FST.L Regulatory News (FST)

Toumaz Limited

('Toumaz' or the 'Group')

Sale of Healthcare division

and

Half year trading update

Toumaz (AIM: TMZ), a pioneer in wireless technologies, announces the sale of its healthcare business, Sensium Healthcare ("Sensium"), and also provides a trading update for the six months ended 30 June 2016.

Sale of Healthcare division

Toumaz has agreed the sale of Sensium to Dutch healthcare group, The Surgical Company ("TSC"). TSC has been Sensium's distribution partner in France, Germany and Benelux for the last three years.

The consideration for Sensium comprises an initial payment of £1 million on completion with an additional payment of £0.3 million on 31 December 2016. Toumaz will also receive royalties of 3% of net revenues for five years, followed by royalties of 2% of net revenues for the following five years. If TSC chooses to sell the business within the next four years, Toumaz will also receive 19% of the net proceeds.

The sale follows a strategic review which concluded that this was the best option for the Group. The sale eliminates any further cash losses associated with Healthcare - in H1 2016, the EBITDA loss for Sensium was £3.9m - and will allow the Group to focus on its Digital Audio division, Frontier Silicon, where the Board sees significant growth opportunities.

Frontier Silicon is already the established market-leader in Digital Radio and is benefitting from the growing adoption of DAB radio internationally. In addition, the Group is well placed to take advantage of the fast-growing demand for Wi-Fi-enabled smart audio solutions.

Financial effects of the sale and losses attributable to Sensium

For the year ended 31 December 2015, Sensium contributed revenue to the Group of £0.3 million, an EBITDA loss of £6.9 million and a loss before tax of £7.5 million. The total value of the net assets being disposed of as at 31 December 2015 was £1.6 million.

Following the sale, the Group is expected to be cash-flow positive in H2 2016.

Use of sale proceeds

The consideration will provide additional working capital to support the growth and development of the Group.

Trading Update

As anticipated, Group revenues in the first half were marginally lower at £13.7 million (£14.0 million in H1 2015) due mainly to a decline in Healthcare revenues. Excluding Healthcare, revenues were steady at £13.7 million (£13.8 million in H1 2015) ahead of the launch of the Group's next generation smart audio product in H2.

Group EBITDA improved by 35% to a loss of £3.6 million in H1 2016 (£5.5 million loss in H1 2015). This is largely attributable to the reduction in the Group's research and development ('R&D') expenditure, which as planned decreased from £6.3 million in H1 2015 to £4.8 million in H1 2016.

Excluding Healthcare, the loss improved from £1.8 million in H1 2015 to £35,000 in H1 2016 as R&D expenditure fell from £4.7 million in H1 2015 to £2.6 million in H1 2016. R&D expenditure is now focused primarily on software, with no new silicon development programmes currently planned. The Board anticipates that the Digital Audio division will be EBITDA positive for FY 2016.

As at 30 June 2016, the cash balances stood at £3.8 million (31 December 2015: £7.7 million).

Digital Radio

Digital Radio revenues increased 7% to £9.3 million (£8.7 million in H1 2015). The Group retained market share as volumes increased, driven by the international expansion of DAB digital radio, especially in continental Europe.

Smart Audio

Smart Audio revenues were £4.4 million (£5.1 million in H1 2015). This reflects a transition in the business to the Group's next generation solution, incorporating Google's Cast for Audio technology. Toumaz is one of a very small number of system integrators to support Google Cast and interest from customers is strong, particularly in the US. The Group's Cast-enabled solution is on schedule to be released in Q3 2016, with first consumer products incorporating the technology expected to be available in Q4. Sales are expected to gain significant momentum in 2017.

The Board will provide a fuller update on trading and the Group's future prospects at the announcement of the Half Year results in the second half of September.

Anthony Sethill, CEO of Toumaz, commented:

"We are pleased to have completed the sale of the Healthcare division, eliminating the associated cash burn and allowing us to focus our financial and operational resources on Frontier Silicon, our high growth Digital Audio business. 

"Frontier Silicon benefits from market leading expertise both in Digital Radio and increasingly in Smart Audio. The Group, excluding Healthcare, remains on track to be EBITDA positive for the full year and the growth opportunities for Digital and Smart Audio in the years ahead are significant."

This announcement contains price sensitive information.

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About Toumaz

Toumaz Limited is a pioneer in digital radio and smart audio technologies, providing chips, modules and software for consumer electronic devices. For further information, please visit www.toumaz.com.