RNS Number:7660V
Reflex Group PLC
10 May 2002
REFLEX GROUP PLC
ANNUAL RESULTS
YEAR ENDED 31 DECEMBER 2001
CHAIRMAN'S STATEMENT
As you are aware your Board has been seeking a new direction for the Group for
some time and the year 2001 saw major changes in the structure of the Reflex
Group.
In September 2001 we completed the disposal of First Rental Limited by way of
management buyout and at the same time completed the acquisition of Fitness &
Leisure Group (Holdings) Limited ("FLG"). The accounts for the year reflect the
trading of First Rental Limited ("FRL") until disposal in September and the
trading of FLG since then. In recognition of the UK source of income, these
accounts have been prepared in pounds sterling.
Acquisition
FLG has a unique approach to the health and fitness industry as it is the first
operator to specifically target the over 40's market, with a specifically
designed range of motorised exercise equipment, operated under the Motorcise
Healthy Living Centres brand.
At the time of the announcement of the acquisition, FLG operated 23 Motorcise
Healthy Living Centres; since then a further eight centres have been opened in
the UK, bringing the total to 31. The Motorcise membership base has grown
significantly in the period. Trading since September 2001 proved somewhat more
difficult than expected and fewer new centres than originally planned were
opened in the period.
FLG turnover for the four months of ownership was £1,605,000 with a loss prior
to goodwill amortisation in the four months of our ownership of £257,000. This
loss reflects particularly the initial losses incurred with the new centres.
Shareholders should also note that the bulk of FLG's income relates to annual
subscriptions and the accounting policy adopted for these creates an element of
income deferred and not recognised in the profit and loss account until the next
year, which at 31 December 2001 amounted to £1,252,000.
Consolidated Group results
The Group recorded a loss attributable to shareholders of £5,715,000, which
compares with a profit of £204,000 in 2000. As FLG was acquired for shares,
Accounting Standards require that FLG be valued at the share price of Reflex at
the date of announcement of the acquisition, even though the share price has
been thinly traded and somewhat volatile. This created goodwill of £5,199,000.
Your Board has adopted a prudent approach and these accounts include an
amortisation and an impairment of goodwill together totalling £5,054,000, which
has the effect of reducing the carrying value of goodwill in the balance sheet
to £181,000.
The balance sheet shows shareholders funds of £2,068,000. The Group is currently
ungeared with net cash in the bank. The fixed assets held by the Group
principally comprise expenditure on the Motorcise Healthy Living Centres and the
proprietary exercise equipment used in these centres.
I would like to welcome Luke Johnson, Paul May and Philip Daw to the Board and I
would like to thank all the executives and staff of the Group for all their
efforts and commitment during the year.
Outlook
Trading has picked up in the current year and to support this, new marketing
initiatives are being put into place.
We expect further growth in membership this year both in the existing centres
and from new centre openings.
M. A. Kilduff
Chairman
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2001
Discontinued
Continuing Discontinued operations
Operations Acquisition operations Total Total
2001 2001 2001 2001 2000
£000's £000's £000's £000's £000's
Turnover - 1,605 871 2,476 2,282
Cost of sales - - - - (841)
Gross profit - 1,605 871 2,476 1,441
Administrative
expenses (33) (6,916) (994) (7,943) (1,153)
Operating
(loss)/profit (33) (5,311) (123) (5,467) 288
Exceptional loss
on disposal of
discontinued
operations - - (222) (222) -
(Loss)/profit on
ordinary activities
before interest (33) (5,311) (345) (5,689) 288
Interest, net 19 3
(Loss)/profit on
ordinary activities
before taxation (5,670) 291
Taxation (45) (87)
(Loss)/profit
attributable to
group shareholders (5,715) 204
Earnings per
ordinary share (8.28)p 0.49p
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2001
2001 2000
£000's £000's
Fixed assets
Intangible assets 181 -
Tangible assets
- Lease and rental equipment - 806
- Gym fixtures and fittings and equipment 4,162 221
4,343 1,027
Current assets
Stock 50 14
Debtors 168 290
Cash at bank and in hand 428 1,098
646 1,402
Creditors (amounts falling due within one year) (2,159) (451)
Net current (liabilities)/assets (1,513) 951
Creditors (amounts falling due after more than one year) (300) (24)
Provisions for liabilities and charges (462) (40)
Net assets 2,068 1,914
Capital and reserves
Called up share capital 4,932 1,649
Share premium account 6,074 3,410
Profit and loss account (8,938) (3,145)
Shareholders' funds - all equity 2,068 1,914
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2001
2001 2000
£000's £000's
Net cash inflow from operating activities 341 1,038
Returns on investments and servicing of finance 19 3
Taxation - -
Capital expenditure and financial investment (625) (397)
Acquisitions and disposals 589 -
Cash (outflow)/inflow before finance 324 644
Financing (1,032) (51)
(Decrease)/increase in cash in the year (708) 593
2001 2000
£000's £000's
Reconciliation of net cash flow to movement in net funds
(Decrease)/increase in cash in year (708) 593
Cash outflow from financing 350 51
Cash outflow from finance leases 63 -
Change in net funds resulting from cash flows (295) 644
Loans, finance leases disposed/acquired with subsidiary (683) -
New finance leases - (22)
Movement in net funds in the year (978) 622
Net funds, beginning of year 1,044 422
Net funds, end of year 66 1,044
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 31 DECEMBER 2001
2001 2000
£000's £000's
(Loss)/profit attributable to group shareholders (5,715) 204
Exchange adjustments (78) (4)
Total recognised (losses)/gains for the year (5,793) 200
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE YEAR ENDED 31 DECEMBER 2001
2001 2000
£000's £000's
At 1 January 2001 1,914 1,714
Total (losses)/gains for the year (5,793) 200
Issue of shares 5,947 -
At 31 December 2001 2,068 1,914
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2001
1. Accounting Policies
The significant policies adopted by the Group are as set out in the financial
statements for the year ended 31 December, 2000 except for the following:
(a) Principles of consolidation
The consolidated financial statements include the financial statements
of the Company and all its subsidiaries made up to the 31 December 2001.
All inter-company transactions and balances have been eliminated in
their preparation.
Goodwill arising on the acquisition of subsidiary undertakings and
businesses, representing any excess of the fair value of the
consideration given over the fair value of the identifiable assets and
liabilities acquired, is capitalised and written off on a straight line
basis over its useful economic life.
Goodwill arising on the acquisition of Fitness & Leisure (Holdings)
Limited is regarded by the Directors as having a useful economic life of
five years.
(b) Turnover
Turnover includes annual membership sales and the income is recognised
as 20% in the month of joining with the balance recognised evenly over
the period of membership. Other income included within turnover is
recognised when it is earned.
Rentals arising from the provision of data processing equipment are
recognised over the period of the rental contract. Revenues from the
disposal of rental assets are recognised on delivery of the related
products with the book value of the assets at the date of sale included
in related costs of sales.
(c) Foreign currencies
These accounts are presented in pounds sterling to reflect the fact that
substantially all activity of the Group is in that currency.
Transactions denominated in foreign currencies are translated into
pounds sterling at the rate of exchange ruling at the transaction date.
Monetary assets and liabilities denominated in foreign currencies are
retranslated at the rates ruling at the balance sheet date with the
resulting profit or loss included in the profit and loss account for the
year.
The balance sheets and profit and loss accounts of Irish subsidiary
companies are translated into pounds sterling using the closing rate
method. Exchange differences arising from translation of the opening net
investment in foreign subsidiary companies are dealt with as adjustments
to reserves.
2. Exceptional losses
2001 2000
£000's £000's
Loss on sale of subsidiary 222 -
See note 6 for further information
3. Taxation
2001 2000
£000's £000's
Corporation tax - foreign taxes - (87)
Adjustments in respect of prior periods (45) -
(45) (87)
There was no unprovided deferred taxation at 31 December 2001 or 31 December
2000.
4. Earnings per ordinary share
2001 2000
(Loss)/profit attributable to group shareholders (£000's) (5,715) 204
Number of ordinary shares in issue (000's) 130,262 41,615
At 31 January 2001 41,615 41,615
At 31 December 2001 130,262 41,615
Weighted average 69,059 41,615
Earnings per ordinary share (pence) (8.28)p 0.49p
It is not proposed to pay a dividend in respect of the year ended 31 December,
2001.
5. Acquisition
On 10 September 2001 the Group acquired 831,183 of ordinary shares of £1 each in
Fitness & Leisure Group (Holdings) Limited, being 100% of its nominal share
capital for a consideration of £6,565,542, satisfied by the issue of 88,646,876
ordinary shares at €0.06 at a premium of €0.06 per share. Goodwill arising on
the acquisition of Fitness & Leisure Group (Holdings) Limited has been
capitalised. The purchase of Fitness & Leisure Group (Holdings) Limited has been
accounted for by the acquisition method of accounting.
Costs amounting to £619,000 in relation to this issue of shares were written off
to share premium account in the year.
The consolidated profit before and after taxation of Fitness & Leisure Group
(Holdings) Limited for the period from
1 April 2001, the beginning of the subsidiary's financial year to the date of
acquisition was £183,000. During this period, turnover amounted to £1,318,000,
operating profit amounted to £161,000 and profit before taxation amounted to
£167,000. The loss after taxation for the year ended 31 March 2000 was £355,000.
The assets and liabilities of Fitness & Leisure Group (Holdings) Limited
acquired were as follows:
Book and
fair value
£000's
Fixed assets
Tangible 3,498
Intangible 37
Investments 140
Current assets
Stocks 30
Debtors 183
ACT debtor 45
Bank and cash 479
Total assets 4,412
Creditors
Bank loans and overdrafts 42
Trade creditors 380
Other creditors 263
Deferred income 1,255
Finance lease payable 33
Loans 650
Deferred tax provision 422
Total liabilities 3,045
Net assets 1,367
Purchased goodwill capitalised 5,199
6,566
Satisfied by:
Issue of shares 6,566
The subsidiary undertakings acquired during the year made the following
contributions to, and utilisations of, Group cash flow.
2001
£000's
Net cash inflow from operating activities 830
Returns on investments and servicing of finance 2
Capital expenditure and financial investment (525)
Financing (359)
Decrease in cash (52)
Analysis of net outflow of cash in respect of the purchase of the subsidiary
undertakings
2001
£000's
Cash at bank and in hand acquired 479
Bank overdrafts (42)
437
Cash consideration -
437
6. Disposals
During the year the Group disposed of its interest in First Rental Limited.
Prior to disposal, a dividend of £1,000,000 was paid by First Rental to the
Group. Group losses include a loss of £985,000 after dividend payment earned by
First Rental Limited up to its date of disposal on 10 September 2001.
2001
£000's
Net assets disposed of:
Tangible fixed assets 625
Stocks 5
Debtors 9
Intercompany debtors 496
Cash at bank and in hand 248
Creditors (286)
Net assets 1,097
Leasehold write off 21
Loss on disposal (222)
Intercompany debtor waiver (496)
400
Satisfied by:
Cash 400
Deferred contingent consideration 1,600
2,000
Deferred contingent consideration provision (1,600)
400
The deferred contingent consideration is represented by:
2001
£000's
Deferred asset consideration 600
Deferred loan notes 500
Deferred investments 500
Deferred contingent consideration 1,600
The deferred asset consideration is payable in 34 monthly instalments commencing
March 2003, with interest being payable on a monthly basis at LIBOR plus 6%.
The convertible interest bearing loan notes are repayable in seven equal
tranches of £66,667 commencing 31 March 2003 with a final payment of £33,331
payable on 30 June 2005. The loan notes attract interest at a rate of LIBOR
until 30 June 2003 and thereafter at LIBOR plus 6%. Each tranche of the loan
notes is convertible into ordinary shares in the capital of the purchaser at the
election of Reflex Holdings (UK) Limited in the event that, within three months
of the due time for redemption, the purchase has not redeemed 25% or more of
that tranche of loan notes.
Deferred investments relate to 19,800 'A' redeemable ordinary shares of £1 each
and 480,200 'A' cumulative redeemable preference shares of £1 each in the
company acquiring First Rental Limited.
The 'A' ordinary shares have no coupon attached to them and are redeemable only
following the repayment in full of the 'A' preference shares, the loan notes and
the asset consideration.
The 'A' preference shares are redeemable in seven equal tranches of £68,600,
commencing 31 December 2004 and ending 31 December 2006. The 'A' preference
shares have a coupon attached to them commencing on 30 June 2003 being LIBOR
plus 6% until 30 June 2004 and LIBOR plus 8% thereafter until redemption.
As the deferred consideration is deemed to be contingent it has been deducted
from the calculation of the loss on sale of First Rental Limited.
First Rental Limited contributed £617,000 of net operating cash flow during the
year, received £4,000 in respect of net returns on investment and servicing of
finance and paid £1,000,000 on equity dividends in the year.
Analysis of the net cash inflow of cash in respect of disposals during the year:
2001
£000's
Cash at bank and in hand disposed of 248
7. Financial Statements
The announcement set out above does not constitute a full financial statement of
the Group's affairs for the year ended 31 December 2001. The auditors have
reported on the full accounts for the said year and have accompanied them with
an unqualified report. The accounts have yet to be delivered to the Companies
Office in Ireland. The annual report and accounts is expected to be posted to
shareholders shortly.
For further information:
Tony Kilduff
Chairman
Reflex Group plc
Tel: + 353 1 660 04 66
Mary Finan
WHPR
Tel: + 353 1 669 00 30
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