30th Mar 2007 07:04
Fonebak plc30 March 2007 FONEBAK PLC Interim report for the six months ended 31st December 2006 Fonebak plc, a leading provider of outsource services including the repair,resale and recycling of technology products, is pleased to announce its Interimresults for the six months to 31 December 2006. Highlights: * Turnover increased by 35% to £38.7million (2006: £28.6 million) * Continuing strong cash flows * CRC business trading ahead of expectations - New business including Tom Tom, Pure Digital, Epson and T-Com - Increased activity, including Apple iPods and notebooks * Vodafone, O2 and Orange now contracted to Fonebak Producer Compliance Scheme * Operational review progressing: - Results expected late Spring - Short term issues identified in core Fonebak business * Integration of CRC into Fonebak progressing well - cost savings post acquisition inline with expectations * Main Board Strengthened: - Gary Stokes appointed Chief Executive - David Kelham appointed Chief Financial Officer Commenting, Gary Stokes, Chief Executive, said: "Having commenced a full review of the enlarged business it is already evidentthat there is much that is positive and that supports confidence in the future,despite some of the short term challenges". "The integration of the acquisition of CRC is progressing well and the costreductions forecast at the time of the Offer are being delivered. The CRCbusiness is trading ahead of expectations, having recently won a number of newcontracts and is seeing an increase in volumes. These benefits will come throughin the second half of 2007. Overall, there remain considerable opportunities forthe enlarged business and the market generally is buoyant". 30 March 2007 Enquiries: FonebakGary Stokes Chief Executive 01844 219 400David Kelham Chief Financial Officer 01844 219 400 KBC Peel Hunt LtdJonathan Marren 020 7418 8900Gordon Suggett 020 7418 8900 Pelham Public RelationsJames Henderson 020 7743 6673Philip Dennis 020 7743 6363 CHIEF EXECUTIVE'S STATEMENT Since the start of the current financial year there has been a significant stepchange in the scale and operational capability of the Group. The business hascontinued to grow with the expansion of the client base and the development ofthe European network helping to drive inbound volumes. At the same time theservice offering has broadened, firstly with the acquisition in September 2006of DSG's Stoke based mobile phone repair and administration business, and morerecently with the completion in January 2007 of the acquisition of CRC GroupPLC. Having commenced a full review of the enlarged business it is already evidentthat there is much that is positive and that will support confidence in thefuture. However, as previously reported in our trading update on 6th March, itis also the case that we have some short term challenges. Notably, there hasbeen a general decline in the trading margins of the core Fonebak businesscompounded by the recent loss of a contract. A shortfall in repair volumes inIntec Cellular is also affecting current trading. The operational review will be completed by late spring; it is already clearthough that Fonebak has diversified from its original business model andcompetencies, which has not been beneficial in the short term. Whilst thestrategy of providing a more comprehensive range of value-added services to theafter sales market is valid the business has lacked the depth of management andthe infrastructure to integrate these businesses effectively. The short termfocus will therefore be on strengthening the organisation whilst addressing theobvious areas of underperformance. With the focus on the performance of the core Fonebak activities it is positiveto note that CRC is trading well; the Board anticipates that the benefits of theacquisition will become evident in the second half of the current year. CRCbrings a robust operational capability and offers access to new technologies,which together with the well established environmental credentials of Fonebak,will create a more compelling and integrated 'full service' proposition. Within our market place the much awaited legislation implementing the WEEEdirective finally came into force in the UK with effect from January. Thelegislation, which aims to improve reuse & recycling rates, will impactmanufacturers and distributors of electronic equipment. Fonebak has been at theforefront of the environmental debate within the communications industry and hasnow been licensed to operate a Producer Compliance Scheme, a true differentiatorfrom our competitors and an opportunity to deliver a real 'one stop solution'. Without prejudicing the outcome of the operational review there are considerableopportunities for the enlarged business and the market generally is buoyant. Thepriority for now is to capitalise on these opportunities and to restore theGroup's profitability to acceptable levels whilst building an organisationcapable of delivering our future growth expectations. Results For the six months ended 31st December 2006 sales increased to £38.7 million(including benefits from the acquisition of businesses from DSG of £2.2 million)from £28.6 million the previous year, representing like-for-like sales growth of27.7%. The carrying value of inventories, in particular mobile phones held for resale,has been revisited as part of the ongoing operational review. The profile ofthese phones has been progressively ageing and as such a decision has been takento create an additional provision. The impact of this charge has been to reduceoperating profits by £2.0 million in the period. This is a one-off adjustmentand initiatives are already in place to ensure surplus inventory is cleared. Further charges totalling £0.7 million have been booked for goodwillamortisation including the complete write down of the goodwill arising from theacquisition of the DSG repair centre in September 2006. Under FRS 20 a charge of£0.1 million has also been taken to reflect the valuation of share options inissue during the six months ended 31st December 2006. The additional charges for aged stock, goodwill amortisation and share optionvaluations have led to the Group reporting a loss of £1.1 million at theoperating level compared to a prior year profit of £0.8 million. The loss for the six months to 31st December 2006 equates to 6.29 pence pershare (2005: profit per share of 0.21 pence). A final dividend of 1.0 pence per share in respect of the year ended 30th June2006 was paid to shareholders on 27 December 2006. The directors will not berecommending an interim dividend in respect of the six months ended 31stDecember 2006. CRC Acquisition On 24th January 2007 Fonebak announced that the offer for CRC Group PLC had beendeclared unconditional in all respects. CRC is primarily a warranty based repairer of hi-tech equipment for leadinginternational consumer and business-to-business brands. The business currentlyhas six facilities operating in the UK (Glenrothes, Nottingham and Huntingdon),Germany (Paderborn and Berlin) and Poland (Warsaw). CRC serves the mobile communication sector through the repair centres in the UKand Poland. Principal clients include airtime providers such as Vodafone as wellas the major OEM's such as Nokia, Sony Ericsson, Motorola and Samsung. The IT sector is significant in the UK, Germany and Poland. Key clients in thelaptop market include Fujitsu Siemens, ACER, Apple, HP and ASUS. A growingmarket is for security and financial equipment such as EPOS, ATM and 'chip andpin' technologies with clients such as Wincor Nixdorf, Diebold, Verifone andIBM. A third market is in hi-tech consumer products, including home gateway. TheGlenrothes site supports the Virgin Media set-top box program and processescirca 1 million boxes a year. Other prominent products include Apple iPods andTom Tom satellite navigation devices. During 2006 management announced the closure of the headquarters and repaircentre in Thame, Oxford and the withdrawal from the four sites in Italy. Inaddition agreement was reached with employees at the Berlin site to close witheffect from 30th June 2007. The closure programme is substantially complete, with the exception of Berlin,and the benefits are evident with each location now profitable. Results will beconsolidated into Fonebak reporting with effect from the completion date. Business Development The commercial case supporting the reuse and recycling of electronic equipmenthas been strengthened with the passing of the WEEE directive into UK legislationearlier this year. At the end of February Fonebak was formally accredited as aProducer Compliance Scheme for hand held communication devices. Since theFonebak scheme was approved market leaders Vodafone, O2 and Orange are alreadycontracted as members. Intec Distribution, which supplies replacement mobile phones to end users,continues to make progress in the insurance fulfilment market and has recentlybeen voted 'supplier of the year' by its largest customer Homecare. This is agrowing market and one that can be developed further. The Intec Distribution andFonebak sales and operations teams are now located on one site in Thurrock andwill benefit from shared resource and a lower cost base. Intec Cellular, has recently secured a new repair contract. Following therelocation of Intec Distribution and a re-evaluation of the projected activityat the Barnet site the business will be restructured to significantly reduce itscost base and consultation with the workforce has already begun. The business iscurrently loss making; the director's believe that the elimination of theselosses would save the Group approximately £1 million in a full year. The project pipeline in CRC has been growing in recent months and in mostmarkets there is a steady flow of new opportunities. In the UK, CRC commenced the repair of Tom Tom satellite navigation systems inJanuary and activity on Apple iPods and notebooks has been stepping up over thesame timescale. The UK market leader in DAB radio, Pure Digital, has alsoawarded CRC a contract to repair its products within the UK. In Germany contracts were recently signed with Epson and T-Com to provideoutsourced service support across a large number of products. Both theseprojects were commissioned in the New Year and will make a contribution duringthe current calendar year. An agreement has also been completed with FujitsuSiemens to co-locate laptop repairs to a lower cost facility in the former EastGermany; the new site is expected to be operational in the 2008 financial year. Finally the Polish operation, which was part of the CRC Group, is seeingopportunity in both the communications and IT sectors. The Warsaw facilityrepairs mobile phones to component level for market leaders Nokia, Sony Ericssonand Motorola from both the local Polish and other European markets. In additionthe volumes of motherboard repairs for the IT market have been steadilyincreasing and additional capacity is now being investigated. The main former CRC sites in Glenrothes, Paderborn and Warsaw have all seenrecord output in recent months and continue to make progress in developing bothcurrent and prospective clients. Board The Board is being strengthened to reflect the greater scale and complexity ofthe Group and the necessary emphasis on the recovery programme for the coreFonebak business activities. With effect from today David Kelham is being appointed to the Board as ChiefFinancial Officer of the enlarged Fonebak Group. David has considerableexperience within the service sector and has a successful record working withboth public companies and turnaround situations. Previously David was recruitedas Chief Financial Officer of CRC in mid 2006 and has been instrumental intransforming the performance of that business. At the same time Arthur Crocker has decided for personal reasons to step downfrom the Board and will do so with immediate effect. Having been a significantpart of the success story of Fonebak thus far I would like to thank Arthur forhis contribution and wish him well for the future. Arthur will continue tosupport the business through to the end of the year to ensure a smoothtransition. Outlook In early March it was reported that Fonebak had lost a significant tranche ofbusiness with one of its customers. This business had contributed approximately£0.9 million to operating profit in the six months ended 31st December 2006 andtherefore the loss of the business has a material impact on ongoing performanceof the Fonebak business. The core Fonebak business has also seen a deterioration in margins which hasbeen partially masked by the increase in volumes and the diversification of thebusiness into activities which have diluted the original revenue share model. Under the remit of the operational review all aspects of the Group's currentactivities are being considered. The work undertaken to date suggests that thecore Fonebak business, at the current run rate, is operating at no better thanbreakeven. Similarly the profits generated from Intec Distribution are largelybeing dissipated by the losses in the repair activities at Stoke and Barnet.This situation is plainly not acceptable and a number of actions are already inprogress notwithstanding the outcome of the review. The Group's bank, KBC Bank NV, is fully aware of Fonebak's current position andof the ongoing operational review and is supportive of the new management teamand the Group. As indicated the CRC sites are trading well and are ahead of expectations. Thecost reductions forecast at the time of the Offer are being delivered followingthe de-listing of CRC and a number of additional contracts have also been won.These benefits will come through in the second half of 2007. However, as alreadyoutlined, given the shortfall in the core Fonebak business it is not expectedthat CRC's improved performance can wholly bridge that gap in the current year.Once the operational review is complete the Board will have a clearerunderstanding of the longer term outlook for Fonebak and will be in a positionto provide details of the proposed recovery plan for the Group. Gary Stokes 30 March 2007Chief Executive Financial Statements Profit & Loss AccountSix Months to 31 December 2006 Unaudited Unaudited Audited Six months ended Six months ended Year ended 31 December 2006 31 December 2005 30 June 2006 ------------------------ ------------------------ -------------------- ------------------------ ------------------------ -------------------- Note £'000 £'000 £'000--------------------------- ------ ------------------------ ------------------------ ----------------------------------------------- ------ ------------------------ ------------------------ -------------------- Turnover 38,678 28,583 60,361--------------------------- ------ ------------------------ ------------------------ ----------------------------------------------- ------ ------------------------ ------------------------ -------------------- --------------------------- ------ ------------------------ ------------------------ --------------------Operating (loss)/profit: Before exceptional (413) 1,541 3,747 items and amortisationAcquired activities 102 - -Goodwill amortisation and exceptional items 3 (799) (782) (1,528)--------------------------- ------ ------------------------ ------------------------ ----------------------------------------------- ------ ------------------------ ------------------------ -------------------- Operating (loss)/profit (1,110) 759 2,219 Net interest payable --------------------------- ------ ------------------------ ------------------------ ----------------------------------------------- ------ ------------------------ ------------------------ --------------------Before exceptional item (119) (240) (468)Exceptional item 4 (37) (59) (132)--------------------------- ------ ------------------------ ------------------------ ----------------------------------------------- ------ ------------------------ ------------------------ -------------------- (156) (299) (600) --------------------------- ------ ------------------------ ------------------------ ----------------------------------------------- ------ ------------------------ ------------------------ -------------------- (Loss)/profit on ordinary activities before taxation (1,266) 460 1,619 Tax on (loss)/profit on ordinary activities 5 59 (419) (984)--------------------------- ------ ------------------------ ------------------------ ----------------------------------------------- ------ ------------------------ ------------------------ -------------------- (Loss)/profit for the period (1,207) 41 635=========================== ====== ======================== ======================== =============================================== ====== ======================== ======================== ==================== --------------------------- ------ ------------------------ ------------------------ ----------------------------------------------- ------ ------------------------ ------------------------ --------------------(Loss)/earnings per share: 6Basic (6.29)p 0.21 p 3.31 pDiluted (6.29)p 0.21 p 3.24 p--------------------------- ------ ------------------------ ------------------------ ----------------------------------------------- ------ ------------------------ ------------------------ -------------------- --------------------------- ------ ------------------------ ------------------------ ----------------------------------------------- ------ ------------------------ ------------------------ --------------------Dividends per share: 7 Interim - p - p - pFinal 1.0 p - p - p--------------------------- ------ ------------------------ ------------------------ ----------------------------------------------- ------ ------------------------ ------------------------ -------------------- Statement of Total Recognised Gains & Loss There are no differences between the profit on ordinary activities before taxationFor the periods stated above and their historical cost equivalents. Unaudited Unaudited Audited Six months ended Six months ended Year ended 31 December 2006 31 December 2005 30 June 2006 ------------------------ ----------------------- -------------------- ------------------------ ----------------------- -------------------- £'000 £'000 £'000--------------------------------- ------------------------ - ----------------------- ----------------------------------------------------- ------------------------ - ----------------------- -------------------- (Loss)/profit for the financial period (1,207) 41 635Exchange adjustment offset in reserves (1) 1 2--------------------------------- ------------------------ - ----------------------- ----------------------------------------------------- ------------------------ - ----------------------- -------------------- Total recognised (loss) /profit for the period (1,208) 42 637================================= ======================== = ======================= ==================== Unaudited Unaudited Audited Six months ended Six months ended Year ended 31 December 2006 31 December 2005 30 June 2006 ----------------------- ----------------------- -------------------- ----------------------- ----------------------- -------------------- £'000 £'000 £'000--------------------------------- - ----------------------- - ----------------------- ----------------------------------------------------- - ----------------------- - ----------------------- -------------------- (Loss)/profit for the financial period (1,207) 41 635Dividend paid (192) - -FRS 20 share option credit 65 62 124Exchange adjustment offset in reserves (1) 1 2--------------------------------- - ----------------------- - ----------------------- ----------------------------------------------------- - ----------------------- - ----------------------- -------------------- Net (decrease)/increase in equity shareholders' funds (1,335) 104 761 Opening equity shareholders' funds 16,049 15,288 15,288--------------------------------- - ----------------------- - ----------------------- ----------------------------------------------------- - ----------------------- - ----------------------- -------------------- Closing equity shareholders' funds 14,714 15,392 16,049================================= = ======================= = ======================= ==================== Balance Sheet Unaudited Unaudited Audited 31 December 2006 31 December 2005 30 June 2006 ------------------------ ----------------------- -------------------- ------------------------ ----------------------- -------------------- Note £'000 £'000 £'000------------------------ ------ ------------------------ - ----------------------- - -------------------------------------------- ------ ------------------------ - ----------------------- - -------------------- Fixed assets Intangible assets 2 18,480 19,352 19,120Tangible assets 740 932 728------------------------ ------ ------------------------ - ----------------------- - -------------------------------------------- ------ ------------------------ - ----------------------- - -------------------- 19,220 20,284 19,848------------------------ ------ ------------------------ - ----------------------- - -------------------------------------------- ------ ------------------------ - ----------------------- - -------------------- Current assets Stock 5,290 8,103 7,879Debtors 6,806 4,080 6,570Cash at bank & in hand 643 1,056 1,137------------------------ ------ ------------------------ - ----------------------- - -------------------------------------------- ------ ------------------------ - ----------------------- - -------------------- 12,739 13,239 15,586------------------------ ------ ------------------------ - ----------------------- - -------------------------------------------- ------ ------------------------ - ----------------------- - -------------------- Creditors - amounts falling due within oneyear:Bank loans & overdrafts (1,600) (1,200) (1,400)Finance leases (23) (59) (24)Deferred consideration (58) (2,390) (2,463)Other creditors (12,615) (10,000) (11,744)------------------------ ------ ------------------------ - ----------------------- - -------------------------------------------- ------ ------------------------ - ----------------------- - -------------------- (14,296) (13,649) (15,631)------------------------ ------ ------------------------ - ----------------------- - -------------------------------------------- ------ ------------------------ - ----------------------- - -------------------- Net current liabilities (1,557) (410) (45)------------------------ ------ ------------------------ - ----------------------- - -------------------------------------------- ------ ------------------------ - ----------------------- - -------------------- Total assets less current liabilities 17,663 19,874 19,803 Creditors - amounts falling due after morethan one year:Bank loans (2,900) (4,500) (3,700)Finance leases (49) (88) (54)Deferred taxation - 106 ------------------------- ------ ------------------------ - ----------------------- - -------------------------------------------- ------ ------------------------ - ----------------------- - -------------------- Net assets 14,714 15,392 16,049======================== ====== ======================== = ======================= = ============================================ ====== ======================== = ======================= = ==================== Capital & reserves Called up share capital 384 384 384Share premium account 15,076 15,076 15,076Profit & loss account (746) (68) 589------------------------ ------ ------------------------ - ----------------------- - -------------------------------------------- ------ ------------------------ - ----------------------- - -------------------- Equity shareholders' funds 14,714 15,392 16,049======================== ====== ======================== = ======================= = ==================== Cash Flow Statement Unaudited Unaudited Audited Six months ended Six months ended Year ended 31 December 2006 31 December 2005 30 June 2006 ----------------------- ------------------------ ------------------ ----------------------- ------------------------ ------------------ Note £'000 £'000 £'000--------------------------- ----- ----------------------- - ------------------------ - --------------------------------------------- ----- ----------------------- - ------------------------ - ------------------ Net cash inflow from operating activities 8 3,878 1,447 2,900--------------------------- ----- ----------------------- - ------------------------ - --------------------------------------------- ----- ----------------------- - ------------------------ - ------------------ Returns on investments and servicing of finance Interest received 58 8 18Bank interest paid (175) (244) (486)Finance lease interest paid (3) (4) ---------------------------- ----- ----------------------- - ------------------------ - --------------------------------------------- ----- ----------------------- - ------------------------ - ------------------ Net cash outflow from returns on investments and servicing of finance (120) (240) (468)--------------------------- ----- ----------------------- - ------------------------ - --------------------------------------------- ----- ----------------------- - ------------------------ - ------------------ Taxation (468) (405) (888)--------------------------- ----- ----------------------- - ------------------------ - --------------------------------------------- ----- ----------------------- - ------------------------ - ------------------ Capital expenditure & financial investmentPurchase of intangible fixed assets - - (5)Purchase of tangible fixed assets (131) (117) (172)Sale of tangible fixed assets - - 72--------------------------- ----- ----------------------- - ------------------------ - --------------------------------------------- ----- ----------------------- - ------------------------ - ------------------ Net cash outflow from capital expenditure and financial investment (131) (117) (105)--------------------------- ----- ----------------------- - ------------------------ - --------------------------------------------- ----- ----------------------- - ------------------------ - ------------------ Acquisitions Purchase of Stoke business 2 (406) - -Purchase of interest in subsidiary undertaking 2 (2,442) (1,789) (1,789)Cash acquired with subsidiary undertaking - (669) (669)(net of overdrafts)--------------------------- ----- ----------------------- - ------------------------ - --------------------------------------------- ----- ----------------------- - ------------------------ - ------------------ Net cash outflow from acquisitions (2,848) (2,458) (2,458)--------------------------- ----- ----------------------- - ------------------------ - --------------------------------------------- ----- ----------------------- - ------------------------ - ------------------ Equity dividend paid (192) - ---------------------------- ----- ----------------------- - ------------------------ - --------------------------------------------- ----- ----------------------- - ------------------------ - ------------------ Net cash inflow / (outflow) before 119 (1,773) (1,019)financing--------------------------- ----- ----------------------- - ------------------------ - ------------------ Cash Flow Statement (Continued) --------------------------- ----- ----------------------- - ------------------------ - ------------------ Financing New borrowings - 2,000 2,000Repayment of bank borrowings (600) (300) (900)Repayment of capital element of finance lease (13) (25) (98)--------------------------- ----- ----------------------- - ------------------------ - --------------------------------------------- ----- ----------------------- - ------------------------ - ------------------ Net cash (outflow) / inflow from financing (613) 1,675 1,002--------------------------- ----- ----------------------- - ------------------------ - --------------------------------------------- ----- ----------------------- - ------------------------ - ------------------ Decrease in net cash 9/10 (494) (98) (17)=========================== ===== ======================= = ======================== = ================== Notes to the Interim Report: 1. Basis of preparation The interim report has been prepared under the same accounting policies as thoseused for the most recent audited financial statements contained in the annualreport for the year ended 30 June 2006, except for the adoption of FRS 20 -'share based payments', which requires the recognition of share based paymenttransactions in the financial statements. Accordingly, the company has recordedan expense of £65,000 in the six months to 31 December 2006 and has restated thecomparative periods, recording an expense of £62,000 in the six months to 31December 2005 and £124,000 in the year ended 30 June 2006. The financial information as at, for each of the six-month periods ended, 31December 2005 and 2006 is unaudited. The financial information as at, and forthe year ended, 30 June 2006 is extracted from the audited financial informationcontained within the published annual report for the year ended 30 June 2006.None of the financial information in this interim report constitutes statutoryfinancial statements within the meaning of the Companies Act 1985. The comparative figures for the financial year ended 30 June 2006 are not thecompany's statutory accounts for that financial year. Those accounts have beenreported on by the company's auditors and delivered to the registrar ofcompanies. The report of the auditors was (i) unqualified, (ii) did not includea reference to any matters to which the auditors drew attention by way ofemphasis without qualifying their report and (iii) did not contain a statementunder section 237(2) or (3) of the Companies Act 1985. 2. Acquisition Fonebak was awarded a rolling annual contract by DSG Retail ("DSG") for theprovision of mobile phone repair and administration services on 15 September2006. At the same time, Fonebak acquired the Stoke based mobile phone repair andadministration business of DSG (the "Stoke Business"), together with 87 fulltime employees and 29 temporary employees, for goodwill of £3, plus £74,500 forfixed assets and approximately £235,000 for stock and £3,000 for debtors, allpaid in cash. Costs of approximately £94,000 were incurred. The Stoke Business' turnover for the year ended 30 April 2006 was £11.0 millionwith an operating loss of £16,000. The Stoke Business' turnover for the 4 1/2months ended 15 September 2006 was £4.1 million with an operating loss of£43,000. As the Stoke Business was not separately accounted for within DSG, itis not possible to state its profit before tax for either period or its grossassets at 30 April 2006 or 15 September 2006. In addition, Fonebak paid £2,442,000 in respect of deferred consideration forthe acquisition of Intec Group Limited in October 2006. £58,000 of the deferredconsideration remains outstanding at 31 December 2006. 3. Goodwill amortisation and exceptional items Unaudited Unaudited Audited Six months ended Six months ended Year ended 31 December 2006 31 December 2005 30 June 2006 ----------------------- ----------------------- ------------------------ ----------------------- ----------------------- ------------------------ £'000 £'000 £'000------------------------------- - ----------------------- ----------------------- ------------------------------------------------------- - ----------------------- ----------------------- ------------------------ Goodwill amortisation 734 590 1,274 FRS 20 Share option charge 65 62 124 Termination costs - 130 130 ------------------------------- - ----------------------- ----------------------- ------------------------------------------------------- - ----------------------- ----------------------- ------------------------ Total 799 782 1,528 =============================== = ======================= ======================= ======================== 4. Exceptional financing cost In the six months ended 31 December 2006 and 2005 and the year ended 30 June2006, £37,000, £59,000 and £132,000, respectively, was charged to interestpayable in respect of unwinding of the discount applied to the deferredconsideration on the acquisition of Intec Group Limited (and added to thedeferred consideration payable). As this charge relates to the acquisition ofIntec, it has been shown in the column containing goodwill amortisation andexceptional items in the profit and loss account for those periods. 5. Tax on (loss)/profit on ordinary activities The taxation (credit)/charge for the six months ended 31 December 2006 is basedon the estimated tax rate for the full year. 6. (Loss)/earnings per share The calculation of the basic (loss)/earnings per share is based on the(loss)/earnings attributable to ordinary shareholders divided by the weightedaverage number of shares in issue during the period. The calculation of diluted(loss)/earnings per share is based on the basic (loss)/earnings per share,adjusted to allow for the issue of share on the assumed conversion of alldilutive options. Reconciliations of the (loss)/earnings per share and weighted average number ofshares used in the calculations are set out below: Unaudited Unaudited Audited Six months ended Six months ended Year ended 31 December 2006 31 December 2005 30 June 2006 --------------------------------------- ----------------------------- ----------------------------- Loss Weighted Loss Profit Weighted Profit Profit Weighted Profit Average per Average per Average per no. of share no. of share no. of share shares shares shares £'000 Number Pence £'000 Number Pence £'000 Number Pence --------- --------- ----------- ---------- --- ------- ----------- -------- -- ------- ----------- --------- Basic (loss) /earnings per share: (Loss)/ profit attributable to ordinary shareholders (1,207) 19,199,995 (6.29)p 41 19,199,995 0.21 p 635 19,199,995 3.31p Effect of dilutive options - - - p - 264,889 - p - 404,006 (0.07)p--------- --------- ----------- ---------- --- ------- ----------- -------- -- ------- ----------- --------- Diluted (loss) /earnings per share (1,207) 19,199,995 (6.29)p 41 19,464,884 0.21 p 635 19,604,001 3.24p ========= ========= =========== ========= ==== ======= =========== ======== == ======= =========== ========= An adjusted (loss)/earnings per share has also been presented, based on adjustments in respect of exceptional items and the amortisation of goodwill.The effects of the adjustments are as follows: Unaudited Unaudited Audited Six months ended Six months ended Year ended 31 December 2006 31 December 2005 30 June 2006 --------------------------------- ---------------------------- ----------------------------- Loss Weighted Profit Profit Weighted Profit Profit Weighted Profit Average Per Average Per Average Per no. of Share no. of share no. of share shares shares shares £'000 Number Pence £'000 Number Pence £'000 Number Pence ------- --------- ----------- --------- --- -------- ----------- -------- -- ------- ----------- --------- Basic (loss) /earnings per share (1,207) 19,199,995 (6.29)p 41 19,199,995 0.21 p 635 19,199,995 3.31 p Post tax effect of excluding amortisation of goodwill & exceptional items 836 - 4.36 p 802 - 4.18 p 1,621 - 8.44 p------- --------- ----------- --------- --- -------- ----------- -------- -- ------- ----------- --------- Adjusted basic (loss) /earnings per share (371) 19,199,995 (1.93)p 843 19,199,995 4.39 p 2,256 19,199,995 11.75 p ========= ========= =========== ========= === ======== =========== ======== == ======= =========== ========= Diluted (loss) /earnings per share (1,207) 19,199,995 (6.29)p 41 19,464,884 0.21 p 635 19,604,001 3.24 p Effect of dilutive options - 338,023 0.03 p - - - p - - - pPost tax effect of excluding amortisation of goodwill & exceptional items 836 - 4.36 p 802 - 4.12 p 1,621 - 8.27 p--------- --------- ----------- --------- ----- -------- ----------- -------- --- ------- ----------- --------- Diluted (loss) /earnings per share (371) 19,538,018 (1.90)p 843 19,464,884 4.33 p 2,256 19,604,001 11.51 p ========= ========= =========== ========= ===== ======== =========== ======== === ======= =========== ========= 7. Dividends A final dividend in respect of the year ended 30 June 2006 of 1.0 pence pershare (totalling £192,000) was paid on 27 December 2006 to shareholders on theregister at 8 December 2006. No interim dividend is proposed in respect of thesix months ended 31 December 2006. 8. Reconciliation of operating (loss)/profit to net cash inflow from operating activities Unaudited Unaudited Audited Six months ended Six months ended Year ended 31 December 2006 31 December 2005 30 June 2006 ----------------------- ----------------------- ------------------------ ----------------------- ----------------------- ------------------------ £'000 £'000 £'000------------------------------- ----------------------- - ----------------------- ------------------------------------------------------- ----------------------- - ----------------------- ------------------------ Operating (loss)/profit (1,110) 759 2,219 Depreciation charge 206 207 391 Amortisation of goodwill 734 590 1,274 Share option scheme 65 62 124 Decrease/(increase) in stock 2,824 (2,771) (2,514) (Increase)/decrease in debtors (1,837) 1,343 (1,109) Increase in creditors 2,996 1,257 2,515 ------------------------------- ----------------------- - ----------------------- ------------------------------------------------------- ----------------------- - ----------------------- ------------------------ Net cash inflow from operating activities 3,878 1,447 2,900=============================== ======================= = ======================= ======================== 9. Reconciliation of net cash flow to movement in net debt Unaudited Unaudited Audited Six months ended Six months ended Year ended 31 December 2006 31 December 2005 30 June 2006 ----------------------- ----------------------- ------------------------ ----------------------- ----------------------- ------------------------ £'000 £'000 £'000------------------------------- - ----------------------- ----------------------- ------------------------------------------------------- - ----------------------- ----------------------- ------------------------ Net debt at beginning of (4,041) (2,846) (2,846) periodDecrease in net cash (494) (98) (17) New borrowings - (2,000) (2,000) Borrowings repaid 600 300 900 Finance lease obligation (7) (172) (176) acquiredCapital element of finance lease repayments 13 25 98------------------------------- - ----------------------- ----------------------- ------------------------------------------------------- - ----------------------- ----------------------- ------------------------ Net debt at end of period (3,929) (4,791) (4,041) =============================== = ======================= ======================= ======================== 10. Analysis of net debt ----------- ---------- ----------- Cash in Total Debt due Debt due hand & net within one after one Total Net at bank Overdrafts cash year year debt Debt £'000 £'000 £'000 £'000 £'000 £'000 £'000 ----------------------- -- -------- ---------- ----------- -- ----------- ----------- ---------- -- ---------------------------------- -- -------- ---------- ----------- -- ----------- ----------- ---------- -- ----------- At 1 July 2005 1,155 (1) 1,154 (800) (3,200) (4,000) (2,846) Cash flow (99) 1 (98) 300 (1,975) (1,675) (1,773) Acquisition excluding cash & overdrafts - - - (59) (113) (172) (172)Non-cash changes - - - (700) 700 - - ----------------------- -- -------- ---------- ----------- -- ----------- ----------- ---------- -- ---------------------------------- -- -------- ---------- ----------- -- ----------- ----------- ---------- -- ----------- At 31 December 2005 1,056 Nil 1,056 (1,259) (4,588) (5,847) (4,791) ======================= == ======== ========== =========== == =========== =========== ========== == ================================== == ======== ========== =========== == =========== =========== ========== == =========== At 1 July 2005 1,155 (1) 1,154 (800) (3,200) (4,000) (2,846) Cash flow (18) 1 (17) 998 (2,000) (1,002) (1,019) Acquisition excluding cash & overdrafts - - - (59) (113) (172) (172)Non-cash changes - - - (1,563) 1,559 (4) (4) ----------------------- -- -------- ---------- ----------- -- ----------- ----------- ---------- -- ---------------------------------- -- -------- ---------- ----------- -- ----------- ----------- ---------- -- ----------- At 30 June 2006 1,137 Nil 1,137 (1,424) (3,754) (5,178) (4,041) ======================= == ======== ========== =========== == =========== =========== ========== == ================================== == ======== ========== =========== == =========== =========== ========== == =========== At 1 July 2006 1,137 - 1,137 (1,424) (3,754) (5,178) (4,041) Cash flow (494) - (494) 603 10 613 119 Acquisition excluding cash & overdrafts - - - - - - -Non-cash changes - - - (802) 795 (7) (7) ----------------------- -- -------- ---------- ----------- -- ----------- ----------- ---------- -- ---------------------------------- -- -------- ---------- ----------- -- ----------- ----------- ---------- -- ----------- At 31 December 2006 643 Nil 643 (1,623) (2,949) (4,572) (3,929) ======================= == ======== ========== =========== == =========== =========== ========== == ================================== == ======== ========== =========== == =========== =========== ========== == =========== ----------- ---------- ----------- Post balance sheet events On 14 December 2006, Fonebak announced that it had reached agreement with theBoard of CRC Group plc ("CRC") on the terms of a recommended cash offer toacquire the entire share capital of CRC for 50 pence per CRC share, valuing CRCat £12.3 million. The offer was declared wholly unconditional on 24 January2007. Fonebak funded the consideration under the Offer through a placing of 6,756,757new Fonebak shares at a price of 148 pence per share to raise approximately£10.0 million (before expenses) and new bank facilities totalling £25.0 millionprovided by KBC Bank. The placing shares represented approximately 35.2 percent. of the existing Fonebak share capital. The new bank facilities with KBCBank consist of a £17.5 million term loan and a £7.5 million revolving creditfacility. The monies raised from the placing and the new bank facilities willalso be used to refinance existing bank facilities in Fonebak and CRC. Rider As noted above, David Kelham has been appointed as a director of Fonebakeffective immediately. For the purposes of Rule 17 of the AIM Rules, DavidKelham's details are as follows: Full name: David William Kelham Age: 49 Directorships held within the last 5 years: CRC Group plc CRC Global Limited Cabletel West Riding Ltd Heartland Cablevision II (UK) Ltd Inquam Telecom (Holdings) Ltd Lanbase Limited NTL (Broadland) Ltd NTL (County Durham) Ltd NTL (Fenland) Ltd NTL (Norwich) Ltd NTL (Peterborough) Ltd NTL Bolton Cablevision Holding Company NTL Business (Ireland) Ltd NTL Cablecomms Bolton NTL Cablecomms Bury and Rochdale NTL Cablecomms Derby NTL Cablecomms Greater Manchester NTL Cablecomms Lancashire No. 2 NTL Cablecomms Ltd NTL Cablecomms Oldham and Tameside NTL Cablecomms Stockport NTL Cablecomms Sussex NTL Derby Cablevision Holding Company NTL Holding (Broadland) Ltd NTL Holdings (Fenland) Ltd NTL Holdings (Leeds) Ltd NTL Holdings (Norwich) Ltd NTL Manchester Cablevision Holding Company NTL Microclock Services Ltd NTL Pension Trustees Ltd NTL (CWC) No. 3 Ltd Secure Backup Systems Ltd Directorships of companies placed in administration: Inquam Telecom Limited David Kelham does not currently hold any shares in Fonebak There are no further details to be disclosed pursuant to Schedule 2(g) of theAIM Rules. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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