Crawshaw Group Regulatory News (CRAW)

26 Feb 2007 07:03

Felix Group PLC26 February 2007 26 February 2007 Felix Group plc Interim Results for the Six Months Ended 30 November 2006 HIGHLIGHTS • Machine deployment • Revenue generation now underway • New product development • Group's costs in line with expectations • Cash machine operational agreement CHAIRMAN'S STATEMENT Strategy update Since the publication of the Group's Annual Report and Accounts last October, wehave been validating the business model through the deployment of an initialquantity of MAX BOX machines. I referred to this validation exercise at our AGMin November and principally this has been about the on-going testing of theactual machines whilst in tandem, assessing consumer reaction to the variousdigital content applications which are coupled with an ATM. Indications at thisstage are that we do have a proposition which consumers want to utilise andengage with. The digital jukebox facility is providing excellent returns and this applicationis also a high margin product for us. Other applications are receiving concertedmarketing effort in order to produce the requisite overall 'break-even'contribution per machine and already, we are starting to see gross revenueincreases almost week on week as customers become more aware of theapplications. Further marketing activity, software enhancements as well as newapplications are being developed which will increase the revenue potential.Additionally we have secured an on screen advertising deal that will furtherboost income per machine - this will come into effect once a minimum thresholdof machines sited has been reached, expected later this year. I am pleased to report that the MAX BOX is proving to be technically reliableand that the costs of providing technical support and maintenance to the venuesare as expected. Product - Deployment We currently have 61 sited machines and have recently started placing machinesas part of a number of pre-contract agreements with Odeon Cinemas, Aramark andother independently owned venues. Discussions are currently taking place toextend this phase with other multiple groups. Although the interest in takingmachines is high, the board feels it prudent to proceed slowly until the averagerevenue per machine has exceeded breakeven and that sufficient experience hasbeen gained as to the type of venue that produces the best returns. We expect this to lead to a larger scale roll out once the effectiveness of theMAX BOX has been established in each particular environment. Investment Opportunity In November the board approved a strategic investment in Cupera InternationalLimited and Underberry Financial Services Limited. It is anticipated that MoneyCard, the resultant trading entity of Cupera and Underberry will enable Felix tomore quickly break into the volume retail market by providing alternativepayment facilities, via its MAX BOX machine. This can provide retailers withbetter promotion, loyalty and footfall driving opportunities by accepting (andpersonalising) the pre-paid Money Card to their customers. Outlook The MAX BOX proposition is evolving into a broad consumer offering and we areworking hard at seeking to integrate evolving technologies, particularly in themusic area which we believe is set to be transformed over the coming years. Weare learning a great deal about the elements that lead to successful deploymentand are encouraged by the increasing revenue profile of the initial machinessited. Deployment of machines has been a little slower than anticipated largely as aresult of manufacturing and telecommunications delays although our potentialsales pipeline remains in line with our stated expectations. We remain confidentabout the prospects of commercialising our technology. Whilst we still have someway to go before we achieve a break-even position, we have the right people, theright products (either in place or in development) and are doing all the rightthings to maximise our revenues and grow our estate. In summary, the challenge ahead is to drive the average revenue per machinethrough break-even, and then to achieve a significant deployment of machines insuitable venues across the UK. The management team remains firmly committed tomaking this happen. Richard S RoseNon-Executive Chairman CHIEF EXECUTIVE'S STATEMENT New and Improved MAX BOX We now have three variations of the MAX BOX; the MAXI, which incorporates alldigital content as well as an ATM, the MINI which houses certain tailoredaspects of digital content and is targeted at the retail sector and the MIDIwhich is the same format as the MINI but targets the pub sector. MAX BOX Deployment For the past 2 to 3 months we have been deploying quantities of our machines tobetter understand and validate the business model and the overall technicalcapability of such a complex machine. I am pleased to say that from a technicalperspective we are well positioned to deploy volumes of all 3 machines. Whilstthere remains more to do to obtain the right blend of products in order tomaximise the overall contribution, we are encouraged by the financial potentialof each machine variant and look to build on this in the future. Our recent agreement with Bank Machine Limited, a division of Cardtronics, theworld's leading ATM operator, is significant in the context of further machinedeployments. Bank Machine Limited is expert in their field and this agreementwill enable us to further establish a presence in venues where the ATM modelworks as a standalone customer proposition. Naturally, the integration ofadditional services will serve to augment this product offering to the consumerand with the right mix of marketing communications in place to support theseproducts, we have the opportunity to significantly enhance the revenues thesevenues can generate. MAX BOX Content The MAX BOX MINI in particular utilises the intellectual property realised bythe acquisition of 4Kiosk Solutions Limited in September last year and hasalready enabled us to improve upon certain aspects of both hardware manufactureand software development. We are working continuously to develop and improveexisting applications to make these as intuitive for customers as possiblewhilst at the same time, exploring other content we can integrate with newsoftware. We are also working closely with our digital music provider;Broadchart to explore other more innovative ways to distribute music, without ofcourse infringing upon the copyright of others. Licensing Opportunities Whilst the digital products themselves are well proven individually, aggregatingthem and coupling them with an ATM product is very innovative and we arecurrently in a dialogue with a large US kiosk distributor to license theintellectual property we have vested in the MAX BOX with a view to providingthis know how to others to operate in other territories. There was also a greatdeal of interested generated in this area during the recent ATEI tradeshow inLondon from operators in Spain, Portugal, Australia and Dubai. The Group's Costs I am pleased to report that overall the Group's costs during this period are inline with our expectations and the budgets we have set ourselves. We continue tomanage our cash carefully and the Bank Machine agreement will substantiallyreduce the capital cost of each MAX BOX MAXI machine. In addition, we arecontinually looking at ways to improve efficiencies and strip out any cost whichwe believe to be either prohibitive or excessive. Funding We have also received outline terms for 'receivables finance' funding options.This facility would be contracted on a venue owner by venue owner basis intandem with Felix's standard form machine siting agreement. The criteria forreceivables finance include the financial standing of the third party kioskvenue owner and the owner contracting for a fixed minimum rental amount andperiod. We will seek to utilise this arrangement where appropriate and will lookat other funding options to adequately capitalise the business as we continue toscale up our estate. Management Changes We have recently recruited the services of Andy McInally. Andy has joined us asSales and Marketing Director of Felix Corporation Limited, responsible for allour strategic and tactical marketing activities as well as our sales funnel.Andy joins us from The Centaur Group and previously, Greenland Interactive. Weare delighted to have secured his services. Our Future Digital retail has now become an integral part of our machine offering. Thisstrategic direction is undoubtedly the right one. Not only has this provided uswith new content offerings and licensing opportunities, it has also opened up arange of additional venues to site machines in. Weekly revenues per machine areincreasing steadily towards break even point, customer and venue reaction hasbeen very favourable and new applications and opportunities are unfolding - Itherefore remain very confident about the long term prospects for the group. Finally, I would like to take this opportunity to thank all our staff who areworking tirelessly to deliver a business which aims to produce impressiveresults for our customers and shareholders alike. Andrew EganChief Executive Officer GROUP PROFIT AND LOSS ACCOUNTFOR THE SIX MONTHS ENDED 30 NOVEMBER 2006 Re-stated Re-stated 6 Months Year 6 Months Ended Ended Ended 30.11.06 31.05.06 30.11.05 Note £'000 £'000 £'000 Turnover 24 3 1Cost of Sales (68) (724) (251) -------- -------- --------Gross Loss (44) (721) (250) Administrative expenses (1,759) (3,021) (1,328)Depreciation and amortisation (672) (1,328) (679) -------- -------- --------Operating loss (2,475) (5,070) (2,257) Interest receivable 80 67 30Interest payable (2) (13) (12) -------- -------- --------Loss on ordinary activities before taxation (2,397) (5,016) (2,239)Taxation - - - -------- -------- --------Loss on ordinary activities after taxation retained for the period (2,397) (5,016) (2,239)Loss per share: Basic (pence) 1 (1.320) (4.137) (1.933) 1. Loss per share The calculation of basic loss per share is based upon the loss for the periodand the weighted-average number of 181,456,040 (31 May 2006 - 121,245,378,30November 2005 - 115,841,584) shares in issue during the period. See also note 5to the Group Balance Sheet for the impact of FRS 20 on loss per share fromfigures as previously reported. Given the loss for the period, no fully diluted earnings per share is disclosed. GROUP BALANCE SHEETAS AT 30 NOVEMBER 2006 Re-stated Re-stated As at As at As at 30.11.06 31.05.06 30.11.05 Note £'000 £'000 £'000Fixed assetsInvestments 2 250 0 0Tangible assets 3 1,621 455 103Intangible assets 4 9,480 10,052 10,700 ------- ------- ------- 11,351 10,507 10,803Current assetsStock 13 13 17Debtors 229 413 307Cash at hand and in bank 2,578 534 2,750 ------- ------- ------- 2,820 960 3,074Creditors: amounts due within one year (371) (569) (320) ------- ------- -------Net current assets 2,449 391 2,754 ------- ------- -------Total assets less current liabilities 13,800 10,898 13,557 Creditors: amounts due after more than one year (53) (8) (8) ------- ------- -------Total assets less liabilities 13,747 10,890 13,549 Capital and reservesCalled up share capital 1,827 1,277 1,264Share option reserve 5 191 213 121Share premium account 23,231 18,594 18,558Profit and loss account (11,502) (9,194) (6,394) ------- ------- -------Equity shareholders' funds 13,747 10,890 13,549 ------- ------- ------- NOTES TO THE GROUP BALANCE SHEETAS AT 30 NOVEMBER 2006 1. Basis of preparation The interim financial information has been prepared on the basis of theaccounting policies set out in previous statutory and interim accounts exceptfor the introduction of FRS 20 "Share Based Payment", the impact of which isexplained in note 5. The interim financial information is unaudited. The financial information doesnot constitute statutory accounts as defined by section 240 of the Companies Act1985. Full accounts of the company for the year ended 31 May 2006 on which theAuditors gave an unqualified report, have been delivered to the Registrar ofCompanies. These accounts consolidate the accounts of Felix Group Plc and all ofits wholly owned subsidiaries. 2. Fixed Asset Investments On 8 November 2006, Felix Group Plc acquired 4% of both Cupera InternationalLimited and Underberry Financial Services Limited for cash consideration of£235,000 and £15,000 respectively. 3. Tangible Fixed Assets The majority of the tangible fixed assets additions in the 6 months to 30November 2006 are in relation to the MAX BOX machines. 4. Intangible Fixed Assets On 4 September 2006, the Group acquired the digital kiosk business of 4KioskSolutions Limited. The initial consideration was £75,000 in respect of theintellectual property and software. This is included within intangible fixedassets. 5. Prior Year Adjustments to financial statements as a result of the implementation of FRS 20 FRS 20 'Share Based Payments' applied to the Group with effect from 1 June 2006.This accounting standard requires a company to make a charge to profit inrespect of share options issued after 7 November 2002 but which had not lapsedor been exercised by the period end date. The charge is based on the fair valueof the options spread over their exercise period. The impact of FRS 20 on theGroup profit and loss accounts and balance sheets is shown in the table on page9. 6. Copies of report Copies of this interim statement will be despatched to shareholders and will beavailable to the public at the Registered Office, Cherry Tree House, Cherry TreeLane, Rostherne, Cheshire, WA14 3RZ. 7. Approval of Interim Statement The interim statement was approved by the Board on 16 February 2007. NOTES TO THE GROUP BALANCE SHEETAS AT 30 NOVEMBER 2006 The impact of FRS 20 on the Group Profit and Loss accounts and Balance Sheets isshown below Year 6 Months As at Ended Ended 30.11.06 31.05.06 30.11.05 £'000 £'000 £'000Profit and Loss accountLoss on ordinary activities after taxation retained for the period As previously reported (2,330) (4,924) (2,216) (67) (92) (23) -------- ------- -------As re-stated (2,397) (5,016) (2,239) -------- ------- ------- (pence) (pence) (pence)Loss per shareAs previously reported 1.282 4.061 1.913Share option charge 0.038 0.076 0.020 -------- ------- -------As re-stated 1.320 4.137 1.933 -------- ------- ------- As at As at As at 30.11.06 31.05.06 30.11.05 £'000 £'000 £'000Balance SheetsCapital and reservesCalled up share capital 1,827 1,277 1,264Share option reserve 0 0 0Share premium account 23,231 18,594 18,558Profit and loss account (11,311) (8,981) (6,273) -------- -------- --------Equity shareholders' funds (as previously reported) 13,747 10,890 13,549 -------- -------- --------Adjustments to share option reserve 22 (92) (121) Capital and reservesCalled up share capital 1,827 1,277 1,264Share option reserve 191 213 121Share premium account 23,231 18,594 18,558Profit and loss account (11,502) (9,194) (6,394) -------- ------- --------Equity shareholders' funds (as re-stated) 13,747 10,890 13,549 -------- ------- -------- GROUP CASH FLOW STATEMENTFOR THE SIX MONTHS ENDED 30 NOVEMBER 2006 Re-stated Re-stated 6 Months 12 Months 6 Months Ended Ended Ended 30.11.06 31.05.06 30.11.05 £'000 £'000 £'000 NoteNet cash outflow from operating activities 1Returns on investment and servicing of finance (1,741) (3,531) (1,602)Interest received 80 67 30Interest paid (2) (13) (12) ------- -------- -------- 78 54 18 Capital expenditure and financial investmentPayments to acquire tangible assets (1,150) (415) (36) Receipts from sale of tangible fixed assets - 12 -Payments to acquire intangible assets (75) - - ------- -------- -------- (1,225) (403) (36)Acquisitions and disposals Payments to acquire shares in investments (250) - - Net cash outflow before financing (3,138) (3,880) (1,620) Financing Issue of shares (net of costs) 5,187 3,936 3,887Repayment of loans - (392) (387)Repayment of finance lease and hire purchase contract (5) (9) (9) ------- -------- --------Net cash inflow from financing 5,182 3,535 3,491Increase in cash 2,044 (345) 1,871 ------- -------- -------- NOTES TO THE GROUP CASH FLOW STATEMENTFOR THE SIX MONTHS ENDED 30 NOVEMBER 2006 1. Reconciliation of operating loss to net cash outflow from operating activities Re-stated Re-stated 6 Months 12 Months 6 Months Ended Ended Ended 30.11.06 31.05.06 30.11.05 £'000 £'000 £'000 Operating loss (2,475) (5,070) (2,257)Depreciation 23 32 25Loss on disposal of fixed assets 7 8 -Amortisation 648 1,296 648Share option cost 67 92 23Movement in stocks - 20 16Movement in debtors 184 (168) (62)Movement in creditors (195) 259 5 -------- -------- --------Net cash outflow from operating activities (1,741) (3,531) (1,602) -------- -------- -------- 2. Reconciliation of net cashflow to movement in net funds £'000 £'000 £'000Increase in cash in period 2,044 (345) 1,871Cash outflow from decrease in debt - 392 387 -------- -------- --------Change in net debt arising from cashflows 2,044 47 2,258Hire purchase (43) 9 9 -------- -------- -------- 2,001 56 2,267Opening net funds 514 458 458 -------- -------- --------Closing net funds 2,515 514 2,725 -------- -------- -------- 3. Analysis of changes in net funds At At Non cash At 01.12.05 Cashflows 31.05.06 Cashflows movements 30.11.06 £'000 £'000 £'000 £'000 £'000 £'000Cash at bank and in hand 2,750 (2,216) 534 2,044 - 2,578 Debt due within one year: Hire Purchase (17) 5 (12) 5 (3) (10)Debt due after more than one year: Hire Purchase (8) - (8) - (45) (53)Net funds 2,725 (2,211) 514 2,049 (48) 2,515 Enquiries: Felix Group plcMike Wallwork (o) 01565 831100email: mike@felixcorp.com PR for Felix Group plc - Holborn PRDavid Bick (o) 020 7929 5599email: david.bick@holbornpr.co.uk Notes to Editors About Felix Group plc - Felix Group plc (Reuters FLX.L; Bloomberg FLX LN)www.felixgroupplc.com Felix Group's ordinary shares were admitted to trading on AIM on 8 March 2004.Felix Group initially developed a new form of sales promotion through a directconsumer interactive medium called Everyone's A Winner. Felix has now combinedthis retail innovation with a traditional ATM machine and included a (growing)range of digital consumer services (photo processing, mobile top-up and contentand music downloads) to form MAX BOX, a kiosk designed to dispense cash, vendsales promotions and provide additional consumer services. This information is provided by RNS The company news service from the London Stock Exchange