Crawshaw Group Regulatory News (CRAW)

11 Oct 2006 07:01

Felix Group PLC11 October 2006 11 October 2006 Felix Group plc Preliminary Results for the Year Ended 31 May 2006 Felix Group plc ('Felix', the 'Group' or the 'Company') (LSE:FLX), todayannounces Preliminary Results for the year ended 31 May 2006. 2006 HIGHLIGHTS • New prototype cash machine incorporating Everyone's A Winner proposition and other digital content now developed achieving full European Conformity (CE) approval • Agreements announced with Kwik Save Ltd, Comet Group plc and Whitbread plc • Contracts in place with key digital services suppliers • Acquisition of 4Kiosk Solutions Ltd OUTLOOK Since the financial year end, the business has raised additional equity fundingof £5.1m (after expenses). The Group remains debt free with cash in thebank and the intention is to put this additional capital to good use as wedeploy the MAX BOX and MAX BOX Mini in as many different retail and leisurevenues as possible in order to prove our model. The Group has a newNon-Executive Chairman - Richard Rose and one other new Non-Executive Director -Mike Masters. Both will add considerable expertise and experience to thebusiness. The board of directors and management team have been busy concluding all thepre-deployment work needed to support the new MAX BOX machine. This has includedthe final software application development and testing, the physical hardwaremanufacture and assembly as well as putting the final post production machinethrough full European CE approval. This process has involved testing all thecomponents for electrical safety and emissions to ensure compliance. As part of the initial pilot roll-out, the Group now has its first few MAX BOXmachines deployed with customers who have assisted throughout the machine's testphase. The principle purpose of these first machines is to operationally andtechnically confirm their reliability in a live environment (both the ATM andall the digital content applications), and to evaluate the commercial returnsachieved. Following the recent acquisition of the 4KS digital kiosk business, the Groupsees potential to deploy increasing amounts of this kiosk, now re-named the MAXBOX Mini, where either the venue already has an ATM agreement in place, but noother services, or where retail floor space is at a premium. The Group is nowfocused on contracting with a broad range of venues to deploy both types ofmachine and remains on target to deploy the first 400 Felix machines referred toin the circular to shareholders at the time of the June 2006 Placing. The board remains excited by the opportunities offered by the technology and islooking forward to the next phase of the businesses development. The pre-tax loss for the year to 31 May 2006 was £4.9m. Income during the periodwas, as expected, negligible. CHIEF EXECUTIVE'S REVIEW Machine Development The past few months, and in particular the period since the Placing in June,have seen a tremendous amount of hard work behind the scenes. Inevitably, to theoutside world and our shareholders in particular, there has been little by wayof 'announceable' news to report. I appreciate the frustration this can bringabout but we have made great strides. Firm foundations have now been laid inareas such as; digital content development, software interface and applicationbuild, conformity and compliance, parts procurement, manufacturing and assemblyand marketing. In addition, we now have the assets and I.P, having acquired the4KS digital kiosk business, to offer an alternative type of machine (the MAX BOXMini), one that is still operated via a broadband line and which can house theexisting Felix digital content as well as the other applications we are lookingto provide, without the requirement for an ATM. The benefits of this machinemean that we can actively contract with customers who already have an existingATM machine agreement, and over time and where appropriate, up-grade from a MAXBOX Mini machine to a MAX BOX containing an ATM. The Group's Costs As can be seen from the Financial Statements for the year ended 31 May 2006, theGroup incurred losses in developing its offering as described above. Anexplanation of variances (as a comparison to the previous financial year) in themain cost categories in the Group Profit and Loss account are as follows. Cost Of Sales - The level of costs in the year to May 2006 reflects theinvestments we have made in (i) designing and developing our machines through anumber of prototypes (£0.3m), (ii) adding content to the Everyone's A Winnergame (£0.1m) and (iii) increasing awareness of the MAX BOX via trade shows(£0.1m). Administrative Expenses - Over the past year we have sought to build a robustoperating structure, create awareness and generate the required funds to deliverour business objectives. In so doing, we have increased staff costs by £0.5m(with recruitment in key areas such as Operations, IT and Finance) and increasedsoftware development costs by £0.2m. During the year we also took theopportunity to increase brand awareness by sponsoring Sale Sharks, the GuinnessPremiership Rugby Union Champions at a cost of £50,000 plus expenses. Finally,the fund raising during the year incurred professional fees and staffing costsof £0.4m. Machine Finance In tandem with all this development work we have been exploring a range offinance options to capitalize an increasing amount of either MAX BOX or MAX BOXMini machines. There is no question of appetite in providing a funding line, thedebate we have centres upon the terms of such funding. Given this is a brand newproposition and therefore a new piece of hardware to capitalize with only ashort historical performance to review, residual values to rely upon have beendifficult to determine. We will capitalize an initial quantity of machines fromthe funds raised in June, deploy these machines and then employ alternativefunding sources on a contract by contract basis with our venue partners (havingreaffirmed the business model) for larger quantities of machines. Machine Venue Contracts We have a signed agreement in place with Kwik Save Ltd to deploy MAX BOXmachines in line with their own store regeneration programme. A series of recentsenior management changes within Kwik Save have ultimately impacted upon ourdeployment progress, we are liaising with their new management team and hope toget our roll-out plan back on track with them shortly. In addition, we already have in place a number of smaller quantity contracts forthe MAX BOX machine with a range of companies and distributors and have a numberof other broad retail and leisure discussions at various stages of contractnegotiation. We will obviously announce all material contracts in the usualmanner. Our plans include the deployment of an initial quantity of MAX BOXmachines in as many different types of sector and venue as possible. Thisstrategy has a number of benefits, the main one being the ability to accuratelydetermine the total quantum of revenue by product application, bearing in minddifferent applications produce different revenue margins, across different typesof retail and leisure venue. This data will help test and refine our businessmodel, focus our negotiation position going forward and determine which routewill produce the best returns for us and our shareholders. Content Delivery Currently we have the capability to operate: • a nanocash ATM in conjunction with Omnicash (an Independent ATM Deployer) • high quality (Sony) digital photo processing • mobile phone top up across all major networks • a digital juke box facility, which includes every single UK top 40 hit • downloadable mobile phone content for games, ringtones, logos and wallpapers. All of these services are now fully functional and proving to be technicallyvery reliable within the few locations we have deployed to date. In addition we have a number of other digital services which have the capabilityto generate incremental revenues for both venues and Felix. These each require adegree of consumer research and if successful, applications built and interfacedwith our proprietary monitoring software. Again, we will communicate further onthese development aspects as they become live. Management Changes In June we appointed Lynda Sherratt as Managing Director to replace John Liwoszwho resigned to pursue other opportunities and more recently we have appointedMatt Talbot to replace Lynda as Operations Director. We have also very recentlyappointed Peter Jones as Commercial Director with specific responsibilities forall sales and marketing activity. Peter has a wealth of experience and relevantindustry contacts established during his employment with Mars UK, Bass Brewersand more recently Leisure Link plc where he was On-Trade Sales Director. Peter'sappointment completes the key senior management team and I am delighted that he,Lynda and Matt are now part of the team. We remain debt free with cash in the bank and a proposition which has undergonerigorous and extensive testing, trialing and accreditation procedures. We arenow at a point whereby we can, subject to successful contract negotiations,deploy quantities of both types of machines into a wide range of leisure andretail venues. Finally, I would like to take this opportunity to thank all our staff for theircontinued hard work and support and look forward to reporting our progress inthe forthcoming weeks and months. Andy Egan, Chief Executive Group Profit and Loss AccountYear ended 31 May 2006 NOTES 2006 2005 £'000 £'000 TURNOVER 3 35 Cost of sales (724) (246) -------- --------GROSS LOSS (721) (211)Administrative expenses (4,257) (3,015)Other operating income - 20 -------- --------OPERATING LOSS (4,978) (3,206)Interest receivable 67 41Interest payable (13) (59) -------- --------LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (4,924) (3,224)Taxation - - -------- --------LOSS ON ORDINARY ACTIVITIES AFTER (4,924) (3,224) TAXATION FOR THE YEAR -------- --------LOSS PER SHARE - BASIC 2 (4.0607)p (3.1470)p -------- -------- There are no recognised gains or losses other than those passing through theprofit and loss account. All operations are continuing. Group Balance SheetAs at 31 May 2006 NOTES 2006 2005 £'000 £'000 FIXED ASSETS Intangible assets 10,052 11,348Tangible assets 455 92 -------- -------- 10,507 11,440 -------- --------CURRENT ASSETSStock 13 13Debtors 413 245Cash at bank and in hand 534 879 -------- -------- 960 1,157 -------- --------CREDITORS: amounts falling due within one year (569) (702) -------- --------NET CURRENT ASSETS 391 455 -------- --------TOTAL ASSETS LESS CURRENT LIABILITIES 10,898 11,895CREDITORS: amounts falling due after more than one year (8) (17) -------- -------- 10,890 11,878 -------- --------CAPITAL AND RESERVES Called up share capital 1,277 1,088Share premium account 18,594 14,847Profit and loss account (8,981) (4,057) -------- --------EQUITY SHAREHOLDERS' FUNDS 10,890 11,878 -------- -------- These financial statements were approved by theBoard on 21 September 2006 Group Cash Flow StatementYear ended 31 May 2006 NOTES 2006 2005 £'000 £'000 NET CASH OUTFLOW FROM OPERATING ACTIVITIES 3 (3,531) (2,157) ------- --------RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest received 67 41Interest paid (13) (59) ------- -------- 54 (18)CAPITAL EXPENDITURE AND FINANCIAL INVESTMENTProceeds from sale of tangible assets 12 12Payments to acquire tangible assets (415) (22) ------- -------- (403) (10) ------- --------NET CASH OUTFLOW BEFORE FINANCING (3,880) (2,185) FINANCINGIssue of shares net of costs 3,936 2,933Repayment of short term loans (392) (45) ------- --------Repayment of long term loans - (370) ------- --------Repayment of finance lease and hire purchase contracts 3,535 2,498 ------- --------(DECREASE)/INCREASE IN CASH (345) 313 Notes: Note 1 - Publication of Non Statutory Accounts The financial information set out in this preliminary announcement does notconstitute statutory accounts as defined in Section 240 of the Companies Act1985. The financial information for the year ended 31 May 2006 has been extracted from the Group's financial statements to that date which have received an unqualified auditors' report but have not yet been delivered to the Registrarof Companies. Note 2 - Loss per Share The calculation of basic loss per share is based on a loss of £4,924,000(2005 - £3,224,000) and on 121,245,378 (2005 - 102,458,331) ordinary shares, being the weighted average number of ordinary shares in issue during the period. As the Group reports a loss for the period then, in accordance with FinancialReporting Standard Number 14, the share options in issue are not considereddilutive. Note 3 - Reconciliation of operating loss to operating cash flows 2006 2005 £'000 £'000Operating loss (4,978) (3,206)Depreciation 32 31Loss/(profit) on disposal 8 (1)Amortisation 1,296 1,297Movement in stocks 20 (6)Movement in debtors (168) (28)Movement in creditors 259 (244)-------------------------------------------------------------------------------Net cash outflow from operating activities (3,531) (2,157)------------------------------------------------------------------------------- Note 4 - Reconciliation of Net Cash Flow to Movement in Net Funds/(Debt) 2006 2005 £'000 £'000(Decrease)/increase in cash and change in net funds resulting from cash flows (345) 313Cash outflow from decrease in debt and lease financing 401 435-------------------------------------------------------------------------------Changes in net funds resulting from cash flows 56 748Hire purchase - (4)Net funds/(debt) at 1 June 2005 458 (286)-------------------------------------------------------------------------------Net funds at 31 May 2006 514 458------------------------------------------------------------------------------- Note 5 - Annual Report A copy of the Annual Report and Accounts will be sent to all shareholdersshortly and will be available from the Company's registered office:Cherry Tree House, Cherry Tree Lane, Rostherne, Cheshire WA14 3RZ. Enquiries Felix Group Tel: 01565 831 100Mike Wallwork E: mike@felixcorp.com Teather & Greenwood Tel: 020 7426 9000Mark Dickenson E: mark.dickenson@teathers.com NOMAD and broker for Felix Group plc Tel: 020 7426 9000Fred Walsh E: fred.walsh@teathers.com Holborn PR Tel: 020 7929 5599Trevor Phillips E: trevor.phillips@holbornpr.co.uk Notes to Editors Felix Group plc (Reuters FLX.L Bloomberg FLX LN)www.felixcorp.com This information is provided by RNS The company news service from the London Stock Exchange