Touchstar (LSE:TST) — 2024 Full Year Results & Strategic Update

0:01 Good afternoon, and welcome to the TOUCHSTAR PLC Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged, and they can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can receive or can review all questions submitted today and publish responses where appropriate to do so. Before we begin, I would like to submit the following poll.

0:31 And I would now like to hand you over to executive chairman, Ian Martin. Good afternoon to you. Good afternoon, everybody, and and many thanks for taking the time to hear our story. I'm joined today with by Linden. He's new CEO of the group, and we're gonna talk you through the story of TOUCHSTAR. We'll we'll touch on the 2024 results, the strategic review that we've just come through, our ambitions in '25, and give you a feel of the long term potential that we really feel this this company has. For those of you that don't know me, I I've been with the group for about eight or nine years. Before that, I ran a big Lloyd's insurer called Brotbank, which you may not have heard of. But from Brotbank, we started Admiral from six people in in an office in Cardiff, and it's now a FTSE one hundred company.

1:26 I was also chairman and CEO of a company called Avesco that did major events around around the the world, world, which was also a creative business that was sold about four or five years ago considerable at price. So we we try and and run these presentations in a very open manner, so please ask us any question that that is on your mind. It's very much your time. As I say, we are gonna talk about the potential of the business, what we do, how we make money, and where we're going. Really, with that, I'm gonna hand over to Lindon who's gonna take you through initially what the business does.

2:06 Thanks very much, Ian. So I'm Lindon Jones, new CEO here at TOUCHSTAR PLC. But I was employed by this group of companies fourteen years ago, nearly fifteen years ago in the fire and security division. And since that time, we have taken the opportunity to merge the sectors of our group of companies together, and we are now in a position to tell a single story that will present us to the marketplace in a concise and clear way. The slide that we're looking at at the moment is our single line sentence that will resonate with our existing customers and allow us to build on those customers and find new customers that match that criteria. The technology enabling security and logistics of people and products, which has taken a long time to get to this point with all the improvements we've been making in the company, and we will be specializing in the depot warehouse and the retail industry.

3:05 Slide. So in terms of what we do, we are a solutions provider in the logistics and security markets. At the moment, this has been a separate venture, so each division has attached their own customers in their own way. And part of the strategy going forward is how we merge those efforts in terms of a UK pooled marketing research resource to

3:30 really head home all of these divisions to the same customer base. And what that will do over the next two years is build a funding goal for other adventures such as overseas marketing. Yeah. So these are the characteristics that we see in the business. As it as Lyndon says, we we spent a long time sort of bringing clarity to a chaotic position, but now we have a very stable and established business. We've been growing our reoccurring revenues or a r ARRs at a faster rate than the overall turnover. And then last year, the reoccurring revenue represented 40% of our revenue 44% of our revenue. Typically, our contracts are probably three to five years, so it gives you a stability of of what the business where the business is. We're profitable.

4:31 We generate cash from operations, and we'll go through the use of that cash. And we have significant cash and no borrowings on the balance sheet as we speak. So review of 2024. So there was really two aspects to 2024 that painted the the picture for TOUCHSTAR. The first was we when we look at our comparison to '23, it doesn't look particularly good. We're we were hit with a major customer moving a contract from 2024 into 2025, which had an impact on '24. It happened in q four of twenty four, so there was not a lot we could do about that. But it gives you a feel of of how the leverage in the revenue line feeds both positive way, but last year in a negative way through to the bottom line.

5:31 So our revenue declined slightly. And when you look at EBITDA, post tax profits, they also declined in line. Really, this this presentation is really talking about the future of the business, and I think the market estimates for the coming year are about revenue of about £8,000,000. So it gives you a feel of of of where our focus and ambition is. And but but from this slide, the other things I'd like to point out is we have nearly £3,000,000 of cash on the the balance sheet. As I said, we have no borrowings on our plans to either reinvest that cash into the business. But on top of that, there will be surplus cash that we return to shareholders over the next few few quarters, and we'll I'll articulate how that's gonna be done.

6:28 As a mark of our confidence in the business, we've also increased the dividend from to to 3 p a share with a final dividend of 1.5 p, which is 20% improvement on the prior year. Give you a feel of of of how the business has changed, and and there's been a lot of change, and we're probably another point of change in our history. If we go back a few years, you can see when we started this journey to turn this hardware business into a solutions provider, you can see the dramatic impact that we've had on improving the reoccurring revenue. Our ambition initially was to get the reoccurring revenue up to 40%, which we've now achieved. I think going forward, it would be fair to assume that if we increase the revenue as we hope that the reoccurring revenue will will trend over the next two or three years to round about 50% of our revenues.

7:27 The the other thing that happened last year was we had a we're in a strategic review. During 2024, we had approaches from two North American suitors that were interested in beginning a dialogue to acquire the companies, and they to a point where we had to take them seriously. So we decided to appoint TSUCHSTAR PLC to run a process, and that process started in September. We had three aims in that process. One was to ascertain whether we could attain a fair price for shareholders, which would give them a fair reflection of the value of the business as we saw it. The second was to find a good home for the business. We were keen that it it it thrived outside of ownership as a listed business.

8:22 The third, we wanted our employees who have been on this journey with us to have real opportunity going forward. And it was done in a very open manner.

8:32 The two two factors came along that that probably didn't help us. The first was the movement of that order from '24 to '25. Actually, the the the two North American potential buyers that didn't face, and they still went to a final offer position. And there was also another party that that withdrew because they had their own internal issues. So went through the strategic review. We didn't attain a price that we felt reflected the long term potential of the business. We remain on good terms with everybody that was in that process. Never know where life takes you. But from that, we felt that we had to we were at a point of change. And to take the business forward, we had to address a number of issues that would take us back on a road map and, as I say, step change to the future.

9:31 And, really, I'll hand over well, the road map that we created before I hand over to Linden is we had to implement management changes. Linden came along, and he is replacing Mark Hardy, the current CEO. We felt that we probably had been too cautious in investment in the business, so we're accelerating the investment in organic growth. To date, we really have grown this business through organic growth. If you look at my track record in business, that tends to be how I've predominantly done things. But I think we're actually at a point where we are starting to look outwardly, and we've we're we're in early stage talk to with a couple of potential acquisitions.

10:17 These are really big bolt ons, and they'll be using the cash generation of the business. Also, I think we we we took the criticism, one of the reasons we're we're in front of you today, that we've been quite insular looking and that we needed to raise the profile of the business both in the trade and the marketplaces we operated, but also with shareholders and potential investors in the business. And lastly, the the cash that we had in the business, the stock market doesn't seem to give us credit for that. And certainly, when we were in the strategic review, it wasn't clear that the strategic buyers were particularly interested. So we've got a road map of how we're gonna return that to shareholders. And with that, I will hand over to Linda. Thank you. So I've already mentioned a little bit about the management changes, the stepping down of of Mark Hardy.

11:11 Think in Mark Hardy's final years, we've turned the corner of changing from a hardware only business to a hardware and software business, and the software is becoming more and more. That's allowed us to now take stock of all of the groups, and we can now push forward with a new strategic approach. And I think given Mark's time in life, he believes that somebody a little younger, such as myself, will have the energy to to really push this home because it's gonna be it's a big challenge, but I think the whole business is behind it. And, Ian, obviously, we're we're keeping Ian on as well, so we'll have some consistency through the board as well. So that that's gonna come in handy. My previous world was more of production management, before I started at the time FeedbackData.

12:03 So I was quite process driven. And since my time here at TOUCHSTAR, originally FeedbackData, part of my job was to align with the business that acquired us. And so I've been doing that for the last five to six years. We now share the same stores, the same purchasing, the same operations, the same finance. And now the next tier of integrations is gonna take us to the same product sets going forward and the same products customer space in terms of the sales resource. In terms of the sales resource, we have a now shared sales and marketing department, and they will now be integral to reattack how we go forward in promoting those ourselves as a business.

12:50 Prior to, let's say, today, we have been using TOUCHSTAR as it's a fire and security business or TOUCHSTAR as a fuel delivery business or an e electronic proof of delivery, which is all valid and was working well for us for maintaining. But if we want to grow, we need to reduce that total reach and really champion a particular marketplace and a particular particular geographical location. So that's part of our our changes that we're doing. That will give us the focus, and we our first focus will be the fuel depot, which is our biggest share of turnover at the moment. That we have between 5070% of that market share in terms of our solution. It's very niche. It's very particular to us, and we are The UK's leading authority in that world as well. What we'd like to do is cross sell our other products to the same customer set to really give that customer experience the full breadth of our service and capabilities.

13:49 That will then give a returned boosted return on investment because we're talking to less people but more often. And we will then really understand our customer's journey and the integration of our technologies will then come into their own.

14:07 So in terms of how we will be looking to achieve this, I think the unified training and identified marketplaces and cross selling KPIs are pretty standard in most businesses. The difference with ourselves in term is this will now be a shared meeting space as opposed to every division being siloed. The merger of service and support was the last one that was merged before we we start looking at sales and marketing. We now have a a team in The UK that operate a six to six support network, and that will go across all of our business sectors where required or designed to give us that extra uplift and support. The pitch deck is going to be our sales and marketing approach where we go to see a customer that has a particular need, and we will then share with them, by the way, we do x, y, and zed that may fit into your business.

15:05 The targeted resource allocation, we are looking to expand our sales team. That is one to backfill my position as now CEO and to then fill forward the momentum that we want to do with the new verticals of cross selling. Existing customers is important for us. We we strongly believe you can't grow if your foundation is crumbling. Our foundation is extremely strong. Our customers are happy and excited about what we can bring to the table. We've turned a lot of customers from legacy equipments on all divisions, and they are now all in our latest or well with on their journey with us to upgrade to our next generation. So we'll have a very strong foundation of product sets going out into the marketplace.

15:55 The nonintrusive engagement. As we sell one product to one customer, we will be gently reminding them of our other value add. And with that, we'll come economies of scale. So if we have engineers on-site fitting meters on trucks or integration with meters on trucks, we can then also do the CCTV or the access control, and we'll take it from there. The unified event presence, we are now looking at doing, and we have done two already now where we have a banner that shows us as a complete customer focused as opposed to a product customer focused. So we've done a couple of warehouse shows now where we advertise the final security, the electronic proof of delivery, and the scanner warehouses at the scanning at these warehouse shows.

16:44 And it's been it's been accepted quite well where customers that we've known for years look looking at the the banners that we have and the products that we have on displays, thinking that's really interesting. We didn't know you did that. And so we're gonna expand on that marketing and invite our current customers to see what else that we do. The depot first campaign, that's so we can leverage on the fuel success that we've had as a business. Once we've done the depots, if you put a a roof on a depot, you become the warehouse, which ties in very well with our electronic proof of living for our parcel product. We also have our scanning sector as well, and we also partner with Zebra for those as well. And then from a a retail perspective, which is a warehouse where they tilt inside for simplicity, that will allow us to sell a complete suite of products to a very similar market base, and that market base is a lot larger than just the depots that we're currently doing at the moment.

17:46 The increase in sales capacity will help. Part of our strategy is to make The UK a cross selling sweet spot so we can increase our incoming revenue and therefore margins and profits. And with that, that money can be reinvested into allowing us to go overseas with our jewel in the crown, the fuel star product. Fuel star product will also be rebadged as a bulk product as in it's not just fuel specific as we're already investigating new verticals where our

18:17 product fits quite well. The investment of UK growth and international markets will continue also with our research and development. There will be small tweaks to our software to go from just a fuel only product to a more bulk rounded product. And also if as we go overseas, we will have to invest in the back office language changes as well.

18:43 Unified sales and marketing approach. Again, we've touched on this just a moment ago. Every department will be able to have access to every product. They will lean on their counterparts in that silo, but we're bringing them together. The silos are knocked down, and we will open up opportunities. We do talk across all of our departments to very similar people. So it's either facilities or IT or project delivery, and those are the same people that all of our divisions talk to. And so it's a it's a good opportunity to continue that sales approach. Centralized centralized leadership, we are gonna appoint either sales leads or more of a an overseer of the verticals. That's still in discussion internally. We have a good team internally, so we'll we'll investigate that first.

19:29 And then we'll do a phase integration over the next two to three years of those changes.

19:35 Align product development, we've been doing this for quite a while now. We use similar technologies across all of our platforms where it's applicable and makes sense for the end user. And that, again, with a shared team, we are now more efficient going forward with our product development.

19:54 Over the next two one to two years, possibly two to three years with growing the UK team, in parallel, we will be doing market research into overseas markets. We have already done some research into some of those areas. Some turns out isn't right for us just at the moment. Others are going extremely well, and we're gonna look at building on those as well. And we expect to see that return in small parts over this two to three years period, but then growing from that point forward as we are more known for that geographical location.

20:30 In terms of enhanced market profile, we are strengthening the sales team, continue our product development to maintain competitive advantages, and annual developments return on investments to increase per head. So with that, as we're sharing different verticals within our internal team, we can use the similar technologies and work less hard but more smarter, and that that's something that we're very keen to do across our network. Increased marketing activity and spend, exhibitions overseas, list building, prospects for direct mail and website refresh. The website refresh is expected, I believe, the first revision will be, I believe, end of May is what we're aiming for, going just before the end of this quarter.

21:17 With that comes a fresh feel and, again, a single unified message which we haven't had before, but you'll still see all divisions on that website.

21:28 Yeah. And following on, I I think it's valid observation that we have for shareholders that we we've been very insular. We're we're looking to address that by increasing the news We're we're doing this event. We're scheduled to do one or two other events between now and the end of September. You'll see far more on use of RNS reach where we will talk about, you know, the wins and the new developments within the business. And we're also got a publications. AJ Bell and Shares magazine will be publishing articles on us over the next sort of five or six weeks. And also part of that, as you'll see, if you have any of the Zoosk research, we've reinstated both '25 and '26 forecasts, which give you a guide of where we believe the business is going financially.

22:21 But the last aspect of the the plan was we have about 3,000,000 of cash. We we believe that there is surplus cash within the business. Our operations generate a lot of free cash flow every year. The first use of that cash flow is really gonna be reinvestment in the business. I think you're gonna see higher reinvestment, which the forecast that are in the market already reflect in terms of people marketing spend as we try and push that that that line. We're assuming the share buybacks in next few days or early next week. You'll see an announcement of what that means. We'll make a step forward. Hopefully, the announcement will go out next week.

23:08 And then over the next couple of quarters, you'll see

23:11 further announcements of how that will be done. And the intention is to return about a million pounds of cash over the next twelve months. We pay a dividend. We pay three p. I think our intention is, you know, to use the world trodden phrase progressive, so we would like to see that increase as the business develops and the financials show progression too. But we are committed to

23:42 keeping a strong balance sheet. I think it suit it's served us very well over the last two or three years, and and I think that as we have that balance sheet, we will maintain it. So the prospects for '25, as I say, there there is there is forecast in the market. We entered because we had that contract move from '24 to '25, and also with other order intakes, we began the year in a far healthier position in on the 01/01/2025 in comparison to four. Linden has injected a pace change and motivation into into the team. We've come out of the strategic review.

24:28 There's there's a real air of wanting to make this happen now. We we've always remained good at controlling our costs and maintaining our margins. So as our top line increases and improves, it it does through the financial statement. And early days, you know, this year, because we're dictated very much by when our customers want to implement their their their sales into embed their sales into their operations, we are very much dictated by their pace. So this year, we'll be a little bit second half weighted, but we are very comfortable at the moment with the position that we are in the market and with the expectations that people have placed on us. So that really is our our simple story. You've caught us at a at a time where

25:19 four or five well, five or six years ago, there was a there was a change in the business as we created a coherent structure stabilized the business and build a platform. And now I think under Linden, with my help, we're gonna drive this forward to fulfill the potential that we really believe this has and that this business is capable of being scaled both within within The UK market, but also, we can take our products, solutions, dominant market share and fuel, overseas. With that, perhaps I should hand back, and, we will take questions. Fantastic. Ian Linden, thank you very much indeed for your presentation. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the top right corner of your screen.

26:07 The company take a few moments to review those questions submitted today, I would like to remind you that a recording of this presentation along with a copy of the slides and the published Q and A can be accessed via our investor dashboard. I'm Ian Linden. As you can see, we have received a number of questions throughout today's presentation. And if I may now hand back to you and kindly ask you to read out the questions where appropriate to do so, and I'll pick up from you both at the end. Linda, shall I take the first two? And then then you can study number three down. And so the the first question is how do potential tariffs affect your business? I think at the moment, any direct and, Lyndon, please contradict me if if if you have a different different opinion. I'd say in terms of direct effect, I don't think there is much.

26:59 Well, with the current tariffs, mean, who knows? I think we'll see change on a on a regular basis. I would say that the indirect effects could be if the it starts affecting or has affected business confidence, the economic situation, and maybe if supply chains start to get a little bit frayed, that may have a have an impact, but we we've got enough stock to fulfill our orders that we have in the pipeline. So I would hope that that in terms of the direct impact, it's it's

27:34 small and indirect. You know, we have stable business. We've been through the pandemic and and kept the, you know, the business moving forward. So I would have thought that we would would weather it as well as anybody. The second question was really to do with offers for the business. We as we said, we we had I'm not sure there were two offers, but we had two expressions of interest that did turn into offers, but they weren't at price that I felt shareholders would accept. Who knows in the future whether they come back and say we've we've left on good terms, but you you never know where those discussions take you. Linda, would you like to do the the next question?

28:24 Thank you very much. So the first question I can answer here is what is the current product road map, and how will it support cross selling ambitions and full end to end solution delivery? It's a good question because it's quite difficult. In in the foreign security industry, a lot of people talk about an integrated solution. And when I speak to direct end users as I do from time to time still, they don't know what that means themselves. It's as though it's it's a buzzword that we have to pick up on. In terms of our approach, our product set really complements that depot warehouse and retail industry. So in terms of a depot, if we are selling the the the logistics of delivering product, whether it be bulk or parcel as we now put those two in the same umbrella, well, the next thing is we need to do the security of that as well. So our security is typically premises and people.

29:18 But if you've got a truck that's full of fuel that's about to go out the following morning, that truck is more valuable to that customer than an empty truck, although both carry significant value. But the value isn't just what's in the truck. It's also the promise that that customer has given to its customers. So if we can link our fire security products to their depot and the analytics that cameras will give you or the access control links to intruder systems or fires for protecting assets, then all of a sudden, that those two connected is we're allowing them to be able to do their job by safeguarding their depots. And, the next stage would be done warehouse and retail. So our end to end road map is the linking of those. So sell them as siloed products, then work out how we can make them benefit each other such as integration.

30:10 We've just gone through, and we're still going through on some other products, some revamping of our products. So our access control pro pro product is Evolution. Currently on a version two. That's now just been ended, and we're now on our version three. As a business, we try and make all of our hardware backwards compatible. So if you're a version two hardware user for our access control, the version three will sit right next door to it and work on the same software. We're we're a great believer of not doing full upgrades. It's a case of a complementary edition, and that's where we're at at the moment. Our time and attendance is currently coming to an end for our current product, and we've already I think we're probably 95% now complete on our next product. And then when that's launched again, that will go plug and play into the exact same software world that we've been selling to, but open up more capabilities within the device and potential new partners.

31:04 In terms of our fuel delivery, we have a seven inch screen at the moment, and we are looking at releasing a slightly larger screen in the short term for our customers on the old technology. And then they will get a slightly bigger screen, and we'll look at what we're doing in a few years on the next big thing for the fuel industry as well. So I believe that answers question three. Question four. Can you outline in simple terms the USP benefits of your customers' day to day operations? What are the products and what do they do? It's quite well. We're four individual businesses, which we've gone into. Hopefully, we've probably already answered some of this as well. But we do fire and security products, the full suite end to end. We do proof of delivery that's bulk and parcel, and we do the warehouse scanning so we can control the people going into a depot warehouse or retail. We can control the stock that's within that, and then we can also make sure that it gets delivered safely and accurately counted for when when the product is ready. So in in a, that's that's what they do.

32:12 Given the next question is given the expected second half weighting, how comfortable is the board with the targets for 25? I think from a board perspective, we're comfortable. We had a board meeting last week. As ever, that that there's always lots to be done, but we are comfortable. Linden, would you like to comment comment on that? I'm sure the guy is probably gonna have to deliver it. I am gonna be the ones delivering it. Yes. So the the team is is energized with business. There's always problems and quirks in the market, and they do have an impact. You know, we we had an order last year that fell out to last year and fell into this year, and that does happen. Some of these products are extremely lumpy in terms of they are large projects, and it doesn't take much for something to slip out.

33:00 What I would say is it's they they slip out as opposed they don't disappear. We don't lose that much. You know, it's it's competitive marketplace. We're very confident in our product and our pricing. So, unfortunately, we are beholden to, yes, the marketplace, but also we're beholden to our customers. If the customer is not ready to go forward for various different reasons, then we have to support them because, yeah, they they have their own battles internally, whether it be budget. If you look at the fire and security industry that we're in, the intruder and fire alarms, you have no choice. That's a legal requirement. You have to have them. But if it's cameras or access control or time and attendance, they can become a bit of a begrudge buy. And if you've got a a leaky roof, your roof is gonna get fixed before you put an extra camera in. Usually, it's how it goes. And on some of these sites, these sites are huge. So the investment of a leaky roof will take out a lot of projects, and that does happen. However, our goal with our centralized marketing is to be more exposed to our current customers with the cross selling, which will invoke more sales, but also a targeted market with our warehouse depot and retail industries to say, we know your businesses. We do it end to end for you in all of these ways. We we know you. You can trust us. Let let us partner up. It's not a supplier in a customer relationship that we do. We do partnerships.

34:27 And we've kept customers for many decades through upgrades, through tenders. We retain them customers because we make it our mission to understand them. So, yeah, I'm I'm quietly confident that we will hit the numbers as we always aim for the very best. And, also, I I would point out that that, you know, we we do have now a a substantial part of of our revenues, reoccurring revenue, which helps. We have a we have an order bank, which is committed orders that that that are in the diary are being rolled out over the next sort of one to two quarters. And then the others, we always always have sort of background orders of things that just turn up month on month, you know, that that there's a level of revenue that that comes from that.

35:15 And then on top of that, we identify, you you know, know, the revenues that we need to make this year, and and they're made up of known projects. What we don't know is when those projects will happen. As Linden says, we're we're probably more confident in knowing about the project and the timing of the project. Sometimes it's it's down to customers' own own demands. The last question we have is from Martin. I don't know why he's asking it. When and where is the AGM to be held? We we, as a business, Linden's in in Manchester, that that's our head office. That's where 98% of the people that we employ are situated or housed. Or the AGM, it will be in London. It will be on the June 24. I believe it's midday.

36:10 It will be at Zeus' offices, which in Broadgate, the old Stock Exchange building as I know it. And the reason it's in London is really that that we've we've alternated it in the past, and we get a better attendance in London both in terms of number of people, but more importantly, in terms of the number of of shares that turn up physically for the meeting. I think we had shareholders represented over sort of 45% of the business turned up in person last time, and and they seemed prefer it to be in London. Fantastic. That's great. Ian, Linden, thank you for addressing all those questions for investors today. And, of course, the company can review all questions submitted today, and we'll publish those responses on the investment company platform.

36:55 But, Ian, before we we redirect investors to provide you with their feedback, which is particularly important to the company, could I just please ask you for a few closing comments? Well, firstly, if anybody so we try and and and be as open as we can. If people have a question that they would like to ask, please either contact Linden or myself. We'll we'll answer it as best we can. Really, thank you for the time. This is a business. It really has got potential. We've got a good platform that we can grow from. We have good operational cash flow. We have the ability to invest that cash. We've got a new team in place with a new energy, and it's an exciting time. And I think the next three or four years, you're gonna see the potential of this company realized at last. And thank you if you've been a shareholder for your patience, and if you're potentially looking at acquiring some shares, that we would welcome you on on the journey.

38:00 Fantastic. Ian Linden, thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of TOUCHSTAR PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all. Thank you. Thank you.