Touchstar Plc Regulatory News (TST)

2 Mar 2006 07:00

Belgravium Technologies PLC02 March 2006 02 March 2006 Belgravium Technologies Plc (BVM:AIM) Preliminary Results for the Year Ended December 31 2005 The Board of Belgravium Technologies plc ("Belgravium" or "the Group"),designers and manufacturers of real-time data capture systems, is pleased toannounce the Preliminary Results for the year ended 31 December 2005. HIGHLIGHTS • Turnover up 41% £5,430,000 (2004: £3,859,000) • Pre tax profits up 31% (before amortisation) £982,000 (2004: £751,000) • Dividend policy maintained • Acquisition of Touchstar Technologies Ltd ("Touchstar") in October 2005 (Touchstar sales and profits for the last two months of 2005 are included in the Group results) • Integration of Touchstar product range • Expansion into new markets and territories - international petrochemical supply and mobile retail • Acquisition of Novo IVC Ltd in January 2006 • Both acquisitions earnings enhancing and complimentary to the Group's growth potential 1 Commenting today, Executive Chairman John Kembery said: "The Group made significant progress in 2005 and delivered a solid result, withthe largest contribution coming from Belgravium Limited. It is also pleasing to report that a major acquisition was completed in Octoberand a further acquisition in January 2006, fully consistent with our policy ofaugmenting organic growth through acquisition. Due both to their strategicimportance and earnings enhancement 1, the Board believes these to be compellingdeals for Belgravium. Clearly shareholders agreed, the share placement inrelation to the acquisition of Touchstar being over-subscribed and the EGMendorsing the proposal unequivocally. The teams in all three companies have made a good start in co-operation onmatters of finance, sales and technology. Order prospects are excellent, andwith the enhanced strength of the enlarged Group, we are optimistic for 2006." For further information please contact: Buchanan Communications ltd Kelly-Ann French Mob: 07958 972164 Belgravium Technologies plc John Kembery Mob: 07770 731021 www.belgraviuminvestorrelations.com FULL RESULTS BELOW Chairman's statement Introduction Belgravium Technologies plc ("Belgravium" or the "Group") designs, manufacturesand installs real time, electronic data capture systems. Historically, thesehave largely been applied to the UK logistics and the supply chain sectors, butrecent acquisitions have moved the Group into international petrochemical supplyand mobile retail systems. Results The Group made significant progress in 2005 and delivered a solid result, withthe largest contribution coming from Belgravium Limited. Turnover for the yearwas £5,430,000, 41% up on 2004 (£3,859,000). Profit before tax and amortisationof goodwill was £982,000, 31% up on prior year (£751,000). An excellent result,although a little less than expected, due to seasonal delays in some contracts. Balance Sheet and Acquisitions The Group balance sheet at the end of 2005 was radically different from that of2004, due to the major acquisition of Touchstar Technologies Limited ("Touchstar"), financed partly in cash and partly by a term loan and placement of newshares. The net worth of the Group increased from £2,646,000 to £7,406,000 andthe year end balance sheet contained £1,799,000 (2004: £2,219,000) in cash, someof which was used for the acquisition of Novo IVC, subsequent to the year end. Dividend It is Belgravium's policy to pay dividends and, even though cash reserves havebeen utilised for acquisitions, future prospects for the enlarged Group areexcellent. The Board is therefore pleased to recommend a final dividend of0.32p per ordinary share. This will be paid on 7 June, subject to the approvalat the AGM of shareholders on the register on 12 May 2005. Belgravium Limited Operations in 2005 Belgravium Limited had another good year in 2005, completing the company'sbiggest ever contract to supply proof of delivery systems for Grattan. Overallturnover increased by 12% compared to the prior year and the company made goodprogress in increasing the range and functionality of its products, whilstmaintaining the quality of its goods and services. The logistics sectorcontinues to expand but there is no doubt that the market has become morecompetitive, such that more rapid growth could only be achieved at the expenseof margin. In this environment the Group needed to be bigger and to have alarger platform for its technical and geographical development. It is thereforepleasing to report that a major acquisition was completed in October, fullyconsistent with our policy of augmenting organic growth through acquisition. Touchstar Technologies Ltd Like Belgravium Limited, Touchstar supplies data capture systems but into thepetrochemical distribution and retail passenger sales market on a much moreinternational scale. The company has been known to Belgravium for several yearsand there had been some discussions in the past on the benefits that wouldaccrue from a merger. In the second half of 2005 it became clear that many ofthe historic barriers to such an agreement could be overcome and the deal wascompleted before the year end. Touchstar turnover, in its financial year to the end of May 2005, was £7.4million with a profit before interest and tax of £2.1 million. The acquisitionby Belgravium was therefore, a reversal, requiring shareholders' approval. Thebenefits of this protracted and expensive process were to add to the Group: - an established brand name with international recognition and real growth opportunities in its target sectors and territories - additional routes to market and cross-selling opportunities into new geographical areas - increased buying power and leverage with suppliers of components - opportunity to streamline product development and realise synergies from combined technical capability - a higher profile from which to target new markets In addition, the Directors' believe that the acquisition will enhance earningsin the first year of operation and, partly funded by a share placement, has leftthe Group's gearing at an appropriate level. Touchstar was acquired for a totalof £10.75 million in cash but, since the vendors agreed to leave a minimum of£2.55 million cash in the balance sheet at completion, the debt free/cash freeprice for the company was £8.2 million, or 3.9 times Touchstar's pre-taxearnings in the year to May 2005. Due both to the strategic importance and the earnings enhancement,, the Boardbelieves this to be a compelling deal for Belgravium. Clearly shareholdersagreed, the share placement being over-subscribed and the EGM endorsing theproposal unequivocally. Touchstar sales and profits for the last two months of2005 are included in the Group results. Future Group Operations We believe it to be important to maintain the brand names of Belgravium andTouchstar since both have significant value in their chosen market sectors.Beyond this aspect, many of the functions of the two companies can be mergedwith substantial benefits, arising not so much from cost saving but from shareduse of resources and experience. This is particularly true on the technicalfront where both companies have, in the past, solved the same technical issuesin different ways. Coordination of this function is already bringing benefits.However, we do not intend to rush the merger process, preferring to let theoperations grow together rather than force synergies which may not exist. Thisis a process predicated much more on growth potential than on cost saving. Novo IVC Touchstar's other main market is in the travel industry where its data capturehardware is used in retail systems, largely on aircraft but more recently ontrains. This sector has historically been handled exclusively by a LeamingtonSpa based company called Novo IVC ("Novo"), owned by the Swedish software Group,WM-Data. This company has historically been very profitable and, with its softwarecombined with Touchstar hardware, offers substantial growth opportunities in yetanother sector. Subsequent to the year end, Belgravium completed the purchase ofthis company from WM-Data on 13 January 2006. The consideration of £1,316,000was paid in cash. At the time of the acquisition Novo had over £600,000 in cashand although the costs of the transaction were high at £350,000, the purchase ishighly attractive as the company is expected to make a profit before tax of£250,000 in 2006.1 Novo works closely with WM-Data whose products include software for datacollection analysis. As part of the deal, the two companies have signed aco-operation agreement aimed at future development of the mobile retail markets. The whole of Novo staff will be retained and, as with Touchstar, many of itsfunctions will be gradually assimilated into the Group. Thus, the acquisitionwill be both earnings enhancing and complimentary to the growth potential of thewhole Group. 1 Product Development In 2005, we launched the vehicle mounted Monaco terminal with Windows CEcapability. Work has been completed on integrating Radio FrequencyIdentification (RFID) into the Atlanta terminal and two contracts have beencompleted in Europe. The functional range of the Atlanta was significantlyincreased to include voice recognition and GPRS communication. An extensiveprogramme of product development was inherited at Touchstar and has beencomplimented by sharing resources between the two sites. Employees As in previous years Belgravium's staff have coped admirably with all of thechanges inevitable in such an active year. The two acquisitions more thandouble the numbers employed within the Group and bring additional skills withwhich to approach the substantial growth potential of our chosen markets. Wewelcome these new members to Belgravium, and they may look forward to a securefuture in the enlarged Belgravium. Outlook The Group has made two investments which the Board believes to be earningsenhancing. The teams in all three companies have made a good start inco-operating on matters of finance, sales and technology. Seasonality in tradinghas repeatedly shown us that the early part of the year is typically a quietperiod and the trend has continued in 2006. However, order prospects areexcellent and with the enhanced strength of the enlarged Group, we areoptimistic for 2006.1 J P KemberyExecutive Chairman1 March 2006 1 This statement should not be taken to mean that the earnings per share of theGroup will necessarily match or exceed the historical reported earnings pershare of the Group and no forecast is intended or implied. Audited Group profit and loss account for the year ended 31 December 2005 2005 2004 Continuing Acquisitions Total (as restated) operations Total £'000 £'000 £'000 £'000Turnover 4,351 1,079 5,430 3,859Cost of sales 1,700 580 2,280 1,369 Gross profit 2,651 499 3,150 2,490 Distribution costs 32 12 44 31Administrative expenses 1,936 264 2,200 1,800 1,968 276 2,244 1,831 Operating profit before goodwill amortisation 683 223 906 659Goodwill amortisation - (80) (80) - Operating profit 683 143 826 659Net interest receivable 76 92 Profit on ordinary activities before taxation 902 751Tax charge on profit on ordinary activities (273) (148) Profit for the financial year 629 603 Basic earnings per ordinary share 0.86p 0.90pDiluted earnings per ordinary share 0.85p 0.89p There are no recognised gains or losses other than the profit for the year andtherefore no separate statement of total recognised gains and losses has beenpresented. There is no difference between the profit on ordinary activities before taxationand the retained profit for the year as stated above, and their historical costequivalents. Audited Group balance sheet as at 31 December 2005 2004 2005 (as restated) £'000 £'000Fixed assetsIntangible assets 8,232 -Tangible assets 325 237 8,557 237 Current assetsStocks 1,103 443Debtors 2,479 1,458Cash at bank and in hand 1,799 2,219 5,381 4,120 Creditors: amounts falling due within one year (6,189) (1,657) Net current (liabilities)/assets (808) 2,463 Total assets less current liabilities 7,749 2,700Creditors: amounts falling due after more than one year (170) -Provisions for liabilities and charges (173) (54) Net assets 7,406 2,646 Capital and reservesCalled up share capital 5,021 3,341Share premium account 2,915 120Capital redemption reserve 2,100 2,100Profit and loss account (2,630) (2,915) Total equity shareholders' funds 7,406 2,646 Audited Group cash flow statement for the year ended 31 December 2005 2005 2004 £'000 £'000 Net cash inflow from operating activities 870 672 Returns on investment and servicing of financeInterest received 96 92Interest paid (20) - 76 92 TaxationCorporation tax paid (396) (180)Corporation tax received - 55 (396) (125) Capital expenditure and financial investmentPurchase of intangible fixed assets (28) -Purchase of tangible fixed assets (52) (51) (80) (51) AcquisitionsAcquisition of subsidiary company (8,170) -Acquisition expenses (633) -Cash at bank and in hand acquired with subsidiary 3,362 - (5,441) - Equity dividends paid to shareholders (344) (291) Net cash (outflow)/ inflow before financing (5,315) 297 FinancingPurchase of own ordinary share capital - (121)Issue of own ordinary share capital 4,704 -Expenses of share issue (229) -New bank loans 420 - 4,895 (121) (Decrease)/increase in cash in the year (420) 176 Audited reconciliation of net cash flow to movement in net funds 2005 2004 £'000 £'000 (Decrease)/increase in cash in the year (420) 176 Cash inflow from increase in debt (420) -Non cash changesLoan notes issued in connection with acquisition (see note 24) (2,580) - Movement in net funds during year (3,420) 176Net funds at 1 January 2,219 2,043 Net (debt)/funds at 31 December (1,201) 2,219 Audited reconciliation of operating profit to net cash inflow from operatingactivities: 2005 2004 £'000 £'000 Operating profit 826 659Depreciation 123 108Amortisation 85 -Movement in provisions (16) (16) Funds generated by operations 1,018 751 Increase in stocks (156) -Increase in debtors (41) (239)Increase in creditors 49 160 Increase in working capital (148) (79) Net cash inflow from operating activities 870 672 Audited reconciliation of movements in Group equity shareholders' funds 2004 2005 (as restated) £'000 £'000 Profit for the year 629 603Dividends (344) (291) 285 312 Issue of own ordinary share capital 4,704 -Expenses of share issue (229) -Purchase of own ordinary share capital - (121) Net change in equity shareholders' funds 4,760 191Opening equity shareholders' funds as at 31 December 2004(previously £2,432,000 before prior year adjustment of£214,000) 2,646 2,455 Closing equity shareholders' funds 7,406 2,646 Basis of reporting This preliminary announcement, which has been prepared on a basis consistentwith the previous year (except for the adoption of new accounting standards asexplained in Note 20 of the audited financial statement for the year ended 31December 2005), does not constitute statutory accounts within the meaning ofSection 240 of the Companies Act 1985. This preliminary announcement contains information extracted from the auditedfinancial statements of the group for the year ended 31 December 2005. Thestatutory accounts for the year ended 31 December 2005 will be sent to theshareholders shortly. The information for the year ended 31 December 2004 is an extract from thestatutory accounts to that date (except as explained in Note 20 of the auditedfinancial statements for the year ended 31 December 2005) which have beendelivered to the Registrar of Companies. These accounts included an auditedreport which was unqualified and which did not contain a statement under Section237(2) or (3) of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock Exchange