Interim Results

3rd Dec 2009 14:00



ADDleisure Plc / Epic: ADE.L / Index: AIM / Sector: Leisure

3 December 2009

ADDleisure Plc ('ADDleisure' or 'the Company')

Interim Results for the six months ended 30 June 2009

ADDleisure Plc, the AIM traded company formed to develop products and services in the health and leisure sectors, announces its results for the six months ended 30 June 2009.

Chairman's Statement

We have made some difficult decisions during and post period end, placing two of our trading subsidiaries into administration and refocusing the business solely on Fitbug, which we believe offers considerable scope for growth. As part of this process, we have also refinanced the business post period end and recently completed a placing to raise approximately £1.2 million of new money.

During and post period end, Fitbug has taken some major steps forward: establishing a new software platform, developing its own proprietary hardware, signing a number of new partnerships with blue-chip clients including Nectar, Yorbody, and the Vitality Group, in addition to securing tenders within the lucrative public health arena having developed special weight loss management programmes for Primary Care Trusts ('PCTs'). It has also developed its direct consumer sales channels through its own website, fitbug.com, as well as other retailers including Amazon and WH Smith.

Looking forward, Fitbug has an exciting pipeline of new business opportunities both in the UK and internationally, which the Company anticipates will see the business grow through 2010 and beyond.

Continuing Operations

Fitbug offers online personal health and well-being services by combining interactive tracking devices and web technology to measure activity and health indicators, provide feedback and motivate the user towards a healthier lifestyle. The service is in a position to capitalise on its first-mover advantage, which has already led to a significant presence in the health insurance sector, with increasing efforts being placed on the public health arena and workplace health. It is mainly focussed on the corporate wellness and health insurance sectors, with increasing effort being placed on the public health arena.

In the UK, Fitbug's growth continues to gain momentum. It extended its contract with PruHealth and broke into the PCT arena having formed agreements with various PCTs across the UK. Post-period end it also signed a contract with Nectar, the UK's leading coalition loyalty programme, to provide a white labelled version of the Fitbug product which will reward collectors of Nectar points for living a healthy lifestyle. This service is due to be launched at the beginning of 2010.

Internationally, Fitbug is extending its geographic reach through various partnership agreements including The Vitality Group in the USA, a member of South Africa-based Discovery Holdings Limited and developer of the world's longest-standing health enhancement programme. On a much larger scale, Fitbug is in advanced negotiations with a major US insurance company which could see Fitbug generate significant revenues which would materially impact the Group's financial performance in 2010 and onwards.  Whilst the Directors are confident that these negotiations can be successfully concluded in the near term, there can be no guarantee that any such contract will be signed.

Fitbug remains dedicated to improving and increasing the functionality of its service, and in line with this, a new model 'Bug' was launched in August 2009. This new device is not only smaller and slimmer than its predecessor, but it offers enhanced functionality that will allow members to get more from their Fitbug programme. In particular, the new Bug, which uses accurate acceleration sensor technology, will:

Measure speed, which allows us to monitor exercise intensity; 

Calculate calorie burn accurately based on speed, which is key to our 'energy balance' approach; and

Record 'active time' which allows us to show users precisely how long in any 24-hour period they are up on their feet, or indeed sitting down!

In parallel, we are close to completing a new technology platform, which we anticipate launching in January 2010, designed to give fitbug.com superior site performance, scalability and internationalisation capabilities, whilst offering users numerous enhanced areas of functionality.

Additionally, we are exploring future applications and platforms for Fitbug's accelerometer technology. With the increasing number of functions that mobile phones and other hand-held technology offer, there is obviously scope for Fitbug to assist its users through new channels and devices. 

Discontinued Operations

In order to focus the team's energies on developing Fitbug, which the Directors believe will deliver substantial value to shareholders, the Company decided to divest its non-core assets. This process included placing Movers & Shapers Limited into administration in April 2009, along with its parent company ADDWellness Holdings Limited, which was a 50% subsidiary of ADDleisure. Whilst the Directors believed that the concept could, in the longer term, offer attractive growth prospects, the difficult market conditions, as well as the capital required to roll-out the concept meant we could no longer justify the high costs involved.

Additionally, post period end, in October 2009, the Company's 50.2% owned subsidiary, Ez-Runner, also entered into administration. Unfortunately, Ez-Runner did not deliver on its business objectives - its pipeline of new business opportunities had been slow to advance and existing contracts had taken longer to complete than anticipated  The Board believes that ADDleisure will receive significantly higher returns on investment by focusing resources on Fitbug.

Board Changes

During the period and post period end, there have been a number of changes to the Board. In October 2009, Andrew Brummer, who has been Finance Director designate and Financial Controller since May 2009, joined the Board as Finance Director, replacing Mike Mills, who has retired but remains a consultant to the Company. Paul Landau, the driving force behind the Fitbug concept and its Managing Director, has also joined the Board.

Michael Warshaw, a Non-executive Director, resigned from the Board in February 2009 but remains as a shareholder and consultant to the Company. Stephen Flanagan resigned as a Director in July 2009, having been promoted within Bupa and decided that he could no longer devote the required time to his position within ADDleisure. Finally, David Cummin stepped down from the Board in October 2009, following the placement of Ez-Runner into administration.

Financial Review

The results for the six months to 30 June 2009 show revenue of £1,481,000 (2008: £697,000) and pre-tax profit of £18,000 after a gain of £878,000 in the relation to the disposal of discontinued operations (2008 loss: £1,812,000). At the end of the period, the Group's cash position was £294,000 (2008: £3,100,000).

To facilitate the growth of Fitbug, the Company raised by way of a placing in December 2009, approximately £1.2 million of new money. However, in order to accommodate the short term cash flow requirements of the Company, Allan Fisher, David Turner and Pantheon Leisure Plc made available in two tranches, £300,000 to Fitbug Limited by way of interest free bridging finance which has now been converted into equity as part of the placing.

Outlook

After some years of development, Fitbug has now reached the point where it can begin to realise fully its potential and we anticipate seeing the business strengthen from its already well established position in the market. Not only is Fitbug gaining recognition and traction in the UK, but its international profile is also increasing, as highlighted by the exciting pipeline of new business opportunities. For the reasons outlined above, I am confident of the Company's growth prospects.

Allan Fisher

Chairman

3 December 2009

Unaudited Consolidated Income Statement

For the six months ended 30 June 2009

		Six months ended 30 June 2009	Six months Ended 30 June 2008	17 Months Ended 31 December 2008
	Note	£'000	£'000	£'000
		Unaudited	Restated Unaudited	Restated Audited
Revenue		1,481	697	2,427
Cost of sales		(258)	(238)	(589)
		------------	------------	------------
Gross profit		1,223	459	1,838
Operating and administrative expenses		(1,863)	(1,843)	(4,482)
		------------	------------	------------
Loss from operations		(640)	(1,384)	(2,644)
Finance income		69	116	218
Finance expenses		(132)	(33)	(72)
		------------	------------	------------
Loss before tax		(703)	(1,301)	(2,498)
Income tax credit		2	-	40
		------------	------------	------------
Loss for the period from continuing operations		(701)	(1,301)	(2,458)
Profit for the period from discontinued operations		719	(511)	(3,495)
		------------	------------	------------
Profit for the period and total comprehensive income		18	(1,812)	(5,953)
		------------	------------	------------
Total comprehensive income attributable to:
Owners of the parent		405	(1,554)	(5,317)
Non-controlling interest		(387)	(258)	(636)
		------------	------------	------------
		18	(1,812)	(5,953)
		------------	------------	------------
Earnings per share
Basic and diluted earnings per share attributable to the equity holders of the parent in pence	3	0.2	(0.8)	(2.6)
Basic and diluted earnings per share attributable to continuing operations in pence	3	(0.2)	(0.1)	(0.3)
		------------	------------	------------

 

Consolidated Statement of Changes in Equity

For the six months ended 30 June 2009

	Share capital	Share premium	Merger reserve	Excess of minority interest in losses over their equity interest in subsidiaries	Retained deficit	Total  equity
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2008 (unaudited)	1,045	4,717	1,319	(488)	(1,110)	5,483
Total comprehensive income for the period	-	-	-	(258)	(1,554)	(1,812)
Share based payment	-	-	-	-	45	45
Issue of shares for cash	3	32	-	-	-	35
	----------	------------	-----------	------------	------------	------------
Balance at 30 June 2008 (unaudited)	1,048	4,749	1,319	(746)	(2,619)	3,751
Total comprehensive income for the period	-	-	-	(52)	(3,947)	(3,999)
Adjustment to minority interest due to change in percentage ownership	-	-	-	-	-	-
Share based payment	-	-	-	-	130	130
Exercise of warrants	-	-	-	-	-	-
	--------	-----------	---------	------------	-----------	------------
Balance at 31 December 2008 (audited)	1,048	4,749	1,319	(798)	(6,436)	(118)
Total comprehensive income for the period	-	-	-	(44)	62	18
Adjustment to minority interest due to change in percentage ownership	-	-	-	(343)	343	-
Share based payment	-	-	-	-	45	45
Issue of shares for cash	-	-	-	-	-	-
	--------	-----------	---------	------------	-----------	------------
Balance at 30 June 2009 (unaudited)	1,048	4,749	1,319	(1,185)	(5,986)	(55)
	--------	-----------	---------	------------	-----------	------------

Consolidated Balance Sheet

As at 30 June 2009

	Six months ended 30 June 2009	Six months Ended 30 June 2008	17 Months Ended 31 December 2008
	£'000	£'000	£'000
	Unaudited	Unaudited	Audited
Assets
Non-current assets
Property, plant and equipment	86	260	131
Intangible assets	1,360	10	928
	------------	------------	------------
Total non-current assets	1,446	270	1,059
	------------	------------	------------
Current assets
Inventories	81	88	58
Trade and other receivables	1,388	1,644	961
Cash and cash equivalents	294	3,100	880
	------------	------------	------------
Total current assets	1,763	4,832	1,899
	------------	------------	------------
Total assets	3,209	5,102	2,958
	------------	------------	------------
Liabilities
Non-current liabilities
Borrowings	(1,125)	(157)	(161)
Contingent consideration	(693)	-	(666)
	------------	------------	------------
Total non-current liabilities	(1,818)	(157)	(827)
	------------	------------	------------
Current liabilities
Trade and other payables	(1,446)	(1,194)	(2,099)
Borrowings	-	-	(150)
	------------	------------	------------
Total current liabilities	(1,446)	(1,194)	(2,249)
	------------	------------	------------
Total liabilities	(3,264)	(1,351)	(3,076)
	------------	------------	------------
Total net (liabilities)/assets	(55)	3,751	(118)
	------------	------------	------------
Capital and reserves attributable to equity holders of the company
Share capital	1,048	1,048	1,048
Share premium reserve	4,749	4,749	4,749
Merger reserve	1,319	1,319	1,319
Excess of minorities interest in losses over their equity interest in subsidiaries	(1,185)	(746)	(798)
Retained deficit	(5,986)	(2,619)	(6,436)
	------------	------------	------------
Total equity	(55)	3,751	(118)
	------------	------------	------------

 

 

 

Consolidated Cash Flow Statement

For the six months ended 30 June 2009

	Six months ended 30 June 2009	Six months ended 30 June 2008	17 Months ended 31 December 2008
	£'000	£'000	£'000
Cash flows from operating activities
Profit/(loss) before taxation	18	(1,812)	(5,953)
Adjustments for:
- Depreciation and amortisation	45	151	160
- Impairment charge	-	595	1,118
- Share-based payments	45	45	130
- Finance income	(69)	(116)	(300)
- Finance expense	132	33	73
- Income tax credit	(2)	-	(46)
	------------	-----------	------------
Cash flows from operating activities before changes in working capital and provisions	169	(1,104)	(4,818)
- Decrease/(increase) in inventories	53	(49)	(38)
- (Increase)/decrease in trade and other receivables	(140)	(155)	671
- (Decrease)/increase in trade and other payables	(1,736)	326	989
	-----------	-----------	------------
Cash flow from operating activities	(1,654)	(982)	(3,196)
Corporation tax credit received	2	-	46
	-----------	-----------	------------
Net cash used in operations	(1,652)	(982)	(3,150)
	-----------	-----------	------------
Cash flow from investing activities
Purchase of property, plant and equipment	-	(158)	(593)
Acquisition of subsidiary	-	-	(583)
Cash acquired from acquisition of subsidiary	228	-	293
Development costs	(97)	-	-
Finance income	69	116	300
	-----------	-----------	------------
Net cash used in investing activities	200	(42)	(583)
	-----------	-----------	------------
Cash flow from financing activities
Issue of ordinary shares for cash	-	35	337
Loan proceeds	1,000	-	-
Capital repayments of finance lease obligations	(20)	(33)	(7)
Finance expense	(105)	(33)	(18)
	-----------	-----------	------------
Net cash generated from financing activities	875	(31)	312
	-----------	-----------	------------
Net decrease in cash and cash equivalents	(577)	(1,055)	(3,421)
Cash and cash equivalents at beginning of period	871	4,155	4,292
	-----------	-----------	------------
Cash and cash equivalents at end of period	294	3,100	871
	-----------	-----------	------------

 

Unaudited notes forming part of the consolidated interim financial statements

For the six months ended 30 June 2009

1. Accounting policies

Basis of preparation

Except as described below, the accounting policies adopted are consistent with those which will be applied in preparing the group's financial statements for the year ended 31 December 2009.

The following new standards, amendments to standards and interpretations have been adopted by ADDleisure Plc for the first time for the financial period ended 30 June 2009:

International Accounting Standard 1: Presentation of financial statements (IAS 1) (revised 2008) replaces IAS 1 (revised 2005) and is effective for financial periods beginning on or after 1 January 2009. This standard requires the Group to introduce the concept of 'total comprehensive income', which represents the change in equity during a period, other than changes resulting from transactions with owners in their capacity as owners. In applying this revision to IAS 1, a 'consolidated statement of comprehensive income' has been introduced which replace the 'consolidated income statement'.

International Accounting Standard 23: Borrowing costs (IAS 23) (amended 2007) supersedes IAS 23 (revised 1993), making it mandatory to capitalise borrowing costs that are directly attributable to a qualifying asset as defined by IAS 23. The impact of IAS 23 is immaterial to the Group's financial statements as at 1 January 2009 and for the six months to 30 June 2009.

International Financial Reporting Standard 2: Share-based payment: Vesting conditions and cancellations. The impact of this amendment is immaterial to the Group's financial statements as at 1 January 2009 and for the six months to 30 June 2009.

International Financial Reporting Standard 8: Operating segments (IFRS 8) is applicable for financial periods beginning on or after 1 January 2009 and requires the Group to report information about its operating segments based on the components of the entity that management uses to make operating decisions. 

No other new standards, amendments or interpretations applicable to this accounting period have had an effect on these interim results.

The preparation of the condensed consolidated half year financial statements requires the use of certain accounting estimates and judgments that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. The significant judgments made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the financial statements for the 17 months ended 31 December 2008.

2. Financial reporting period

The condensed interim financial information for the period 1 January 2009 to 30 June 2009 is unaudited. In the opinion of the directors the condensed interim financial information for the period presents fairly the financial position, and results from operations and cash flows for the period and are in conformity with the generally accepted accounting principles consistently applied. The accounts incorporate comparative figures for the interim period 1 January 2008 to 30 June 2008 (not previously published) and the audited 17 month period to 31 December 2008.

The financial information contained in this interim report does not constitute statutory accounts.

The comparatives for the 17 months ended 31 December 2008 are not the company's full statutory accounts for that period. A copy of the statutory accounts for that period has been delivered to the Registrar of Companies. The auditors' report on those financial statements was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under section 237(2)-(3) of the Companies Act 1985.

The presentation of the comparatives for the 17 months ended 31 December 2008 has been restated to reflect the impact of discontinued operations as discussed in Note 4.

3. Earnings per share

The calculation of basic and diluted profit per share has been based on the profit for the period of £18,000 (2008 - loss of £1,812,000) and the weighted average number of shares being 209,621,949 ordinary shares issued for the period ended 30 June 2009 (2008 - 209,505,282).

4. Discontinued operations

As announced on 1 April 2009, the Group undertook a restructuring in which ADDWellness Holdings Limited, a joint venture between ADDleisure and Bupa Finance Plc, and its subsidiary Movers & Shapers Limited were placed into administration.

On this date, ADDleisure Plc also purchased 100% of the issued share capital of Fitbug Limited for £1 cash and acquired ADDWellness Holding Limited's receivable rights under an existing inter-company loan made by ADDWellness Holdings Limited to Fitbug Limited of £3.5 million for a total cash consideration of £250,000.

During the period, a loan of £1,000,000 was raised being £800,000 from Bupa and £100,000 from both Allan Fisher and David Turner. The loan is for 3 years with interest at 5% above LIBOR and all interest is to be rolled up until repayment of the loan in full or part. Subsequent to 30 June 2009, it has been agreed that £500,000 of these loans will be converted into equity.

5. Acquisition of Fitbug

On 1 April 2009, ADDleisure plc acquired the entire share capital of Fitbug Limited for the sum of £1.

Fair value of assets acquired	£'000	£'000
Fixed assets	128
Inventories	76
Debtors	444
Bank deposits	228
Creditors	(1,083)
Net liabilities acquired		(207)
Consideration paid
Cash payments		-
Excess of consideration paid over net liabilities		(207)

6. Intangible assets

During the year intangible assets increased due to the recognition of £207,000 of goodwill (see note 5) and additional development expenditure of £248,000 coupled with amortisation of £23,000. No impairment charges have been recorded during the period.

7. Post balance sheet events

Ez-Runner Limited

On 5 October 2009, Ez-Runner Limited was placed into administration. The contingent consideration of £693,000 and the goodwill, arising on the acquisition of ClubRunner (Europe) Limited, of £928,000 are included in the accounts of Ez-Runner Limited and therefore will not form part of the consolidated accounts at 31 December 2009.

As at 30 June 2009, the investment in Ez-Runner Limited by ADDleisure plc was £532,000 which will be fully impaired in the December 2009 accounts.

Additionally, as at 30 June 2009 the intercompany balances due from Ez-Runner Limited were:

ADDleisure plc	£1,599,000
ADDleisure 2004 Limited	£1,024,000

All these intercompany accounts will be impaired in the December 2009 results.

As a result of Ez-Runner Limited being placed into administration, a subsidiary guarantee given by ADDleisure plc to secure the Virgin Active UK contract has now crystallised and a full and final settlement of £150,000 has been agreed.

8. Fundraising and going concern

The Group has conditionally raised £1,200,000, before expenses, by way of a share placing on 3 December 2009. On this basis the directors are of the opinion that the business will be able to continue as a going concern for at least the next 12 months.

The £1.2 million consists of £300,000 interim funding from the directors which will be converted into equity and the balance of £900,000 being new money.

In addition to the £1.2 million raised, Bupa and the directors have agreed to convert £500,000, being part of their loans made in April 2009, into equity.  Bupa have agreed to convert £300,000 and David Turner and Allan Fisher agreed to convert £100,000 each.

* * ENDS * *

For further information visit www.addleisure.com or contact:

Andrew Brummer	ADDleisure Plc	Tel: 020 7449 1000
Mark Percy / Catherine Leftley	Seymour Pierce	Tel: 020 7107 8000
Isabel Crossley / Paul Youens	St Brides Media & Finance Ltd	Tel: 020 7236 1177

ENDIR EADADEELNFFE

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