Touchstar (TST) , a supplier of mobile data computing solutions and managed services, announced its interim results for the 6 months to June 30, 2024 (H1 2024).
Touchstar reported materially increased margins to 59.1% from 55.4% LY, offsetting 6.7% lower revenues to £3.38m. While overall revenues declined, recurring revenues continued growing to £1.50m from £1.44m LY. Notably, Touchstar's access control business "ATC" had a particularly strong H1, which drove business outperformance to budget.
Touchstar proposed an interim dividend of 1.5p, 50% higher year-on-year from 1.0p in H1 2023. Cash balance dropped to £1.74m due to stock levels increasing ahead of expected H2 activity and an increase in debtors following strong June trading. The cash position is expected to normalise by year-end.
Separately, Touchstar announced a strategic review to identify the best path forward for the business. TST said the review would explore "various options, including a potential sale of the company, its assets or other relevant transactions." TST clarified that it had been approached by 3rd parties about possible mergers, alliances or sale of part or all of the business, and considered those on an ad hoc basis.
The strategic review will now formalise this process, with a conclusion expected by the end of the year.
Ian Martin, Chairman, commenting: "The Board remains confident in the long-term growth potential of the business, and we are investing to support that growth. Our strong financial position and underlying cash generation allows us to continue to fund our organic growth plans, accelerate investment, add resource and continue to return surplus cash to shareholders. We will maintain the discipline that has delivered profitable growth in recent years"
View from Vox
A good set of interim results from Touchstar with a significant increase in gross margins offsetting a small decline in total revenues as petrochemical distribution projects reverted to a seasonal pattern i.e. an H2 weighting. Recurring revenues continued their steady growth, however, and H1 2024 trading is so far ahead of management expectations while full-year expectations remain broadly on track.
As previously indicated, H1 was a quieter half for TST with the full-year now expected to be significantly H2-weighted. However, prospects for FY24 remain the same, including year-on-year revenue growth, continued recurring revenue growth (outpacing total), margins in FY24 staying at a good level, year-on-year progress in profitability and EPS, and strong cash generation in H2. Cash at year-end should normalise as timing factors in working capital unwind.
Regarding the strategic review, the outcome will be a value inflection point, with sale of the company being a definite possibility. In the meantime, trading continues to be robust and the business' long-term growth strategy and prospects remain positive. The substantial 50% increase in TST's interim dividend reflects management's confident outlook, including the strategic review.
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