilised against taxable future profits. These losses are still to be agreed with the UK tax authorities. In the Board's opinion there is uncertainty over the timing and quantum of their use in the foreseeable future and therefore a deferred tax asset has not been recognised.

Cash flow

During the year the Group raised £17.2m net of new funds and at the year-end recorded £21.5m of cash and cash equivalents on the balance sheet.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2013

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

For the year ended 31 December 2013

CONSOLIDATED CASHFLOW STATEMENT

For the year ended 31 December 2013

NOTES TO THE FINANCIAL STATEMENTS

1 BASIS OF PREPARATION

The Company was incorporated in the Cayman Islands which do not prescribe the adoption of any particular accounting framework. The Board has therefore adopted and complied with International Financial Reporting Standards as adopted by the European Union (IFRS). The Company's shares are listed on the AIM market of the London Stock Exchange. The principal accounting policies of the Group are set out below.

The financial information set out in the announcement does not constitute statutory accounts for the years ended 31 December 2013 and 31 December 2012. The financial information for the year ended 31 December 2013 is derived from the statutory accounts for that year, which will be delivered to shareholders shortly and were approved by the Directors on 28 March 2014. The auditors' report on those accounts was unqualified.

2 revenue, LOSS before taxation and segmental information

Revenue and loss before taxation

Revenue and loss before taxation are attributable to the principal activities of the Group.

The loss before taxation is stated after charging:

Revenue by geographic location

Assets and liabilities by geographic location

Segmental information

As described under Segmental Reporting in the Principal Accounting Policies, Management currently identifies three divisions as operating segments.

Included in revenues in the Digital Radio/ Connected Audio segment for the year ended 31 December 2013 are revenues of £3.1m from the largest customer and £1.7m from its second largest customer and £1.7m from its third largest customer. Together these represent 30% of the reported divisional revenue for the year and 30% of the total Group revenue for the year.

Included in revenues in the Digital Radio/ Connected Audio segment for the year ended 31 December 2012 are revenues of £1.7m from the largest customer and £1.2m from its second largest customer and £1.1m from its third largest customer. Together these represent 48% of the reported divisional revenue for the year and 46% of the total Group revenue for the year.

3 Impairment

During the year the Board has reviewed the carrying value of its intangible assets as required by IAS38. As a result of this review the Board decided that no impairment was required during the year.

4 LOSS PER SHARE

The calculation of the basic loss per share of 0.88p (2012: 2.19p) is based on the loss after tax of £10.8m (2012: £20.3m) divided by the weighted average number of ordinary shares in issue during the year of 1,225,760,858 (2012: 927,984,462).

Due to the losses incurred the impact of the share options and other deferred shares is anti-dilutive. As such the diluted earnings per share equals the ordinary earnings per share.

5 GOODWILL

Goodwill relating to Sensium Healthcare results from the acquisition of Sensium Healthcare Limited on 3 November 2005. Goodwill relating to Frontier Silicon results from the acquisition of the Frontier Silicon Group on 20 August 2012.

There is considerable cross over and exchange of knowledge, intellectual property and the application and use of products between the cash generating units. The expertise and know-how of the Group as a whole provides a platform for all of its products. The customer access, supply chain and technical knowhow acquired with Frontier will be used across the Group.

All principal operating divisions incurred losses in the year ended 31 December 2013, which is an indicator of impairment. The Directors have tested the aggregate recoverable value of goodwill, specific intellectual property, and licence & development fees for impairment in accordance with the Group's accounting policy of testing annually for impairment. Recoverable value is assessed by value in use. The Directors, in assessing the recoverability of the remaining amount have considered the technical feasibility of the technology and the opportunities for commercial exploitation, including the position with the current commercial relationships.

To determine the value in use, the Directors have produced detailed monthly profit and loss and cash flow forecasts for the four years ended December 2017 and annual profit and loss forecasts for the years to December 2021. An eight year forecast period is considered reasonable for the markets that the Company addresses, particularly given the stage of development of the Group's products and the expected life of new technologies as explained further below.

The Chief Executive's Statement on pages 3 to 9 provides a summary of the Group's expectations for each division, together with an overview of the relevant markets. Below we have summarised the key judgements in relation to the individual impairment reviews.

Sensium Healthcare

The above average growth rates of revenue for Sensium Healthcare used in the projections are based on the Directors' considered estimates in a developing market and include significant estimates of both the volume and individual value of sales. The introduction of new and untested "disruptive technology" into the market place exposes the Group to the risk that costly developments will take longer than planned or not achieve the forecast financial returns. Should these estimates not be achieved there is a risk these assets will be impaired.

Consistent with 2012, a discount rate of 15% has been applied to the aggregate results of the forecast. The Directors considered the applicability of a discount rate of 18% and are satisfied that even if that rate were to be applied, the carrying value of the Healthcare goodwill is justified.

The key assumptions with regard to the revenues and profitability of the cash generating units used in testing the aggregate recoverable value of goodwill, specific intellectual property, and licence & development fees for impairment are as follows:

· The life cycle of any product introduced into the Healthcare market will be in the order of 3 to 10 years whilst it is first being tested, then gaining adoption and finally being fully rolled out. revenues were recorded in 2013 and are expected to increase over the remainder of the planning horizon based on expectations of sales volumes and price.

· The forecast model is built on the Directors' best estimates of addressable market and the Company's resultant share of that market. In determining these estimates the company commissioned independent third party research which provided insight into the global hospital environment, potential competitive threats and the expected growth in the market over the expected life cycle of the company's products. Across a number of third party studies the markets that SensiumVitals® will address are expected to grow by a factor of 3-5times over the next 3 years.

· Further products, based on the SensiumVitals® system and related technology, are forecast.

Digital radio and connected audio - Frontier Silicon

The intangible assets of Frontier Silicon were independently valued in the prior year as part of the acquisition accounting. The difference between the fair value of the net assets and the fair value of the consideration treated as goodwill.

Whilst Frontier has continued to make losses post acquisition this is in line with the forecasts at the time of the acquisition and therefore the directors consider the Goodwill arising on consolidation as still valid and no impairment has occurred since acquisition.

The Directors have reviewed the carrying value of these assets in light of their forecasts of revenues and profitability for this business sector. As with the healthcare division, a discount rate of 15% was applied to future cash flows with a rate of 18% used as a stress test. Under both scenarios, the carrying value of the intangible assets could be supported.

In assessing the future cash flows of the division, the Directors have looked at a 6-8 year forward view. This is based on the life cycle of the connected audio and digital radio products, where existing models are reaching end of life, and new models have 12 to 24 months development ahead of them before a useful sales life of 5-6 years depending on future product enhancements. The Directors expect the market for digital radio to keep expanding at its current rate and for the company to maintain its market share and for the connected audio market to expand significantly as the "Internet of Things" really takes hold.

The key judgements applied by the directors in the forecasts are in relation to sales price and volumes. The forecast model is built on the Directors' best estimates of the addressable market and the Company's resultant share of that market. In determining these estimates the directors have considered information and trends from existing markets and their expectations for emerging markets in order to develop an assessment of both future sales volumes and prices. Should these estimates not be achieved there is a risk these assets will be impaired.

6 OTHER intangible assets

Intellectual property

Intellectual property at 1 January 2013 relates to the valuation of beneficial licence agreements, trade names and customer relationships in Sensium Healthcare and Frontier Silicon at the date of their original acquisition.

Licence & development fees

At 1 January 2012 licence and development fees related to an agreement, dated 14 May 2009, with Imagination Technologies Group plc to licence a next generation communication and digital radio multimedia IP platform. The consideration for the licence deal consisted of a number of payments scheduled over the duration of the Group's development projects.  The remaining life of this asset is five years. The additions in the year relate to technology on new projects essential to the future development of the new generation digital chips. The licences will be amortised in accordance with the Group accounting policy and will be subject to an annual impairment review.

Marketing

Marketing-related intangible assets are defined as those assets that are primarily used in the marketing or promotion of products and services. The Frontier solutions are well known and preferred by a majority of the consumer electronic brands who specifically instruct their manufacturers to use Frontier modules and solutions in their audio systems.

Customer relationships

Customer-related intangible assets may consist of customer lists, order or production backlogs, customer contracts and relationships, and non-contractual customer relationships. Frontier has developed relationships with both consumer electronic brands and manufacturers. The customer relationship valuation captures the economic benefits of having these trading relationships.

Impairment reviews

The Directors have tested all intangible assets for impairment in conjunction with their testing for goodwill, in accordance with the Group's accounting policy.

7 ANNUAL REPORT AND ACCOUNTS

The Annual Report and Accounts for 2013 will be posted to Shareholders on 17th April 2014 and will also be available free of charge on request from the Group's registered office, 4th Floor, 137 Euston Road, London NW1 2AA and on the Group's website at www.toumaz.com.

8 Notice of Annual General Meeting

Notice is given that the annual general meeting of the members of Toumaz Ltd will be held at Instinctif Partners, 65 Gresham Street, London, EC2V 7NQ on 23 May 2014 at 9:30am.