BLTG.L Regulatory News (BLTG)

6 Mar 2007 07:06

Fonebak plc06 March 2007 Fonebak plc ("Fonebak" or "the Company") Trading Statement Following the completion of the acquisition of CRC Group plc and the appointmentof Gary Stokes as Chief Executive of Fonebak, a full review of the integrationplans and current prospects is being undertaken. This review is not yetcomplete; however, sufficient is now known to be able to give an update on theprogress of the business. Inbound volumes for the period to end January 2007 have increased by more than50% compared to prior year. The increase in volumes reflects the expansion intomainland Europe and a strengthening of our relationships with the majornetworks. However, over the same period the average outbound sales value of ahandset has been declining. In addition there has been a more recent change in inbound mix and specificallythe loss of some higher margin business. The combined impact of lower averagesales prices and a less favourable product mix is having a significant impact onmargins which will be materially below prior year. Positively with the anticipated impact of the WEEE directive and new UKlegislation; Fonebak has now been authorised as an approved Producer ComplianceScheme and is focused on accrediting the networks as we build our added-valueservice offering. Whilst progress is being made on several fronts the decline in margins more thanoffsets benefit from additional inbound volumes. Whilst new marketinginitiatives and revenue streams will support future business, in the short termit is now clear that Fonebak profits will be below expectations in the currentyear. The Intec business has also enjoyed mixed fortunes; the distribution andfulfilment activities are trading profitably. The sales and support teams ofFonebak and Intec are in the process of being co-located and both businesseswill benefit from a more co-ordinated and better resourced sales effort. The Intec repair business has suffered from lack of volume and has been lossmaking. However a new contract for additional work has recently been won and weexpect to be able to formally announce this together with plans to eliminate thelosses in the next few days. The Fonebak results will include CRC with effect from the completion date; 24thJanuary 2007. Experience so far is that CRC is trading well and the main sitesat Glenrothes, Paderborn and Warsaw have all seen record output in recentmonths. New client and product introductions are progressing well and thebusiness as a whole is expected to perform ahead of the assumptions in the offerdocumentation. The restructuring programme commenced by CRC in 2006 is now well advanced and onplan. Cost savings following the de-listing of CRC and the integration withFonebak are already coming through and are expected to be in line with forecastover the first year. This initial review of the Group confirms that despite the positive progressbeing made, the upsides in CRC and Intec will be insufficient to cover theprojected shortfall in Fonebak. There are clearly many opportunities for theGroup and the longer term prospects remain good, however in the short term thepriority will be to restore the profitability of the core Fonebak mobile phonerefurbishment and resale activities to acceptable levels. Whilst further work progresses the release of the interim results is likely tobe delayed until the end of March, where upon management will give a furtherupdate on progress and the actions to be taken to address these issues. 6 March 2007 Fonebak PlcGary Stokes, Chief Executive +44 (0) 777 0542 856 Pelham Public RelationsPhilip Dennis +44 (0) 20 7743 6363 This information is provided by RNS The company news service from the London Stock Exchange