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Rest of WorldNews > Press Release: Freeplay Energy plc ( AIM:FRE ), INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2006
2006-09-21
Press Release - 2006-09-21INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2006
Freeplay Energy plc, the sustainable energy company that captures, stores and delivers electric power to self-powered devices such as radios, torches and mobile phone chargers, announces interim results for the six months ended 30 June 2006
- Acquisition of Barrett Marketing Group Inc. and Dixie Sales Company Inc., its wholly owned marketing and distribution subsidiary, completed on 19 July 2006
- Placing on 19 July 2006 raised £2.38 million, net of expenses, to fund working capital and investment needs of the Enlarged Group
- Strong growth in turnover to US $3.0 million (2005 : US $1.1 million)
- Strengthened management team, including Peter Porteous as Chief Executive
- Good operational progress
- Initial shipments of Lifeline radios under Long Term Agreement signed with UNICEF delivered in June, with remaining to be shipped by the end of September 2006
- 5 year contract signed with WP Phones for 1.1 million FreeCharge mobile phone units per annum in Africa and the Caribbean
- Three year licensing agreement with Nicco Industries in China for the use of Freeplay technology
"The first half of 2006 has proved very exciting for the Group. The acquisition of Dixie Sales has marked a step-change for Freeplay and we are already seeing the benefits of having an integrated sales, distribution and marketing function."
"The second half has started well and we are beginning to see sales from our product launches and broadened distribution network. The Directors of Freeplay remain confident about the prospects of the group for 2006 and beyond."
For further information, please contact:
Freeplay Energy plc 020 7851 2630
Rory Stear, Chairman and Chief Executive Officer
Weber Shandwick Square Mile 020 7067 0700
Susan Ellis, Nick Oborne, Rachel Taylor
Charles Stanley &Co 020 7739 8200
Mark Taylor, Freddy Crossley
Notes to Editors: Freeplay Energyís core technology revolves around the efficient conversion and storage of applied human energy, and the delivery of this energy on demand as electricity to create self-powered electronic devices. Initial applications include radios (both consumer and humanitarian), torches, mobile phone chargers and standalone foot chargers and the Company has a new product development plan which anticipates broadening the application of its technology into new product categories. Freeplay believes it was first to market and commercialise self-powered technology and that it is recognised as a leading brand in this market for such products.
Established in 1994, the Company today has offices in both London and Cape Town and floated on AIM, a market operated by the London Stock Exchange plc in March 2005. Further information about Freeplay Energy and its products can be found at www.freeplayenergy.com.
The Board of Freeplay announces its interim results for the period ended 30 June 2006. During the period, the Group has focused its efforts on developing the business to drive sales growth and this has involved new product launches and development, the establishment of sales led distribution channels and investment in operational management. The Directors believe that there is a growing demand for sustainable energy products which underlines their confidence in the Groupís prospects in the next six months and thereafter.
Acquisition of Barrett Marketing Group Inc. and Dixie Sales Company
On 23 June 2006, Freeplay announced the acquisition of Barrett Marketing Group Inc., and its wholly owned subsidiary, Dixie Sales Company Inc ("Dixie"), together with a Placing to raise approximately £2.38 million net of expenses, which completed after the period end on 19 July 2006. The acquisition of Dixie and the fundraising marked a step-change for Freeplay, giving the Group direct control in North America over its sales targets, through Dixie's strong formal relationships with many US retailers and merchants. Although Dixie was not part of Freeplay during the period under review, it has achieved its turnover and profit forecasts for the first half of the year. Freeplay's results for the year ended 31 December 2006 will incorporate just over five months of trading from Dixie.
The overall integration of Dixie into Freeplay is progressing well and the Board is examining opportunities for further synergies, specifically in the areas of IT, human resources and logistics, where Dixie has particular expertise.
Peter Porteous, CEO of Dixie, is now Chief Executive of Freeplay and his responsibility is the day-to-day operational focus of the business. Rory Stear remains as Executive Chairman and he is now focusing on Group strategy and looking for new opportunities for the Group, including new geographic markets such as India and Brazil.
Financial Results
For the period ended 30 June 2006, turnover was US $3.0 million (2005: US $1.1 million). The improvement in turnover was achieved from a number of areas. In North America sales were US $0.9 million (2005: negative $0.2 million). Aid Sales of US $0.9 million (2005: US $0.2 million) also saw significant growth following initial deliveries under the Long Term Agreement signed with UNICEF. Revenue growth has also been seen in Africa (2006: US $0.6 million; 2005: US $0.3 million) and Europe excluding the United Kingdom (2006: US $0.2 million; 2005: US $0.05 million). This has partially been offset by a reduction in turnover in the United Kingdom (2006: US $0.4 million; 2005 : US $0.8 million) following slower than expected sell through of the Digital radio ("Devo").
Gross profit improved to US $0.9 million (2005: US $0.4 million) as a result of the increase in revenue. Administrative expenses grew by 28% to US $3.2 million (2005: US $2.5 million) reflecting the continuing investment in business development begun during 2005. Freeplay reported an increase in operating loss of 8% to US $2.2 million (2005: loss of US $2.1 million) and the loss before taxation increased to US $2.4 million (2004: loss of US $2.1 million).
The Group utilised research and development tax credit claims of US $0.1 million bringing the loss for the financial year to US $2.3 million (2005: US $2.1 million). The loss per share for the period was US $0.08, compared with a loss of US $0.12 for the same period last year.
During the period net debt increased by US $2.8 million (2005: reduction of US $6.2 million). This was due to losses from the first six months operations (US $2.2 million), an increase in debtors of US $0.5 million following the increase in trade and an increase in inventories (US $0.3 million). This was partially offset by a reduction in trade and other liabilities (US $0.2 million). At 30 June 2006, Freeplay had a net overdraft of US $4.0 million.
Following the Placing on 19 July 2006, US $4.6 million was raised net of expense. This will be used to repay debt (US $2.2 million), some investment in new tooling (US $0.2 million), with remainder (US $2.4 million) to sustain ongoing working capital requirements.
A Pro Forma Consolidated Balance Sheet as at 30 June 2006 has been included at the end of this announcement in order to provide an indicative expected impact of the acquisition of Barrett Marketing Group Inc.
Product Development
The Group has made good progress with its product development plan and has now brought to market all the new products scheduled to date. As a result, the Freeplay product range has increased to 17 as at 19 September 2006.
Production continues to progress in line with our development plans. During the period, the Group commenced shipments of the Weza, the FreeCharge portable energy source and the 12V FreeCharge Mobile Phone Charger. In addition, Freeplay has been notified by the European patent office that a patent has been granted for the Weza in Europe. This follows on from the approval by the UK Patent Office in March of this year.
The Group has also completed the deliverables required under the first phase of the project to develop a self powered laptop for the Massachusett's Institute of Technology "One Laptop per Child" project.
On [14] September 2006, the Group signed a three year licensing agreement with Nicco Industries, a Chinese manufacturer of sustainable energy products, whereby Nicco will incorporate Freeplay's leading technology in a range of its flashlights, which are specifically designed for the North American market.
On 19 September, Freeplay launched its latest product, the Freeplay Indigo LED Lantern, a modern version of an old style camping lantern, which will be available through all major retailers in the UK from September 2006. This follows the successful launch in North America through Dixie Sales, where the lantern is already being sold through retailers such as Target and REI. Using Freeplayís self-sufficient, leading energy technology, the Indigo is believed to be the most reliable and dependable lantern in the market today.
The Group has continued to make progress on adapting medical devices, including a foetal heart rate monitor and pulse oximeter, to be driven by human power.
Manufacturing
Freeplay's products are currently manufactured through five factories in China, which allows the Group to take advantage of the specialist manufacturing and technologically advanced capabilities needed for its newer products and provides the Group with enough capacity for its current growth plans, thereby reducing reliance on a single provider.
Sales and Distribution
We have made strong progress in North America following the first complete period of trading under the exclusive distribution agreement signed with Dixie Sales Company in May 2005. The distribution relationship with Dixie Sales has achieved notable recent success in signing up and receiving orders from retail groups in the North American market, including Target, Tractor Supply Company, Sharper Image and REI. In addition, Dixie has signed Philips, the consumer electronics company, as a new customer in Canada, which indicates the strength of Dixie and its ability to sign up key consumer brands. The acquisition of Dixie Sales brings us a dedicated sales team, infrastructure and reduced lead times in North America, as well as allowing the Group to leverage Dixie's expertise into other markets around the world. This underpins Freeplay's optimism for achieving significant revenue growth in North America during 2006 and, in the longer term, globally.
In South Africa Freeplay completed the first shipments to its exclusive retail distributor, Connoisseur Electronics (Pty) Limited, which was appointed on 30 March 2006. Plans are in place to extend to sectors and products not covered by this agreement, including a direct sales approach. During the period, a number of regional non-exclusive distribution partners were appointed throughout Southern Africa and Freeplay has opened an office in Nairobi to support customers in the strategically important East Africa.
On 15 May 2006, we announced a five year distribution agreement with WP Phones for the FreeCharge mobile phone charger in sub-Saharan Africa for a minimum of one million units per annum. The agreement was subsequently extended to cover an additional 100,000 units for the Caribbean, bringing the total agreement to 1.1 million units per annum over the next five years. During the period we have been working closely with WP Phones to ensure that the FreeCharge is fully compatible with WP Phones' products. We have now developed a number of customised samples which are being tested in the market. We are currently on track to deliver the first shipment of the fully developed product in the last quarter of 2006.
The Aid sector continues to be extremely important for Freeplay, where we have a strong enquiry and order book. We are seeing major opportunities in Africa. The strong performance during the first half was a result of large orders received from Freeplay Foundation and UNICEF in April and May.
In June Freeplay signed a Long Term Arrangement with UNICEF to be the sole supplier of the Freeplay Lifeline radio to UNICEF. The significant opening order of 20,000 radios for Madagascar followed independent testing by UNICEF and makes the Lifeline radio available to the entire United Nations through UNICEF. The second half of the 20,000 unit UNICEF order will be shipped in late September.
We continue to work closely with the Freeplay Foundation and have received a further order for 10,000 Lifeline radios, which will be delivered at the end of the third quarter.
The UK market slowed during the first half of 2006. We saw further deliveries of the Devo, our DAB digital radio, in the first half and continue to see sell through. Current pipeline orders indicate that the UK will achieve a consistent level of sales by the end of 2006. Since the period end, the Group received a large order of 24,000 units, through Tango Group, from the Gurkha Welfare Trust for Ranger radios and Kito lanterns. This order was shipped on 31 August 2006. A key focus in the UK is distribution and during the period we have appointed Rocom as a distributor to work alongside Tango Group. In addition, Freeplay are engaging directly with key retailers.
In Continental Europe, we continue to deliver through several small distributors to serve the Dutch and French markets. Further orders have been received in these areas, including a 7,000 unit order for a range of Freeplay products from Catter, our main European distributor, and new regions are being pursued in varying degrees of progress.
People
Through the acquisition of Dixie, Freeplay has significantly strengthened both its Board and senior management team.
Peter Porteous, CEO of Dixie, was appointed chief executive of Freeplay and William and Edward Barrett, Harold Reiter, Barrett Corporation President and COO and Stuart Kinney, Barrett Corporation General Counsel joined as non-executive directors. Both Rory Stear and Richard Court remain as Executive Chairman and Finance Director respectively.
We were pleased that the senior management team of Dixie joined the Freeplay Energy Group at the time of the acquisition and look forward to working with Mike Rounsavall, recently promoted to President, and his team in North America, where their expertise in sales, marketing and distribution is already proving to be of significant benefit to the Group, continuing to grow Dixie's traditional business and expanding the Freeplay brand in North America and globally.
Focus has been on growing and supporting the Business Development team to drive revenue. David Floyd joined as Business Development Manager for Europe in February 2006 and his remit is to lead growth in the region. Sameer Hajee, who joined in December 2005, is Business Development Manager for the Aid business and, continues to make considerable progress in growing sales in this area. In addition, we are now seeing the benefits from having Jenny Kotze, who has been Business Development Manager for Africa for eighteen months. We will continue to seek suitable new candidates who will be able to work with us to expand the business.
The Board would like to thank all the Freeplay employees for their considerable hard work during the year and welcome the Dixie employees to the Group.
Current Trading and Outlook
The efforts and changes implemented throughout the business since flotation in March 2005 have begun to bear fruit. Freeplay has and continues to experience a significant increase in orders, which are underpinned by the investment in the new business development team. Freeplay's total sales book was approximately US $6.7 million for the year to date. We continue to see numerous opportunities for Freeplay's existing set of sustainable energy products, particularly in lighting and mobile telephony, which underpins our confidence in achieving a significant uplift in revenue during 2006 and beyond.
Freeplay's strategy to develop the Group into a broad based sustainable energy company remains sound. There are exciting growth opportunities in the current product range as well as in the wider market place.
The second half has started well and we have begun to see sales from our recent product launches, including the Indigo lantern where we started shipments to key retailers in September, and our broadened distribution network. In the short term the Board's focus is to fully integrate Dixie into the Group and for the new management team to unlock the potential of the current product range in the Group's core markets. The Directors of Freeplay remain confident of the prospects of the Group for 2006 and beyond.
A CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the six months ended 30 June 2006
| Notes | For the Six months ended 30 June 2006 (Unaudited) US $'000 | For the Six months ended 30 June 2005 (Unaudited) US $'000 | For the year ended 30 Dec 2005 (Audited) US $'000 | |
| Turnover - continuing operations Cost of sales - continuing operations | 3.001 (2.074) | 1.129 (728) | 3.083 (1.977) | |
| Gross profit | 927 | 401 | 1.106 | |
| Net operating expenses continuing operations | (3.162) | (2.471) | (5.524) | |
| Operating loss - continuing operations Interest receivable Interest payable and similar charges | (2.235) - (128) | (2.070) 11 (66) | (4.418) 36 (129) | |
| Loss on ordinary activities before taxation Tax on loss on ordinary activities | (2.363) 58 | (2.125) - | (4.511) 212 | |
| Loss for the financial period | (2.305) | (2.125) | 4.299 | |
| Basic and diluted loss per 5p ordinary share (in US $) | 1 | (0.08) | (0.12) | (0.22) |
CONSOLIDATED BALANCE SHEET
At 30 June 2006
| Notes | 30 June 2006 US $'000 (Unaudited) | 30 June 2005 US $'000 (Unaudited) | 30 Dec 2005 US $'000 (Audited) | |
| Fixed assets Tangible assets Investments | 574 - | 455 - | 651 - | |
| Current assets Stocks Debtors Cash at bank and in hand | 574 1.094 3.131 25 | 455 504 2.640 702 | 651 838 2.643 325 | |
| Creditors amounts falling due within one year (including convertible loan stock) | 4.250 (7.376) | 3,846 (2.827) | 3.806 (4.661) | |
| Net current liabilities | (3.126) | 1.019 | (855) | |
| Total assets less current liabilities Creditors amounts falling due after more than one year | (2.552) (32) | (1.474) - | (204) (45) | |
| Net liabilities | (2.584) | (1.474) | (249) | |
| Capital and reserves Called up share capital Share premium account Merger reserve Other reserve Profit and loss account | 3.936 17.052 1.947 60 (25.579) | 3.936 16.956 1.947 60 (21.425) | 3.936 17.052 1.947 60 (23.244) | |
| Total shareholders' deficit | (2.584) | 1.474 | 249 | |
| Represented by: Equity shareholders' deficit Non-equity shareholders' funds | (2.584) - | 1.474 - | (249) - | |
| Total shareholders' deficit | (2.584) | 1.474 | (249) |
CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months 30 June 2006
| Notes | For the six months ended 30 June 2006 (Unaudited) US $'000 | For the six months ended 30 June 2005 (Unaudited) US $'000 | For the period ended 30 Dec 2005 (Audited) US $'000 | |
| Net cash outflow from operating activities Returns on investments and servicing of finance Interest paid Interest element of finance lease rentals payment Interest received | (2.681) (102) (4) - | (4.066) (35) - 11 | (6.206) (75) (1) 36 | |
| Net cash outflow from returns on investments and servicing of finance Taxation refund Capital expenditure and financial investment Purchase of tangible fixed assets | (106) 58 (52) | (24) - (53) | (40) 212 (291) | |
| Net cash outflow for capital expenditure and financial investment | (52) | (53) | (291) | |
| Net cash outflow before financing | (2.791) | (4,143) | (6.325) | |
| Financing Issue of ordinary share capital Expense of share stock New convertable loan stock Issue of preference share capital Issue of preference share warrants Capital element of finance lease payments (Decrease)/Increase in borrowings | - - - - - (4) (20) | - - - - - (5.680) | 6.650 2.189 - - (1) (455) | |
| Net cash inflow from financing | 16 | 6.638 | 6.717 | |
| Decrease in cash | (2.765) | 2.495 | 3.92 |
CASH FLOW FROM OPERATING ACTIVITIES
Reconciliation of operating loss to net cash outflow from operating activities
| For the six months ended 30 June 2006 (Unaudited) US $'000 | For the six months ended 30 June 2005 (Unaudited) US $'000 | For the period ended 30 December 2005 (Audited) US $'000 | |
| Operating loss Depreciation charge Profit on sale of fixed assets Increase in stocks Increase in debtors (Decrease)/Increase in creditors Decrease in provisions | (2.235) 119 (1) (256) (488) 180 - | (2.070) 100 - (364) (193) 1.484 (55) | (4.418) 199 - (698) (196) 1.038 (55) |
| Total net cash outflow from operating activities | (2.681) | (4.066) | (6.206) |
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the period ended 30 June 2006
| Notes | For the six months ended 30 June 2006 (Unaudited) US $'000 | For the six months ended 30 June 2005 (Unaudited) US $'000 | For the period ended 30 Dec 2005 (Audited) US $'000 | |
| Loss for the financial period Currency translation differences on net investment in foreign subsidiries | (2.305) (30) | (2.125) 360 | (4.299) 713 | |
| Total recognised losses for the period | (2.335) | (1.765) | (3.586) |
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS'(DEFICIT)/FUNDS
For the six monthes ended 30 June 2006
| For the six months ended 30 June 2006 (Unaudited) US $'000 | For the six months ended 30 June 2005 (Unaudited) US $'000 | For the period ended 30 Dec 2005 (Audited) US $'000 | |
| Loss for the financial period Currency translation differences on net investment in foreign subsidiaries Net proceeds from equity shares issued Conversion of loans to equity shares Net proceeds from non-equity share warrants issued | (2.305) 30 - - - | (2.125) (360) 7.085 5.231 - | (4.299) (713) 4.354 8.060 - |
| Net increase/(decrease) in shareholders' funds/(deficit) Opening shareholders'deficit | (2.335) (249) | 10.551 (9.077) | 8.828 (9.077) |
| Closing shareholders' deficit | (2.584) | 1.474 | (249) |
NOTES INTERIM ANNOUNCEMENT
1. The calculation of earnings per share is based on the loss of US $2.305 million (for the six months ended 30 June 2005: US $2.125 million; for the year ended 30 December 2005: US $4.299 million) and on 29,110,647 Ordinary shares (for the six months ended 30 June 2005: 18,477,610; for the year ended 30 December 2005: 13,990,342) in issue.
2.The financial statements have been prepared on the basis of the accounting policies set out in the Group's statutory accounts for 2005.
3.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.
4.The 2005 comparatives are derived from the statutory accounts for the period ended 30 December 2005 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).
5.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, Lincolnís Inn,LONDON WC2A 3TH.
PRO-FORMA CONSOLIDATED BALANCE SHEET
At 30 June 2006
| 30 June 2006 US $'000 (Unaudited) | |
| Fixed assets Tangible assets Tangible assets Investments | 7.539 1.629 25 |
| Current assets Stocks Debtors Cash at bank and in hand | 9.913 9.546 9.515 674 |
| Creditors amounts falling due within one year (including convertible loan stock) | 19.735 (16.343) |
| Net current assets | 3.392 |
| Total assets less current liabilities Creditors amounts falling due after more than one year | (12.585) (1.263) |
| Net assets | (11.322) |
| Capital and reserves Called up share capital Share premium account Merger reserve Other reserve Profit and loss account | 6.626 28.264 1.947 60 (25.575) |
| Total shareholders' deficit | (11.322) |
| Represented by: Equity shareholders' deficit Non-equity shareholders' funds | 10.238 1.084 |
| Total shareholders' deficit | 11.322 |