Crawshaw Group Regulatory News (CRAW)

10 Dec 2007 17:00

Felix Group PLC10 December 2007 Felix Group plc ("Felix" or the "Group") Results of business review On November 30th 2007 Felix announced that Richard Rose, Chairman, had begun adetailed review of the viability of the Group's business model. On December 3rd2007 the Group announced that Andrew Egan (former Chief Executive) was no longera Director and that independent consultants had been appointed to assess theoperational and business prospects of the Group. The Group Board met, together with its legal advisors LG and independentconsultants KPMG on Monday 10th December 2007 to consider the review referred toabove, and decided after careful consideration to cease providing funding to itstrading subsidiary Felix Corporation Ltd. The Directors of Felix CorporationLtd have since met and decided to put Felix Corporation Ltd into administration. In conjunction with KPMG, revised, sensitised financial forecasts were preparedfor the Group taking into account, inter alia, the factors detailed below. Underthe scenarios modelled it became apparent that the business would not generateprofit or positive cash flow for the foreseeable future, and not withoutconsiderable additional funding, which may not be forthcoming from existingshareholders. It was therefore concluded that the business model in its currentform is not viable. In making its decision the board took into account, inter alia, the followingfactors:- 1. The Group Board had been in discussions regarding a potential merger with a company operating in the same market sector and with a manufacturing capability. There was much synergy between the two companies and the Board believed a merger would have provided many opportunities for cost savings and growth. Following Felix's due diligence on the company in the question the prospective merger talks have been terminated. 2. On 26th October 2007 Felix Group PLC announced it had signed a licensing agreement with Kiosk Information Systems Inc (KIS) granting them the right to install Felix software onto their new and existing kiosks in North America and worldwide. Towards the end of November 2007 the Board was advised by KIS that they no longer wished to pursue the licence opportunity. 3. Kiosk units had been placed recently for evaluation with two major high street multiples. Although the multiples were happy with the customer reaction and operational performance, a detailed review of the financial performance indicated that the machine contribution is very poor due to the customers selecting mainly very low margin applications such as mobile phone top up. Although one of the multiples now wishes to order more units it is not viable for Felix to provide them on the current terms. In addition, the High Street trial indicated that retailers were not prepared to run 3rd party advertising thereby removing an important source of revenue. 4. The independent consultant's review confirmed the Board's assessment of the existing estate of 118 units, that the proposition is appealing and that progress is being made towards breakeven at machine contribution level. However, the report concludes that, in the light of the issues identified above, insufficient scale in terms of roll out could be achieved in the timeframe necessary to justify the level of support overhead required. The consultants add that whilst it is reasonable to assume that revenues will continue to rise as new applications are added there is considerable risk that it may not lead to the scale of increase needed to produce the level of returns required. Felix Group PLC will retain its AIM listing and as at today's date has cash inexcess of £2m. It is the intention of the Board to seek suitable alternativeopportunities for the Group going forward and the Board is committed torestoring shareholder value. Trading in the Group's Ordinary Shares on the AIM market of the London StockExchange is expected to resume on 11th December 2007 at 7am. Due to thedivestment of Felix's trading business, the Group will now be treated as aninvesting company for the purposes of the AIM Rules. The Board will in duecourse be sending a circular to shareholders in order to outline the Group'sinvesting strategy and convene an EGM to seek shareholder approval of thestrategy. Media Enquiries: Susanna VoyleCelia Gordon ShuteTulchan Communications +44 (0) 20 7353 4200 Other Enquiries: Mark DickensonSimon BrownLandsbanki Securities (UK) Limited, Nomad and Broker to Felix Group +44 (0)20 7426 9000 This information is provided by RNS The company news service from the London Stock Exchange