RNS Number:3750V
Formjet PLC
24 April 2007
24 APRIL 2007
FORMJET PLC
("FORMJET" OR "THE COMPANY")
(AIM:FMJ)
FINAL RESULTS FOR THE FINANCIAL YEAR TO
31 DECEMBER 2006
Formjet, the AIM listed alternative software vendor, announces today final
results for the twelve month period ended 31 December 2006.
HIGHLIGHTS
*The loss for the year has been significantly reduced and Q4 was
profitable; most of the sales success of 2006 will come through in 2007;
*Having signed a white labeling deal with Tesco, Formjet has since added
Dell and Woolworths to its blue chip client list, thanks to a growing
product range and the provision of fully integrated support;
*The strong performance by Panda Software - with its high margins and
recurring annual renewal revenues is expected to be an integral part of
Formjet's continued growth during 2007;
*Formjet is continuing to explore ways of exploiting "alternative" routes
to the market - to this end it has created Formjet Innovations, which will
enable it to build on the momentum achieved last year; and
*The combination of reduced costs and further growth of its white label
business is expected to underpin a return to profitability in 2007.
Commenting on today's results, Lyndon Chapman, Executive Chairman of Formjet,
said: "The loss for the year has been significantly reduced and Q4 was
profitable; most of the sales success of 2006 will come through in 2007. I am
pleased to report that we expect our pipeline of potential business to be
stronger and develop faster than at any time in our previous history and we are
confident it will form the basis for our return to profitability in 2007.
Chief Executive Tony Lee added: "I am confident that our strategy of creating
"alternative" routes to market during 2006 should deliver profitable growth in
2007. Our ability to create and support white label product ranges for leading
retailers sets us apart from our competitors and we are building a significant
pipeline of opportunity in this area which should deliver further sales growth
in the second half of 2007."
ENQUIRIES
Formjet Plc Tel: 01293 848 860
Lyndon Chapman, Executive Chairman
Tony Lee, Chief Executive
www.formjetplc.com
Bishopsgate Communications Ltd Tel: 0207 562 3350
Maxine Barnes
Nick Rome
www.bishopsgatecommunications.com
Blue Oar Securities* Tel: 0207 448 4400
David Seal/Rhod Cruwys
www.blueoarsecurities.co.uk
*Blue Oar Securities was formerly Corporate Synergy Plc and acts as Nominated
Advisor and Broker for the Company.
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. The
Formjet Group currently has four product lines: Panda Software and Filestream
are UK licences and Ability and Software Dialog are worldwide.
Formjet reaches a customer base of more than 400,000 direct customers and in
excess of 17,000 corporate clients. This market penetration has been achieved
through careful research into relevant territories and then applying the most
suitable routes to market, whether through distribution and/or reseller
partners, or via direct sales. Formjet acquired SouthCoast Distributions Ltd, a
specialist OEM provider to system builders in July 2005.
Formjet has developed a clear niche for creating "white label" software,
targeting retail and brand leaders and investing heavily in its technical and
customer support facilities, which can also be white label branded to fit a wide
range of customers. This business will grow under the Formjet Innovations banner.
CHAIRMAN'S STATEMENT
Introduction
Formjet has made significant progress during 2006 growing its white label
business product range and ties with blue-chip companies. This was despite the
challenging IT market and the Government's cancellation of its Home Computing
Initiative (HCI) scheme in the March 2006 Budget. Given that the scheme
represented 37% of Formjet's turnover, I believe it was a credible performance
to maintain 2005 sales levels and increase percentage gross margins.
The Formjet strategy of creating alternative software solutions taking the place
of the vendor in exclusive territories has been enlarged and now includes
financial software to add to our corporate and business solutions and a range of
edutainment software targeted at home and school learning through the ages of 4
to 15 years, a new market for the Group taking it into the education and
entertainment software sector.
The Group's ability to create alternative routes to market for its products has
gained impressive momentum as its products are now being sold by many leading
retailers in the form of its own brands Panda and Ability or are being "white
labelled" in the name of top brands such as Tesco and Woolworths. The momentum
of this strategy will be a main driver through 2007 and beyond as we capture new
and expanded alternative routes to market.
Overview
A number of important milestones were achieved during 2006 and have continued
into 2007. Formjet commenced 2006 with two product sets, Panda Software Security
products and Ability Office, both products featured heavily in the cancelled HCI
scheme and therefore the maintenance and increase in their turnovers during the
year is commendable. In May 2006 Formjet Innovations was created to facilitate
our strategy of targeting sales through non-traditional IT sales routes such as
supermarkets. We have been delighted with the progress made by the division,
which is already servicing Tesco and Woolworths and remains in talks with a
number of other potential blue chip white label clients. In addition to
providing the own brand software Formjet Innovations also provides technology
and customer support via bespoke websites such as Tescosoftware.com for its
products. The exposure, credibility and product reviews gained by such
initiatives provide scope for the Group to further grow this side of the
business.
The location of all businesses into our freehold premises in Crawley has enabled
effective cost cutting measures and improved controls as well as enabling the
Group to enlarge in-house graphics design, marketing and customer support
facilities that have been pivotal in achieving the high profile "white label"
successes.
Current Trading
Formjet has maintained its "royalty" based business model on new product lines
ensuring that it will continue to deliver high gross margins even in highly
competitive environments. The loss for the year has been significantly reduced
and Q4 was profitable; most of the sales success of 2006 will come through in
2007.
I am pleased to report that we expect our pipeline of potential business to be
stronger and develop faster than at any time in our previous history and we are
confident it will form the basis for our return to profitability in 2007.
Board Changes
In January 2007 we announced a restructuring of the board partially as a result
of a change in AIM regulations and also to reflect the changing shape and
direction of the business. James Heyworth-Dunne and Chris Roberts our
non-executive Chairman and Independent Director both resigned in January. Chris
had been with us from the formation of Formjet and had to leave due to
regulation change; James provided a wealth of experience and we are indebted to
them both for their contributions. The restructure resulted in Tony Lee our
Finance Director taking up the position of Group CEO and I moved to Executive
Chairman, with Tony now in charge of the running of Group I can devote my
attentions to the strategies necessary in meeting the needs of a changing market
place, the enlargement of our product sets and acquisition opportunities.
Emma Porteus has been appointed Group Financial Controller having previously
held this position with our Panda Software subsidiary for a number of years.
Frank Lewis, a qualified accountant with substantial experience of growing mid
market companies on AIM, also joined the Board in January.
Philip Speer a corporate lawyer remains as Company Secretary a position he has
held since the formation of Formjet.
I believe that the Board now has the correct balance of entrepreneurial spirit,
financial and legal control to move forward with confidence. Corporate
Governance will continue at the high levels of priority established over recent
years.
Outlook
My predecessor mentioned in last year's financial statements the challenges to
young businesses in the fast changing IT industry, these challenges are no less
in the current year. The business has changed however in a number of material
ways. Our "alternative" routes to market have opened up large and previously
unexplored sales opportunities. Meanwhile the credibility and profile of the
business is extremely high in the retail and IT sectors as a result of our
ventures with Dell, Tesco and Woolworths. This success has led to the need for
expansion of our product ranges to satisfy a growing and diverse demand from new
customers. The new additions have the same commercial terms as our successful
Panda and Ability models. The Group's longer-term strategies on client
acquisition are ahead of schedule and will continue to explore new and
large-scale alternative routes to market. We are moving forward in product
distribution methods to meet the challenges of Web2 and our products are
attracting the attentions of large telecom companies. Exploring these new
markets, where no reliable statistics exist, forecasting can be difficult.
However, we believe that the significant deals announced over recent months will
provide the business with revenues to generate significant profits once regular
monthly sales patterns are established.
We expect 2007 to be profitable and hope that our brokers can return to
forecasting in the current year. I would like to thank our staff, advisors and
shareholders for their support and encouragement and to all of our customers
especially Tesco who in October 2006 placed considerable faith in our small
company, a decision that has worked well for both businesses and opened up a
significant new phase in Formjet's history.
Lyndon Douglas Chapman
Executive Chairman
Formjet plc
24th April 2007
CHIEF EXECUTIVE OFFICER'S STATEMENT
I am pleased to report significant cost savings and a reduction in losses during
the year. Given the challenging conditions, the Group has developed a strategy
for growth across each of its divisions.
While the year under review began with some significant challenges to the Group
- with the cancellation of the Government's Home Computing Initiative (HCI),
Formjet has created a rounded offering that is benefiting from a growing product
range and impressive contract wins.
While our sales levels were largely unchanged year on year, our strategy to find
alternative channels to market was successfully implemented during the period,
gaining early success with a number of leading retailers. We are now well placed
to continue delivering growth in 2007.
One of the main issues affecting the Group was a subdued IT software market for
much of the year as buying was cautious ahead of Microsoft's Vista launch. The
uncertainty over the security features to be included and the anticipated
introduction of the Microsoft OneCare security product led our main competitors
to reduce pricing which led to a highly competitive market place.
Formjet also suffered because of the Government's decision to terminate HCI
Schemes with a week's notice. This had a profound effect on South Coast
Distributions Limited's sales with its OEM product range highly suited to this
market. HCI related revenues contributed nearly 40% of the total Group revenue
in the first quarter of 2006.
However, despite this set back, the deal with Dell, one of the largest PC
manufacturers in the World, secured in November 2006 will assist South Coast in
re-building its business model targeted at system builders.
Meanwhile, the white label deal secured with Tesco has elevated the credibility
of the Group and we are now well placed to build on this. We have also added
Woolworths to our white label portfolio in March 2007 and expect to secure
further large contract wins throughout 2007 in this niche area.
We set up a specialist subsidiary called Formjet Innovations Limited in
September 2006. This company is solely responsible for developing "alternative"
routes to market for the entire range of Group products.
Formjet Innovations achieved a profit in its first four months and we are
optimistic of growth in this area in 2007 with a growing pipeline of opportunity
that will have an impact in the second half of this year.
In addition our decision to locate all our operations into one building has
delivered substantial cost savings during 2006 and we have a stable platform on
which to expand the business. Our internal controls were improved considerably
over the year, assisting in efficiency and cost reduction. Our debtor days
reduced by 23% over the year.
Our losses were reduced considerably during 2006, and with a return to profit in
the 4th quarter we are confident of a profitable year in 2007.
Following the year end, we set up a Research and Expansion department within
Formjet in order to service the demand for additional product ranges for white
label and retail opportunities. This will concentrate on researching the market
for high quality products that will fit in to our alternative product portfolio.
We have already announced the launch of an accounting package and a range of
edutainment products and expect to add further ranges during the course of the
year. One of the key criteria will be the ability to "white label" each product
range.
Panda Software UK
With its high margins and recurring annual renewal revenues, Panda is a major
contributor to the Group's sales and profitability. While competitive market
factors as outlined above contributed to little sales growth during the year,
the reduced costs of the smaller Crawley based team meant a return to
profitability. The product ranges continue to expand and improve and the 2007
range has attracted excellent reviews on both the retail and corporate products.
The added endorsement of some leading retailers adding their brands to some of
the white label products has further strengthened Panda's credentials as one of
the World's leading antivirus and security suppliers. Despite the increased
competition provided by Microsoft's Vista launch we have seen improved Panda
sales in the first quarter of 2007 over the first quarter of 2006 and aim to
maintain this growth throughout the rest of the year. We are also committed to
strengthening our corporate sales team during 2007 to take advantage of the
market opportunities available.
Formjet Innovations
Formjet Innovations has been set up as the specialist distribution arm of the
Formjet Group focusing on our alternative product range and associated
alternative routes to market. Although only commencing trading late in the third
quarter of 2006 it has achieved a profitable first reporting period and is
expected to form a significant part of the Group's future growth. Its unique
ability to "white label" a varied range of products under leading brands and to
support them resulted in the securing of the Tesco contract in October 2006
followed by the Woolworths contract in March 2007. A significant pipeline of
further opportunity has also been created. Formjet Innovations is also
responsible for the launch and ongoing sales and marketing of the new Group
product ranges sourced by our newly formed Research and Expansion department.
Ability
The Ability products form an integral part of the white label opportunities we
are creating and the Tesco Complete Office and Photo Restyle products are
amongst the best selling of their range. Woolworths will also be selling two
Ability based products as part of its initial range. Given our high margin,
royalty based model we believe that Ability will achieve a profitable return
during 2007. Costs were trimmed significantly during 2006 at Ability and the
loss of #83,000 was a substantial reduction on the loss of #442,000 in 2005. Our
international country partners experienced similar market pressures to the UK
during the year however we added new partners in Asia, Portugal, Spain and the
US.
South Coast Distributions
South Coast's core activity is the design of software bundles for supply with
new PC's either as a disc or pre-installed. The short term notice of the HCI
Scheme's demise, together with the absence of senior management from the
business for a large part of the year due to illness, meant that significant
losses were made in this subsidiary and this was the main individual contributor
to the Group's losses for the year. Despite this setback, the deal achieved with
Dell in November 2006 to enable PC purchasers to buy a bundle of software
products re-establishes South Coast's credentials as a leading OEM supplier and
will allow a platform for growth in 2007.
Conclusion
I am confident that our strategy of creating "alternative" routes to market
during 2006 should deliver profitable growth in 2007.
Our ability to create and support white label product ranges for leading
retailers sets us apart from our competitors and we are building a significant
pipeline of opportunity in this area which should deliver further sales growth
in the second half of 2007.
We have extended our product range and the creation of our Research and
Expansion division will enable us to continue to service our growing customer
base with high quality alternative software products.
Tony Lee
Chief Executive Officer
24th April, 2007
FORMJET PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For The Year Ended 31 December 2006
--------------------------------------------------------------------------------
Continuing Continuing
2006 2005
as restated
# #
TURNOVER
Existing operations 3,783,587 2,755,037
Acquired operations - 1,076,907
----------- -----------
3,783,587 3,831,944
Cost of sales (1,668,433) (1,714,279)
----------- -----------
GROSS PROFIT 2,115,154 2,117,665
Existing operations 2,115,154 1,921,485
Acquired operations - 196,180
Administrative expenses (2,392,277) (2,730,465)
----------- -----------
(277,123) (612,800)
Other operating income 860 -
----------- -----------
OPERATING LOSS (276,263) (612,800)
Existing operations (276,263) (543,519)
Acquired operations - (69,281)
Exceptional items - (345,869)
Interest receivable and similar income 9,733 19,011
Interest payable and similar (32,777) (15,227)
charges
----------- -----------
LOSS ON ORDINARY ACTIVITIES
BEFORE TAXATION (299,307) (954,885)
Tax on loss on ordinary activities - 6,636
----------- -----------
LOSS FOR THE FINANCIAL YEAR
AFTER TAXATION (299,307) (948,249)
=========== ===========
Earnings per share
Basic earnings per share (0.31p) (1.18p)
FORMJET PLC
CONSOLIDATED BALANCE SHEET
31 December 2006
--------------------------------------------------------------------------------
2006 2005
as restated
# # # #
FIXED ASSETS
Intangible assets 748,186 864,182
Tangible assets 999,723 1,035,798
---------- -----------
1,747,909 1,899,980
CURRENT ASSETS
Stocks 214,653 334,096
Debtors 845,385 1,189,984
Cash at bank and in hand 1,043,809 637,150
---------- ----------
2,103,847 2,161,230
CREDITORS
Amounts falling due within one
year (915,300) (1,985,421)
---------- ----------
NET CURRENT ASSETS 1,188,547 175,809
---------- -----------
TOTAL ASSETS LESS CURRENT
LIABILITIES 2,936,456 2,075,789
CREDITORS
Amounts falling due after
more than one year (392,825) (422,441)
---------- -----------
NET ASSETS 2,543,631 1,653,348
=========== ===========
CAPITAL AND RESERVES
Called up share capital 259,546 173,983
Share premium 3,319,027 2,215,000
Profit and loss account (1,034,942) (735,635)
----------- -----------
SHAREHOLDERS' FUNDS 2,543,631 1,653,348
=========== ===========
The financial statements were approved by the Board of Directors on 24th April,
2007 and were signed on its behalf by:
L D Chapman
Chairman
24th April, 2007
FORMJET PLC
CASH FLOW STATEMENT
For The Year Ended 31 December 2006
--------------------------------------------------------------------------------
2006 2005
as restated
# #
NET CASH OUTFLOW FROM OPERATING ACTIVITIES (683,842) (658,169)
RETURNS ON INVESTMENTS & SERVICING OF FINANCE
Interest received 9,733 19,011
Interest paid (32,777) (15,227)
----------- ----------
NET CASH (OUTFLOW) / INFLOW FROM
RETURNS ON INVESTMENTS &
SERVICING OF FINANCE (23,044) 3,784
----------- ----------
TAXATION
UK corporation tax paid (6,636) -
CAPITAL EXPENDITURE & FINANCIAL INVESTMENT
Purchase of tangible fixed assets (28,827) (998,038)
----------- ----------
NET CASH OUTFLOW FROM
INVESTING ACTIVITIES (28,827) (998,038)
----------- ----------
ACQUISITIONS & DISPOSALS
Purchase of subsidiary undertaking - (358,329)
Cash acquired with subsidiary undertaking - 202,037
----------- ----------
NET CASH OUTFLOW FROM ACQUISITIONS
& DISPOSALS - (156,292)
----------- ----------
EQUITY DIVIDENDS PAID - -
----------- ----------
NET CASH OUTFLOW BEFORE FINANCING (742,349) (1,808,715)
FINANCING
Issue of shares 1,258,350 1,330,985
Cost of shares issued (68,760) (35,215)
Additions to borrowings - 489,550
Repayment of borrowings (38,532) (15,843)
----------- ----------
NET CASH INFLOW FROM FINANCING 1,151,058 1,769,477
----------- ----------
INCREASE / (DECREASE) IN CASH 408,709 (39,238)
----------- ----------
The Report and Accounts will be sent to shareholders on Thursday 26th April. If
you would like a copy please call 01293 848 860.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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