30 Jan 2009 07:00
ADDleisure Plc / Epic: ADE.L / Index: AIM / Sector: Leisure
30 January 2009
ADDleisure Plc ('ADDleisure' or 'the Company')
Interim Results for the twelve months ended 31 July 2008
ADDleisure Plc, the AIM traded company formed to develop products and services in the health and leisure sectors, has changed its accounting reference date to 31 December and accordingly announces its unaudited results for the 12 months ended 31 July 2008. This period covers the first 12 months of the Company's 17 month financial period to 31 December 2008, as announced on 22 January 2009.
CHAIRMAN'S STATEMENT
We are operating in an exciting arena and remain committed to becoming a leading investor and innovator in wellness products and services, with our key investments continuing to move forward. We continue to develop our product ranges and services and have signed new blue-chip clients to our register, bringing our wellbeing offerings further exposure and market presence in the health and wellness sector.
The health and leisure market is continuing to grow and build momentum, and I am confident that our investments are capable of catering to a wide audience due to the diverse nature of their offerings. In particular, our Movers and Shapers ('Movers & Shapers') stores and Fitbug ('Fitbug') online personal health services offer health and fitness training in an environment and style that many people recognise as more convenient and comfortable than traditional gym work-outs. In addition, many people, especially in the current 'credit crunch' climate, would prefer a one off payment or course of work-outs rather than paying for a conventional gym membership, as this gives more financial control and offers increased value to consumers. With all this in mind, I believe that ADDleisure is well positioned to capitalise on the increased public awareness and appreciation of the importance of a fit and healthy lifestyle.
Our relationship with Bupa Finance plc ('Bupa'), the UK market leader in health and care, has continued to flourish and we look forward to working closely with them in the future. This partnership, which combines our management team and unique products and services with Bupa's wealth of experience and leading market position, represents a significant endorsement of our activities by a major UK institution and also provides the Group with the ability to expand by utilising Bupa's established network of contacts across the sector.
Operations Overview
Our key investments continue to move forward, giving the Group the opportunity to reap the benefits from the investment of both time and money made over previous years. The acquisition in October 2008 of our competitor, ClubRunner (Europe) Limited ('ClubRunner'), through our 50.2% owned intelligent booking software business Digital Plantation Limited ('Digital'), will improve and expand the reach of the merged company and give access to previously unobtainable markets. The merged business has been renamed Ez-Runner.
Movers & Shapers, the Group's high street health and wellbeing concept, has expanded its operations as consumers increasingly recognise the benefits of the convenient and comfortable work-out that Movers & Shapers has developed. Movers & Shapers currently has eight high street locations with two more due to open shortly, one of which is located within a Bupa Wellness Centre.
Our investment in Fitbug, 'the online personal health and well-being coach', has also enjoyed successes during the 12 month reporting period. Several large blue-chip companies and Primary Care Trusts ('PCTs') have adopted Fitbug with extremely positive results and have subsequently received excellent feedback from employees and patients. We are optimistic that this is a trend that will continue and intensify with large scale employers increasingly appreciating the importance of a fit and healthy workforce in relation to a company's success. Furthermore, within the public sector, the Government's efforts to target obesity are set to grow as the issues continue to become more prevalent. Indeed, the 'Change4Life' promotion is one such high profile Government initiative aimed at reducing obesity and increasing the activity levels, which we believe Fitbug is well positioned to capitalise on.
Financial Performance
The Group has continued to invest in its products and services from its joint venture operation with Bupa and increased the number of Movers & Shapers stores to five by 31 July 2008. This continued investment in products and services across the Group, together with writing off the initial expense, resulted in the Group reporting a pre tax loss of £2,356,000 (2007: loss of £201,000) for the 12 months ended 31 July 2008.
In the 12 months to 31 July 2008 the Group has reviewed the carrying value of its intangible assets and has written off the opening value of goodwill of £595,000 and development costs of £75,000.
The Group has complete confidence in the future performance of all its operating divisions but the financial projections for the next twelve months continue to show a cash requirement as we complete the various stages of the ongoing developments. Given the delay in completing the product development and the ongoing cash requirement over the next 12 months we have decided to expense all current year development expenditure and write off the opening net book values of goodwill.
The Group has changed its accounting reference date to 31 December to bring it into line with Bupa, its joint venture partner, and will reorganise its capital structure post publication of the 17 month accounts to 31 December 2008 in April 2009. This will enable the payment of dividends as soon as the Company has sufficient distributable reserves.
As at 31 July 2008 the Group's cash position remains positive at £3.0 million (2007: £4.3 million) and the net assets of the Group were £3.5 million (2007: £5.4 million).
The Group is in a growth stage of development, and is subject to the delays and risk factors which affect many early stage businesses. One such hindrance in the period under review was a six month delay in the development of new Fitbug devices and software enhancements, due to design issues which produced a subsequent lag time to market. The Group's Key Performance Indicators are evolving for each operating company but essentially they continue to be monitoring of cash flows on a weekly basis, and the performance to budget of sales and EBITDA for all operating companies on a monthly basis. Additionally, sales for Movers & Shapers are tracked on a daily basis by store and performance to budget reviewed on a weekly basis.
As highlighted in these interim financial statements, the Group has no exposure to bank finance and has substantial bank deposits. However, the current economic conditions create uncertainty particularly over the level of demand for the Group's products.
ADD Wellness Holdings Limited, the joint venture partnership, is owned 50% by ADDleisure and 50% by Bupa and it has been the practice of the joint venture to finance investment in the operating subsidiaries equally. Currently ADDleisure has advanced in excess of £1.6 million to the joint venture. Discussions with Bupa are at an advanced stage for their matching of the funds advanced by ADDleisure and the receipt of such funds has been taken into account in calculating forward working capital requirements.
Prospects
I am confident that the momentum that we have achieved through investment and hard work in the products and services will continue and increase in the foreseeable future. We have a dedicated and passionate team in place and have developed an innovative and pioneering approach to health and wellbeing through our key investments.
The UK health and wellness industry continues to grow rapidly, and in turn ADDleisure and our operating subsidiaries have grown and developed in order to meet the demands of an ever increasing public audience. Despite the current economic climate, I believe that ADDleisure has the attributes to provide value for its shareholders as we strengthen our position as an innovative provider of exciting products in the health and wellness arena.
I would like to take this opportunity to thank our shareholders for their support, and the ADDleisure team for their loyalty, determination and enthusiasm.
Allan Fisher
Chairman
29 January 2009
** E N D S **
For further information visit www.ADDleisure.com or contact:
| Mike Mills | ADDleisure Plc | Tel: 020 7449 1000 |
| Mark Percy | Seymour Pierce | Tel: 020 7107 8000 |
| Susie Callear | St Brides Media & Finance Ltd | Tel: 020 7236 1177 |
OPERATIONS REVIEW
Fitbug Limited ('Fitbug')
(50/50 ADDleisure/Bupa)
Fitbug, which offers online health and well-being coaching services, continues to develop and expand its offering to an ever growing audience, mainly focusing on the corporate wellness and health insurance sectors, with increasing effort being placed on the public health arena. In the past year Fitbug has invested more in enhancing its core technology and also piloting its offering with various large multi-national corporates and progressing a number of other initiatives, particularly in tackling obesity.
The quality of Fitbug's offering and the potential benefits of its services have been highlighted by PruHealth, a leading private medical insurance company, extending its existing three year contract for a further five years in June 2008. PruHealth offers a unique form of health insurance which recognises and rewards members with lower healthcare insurance premiums for taking care of their health, an approach which dovetails with the results Fitbug strives to achieve. The recognition of Fitbug as such a successful complementary tool by PruHealth, strengthens the Group's belief that the large-scale potential for Fitbug is extremely commercially viable.
Fitbug has also been involved in some new and exciting corporate health initiatives, including a pilot scheme to improve the health of the employees of a major supermarket group. Initially trialled in one store in Glasgow over a six month period, reductions in sickness absence were seen and significant improvements in various health indicators were made. The client has now indicated that, based on the success of the trial programme in its Glasgow store, it intends to extend the pilot and roll this out to further stores.
Fitbug trials have also been successfully conducted in various other environments including several PCTs, and the preliminary results have been extremely encouraging. Chronically ill patients, suffering from obesity related conditions including diabetes, used Fitbug as part of a weight management programme over a 12 month programme. The findings from the majority of patients taking part in the trial were extremely positive, with many individuals seeing and feeling an improvement in their condition, and some improving so dramatically that they were advised by doctors to reduce or even stop taking their medication. This could create significant savings in health care costs. The Group looks forward to updating shareholders with further developments in due course.
Movers and Shapers Limited ('Movers & Shapers')
(50/50 ADDleisure/Bupa)
Movers & Shapers delivers a simple but comprehensive approach to health and well-being for consumers through a growing number of convenient high street locations.
Combining Fitbug and Power Plate, which uses advanced vibration technology to stimulate muscular and circulatory responses, Movers & Shapers is able to deliver an effective health and fitness programme which appeals to a wide audience and is attractive to those who do not like the traditional gym. Resistance training, cardio-vascular exercise and nutrition advice and tracking are offered in an intimate environment and with constant support from a small team of personal instructors. Clients attend two, thirty minute sessions each week at the in-store studio and are encouraged to build activity outside of these sessions which is tracked in-store. This personalised approach has produced real and sustainable results for clients in terms of weight loss, toning and general fitness and has allowed the company to offer a range of related products to its customers. Movers & Shapers is also a specialist retailer of Power Plate equipment.
Movers & Shapers has grown rapidly this year, with the number of stores in the UK increasing over the period from an initial two stores in Stanmore and Vauxhall in January, to five in July with the opening of the West Hampstead, Marble Arch and Stratford-upon-Avon stores. The Stratford-upon-Avon store has the added benefit of an onsite yoga and pilates studio. The Company now operates eight high street stores, following the opening of stores in Barnes, Winchester and Muswell Hill and a further store in Loughton, Essex, is due to open shortly.
In addition, the Company recently signed an agreement with Bupa to open a first concession with Bupa Wellness at the new, state-of-the-art Wellness Centre in Solihull, West Midlands. A successful launch of this unit may lead to other concession opportunities within Bupa's property portfolio.
Whilst the Board is keen to progress the roll-out of stores to high street locations, weak consumer confidence coupled with difficulties in raising bank finance to fund capital expenditure has led to the Board adopting a conservative approach to expansion in 2009. The focus is very much on improving profitability within existing units following an aggressive roll out over the last twelve months. Nevertheless, the Board remains alert to any interesting property situations that may arise and is actively pursuing other opportunities, such as installing Movers & Shapers in corporate locations. The directors believe that studios built into an office environment would prove attractive to employers due to the wide appeal of the programmes, innovative nature of the product and limited capital expenditure required.
In September 2008 the Board decided that the joint venture in Hong Kong should be terminated, preferring to concentrate its efforts on the home market. This is anticipated to be concluded by August 2009.
Ez-Runner Limited (formerly Digital Plantation Limited) ('Ez-Runner')
(50.2% Investment)
This has been a transformational year for Ez-Runner, formerly known as Digital Plantation Limited. The newly named Ez-Runner, continues to grow and build its market presence in intelligent management software business. Ez-Runner has developed end-to-end intelligent web-based resource management systems, designed to improve efficiency and maximise yield through integrated booking, POS and stock control, membership, communications, reporting and web modules and this unique and innovative offering is increasingly being recognised as an essential tool for many companies operating within the health and leisure sectors.
The re-branding of Digital Plantation Limited was adopted as part of the post period end acquisition of ClubRunner (Europe) Limited ('ClubRunner'), a leading leisure management software provider. Specialists in health club management software, ClubRunner provides IT solutions across the leisure industry including the hotel, health and fitness, play and golf markets, complementing the Company's range of proprietary intelligent booking software that specialises in the day and destination Spa markets.
Established in 1995 by Stefan Drummond, who has subsequently joined the Board of Ez-Runner, ClubRunner is a leading leisure management software solutions provider with existing high profile clients such as Livingwell Hilton Hotels, Gambado, Ramada Jarvis and PlayGolf. The Board of ADDleisure saw considerable synergies existing between the two companies and that a merger of the two companies would significantly strengthen their capabilities of attracting major new corporate clients in both the UK and internationally. The combination of innovative software and an established trading record and existing international clients that will be brought together in this merger, has already resulted in agreements and negotiations with potential new clients such as Virgin Active and JJB Mifit, and the Board of Ez-Runner see that other significant contract opportunities will exist for the merged company moving forward.
The numerous benefits of Ez-Runner's offering were recognised by EZYPAY, one of the largest billing companies in Australia and New Zealand, when it signed a joint venture agreement in June 2008 to deliver an integrated fitness management and direct debit solution in Australia and New Zealand. This joint venture is designed to provide customers with the benefits of the combination of Ez-Runner's management software and technology with EZYPAY's billing administration system, resulting in a fully integrated business management tool. EZYPAY has established technical support and delivery teams in Sydney and Wellington, enabling Ez-Runner access and support to the necessary infrastructure required for a smooth transition into operation in Australia, New Zealand and the rest of Asia-Pacific. With the globalisation of large health club chains, the Company sees this as a key strategic advantage for future growth in this region.
Consolidated Income Statement
For the 12 months ended 31 July 2008
| Notes | Unaudited | Unaudited | |
| 2008 | 2007 | ||
| £'000 | £'000 | ||
| Revenue | 2,104 | 1,324 | |
| Cost of sales | (693) | (413) | |
| Gross profit | 1,411 | 911 | |
| Other income: Gain on disposal of subsidiaries to joint venture | 1,942 | ||
| Operating and administrative expenses | (4,149) | (3,057) | |
| Loss from operations | (2,738) | (204) | |
| Finance income | 397 | 12 | |
| Finance expense | (15) | (9) | |
| Loss before tax | (2,356) | (201) | |
| Income tax credit | 27 | 34 | |
| Loss for the year | (2,329) | (167) | |
| Attributable to: | |||
| - (Loss)/profit applicable to the parent's interest in the Group | (1,973) | 285 | |
| - Losses in the subsidiaries applicable to the minority interests in excess of the minorities' interests in the equity of those subsidiaries | (356) | (452) | |
| Loss attributable to the equity holders of the parent | (2,329) | (167) | |
| Basic and diluted loss per share in pence | 2 | (1.1) | (0.1) |
All accounts relate to continuing activities.
The notes set out on the following pages form part of these interim financial statements.
Unaudited Consolidated Statement of Changes in Equity
For the 12 months ended 31 July 2008
| Share capital | Share Premium | Merger reserve | Excess of minority interest in losses over their equity interest in subsidiaries | Retained deficit | Total equity | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| 1 August 2006 | 606 | 1,575 | 757 | (340) | (1,377) | 1,221 |
| Loss and total recognised income and expense for the year | - | - | - | (452) | 285 | (167) |
| Issue of shares for cash | 345 | 2,935 | - | - | - | 3,280 |
| Share issue costs | - | (63) | - | - | - | (63) |
| Issue of shares to acquire minority interest | 62 | - | 562 | 386 | 1,010 | |
| Share based payment | - | - | - | - | 87 | 87 |
| 31 July 2007 | 1,013 | 4,447 | 1,319 | (406) | (1,005) | 5,368 |
| Loss and total recognised income and expense for the period | - | - | - | (356) | (1,973) | (2,329) |
| Issue of shares for cash | 30 | 255 | - | - | - | 285 |
| Exercise of warrants | 5 | 47 | - | - | - | 52 |
| Share based payment | - | - | - | - | 90 | 90 |
| 31 July 2008 | 1,048 | 4,749 | 1,319 | (762) | (2,888) | 3,466 |
Consolidated Balance Sheet
As at 31 July 2008
| Unaudited | Unaudited | |
| 2008 | 2007 | |
| £'000 | £'000 | |
| Assets | ||
| Non-current assets | ||
| Property, plant and equipment | 355 | 97 |
| Intangible assets | - | 670 |
| Trade and other receivables | 98 | 568 |
| 453 | 1,335 | |
| Current assets | ||
| Inventories | 48 | 20 |
| Trade and other receivables | 1,193 | 756 |
| Cash and cash equivalents | 3,037 | 4,292 |
| 4,278 | 5,068 | |
| Total assets | 4,731 | 6,403 |
| Liabilities | ||
| Non-current liabilities | ||
| Interest bearing loans and borrowings | (11) | (296) |
| Current liabilities | ||
| Trade and other payables | (1,109) | (721) |
| Interest bearing loans and borrowings | (145) | (18) |
| (1,254) | (739) | |
| Total liabilities | (1,265) | (1,035) |
| Net assets | 3,466 | 5,368 |
| Capital and reserves | ||
| Share capital | 1,048 | 1,013 |
| Share premium | 4,749 | 4,447 |
| Merger reserve | 1,319 | 1,319 |
| Excess of minorities interest in losses over their equity interest in subsidiaries | (762) | (406) |
| Retained deficit | (2,888) | (1,005) |
| Total equity | 3,466 | 5,368 |
Consolidated Cash Flow
For the 12 months ended 31 July 2008
| Unaudited | Unaudited | |
| 31 July 2008 | 31 July 2007 | |
| £'000 | £'000 | |
| Cash flows from operating activities | ||
| Loss before taxation | (2,356) | (201) |
| Adjustments for: | ||
| Depreciation and amortisation | 71 | 175 |
| Impairment charge | 670 | 396 |
| Share based payments | 90 | 87 |
| Finance income | (397) | (12) |
| Finance expense | 15 | 9 |
| Goodwill disposal | - | 595 |
| Gain on disposal of subsidiaries | - | (1,942) |
| Cash flows from operating activities before changes in working capital and provisions | (1,907) | (893) |
| (Increase)/decrease in inventories | (28) | 48 |
| Decrease/(increase) in trade and other receivables | 60 | (784) |
| Increase in trade and other payables | 388 | 363 |
| Corporation tax credit received | - | 34 |
| Net cash used in operations | (1,487) | (1,232) |
| Cash flow from investing activities | ||
| Purchase of property, plant and equipment | (329) | (110) |
| Development costs | - | (28) |
| Finance income | 397 | 12 |
| Net cash generated/(used) in investing activities | 68 | (126) |
| Cash flow from financing activities | ||
| Issue of ordinary shares for cash | 337 | 3,280 |
| Share issue costs | - | (63) |
| Cash acquired through joint venture issuing shares for cash | - | 1,835 |
| Loan proceeds | - | 125 |
| Loan repayment | (131) | (200) |
| Capital repayments of finance lease obligations | (27) | (26) |
| Finance expense | (15) | (6) |
| Net cash generated from financing activities | 164 | 4,945 |
| Net (decrease)/increase in cash and cash equivalents | (1,255) | 3,587 |
| Cash and cash equivalents at the beginning of the year | 4,292 | 705 |
| Cash and cash equivalents at the end of the year | 3,037 | 4,292 |
Notes
1. Basis of preparation and significant accounting policies
These interim results of the Company and its subsidiaries ('the Group') for the 12 months ended 31 July 2008 have been prepared on a basis consistent with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations as adopted by the European Union and also in accordance with the Companies Act 1985. The comparative periods for the 12 months ended 31 July 2007 have been restated to reflect the adoption of IFRS by the Group. As permitted, the Company has chosen not to adopt IAS34 'Interim Financial Reporting'.
The unaudited information included within this document has been prepared on the basis of the recognition and measurement requirements of applicable IFRS and IFRIC interpretations in issue that either are endorsed by the European Commission and effective (or available for early adoption) at 31 July 2008 or are expected to be endorsed and effective (or available for early adoption) at 31 December 2008, the Group's first statutory reporting date in accordance with IFRS.
The financial statements for the twelve months ended 31 July 2007 as previously stated (under UK GAAP) have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors on such accounts was unqualified, and did not include references to any matters to which the auditors drew attention without qualifying their report, and did not contain any statement under Sections 237(2) or 237 (3) of the Companies Act 1985. The restated adopted IFRS financial information for the year ended 31 July 2007 does not constitute statutory accounts as defined in section 240 of the Companies Act 1985, however it is anticipated to be consistent with the comparative period for the statutory accounts for the period ended 31 December 2008, the Group's first statutory financial statements to be prepared under IFRS.
The restated accounting policies as set out in these results have been consistently applied to all the periods presented. The adopted IFRS that will be effective (or available for early adoption) in the annual financial statements for the period ending 31 December 2008 are still subject to the possibility of change as a result of decisions taken by the European Commission on endorsement. As a result of such changes, the accounting policies cannot be determined with certainty and therefore may require updating when the annual financial statements are prepared for the period ending 31 December 2008.
The comparative figures in respect of the year ended 31 July 2007 have been restated to reflect these adjustments. Reconciliations and descriptions of the effect of the transition from United Kingdom Generally Accepted Accounting Principles to IFRS are provided in note 3 of the interim results for the six months ended 31 January 2008.
Basis of consolidation
The accounting policies applied by the Group in these Interim Results are consistent with those applied by the Group in its Interim Results for the six months ended 31 January 2008.
2. Loss per share
Basic loss per share
The calculation of the basic loss per share is based on the loss attributable to ordinary shareholders of the parent divided by the weighted average number of shares in issue during the period. For diluted loss per share, the weighted average number of ordinary shares in issue would be adjusted to reflect the impact of conversion of dilutive potential ordinary shares. At 31 July 2008 there were 27,461,359 warrants and 11,251,414 share options which could be potentially dilutive in the future, but as they are currently anti-dilutive, they have been excluded from the following calculations.
Adjusted (loss)/earnings per share
The loss attributable to the equity holder of the parent has been increased by the losses attributable to the shares owned by the minority interest that have been re-allocated to the parent in accordance with IAS27. An alternative EPS has been calculated that shows the loss attributable to the parent's percentage interest in the equity of the Group.
| 12 months to 31 July 2008 | Year to 31 July 2007 | |
| £'000s | £'000s | |
| Loss for the period attributable to the equity holders of the parent | (2,329) | (167) |
| Add back the minority's share of losses in subsidiaries that have been re-allocated to the equity holders of the parent | 356 | 452 |
| _____ | _____ | |
| Adjusted (loss)/earnings for the period attributable to the equity holders of the parent | (1,973) | 285 |
| Weighted number of equity shares | 208,636,047 | 124,444,247 |
| Basic and fully diluted loss per share in pence | (1.1) | (0.1) |
| Adjusted basic and fully diluted (loss)/earnings per share in pence | (0.9) | 0.2 |