2nd Quarter & Interim Results
365 Corporation PLC
21 December 1999
365 Corporation plc
Strong Second Quarter and Interim Results
+ unique users up 94%
+ internet revenues up 103%
+ business revenues up 33%
365 Corporation plc ('365' or the 'Company'), the provider of destination
content, community and communication services, today announces results for the
second quarter and the six months ended 30 September 1999 - the first set of
results since admission to the Official List of the London Stock Exchange on 2
December 1999. Highlights of the results include:
Second quarter ended 30 September 1999
+ total unique users(1) increased to 779,591 for September, a 94% increase on
June (401,146 users);
+ turnover of £4,926,000, a 7% increase over the previous quarter
(£4,609,000);
+ internet revenue increased 103% to £293,000 compared to the previous quarter
(£144,000);
+ audiotext minutes(3) increased 6% to 18.4m minutes, compared to 17.3m
minutes in the previous quarter;
+ total business customers(4) as at 30 September 1999 increased 35% to 2,170,
business service revenue increased by 33% to £1,593,000 and business
minutes(5) increased by 38% on the previous quarter;
+ the French acquisitions in July of C-Sports Communication SA and Electron
Libre SARL;
+ the creation and launch of new content and services, including Rugby365 and
Win365.
Six months ended 30 September 1999
+ turnover increased to £9,535,000 compared to £84,000 in the six months to 30
September 1998;
+ operating losses (before amortisation of goodwill and provisions for
National Insurance contributions on share options) of
£233,000 compared to £800,000 for the six months ended 30 September 1998.
Current trading
+ successful debut on the London Stock Exchange;
+ 944,267 unique users for November 1999;
+ brand building and content marketing campaign launched in October;
+ production of the 1999 ITV Rugby World Cup site;
+ created and launched the online entertainment e-zine for Guinness
(www.getG.com);
+ continued growth in users, customers and revenues.
Dan Thompson, Chief Executive Officer, commented today:
'I am delighted to present a strong set of results for our second quarter
which demonstrates our position as a market leader in the creation and
ownership of quality destination content and services. During this period, we
have significantly increased our user base, increased revenues in line with
our expectations and expanded our range of products and services through
acquisition and internal growth.
The successful flotation of 365 on the London Stock Exchange earlier this
month was an important milestone for the Company, and provides us with both
cash and a powerful acquisition currency to pursue our expansion plans and
maintain our first-mover advantages.'
Notes:
1,3,4,5. See note 2 to interim financial statements.
For further enquiries, please contact
365 Corporation plc Tel: 0171 831 3113 today
Dan Thompson, Chief Executive Officer Tel: 0171 505 7800 thereafter
Martin Turner, Finance Director
www.365corp.com
Financial Dynamics Tel: 0171 831 3113
Giles Sanderson
Edward Bridges
Financial and Operating Data Highlights
Quarter 6 months Quarter 6 months
ended ended ended ended
30 September 30 September 30 September 30 September
1999 1999 1998 1998
£'000 £'000 £'000 £'000
Turnover 4,926 9,535 36 84
Operating expenses
before amortisation
of goodwill and
provision for NIC on
share options (5,436) (9,768) (418) (884)
Operating loss before
amortisation of
goodwill and
provision for NIC on
share options (510) (233) (382) (800)
Operating loss (1,387) (1,617) (382) (800)
Operating data for 1999
March April May June July
Consumer Division -
unique users(1) 326,954 352,612 385,935 401,146 526,892
Business Division -
customers(4) 1,280 1,410 1,492 1,613 1,740
Aug Sept Oct Nov
Consumer Division -
unique users(1) 658,996 779,591 934,270 944,267
Business Division -
customers(4) 1,838 2,170 2,366 2,475
Notes:
1,4 See note 2 to interim financial statements.
Chief Executive Officer's Review
On 2 December 1999, we successfully completed our flotation on the London
Stock Exchange. This is the culmination of a period of rapid development and
expansion for 365, and our emergence as a market leader in the area of digital
content creation and ownership. The results for the six months ended 30
September 1999 represent the results of our final period prior to becoming a
quoted company.
Since the acquisition of Symphony Telecommunications plc on 2 February 1999
and its integration into the 365 group, we have accelerated our content and
convergence strategy. This is evidenced by a significant increase in users,
customers and revenues from our established services, together with a number
of new content and service launches during this period. We have also
continued to ensure that the quality of our content is not only maintained,
but also improved, and we have made significant additional investment in
related personnel, technology and infrastructure.
Total unique users increased to 779,591 in September 1999, a 94% increase on
the June total of 401,146 users, and a 138% increase on the March 1999 total
of 326,954 users.
Internet Services
In July, we completed the acquisition of C-Sports Communication SA ('CSports')
and Electron Libre SARL ('Electron Libre'). CSports owns and operates Cfoot
(www.cfoot.com), France's leading football web site and Electron Libre
supplies web development and hosting services to a number of French companies,
including CSports. 365 issued 700,000 shares (pre the 4-for-1 share split in
November 1999) as consideration for the acquisition of CSports and Electron
Libre.
In August, we launched Rugby365 (www.rugby365.com), which is available in
English, Afrikaans, French and Spanish. The Rugby365 operation is based in
Cape Town, South Africa. Shortly after establishing Rugby365, we agreed to
develop, maintain and host ITV's 1999 Rugby World Cup web site. Total rugby
users reached a peak of 128,811 during the World Cup in October 1999, which
contributed to a particularly strong increase in users for that month. The
equivalent number of users for November was 66,107.
In September, we launched Win365 (www.win365.co.uk), a multi-platform
competition product
Internet revenue increased to £293,000, a 103% increase on the previous
quarter (£144,000) and over eight times the revenue in the same quarter in
1998 (£36,000).
Audiotext Services
We have continued to develop and expand our range of companionship services in
the UK, and introduced a number of complementary and related brands. We are
also looking to expand our UK telephony infrastructure in order to service
greater volumes of audiotext traffic, which will enable us to provide bureau
services to third parties. However, despite strong UK growth, second quarter
audiotext revenue fell by 7% overall due to the decline in several short-term
international audiotext contracts.
In August, we launched TalkFootball365, an audiotext and web site
(www.talkfootball.com) service which, amongst other things, leverages the
content created by Football365. This allows callers the opportunity to listen
to football content and interact with each other.
In conjunction with Win365, we have also used our telephone infrastructure to
generate revenue from users of some of our web-based competitions.
Business Services
Business service turnover increased to £1,593,000, compared to £1,199,000 in
the previous quarter, an increase of 33%. As at 30 September 1999, 365 had
2,170 business customers, an increase of 35% on 30 June 1999 (1,613 customers)
and 70% on 31 March 1999 (1,280 customers).
We have continued to expand and develop our successful Joint Venture program
and have concluded deals to form four new Joint Ventures - Essential Network
Solutions Limited, Network Business Call Limited, Telenet Communications
Limited and Unitel Network Services Limited.
In September, we introduced and launched two new product ranges - business
mobile phone services and internet access via our Net@Work product, an
integrated internet access and e-mail service. These products are part of our
core strategy to provide a 'one-stop-shop', or single point of contact for all
of our customers' telecommunications and internet requirements. We believe
that expanding our range of business services, with particular emphasis on the
internet, will maximise revenues from our customer base, and further enhance
customer loyalty.
Recent and Forthcoming Developments
The combination of the launch of new products and services with a marketing
campaign which was initiated in October, has seen a strong growth in total
unique users to 944,267 in November which reinforces our belief that quality
content and services will continue to attract and retain regular users.
Our commitment to producing quality content has also resulted in new
commercial opportunities during the period. We created and hosted ITV's
official rugby web site during the October 1999 Rugby World Cup. We are also
the producers of all the content in 'G', a new internet e-zine, on behalf of
Guinness (www.getG.com). Most recently we created and launched the official
BRIT Awards web site (www.brits .co.uk) in preparation for the 2000 BRIT
Awards.
Our recent listing on the London Stock Exchange provides us with the strategic
acquisition currency that we sought and we are actively searching for suitable
acquisition targets that will enable us to accelerate our growth strategy and
capitalise on our first-mover advantages.
Current Trading
Growth in users and customers has accelerated into the third quarter and the
marketing campaign initiated in October has successfully contributed to the
growth in users.
In October, we launched two new internet lifestyle products - our first online
companionship product, Personals365 (www.personals365.com) and 'The Switch'
(www.theswitch.co.uk), a cross-platform convergence product (telephone and web
site) offering companionship services on a regional or national basis. In
November L!VETV closed and the audiotext business lost one of its sources of
advertising space, but is in the process of securing alternative media
outlets.
Business services is maintaining its impressive rates of growth and the launch
of mobile and internet access services have been well received by both
existing and new customers. We also continue to seek acquisitions and
distribution partners.
We are confident about the future trading prospects of 365.
Financial Review
The Company's first accounting period ran from incorporation on 12 September
1997 to 31 July 1998. Following the acquisition of Symphony
Telecommunications plc on 2 February 1999, the Company adopted 31 March as its
financial year end, and its second financial period covered the eight months
from 1 August 1998 to 31 March 1999. The results of 365 set out below fully
consolidate the results of operations of Symphony Telecommunications plc from
the date of its acquisition.
Results of Operations
Turnover for the second quarter ended 30 September 1999 was £4,926,000,
representing a 7% increase from £4,609,000 in the first quarter ended 30 June
1999.
365 currently derives Internet turnover from advertising, sponsorship, e-
commerce and contract publishing. These revenues increased by 103% to
£293,000 during the second quarter (first quarter - £144,000), reflecting a
significant increase in advertising and sponsorship during the period.
Internet turnover for the comparable period in 1998 was £36,000.
Audiotext turnover fell during the quarter by 7% to £3,040,000 (first quarter
- £3,266,000) due to the expected decline in several short-term international
audiotext contracts. These contracts accounted for turnover of £432,000 in
the first quarter and £15,000 in the second quarter, and are not expected to
generate significant turnover in subsequent financial periods. Excluding
these contracts, audiotext turnover grew by 7% during the quarter. Audiotext
was not provided by 365 in 1998.
Business services turnover increased to £1,593,000 (first quarter -
£1,199,000) in the second quarter, an increase of 33%. As at 30 September
1999, 365 had 2,170 business customers, and the increase in revenues was in
line with a 35% increase in customers during the second quarter. Business
services were not provided by 365 in 1998.
Cost of sales increased by 1% in the second quarter to £2,591,000 (first
quarter - £2,572,000) and gross margin increased to 47% from 44% in the first
quarter. This reflects the significant decline of 365's low margin
international audiotext contracts.
Administrative expenses (before the amortisation of goodwill and National
Insurance provisions in relation to staff share options) rose to £2,845,000
during the second quarter (first quarter - £1,760,000) as 365 increased its
investment in new content and services, its internet publishing systems,
infrastructure and technology, professional services and personnel. In
particular, second quarter administrative costs include those incurred in
connection with the construction of its My365 and Business365 content hubs,
the opening of the South African office, expansion of the Chilean office in
Santiago to produce a Spanish-language internet football service (Futbol365)
and costs incurred in relation to the operations of CSports in France.
Goodwill amortisation increased to £622,000 during the second quarter compared
to £507,000 in the first quarter. This increase reflects the amortisation of
goodwill in relation to the acquisition of CSports and Electron Libre, which
is being written off over 18 months.
Liquidity and Capital Resources
Since inception in September 1997, 365 has financed its operations primarily
through the private placement of ordinary shares and during the six months
ended 30 September 1999 the Company raised £2,603,000 (net of expenses) by
these means.
During the three months ended 30 September 1999, net cash outflow from
operating activities totalled £272,000, compared with £641,000 for the
previous quarter. At 30 September 1999, the Company had £6,729,000 of cash at
bank and in hand, compared to £5,316,000 at 31 March 1999.
On 2 December 1999, 365 was admitted to the London Stock Exchange. The
initial public offering raised net proceeds of approximately £50 million
subject to finalisation of flotation expenses. In addition the Company's
Sponsor, Cazenove & Co, exercised its over-allotment option to purchase an
additional 5,184,375 shares on 15 December 1999 to raise a further £7.9m for
the Company, net of expenses.
365 is using the net proceeds from the offer for the following purposes:
+ Content: investing to maintain and improve existing products and services
and develop new products and services covering
additional passion centres;
+ Convergence: developing 365's content and services to ensure they are
compatible with, and provided across, relevant digital platforms;
+ International expansion: development and expansion of the Company's
international structure and operations;
+ Marketing and brand development: investing in the promotion of 365's brands
and products;
+ Acquisition and strategic partnerships: undertaking appropriate
acquisitions, investments and strategic partnerships to complement the
Company's strategy;
+ Infrastructure: investing in 365's infrastructure to support the Company's
strategy;
+ General corporate purposes: increasing the working capital generally
available to the Group.
Consolidated profit and loss account
for the quarter and 6 months ended 30 September 1999
Quarter 6 months Quarter 6 months
ended 30 ended 30 ended 30 ended 30
September September September September
1999 1999 1998 1998
unaudited unaudited unaudited unaudited
Note £'000 £'000 £'000 £'000
Turnover 3 4,926 9,535 36 84
Cost of sales (2,591) (5,163) (1) (3)
Gross profit 2,335 4,372 35 81
Administrative expenses
before amortisation of
goodwill and provision for
NIC on share options 2,845 4,605 417 881
Amortisation of goodwill 622 1,129 - -
Provision for NIC on share
options 255 255 - -
Total administrative
expenses 3,722 5,989 417 881
Operating loss before
goodwill amortisation and
provision for NIC on share
options 3 (510) (233) (382) (800)
Operating loss (1,387) (1,617) (382) (800)
Net interest 69 132 10 20
Loss on ordinary
activities before taxation
(1,318) (1,485) (372) (780)
Taxation - - (2) (4)
Loss on ordinary
activities after taxation (1,318) (1,485) (374) (784)
Minority interests 36 59 - -
Retained loss for the (1,282) (1,426) (374) (784)
period
Loss per ordinary share 4
Basic loss per share
before amortisation of
goodwill and provision for
NIC on share options 0.3p 0.0p 0.8p 1.7p
Diluted loss per share
before amortisation of
goodwill and provision for
NIC on share options 0.3p 0.0p 0.7p 1.6p
Basic loss per share 0.9p 1.0p 0.8p 1.7p
Diluted loss per share 0.9p 1.0p 0.7p 1.6p
Statement of total recognised gains and losses
for the quarter and 6 months ended 30 September 1999
Quarter 6 months Quarter 6 months
ended 30 ended 30 ended 30 ended 30
September September September September
1999 1999 1998 1998
unaudited unaudited unaudited unaudited
£'000 £'000 £'000 £'000
Retained loss for the
period (1,282) (1,426) (374) (784)
Exchange adjustments 8 4 - -
Total recognised losses
for the period (1,274) (1,422) (374) (784)
Consolidated balance sheet
As at 30 September 1999
30 September 30 September 31 March
1999 1998 1999
unaudited unaudited audited
Note £'000 £'000 £'000
Fixed assets
Intangible fixed assets 9,611 - 9,798
Tangible fixed assets 957 87 728
10,568 87 10,526
Current assets
Stock - goods for resale 33 - 16
Debtors 3,421 105 2,482
Cash at bank and in hand 6,729 485 5,316
10,183 590 7,814
Creditors: amounts falling
due within one year (3,955) (120) (3,750)
Net current assets 6,228 470 4,064
Total assets less current
liabilities 16,796 557 14,590
Creditors: amounts falling
due after more than one
year (15) - (25)
Provision for liabilities 9
and charges (255) - -
Net assets 16,526 557 14,565
Capital and reserves 5
Called up share capital 355 123 319
Share premium account 14,091 1,729 11,517
Other reserves 5,770 - 4,937
Profit and loss account (3,566) (1,295) (2,144)
Total equity shareholders'
funds 6 16,650 557 14,629
Minority interests (124) - (64)
Capital employed 16,526 557 14,565
Consolidated cash flow statement
for the quarter and 6 months ended 30 September 1999
Quarter 6 months Quarter 6 months
ended 30 ended 30 ended 30 ended 30
September September September September
1999 1999 1998 1998
unaudited unaudited unaudited unaudited
Note £'000 £'000 £'000 £'000
Net cash outflow from 7
operating activities (272) (912) (387) (864)
Returns on investment and
servicing of finance
Net interest 69 132 10 20
Capital expenditure and
financial investment
Purchase of tangible
fixed assets (339) (405) (21) (38)
Acquisitions
Net cash acquired with
subsidiaries 12 12 - -
Purchase of subsidiaries 8 (17) (17) - -
(5) (5) - -
Cash outflow before
financing (547) (1,190) (398) (882)
Financing
Issue of shares 566 2,603 559 559
Increase/(decrease) in
cash in the period 19 1,413 161 (323)
Notes to interim financial statements
1. Basis of preparation
The interim financial statements for the second quarter and six months ended
30 September 1999 have been prepared using accounting policies consistent with
those set out in the Company's consolidated 1999 statutory accounts. These
statements do not constitute statutory accounts within the meaning of section
240 of the Companies Act 1985 and are unaudited.
Financial information for the three months and six months ended 30 September
1998 have been extracted from the accounting records of the Company, and is
also unaudited. It does not consolidate any results of operations of Symphony
Telecom, which was acquired on 2 February 1999.
The balances as at 31 March 1999 have been extracted from the accountants'
report included in the prospectus. The accountants' report was extracted from
the statutory accounts which have been filed with the Registrar of Companies.
The auditor's report on those accounts was unqualified and did not contain any
statement under section 237 of the Companies Act 1985.
The interim financial statements for the second quarter and six months ended
30 September 1999 were approved by the Board on 20 December 1999 and will be
posted to shareholders on 23 December 1999.
2. Operating data for 1999
March April May
Consumer Division
Unique users(1)
Sport
Football 160,618 173,894 191,393
Cricket 69,157 78,803 92,179
Rugby
Other
Total Sport 229,775 252,697 283,572
Entertainment 31,750 33,189 33,485
Lifestyle 65,429 66,726 68,878
Total unique users 326,954 352,612 385,935
User sessions(2)
Sport
Football 1,831,348 1,874,676 2,102,564
Cricket 2,143,867 2,364,090 2,857,549
Rugby
Other
Total Sport 3,975,215 4,238,766 4,960,113
Entertainment 126,605 133,753 150,628
Lifestyle 559,254 481,852 484,024
Total user sessions 4,661,074 4,854,371 5,594,765
Audiotext minutes(3) 5,826,875 5,829,453 5,339,713
Business Division
Business customers(4) 1,280 1,410 1,492
Business minutes(5) 5,631,912 5,495,010 6,434,351
June July Aug
Consumer Division
Unique users(1)
Sport
Football 186,537 266,472 366,401
Cricket 101,688 143,835 145,745
Rugby 6,759
Other
Total Sport 288,225 410,307 518,905
Entertainment 34,919 34,110 46,894
Lifestyle 78,002 82,475 93,197
Total unique users 401,146 526,892 658,996
User sessions(2)
Sport
Football 2,182,961 2,681,722 3,196,288
Cricket 3,050,625 4,458,870 4,518,080
Rugby 16,796
Other
Total Sport 5,233,586 7,140,592 7,731,164
Entertainment 147,952 156,347 187,589
Lifestyle 526,092 518,980 577,147
Total user sessions 5,907,630 7,815,919 8,495,900
Audiotext minutes(3) 6,097,658 6,152,836 6,136,871
Business Division
Business customers(4) 1,613 1,740 1,838
Business minutes(5) 6,948,406 8,118,687 7,910,244
Sept Oct Nov
Consumer Division
Unique users(1)
Sport
Football 376,161 394,449 439,945
Cricket 148,354 146,807 148,128
Rugby 38,719 128,811 66,107
Other 2,540 833 413
Total Sport 565,774 670,900 654,593
Entertainment 117,837 143,402 151,201
Lifestyle 95,980 119,968 138,473
Total unique users 779,591 934,270 944,267
User sessions(2)
Sport
Football 3,275,769 3,482,203 3,633,080
Cricket 4,598,974 4,551,017 4,443,840
Rugby 69,603 402,091 279,699
Other 3,429 1,029 488
Total Sport 7,947,775 8,436,340 8,357,107
Entertainment 248,240 457,136 462,265
Lifestyle 571,906 662,849 770,147
Total user sessions 8,767,921 9,556,325 9,589,519
Audiotext minutes(3) 6,072,885 6,758,761 5,874,780
Business Division
Business customers(4) 2,170 2,366 2,475
Business minutes(5) 10,047,227 10,348,644 10,969,562
Notes:
1. 365 defines the number of unique users in a month as the number of
people who visit one of 365's web sites (including those web sites created and
hosted by 365 for third parties) during a month, telephone one of 365's
audiotext telephone services during a month or are registered to receive an
e-mail product at a selected mid-month date. If a person uses the same 365
service more than once in a month they are counted only once as a unique user.
If, however, that person uses more than one 365 service during that month,
they are counted as a unique user once for each service used.
2. 365 defines the number of user sessions in a month as the number of times
that each 365 service is used. If a user leaves a web site and returns more
than 30 minutes later the return visit is counted as a separate user session.
E-mail user sessions represent the number of registered subscribers at the
date selected to determine the number of unique e-mail users multiplied by the
number of issues in that month of the e-mail service they are registered to
receive. Each incoming call to 365's audiotext telephone services represents
a user session.
3. 365 defines the number of audiotext minutes in a month as the number of
minutes recorded by 365 and its carriers in respect of calls to 365's
audiotext services in that month.
4. 365 defines the number of business customers at each month end as the
total number of customers at that month end who have been billed for that
month.
5. 365 defines the number of business minutes in a month as the number of
minutes tracked by the carriers' systems which are billed to the Business
Division's customers in that month.
3. Segmental analysis
Turnover and loss or profit before amortisation of goodwill and provision for
NIC on share options are classified below by geographical area by origin,
which is not materially different from geographical area by destination, and
by class of business.
Turnover
Quarter 6 months Quarter 6 months
ended 30 ended 30 ended 30 ended 30
September September September September
1999 1999 1998 1998
£'000 £'000 £'000 £'000
Geographical
analysis
United Kingdom 4,807 9,276 36 84
France 17 17 - -
Germany 19 92 - -
Chile 83 150 - -
South Africa - - - -
4,926 9,535 36 84
Busines Analysis
Audiotext 3,040 6,306 - -
Business Services 1,593 2,792 - -
Internet 293 437 36 84
4,926 9,535 36 84
(Loss)/profit before goodwill and NIC
Quarter 6 months Quarter 6 months
ended 30 ended 30 ended 30 ended 30
September September September September
1999 1999 1998 1998
£'000 £'000 £'000 £'000
Geographical
analysis
United Kingdom (298) (31) (382) (800)
France (124) (124) - -
Germany (14) 3 - -
Chile 7 - - -
South Africa (81) (81) - -
(510) (233) (382) (800)
Busines Analysis
Audiotext 896 1,945 - -
Business Services (162) (293) - -
Internet (1,244) (1,885) (382) (800)
(510) (233) (382) (800)
4. Loss per ordinary share of 0.25p each
Quarter 6 months Quarter 6 months
ended ended ended ended
30 30 September 30 30 September
September 1999 September 1998
1999 £'000 1998 £'000
£'000 £'000
Loss for the period
before amortisation of
goodwill and provision
for NIC on share options (405) (42) (374) (784)
Goodwill amortisation (622) (1,129) - -
Provision for NIC on (255) (255) - -
share options
Loss for the period (1,282) (1,426) (374) (784)
Weighted average number
of shares in the period:
Basic 140,603,609 136,473,008 48,548,083 46,394,697
Diluted 142,505,126 138,338,174 50,159,172 47,961,354
Basic loss per share
before amortisation of
goodwill and provision
for NIC on share options 0.3p 0.0p 0.8p 1.7p
Goodwill amortisation 0.4p 0.8p - -
Provision for NIC on
share options 0.2p 0.2p - -
Basic loss per share 0.9p 1.0p 0.8p 1.7p
Diluted loss per share
before amortisation of
goodwill and provision
for NIC on share options 0.3p 0.0p 0.7p 1.6p
Goodwill amortisation 0.4p 0.8p - -
Provision for NIC on
share options 0.2p 0.2p - -
Diluted loss per share 0.9p 1.0p 0.7p 1.6p
The weighted average number of shares have been restated to reflect the
effective 4-for-1 share split in November 1999.
5. Share capital and reserves
Ordinary Share Merger Profit and
share premium reserve loss
capital account £'000 account
£'000 £'000 £'000
At 1 April 1999 319 11,517 4,937 (2,144)
Retained loss for the period - - - (1,426)
Exchange adjustments - - - 4
Shares issued in respect of
various fund raising
exercises 29 2,574 - -
Shares issued in respect of
the acquisition of CSports
and Electron Libre 7 - 833 -
At 30 September 1999 355 14,091 5,770 (3,566)
On 24 July 1999, 700,000 ordinary shares in the Company (prior to the 4-for-1
share split in November 1999) were issued in consideration for the acquisition
of C-Sports Communication SA and Electron Libre SARL. The merger reserve
reflects the difference between the fair value and nominal value of the shares
issued.
6. Reconciliation of movements in shareholders' funds
Quarter 6 months Quarter 6 months
ended ended ended ended
30 30 30 30
September September September September
1999 1999 1998 1998
£'000 £'000 £'000 £'000
Opening shareholders' 16,523 14,629 931 782
funds
Loss for the period (1,282) (1,426) (374) (784)
Proceeds from the issue of
shares 1,401 3,443 - 559
Exchange adjustments 8 4 - -
offset in reserves
Closing shareholders'
funds 16,650 16,650 557 557
7. Net cash outflow from operating activities
Quarter 6 months Quarter 6 months
ended 30 ended 30 ended 30 ended 30
September September September September
1999 1999 1998 1998
£'000 £'000 £'000 £'000
Operating loss before
interest and minorities 1,387) (1,617) (382) (800)
Depreciation 111 189 9 15
Amortisation of goodwill 622 1,129 - -
(Increase) in stock (10) (17) - -
(Increase) in debtors (257) (836) (1) (20)
Increase/(decrease) in 649 240 (13) (59)
creditors/provisions
(272) (912) (387) (864)
8. Acquisitions
On 24 July 1999, 365 acquired 100% of the issued share capital of C-Sports
Communication SA and Electron Libre SARL for a consideration of £857,423,
consisting of a consideration of £840,000 which was financed by the issue of
700,000 ordinary shares in the Company (prior to the 4-for-1 share split in
November 1999), and acquisition costs of £17,423.
£'000
Assets acquired
Electron Libre 25
CSports (81)
(56)
Goodwill 913
Cost of acquisition 857
Comprising:
Consideration satisfied by shares issued 840
Professional fees incurred on acquisition 17
857
Goodwill arising on the acquisition of CSports and Electron Libre is being
amortised on a straight line basis over the estimated economic useful life of
18 months.
9. Future liabilities
On exercise of share options issued after 6 April 1999, the Company will be
required to pay National Insurance on the difference between the exercise
price and market value of the shares issued. The Company will become
unconditionally liable to pay the National Insurance upon exercise of the
options, which are exercisable over a period of up to seven years from the
date of the grant. The Company therefore makes a provision following the
grant of options, as opposed to on vesting or on exercise.
The amount of the National Insurance payable will depend on the number of
employees who remain with the Company and exercise their options, the market
price of the Company's ordinary shares at the time of exercise and the
prevailing National Insurance rates at the time. For the first quarter to 30
June 1999 no provision has been made in the accounts as any such provision was
considered to be immaterial. In the second quarter to 30 September 1999 a
provision of £255,000 has been made taking into account movements in the
market value of the Company's shares up to 30 September 1999 and further share
options issued during the second quarter. The accounts for the third quarter
will include any adjustment required arising from any movement in the
Company's share price between 30 September and 31 December 1999. Based on a
the mid-market closing share price of 220.5 pence on 17 December 1999, this
would result in a charge in the third quarter of £2,159,000.
On 10 November 1999 the Company allotted 400,000 ordinary shares of 1p each to
two Directors at nominal value (prior to the 4 for 1 share split). This will
result in an employer's National Insurance liability of up to £300,000 (which
is payable in the quarter ending 31 December 1999), and a non-cash charge of
up to £2,500,000 in the profit and loss account in the third quarter.
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