FST.L Regulatory News (FST)

25 September 2014

Toumaz Limited

Half 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 six months ended 30 June 2014.

Highlights

· Group revenues up 32% to £10.8m (H1 2013: £8.2m)

o Digital Radio revenues up 27% to £7.4m (H1 2013: £5.8m)

o Connected Audio revenues up 18% to £2.8m (H1 2013: £2.4m)

o Healthcare revenues of £0.5m (H1 2013: Nil)

· EBITDA loss £5.6m unchanged (H1 2013: loss £5.6m)

· Cash £13.2m at 30 June 2014

Healthcare

· First NHS pilot started in September

· Healthy pipeline of private and NHS hospitals in the UK and around the world

· First two deployments of SensiumVitals® in UK and US went live in May

· Distributors appointed in key territories - evaluations have started in Australia and Portugal

· Grant funding awarded by the UK's Technology Strategy Board to support development of next generation system

Consumer Audio

· Strong growth in Digital Radio driven by international expansion of DAB

· Next generation Digital Radio solution launched in September - first revenues due Q4 2014

· Connected Audio benefiting from sector growth and relationship with Spotify - Philips launch new multi-room speakers based on Group's solutions

Anthony Sethill, CEO of Toumaz said:

"We have made encouraging progress in the first six months of the year. We have seen our first material Healthcare revenues from SensiumVitals®. Our Digital Radio and Connected Audio businesses also saw good growth - up 27% and 18% respectively.

"In Healthcare, we are developing a strong international pipeline and customer feedback from our first deployments has been positive. In the last month, we have started the first NHS pilot of SensiumVitals® and our first deployments in Australia and Portugal.

"Digital Radio is benefitting from international market growth and our next generation solution will enhance revenues and margins. Our Connected Audio solutions, enhanced by our relationship with Spotify, are driving design wins and growth."

Enquiries:

About Toumaz (www.toumaz.com)

Toumaz Limited is a pioneer in low-power, wireless semiconductor and software technologies for Healthcare and Consumer Audio. The company has two divisions, Sensium Healthcare and Frontier Silicon. Sensium Healthcare develops wireless solutions for patient monitoring. Frontier Silicon provides chips, modules and software for Digital Radio and Connected Audio devices.

Overview

The first half of 2014 has seen the Group make significant progress, both in trading performance and investing for medium term growth.

In May, Healthcare saw the first live deployments of SensiumVitals® in Spire Healthcare's Montefiore Hospital in Brighton and Hurley Medical Center in Flint, Michigan. These deployments helped generate this unit's first notable revenues. The first NHS pilot began in September.

The Group has established sales and distribution networks in 19 territories. The system is being evaluated in hospitals in Australia and Portugal, with evaluations in further territories expected before the end of 2014.

In July, the Group was awarded funding by the UK's Technology Strategy Board to support development of its next generation system.

In Consumer Audio, both lines of business (Digital Radio and Connected Audio), have achieved healthy revenue growth - up 27% and 18% respectively. Digital Radio has benefited from the development of international markets. Connected Audio is seeing the benefits of its relationship with Spotify.

The Group's next generation chips are expected to provide the basis for strong market positions in Digital Radio and Connected Audio.

The Group's new Digital Radio chip was launched this month and is expected to generate first revenues before the end of the year.

The Group has continued to invest in its next generation Connected Audio chip, which is well positioned to deliver significant market impact - first revenues from this development are now expected in the second half of 2015.

Current trading and outlook

The Board expects the Group's trading for the rest of the year to be broadly in line with its expectations. In Consumer Audio, Toumaz expects to ship c.4.3m units this year, representing 23% increase on last year's 3.5m units. In September 2014, the Group shipped a record 602,000 units.

As both the Healthcare and Digital Radio businesses build revenue momentum and Toumaz continues to invest in Connected Audio, the Board believes that the prospects for strong medium term growth across the Group are increasingly encouraging.

Healthcare

The Group now has direct sales teams in the UK, France and Germany and distribution networks in a further 16 territories: the USA, Canada, Mexico, Australia, New Zealand, Italy, Portugal, Norway, Denmark, Sweden, South Africa and five countries in the Middle East. The business is investing significantly in sales and engineering resource.

The first deployments of SensiumVitals® went live in May, in Spire's Montefiore Hospital in Brighton and Hurley Medical Center in Flint, Michigan. The start dates of these deployments were a little later than initially anticipated, as in both cases the set-up process required optimisation of the system's software.

Despite these initial delays, feedback from clinicians has been encouraging. Over time, the scale of customisation required for future installations is expected to reduce.

The Spire deployment was the focus of a BBC News feature http://www.bbc.co.uk/news/health-28415753. This has generated a high degree of interest from other media, policy makers and potential customers. The film, which ran on BBC Breakfast TV, demonstrated how the system works and included interviews with nursing staff and patients.

In July, the Group was awarded grant funding from the UK's innovation agency, the Technology Strategy Board, to support development of its next generation system. This development will be a partnership with the University of Leicester, which should help facilitate uptake of the technology within the NHS - in particular, for patients in emergency care.

The first NHS pilot of SensiumVitals® started in September in an acute surgery ward. Further details will be provided when the pilot is completed. In the meantime, a healthy pipeline of private and NHS hospitals is being developed.

In the Rest of the World, progress has been good. Distributors have been appointed in key territories and evaluations in several markets are expected to start before the end of the year. In 2015, the aim will be to convert these evaluations into long term contracts.

Consumer Audio

Digital Radio

Results for H1 2014 have been encouraging, with year on year revenue growth of 27%. Key drivers have been strong market growth in Germany, where volumes are up 35%, and Norway, the first country to commit to Digital Switchover. The Group has been successful in maintaining market share in its core consumer DAB / DAB+ markets.

Continued market growth is expected as established territories such as Germany and Norway continue to grow, and newer or potential markets such as Netherlands and Italy start to build momentum.

In addition, the UK is introducing a Digital Tick campaign to promote "future ready" devices which will function effectively in a potential post-Digital Switchover environment. The Group's Frontier Silicon business was the first technology provider to have its solution approved as Digital Tick mark compliant.

The Group is well positioned to exploit this overall growth in the market and protect its market share as it introduces new solutions based on its next generation chip. The first of these, the Verona 2 module, was launched in September at the IFA consumer electronics show in Berlin.

These new solutions offer 50% lower power consumption, coupled with enhanced performance and functionality. By using a single, integrated chip instead of four separate chips, significant scope exists for margin improvements. Initial customer reaction to Verona 2 has been positive. First revenues are expected before the end of 2014 - with volumes increasing in 2015.

Connected Audio and Internet of Things

Growth in Connected Audio revenues has also been encouraging, up 18% year on year. Further increases are expected in the second half of 2014 following the successful launch of the Philips Spotify Connect solutions.

Key drivers of this growth have been increasing customer demand for the Group's new software development kits which are enabled for Spotify Connect, coupled with a number of high volume retailer promotions for Internet radios.

In September, at IFA in Berlin, Philips became the first major brand to launch a range of multi-room speakers using the latest iteration of the Group's Spotify-supported technology - an important endorsement of the Group's capabilities in Connected Audio. The Group has also secured several other design-wins, due to be announced early next year, which are expected to support continued revenue growth in 2015.

Development of the Group's next generation Connected Audio solution is at an advanced stage with first revenues expected in the second half of 2015 and volumes ramping in 2016. The next generation solution has attracted global Tier 1 brands as launch partners. This gives the company confidence that medium term prospects for the Connected Audio business are strong.

The Group is assessing a number of concepts and opportunities in the "Internet of Things". Focus is likely to be on areas where the Group can exploit both its existing market positions and its technology expertise, such as in low power RF.

Financial Review

Group revenue was up 32% to £10.8m (2013 £8.2m) with Digital Radio, up 27% to £7.4m (2013: £5.8m), making the largest contribution.

Digital Radio revenue growth was primarily due to growth in the German and Scandinavian markets.

Connected Audio revenues increased by 18% to £2.8m (H1 2013: £2.4m) primarily due to the uptake of its solutions for Spotify Connect and Internet Radio.

Healthcare revenues of £0.5m (H1 2013: nil) derive from patch and bridge sales as well as maintenance fees in the US.

EBITDA loss can be calculated as:

Overall gross margins are 42.1% (2013: 44.3%), and gross profit has increased by £0.9m.

Research and development costs are expensed where possible and mainly reflect the ongoing development in the current financial year of the next generation Connected Audio silicon.

Sales and admin expenses have increased as planned due to the increase in SensiumVitals® sales and marketing heads (£0.4m). The Group was also adversely affected by foreign exchange movements (£0.3m).

EBITDA has remained unchanged.

Other non-trading costs primarily comprise the non-cash employee share based payments and amortisation and depreciation.

Group pre-tax loss was £7.6m (2013: loss £7.6m) with a loss per share of 0.46p (2013: loss 0.65p).

Cash and cash equivalents of £13.2m at 30 June 2014 (31 Dec 2013: £21.5m) and the balance at 31 August 2014 was £12.8m.

Toumaz Limited

Unaudited Interim Results

for the six month period ended 30 June 2014

Statement of Comprehensive Income

for the period ended 30 June 2014

Consolidated Statement of Financial Position

at 30 June 2014

Consolidated Statement of Changes in Equity

for the period ended 30 June 2014 

Consolidated Cash Flow Statement

For the period ended 30 June 2014

Notes to the Interim ReportFor the period ended 30 June 2014

1. Nature of operations and general information

Toumaz Limited and subsidiaries' ('the Group') principal activity is that of commercial exploitation of ultra-low power wireless infrastructure technologies with commercial propositions for the healthcare and electronic sectors.

Toumaz Limited is the Group's ultimate parent company. It is incorporated in the Cayman Islands. The address of Toumaz Limited's registered office is Elgin House, 119 Elgin Avenue, George Town, Grand Cayman, Cayman Islands. Toumaz Limited's shares are listed on the Alternative Investment Market of the London Stock Exchange.

Toumaz Limited's consolidated interim financial statements are presented in Pounds Sterling (£), which is also the functional currency of the parent company.

The financial information set out in this interim report does not constitute statutory accounts. The Group's statutory financial statements for the year ended 31 December 2013 are available from the Group's website. The auditor's report on those financial statements was unqualified

 2. Accounting Policies

Basis of Preparation

These interim condensed consolidated financial statements are for the six months ended 30 June 2014. They have been prepared following the recognition and measurement principles of IFRS. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2013.

These financial statements have been prepared on the going concern basis and under the historical cost convention.

These condensed consolidated interim financial statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year to 31 December 2013.

The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these condensed consolidated interim financial statements.

3. Revenue by sector

4. Loss per share

The calculation of the basic loss per share is based on the loss attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period. The impact of the share options and share warrant on the loss per share is anti-dilutive.

5. Goodwill

Toumaz Healthcare

Goodwill relating to Toumaz Healthcare results from the acquisition of Toumaz Healthcare Limited (formerly Toumaz UK Limited) on 3 November 2005.

Toumaz Microsystems

Goodwill relating to Toumaz Microsystems results from the acquisition of Future Waves UK Limited and Toumaz Asia on 20 May 2009.

Frontier Silicon

Goodwill relating to Frontier Silicon results from the acquisition of Frontier Silicon Ltd on 20 August 2012.

6. Other intangible assets

Intellectual property

Intellectual property 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

The licences 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.

7. Trade and other receivables

Trade and other receivables are usually due within 30 - 60 days and do not bear any effective interest rate.

The fair value of these short term financial assets is not individually determined as the carrying amount is a reasonable approximation of fair value.

8. Trade and other payables

The fair value of trade and other payables has not been disclosed as, due to their short duration, management considers the carrying amounts recognised in the balance sheet to be a reasonable approximation of their fair value.

9. Share capital

All shares are equally eligible to receive dividends and the repayment of capital and represent equal votes at meetings of shareholders.

Allotments

27 January 2014, 1,000,000 ordinary shares 0f 0.25p were issued in relation to the exercise of share options by employees.

29 April 2014, 2,631,920 ordinary shares of 0.25p were issued in settlement of deferred consideration under the acquisition agreement of Frontier Silicon (Holdings) Limited ("Frontier") in respect of Frontier's acquisition by Toumaz.

27 June 2014, 31,361,243 ordinary shares of 0.25p were issued ("JSOP Shares") pursuant to the implementation by the Company of the joint share ownership schedule to the LTIP ("JSOP").