Feedback Regulatory News (FDBK)

19 Dec 2006 14:36

Feedback PLC19 December 2006 Feedback plc Unaudited Interim Report 30 September 2006 CHAIRMAN'S STATEMENT During the first six months of the year Feedback plc and its subsidiarycompanies (the Group) produced an operating profit of £119,700 beforereorganisation costs of £153,000, resulting in an operating loss of £33,300.The restructuring of the Group continued during the period incurringreorganisation costs as noted above, and these, together with interest charges(mainly in connection with the preference share dividend) and finance costs ofthe closed pension scheme brought about a loss on ordinary activities beforetaxation of £265,700. Restructuring has progressed well and the Group's UK operations wereconsolidated onto one location by the end of September 2006. Vigorous effortswere made to find a satisfactory solution to the pension deficit problem, inconjunction with the Group's professional advisors, and this work is ongoing.The local Council rejected the application to develop the Park Road site, but anappeal is being considered. Feedback Instruments has continued to see the benefits of earlier restructuringand strengthening of the management team. There was a significant upturn in thevalue of orders received compared with the corresponding period of 2005, and theorder book at the end of the period was very pleasing. In addition, the levelof routine business and the distribution of third party equipment to the schoolsmarket have been encouraging. Feedback Data, together with its German subsidiary made a small profit in thefirst half of the year. There are indications that the new access controlproduct, Evolution, will be well received in the marketplace and work iscontinuing to build up the reseller base in Europe. Feedback Incorporated had a disappointing first half result but the order book,as in the case of Feedback Instruments, was much improved compared with that of2005. Dividends The company was unable to pay a dividend on its Cumulative ConvertibleRedeemable Preference Shares due to the continued lack of distributablereserves. However, unpaid preference dividends continue to be accrued. Going Concern The Group is currently paying contributions to the pension fund under anagreement with the Occupational Pensions Regulatory Authority (Opra, now thePensions Regulator) dated February 2005, although other provisions within thatagreement no longer apply. A provisional actuarial valuation of the fund wascarried out at 31 March 2006 which indicates a deficit of £17,100,000 on abuy-out basis. A full actuarial valuation is still being prepared by the SchemeActuary. The directors remain in regular contact with the pension fund trusteesand are continuing to take appropriate professional advice with a view toaddressing the pension scheme deficit. The process is not yet complete andtherefore the outcome remains uncertain. Nevertheless, the directors believethat a conclusion which is acceptable to all parties is achievable. Outlook Although the financial position of the Group is overshadowed by the deficit inthe closed pension scheme, the substantial order book at the end of Septemberindicates that at a trading level, the third quarter of the year should be inline with the Board's expectations. David Harding Chairman UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT 6 months to 6 months to Year to 30 Sept 2006 30 Sept 2005 31 March 2006 £'000s £'000s £'000s Unaudited Unaudited AuditedTurnover 4,177.9 4,090.8 7,638.6 Cost of sales (2,548.4) (2,140.8) (4,255.9) ----------------- ----------------- -----------------Gross profit 1,629.5 1,950.0 3,382.7 Other operating expenses (1,509.8) (1,763.9) (3,223.2) Operating profit before reorganisation costsand pension adjustments 119.7 186.1 159.5Reorganisation costs (153.0) - 0.0Pension adjustments - 0.6 - Operating (loss) / profit (33.3) 186.7 159.5Net interest payable (101.4) (80.3) (148.8)Other finance costs (131.0) (139.0) (306.0) ----------------- ----------------- -----------------Loss on ordinary activities before taxation (265.7) (32.6) (295.3)Tax on ordinary activities - - - ----------------- ----------------- -----------------Retained loss for the period (265.7) (32.6) (295.3) ========= ========= =========Basic and diluted loss per share (2.15)p (0.27)p (2.4)p ----------------- ----------------- ----------------- All activities are classed as continuing. UNAUDITED CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 6 months to 6 months to Year to 30 Sept 2006 30 Sept 2005 31 March 2006 £'000s £'000s £'000s Unaudited Unaudited AuditedLoss for the period (265.7) (32.6) (295.3)Unrealised surplus on revaluation of land andbuildings - - 223.2Currency translation differences on foreigncurrency net investments 38.4 32.1 86.5Actual return less expected return on pensionscheme assets (251.0) 827.0 1,315.0Experience gains and losses arising from schemeliabilities - - 596.0Changes in assumptions underlying the presentvalue of the scheme liabilities 149.0 (1,025.0) (2,068.0) ------------------ ------------------ ------------------Total losses relating to the period (329.3) (198.5) (142.6)Prior year adjustment 0.0 (7,156.0) (7,156.0) ------------------ ------------------ ------------------Total recognised losses since the last annualreport (329.3) (7,354.5) (7,298.6) ========== ========== ========== UNAUDITED CONSOLIDATED BALANCE SHEET 6 months to 6 months to Year to 30 Sept 2006 30 Sept 2005 31 March 2006 £'000s £'000s £'000s Unaudited Unaudited Audited Fixed Assets 697.9 516.9 714.9Current Assets Stock 885.9 1,218.3 1,000.3 Debtors 2,464.5 1,758.9 1,616.3 Cash at bank and in hand 96.2 682.5 805.7 3,446.6 3,659.7 3,422.3Creditors: amounts falling due within oneyear Borrowings (1,070.8) (15.0) (1,132.1) Other creditors (1,853.1) (1,624.9) (1,447.4) (2,923.9) (1,639.9) (2,579.5) -------------------- -------------------- --------------------Net current assets 522.7 2,019.8 842.8 -------------------- -------------------- --------------------Total assets less current liabilities 1,220.6 2,536.7 1,557.7 Creditors: amounts falling due after morethan one year Borrowings (535.3) (1,555.3) (579.0) Net assets excluding pension liability 685.3 981.4 978.7 Pension liability (8,257.0) (8,315.0) (8,233.0) -------------------- -------------------- --------------------Net liabilities including pension (7,571.7) (7,333.6) (7,254.3)liability =========== =========== ===========Ordinary share capital 1,234.5 1,234.1 1,234.5 Share premium account 409.8 410.2 409.9 Revaluation reserve 595.6 379.7 595.6 Capital reserve 299.9 299.9 299.9 Profit and loss account (10,111.5) (9,657.5) (9,794.2) Reserves (8,806.2) (8,567.7) (8,488.8) -------------------- -------------------- --------------------Shareholders' funds (7,571.7) (7,333.6) (7,254.3) =========== =========== =========== UNAUDITED CONSOLIDATED CASH FLOW STATEMENT 6 months to 6 months to Year to 30 Sept 2006 30 Sept 2005 31 March 2006 £'000s £'000s £'000s Unaudited Unaudited AuditedNet cash (outflow) / inflow from operatingactivities (556.3) 19.1 62.7 Returns on investments and servicing offinanceOther interest paid (17.4) (33.8) (47.8)Capital expenditure and financial investmentPurchase of tangible fixed assets - (13.8) (26.0)FinancingFinancing - repayments of bank and otherloans (15.0) (15.0) (30.0) -------------------- -------------------- --------------------Decrease in cash (588.7) (43.5) (41.1) =========== =========== =========== Reconciliation of operating (loss) / profit to net cash flow from operatingactivities Operating (loss) / profit (33.3) 186.7 159.5Depreciation of tangible fixed assets 17.0 23.2 60.9Decrease / (increase) in stock 114.4 (7.6) 210.4(Increase) / decrease in debtors (848.2) (5.3) 137.3Increase / (decrease) in creditors 402.8 31.1 (88.4)Pension contributions paid (209.0) (209.0) (417.0) -------------------- -------------------- --------------------Net cash (outflow) / inflow from operating (556.3) 19.1 62.7activities =========== =========== =========== Notes to the Unaudited Interim Report Basis of the Report This Interim Report was approved by the directors on 19 December 2006. The interim figures for the six months to 30 September 2006, which areunaudited, have been prepared on the basis of the accounting policies set out inthe Annual Report for the year ended 31 March 2006. The financial informationcontained in this Interim Report does not constitute statutory accounts withinthe meaning of Section 240 of the Companies Act 1985. The results for the yearended 31 March 2006 are based upon the published accounts for that period onwhich the auditors gave a report which did not contain statements under Sections237 (2) or (3) of the Companies Act 1985. The Auditors included an emphasis ofmatter paragraph in relation to going concern in their report but their opinionwas not qualified in this respect. The accounts for the year ended 31 March 2006 have been filed with the Registrarof Companies. Copies of the audited accounts for the year ended 31 March 2006and further copies of this Interim Report and the Interim Statement for the sixmonths ended 30 September 2005 are available upon request from the company'sregistered office at Park Road, Crowborough, East Sussex, TN6 2QR. Loss per share The loss per share for the six months ended 30 September 2006 is based on theGroup loss on ordinary activities after taxation of £265,700 (2005 - loss of£32,600) attributable to 12,344,896 (2005 - 12,294,532) ordinary shares, beingthe weighted average number of shares in issue. The diluted earnings per shareis calculated allowing for the full conversion of the Preference Shares.However, in accordance with Financial Reporting Standard 14, as theseconversions do not have a dilutive effect the loss per share remains unaltered. Going Concern The financial information for the period ended 30 September 2006 shows that,after including the pension scheme liability of £8,257,000 the Group has adeficiency of shareholders' funds of £7,571,700. The Interim Report has beenprepared on the going concern basis which assumes that the Group will be able tocontinue in operational existence for the foreseeable future, as a minimum for aperiod of one year from the date of approval of this Interim Report. Thevalidity of this assumption depends on the successful outcome of discussionswith the pension fund trustees. The Group is currently paying contributions to the pension fund under anagreement with the Occupational Pensions Regulatory Authority (Opra, now thePensions Regulator) dated February 2005, although other provisions within thatagreement no longer apply. A provisional actuarial valuation of the fund wascarried out at 31 March 2006 which indicates a deficit of £17,100,000 on abuy-out basis. A full actuarial valuation is still being prepared by the SchemeActuary. The directors remain in regular contact with the pension fund trusteesand are continuing to take appropriate professional advice with a view toaddressing the pension scheme deficit. The process is not yet complete andtherefore the outcome remains uncertain. Nevertheless, the directors believethat a conclusion which is acceptable to all parties is achievable. The Group is currently operating within its overdraft facilities which thedirectors have agreed with the Group's bankers to the normal renewal date of 31March 2007. The directors are of the view that there is no reason why theoverdraft facilities will not be renewed after that date. Whilst the directors are presently uncertain as to the outcome of the mattersreferred to above, they believe it is appropriate to continue to prepare theInterim Report on the going concern basis. INDEPENDENT REVIEW REPORT TO FEEDBACK PLC Introduction We have been instructed by the company to review the financial information whichcomprises the Consolidated Profit and Loss Account, the Consolidated Statementof Total Recognised Gains and Losses, the Consolidated Balance Sheet, theConsolidated Cash Flow Statement and the Notes to the Interim Report and we haveread the other information in the interim report and considered whether itcontains any apparent misstatements or material inconsistencies with thefinancial information. This report, including the conclusion, has been prepared for and only for thecompany for the purpose of their interim report and for no other purpose. We donot, therefore, in producing this report, accept or assume responsibility forany other purpose or to any other person to whom this report is shown or intowhose hands it may come save where expressly agreed by our prior consent inwriting. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The directors areresponsible for preparing the Interim Report in accordance with the AIM MarketRules which require that the accounting policies and presentation applied to theinterim figures must be consistent with those that will be adopted in thecompany's annual accounts. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom, as if thatBulletin applied. A review consists principally of making enquiries of groupmanagement and applying analytical procedures to the financial information andunderlying financial data and based thereon, assessing whether the disclosedaccounting policies have been consistently applied unless otherwise disclosed.A review excludes audit procedures such as tests of controls and verification ofassets, liabilities and transactions. It is substantially less in scope than anaudit and therefore provides a lower level of assurance. Accordingly, we do notexpress an audit opinion on the financial information Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 September 2006. Emphasis of matter - going concern In arriving at our review conclusion, we have considered the adequacy of thedisclosures made in the notes to the interim report under the heading 'Goingconcern' concerning the group's ability to continue as a going concern. Thegroup's liabilities (including the pension liability of £8,257,000) exceeded itsassets at 30 September 2006 by £7,571,700, and the continuation of groupoverdraft facilities past the next renewal date of 31 March 2007 has not yetbeen agreed with the company's bankers. This situation, as further explained inthe note referred to above, indicates the existence of a material uncertaintywhich may cast significant doubt about the group's ability to continue as agoing concern. The interim financial information does not include theadjustments that would result if the group was unable to continue as a goingconcern. BAKER TILLY Chartered AccountantsHanover House18 Mount Ephraim RoadTunbridge WellsKentTN1 1ED 19 December 2006 This information is provided by RNS The company news service from the London Stock Exchange