13 August 2009 08:00

Half Yearly Report

FORMJET PLC


("FORMJET", OR "THE COMPANY")

(AIM:FMJ)


HALF-YEARLY REPORT FOR THE SIX MONTHS ENDED 30th JUNE 2009


Formjet, the AIM listed alternative software vendor, announces today half-yearly results for the six month period ended 30th June 2009.


HIGHLIGHTS


Trading:


  • Six months sales ended 30 June 2009 £1,449,659, (2008: £1,747,421)

  • Decline in total sales mainly due to reduced sales in Panda, now sold, and non-core activities now discontinued

  • Sales of ASI Ability branded products increased by £220,000 in six months ended 30 June 2009, compared with the same period in 2008

  • Operating loss before exceptionals £113,897 (2008: £74,323 loss)

  • Loss for period £186,162 (2008: 83,539)

  • Gross margin 60.3%, reduction in overheads of 12% due to savings achieved in Q2, further savings targeted in Q3

  • Strong credit control reduces debtor balances by 36.8%

 

Post Period Events:


  • Panda Software subsidiary sold on 8 July 2009 for a consideration of £1,200,000 payable by instalments, with a further £200,000 subject to certain performance criteria. 

  • Discontinuance of non-core trading activities, main ongoing trading focus on ASI Ability and a significantly reduced overhead structure.

  • Mr Tony Lee steps down as CEO and continues as FD. Mr David Hennell steps down from board to focus on ASI Ability.

  • Mr Andrew Monk appointed as CEO with effect from 1 September 2009. Mr Monk acquires 24% of enlarged share capital out of a placing in July 2009 which raised £250,000 before expenses.

  • Ongoing strategy: increased scale through expansion of remaining business plus suitable acquisitions.

 

Commenting on today's results, Lyndon Chapman, Executive Chairman of Formjet, said :


"The Company has weathered a serious storm. The restructuring of the Formjet plc Group has not been easy, but recent actions enable it to grow with positive cash balances, a strong balance sheet, reduced costs and a new determined CEO. The board looks forward to working closely with him and delivering shareholders results for their continued support."


Finance Director, Tony Lee added : 


"Losses before exceptional items for the first 6 months of the period increased from £74,323 in 2008 to £113,897, although losses slowed considerably in Q2 to £23,000 due to reduced costs."



 

ENQUIRIES:


Formjet plc                                                                                   Tel: 01293 848 860

Lyndon Chapman, Executive Chairman

Tony Lee, Finance Director
www.formjetplc.com


Dowgate Capital Advisers Ltd                                                    Tel: 020 7492 4777

Liam Murray or Jo Turner 

www.dowgatecapitaladvisers.co.uk 


Dowgate Capital Stockbrokers Ltd                                            Tel: 01293 517 744

Neil Badger, Broker

www.dowgatecapitalstockbrokers.co.uk 



Notes to Editors:


Formjet plc


Formjet plc is a UK-based company with a highly distinctive business model. It acquires territorial rights to 'alternative' software products, and markets, sells, distributes and supports these products in place of the vendor in worldwide markets. The strategy has at its heart the proposition that the Company can acquire product lines in territories of at least one country without the expense of either product development or the creation of IPR. 



Alternative Products 

  • Ability Software International (ASI) distributes a powerful suite of office products which, as well as being sold under their own branding, form an integral part of the white label opportunities that Formjet is creating. Ability Software International has also developed the ASI Business Software range. This comprises nine titles, which include fully comprehensive office and graphics suites, a business plan development application, small business accounting, staff records management and a remote access tool called BeAnywhere.

  • EdAlive edutainment software has opened up a new and growing market for Formjet and now covers a wide range of core subjects including maths, word skills and spelling.

  • Formjet Innovations operates a distribution agreement for the sale of Panda Security consumer products in the UK.

Alternative Routes to Market

  • Formjet Innovations is the specialist distribution arm of the Formjet Group focusing on its alternative product range and associated alternative routes to market. The focus here is on creating "white label" software, targeting retail and brand leaders 

 


 

Chairman's Statement


The Board is pleased to announce the half-yearly results for 2009. During the period, management's main priorities have been to stabilise the business and provide a platform for future growth.


In order to achieve this, it has been necessary to make difficult decisions to deliver the desired cost savings. All aspects of the business have been reviewed resulting in the closure or disposal of loss making activities whilst retaining the basic infrastructures to continue to grow the Company. Staffing levels have been reduced in all non-sales areas and head office costs have been cut including directors' salaries.


An important development in the first six months, but completed immediately post period was the disposal of Panda Software (UK) Ltd. Panda was the main focus of the business for many years but our ASI Ability range was developed to provide an alternative strand for the ongoing business in the event of termination of the UK Panda franchise. Fortunately this never happened although it became apparent that the IPR holder, Panda Security S.L., intended to take franchises in important markets into direct ownership. With the UK licence due to expire in December 2010 it was deemed appropriate to commence negotiations for the disposal of the business early and I am pleased to report that a successful sale was achieved on 8 July 2009.


Unconnected with the disposal of Panda, Mr Andrew Monk has taken an important stake in the business with a view to engaging an investment and acquisition strategy. He has been appointment as CEO at a nominal salary of £1,200 per annum until the Company returns to profitability. Mr Monk takes up his position on the 1 September 2009.


The Company continues to grow its alternative software product range and entry points into new markets. We have significantly expanded our ASI product offering, which now consists of nine titles including a completely new version of our Ability Office Suite and a new innovative product ASI BeAnywhere, both of which are receiving encouraging reviews. Recent successes include the products being sold through DABs and DSGI, whose brands include Dixons, Currys and PC World amongst others, with continued sales through Tesco, Asda and other leading retailers.  


The Group's expanding product range is now being considered as pre-install software by major computer manufacturers. The recent launch of the Intel Atom processor and its adoption into the new breed of cost-effective sub-notebooks has resulted in Ability Office being supplied with thousands of machines, significantly improving the brand awareness and providing further credibility to the entire product range.


Our EdAlive edutainment software range is expected to boost sales as the Company further strengthens its relationships with major retailers and, under the terms of the Panda disposal, Formjet Innovations Limited retains the rights to distribute the Panda retail product range.

 

The next 12 months will be a defining period for the Group with a more focused product range supporting our existing business model and potential acquisition activity. 


Management remains mindful that, given the current market conditions, bad debts are an issue that need to be considered by all companies and we continue to deliver strong credit control and debtor collections.


The Company has weathered a serious storm. The restructuring of the Formjet plc Group has not been easy, but recent actions enable it to grow with positive cash balances, reduced costs and a new and determined CEO. The board looks forward to working closely with him and delivering shareholders results for their continued support. 


Lyndon Douglas Chapman

Executive Chairman

Formjet plc 




Finance Director's Statement


Although Group sales were up year-on-year in 4 of the first 5 months of 2009, a particularly strong June in 2008 was not repeated and sales for the first six months of 2009 fell 17% on the previous year. Losses before exceptional items for the six month period to 30 June 2009 increased from £74,323 to £113,897.


Gross margins were improved to 60.3% from the 54% achieved over the 12 months ended 31 December 2008.


Our cost reduction programme, begun in March 2009 delivered just under £200,000 of like-for-like overhead reductions on the six months ended 30 June 2008 with an expected £500,000 saving for the full year. The restructuring costs are included under exceptional items in the Income Statement. Trading losses before exceptional items were reduced substantially in the second quarter of 2009 as a result from a £91,000 loss in the first quarter to a £23,000 loss in the second quarter.


Despite the difficult economic environment, our focus on credit control delivered strong debtor collections in the period reducing trade and other receivables by 36.8% from £1,250,528 to £790,086.


Net overdrawn cash balances increased from £92,000 to £167,000 with the Group replacing its invoice discounting facilities with an overdraft during the period. With the cost savings achieved from our restructure, together with the proceeds from the Panda disposal and the share placing in July, the Group has adequate cash to meet its obligations.


Tony Lee
Finance Director

 


 


CONSOLIDATED INCOME STATEMENT

For the period to 30 June 2009









Six months ended 

Six months ended 

Year 

ended 

31-Dec-08

30-Jun-09

30-Jun-08



(Unaudited)

(Unaudited)

(Audited)

£

£

£




Group Revenue - continuing operations

1,449,659

1,747,421

3,592,144

Cost of sales

(575,490)

(645,565)

(1,652,428)

_______

_______

_______

Gross profit

874,169

1,101,856

1,939,716




Administrative expenses

(1,034,904)

(1,176,179)

(2,751,772)

_______

_______

_______




Operating loss

(160,735)

(74,323)

(812,056)




Analysed as:

 

 

 

Operating loss before exceptional items

(113,897)

(74,323)

(292,457)

Exceptional items

(46,838)

-

(519,599)

 

_______

_______

_______

Operating loss

(160,735)

(74,323)

(812,056)

 

_______

_______

_______

 

 

 

 




Finance income

713

3,304

6,514




Finance expenses

(26,140)

(12,520)

(39,513)

_______

_______

_______

Loss for the period 

(186,162)

(83,539)

(845,055)

_______

_______

_______




Basic and diluted loss per share from continuing and total operations (note 2)




(0.07p)

(0.06p)

(0.47p)

______

______

______








STATEMENT OF CHANGES IN EQUITY

For the period to 30 June 2009









Six months ended

Six months ended

Year 

ended 

31-Dec-08

30-Jun-09

30-Jun-08

(Unaudited)

(Unaudited)

(Audited)

£

£

£




Loss for the financial period

(186,162)

(83,539)

(845,055)




Issue of share capital

-

-

823,706

_______

_______

_______

Net decrease in shareholders' equity

(186,162)

(83,539)

(21,349)




Equity at the start of the period

2,452,276

2,473,625

2,473,625

_______

_______

_______

Equity at the end of the period

2,266,114

2,390,086

2,452,276

_______

_______

_______


CONSOLIDATED BALANCE SHEET

As at 30 June 2009









As at 

As at 

As at 

30-Jun-09

30-Jun-08

31-Dec-08

(Unaudited)

(Unaudited)

(Audited)

£

£

£

ASSETS




Non-current assets




Property, plant and equipment

913,418

949,036

925,062

Goodwill

562,207

562,207

562,207

Investment held to maturity

342,852

-

208,085

Other intangible assets

403,813

391,408

446,308

_______

_______

_______

2,222,289

1,902,651

2,141,662

_______

_______

_______

Current assets




Inventories

226,256

195,428

273,408

Trade and other receivables

790,086

1,646,286

1,250,528

Cash and cash equivalents

32,097

296,399

298,345

_______

_______

_______

1,048,438

2,138,113

1,822,281

_______

_______

_______

Total assets

3,270,728

4,040,764

3,963,943

________

________

________




EQUITY AND LIABILITIES

Equity attributable to equity holders of the parent




Share capital

500,306

259,546

500,306

Share premium

3,901,973

3,319,027

3,901,973

Share to be issued reserve

-

-

-

Retained earnings

(2,136,165)

(1,188,487)

(1,950,003)

_______

_______

_______

Total equity

2,266,114

2,390,086

2,452,276

________

________

________




Non-current liabilities




Long-term borrowings

285,201

333,991

314,536

_______

_______

_______

Total non-current liabilities

285,201

333,991

314,536

________

________

________




Current liabilities




Trade and other payables

678,690

1,274,629

1,156,042

Short term borrowings

-

-


Current portion of long-term borrowings

40,722

42,058

41,089

________

________

________

Total current liabilities

719,412

1,316,687

1,197,131

________

________

________




Total liabilities

1,004,614

1,650,678

1,511,667

________

________

________

Total equity and liabilities

3,270,728

4,040,764

3,963,943

_______

_______

_______






Six months ended 

Six months ended 

Year 

ended 

31-Dec-08

30-Jun-09

30-Jun-08

(Unaudited)

(Unaudited)

(Audited)

£

£

£

Cash flows from operating activities




Operating loss

(160,735)

(74,323)

(812,056)

Adjustments for:





Depreciation

23,056 

35,000 

66,924 

Amortisation

42,495 

31,800 

143,850 

Equity-settled share-based payment expense

-

-

-

Inventories

47,152 

10,661 

(67,319)

Trade and other receivables 

460,442 

(216,170)

179,588 

Trade and other payables

(477,352)

183,836 

65,249 

______

______

______

Net cash flows used in operating activities

(64,941)

(29,196)

(423,764)

______

______

______

Cash flows from investing activities




Investments held to maturity

(134,767)

-

(208,085)

Purchase of property, plant and equipment

(11,412)

(10,972)

(18,922)

Purchase of intangible fixed assets

-

(93,873)

(260,823)

Interest received

713 

3,304 

6,514 

______

______

______

Net cash used in investing activities

(145,465)

(101,541)

(481,316)

______

______

______




Cash flows from financing activities

 

 


Proceeds from issue of ordinary shares

-

-

902,846 

Costs of issuing shares

-

-

(79,140)

Decrease in borrowings

(29,702)

(165,239)

(185,663)

Interest paid

(26,140)

(12,520)

(39,513)

______

______

______

Net cash used in financing activities

(55,842)

(177,759)

598,530 

______

______

______




Net decrease in cash and cash equivalents

(266,248)

(308,496)

(306,550)




Cash and cash equivalents at beginning of period

298,345 

604,895 

604,895 

______

______

______

Cash and cash equivalents at end of period

32,097 

296,399 

298,345 

______

______

______



Notes to the unaudited half-yearly report


1.       Basis of preparation






This announcement was approved by the Board of directors on 12 August 2009. The financial information set out in this interim statement has been prepared under IFRSs as adopted by the European Union and on the basis of the accounting policies set out in the statutory accounts of Formjet plc for the year ended 31 December 2008, with the exception of the adoption of IAS 1 (revised). This report is not prepared in accordance with IAS 34 which is currently not mandatory. This interim statement has not been audited.

The financial information does not constitute statutory accounts within the meaning of section 434 of the 

Companies Act 2006. Statutory accounts for Formjet Group plc for the year ended 31 December 2008 

reported under IFRS, on which the auditors gave an unqualified opinion, have been delivered to the 

Registrar of Companies. 



2. Earnings per ordinary share






The calculation of basic earnings per ordinary share is based on the result for the period, for continuing 

operations as well as total acquisitions, and the weighted average number of shares in issue during the 

period.




Weighted average number of ordinary shares in issue

250,153,145

129,773,025

180,153,145




Dilutive potential ordinary shares: Employee share options

21,534,997

16,476,393

23,612,992




Loss after tax (£)

(186,162)

(83,539)

(845,055)




Basic earnings per share - pence per share (p)

(0.07p)

(0.06p)

(0.47p)




Diluted earnings per share - pence per share (p)

(0.07p)

(0.06p)

(0.47p)




3. Segmental Reporting








In the opinion of the directors the Group's core activities are the sales and distribution of computer 

software, hardware and consumables as carried out by the subsidiary companies within the United 

Kingdom. The primary segmental information relating to business segments and the secondary 

segmental geographical information is considered immaterial.



4. Due to the Company's losses, no taxation charge has arisen for the period.






5. The Directors have not declared an interim dividend.






6. The financial statements for the six months ended 30 June 2009 were approved by the Board of 

Directors on 12 August 2009.



These financial statements do not constitute statutory accounts within the meaning of the Companies 

Act 2006 and are neither reviewed nor audited.



7. Copies of this statement are available to shareholders and members of the public, free of charge, 

from the Company's registered office at Innovation House, Windsor Place, Faraday Road, Crawley, 

West Sussex, RH10 9TF.




This information is provided by RNS The company news service from the London Stock Exchange