TIDMFDBK
RNS Number : 4899Q
Feedback PLC
07 November 2012
7 November 2012
Feedback plc
("Feedback" or "the Company")
Final Results for the year ended 31 May 2012
Chairman's Statement
2012 was a difficult year for everyone at Feedback plc as tough
market conditions further exposed the Group's long-term
weaknesses.
The structure and costs of Feedback were those of a larger
Group. Without sustained growth reversing the more than 40% decline
in revenues over the past few years, the business was not
sustainable.
The Group's strategy, since my appointment, had been for a sales
led turnaround whilst investing in new products and pushing through
measures to improve operational effectiveness, all the time working
within the harsh constraints of the Group's working capital
requirements.
Results
The financial year started well. Half-year results showed what
looked like clear indications of a recovery. Turnover to November
2011 was up 13% with the Group running at breakeven on a
like-for-like basis. The multi-year implementation of an expensive
new ERP system was finally completed and immediately delivered on
its long-anticipated promise of enabling faster order-to-ship times
and real-time management of inventory. Two loss-making product
ranges were eliminated, the operational structure was simplified
somewhat to reduce cost, and we started Feedback Black Box (Black
Box) as a new product incubator with a promising first
customer.
The cost of restructuring the Group, of following through on a
number of long-term investment decisions, the impact of margins
being squeezed from customers and suppliers, and the simple demands
of growth, all created an increased need for working capital that
was forecast to be on-going. Funds were raised from new and
existing shareholders, including every member of the Board, in
October 2011.
Despite the encouraging start, results for the full year,
including for Feedback Instruments Limited and Feedback Inc
(Feedback Instruments) up to its disposal on 23 May 2012 and
allowing for the effects of its sale, are extremely
disappointing.
Turnover of GBP7.0 million was up 11.7% from GBP6.3 million in
the previous year. Reported loss on all activities was GBP1.8
million (2011: loss of GBP831,000) reflecting operating losses of
GBP414,000 (2011: loss of GBP831,000), loss of GBP802,000 (2011:
nil) on the sale of Feedback Instruments, GBP293,000 (2011: nil)
write-off of intercompany debt, and an impairment of GBP274,000
(2011: nil) relating to property. The loss after taxation was
GBP1.82 million (2011: GBP862,000).
Revenue for Feedback Instruments up to the date of its disposal
grew 8% to GBP4.9 million, up from GBP4.5 million in 2011, despite
extremely low order volumes for most of the second half of the
year. This growth was well below management's expectations with
export sales particularly disappointing. Feedback Instruments had
an operating profit of GBP311,000 (2011: GBP466,000 loss) due in
part to the write-back of GBP260,000 (2011: nil) legacy stock
provisions.
The financial challenge facing Feedback Instruments that led to
its disposal was funding the working capital demands of the long
lead-time between receipt of order and receipt of payment and the
overhead needed to maintain the minimum level workforce during the
months of lean trading.
For Feedback Data, revenues of GBP1.9 million represent a 12%
growth on the GBP1.7 million performance in 2011. However, losses
worsened to GBP294,000 (2011: GBP23,000) largely due to the cost of
restructuring the sales team and the increased investment necessary
to finish two product development projects started in prior
years.
The increases in revenue in both operating companies occurred in
the first half of the year.
As we moved into the second half of the year, all parts of the
Group suffered poor levels of sales. Feedback Instruments in
particular experienced several consecutive months of extremely weak
order intake that fell well below management's even short-term
forecasts.
The engine of the Group had long been Feedback Instruments'
export sales. When these dried to a trickle, predominantly due to
the lack of product investment in prior years, the prospect of a
sales led recovery evaporated and the Board then determined that to
turnaround the entire Group would be impossible.
After a thorough review in early 2012 the Board concluded that
given its cash burn, its weakness in terms of the age of its
existing products, and the length of time needed for any new
products to be developed and marketed effectively in the education
sector, returning Feedback Instruments to positive cash flow and
profitability would take more time and cash resources than the
Group possessed or had access to.
Accordingly, and with a heavy heart given its position as the
foundation stone of the Group in 1958 and the presence still on the
Board of one of the founders, the decision was taken to dispose of
Feedback's education business. In a difficult and, due to the lack
of viable offers received, in the end distressed transaction,
Feedback Instruments was sold to a subsidiary of LD Didactic GmbH
for a nominal consideration in respect of the shares and a
repayment of GBP260,000 of the Group's indebtedness.
Losses in Feedback Data (Data) also increased in the year under
review; the result of its own ageing product range, postponed
projects, and further restructuring costs.
The Group undertook a series of actions to preserve and maximise
value for shareholders. Data was restructured to reduce headcount;
hardware development, production and certain customer support
functions were outsourced. The Board has determined that the
Group's headquarters in Crowborough, which long-standing
shareholders will remember was sold in 2007 and bought back in
2008, is now surplus to requirements and is in the process of being
sold.
Notwithstanding the challenges of the current economic
environment, shareholders should be aware that the single factor
most responsible for the decline in the Group's long-term
performance is the lack of priority given, over many years, to new
product development.
In the education sector, product development is generally
accepted to be a long-term strategy. The Group's education
customers are reluctant to consider new products until they are
available on the market, and the sales cycle is upwards of two
years due to the necessary time required to incorporate new
equipment into curricular activities. However, even in this
context, Feedback Instruments generating approximately 90% of
revenues from products developed more than 10 years ago shows a
clear picture of a company resting too long on past glories.
The pace of product development in the Group has been, in the
eyes of our customers and when compared with our competitors,
extremely disappointing. Feedback's development teams, working with
the evolving demands of the market place and rapidly changing
technologies, were left behind by the quicker cycle times of larger
and faster manufacturers who have bigger development budgets.
None of this is to say that Feedback products are not excellent
pieces of engineering. They are. Indeed, the Company has built a
strong reputation for designing and building robust products that
continue to provide value even after many years in the field.
Developing new products is always a risk-based activity.
However, for too many years the operating companies failed to make
enough wise choices - leaving decisions in the hands of engineers,
and not listening to end users or feeling the pulse of the market -
which left customers looking elsewhere for the innovation that
would drive their own growth.
Given the time needed to develop new products for our
established markets, Feedback Black Box Company (Black Box) was an
attempt to leverage Feedback's engineering reputation and inject
urgency and revenue into the Group with a completely outsourced
business model. But with start-up revenues of only GBP186,000
(2011: nil) and losses of GBP128,000 (2011: nil), despite much
promise, Black Box was closed as part of the cost cutting programme
immediately after the sale of Feedback Instruments.
People
In October 2011, David Marks left the Company after giving over
30 years' service in all parts of the business. He joined the main
Board in 2009 after spending time as Managing Director of Feedback
Instruments Limited, and more latterly held the role of Group
Operations Director.
We have recently also seen the departure, on health grounds, of
David Barton. David worked tirelessly for the Company from his
appointment as a non-executive director in 2007 until his
withdrawal in October 2012.
I would like to thank the two Davids and all my other colleagues
across the Group's operations for their commitment and hard work
during what continues to be an extremely difficult year.
Outlook
After 54 years in operation, 2012 has been Feedback's annus
horribilis and this has forced a complete re-evaluation of the
business.
With the distressed sale of Feedback Instruments, Feedback is
left with annual revenues of approximately GBP2 million. These
revenues are predominantly derived from low-growth products which
are sold into a competitive market. The cost base of the remaining
business is difficult to bare and the potential for organic growth
is limited. The Group's continued poor performance has resulted in
it relying on its banking and other loan facilities and has meant a
significant amount of management time has been focused on cash
management.
In such a challenging environment the Board continue to consider
all viable strategic opportunities to maximise value for
shareholders, including the potential disposal of the remaining
operating businesses.
In the meantime, the Group is seeking to minimise its cash burn
from on-going operations.
Nick Shepheard
Chairman
Consolidated Statement of Comprehensive Income
for the year ended 31 May 2012
Notes 2012 2012 2012 2011
GBP000 GBP000 GBP000 GBP000
Continuing Discontinued Total
REVENUE 3 2,111 4,935 7,046 6,308
Cost of sales (1,290) (3,308) (4,598) (3,969)
----------- ------------- -------- --------
GROSS PROFIT 821 1,627 2,448 2,339
Other operating expenses 4 (1,522) (1,340) (2,862) (3,170)
----------- ------------- -------- --------
OPERATING LOSS (701) 287 (414) (831)
Losses on disposal of discontinued
operations - (1,369) (1,369) -
Net finance expense (13) - (13) (9)
----------- ------------- -------- --------
Loss on ordinary activities
before taxation (714) (1,082) (1,796) (840)
Tax charge (29) 6 (23) (22)
----------- ------------- -------- --------
Loss for the year attributable
to the equity shareholders of
the Company (743) (1,076) (1,819) (862)
----------- ------------- --------
Other comprehensive income/(expense)
Translation differences on overseas
operations 10 (36)
----------- ------------- -------- --------
Total comprehensive expense
for the year (1,809) (898)
=========== ============= ======== ========
LOSS PER SHARE (pence)
Basic and diluted 5 (0.60) (0.87) (1.47) (0.79)
=========== ============= ======== ========
Consolidated Statement of Changes in Equity
for the year ended 31 May 2012
Share Share Capital Retained Translation
Capital Premium Reserve Earnings Reserve Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 June 2010 273 633 300 2,519 (178) 3,547
Total comprehensive expense
for the year - - - (862) (36) (898)
-------- -------- -------- --------- ------------ --------
At 31 May 2011 273 633 300 1,657 (214) 2,649
New shares issued 54 218 - - - 272
Total comprehensive expense
for the year - - - (1,819) 10 (1,809)
-------- -------- -------- --------- ------------ --------
At 31 May 2012 327 851 300 (162) (204) 1,112
======== ======== ======== ========= ============ ========
Consolidated Balance Sheet
at 31 May 2012
2012 2011
Notes GBP000 GBP000 GBP000 GBP000
ASSETS
Non-current assets
Held for sale 1,050 -
Property, plant and equipment 6 73 1,505
Intangible assets 7 330 732
Deferred tax asset - 134
------- ------- ------- -------
1,453 2,371
Current assets
Inventories 8 316 1,030
Trade receivables 343 930
Other receivables 160 233
Cash and cash equivalents - 9
------- ------- ------- -------
819 2,202
------- ------- ------- -------
Total assets 2,272 4,573
------- ------- ------- -------
LIABILITIES
Non-current liabilities
Deferred tax liabilities 86 198
Current liabilities
Trade payables 228 909
Other payables 9 688 817
Bank borrowings 158 -
------- ------- ------- -------
1,074 1,726
------- ------- ------- -------
Total liabilities 1,160 1,924
------- ------- ------- -------
TOTAL NET ASSETS 1,112 2,649
======= ======= ======= =======
EQUITY
Capital and reserves attributable
to the Company's equity
shareholders
Called up share capital 327 273
Share premium account 851 633
Capital reserve 300 300
Retained earnings (366) 1,443
------- ------- ------- -------
TOTAL EQUITY 1,112 2,649
======= ======= ======= =======
Consolidated Cash Flow Statement
for the year ended 31 May 2012
2012 2011
GBP000 GBP000 GBP000 GBP000
Cash flows from operating activities
Loss before tax (1,796) (818)
Adjustments for:
Loss on disposal of subsidiary 802 -
Impairment provision against property 274 -
Net finance expenditure 13 -
Depreciation and amortisation 508 565
Foreign exchange difference (10) (36)
Decrease in inventories (310) 270
Decrease in trade receivables 212 956
Decrease/(increase) in other receivables 42 (8)
Decrease in trade payables (286) (357)
Decrease in other payables 434 (111)
------- -------- ------- -------
1,679 1,279
------- -------- ------- -------
Net cash generated in operating
activities (117) 461
Cash flows from investing activities
Purchase of tangible fixed assets (51) (98)
Purchase of intangible assets (258) (370)
------- -------- ------- -------
Net cash used in investing activities (309) (468)
Cash flows from financing activities
Interest paid (13) (9)
Proceeds of share issue 272 -
------- -------- ------- -------
Net cash used from financing activities 259 (9)
------- -------- ------- -------
Net decrease in cash and cash
equivalents (167) (16)
Cash and cash equivalents at beginning
of year 9 25
------- -------- ------- -------
Cash and cash equivalents at end
of year (158) 9
======= ======== ======= =======
1. ACCOUNTING POLICIES
Basis of preparation
These financial statements have been prepared in accordance with
those IFRS standards and IFRIC interpretations issued and effective
or issued and early adopted as at the time of preparing these
statements (October 2012). The accounting policies have been
consistently applied to all the years presented.
These consolidated financial statements have been prepared under
the historical cost convention.
During the period the Group disposed of its Feedback Instruments
Limited and Feedback Inc subsidiaries and is in negotiations to
dispose of its property (held by Brickshield Limited). For these
reasons the results of these subsidiaries have been disclosed as
discontinued.
The financial information set out above does not comprise the
Company's statutory accounts for the periods ended 31 May 2012 or
31 May 2011. Statutory accounts for 31 May 2011 have been delivered
to the Registrar of Companies and those for 31 May 2012 will be
delivered following the Company's Annual General Meeting. The
auditors have reported on those accounts; their report was
unqualified and did not contain statements under section 498(2) or
(3) of the Companies Act 2006 in respect of the accounts for 2012
or for 2011.
2. GOING CONCERN
As highlighted in the Chairman's statement, the cost base of the
Group's remaining business is difficult to bare and the potential
for organic growth is limited. The Group is reliant on its banking
and other loan facilities and a significant amount of management
time is focused on cash management. The Board continue to consider
all viable strategic opportunities to maximise value for
shareholders including the disposal of the remaining operating
businesses. In the meantime, the Group is seeking to minimise its
cash burn from on-going operations.
The current situation and outlook cast significant doubt on the
Group's ability to continue as a going concern. Based on current
plans however, the Directors consider that the Group is a going
concern and have prepared the Group financial statements on a going
concern basis. The financial statements therefore do not include
any adjustments that would result if the Group was unable to
continue as a going concern. In the event the Group ceased to be a
going concern, the adjustments would include writing down the
carrying value of assets, including intangible assets and
inventories, to their recoverable amount and providing for any
further liabilities that might arise.
3. SEGMENTAL REPORTING
The directors have determined the operating segments based on
the management reports that are used to make strategic decisions.
The Group's business is analysed below between the Feedback
Instruments segment and the Data segment. The Feedback Instruments
segment primarily relates to the former subsidiary companies
Feedback Instruments Limited and Feedback Incorporated which were
disposed of in the year. The Data segment relates to the subsidiary
company Feedback Data Limited. Details of these companies are
included in the Directors' Report.
On 23 May 2012 the Group disposed of its Feedback Instruments
business. For this reason the results shown below disclose the
results of the Feedback Instruments business for the period to 23
May 2012.
Year ended 31 May 2012
Feedback Feedback Other Total
Instruments Data
GBP000 GBP000 GBP000 GBP000
Revenue
External 4,935 1,925 186 7,046
------------- --------- -------- --------
Finance expense - - (13) (13)
------------- --------- -------- --------
Loss before tax 311 (286) (1,821) (1,796)
============= ========= ======== ========
Balance sheet
Assets - 781 2,524 3,305
Liabilities - (602) (2,138) (2,740)
------------- --------- -------- --------
- 179 386 565
============= ========= ======== ========
Capital expenditure - 6 33 39
============= ========= ======== ========
Year ended 31 May 2011
Feedback Feedback Other Total
Instruments Data
GBP000 GBP000 GBP000 GBP000
Revenue
External 4,558 1,750 - 6,308
------------- --------- -------- --------
Finance expense - - 9 9
------------- --------- -------- --------
Loss before tax (466) (23) (351) (840)
============= ========= ======== ========
Balance sheet
Assets 1,359 975 3,329 5,663
Liabilities (1,096) (985) (1,635) (3,716)
------------- --------- -------- --------
263 (10) 1,694 1,947
============= ========= ======== ========
Capital expenditure 6 37 53 96
============= ========= ======== ========
Reported segments' assets are reconciled to total assets as
follows:
2012 2011
GBP000 GBP000
Segment assets for reportable
segments 3,305 5,663
Unallocated:
Inter-company receivables
adjustment (1,223) (1,541)
Intangible assets 330 732
Investments (140) (281)
-------- --------
Total assets per the balance
sheet 2,272 4,573
======== ========
Reported segments' assets are reconciled to total assets as
follows:
2012 2011
GBP000 GBP000
Segment liabilities for reportable segments 2,740 3,716
Inter-company payables adjustment (1,666) (1,990)
Deferred tax 86 198
-------- --------
Total liabilities per the balance sheet 1,160 1,924
======== ========
External revenue Total assets Capital expenditure
by location of by location of by location of
customer assets assets
2012 2011 2012 2011 2012 2011
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
United Kingdom 3,070 2,820 2,258 4,312 51 95
Rest of Europe 644 879 14 14 - -
United States of
America 445 734 - 247 - 1
Other Americas 498 148 - - - -
Asia 1,040 792 - - - -
Africa 384 192 - - - -
Middle East 965 743 - - - -
--------- -------- -------- -------- ---------- ----------
Total 7,046 6,308 2,272 4,573 51 96
========= ======== ======== ======== ========== ==========
4. OTHER OPERATING EXPENSES
2012 2011
GBP000 GBP000
Distribution costs 1,821 1,352
Administrative costs:
Research and development 619 526
Other 422 1,292
------- -------
2,862 3,170
======= =======
5. LOSS PER SHARE
Basic earnings per share is calculated by reference to the loss
on ordinary activities after taxation of GBP1,819,000 (2011:
GBP862,000) and on the weighted average of 123,679,889 (2011:
109,146,746) shares in issue.
6. PROPERTY, PLANT AND EQUIPMENT
Land and Plant and Motor
buildings equipment vehicles Total
GBP000 GBP000 GBP000 GBP000
Cost of valuation
At 31 May 2010 1,441 757 19 2,217
Additions - 96 - 96
Exchange adjustments - 2 - 2
---------- ---------- --------- --------
At 31 May 2011 1,441 855 19 2,315
Additions - 51 - 51
Disposal (504) (5) (509)
Reclassification (1,441) - - (1,441)
---------- ---------- --------- --------
At 31 May 2012 - 402 14 416
---------- ---------- --------- --------
Depreciation
At 31 May 2010 71 528 15 614
Charge for the year 23 170 1 194
Exchange adjustments - 2 - 2
---------- ---------- --------- --------
At 31 May 2011 94 700 16 810
Charge for the year 24 121 1 146
Disposal - (492) (3) (495)
Reclassification (118) - - (118)
---------- ---------- --------- --------
At 31 May 2012 - 329 14 343
---------- ---------- --------- --------
Net book value
At 31 May 2012 - 73 - 73
========== ========== ========= ========
At 31 May 2011 1,347 155 3 1,505
========== ========== ========= ========
7. INTANGIBLE ASSETS
Development
expenditure
GBP000
Cost
At 31 May 2010 3,725
Additions 370
-------------
At 31 May 2011 4,095
Additions 258
Disposed on sale of subsidiary (2,236)
-------------
At 31 May 2012 2,117
-------------
Amortisation
At 31 May 2010 2,992
Charge for the year 371
-------------
At 31 May 2011 3,363
Charge for the year 362
Disposed on sale of subsidiary (1,938)
-------------
At 31 May 2012 1,787
-------------
Net book value
At 31 May 2012 330
=============
At 31 May 2011 732
=============
8. INVENTORIES
2012 2011
GBP000 GBP000
Raw materials and consumables 308 432
Work in progress 8 11
Finished goods - 587
------- -------
316 1,030
======= =======
9. OTHER PAYABLES
2012 2011
GBP000 GBP000
Amounts falling due within one year
Other payables 124 260
Other taxes and social security 44 102
Accruals and deferred income 520 455
------- -------
688 817
======= =======
10. PUBLICATION OF ANNOUNCEMENT AND REPORT AND ACCOUNTS
A copy of this announcement will be available at the Company's
registered office (Park Road, Crowborough, East Sussex TN6 2QR) and
on its website - www.fbk.com.
This announcement is not being sent to shareholders. The Annual
Report will be posted to shareholders shortly and will be made
available on the website.
For further information contact:
Feedback plc Tel: 0845 3379
155
Nick Shepheard
Merchant Securities Limited
Simon Clements/Lindsay Mair Tel: 020 7628
2200
This information is provided by RNS
The company news service from the London Stock Exchange
END
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