Final Results

RNS Number : 4393Y

Touchstar PLC

09 May 2019

 

9 May 2019

Touchstar plc

Preliminary results for the year ended 31 December 2018

The Board of Touchstar plc ((AIM:TST) 'Touchstar', the 'Company' or 'the Group'), suppliers of mobile data computing solutions and managed services to a variety of industrial sectors, is pleased to announce its final results for the year ended 31 December 2018.

Key Financials:

	31 December 2018 (£'000)		31 December 2017 (£'000)
·      Revenues	£6,898		£7,868
·      'Trading (loss)/profit' after tax before exceptional costs	£(582)		£380
·      Adjusted earnings per share	(6.95)p		6.02p
·      Exceptional costs	£334		£3,965
·      Net Cash At Year End	£296		£(336)
·      Loss after tax	£(916)		£(3,585)
·      Basic earnings per share	(10.94)p		(56.83)p

Commenting today, Ian Martin, Chairman of Touchstar, said:

The Group is positioned in a growth market of data capture, mobile devices and expanding customer desire to use digital information. Our products are now developed, we are customer focused, proud of what we do and we know what is required. We are ready to go and it is down to us.

Our focus now is simple - we need to scale the business. With our solutions in the market, we are better placed than a year ago. It is now down to management to grow the top line. If this is achieved, we should see substantially improved performance this year."

This announcement contains inside information as defined in Article 7 of the Market Abuse Regulation No. 596/2014 and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.

For further information please contact:

Touchstar plc	Ian Martin Mark Hardy	0161 8745050 0161 874 5050
WH Ireland - Nominated Adviser	Mike Coe/ Chris Savidge	0117 945 3472

Information on Touchstar plc can be seen at: www.touchstarplc.com

CHAIRMAN'S STATEMENT 2018

The year ended 31 December 2018 was a very important one for Touchstar. The year began with a successful fund raising of £1.3 million the purpose of which was to enabled Touchstar to accelerate, complete and launch the next generation of Touchstar products and solutions. This fundraising put Touchstar in a fortunate position and we are very mindful that this is due to the support and understanding of shareholders, who were willing to invest in the business and to give the Group time to complete its transformation.

I am pleased to report that, while not everything has gone according to plan, during the year we have taken to market a new generation of products and solutions in each of our business units, and our user base is growing.

Our business now needs to be larger and while it would be fair to observe we are yet to give evidence the business can be scaled, we are heading in the right direction and remain broadly on track. The Group is positioned in a growth market of data capture, mobile devices and expanding customer desire to use digital information. Our products are now developed, we are customer focused, proud of what we do and we know what is required. We are ready to go and it is down to us.

My objective in this statement is to report how the year played out, how our intentions have altered in light of our experience and our current thoughts on the outlook for 2019. As ever I intend to be open, balanced and clear about where I believe the business to be. My report is ordered in the following manner:

1.     What we said we would do, and what we did.

2.     What were the financial results.

3.     Lessons learnt and how we are reshaping the business for the future.

4.     How did the Operational Review announced in February conclude, and

5.     What is the outlook for 2019.

What we said we would do and what we did

In January 2018 we raised £1.3million before expenses by issuing 2,166,327 new ordinary shares at 60p per share. This consisted of a firm placing of 630,840 shares, a conditional placing of 639,158 shares and a further 896,329 shares pursuant to an open offer. The Directors' participation in the fundraising amounted to 407,999 new ordinary shares.

The proceeds of the placing, together with the natural underlying positive cash flow of the business, have enabled the Group to accelerate development, boost underlying pipeline on new products and marketing activity, invest in customer support and complete the solution upgrade cycle. In 2018, we invested £1.5m in development, successfully launching new products and solutions into each of the markets we operated in. We now have modern, relevant products in each. This is exactly what we set out to achieve.

In 2018 we moved a suite of products from development, through beta testing, client pilot schemes to actual sales to customers. In addition, to allow us to support applications in different market sectors we built on an android operating system, developed on generic technology using similar architecture, and made use of the Azure cloud to move the data, from the device to wherever a customer needs it.

To capitalise on these products we have implemented a "hybrid" operating model whereby the customer contact is direct with the Group, but elements of our support and development are delivered through an outsourcing partner - this has given us the ability to "scale up or scale down" our capacity and deliver projects effectively.

What were the financial results

The Group results for the year ended 31 December 2018 are shown below. It should be noted that the historical analysis is not strictly comparing like with like, as this year's results now incorporate the impact of IFRS 15 (Revenue from Contracts with Customers); the prior year comparable figures do not. The deferring of some contracted revenues required under IFRS15 had a negative impact on both the top and bottom line in 2018 but cash generation is unaltered. The impact of IFRS 15 should lessen as the Group's recurring revenue builds.

2018 revenues fell 12% to £6.9m (2017: £7.9m), which was below what we hoped to achieve. The short fall was due mainly to a weak first half performance from Access Control and sales not materialising to the extent we had hoped for in our On-Board business.  Margins rose to 51.1% (2017: 49.45%) due to a better product mix which reflects moving the business towards software and solution sales. Costs were higher than in the previous year as we invested as planned in people, increased our support structure ahead of product launches, and invested aggressively in development. Overall the Group recorded an after-tax trading loss of £582,000 (2017: trading profit £381,000), somewhat better than we expected at the beginning of the year.

Adjusted earnings per share was negative 6.95p compared to a positive 6.02p in the year ended 31 December 2017.

Even after the increased spending on solutions development, the Group maintained a reasonably robust financial position, helped by the fund raising and the underlying cash generation within the trading business. The group ended the year with Net Cash in the bank of £296,000 (2017: Net Debt £336,000).

With these results in mind we have again taken a hard look at each business to ensure assumptions remain valid, now we have real experience.

Lessons learnt and how we are reshaping the business for the future

We have developed a complete management suite of software in the transportation and proof of delivery market (PODStar). PODstar was originally aimed at the small to medium fleet operators (10 -100 vehicles). From a standing start we now have an installed base of 14 customers. The financial model is for the customer to pay an installation set up fee, then a monthly charge per vehicle per month.

We originally targeted smaller fleet operators, as it was the quickest way to market and to establish an installed user base. However, our solution is very scalable and we are now starting to see enquiries from much larger fleet owners. This is encouraging, although we recognise that decision timelines of these organisations tend to be much longer.

PODStar has now been further enhanced to cater for the fuel delivery sector, a market in which Touchstar has major clients over a long period of time. In recent years, however, there has been some erosion of our market share, but we are now fighting back. Our early adoption of Android based technology - both in software and with new rugged hardware devices - has been well timed as we appear to be at the beginning of an upgrade cycle, both from our existing user base and from some former major customers that are returning. We expect this trend to accelerate as Microsoft, who have had the dominant operating system in this market to date, has recently announced it will not be supporting its mobile products beyond 2020. This could be very beneficial for Touchstar.

The performance of Access Control highlights why investment in the next generation product is so important. Its first half result was poor, as our customers waited for the launch of our new product - Evolution. Since its launch, the performance of Access Control has returned to plan and, although some orders slipped into 2019, the second half was strong enough to bring that business close to breakeven for the year as a whole.

The logistics and warehouse businesses were steady, although the traditionally strong trading in November and December did not materialise. This is a very transactional bias business and is probably being affected by Brexit uncertainty.

In our trading update of the 12 February 2019 we informed shareholders that a further  operational review was being undertaken. Although our goal is to build top line growth, it is nevertheless important we are realistic, focused, apply resources in areas where we have the ability to compete, and where we can generate satisfactory returns on investment in the medium term.

The conclusion of this review was to rethink On Board.  On Board sells to airlines and it has developed NOVOStar, a software suite that facilitates the sales of in-flight duty-free, catering and ancillary products. It has had a difficult 2018. We underestimated the bespoke nature of the required solutions, were over optimistic in the speed of adoption of our solution and the slow growth in the market has brought focus upon our existing operation.

We have therefore taken corrective action.  The cost base has been significantly reduced, customer support improved; clients will now being serviced out of our main office in Manchester and the Kenilworth office closed.  Additional support when needed will be made available from our resource partner in India. The decision has also been taken to impair the carrying value of the development in 2018 which has been identified as an exceptional cost on the Consolidated income statement. As a result of these changes and based purely on existing revenue we expect this business to be close to breakeven in 2019, before taxation and any exceptional items.

Outlook and Expectations for 2019

Our focus now is simple - we need to scale the business. With our solutions in the market, we are better placed than a year ago. It is now down to management to grow the top line. If this is achieved, we should see substantially improved performance this year.

The open question is will this growth come through?  Investment cycles have undoubtedly become longer, which has impacted the business over the last few years.  However, Touchstar's fuel sector customers are at last entering an upgrade cycle, PODStar is established and growing its recurring revenues, and Access Control is back on plan. These are all positive factors and with On Board's significantly reduced costs we have the basis of a reasonable year. Trading in Q1, typically our weakest quarter, has been ahead of the equivalent period with revenues approximately 14% ahead and trading losses some £175k lower. We expect to accelerate this improvement in the remainder of the year.

With Brexit uncertainty continuing, there will be political and economic factors at play. As a business we are aware of them, and focused on things we can influence, fighting for market share, and getting your Group to scale.

The growth of Touchstar's top line over the next few years will determine what level of success we achieve. I remain hopeful that the journey we have begun will reach the right destination and reward the patience of shareholders and the many people whom work so hard every day to try to make this happen.

I Martin

Executive Chairman

8 May 2019

 

Consolidated income statement for the year ended 31 December 2018

	2018 £'000	2017 £'000
Continuing operations	£'000	£'000
Revenue	6,898	7,868
Cost of sales	(3,370)	(3,977)
Gross profit	3,528	3,891
Distribution costs	(66)	(79)
Administrative expenses	(4,778)	(7,666)
Operating (loss)/profit before exceptional items	(982)	111
Exceptional costs included in administrative expenses	(334)	(3,965)
Operating loss	(1,316)	(3,854)
Finance costs	(4)	(11)
Loss before income tax	(1,320)	(3,865)
Income tax credit	404	280
Loss for the year attributable to the owners of the parent	(916)	(3,585)
	2018	2017
Basic	(10.94)p	(56.83)p
Adjusted	(6.95)p	6.02p

There is no other comprehensive income or expense in the current year or prior year and consequently no statement of other comprehensive income or expense has been presented.

The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent Company income statement. The loss for the Company is detailed in the Statement of financial position and the Company statement of changes in shareholders' equity.

 

Consolidated statement of changes in equity for the year ended 31 December 2018

	Share       capital	Share premium account	Retained earnings	Total equity
	£'000	£'000	£'000	£'000
At 1 January 2017	315	-	5,441	5,756
Loss for the year	-	-	(3,585)	(3,585)
At 31 December 2017	315	-	1,856	2,171
Effect of revenue recognised under IAS 18 adjusted for IFRS 15	-	-	(91)	(91)
Restated balance 1 January 2018	315	-	1,765	2,080
Share Issue	109	1,191	-	1,300
Cost of share issue	-	(72)	-	(72)
Loss for the year	-	-	(916)	(916)
At 31 December 2018	424	1,119	849	2,392

Company statement of changes in equity for the year ended 31 December 2018

	Share  capital	Share premium account	Retained earnings	Total equity
	£'000	£'000	£'000	£'000
At 1 January 2017	315	-	4,483	4,798
Loss for the year	-	-	(3,710)	(3,710)
At 31 December 2017	315	-	773	1,088
Share Issue	109	1,191	-	1,300
Cost of share issue		(72)	-	(72)
Loss for the year	-	-	(3,476)	(3,476)
At 31 December 2018	424	1,119	(2,703)	(1,160)

 

Consolidated and Company statements of financial position as at 31 December 2018

		Group			Company
		2018	2017		2018	2017
		£'000	£'000		£'000	£'000
Non-current assets
Intangible assets		1,352	1,136		-	-
Investments		-	-		-	3,474
Property, plant and equipment		228	237		-	-
Deferred tax assets		157	168		-	7
		1,737	1,541		-	3,481
Current assets
Inventories		1,210	1,387		-	-
Trade and other receivables		1,928	2,256		706	227
Corporation tax receivable		487	272		-	-
Cash and cash equivalents		2,112	2,159		-	-
		5,737	6,074		706	227
Total assets		7,474	7,615		706	3,708
Current liabilities
Trade and other payables		1,444	1,382		50	125
Contract liabilities		1,365	1,237		-	-
Borrowings		1,816	2,495		1,816	2,495
		4,625	5,114		1,866	2,620
Non-current liabilities
Deferred tax liabilities		269	179		-	-
Contract liabilities		188	151		-	-
Total liabilities		5,082	5,444		1,866	2,620
Capital and reserves attributable to owners of the parent
Retained earnings at 31 December 2017		1,856	5,441		773	4,483
Effect of IFRS 15 adjustment*		(91)	-		-	-
Loss for the year		(916)	(3,585)		(3,476)	(3,710)
Retained earnings at 31 December 2018		849	1,856		(2,703)	773
Share capital		424	315		424	315
Share premium		1,119	-		1,119	-
Total equity		2,392	2,171		(1,160)	1,088
Total equity and liabilities		7,474	7,615		706	3,708

 

Consolidated and Company cash flow statement for the year ended 31 December 2018

		Group			Company
		2018 £'000	2017 £'000		2018 £'000	2017 £'000
Cash flows from operating activities
Operating loss		(1,316)	(3,854)		(3,465)	(3,710)
Depreciation		70	91		-	-
Amortisation		379	400		-	-
Development expenditure impairment		334
Goodwill impairment		-	3,824		-	-
Investment impairment		-	-		3,474	3,824
Movement in:
Inventories		177	(128)		-	-
Trade and other receivables		328	(248)		(479)	(3)
Trade and other payables and contract liabilities		136	326		(75)	(71)
Cash generated from/(used in) operations		108	411		(545)	40
Interest paid		(4)	(11)		(4)	-
Corporation tax received		290	231		-	-
Net cash generated from/(used in) operating activities		394	631		(549)	40
Cash flows from investing activities
Purchase of intangible assets		(929)	(547)		-	-
Purchase of property, plant and equipment		(61)	(91)		-	-
Net cash used in investing activities		(990)	(638)		-	-
Cash flows from financing activities
Proceeds from issue of shares		1,300	-		1,300	-
Costs of issue of shares		(72)	-		(72)	-
Net cash generated from financing activities		1,228	-		1,228	-
Net increase/(decrease) in cash and cash equivalents		632	(7)		679	40
Cash and cash equivalents at start of the year		(336)	(329)		(2,495)	(2,535)
Cash and cash equivalents at end of the year		296	(336)		(1,816)	(2,495)

1          General information

Touchstar plc (the 'Company') and its subsidiaries (together 'the Group') design and build rugged mobile computing devices and develop software solutions used in a wide variety of field-based delivery, logistics and service applications. The Company is a public company limited by share capital incorporated and domiciled in the United Kingdom. The Company has its listing on the Alternative Investment Market. The address of its registered office is 1 George Square, Glasgow, G2 1AL. 

2          Basis of preparation

The preliminary results for the year ended 31 December 2018 have been prepared in accordance with the accounting policies set out in the annual report and the accounts for the year ended 31 December 2017.

There have been no changes in accounting policies in the year.

The Group Financial Statements have been prepared in accordance with the International Financial Reporting Standards ('IFRS') as adopted by the European Union, IFRS IC interpretations and the Companies Act 2006 applicable to companies reporting under IFRSs and the AIM Rules for Companies. The Group Financial Statements have been prepared under the historical cost convention.

While the financial information included in this preliminary announcement has been computed in accordance with IFRS, this announcement does not itself contain sufficient information to comply with IFRS.  The accounting policies used in preparation of this preliminary announcement have remained unchanged from those set out in the Group's 2017 statutory financial statements.  They are also consistent with those in the Group's statutory financial statements for the year ended 31 December 2018 which have yet to be published.  The preliminary results for the year ended 31 December 2018 were approved by the Board of Directors on 8 May 2019.

The financial information set out in this preliminary announcement does not constitute the Group's statutory financial statements for the year ended 31 December 2018 but is derived from those financial statements which were approved by the Board of Directors on 8 May 2019. The Auditors have reported on the Group's statutory financial statements and the report was unqualified and did not contain a statement under section 498(2) or 498(3) Companies Act 2006.  The statutory financial statements for the year ended 31 December 2018 have not yet been delivered to the Registrar of Companies and will be delivered following the Company's Annual General Meeting.

The comparative figures are derived from the Group's statutory financial statements for the year ended 31 December 2017 which carried an unqualified audit report, did not contain a statement under section 498(2) or 498(3) Companies Act 2006 and have been filed with the Registrar of Companies.

Non - GAAP financial measures

For the purposes of the annual report and financial statements, the Group uses alternative non-Generally Accepted Accounting Practice ('non-GAAP') financial measures which are not defined within IFRS. The Directors use the measures in order to assess the underlying operational performance of the Group and as such, these measures are important and should be considered alongside the IFRS measures.

The following non-GAAP measure referred to in the Chairman's statement relates to trading loss or profit.

'Trading loss or profit' is separately disclosed, being defined as loss or profit after tax adjusted to exclude exceptional costs such as development expenditure impairment, goodwill impairment and restructuring costs. These exceptional costs relate to items which the management believe do not accurately reflect the underlying trading performance of the business in the period. The Directors believe that the trading loss or profit is an important measure of the underlying performance of the Group.

Going concern

These financial statements have been prepared on a going concern basis, which assumes that the Group will be able to meet its liabilities when they fall due. As at 31 December 2018, a total of £nil was drawn down from the £1 million on demand overdraft facility (£127,000 in March 2019).

Towards the end of 2017 Touchstar embarked on a change of strategy, moving from a hardware-based business model to a software based one. This envisaged 2018 being a year of declining growth and negative cash flow as the company focused on completing its software projects, with growth to come thereafter. Consequently, the company embarked on a capital raising exercise in early 2018, raising £1.3m net of expenses. 

The company met its profit target in 2018, achieved through lower sales than expected (due mainly to delays in project completion) combined with lower costs. The loss was as a result of significant investment in resource for development, sales & marketing and project management to implement the software solutions enabling the Group to grow. These have now been completed and are expected to drive the company's growth in 2019.

During 2018, the Group performed comfortably within its £1m overdraft facility, although 2019 is expected to see a greater reliance on the overdraft facility in place.

The Group benefits from a supportive bank who have provided the borrowing facility since 2005.  In assessing the Group's ability to continue as a going concern, the Board has reviewed the Group's cash flow and profit forecasts against this facility. The impact of potential risks and related sensitivities to the forecasts were considered in assessing the likelihood of additional facilities being required, whilst identifying what mitigating actions are available to the Group to avoid additional facilities and the potential withdrawal of the facility by the bank. Specifically, a range of assumptions underpin the profit and cash flow forecasts for the period to 31 December 2020, including:

·      growth of the sales pipeline in 2019 and 2020 deriving mainly from the completed software projects; and

·      mitigation of the potential impact of not achieving the growth by implementing costs savings.

Failure to achieve one or more of the above would result in lower EBITDA with a consequent negative impact on cash generation. If the Group's forecast is not achieved, there is a risk that the Group will require additional facilities that it has not secured or the bank withdraws the existing facility. Without the support of the bank, the Group and Parent Company would be unable to meet their liabilities as they fall due.

Given the timing and execution risks associated with achieving the forecast and therefore remaining within the facility, the directors have concluded that it is necessary to draw attention to this as a material uncertainty which may cast significant doubt about the Group's and the Parent Company's ability to continue as a going concern in the basis of preparation to the financial statements. The directors have confirmed that, after due consideration, they have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

3          Critical accounting estimates and judgements

The Group and Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(a) Development expenditure

The Group recognises costs incurred on development projects as an intangible asset which satisfies the requirements of IAS 38. The calculation of the costs incurred includes the percentage of time spent by certain employees on the development project.  The decision whether to capitalise and how to determine the period of economic benefit of a development project requires an assessment of the commercial viability of the project and the prospect of selling the project to new or existing customers. 

(b) Impairment of intangibles

Judgement is required in the impairment of assets, notably intangible software development costs. Recoverable amounts are based on a calculation of expected future cash flows, which require assumptions and estimates of future performance to be made. Cash flows are discounted to their present value using pre-tax discount rates based on the Directors market assessment of risks specific to the asset.

4          Exceptional costs

	2018 £'000	2017 £'000
Restructuring expenses:
Redundancy costs	-	77
Onerous lease costs	-	64
Goodwill impairment	-	3,824
Development expenditure impairment (note 7)	334
	334	3,965

 

5.1      Income tax credit

	2018 £'000	2017 £'000
Corporation tax
Current tax	(468)	(254)
Deferred tax	101	3
Adjustments in respect of prior years	(37)	(29)
Total tax credit	(404)	(280)

Corporation tax is calculated at 19% (2017: 19.25%) of the estimated assessable profit for the year.  This is the weighted average tax rate applicable for the year.

5.2 Factors affecting the tax credit for the year

The tax credit for the year is different (2017: different) from the standard rate of corporation tax in the UK of 19% (2017: 19.25%). The differences are explained below:

	2018 £'000	2017 £'000
Loss before income tax	(1,320)	(3,865)
Multiplied by the standard rate of corporation tax in the UK of 19% (2017: 19.25%)	(251)	(744)
Effects of:
Items not deductible for tax purposes	68	738
Enhanced research and development deduction	(368)	(261)
Adjustments in respect of prior years	(37)	(29)
Losses surrendered through R&D tax credit	150	95
Recognition of unrelieved tax losses	-	(131)
Capital allowances claimed in year less than/(in excess of) depreciation	20	56
Adjustment to deferred tax arising from changes in tax rate	14	(4)
Total tax credit for the year	(404)	(280)

Factors affecting the future tax charge

The Chancellor's budget of March 2016 announced that corporation tax rates will ultimately fall to 17% on 1 April 2020. Consequently, deferred taxation has been calculated with reference to this ultimate tax rate of 17%. The Directors do not expect timing differences arising in the intervening period, when higher taxation rates apply, to have a significant effect on the Group's future tax charge.

6          (Losses)/earnings per share

	2018	2017
Basic	(10.94)p	(56.83)p
Adjusted	(6.95)p	6.02p

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year. The calculation of adjusted earnings per share excludes exceptional costs of £334,000 (2017: £3,965,000). 

Reconciliations of the earnings and weighted average number of shares used in the calculation are set out below:

	2018		2017
	Earnings £'000	Weighted average number of shares (in thousands)	Earnings £'000	Weighted average number of shares (in thousands)
Basic EPS
Loss attributable to owners of the parent	(916)	8,374	(3,585)	6,308
Exceptional costs (note 4)	334		3,965
Adjusted EPS
(Loss)/earnings attributable to owners of the parent before exceptional items	(582)	8,374	380	6,308
The Group does not operate a share option scheme and as a result diluted earnings per share are not presented.
Non - GAAP financial measures For the purposes of the annual report and financial statements, the Group uses alternative non-Generally Accepted Accounting Practice ('non-GAAP') financial measures which are not defined within IFRS. The Directors use the measures in order to assess the underlying operational performance of the Group and as such, these measures are important and should be considered alongside the IFRS measures. The following non-GAAP measure referred to in the Chairman's statement relates to trading loss or profit. 'Trading loss or profit' is separately disclosed, being defined as loss or profit after tax adjusted to exclude exceptional costs such as development expenditure impairment, goodwill impairment and restructuring costs. These exceptional costs relate to items which the management believe do not accurately reflect the underlying trading performance of the business in the period. The Directors believe that the trading loss or profit is an important measure of the underlying performance of the Group.

7          Intangible assets

	Group
	Goodwill £'000	Development expenditure £'000	Total £'000
Cost
At 1 January 2017	9,904	3,011	12,915
Additions	-	547	547
At 31 December 2017	9,904	3,558	13,462
Additions	-	929	929
Disposals	-	(352)	(352)
At 31 December 2018	9,904	4,135	14,039
Accumulated amortisation
At 1 January 2017	6,080	2,022	8,102
Impairment	3,824	-	3,824
Amortisation charge	-	400	400
At 31 December 2017	9,904	2,422	12,326
Amortisation charge	-	379	379
Impairment	-	334	334
Eliminated on disposal	-	(352)	(352)
At 31 December 2018	9,904	2,783	12,687
Net book value
At 1 January 2017	3,824	989	4,813
At 31 December 2017	-	1,136	1,136
At 31 December 2018	-	1,352	1,352

Amortisation of £379,000 (2017: £400,000) is included within administrative expenses in the income statement.

Development expenditure

The calculation of the costs incurred includes the percentage of time spent by certain employees on the development project.  The decision whether to capitalise and how to determine the period of economic benefit of a development project requires an assessment of the commercial viability of the project and the prospect of selling the project to new or existing customers.

Management determined budgeted sales growth based on historic performance and its expectations of market development via each product set's underlying pipeline

In reviewing these pipelines management found that the sales pipeline for Onboard did not support the level of carrying value for the NOVOStar development therefore management made the decision to fully impair this product set. 

A review of each of the remaining product sets did not result in any further impairment.

Development expenditure has been capitalised on an ongoing basis and therefore has a remaining useful economic life ranging from 0 to 5 years.

 

END

 

 

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