Touchstar ends year above market expectations

Mobile data computing and managed services provider Touchstar said in a trading update on Monday that its unaudited full-year outcome for 2021 was above market expectations in terms of profitability and cash generation.

The AIM-traded firm said it expected profit after tax to be about 200% higher than 2020, with EBITDA growth of over 20%, and cash generation to be “considerably stronger” than expected.

It also anticipated a year-end cash balance of £2.5m, up from £1.9m year-on-year, and an order book at year-end of £0.65m, compared to £0.48m at the end of 2020.

Operationally, Touchstar said its “evolution” to a software-as-a-service (SaaS) model had continued, bringing benefits from long-term contracts and high levels of customer retention.

Recurring revenue accounted for 38% of total revenue in 2021, up from 35%, and the firm’s rate of growth in recurring revenue was 14%.

Looking ahead, the board said it had given a “consistent message” that 2022 would see the underlying growth rate in all its businesses harmonise.

The board said the group’s prospects appeared “more positive and more certain” than for a long time, with the rate of growth in revenue and EBITDA expected to accelerate in 2022, driving further substantial improvements in its financial performance.

It added that the growth in SaaS revenues was likely to outpace the company's overall growth rate, with the aim for recurring revenue moving towards 40% of total revenue by the end of 2022.

Touchstar said the “recent and continuing” supply chain constraints appeared manageable.

“Despite some difficult trading conditions in 2021, the management team has delivered on both the company's strategic and financial objectives,” said chairman Ian Martin.

“Particularly pleasingly, Touchstar has made substantial progress in 2021 in transitioning its business to become a provider of proprietary SaaS in mobile applications.

“Whilst there will be challenges ahead in 2022, we are confident that we are well placed to capitalise on the forward momentum gained, using internally generated cash to accelerate our rate of growth, innovate our products, enhance our solutions, invest in our people, and become a better business.”

Touchstar said it would report its final results for the year ended 31 December in late April.

At 1138 GMT, shares in Touchstar were up 14.19% at 88.5p.