RNS Number:4960E
Fonebak plc
26 September 2007
For Immediate Release: 07:00hrs, Wednesday 26 September 2007
FONEBAK PLC
Preliminary Announcement
Year ended 30th June 2007
Fonebak plc, a leading provider of outsourcing services including the repair,
remarketing and recycling of consumer based technology products, is pleased to
announce its Preliminary Results for the twelve months to 30 June 2007.
Highlights:
* Recovery plan for Fonebak is progressing well establishing the foundations
from which the enlarged group can trade profitably in all of its key markets
* CRC acquisition is performing ahead of management expectations and is
reporting an underlying operating profit (before amortisation, exceptional
items and FRS20 adjustments) of #1.9m for the five months post acquisition
* Jeff Hewitt is confirmed as new Non-Executive Chairman
* Banking facilities are in place to support recovery programme
* New contract wins in 2007 will add #10m to revenues on an annualised basis
* Group revenues increased by 59% to #96.1m, an underlying increase of 9.4%
* Underlying operating losses of #0.3m (2006; profit #3.7m) before impairment
and restructuring costs totalling #8.6m
* Net cash inflow of #8.3m generated from operating activities
* Total net borrowings reduced to #10.9m
* Current year has started well and the benefits of restructuring are starting
to come through
Commenting Gary Stokes, Chief Executive of Fonebak, said:
"The Group is now in much better shape. The recovery plan for Fonebak is
progressing well and trading at CRC is ahead of our expectations. We now have a
platform from which we can start to realise the full benefits of the CRC
acquisition and move the combined business forward"
"I would also like to welcome Jeff Hewitt to the Board. He has considerable
relevant public company experience, which will prove invaluable to the future
development of the Group".
Contacts
Fonebak
Gary Stokes Chief Executive 01865 487235
David Kelham Chief Financial Officer 01865 487235
KBC Peel Hunt Ltd (Nominated Adviser and Broker)
Jonathan Marren 020 7418 8900
Gordon Suggett 020 7418 8900
Pelham (Financial PR)
Philip Dennis 020 7743 6363
Financial Results
I am pleased to be reporting the first set of full year results since the
appointment of the new executive team. Along with David Kelham, Chief Financial
Officer, I joined the Group earlier this year from CRC where I was Chief
Executive from 2006, together putting in place that company's successful
recovery plan.
Overall the performance of the Group in the second half of the year has been
mixed. As previously announced Fonebak endured a difficult start to 2007,
however I can report that the recovery plan outlined in the latest trading
statement in June is progressing well. In addition, the CRC business continues
to make solid progress with trading to 30th June 2007 ahead of expectations.
For the twelve months ended 30th June 2007 the Group achieved sales of #96.1m
against #60.4m in the previous year. This increase in revenues includes #26.1m
as a result of the acquisition, completed in January 2007, of CRC Group PLC. A
further #4.0m arises from the Stoke based mobile phone repair operation,
acquired from DSGi in September 2006. On a like-for-like basis overall sales
grew by 9.4% excluding these acquisitions.
Over the year the volume of phones processed by Fonebak increased by 18.8% to
over 3.6m handsets. As previously reported the fall in the average price
realised per handset has contributed to a marked decline in the margins achieved
within the Fonebak operations.
In aggregate the Group achieved a gross profit #0.7m below 2006 at #6.3m.
Included in gross profit is a #4.7m contribution from businesses acquired during
the year, of which CRC accounts for #4.5m. Therefore, in real terms, the
decrease in margin resulted in a fall in gross profit from the Fonebak business
of #5.4m year-on-year.
This decline is partially explained by additional provisions taken against the
carrying value of inventories, which totalled #2.3m for the year. In March this
year Fonebak also advised of the loss of a significant contract, the full year
profits have been adversely impacted by a further #2.1m.
Given these issues the Group as a whole is reporting an underlying operating
loss (before amortisation, exceptional items and share based payments) of #0.3m
for the year (2006: underlying operating profit #3.7m). The reported loss
includes a contribution from CRC of #1.9m for the five months post acquisition.
For the twelve months ended 31st December 2006 the continuing CRC operations
acquired by the Group reported an equivalent operating profit of #2.6m.
In addition exceptional charges totalling #3.1m have been incurred in relation
to the implementation costs of the recovery plan. A further #5.5m charge has
been made to reflect the impairment of the carrying value of goodwill arising
from the losses and restructuring in the Fonebak businesses. Taken together
these additional charges increase the loss before tax to #11.0m (2006: profit
before tax #1.6m).
Basic losses per share for the year were 47.32p per share compared to a profit
of 3.31p per share in 2006. On an adjusted basis the basic loss was 5.90p per
share (2006: profit 11.10p per share).
Given the extent of the losses the Board will not be recommending the payment of
a dividend.
Recovery plan progress
Following the introduction of the new executive team in early 2007 a full
operational review was instigated. The outcome of this review was announced on
6th June 2007. Of necessity much of the recovery plan has been focused on
short-term actions and the elimination of loss making activities. Progress is
significant and in line with our expectations.
Closure of the Stoke site is due to complete by end September 2007 and the
operations at Barnet have already ceased. The exceptional closure provisions
totalled #1.9m, of which the future cash cost will be #0.4m. The underlying
operating losses incurred by both sites in 2007 totalled #1.5m. The DSGi call
centre services managed in Stoke are being transferred to Huntingdon and mobile
repair activities from both Stoke and Barnet are being supported through our
Nottingham facility.
The activities in Romania have been scaled back whilst discussions continue with
a number of OEM's to secure accreditation for warranty repair. Whilst costs have
been reduced, the Romanian facility is dependent on Group support until more
sustainable business is secured. These costs, previously running at #2m per
annum, have been more than halved at the current run rate.
Fonebak offices in Italy, Portugal and Turkey have now been closed. Work is
currently underway to explore more profitable options to develop the Continental
markets including partnerships other than through direct ownership.
The Fonebak business is today a much smaller but better focused operation. The
business primarily services the mobile networks and will, through the
development of its core environmental credentials, be increasingly focusing on
developing new and value-adding service offerings for its clients. Whilst there
is still much to be done, without the burdens of managing multiple sites and
diverse operations, Fonebak's management will be able to concentrate exclusively
on profitable activities within its target market.
Financing
On 14th December 2006 Fonebak entered into a new loan facility with KBC Bank NV
totalling #25m and in January 2007 the Group also raised #10m of new equity.
Taken together these two amounts were used to finance the acquisition of CRC and
replace existing Fonebak bank facilities.
The bank has been supportive of the new management team in its efforts to
address the performance issues within the business. On 18th September 2007
negotiations were completed with the Bank, which will result in a more flexible
lending structure whilst retaining the benefits of an interest rate fix for the
majority of the borrowings. Total facilities available to the Group remain at
#25m; as at 30th June 2007 net borrowings were #10.9m.
CRC
Whilst management's focus has been directed to addressing the performance issues
in Fonebak, the CRC businesses acquired earlier in the year have been trading
ahead of plan. CRC itself has been completing its own recovery programme
following a difficult period through 2005 and early 2006. The benefits of the
actions taken are now evident in the trading performance of the continuing
business.
Germany
As at 30th June the satellite repair centre in Berlin was closed, costs were in
line with expectations having been fully provided for pre-acquisition. Customer
contracts have been successfully transferred to the main German site at
Paderborn.
Negotiations are progressing with the Paderborn unions on the restructuring of
the employment conditions of the workforce. There is recognition that labour
rates contracted before CRC acquired the business from Siemens in 2003 are high
relative to the market and as such directly impact the competitiveness and
viability of the plant. The agreed objective is to complete the negotiations
before the end of the current calendar year.
In July this year a new repair centre was opened in Sommerda, former East
Germany. This project has been in negotiation for some time and is a co-location
with one of our major clients in Germany, Fujitsu Siemens. The investment is
supported with the commitment of a new four-year contract and the start up is
progressing well. The new repair centre gives us access to a lower cost facility
with which to service the 'in country' market for Germany and additional
business has already been won as a result.
Poland
The facility in Warsaw has recently been restructured to improve the short-term
capacity of the site. Volumes of mobile phones have been steadily increasing
throughout the year; current through put is significantly ahead of a year ago.
Strong consumer demand, growing market share of our clients within Poland and
increased demand from Western Europe are all contributing to our growth.
In addition, IT volumes have also been increasing, which is particularly
pleasing as we only entered this market within the last year. Given the combined
demand for phone and IT repair capacity, negotiations are also in progress to
open a second site. This additional site will offer increased capacity as well
as affording greater operational focus on the respective technologies. We are
hoping to have the new site operational by early 2008.
UK
The consolidation of the UK operations was largely completed with the disposal
of the Thame site earlier in the year. The three remaining service centres in
Glenrothes, Nottingham and Huntingdon have all been trading profitably, albeit
the Nottingham site is processing less volume as Vodafone business progressively
transfers to Unipart. This programme was announced as far back as 2005 and the
lost business will be partly offset by a realignment of repair volumes from
Stoke, Barnet and Huntingdon. Once volumes have settled down the future scope
and scale of activity for Nottingham will be clearer.
The main UK hub in Glenrothes is being expanded with the addition of another
8,000m2 of space currently coming on stream. This will facilitate the
consolidation onto one site of operations at present carried out by two
satellite facilities. The expansion is being supported with funding from the
Scottish Executive.
At Huntingdon greater emphasis is being placed on the development of client
support facilities including the expansion of the call centre capability. The
transfer from Stoke of the DSGi support programme is a positive step in this
direction.
The Future
The Group provides a wide range of after sales support services to an impressive
client list that includes many of the worlds pre-eminent consumer brands. The
technologies we work with are fast evolving and our role is to enhance our
clients' brand and reputation through the excellence of our service. The scope
of the services we currently offer are primarily based around product support
either through the initial warranty period, or through subsequent
out-of-warranty services including remarketing, recycling and environmental
compliance.
Recognising the strength of our client list and the scope of our service
capability it is clear that we now have to make a more concerted effort to
integrate our businesses and present a more cohesive and value-adding front to
these clients.
As part of this process the commercial activities of the Group are being pulled
together under one management team. This will enable us to invest in our key
account management and to develop sales expertise in each of our core
technologies.
In a more public statement of our commitment to 'one business' the Group will be
re-branded including the phasing out of the Fonebak, CRC and Intec names. The
Group will therefore trade and market itself as one integrated, full-service
provider. The timescale for the re-launch is targeted towards the end of 2007
and work is already well progressed.
Despite the considerable demands that the restructuring plan has placed on the
Group and its people, there are many positive developments to report. Fonebak,
for example, is working hard to take a more direct role in the remarketing of
returned mobiles, including within the emerging economies. Fonebak already has
strong connections with Africa and is currently establishing a sales office in
Hong Kong to service markets in the Far East.
With so much attention focused on the environment the Fonebak business model
will continue to promote its ethical and environmental policies. We see
sustainability as the key issue and will promote new and differentiated services
to our clients; protecting their brand and driving added value for both of us.
As part of this programme Fonebak continues to support the efforts of leading
charities. The highest profile of these is Children in Need; in 2006 Fonebak
raised #0.3m for the charity and a new contract has recently been signed in
support of the 2007 campaign.
Intec Distribution has traded well throughout the year and has also been
successfully developing the insurance fulfilment market. We are in the process
of finalising a three-year contract with the market leader, Homecare, which
should be the springboard for further growth.
In addition the warranty repair businesses under CRC have recently added Navman,
Thales, Daimler, Hitachi, Tyco and Pure Digital to the Group's client list.
Including new contracts previously reported in 2007 such as Tom Tom, Epson and T
Com, business wins are expected to exceed #10m on a full-year basis.
From the work done already it is clear that there is an opportunity to expand
the Group in a number of directions. For now though our priority is to
consolidate our position with existing clients and drive more business by
cross-selling our full service capability and geographical reach. As we do this
there will also be opportunities to follow our clients and support them in new
markets.
Board
In the trading update communicated earlier in June it was stated that the Board
was planning for the succession of Gordon Shields, the original Founder of
Fonebak and current Chairman. Since that time a nominations committee has been
appointed to identify and recommend a candidate of appropriate standing.
This process has recently completed, with the aid of an external agency. It has
been reassuring to see that the Group, despite the short-term challenges the
business has been facing, has been able to attract interest of a very high
calibre.
I am pleased therefore to confirm that Jeff Hewitt will be joining the Group as
Non-Executive Chairman, the appointment to become effective from 1st November
2007. Jeff has considerable experience and enjoyed a very successful career
including latterly positions of Deputy Chairman and Finance Director at
Electrocomponents plc until his retirement from his executive career in 2005.
Previously Jeff had been Finance Director at Unitech plc and Strategy Director
at Coats Viyella plc.
Currently Jeff is a Non-Executive Director at Cookson plc and External Chairman
of the audit committee of John Lewis Partnership. In addition Jeff has
Non-Executive roles at Whatman plc, Plasmon plc and TDG plc. Jeff's experience
within the public company sector is considerable and includes recovery
situations as well as exposure to the technologies and services managed by the
Fonebak Group.
As originally stated Gordon will continue to work with the Group as a
Non-Executive Director and will assist the executive team with the recovery and
subsequent development plans for the Fonebak business.
Incentives
In recognition of the challenges presented by the recovery programme the Board
has agreed, in consultation with our major institutional shareholders, to bring
into effect a new share incentive scheme.
A total of 2.15m shares were issued on 26th June 2007 at the mid-market price on
the day of 55.5p. These shares are held in trust, for the benefit of designated
employees and will vest from 1st July 2010 subject to the achievement of
specific targets. These conditions include that the compound growth in earnings
per share over the three years ended 30th June 2010 must exceed 5% per annum and
that the mid-market value of the shares at that time are at least double the
issue price.
The current share option scheme has been progressively wound down as the
previous management team have left the business. There are minimal options still
in issue today. As such the number of outstanding options taken together with
the total number of shares held under trust are within the 10% limit authorised
by shareholders.
People
During 2007 the business has seen considerable disruption and change. The Group
has had to absorb both the acquisition of the larger, in headcount terms, CRC
business and support the recovery programme within the original Fonebak
business.
Since Fonebak and CRC came together at the end of January three sites have been
closed and another considerably reduced in scale with the loss of nearly 300
jobs to date. In total the Group currently has 1,900 employees representing a
reduction in total headcount of approximately 15%.
Such circumstances, married to an aggressive change programme inevitably causes
uncertainty, which in itself has a further cost to the business. It is to the
great credit then of the current management and the workforce as a whole that
the Group has been able to make such rapid progress. It is appropriate to
acknowledge the significant contribution made by our employees in the last year
and we look forward to a more stable and rewarding future.
Outlook
In the two months completed following the year-end the Group has shown good
progress against the objectives set. The continuing activities are, so far,
ahead of management's expectation and the Group is trading profitably in all of
its key markets.
Our strong client list inevitably presents some challenges as competitive
pressures within their own markets forces downward pressure on suppliers. We see
some challenges in the UK and German markets and we have to recognise this as we
seek to ensure we have an efficient and competitive cost base. To reduce the
risk of our services becoming commoditised we also have to accelerate our
commitment to developing innovative and value-adding services that leverage our
broader capabilities.
To this end our new Sales Director, Martin Gossling commenced work with us in
August and is in the process of integrating our sales teams. We recognise the
need to strengthen our organisation and have set aside a proportion of the
savings realised in reducing costs elsewhere to fund investment in our sales and
marketing capabilities. We expect that a greater number of better-focused sales
specialists will benefit our sales push as we look to the future.
With our plans to integrate the Groups business activities more effectively and
progress being made towards a common brand; the marketing of the combined
business is entering a phase where the emphasis must shift to a more coordinated
growth focus. Whilst it is too early to pronounce the turnaround complete,
progress over recent months has been good and the foundations are being
established from which the Group can move profitably forward.
Consolidated profit and loss account
for the year ended 30 June 2007
2007 2006
Note Acquisitions Ongoing Total Total
activities (as restated)
#000 #000 #000 #000
Turnover 1 30,081 66,049 96,130 60,361
Cost of sales (25,342) (64,517) (89,859) (53,389)
Gross profit 4,739 1,532 6,271 6,972
Administrative expenses (3,640) (13,014) (16,654) (4,753)
Operating profit/(loss) before goodwill,
amortisation, exceptional items and
share based payments 1 1,786 (2,110) (324) 3,747
Amortisation of goodwill 3 (304) (1,277) (1,581) (1,274)
Exceptional goodwill impairment 3 - (5,469) (5,469) -
Exceptional costs 3 (383) (2,750) (3,133) (130)
Share based payments 3 - 124 124 (124)
Operating profit/(loss) 1 1,099 (11,482) (10,383) 2,219
Net interest payable (646) (600)
(Loss)/profit on ordinary activities
before taxation (11,029) 1,619
Tax on (loss)/profit on ordinary 611 (984)
activities
(Loss)/profit on ordinary activities
after taxation and for the financial year (10,418) 635
(Loss)/earnings per ordinary share
Basic 4 (47.32) 3.31p
Diluted 4 (46.86) 3.24p
Underlying (loss)/earnings per ordinary
share
Basic 4 (5.84p) 11.10
Diluted 4 (5.86p) 10.87
All activities relate to continuing operations.
Details of exceptional items and acquisitions are set out in notes 3 and 2
respectively.
Consolidated balance sheet
at 30 June 2007
Note 2007 2006
#000 #000 #000 #000
Fixed assets
Intangible assets 25,350 19,120
Tangible assets 2,667 728
28,017 19,848
Current assets
Stock 6,079 7,879
Debtors 5 18,938 6,570
Cash at bank and in hand 9 9,072 1,137
34,089 15,586
Creditors: Amounts falling due within one 6 (33,574) (15,631)
year
Net current assets/(liabilities) 515 (45)
Total assets less current liabilities 28,532 19,803
Creditors: Amounts falling due after more 9
than one year (14,000) (3,754)
Net assets 14,532 16,049
Capital and reserves
Called up share capital 12 566 384
Share premium account 12 25,304 15,076
Profit and loss account (11,338) 589
Equity shareholders' funds 14,532 16,049
Consolidated cash flow statement
for the year ended 30 June 2007
Note 2007 2006
#000 #000
Net cash inflow from operating activities 7 8,296 2,900
Returns on investment and servicing of finance
Interest received 175 18
Interest paid (785) (486)
(610) (468)
Taxation (600) (888)
Capital expenditure and financial investment
Purchase of intangible fixed assets - (5)
Purchase of tangible fixed assets (654) (172)
Sale of tangible fixed assets 7 72
(647) (105)
Acquisitions
Purchase of interest in subsidiary undertaking 2 (14,044) (1,789)
Cash acquired with subsidiary undertakings (net of (1,302) (669)
overdrafts)
Deferred consideration in respect of previous (2,682) -
acquisitions
(18,028) (2,458)
Equity dividends paid (192) -
Net cash (outflow) before financing (11,781) (1,019)
Financing
Increase in share capital 10,004 -
Costs associated with issue of shares (787) -
New borrowings 19,500 2,000
Repayment of borrowings (9,365) (900)
Repayment of finance lease (capital element) (70) (98)
19,282 1,002
Increase/(decrease) in cash in the year 7,501 (17)
Consolidated statement of total recognised gains and losses
for the year ended 30 June 2007
2007 2006
(as restated)
#000 #000
(Loss)/profit for the financial year (10,418) 635
Foreign currency translation differences - 2
Total recognised gains and losses relating to the year (10,418) 637
Reconciliation of movement in consolidated shareholders' funds
for the year ended 30 June 2007
2007 2006
(as restated)
#000 #000
(Loss)/profit for the financial year (10,418) 635
Foreign currency translation differences - 2
Dividend paid (192) -
FRS 20 share option (debit)/credit (124) 124
Issue of share capital 9,217 -
Net (decrease) / increase in equity shareholders' funds (1,517) 761
Opening equity shareholders' funds 16,049 15,288
Closing equity shareholders' funds 14,532 16,049
There is no impact on equity shareholders' funds from the adoption of FRS 20.
FONEBAK PLC - NOTES TO THE FINANCIAL STATEMENTS
1 - Segmental Reporting
The Fonebak group has two classes of business; (1) the repair, remarketing and
re-cycling of mobile phones, accessories and related products and related
services ("Environmental Resale") and (2) the provision of repair and logistics
of technology products including mobile communications equipment, computer
components and other electronic equipment and peripherals.
Turnover by geographical destination
Year ended 30th June 2007 Year ended 30th
June 2006
Ongoing Acquisitions Total Total
Actvities
#'000's #'000's #'000's #'000's
United Kingdom 13,238 19,975 33,213 17,056
Continental Europe 1,966 10,106 12,072 2,146
Africa 5,376 0 5,376 6,266
Asia Pacific 45,469 0 45,469 34,893
------ ------ ------ ------
Total 66,049 30,081 96,130 60,361
====== ====== ====== ======
Turnover by class of business
Year ended 30th June 2007 Year ended 30th
June 2006
Ongoing Acquisitions Total Total
Activities
#'000's #'000's #'000's #'000's
Environmental Resale 61,193 0 61,193 55,393
Repair 4,856 30,081 34,937 4,968
------ ------ ------ ------
Total 66,049 30,081 96,130 60,361
====== ====== ====== ======
All intra segment revenue has been consolidated out.
Operating (loss)/ profit by geographic origin
Year ended 30th June 2007 Year ended 30th June 2006
Operating Operating (loss) Operating Operating
(loss) before after goodwill (loss) before (loss) after
goodwill amortisation, goodwill goodwill
amortisation, exceptional amortisation, amortisation,
exceptional items and share exceptional exceptional
items and share based items and items and share
based payments payments share based based payments
payments
#'000's #'000's #'000's #'000's
United Kingdom 1,227 (8,730) 4,401 2,873
Continental Europe (1,551) (1,653) (654) (654)
------- ------- ------- -------
Total operating profit (324) (10,383) 3,747 2,219
======= ======= ======= =======
The figures included in the 2006 accounts for Profit by geographic location were
previously reported as the profit of the overseas subsidiaries rather than true
business generated from the continent. The totals of all origins were correct. A
re-statement of the comparatives has also been necessary in accordance with FRS
20.
Operating (loss)/ profit by class of business
Year ended 30th June 2007 Year ended 30th June 2006
Operating Operating Operating (loss) Operating (loss)
(loss) before (loss) after before goodwill after goodwill
goodwill goodwill amortisation, amortisation,
amortisation, amortisation, exceptional exceptional
exceptional exceptional items and share items and share
items and items and based payments based payments
share based share based
payments payments
#'000's #'000's #'000's #'000's
Environmental Resale (786) (8,684) 4,216 2,688
Repair 462 (1,699) (469) (469)
------ ------ ------ ------
Total operating (loss)/ (324) (10,383) 3,747 2,219
profit
====== ====== ====== ======
Net assets by geographic origin
As at 30th June 2007 As at 30th June 2006
#'000 #'000
United Kingdom 10,080 15,774
Continental Europe 4,452 275
14,532 16,049
====== ======
Net assets by class of business
As at 30th June 2007 As at 30th June 2006
#'000 #'000
Environmental Resale 4,118 15,972
Repair 10,414 77
------ ------
14,532 16,049
====== ======
2 - Impact of acquisitions
On 15 September 2006 Fonebak was awarded a rolling annual contract by DSG Retail
("DSG") for the provision of mobile phone repair and administration services.
At the same time, Fonebak acquired the Stoke based mobile phone repair and
administration business of DSG. The total consideration, including costs was
#0.4m. This business is being closed in September 2007.
In the year Fonebak also paid #2.4m in respect of deferred consideration for the
acquisition of Intec Group Limited - comprising the Intec Distribution business
and the Intec Cellular business at Barnet. The Barnet business was closed in
September 2007. #58,000 of the deferred consideration remained outstanding at
30th June 2007 and was paid at the beginning of September 2007.
On 14th December 2006 the Board announced it had made an agreed bid for CRC
Group Plc ("CRC") at 50p per share for its then 24.6million shares. On 24th
January the offer was declared unconditional having been accepted by over 90% of
CRC shareholders. The remaining shares were then acquired over the next 6 weeks.
The total consideration including fees for the CRC acquisition was #13.6m.
The net assets of CRC at the time of the acquisition comprised Tangible assets
of #2.5m, Intangible assets of #7.0m, Current assets of #16.8m, Current
liabilities of #13.3m and Bank Loans and overdrafts of #5.6m.
3 - Goodwill amortisation, impairment and exceptional items
The goodwill amortisation charge rose from #1.3m in 2006 to #1.6m in 2007 as a
result of the acquisitions of CRC and Stoke.
The significant downturn in the profitability of the Fonebak business has forced
the new Board to carry out an impairment review of all investments and carrying
values. This review has been based on the groups 3-year plan, which has been
prepared following the trading statement made in March. The discounted
cash-flows of the various business streams has been calculated using a discount
rate of 20%. This rate reflects, in the board's opinion, a fair rate to evaluate
the business carrying value and risk profile. An impairment in the original
Fonebak business of #3.4m, from the carrying value prior to the impairment of
#14.5m, has been charged. The carrying value of Goodwill for Stoke (#0.1m),
Barnet (#1.1m) and Romania (#0.9m) have been totally written off following the
announcements to close Stoke and Barnet and reduce the capacity in Romania.
One off Exceptional Items totalling #2.1m have been charged reflecting closure
and restructuring provisions for Barnet, Stoke and Romania , the major element
of this reflects asset write downs and losses to closure. The post year- end
cash costs to be incurred are approximately #0.4m.
Costs associated with the refinancing and turnaround plan of #0.8m and the
exceptional write off of previously capitalised IT and building costs of #0.2m
have also been charged.
Finally a credit of #0.1m has been processed reflecting the reversal of prior
year charges for share-based payments.
4 - Earnings/(loss) per share
The calculation of the basic earnings/(loss) per share is based on the earnings/
(loss) attributable to ordinary shareholders divided by the weighted average
number of shares in issue during the year.
The calculation of diluted earnings/(loss) per share is based on the basic
earnings/(loss) per share, adjusted to allow for the issue of shares on the
assumed conversion of all dilutive options.
Reconciliations of the earnings/(loss) and weighted number of shares used in the
calculations are set out below:
2007 2006 (as restated)
Earnings Weighted Earnings Earnings Weighted Earnings
average per share average no. per share
no. of of shares
shares
#000 Number Pence #000 Number Pence
Basic (Loss)/earnings per (10,418) 22,015,310 (47.32)p 635 19,199,995 3.31p
share
Effect of dilutive options - 231,990 0.50p - 404,006 (0.07p)
Diluted (Loss)/earnings per (10,418) 22,247,300 (46.82)p 635 19,604,001 3.24p
share
An adjusted earnings per share has also been presented, which the directors
consider gives a useful additional indication of the group's performance. It is
based on adjustments to profit after taxation for the year in respect of
exceptional items (net of tax), the amortisation of goodwill and share based
payment charges. The effects of the adjustments are as follows:
2007 2006 (as restated)
Earnings Weighted Earnings Earnings Weighted Earnings
average per share average no. per share
no.of of shares
shares
#000 Number Pence #000 Number Pence
Basic (Loss)/earnings per (10,418) 22,015,310 (47.32)p 635 19,199,995 3.31p
share
Post tax effect of excluding
amortisation of goodwill and
exceptional items 9,119 - 41.42p 1,497 - 7.79p
Adjusted basic earnings per (1,299) 22,015,310 (5.90)p 2,132 19,199,995 11.10p
share
Diluted earnings/(loss) per (10,418) 22,247,300 (46.82)p 635 19,604,001 3.24p
share
Post tax effect of excluding
amortisation of goodwill and
exceptional items 9,119 - 40.96p 1,497 - 7.63p
Adjusted diluted earnings per
Share (1,299) 22,247,300 (5.86)p 2,132 19,604,001 10.87p
5 - Debtors
Amounts falling due within one year
30th June 2007 30th June 2006
Trade Debtors 13,869 5,221
Deferred tax asset 1,240 42
Corporation Tax asset 1,287 0
Other debtors 343 305
Prepayments and accrued income 2,199 1,002
--------- ---------
18,938 6,570
--------- ---------
6 - Creditors - amounts falling due within one year
30th June 2007 30th June 2006
Bank Loans and other borrowings 5,934 1,400
Trade Creditors 5,272 2,795
Finance Leases 8 24
Corporation Tax 0 527
Other taxes and social security 856 205
Other creditors 3,012 73
Deferred consideration 153 2,463
Accruals and deferred income 18,339 8,144
--------- ---------
33,574 15,631
--------- ---------
7 - Reconciliation of operating (loss)/ profit to net cash inflow from operating
activities
2007 2006
(as restated)
#000 #000
Operating (loss)/profit (10,383) 2,219
Depreciation charge 1,282 391
Amortisation of goodwill 7,050 1,274
Share option scheme (124) 124
Decrease / (increase) in stock 4,759 (2,514)
Decrease / (increase) in debtors 2,249 (1,109)
Increase in creditors 3,463 2,515
Net cash inflow from operating activities 8,296 2,900
8 - Reconciliation of net cash flow to movement in net debt
2007 2006
#000 #000
Increase/(decrease) in net cash 7,501 (17)
Cash inflow from increase in debt and lease financing (10,065) (337)
Change in net debt resulting from cash flows (2,564) (354)
Loans and finance leases acquired with subsidiaries (4,265) (841)
Movement in net debt in the year (6,829) (1,195)
Net debt at the start of the year (4,041) (2,846)
Net debt at end of year (10,870) (4,041)
9-Analysis of changes in net debt
Cash in Overdrafts Total net Debt due Debt due Total Net
hand and cash within after debt debt
at bank one one
year year
#000 #000 #000 #000 #000 #000 #000
At beginning of year 1,137 - 1,137 (1,424) (3,754) (5,178) (4,041)
Cash flow 7,935 (434) 7,501 181 (10,246) (10,065) (2,564)
Acquisition (excluding cash and - - - (4,265) - (4,265) (4,265)
overdrafts)
At end of year 9,072 (434) 8,638 (5,508) (14,000) (19,508) (10,870)
10 - New bank facilities and equity
On 14th December 2006 Fonebak entered into a new loan facility with KBC Bank NV
totaling #25m. This comprises two tranches as follows:
a) #17.5m sterling term loan, drawn in February 2007, repayable over 5
years on a straight-line basis commencing at the end of September 2007.
This term loan was supported by an interest rate swap arrangement to
effectively fix the interest rate.
b) A multicurrency revolving credit facility (RCF) of #7.5m. In February 2007
#2m of the RCF was drawn in cash, #5m was set aside as security for
Letters of Credit in favour of the groups clearing banks and #0.5m
remained un-drawn.
In January 2007 the group also raised #10m of new equity by the issuing, at
#1.48 per share, of 6,756,757 new shares.
The combination of the cash drawings on this bank debt of #19.5m and the new
equity of #10m financed the acquisition of CRC for #13.6m, including fees, and
the repayment of the existing CRC and Fonebak bank loans of #9.4m.
Following the trading statement issued in March the Group has been in
discussions with KBC Bank NV. On 18th September 2007 the Group concluded a
re-shaping of the overall facility. The Group has not drawn, and does not need
to draw, any further funds. It will be making all repayments as originally
scheduled - the first #1.75m being on 28th September 2007. The Group has also
agreed a more flexible structure, which will allow it to effectively offset the
positive cash balances it holds with its clearers.
The Group's new facility of #25m is now fully structured on an RCF basis, giving
the Group the ability to retain all or part of the existing interest rate swap
arrangements. Repayment terms remain as set out above. The facility is secured
on all of the Group's assets.
11 - Employee Benefit Trust
On 21st June 2007 the Company set up an Employee Benefit Trust("EBT")and formed
a subsidiary company,Fonebak Trustees Limited,to administer the EBT
("the Trustee")The Company agreed to make a loan of #1,193,250 to the Trustee to
enable the Trustee to subscribe for 2,150,000 ordinary shares of 2p each in the
issued share capital of the Company at a price of 55.5 pence per share("the
Subscription Shares") in order that the Trustee could make awards over interests
in the Subscription shares to certain directors and employees of the Company
under a new Executive Share Plan("the Executive Plan") approved by the Board on
26th June 2007.The following directors were invited to participate in the
Executive Plan("the Awards")on 26th June 2007:
Name Number of Shares over which interests to be held Base Award
Value
G.Stokes 750,000 60.5 pence
D.W.Kelham 500,000 60.5 pence
The Board agreed to make these awards subject to the following performance
criteria:
Immediately following the announcement of the Company's results for the period
ending 30 June 2010
* Real annual growth in earnings per share for the Company,measured over a
three year period from 1st July 2007 until 30 June 2010 is equal to or in
excess of 5%;and
* The market value of an ordinary share in the Company(as derived from AIM)
is no less than twice the market value of an ordinary share on 30 June 2007
The Executive Plan also contains certain earlier vesting provisions where the
participant leaves the Company for reasons of ill health or early retirement or
a change of control.
12 - Share Capital
The shares in issue in the group have increased from 19,199,995 at 30th June
2006 to 28,342,577 at 30th June 2007. This increase has arisen as a result of
the 6,756,757 shares issued in January at #1.48 to help fund the CRC acquisition
and repay existing Fonebak debt, the taking up, prior to his leaving, of 235,825
options granted to the former Finance Director at 2p and the issue of the
2,150,000 shares to the EBT.
13 - Basis of Preparation
The financial information set out above does not constitute the company's
statutory accounts for the year ended 30th June 2007 or 2006 but is derived from
those accounts. Statutory accounts for 2006 have been delivered to the registrar
of companies and those for 2007 will be delivered in due course. The auditors
have reported on these accounts; their reports were unqualified and did not
contain a statement under section 237(2) or (3) of the companies act 1985.
14 - Copies
Copies of this announcement will be available from the Group's administrative
centre of 7200 The Quorum, Oxford Business Park North, Oxford, OX4 2JZ or from
its nominated advisor and broker KBC Peel Hunt Ltd, 111 Old Broad Street,
London, EC2N 1PH.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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