Half Yearly Report

30 September 2015

LiteBulb Group Limited

("LiteBulb" or the "Company" or the "Group")

Half Yearly Report

LiteBulb (AIM: LBB), the branded product developer, announces unaudited results for the six months ended 30 June 2015 in line with management expectations.

Financial highlights

· Revenue up 98% to £7.9m (H1 2014: £4.0m), with a confirmed order pipeline for delivery in H2 of over £19.4m, equating to committed revenues of 80% of anticipated full year sales target for 2015

· Gross profit up 75% to £2.7m (H1 2014: £1.5m)

· Gross margin in line with expectation but lower than 2014 at 34%, due to the effect of the acquisition of Concept Merchandise

· Adjusted loss before tax* of £2.1m (H1 2014: £2.2m)

*before finance costs, taxation, depreciation, amortisation and exceptional administrative expenses

Operational highlights

· Defined focus on organic growth and completion of integration of acquisitions

· Significant sales growth with Tesco and Underground Toys during the period

· Secured group wide banking services and £7.5m working capital lines from HSBC Bank plc, consolidating the individual financing arrangements of each acquired subsidiary

Howard Partington, Interim Chief Executive of LiteBulb, commented: 

"As set out in our announcement in July the Company has established a solid platform and excellent relationships with a number of retailers. The Group's focus is now on organic growth and economies of scale and I look forward to reporting a satisfactory outcome to the year."

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About LiteBulb Group

LiteBulb Group designs, manufactures and distributes innovative brands and products to the global retail market.

LiteBulb Products, our wide range of products are sold in over 30 countries through blue chip retailers including: Tesco, M&S, John Lewis Partnership, Sainsbury's, Debenhams, Wilkinson's, Next, Boots, WH Smiths, Amazon, Target and Costco. 

LiteBulb Creative is a creative agency with global reach, delivering compelling and agile brand extension programmes to the entertainment industry. LiteBulb Creative has designed products and campaigns for clients around the world, including Disney, Hasbro and Miramax.

Chairman's Statement

I am pleased to write to you with my report as Chairman of your company for the six month period to 30 June 2015.

Introduction

There has been much change in 2015, as well as much to be pleased about.

The Group has now achieved significant scale in terms of customer reach and product category offering and therefore, as previously announced, the Board has agreed on a strategy of focussing on developing these strengths organically, utilising the extensive retail experience of the existing operational management team.

There are significant challenges ahead, but the Group is well placed to meet them.

Financial Results

Revenues from continuing operations for the six months increased by 98% to £7.9m (H1 2014: £4.0m), with an increase in gross profit of 75% to £2.7m (H1 2014: £1.5m).

The revenue by division is shown in the table below:

We are pleased with the excellent H1 performance of Bluw, which has been derived from the strong demand of its Star Wars range, but also note that the shortfall of Meld is mainly due to the later timing of sales of Mary Berry product against 2014.

Gross margin has reduced to 34% (H1 2014: 39%), due to the lower margin business that Concept brings to the overall group offering and, as such, is however in line with management expectation.

The loss before finance costs, taxation, depreciation, amortisation and exceptionals, and excluding discontinued operations, remained in line with 2014 at £2.1m (H1 2014: £2.2m). Although Concept is not as Q4 weighted as the rest of the product businesses within the Group, the overall seasonal profile of the Group remains in line with 2014 with H1 being a loss making period. On a like-for-like basis, the EBITDA performance is broadly the same as 2014, and we anticipate that the efficiency savings from our recent strategic review will deliver an improvement as the Group becomes fully integrated.

Net Cash at Bank at 30 June 2015 was £0.4m, (30 June 2014: £0.9m, 31 December 2014: £4.2m), with the decrease since year end resulting from the funding of losses for the period and the increase in stock to £4.2m in advance of the key trading period.

The Group uses invoice finance and import loan facilities to manage its working capital, which are secured against the receivable balances of each subsidiary. We are pleased that HSBC Bank plc has provided a very attractive offer to extend its services and facilities of £7.5m around the Group, and we are now in the process of expanding this relationship. We believe this puts the Group in a firm position in respect of the funding of its trading cycle.

The longer term debt of £6.3m remains in line with 31 December 2014. This debt comprises three rounds of secured convertible bonds, with the first round of £0.8m due for repayment in February 2016, the second of £2.0m in April 2017 and the final round of £3.5m in December 2017. All bonds carry a 10% per annum interest coupon with a 10% per annum redemption premium in the event that the loans are not converted.

Current trading

Post period end trading remains in line with expectations.

At 28 September 2015, the Group's contracted revenues were £27.3m, equating to 80% of the 2015 target of £34m. Revenues are largely derived from the UK (at 72% for H1 2015), with our customer base representing the most well-known brands on the high street, such as Tesco, M&S, Sainsbury's, JLP, Debenhams, Boots, Next and WH Smiths.

Review of operations

As announced on 6 July 2015, we have been conducting a full review of the Group to determine how best to improve performance and results. We are pursuing four key objectives: 1) to put the Group on a solid platform to deliver the anticipated growth potential; 2) to eliminate any unnecessary duplication; 3) to adopt best practices across all companies within the group; and 4) to deliver a strong top and bottom line performance in 2016 and beyond. In the short term, we are completely focused on integrating the existing businesses to achieve efficiency savings and delivering organic growth.

So far we have identified a number of areas which should deliver material savings to the Group overhead. The areas being addressed are: group-wide headcount, which we plan to reduce by 15% with annualised savings of £500k; consolidating our two London offices into our head office in Battersea by utilising the existing space more efficiently, delivering savings of £65k per annum; elimination of peripheral, start-up divisions; implementing our proven Group best practice product development process, to streamline operations and mitigate historic overspends; focus on fewer, but more valuable licenses and product ranges; and reviewing all service providers to determine the appropriate value of the service we are receiving.

Furthermore we believe we can deliver significant revenue growth by focusing on using our existing customer relationships more widely around the Group, developing bespoke branded product with our tier 1 retailers, growing our online offering and working in a more integrated manner when acquiring licences.

Finally Howard Partington remains committed to his role as interim CEO, which the Board believes is best for the Group at the present time, although the Board continues to consider future candidates for this role in conjunction with the review referred to above.

Outlook

The actions being taken by the new management team should put the Group in a good position to deliver substantial organic growth and allow us to consider further acquisitions in the medium term that both meet our selection criteria and will enhance profitability following integration.

On a final note, I'd like to thank Simon McGivern and James Phillips for their contribution to building your Group and handing the reins over to the new management team to take Litebulb into the next chapter of its evolution. I wish Simon and James the best for the future with their new opportunities.

Michael Hough

Chairman

30 September 2015

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED STATEMENT OF CASHFLOW

1. Basis of preparation

The half yearly financial information set out in this statement for the six months to 30 June 2015 and to 30 June 2014 is unaudited. This financial information does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. It does not comply with IAS 34 'Interim Financial Reporting', as is permissible under the rules of the AIM market.

This half yearly report, which is neither audited nor reviewed, has been prepared in accordance with the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively Adopted IFRSs).

2. Status of financial information

The comparative financial information for the 12 months ended 31 December 2014 has been derived from the audited statutory financial statements for that period.

The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

3. Segment information

The company operates in one business segment and as such this is the primary business segment. The company's secondary segment is geographical. The segmental results by geographical area are shown below:

4. Loss per share

The calculation of basic loss per share is based on the loss attributable to ordinary shareholders and the weighted average number of ordinary shares in issue during the period.

The calculation of diluted loss per share is based on loss per share attributable to ordinary shareholders and the weighted average number of ordinary shares that would be in issue, assuming conversion of all dilutive potential ordinary shares into ordinary shares.

Reconciliations of the loss and weighted average number of shares used in the calculations are set out below:

Due to the Group's loss for the period, the diluted loss per share is the same as the basic loss per share.

On 4 June 2015, the Company announced a capital reorganisation of every 50 existing ordinary shares of no par value in the capital of the Company being consolidated into one ordinary share of no par value in the capital of the Company. Following the capital reorganisation the Company had 51,238,982 ordinary shares in issue.

For comparative purposes, the 2014 share numbers above and in note 5 have been adjusted to reflect the capital reorganisation.

5. Stated capital

During the period, 168,408 ordinary shares were issued as follows:

On 6 January 2015, 80,792 shares in respect of interest.

On 31 March 2015, 87,616 shares in respect of interest.