Crawshaw Group Regulatory News (CRAW)

26 Oct 2007 07:01

Felix Group PLC26 October 2007 Felix Group Plc Preliminary Results for the Year Ended 31 May 2007 2007 HIGHLIGHTS • The UK kiosk estate of c.120 machines now operates across 6 sectors with a number of venues consistently generating the revenues required to break-even. Felix Group is starting to install machines along the UK high street, albeit on a trial basis, in some instances using kiosks which will deliver a combined offering - Felix Digital products plus an order point for the retailers extended catalogue. • Felix Group has signed a licensing agreement with Kiosk Information Systems Inc., a US based group who manufacture, supply and service kiosks and kiosk applications. The license grants them the right to install Felix software onto their new and existing kiosks in North America and worldwide. • Felix Group has signed a licensing agreement with ABK Group Plc, a provider of leased laptop computers to university students and staff. This agreement will see Felix's newly developed PC version of MAX BOX, called MAX BOX LITE, incorporated into the stock of 1600 laptops supplied by ABK through their exclusive arrangements with 12 UK universities. The pre-tax loss for the year to 31 May 2007 was £5.4m. The Group has started togenerate income, however in the period to 31 May 2007 this was from a small butgrowing number of machines in the second half of the year and therefore incomein the period was negligible. Since the financial year end, the business has raised additional equity fundingof £4.15 million (after expenses). The Group remains debt free with cash in thebank and the intention is to put this additional capital to good use as wecontinue to manage the initial quantity of MAX BOX kiosks, to trial kiosks withvarious UK multiples and to maximise the opportunities to license our software,in the UK and overseas. Richard Rose, previously Non Executive Chairman hasrecently become Executive Chairman of the Group. Chairman's Statement Strategy Update Since the publication of the Group's Interim Report in February, we havecontinued to manage the initial quantity of MAX BOX kiosks to capitalise onlessons learned across a range of sectors targeting those venues and customersthat will assist us on reaching our short-term target of kiosk break-even. We are also providing kiosks to various UK multiples who wish to evaluate theMAX BOX in a sample number of their locations. Additionally, we have identifiedopportunities to generate incremental revenues from licensing our software. We are aggregating our digital retail products and services for (i) 3rd partykiosk owners internationally (MAX BOX LITE Pro) and, (ii) installation onpersonal computers in the UK & overseas (MAX BOX LITE), in return for one-offlicense fees and an ongoing revenue share. UK Kiosk Estate We are now operating across six sectors with a number of our venues consistentlygenerating the revenues required to break-even. Many more are currently close tothis target without the benefit of planned advertising revenues and new digitalcontent, which is expected to be integrated later this year. We continue to (i)focus on maximising revenues from the estate and (ii) target UK multiples whowould have the ability to roll-out large numbers of kiosks. The digital jukebox continues to be our best selling product and high footfallsocial/leisure sites are our consistently high performing venues. However, weare seeing improvements in mobile top-ups and digital printing, especially inour new retail locations. Products introduced over the last few months (e.g.Flowers and Fun Games) are generating incremental revenues and we expect this tocontinue. In addition, as we deliver new digital content (including bespokemusic download applications to both Mobile Phones and MP3 players) we arehopeful that retail sector revenues will grow significantly in line with thedemand for music. The deployment of machines into our target retailers has been slower thananticipated but I am pleased to report that we are now starting to installmachines along the UK High Street albeit on a trial basis. In addition, a trialis about to commence with a major retailer using kiosks which will deliver acombined offering - Felix digital products plus an order point for theretailer's extended catalogue. In parallel, we have been working hard utilising our existing resources and withour suppliers to improve performance and reduce costs. I am pleased to reportthat in the year to 31 May 2007 ongoing operating overhead was £0.5m belowbudget and further overhead reductions are planned for 2007/2008. The board is in agreement that it is prudent to continue to proceed slowly withmulti-site venues until (i) we have consistently delivered the required revenueper machine and (ii) the commercial agreements include receivables finance,enabling us to conserve our cash. Opportunities for Incremental Revenues An opportunity exists to license our software I.P. and 'know how' to third partykiosk owners without significant further investment. In October, Felix signed a licensing agreement with Kiosk Information SystemsInc. who manufacture, supply and service self-service kiosks and kioskapplications. The license grants them the right to install Felix software ontotheir new and existing kiosks in North America and worldwide. Kiosk InformationSystems Inc. have supplied services to a variety of well known customers such asWal-Mart, McDonald's, Disney, FEDEX and Mercedes Benz. In August, Felix signed a licensing agreement with ABK Group plc, a provider ofleased laptop computers to University students and staff. This agreement willsee Felix's newly developed PC version of MAX BOX, called MAX BOX LITE,incorporated into the existing stock of 1600 laptops supplied by ABK throughtheir exclusive arrangements with 12 UK Universities. The commercial return toFelix is dependant upon the usage of software. Outlook The MAX BOX proposition continues to evolve and we firmly believe our kioskproposition (with the full effect of music download and advertising revenues)will achieve our short-term goal of break-even at machine contribution level aswe deploy machines with our target retailers. We continue to improve the qualityof our service to customers and we are learning a great deal about the elementsthat lead to successful deployment. The availability of new revenue streams with lower operating costs, added to thecommercial management of the UK kiosk estate means the Board remains optimisticfor the future. Richard S RoseExecutive Chairman Chief Executive's Review Strategy Update Since the publication of the Group's Interim Report in February, we havecontinued to manage the initial quantity of kiosks installed across a number ofsectors including pub & leisure, retail, banking, military bases, petrolforecourts and cinemas. We currently have in excess of 120 kiosks installed withorders for over 100 more. We are holding back on installs to ensure that as weroll-out with customers we have aligned objectives, the right quality sites andjoint marketing initiatives. We are confident that this strategy will generatethe required returns going forward. We continue to improve our product offering, marketing and service to ourcustomers which has led to a number of high profile retail trials. These willhelp immensely in bringing MAX BOX to the consumer's attention, but also endorse'Digital Retailing' into more mainstream acceptance as is the case in the USA.These new placements will support the promotions that MAX BOX have been runningfor sometime in the pub and leisure sectors. New Applications All of our versions of MAX BOX have a variety of applications that are chosen tosuit the type of venue and demographics of the audience. Our core applicationsare 'Everyone's a Winner', Jukebox, Mobile top-up and photo processing both liveat the MAX BOX or prints delivered to home. Additional applications include fungames, digital downloads (including ring tones, games and wallpaper), footballpictures, ordering and delivering of flowers, and promotional offers. Comingsoon, music downloads to device, ordering and delivery of hampers, e-books andMP4 video content. Licensing Opportunities A very important part of our future is our new licensing model for MAX BOX. Wehave adapted a version of our software that can now be retrofitted to a numberof existing installed kiosks both in the UK and the USA. We have called this 'MAX BOX LITE Pro'. This will enable a much faster roll-out of locations wherethe consumer will be able to utilise our facilities. Another software licensing opportunity may come from our kiosk monitoring systemwhich is proving to be an extremely robust and user friendly package. We arecurrently reviewing an opportunity to license this product for use on non MAXBOX kiosks. The final part of our licensing model is that from November, it will be possibleto install MAX BOX LITE onto a laptop or home PC and have all the functionalityof the kiosk at home. This will be marketed in conjunction with third partybrands for endorsement and credibility. Felix will obtain a small license feefor each account signed up. MAX BOX applications can then be accessed on yourhome PC. The software will be distributed via either a download directly fromour website or from a CD or USB memory stick distributed via the third partybrand that will 'white label' MAX BOX LITE as if their own. The Group's Costs Our costs for the year were below budget and we continue to manage cashcarefully. In the period since May, we have reduced headcount in line with thecompletion of the development phase of MAX BOX. In addition, we are currentlyworking through all areas of our cost base to identify further efficiencieswhere possible. As our installs increase and the license business grows, we envisage that Felixwill move more to an outsource model enabling us to cope with higher volumes ofpotential concurrent transactions whilst retaining the required resilience andsecurity. To this end, IBM is currently reviewing all our software in terms of capabilityand scalability to ensure we have the technology to meet the demands of ourcustomers. This action not only improves operational effectiveness but alsogives our commercial partners added confidence in Felix as a service provider. We have negotiated an off balance sheet 'receivables finance' facility. Thismeans that we will be able to roll out future machine contracts without needingto utilise our own funds or without incurring debt directly. Felix will stillfund the initial trials, but subsequent roll-outs will then fit into thereceivables finance model via venue rental agreements. Outlook Felix has been first to market with the multi-functional retail kioskproposition and we firmly believe we are now best placed to grasp the highstreet opportunity with branded partners and to bring digital retail to the UK. We have successfully broadened our range of offerings which now includessoftware available for third party kiosks and personal laptops. The opportunityto launch in the US with our new trading partner KIS Inc is very exciting. Theirexisting client base provides Felix with the potential to gain a footprint inthe US market far quicker than we could ever have achieved directly. 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 Egan, Chief Executive Group Profit and Loss AccountYear ended 31 May 2007 As re-stated 2007 2006 Note £'000 £'000 TURNOVER 81 3 Cost of sales (598) (724) ____________ ____________ GROSS LOSS (517) (721)Administrative expenses (4,976) (4,313) ____________ ____________ OPERATING LOSS (5,493) (5,034)Interest receivable 124 67Interest payable (5) (13) ____________ ____________ LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (5,374) (4,980)Taxation - - ____________ ____________LOSS ON ORDINARY ACTIVITIES AFTERTAXATION FOR THE YEAR (5,374) (4,980) ____________ ____________ LOSS PER SHARE - BASIC 2 (2.951)p (4.107)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 2007 As re-stated 2007 2006 £'000 £'000FIXED ASSETSInvestments 250 -Intangible assets 8,756 10,052Tangible assets 901 455 __________ ____________ 9,907 10,507 __________ ____________CURRENT ASSETSStock 600 13Debtors 144 413Cash at bank and in hand 680 534 __________ ____________ 1,424 960 CREDITORS: amounts falling due within one year (295) (569) __________ ____________NET CURRENT ASSETS 1,129 391 __________ ____________ TOTAL ASSETS LESS CURRENT LIABILITIES 11,036 10,898CREDITORS: amounts falling due after more than one year (48) (8) __________ ____________ 10,988 10,890 __________ ____________CAPITAL AND RESERVESCalled up share capital 1,827 1,277Share premium account 12,401 7,764Merger reserve 10,830 10,830Profit and loss account (14,070) (8,981) __________ ____________EQUITY SHAREHOLDERS' FUNDS 10,988 10,890 __________ ____________ These financial statements were approved by the Board on 25 October 2007. Group Cash Flow StatementYear ended 31 May 2007 2007 2006 Note £'000 £'000 NET CASH OUTFLOW FROM OPERATING ACTIVITIES 3 (4,386) (3,531) RETURNS ON INVESTMENTS AND SERVICING OF FINANCEInterest received 124 67Interest paid (5) (13) _________ ____________ 119 54CAPITAL EXPENDITURE AND FINANCIAL INVESTMENTProceeds from sale of tangible assets - 12Payments to acquire tangible assets (514) (415) _________ ____________ (514) (403) _________ ____________ACQUISITIONS AND DISPOSALSPayments to acquire investments (250) - _________ ____________NET CASH OUTFLOW BEFORE FINANCING (5,031) (3,880) FINANCINGIssue of shares net of costs 5,187 3,936Repayment of short term loans - (392)Repayment of finance lease and hire purchase contracts (10) (9) _________ ____________NET CASH INFLOW FROM FINANCING 5,177 3,535 _________ ____________INCREASE/(DECREASE) IN CASH 146 (345) 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 2007 has been extracted fromthe Group's financial statements to that date, which have received anunqualified auditors' report but have not yet been delivered to the Registrar ofCompanies. Note 2- Loss per Share The calculation of basic loss per share is based on a loss of £5,374,000 (2006 -£4,980,000) and on 182,055,486 (2006 - 121,245,378) ordinary shares, being theweighted 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 2007 2006 £'000 £'000 Operating loss (5,493) (5,034)Depreciation 89 32Loss on disposal 25 8Amortisation 1,296 1,296Share option cost 285 56Movement in stocks (587) 20Movement in debtors 270 (168)Movement in creditors (271) 259 _________ ____________Net cash outflow from operating activities (4,386) (3,531) _________ ____________ Note 4 - Reconciliation of Net Cash Flow to Movement in Net Funds/(Debt) 2007 2006 £'000 £'000 Change in net funds resulting from cash flows 146 (345)Cash outflow from decrease in debt and lease financing 10 401 _________ ____________Changes in net funds resulting from cash flows 156 56Hire purchase (48) -Net funds brought forward 514 458 _________ ____________Net funds carried forward 622 514 _________ ____________ Note 5 - Annual Report and Accounts 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 TreeHouse, Cherry Tree Lane, Rostherne, Cheshire, WA14 3RZ. The Annual Report andAccounts will also be published on the Company's website www.felixgroupplc.com For further information please contact: Felix Group plcLynda Sherratt, Company Secretary01565 831100 Landsbanki Securities (UK) LimitedNominated Adviser & BrokerMark Dickenson/Simon Brown020 7426 9000 This information is provided by RNS The company news service from the London Stock Exchange