RNS Number:0553F
Freeplay Energy PLC
23 June 2006
23 June 2006
Freeplay Energy plc
("Freeplay" or "the Company")
Preliminary Results for the year ended 30 December 2005
CHAIRMAN'S STATEMENT
I am pleased to present the full year results for Freeplay Energy plc for the
year ended 30 December 2005, its first year as a public company.
2005 has proved to be both a challenging and exciting year for Freeplay. The
Company was successfully admitted to AIM on 2 March 2005 raising US $4.4million
net of expenses, by way of a placing of new shares. The funds received from the
flotation have been used to repay existing debt, market the Group's products,
upgrade existing tooling and acquire tooling for new products. Net debt at 30
December 2005 was US $1.2 million (2004: US $1.8 million).
The focus of 2005 was largely one of laying the foundations for the Group:
increasing our manufacturing capability; bringing to market the portfolio of new
products as outlined at the time of the IPO and strengthening our business
development function. In addition, we have spent time reviewing, and
implementing a change in our US strategy, which in May 2005 consolidated North
American distribution into Dixie Sales providing a necessary link in our supply
chain process and improved flexibility as well as providing new channels to
market. Although our financial results for this year are disappointing they
reflect the investments made in the year and the Board's guidance given to the
market in December 2005.
I have been particularly pleased with the number of new products we have
launched since the IPO, which increased the product range from nine at the end
of 2004 to sixteen by the end of 2005. New applications for the core technology
continue in development, with the product pipeline expected to provide new
product launches during 2006.
Progress was also made during 2005 in business development with the recruitment
of senior managers for Africa and Europe. This has resulted in several new
relationships, partnerships and distribution agreements that are expected to
bear fruit through 2006.
2005 reflected the investment in the brand, building the management team and in
new products that build the foundation for future growth in the sustainable
energy arena. Our business model has been enhanced with the addition of
inventory in North America through Dixie Sales, providing a necessary link in
the supply chain process and improved flexibility.
Financial results
For the year ended 30 December 2005, turnover was US $3.1 million (2004: US $6.3
million) with sales of US $2.6 million in the second half contributing to
overall turnover for the period. This reduction in turnover was impacted by like
for like turnover in the UK and Continental Europe decreasing by 37%, due to a
recall of Devo, the Company's new portable DAB and FM radio, and Weza,
Freeplay's FreeCharge portable energy source, towards the year end. Both these
one-off issues have now been resolved and the product reshipped to distributors
in the first quarter of 2006. Turnover was also affected by the change in
accounting treatment of revenue recognition from Dixie Sales Company, the
Group's North American distribution partner.
Gross profit fell to US $1.1 million (2004: US $2.1 million) as a result of the
reduction in revenue. In line with expectations, administrative expenses
increased by 97% to US $5.5 million (2004: US $2.8 million) as a result of the
Group's investment in new staff, business development costs incurred in the US
to set up the new distribution relationship and unrealised foreign exchange
losses. Freeplay reported a substantial increase in operating loss to US $4.4
million (2004: US $0.7 million) and the loss before taxation increased to US
$4.5 million (2004: US $2.0 million). The Group utilised research and
development tax credit claims of US $0.2 million bringing the loss for the
financial year to US $4.3 million (2004: US $2.0 million).
During the period, net debt was reduced by US $6.2 million to US $2.3 million
(2004: US $8.5 million). The Company issued #1.5 million (US $2.8 million) of
convertible loan stock in January 2005, which converted into 3,605,769 ordinary
shares on flotation.
At flotation in March 2005, Freeplay raised US $6.6 million, of which US $2.3
million has been used to reduce debt.
Operational review
Product Development
The Group continued to make good progress with its product development plan over
the period and increased its product range to sixteen as at 30 December 2005.
Freeplay's range of illumination and radio products continued to enjoy success
with consumers and over the course of the year Freeplay launched several new
products to complement the existing range. During Q2 the LED based Jonta was
successfully launched, as well as a light centre to house the Sherpa LED
products as a domestic charging centre. In the final quarter of this year the
Kito lantern was launched.
In terms of audio products, the Eyemax radio was launched in weatherband and
light versions during Q1 and during Q3, Freeplay launched the world's first
sustainably powered portable DAB and FM radio, Devo.
The Group also launched Weza, the first sustainable foot powered generator which
incorporates the very best of Freeplay's technology in one appliance. In March
2006, a patent was granted by the UK Patent Office for the Weza which will help
to ensure that Freeplay remains at the forefront of technical developments and
innovation in this area.
The grant of the patent is an important step for Freeplay, as it helps to open
up additional opportunities for the Company, particularly in the developing
world. A key feature of the Weza is that it can be used to power electronic
equipment via its 12V DC cigarette lighter output socket and so enables those
with little means or infrastructure to charge, for example, multiple mobile
phones simultaneously at any one time.
In recognition of the Group's strong brand, Freeplay was a finalist for the 2005
Walpole Awards for British Excellence.
The Group continues to explore ways to expand the current product platforms and
is investigating ways in which to extend its technology to a range of lighting
systems, audio products and standalone power packs. Further progress has been
made with the medical devices that Freeplay has adapted, including a foetal
heart rate monitor and pulse oximeter, to be driven by human power. Targeted at
the developing world, the products have also been simplified for ease of use by
non-medical professionals and ruggedised to withstand harsh environments. These
products remain in the pipeline as a result of the rigorous testing process
required prior to use. In addition, Freeplay is working with Massachusett's
Institute of Technology to develop the alternative energy solution for their
"One Laptop per Child" project.
Manufacturing
Freeplay has delivered on its strategy to diversify its manufacturing capability
and now outsources to five factories in China compared with one at the beginning
of 2005. Furthermore, Freeplay achieved savings of US $265,000 against budget in
acquiring the moulds and tooling at the new factories for the products launched
during 2005.
Sales and Distribution
As anticipated in the Group's trading statement in December 2005, sales were
lower than originally anticipated in North America arising from the Board's
post-IPO change in US strategy which consolidated North American distribution
into Dixie Sales, and the consequent rebuilding of North American distribution
infrastructure has compounded the situation.
Although implementation and integration of the marketing plan has been slower
than anticipated, the Board is encouraged by the progress made by Dixie Sales,
since its appointment in May 2005. Recent developments include achieving
listings with major sporting and outdoor retailers and the appointment of
commissioned sales representatives, increasing the opportunity to secure
significant retail coverage for Freeplay's product range.
New distribution agreements were also signed during 2005 in West Africa and
Europe. These important distributors have placed initial orders and, in some
cases, we have already seen repeat orders. Freeplay looks forward to developing
further opportunities in conjunction with these distributors. A number of
alternative partnerships are also being tested as Freeplay concentrates on
expanding the routes to the consumer.
We continue to review our distribution arrangements, taking control into
Freeplay whenever possible. Our strategy in North America and the United Kingdom
is to target the major distributors and the Group is making good progress in
securing new distribution partners, where we have already shipped product or are
in final negotiations.
We continue to focus on becoming a major provider of sustainable energy in the
developing world, a strategy which is based on statistics which suggest that
developing nations account for approximately 85% of the world population, but
only 46% of the world's fossil fuel electricity consumption.
Our People
During the period we have continued to strengthen both our operational and
senior management team.
As the Group becomes more focused on strengthening its sales and distribution
efforts, during the year we have strengthened our business development
capabilities, putting in place a team which is able to help Freeplay take
advantage of the significant opportunities available to the Group in 2006.
In February 2005, Jenny Kotze joined as Business Development Manager - Africa.
She is responsible for Freeplay's marketing strategy across the spectrum of
African distribution, with a strong emphasis on market building for the
FreeCharge mobile phone chargers. Sameer Hajee and David Floyd joined the Group
as Business Development Managers on 1 December 2005 and 1 January 2006
respectively. Sameer heads up Freeplay's Aid business globally and David leads
the Group's sales drive in Europe.
In addition, Andy Polansky was appointed to the Board as a Non-executive
Director on 13 December 2005.
The Board would like to take this opportunity to thank all members of staff for
their contribution to the progress the Company has made during this period of
significant change.
Post year-end developments
Since the year-end, we have had a number of significant and positive
developments within our business. As indicated in the trading update issued in
December initial shipments of our FreeCharge portable energy source, Weza, and
the portable DAB and FM radio were recalled due to technical problems. These
one-off problems have now been fully resolved and both products were re-shipped
during the first quarter of 2006.
In terms of products, production continues to progress in line with our
development plans. The Group has commenced tooling a table lantern and 12V
FreeCharge mobile phone charger. A prototype self powered laptop is being
developed in conjunction with a partner that has confirmed the provision of
funding for the project.
While the first quarter is a traditionally quiet period due to the closure of
manufacturing for Chinese New Year, we are pleased that the Group is achieving
promising early sales figures in both Africa and North America.
The distribution relationship with Dixie Sales, begun in mid 2005, has achieved
notable recent success in signing retail groups in the North American market,
including Target, Macys Mid West, Sharper Image and REI. This, in conjunction
with the Dixie sales team, infrastructure and reduced lead times in North
America, underpins Freeplay's optimism for achieving significant revenue growth.
The Aid sector continues to be important for Freeplay and during the period the
Company has established preferred supplier status with a number of aid
organisations. In the year to date, the Freeplay AID and Humanitarian division
has received placed orders in excess of US $1.4 million, including substantial
orders from the Freeplay Foundation and UNICEF.
The Freeplay Foundation is an important outlet for the Lifeline radio, and
Freeplay is pleased to be able to continue to work with them. In December 2005,
the Freeplay Foundation was one of two chosen charities supported by The Times
Christmas Appeal.
On 18 April 2006, Freeplay announced that the Freeplay Foundation, in
partnership with a US-based not for profit organisation, had placed orders for
13,000 Lifeline radios.
On 24 May 2006, Freeplay signed a Long Term Arrangement ("LTA") with UNICEF to
be the sole supplier of wind-up radios, the Freeplay Lifeline radio, to UNICEF.
Following independent testing, UNICEF chose the Freeplay product for an opening
order of 20,000 radios for Madagascar and, in addition, the contract will make
the Lifeline radio available to the entire United Nations through UNICEF. Under
the terms of the contract, the United Nations will no longer need to tender for
the supply of wind-up radios to its sister organisations.
On 15 May 2006, we announced that Freeplay Market Development Limited, a wholly
owned subsidiary company, had signed a five year agreement with WP Phones
International's Hong Kong subsidiary, WP Phones International Hong Kong Limited
("WP Phones") for a distribution order of its FreeCharge Mobile Phone Charger
("FreeCharge") in Africa. The agreement will provide Freeplay with guaranteed
sales through WP Phones of one million units of the FreeCharge per year, over a
five year period. WP Phones will have exclusive distribution rights in both
Nigeria and Tanzania over the period of this contract and if it achieves sales
of more than two million units a year, then it will retain exclusive
distribution rights of the FreeCharge across the whole of Sub-Saharan Africa.
The contract with WP Phones has been broadened to include the Caribbean, where
Freeplay will provide an additional minimum 100,000 units per annum.
Furthermore, to add to its recent success in winning new business, on 8 June
2006, Freeplay received an order, through Tango Group, from the UK Ministry of
Defence for the supply of 12,000 Freeplay Ranger radios and 12,000 Freeplay Kito
lanterns, and on 16 June Catter, Freeplay's European distributor, placed an
order for 7,000 Freeplay products, including the Eyemax radio, the Jonta
flashlight, the Summit radio, the Sherpa LED flashlight and the Indigo lantern.
On 18 May 2006, it was announced that Freeplay had agreed, subject inter alia to
shareholder approval to acquire the entire issued share capital of Barrett
Marketing Group Inc. ("BMGI") and its wholly owned subsidiary Dixie Sales
Company Inc. ("Dixie"). Freeplay also announced today that it has raised US $4.7
million (net of expenses) through a placing with institutional and other
investors, which is also subject to shareholder approval. The acquisition of
BMGI and the placing are inter alia, subject to shareholder approval and an
extraordinary general meeting has been convened for 10.00 am on 17 July 2006 at
which shareholders will be asked to consider resolutions necessary to approve
and implement the acquisition of BMGI and the placing.
Dixie Sales is an established sales, marketing, distribution and customer
service provider based in Greensboro, North Carolina, USA. Dixie provides a full
range of services to its customers and suppliers, which includes customer and
supplier account management, customer and supplier logistics, consumer call
centre services and technical services such as training and education to
customers. In addition, Dixie provides brand building, sales and marketing
support, order management and distribution services for all of Freeplay's
products in North America and Caribbean countries.
Outlook
The investment that Freeplay has made during 2005 and relationships established,
seek to underpin Freeplay's sustainable energy vision.
We are focused on our business development initiatives, in order to deliver a
significant improvement in contribution to operations during 2006 and beyond.
2006 has started well and we remain encouraged by the opportunities currently
available to the Group and are confident of fulfilling the Board's vision of
building a significant sustainable energy company.
Rory Stear
Chairman and Chief Executive Officer
- Ends -
For further information, please contact:
Freeplay Energy plc 020 7851 2630
Rory Stear, Chairman and Chief Executive
Weber Shandwick Square Mile 020 7067 0700
Louise Robson or Rachel Taylor
Freeplay Energy plc
Consolidated profit and loss account for the year ended 30 December 2005
Year ended Period ended
30 December 30 December
2005 2004
US $'000 US $'000
--------- ---------
Turnover - continuing operations 3,083 6,302
Cost of sales - continuing operations (1,977) (4,188)
--------- ---------
Gross profit 1,106 2,114
Net operating expenses - continuing operations (5,524) (2,806)
--------- ---------
Operating loss - continuing operations (4,418) (692)
Interest receivable and similar income 36 39
Interest payable and similar charges (129) (1,313)
--------- ---------
Loss on ordinary activities before taxation (4,511) (1,966)
Tax credit on loss on ordinary activities 212 -
--------- ---------
Loss for the financial year (4,299) (1,966)
--------- ---------
Basic and diluted loss per
5p ordinary share (in US $) (0.22) (0.14)
========= =========
There is no difference between the loss on ordinary activities before taxation
and the loss for the year stated above and their historical cost equivalents.
Freeplay Energy plc
Consolidated balance sheet as at 30 December 2005
30 Dec 2005 Dec 2004
US $'000 US $'000
----------- -----------
Fixed assets
Intangible assets - -
Tangible assets 651 519
Investments - -
----------- -----------
651 519
Current assets
Stocks 838 140
Debtors 2,643 2,447
Cash at bank and in hand 325 118
----------- -----------
3,806 2,705
Creditors: amounts falling due within one year
(including convertible loan stock) (4,661) (12,246)
----------- -----------
Net current liabilities (855) (9,541)
----------- -----------
Total assets less current liabilities (204) (9,022)
----------- -----------
Creditors: amounts falling due after more than
one year (45) -
Provisions for liabilities and charges - (55)
----------- -----------
Net liabilities (249) (9,077)
=========== ===========
Capital and reserves
Called up share capital 3,936 1,342
Share premium account 17,052 7,232
Merger reserve 1,947 1,947
Other reserve 60 60
Profit and loss account (23,244) (19,658)
----------- -----------
Total shareholders' deficit (249) (9,077)
----------- -----------
Represented by:
Equity shareholders' deficit (249) (17,408)
Non-equity shareholders' funds - 8,331
----------- -----------
Total shareholders' deficit (249) (9,077)
=========== ===========
Freeplay Energy plc
Consolidated cash flow statement for the year ended 30 December 2005
Year ended Period ended
30 December 30 December
2005 2004
US $'000 US $'000
--------- ---------
Net cash outflow from operating activities (6,206) (2,377)
Returns on investments and servicing of finance
Interest paid (75) (124)
Interest element of finance lease rentals payment (1) -
Interest received 36 39
--------- ---------
Net cash outflow from returns on investments
and servicing of finance (40) (85)
Taxation refund 212 -
Capital expenditure and financial investment
Purchase of tangible fixed assets (291) (230)
Net cash outflow for capital expenditure
and financial investment (291) (230)
--------- ---------
Net cash outflow before financing (6,325) (2,692)
--------- ---------
Financing
Issue of ordinary share capital 6,650 -
Expenses of share issue (2,296) -
New convertible loan stock 2,819 -
Issue of preference share capital - 40
Issue of preference share warrants - 60
Capital element of finance lease payments (1) -
(Decrease)/increase in borrowings (455) 1,331
--------- ---------
Net cash inflow from financing 6,717 1,431
--------- ---------
Increase/(decrease) in cash 392 (1,261)
========= =========
Freeplay Energy plc
Reconciliation of operating loss to net cash outflow from operating activities
Year ended Period ended
30 December 30 December
2005 2004
US $'000 US $'000
--------- ---------
Operating loss (4,418) (692)
Depreciation charge 199 230
Increase in stocks (698) (54)
Increase in debtors (196) (1,351)
(Decrease)/increase in creditors (1,038) 421
Decrease in provisions (55) (931)
--------- ---------
Total net cash outflow from operating activities (6,206) (2,377)
========= =========
Reconciliation of net cash flow to movement in net debt
Year ended Period ended
30 December 30 December
2005 2004
US $'000 US $'000
--------- ---------
Increase/(decrease) in cash in year 392 (1,261)
Movement in borrowings 455 (1,331)
Convertible loan stock (2,819) -
Finance lease payments 1 -
--------- ---------
Change in net debt resulting from cash flows (1,971) (2,592)
New finance leases (55) -
Other non-cash changes 8,194 (1,189)
Net debt at beginning of year/period (8,458) (4,677)
--------- ---------
Net debt at end of year (2,290) (8,458)
========= =========
Statement of group total recognised gains and losses
Year ended Period ended
30 December 30 December
2005 2004
US $'000 US $'000
--------- ---------
Loss for the financial year (4,299) (1,966)
Currency translation differences on
net investment in foreign subsidiaries 713 (600)
--------- ---------
Total recognised losses for the year (3,586) (2,566)
========= =========
Freeplay Energy plc
Reconciliation of movements in shareholders' deficit
Year ended Period ended
30 December 30 December
2005 2004
US $'000 US $'000
--------- ---------
Loss for the financial year (4,299) (1,966)
Currency translation differences on
net investment in foreign subsidiaries 713 (600)
Net proceeds from equity shares issued 4,354 -
Conversion of loans to equity shares 8,060 -
Net proceeds from non-equity share warrants issued - 60
--------- ---------
Net increase/(decrease) in shareholders' funds 8,828 (2,506)
Opening shareholders' deficit (9,077) (6,571)
--------- ---------
Closing shareholders' deficit (249) (9,077)
========= =========
Freeplay Energy plc
Notes to the financial statements for the year ended 30 December 2005
1 The financial information set out above does not constitute the Company's
statutory accounts within the meaning of section 240 of the Companies Act 1985.
The 2005 figures are based on audited accounts for the period ended 30 December
2005. The auditors do not expect to issue a qualified report on the statutory
accounts which will be finalised on the basis of the financial information
presented by the directors in the preliminary announcement and which will be
delivered to the Registrar of Companies following the Company's annual general
meeting.
2 The 2004 comparatives are derived from the statutory accounts for 2004 which
have been delivered to the Registrar of Companies and received an unqualified
audit report and did not contain a statement under the Companies Act 1985,
s237(2) or (3).
3 This statement will be made available online at www.freeplayenergy.com and
copies will be made available at the Company's registered office, 2 Stone
Buildings, Lincoln's Inn, LONDON WC2A 3TH.
4 Loss per share
Year ended Period ended
30 December 30 December
2005 2004
US $'000 US $'000
--------- ---------
Loss for the financial year/period (4,299) (1,966)
Average number of ordinary shares in
issue (in thousands) 19,599 13,990
Basic and diluted loss per 5p (2004: 5p)
ordinary share (in US $) (0.22) (0.14)
========= =========
The calculation of the basic and diluted loss per ordinary share of 5p (2004:
5p) each has been based on the loss for the relevant financial year/period and
on 19,599,426 shares (2004: 13,990,342). This represents the average number of
ordinary shares in issue. None of the contingently issuable share options give
rise to a dilution in the loss per share due to the losses made in the year.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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