Fieldbury Plc

2009-04-27
27 April 2009

Freeplay Energy plc
Previously Freeplay Energy plc
("Fieldbury" or "the Company")

Unaudited Preliminary Results for the year ended 31 December 2008

Fieldbury plc is pleased to announce unaudited preliminary results for the year ended 31 December 2008. 

Highlights:

Commenting on the outlook for the year, Rory Stear, Chairman, said:
“2008 was a year of significant change for the Group following the disposal of the Freeplay division and the subsequent strengthening of the Group’s balance sheet.  Your Board continues to explore a number of strategic options concerning the Group’s future development”.

-Ends-

Chairman’s Statement

I am pleased to present the results for Fieldbury plc for the year ended 31 December 2008.  The Board is encouraged by the progress made during the period, particularly in light of the increasingly testing economic conditions throughout the year and the significant downturn in consumer confidence.

2008 was a pivotal year for the Group as it marked the disposal of our Freeplay Energy division. The decision to dispose of the division was taken following a strategic review of the business and as assessment of the prevailing economic environment in the business’ core end markets. 

Mr Devinder Raj Narang, Chairman of Narang Group India, with whom Freeplay Energy had a joint-venture company in India, expressed an interest in acquiring the division and, following a brief negotiation process, the sale of Freeplay Energy was completed on 4 August 2008 for US$14.5 million, including the assumption of approximately US$5 million of debt.  The agreement for the sale of Freeplay Energy included a target on the amount of working capital that was required to be in place at 30 June 2008. As the target level of working capital was not achieved the overall disposal proceeds were reduced by US$2.5 million.

This deal was very much in the best interests of shareholders and the Company given the challenging conditions in Freeplay Energy’s key end markets coupled with the Group’s additional working capital requirements. 

Following the disposal and sale of the rights to the Freeplay name and associated trademarks, Freeplay Energy plc changed its corporate name to Fieldbury plc and, as a result of the disposal, Dixie Sales (“Dixie”) is now the sole operating company within Fieldbury. 
The year’s results, therefore, include the activities of the Freeplay Energy division up to 4 August 2008 and thereafter reflect the performance of the Company’s sole remaining trading activities, Dixie.

Dixie

Dixie is now a well structured, established sales, marketing, distribution and customer service provider based in Greensboro, North Carolina, USA. It 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. The business also has electronic ordering and ecommerce tools. Since the disposal of Freeplay Energy, management has been able to focus all its efforts on returning Dixie to profitability. The restructuring at Dixie was largely completed at the end of March 2008 and, as a result of the measures undertaken, overall operational costs have been significantly reduced on an annualised basis. I am pleased to report that revenues and EBITDA at Dixie for 2008 were in line with management's expectations despite a backdrop of continued consumer uncertainty in the core dealer parts and whole goods businesses.

Financial Review

Continuing Operations
Group Revenue from ongoing operations for the year ended December 31, 2008 was $34.3 million (2007: $36.7 million). The 6.5% decline in 2008 revenue is as a result of the planned exit from a number of marginally profitable business activities. Revenue from core business activities increased approximately 8% over 2007. Gross Profit from ongoing operations increased 3.9% to $10.6 million (2007: $10.2 million) due to an increased focus on higher margin products and activities. Administrative and Distribution costs increased 3.4% in 2008 to $12.0 million (2007: $11.6 million). Reduction in ongoing overhead costs of 7.3% was offset by on-time costs related to the exit of certain lines of business and products. Interest costs with respect to continued operations amounted to $0.6 million (2007: $0.7 million) a decline of 14.3% due to a planned reduction in inventory and accounts receivable that was offset by a reduction in interest bearing debt. Discontinued Operations Discontinued Operations consist of the Freeplay Energy Division for the year ended 4 August 2008, the effective date of the sale of that division to Mr. Devin Narang. Total revenue from Discontinued Operations amounted to $5.8 million. Operating expenses before net finance revenue and gain on the sale of the division amounted to $7.5 million. The sale of the Freeplay division generated proceeds, after adjustments and assumption of debt, of $12 million resulting on a net gain from the sale of the division of $11.4 million.

Review of Operations

Dixie Sales
In 2008 Dixie continued to execute its strategic direction as determined in the review completed in the latter half of 2007.  In addition, Dixie refined and focused its business proposition as an independent, full service value added distributor.

Total 2008 revenue for the company of $34.3 million was in line with the Board’s expectations and approximately 7% lower than for the previous year.  The year on year decline was due to the planned exit from marginally profitable business activities.  The company achieved considerable growth in its core business due to effective sales structure and operational improvements, more favourable weather conditions as compared to 2007, and a greater focus on its principal product offerings.  In addition, Dixie started to realise the revenue from its newly acquired manufacturer and retailer relationships.  

Dixie’s gross margin increased by approximately 3 points to 30.6% against 2007(27.3%) on lower sales volume, again the result on focusing on higher margin activities and products. 

The company also made good progress on reducing its cost structure during 2008.  Operating costs in 2008 were 7.3% lower, representing a $716,000 improvement compared to the previous year.  The costs with respect to discontinued product lines and facilities in 2008 were somewhat higher than anticipated due to the earlier than contemplated exit from a significant line of commercial hand held products.   These costs were mainly related to redundancy costs as a result of the decision to exit these lines of business. 

While certain other lines of business are still under review the exit costs related to these lines of business, should Dixie determine to exit them, will be significantly less than those incurred in 2008.

During 2008 Dixie entered into a number of key new business relationships.  Significant new business includes Distribution America (buying group for major independent hardware stores, nationally), Canadian Tire, and American Armed Forces Employees Store (“AAFES”) (an electronic store for the exclusive use of all active and retired USA military personnel).  The relationship with Distribution America opens a new channel for Dixie’s existing product lines and our relationship with AAFES allows the company to expand its retail channel.

The company determined, in discussion with a number of its manufacturing and mass merchant customers, that they had identified a need for assistance to manage the ever growing number of products being returned by end users to retailers.  In response to this, the company has developed a Returned Asset Management Program to assist our partners in dealing with this challenge and in February 2009 Dixie commenced a pilot project with Positec Industries to manage the returned products for a number of its lines on a “fee for service” basis.  This offering is a good example of Dixie’s value to its manufacturing and retail partners utilising its core strengths and capabilities.

Dixie successfully completed a renewal of its banking facility in December 2008 that provides an extension of the banking arrangements to March 2010. 

Overall, Dixie’s first quarter 2009 performance was in line with the Board’s expectations and represents a significant improvement on the same period in 2008 after adjusting for the impact of discontinued lines included in the 2008 revenue.

The business looks forward to 2009 with confidence and optimism.  While current economic conditions will pose a challenge for many, the Board is of the view that this will present opportunity for Dixie.

People

On behalf of the Board I would like to thank the management and staff of Dixie for their commitment during the year.  Despite a backdrop of increased consumer uncertainty, the division’s staff has performed admirably during the period and have responded well to the restructuring of the wider Group.

Outlook

At present, Fieldbury has a net cash position of $2.3 million. 

2008 was a year of significant change for the Group following the disposal of the Freeplay division and the subsequent strengthening of the Group’s balance sheet.  Your Board continues to explore a number of strategic options concerning the Group’s future development.

R Stear
CHAIRMAN

FIELDBURY PLC
group INCOME STATEMENT
For the year ended 31 December 2008

FIELDBURY PLC
group statement of total recognised INCOME AND EXPENSE
For the year ended 31 December 2008

FIELDBURY PLC
group BALANCE SHEET
As at ended 31 December 2008

FIELDBURY PLC
group statement of changes in equity
For the year ended 31 December 2008

Share premium
In 2007 the share premium account arose from the issue of equity shares during the year, the conversion of shareholder loans, convertible loan stock and the issues of non-equity shares in prior years. 

Share Capital has arisen on the issue of shares.  The Retained deficit reflects losses incurred to date.

FIELDBURY PLC
group cash flow statement
For the year ended 31 December 2008

The preliminary financial information does not constitute full accounts within the meaning of section 240 of the Companies Act 1985 but is derived from accounts for the years ended 31 December 2008 and 31 December 2007. The financial information for the year ended 31 December 2007 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The Auditors reported on those accounts; their report was unqualified, and did not contain a statement under s237(2) or (3) Companies Act 1985 but did draw attention to matters by way of emphasis without qualifying their report. The audit of the statutory accounts for the year ended 31 December 2008 is not yet complete, but the Auditors expect to provide an unqualified report. These accounts will be finalised on the basis of the financial information presented by the Directors in this unaudited preliminary announcement.

While the financial information include in this preliminary announcement has been prepared  in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS), as adopted by the European Union (EU), this announcement does not in itself contain sufficient information to comply with IFRS’s.  The preliminary announcement is prepared on the same basis as set out in the statutory accounts for the year ended 31 December 2008.

Fieldbury plc is incorporated and domiciled in the United Kingdom.

At the date of the authorisation of the financial information the following standards and interpretations, which have not been applied in the financial information, were in issue but not yet effective:

IFRS 1    Revised IFRS 1 First time adoption of IFRS (endorsed)
IFRS 2    Share based Payment – Amendments relating to vesting conditions and cancellations (endorsed)
IFRS 3    Business Combinations – Amendments
IFRS 7    Financial Instruments: Disclosures – Consequential amendments arising from amendments to IAS 32
IFRS 8    Operating Segments (endorsed)
IAS 1      Presentation of Financial Statements – Revised (endorsed)
IAS 1      Presentation of Financial Statements – Amendments relating to Puttable Financial Instruments and obligations arising on liquidation (endorsed)
IAS 23    Borrowing Costs – Amendment (endorsed)
IAS 27    Consolidated and separate Financial Statements – Consequential amendments arising from             Amendments from IFRS 3
IAS 27    Consolidated and Separate Financial Statements – Amendments cost of an investment in a subsidiary, jointly controlled entity or associate (endorsed)
IAS 28    Investments in Associates – Consequential amendments arising from IFRS 3
IAS 31    Investments in Joint Ventures – Consequential amendments arising from IFRS 3
IAS 32    Financial Instruments Presentation – Amendments relating to Puttable Financial Instruments and obligations arising on liquidation (endorsed)
IAS 39    Financial Instruments: Recognition and Measurement – Consequential amendments arising from amendments to IAS 32
IAS 39    Financial Instruments: Recognition and measurement – Amendment; Eligible ledged items
IAS 39    Financial Instruments: Recognition and measurement – Amendment; Eligible ledged items
IFRIC 12 Service Concession Arrangements
IFRIC 13 Customer Loyalty Programmes (endorsed)
IFRIC 14 IAS19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (endorsed)
IFRIC 15 Agreements for the Construction of Real Estate Assets
IFRIC 16 Hedges of a Net Investment in a Foreign Operation
IFRIC 17 Distributions of Non-cash Assets to Owners
IFRIC 18 Transfers of Assets from Customers
IFRIC 9   Reassessment of Embedded Derivatives – Amendment; Embedded Derivatives

The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial information when the relevant standards and interpretations come into effect.

GOING CONCERN
The financial statements are prepared on a going concern basis, which assumes the Group will continue in operational existence for the foreseeable future. The Group's ability to meet its future working capital requirements and therefore continue as a going concern is dependent upon it being able to generate significant revenues and free cash flow and the availability of bank facilities.  The current facility has been secured until March 2010 and the Directors do not foresee a problem in securing funding after this date.  The Directors have prepared projections which they consider to be prudent and demonstrate that the business can operate within its existing cash resources, and have identified a series of realistically achievable actions that they are committed to taking to mitigate the rate of cash outflow should revenues not be secured as predicted.

Primary reporting format business segments
The following tables present revenue and losses and certain asset and liability information regarding the Group’s business segments for the years ended 31 December 2008 and 31 December 2007. The discontinued activities in 2008 & 2007 relate to Freeplay and continuing activities relate to Dixie.

Geographical segments
The following table represents revenue, expenditure and certain asset information regarding the Group’s geographical segments by location for the years ended 31 December 2008 and 31 December 2007.

There are no separately disclosed items in the year to 31 December 2008.

As a result of the annual Goodwill impairment test a charge of $1,787,000 was taken during 2007.

Disposal of Freeplay Division

Following approval from the Reserve Bank of India and approval by shareholders at a General Meeting on 27 June 2008, the Company agreed to the disposal of its Freeplay Division (“Freeplay Energy”) to Devinder Raj Narang. The total consideration was $14.5 million, reduced by an adjustment of $2.5 million, and includes approximately $5 million of bank debt.

The disposal was completed on August 4th 2008. Following the disposal and sale of the rights to the Freeplay name and associated trademarks, it was agreed that Freeplay changed its corporate name to Fieldbury plc (“Fieldbury”). The Company’s shares will continue to be traded on AIM under Fieldbury plc and will have a new RIC code, FIE.L, that came into effect during the week beginning Monday 4th August.

As a result of the disposal of Freeplay Energy, Dixie Sales will be the sole company within Fieldbury.
           
The results of the Freeplay division are presented below:

The net cashflows attributable to discontinued operations are as follows:

In December 2007 Freeplay Energy wrote down by $540,000 the value of inventory for slow moving products. $234,000 of this charge related to the cancellation of the WP phones contract.

As announced in August 2007 Freeplay Energy plc embarked on an aggressive restructuring program involving the consolidation of locations and functions as a result of which it incurred one-off severance and exit costs. The cost of this program was $1,258,000.

The net liabilities of the Freeplay Energy division at the date of disposal were as follows:
               

The deferred consideration will be settled in cash by the purchaser on or before 31 December 2009.

The calculation of the basic and diluted earnings/(loss) per ordinary share of 5p (2007: 5p) each has been based on the profit/(loss) for the relevant financial year and on 96,864,559 shares (2007: 52,122,768). This represents the weighted average number of ordinary shares in issue.  The loss for the year and the weighted average number of ordinary shares for the purposes of calculating the diluted loss per share are the same as for the basic loss per share calculation. This is because the outstanding share options would have the effect of reducing the loss per ordinary share and therefore not dilute under the terms of IAS 33.

The board of directors of Fieldbury plc approved the Preliminary Results on 27 April 2009.

The statutory accounts will be posted to shareholders in due course.   Further copies will be available to the public, free of charge, at the company’s registered office, 2 Stone Buildings, Lincoln’s Inn, LONDON WC2A 3TH and the Company’s website at www.fieldbury.com

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