365 Q1 Results - Part 1
365 Corporation PLC
31 August 2000
PART 1
Excellent Start to the Financial Year
Revenue up 117% year on year to £10.0m
Gross profits up 97% year on year to £4.0m
Unique users(1) increased five fold year on year to 2.1m
365 Corporation plc, the digital media and communications company, today
announces results for the quarter ended 30 June 2000 (Q1) showing strong
growth throughout its operations.
Financial Highlights Q1
* Group revenue of £10.0m - up 117% on Q1 1999/00 and up 37% on the
previous quarter (Q4 1999/00 £7.3m)
* Gross profit of £4.0m - up 97% on Q1 1999/00 and up 37% on the previous
quarter (Q4 1999/00 £2.9m)
* Consumer revenue £6.4m up 88% on Q1 1999/00 and up 46% on the previous
quarter (Q4 1999/00 £4.4m)
* Business revenue £3.6m up 200% on Q1 1999/00 and up 23% on the previous
quarter (Q4 1999/00 £2.9m)
* Operating costs (including marketing costs) fell to 74% as a percentage
of revenue (Q4 1999/00 79%)
* Operating loss(2) of £3.4m (Q4 1999/00 £2.9m)
* Cash and short term deposits £45.7m as at 30 June after acquisitions
during the quarter totalling £3.9m
Operational Highlights Q1
Consumer
* Total users increased to 2.1m(3) up 19% for June 2000 (March 2000 1.75m)
(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) Before amortisation of goodwill, provision for NIC and similar taxes on
share options
(3) Excludes 386,000 English and French language users
* Highly successful one-off Euro2000 finals web site available in five
languages generating significant revenue from sponsorship and
advertising
* Further distribution deals including Excite users across Europe, UOL &
Terra Networks (South America)
* Acquisition of Teletalk, making 365 a market leader in voice and
companionship services
* 5 new sites launched - Eurofinals365, Gardening365 and Formula 1 in
Spanish, Italian & German bringing the total web sites on the network to
35
* Second BBC commission - 8 part digital TV series created for BBC Choice
Business
* Business customers increased 16% to 3,473 (March 2000 2,989)
Strategic partnership with Energis for access to their high quality
broadband network
* Continued expansion of product portfolio and take up of value-added
services by existing customer base
* Accelerated sales of mobile services leading to direct contracts with
Vodafone and BT Cellnet
* MTV Telecom distribution deal giving access to 2,000 dealers nationwide
* Consolidation of distribution partners initiated through acquisition of
G Telecommunications
Dan Thompson, Chief Executive Officer, commenting on the results said:
'Our ability to generate high rates of revenue and gross profit growth whilst
tightly controlling our costs is central to our move towards profitability.
This is a fantastic start to the financial year. Quarterly revenue has
exceeded £10m for the first time, generating a gross profit in excess of £4m.
In addition, we have grown our unique users to 2.1m and consolidated our
position as one of Europe's largest producers and owners of digital content.
365's continuing growth in revenue and gross profit is coming from all parts
of our business. Our Consumer Division is developing strongly as we deliver
our digital content to our customers wherever they are, via different
platforms - the internet, telephone, television and, increasingly, mobile
phones and PDAs. Our Business Division continues to expand as we broaden our
range of communication services to our enlarged customer base in the SME
sector and extend our distribution capabilities. Examples of this expansion
are the recent launch of our Business365 web site and the direct mobile
contracts we have signed with Vodafone and BT Cellnet.
While 365 continues to pursue an aggressive growth strategy in expanding our
customer base and product portfolio, we believe that this quarter's results
clearly demonstrate the intrinsically profitable nature of both our consumer
and business divisions.'
For further enquiries, please contact
365 Corporation plc Tel: 020 7505 7800
Dan Thompson, Chief Executive
Officer
Martin Turner, Finance
Director
www.365corp.com
Financial Dynamics Tel: 020 7831 3113
Fiona Meiklejohn
Ben Atwell
Financial and Operating Data Summary
Financial data (£'000)
3 months 3 months ended 3 months ended
ended 30 Sep 1999 31 Dec 1999
30 Jun 1999
Revenue
Consumer Division 3,410 3,333 3,585
Business Division 1,199 1,593 1,981
Total revenue 4,609 4,926 5,566
Cost of sales (2,572) (2,591) (3,047)
Total gross profit 2,037 2,335 2,519
Operating costs (1,248) (2,351) (3,483)
Operating profit (loss) 789 (16) (964)
before marketing costs
Marketing costs** (512) (494) (1,851)
Operating profit 277 (510) (2,815)
(loss)*
Cash and short term 6,710 6,729 62,947
deposits
3 months 3 months
ended ended
31 Mar 2000 30 Jun 2000
Revenue
Consumer Division 4,391 6,406
Business Division 2,928 3,596
Total revenue 7,319 10,002
Cost of sales (4,400) (5,999)
Total gross profit 2,919 4,003
Operating costs (3,678) (5,360)
Operating profit (loss) (759) (1,357)
before marketing costs
Marketing costs** (2,102) (2,031)
Operating profit (2,861) (3,388)
(loss)*
Cash and short term 52,633 45,703
deposits
* before amortisation of goodwill, provision for NIC and similar taxes on
share options and shares issued at below market value.
** includes direct selling expenses and sales office overheads.
Operating data
Jun 1999 Sep 1999 Dec 1999 Mar 2000 Jun 2000
Consumer Division 401,000 779,000 1,031,000 1,752,000 2,091,000
- unique users(1)
Business Division 1,613 2,170 2,484 2,989 3,473
- customers(2)
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 regi to
receive an e-mail product at a selected mid-month date. If a person uses
the same 365service 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 business customers at each month end as the
total number of customers at that month end who have been billed for
that month.
Chief Executive Officer's Review
365 generated group revenue of £10.0m, gross profit of £4.0m and increased
our unique users to 2.1m during the quarter ended 30 June 2000. Our Consumer
and Business Divisions have both performed strongly and continue to deliver
significant increases in revenue and gross profit.
These results, which have been achieved through a combination of organic
growth and acquisitions, make us very confident about the prospects for this
financial year.
CONSUMER DIVISION
First quarter revenue increased to £6.4m from £4.4m in the previous quarter.
In addition to attracting large numbers of users to our network of 35 web
sites, 365 continues to deliver high rates of revenue growth as we make our
high quality digital content available over an array of platforms, including
the internet, fixed line telephone, television and mobiles. We saw very
strong growth from our internet channel - up 55% to £1.1m - the fifth
successive quarter of more than 50% growth. Audiotext, content via fixed
line or mobiles telephones, also grew strongly, up 37% on the previous
quarter.
New web sites
We successfully launched several new sites during the quarter, ranging from
Gardening365 within our Lifestyle division, through to the multi-lingual 'one-
off' Eurofinals365, the Euro2000 event based site, within the Sports
division. 365's network now has 35 web sites covering lifestyle, sports and
entertainment.
Euro2000
The Euro2000 site was highly successful both in terms of revenue and user
numbers and demonstrates our ability to leverage our content and audience to
generate revenue around high profile, one-off events. This was our first
site to be available in 5 languages (English, French, Spanish, German and
Italian), attracting 540,000 users at its peak in June and generating
significant advertising, sponsorship and betting revenue from commercial
partners including Sega Dreamcast, Ericsson, KLM, William Hill, Zetters and
Betmaker. (NB - only 154,000 of these incremental users have been counted in
the June total of 2.1m. All English and French users totalling 386,000 were
excluded.)
Mobile Phones
Mobile phones are already playing a key part in the growth of our voice and
audio revenue and we are particularly excited about the revenue and
distribution potential for 365's content services. Furthermore, our sports
web content can be accessed by WAP phones - both directly and through our
relationships with BT Cellnet and Vodafone and our broad range of audio,
statistical and text content positions us ideally for the next generation of
mobile phones. Finally, our sports and lifestyle content is becoming
available in SMS format both directly and through our agreements with Iobox
(pan-European) and iTouch (Europe, Australasia and Africa).
Teletalk
On 27 April 2000, we acquired the entire issued share capital of Teletalk
Limited for consideration of up to £5.9m, dependent on Teletalk's operations
meeting specific performance targets. Teletalk was formerly owned by the
Financial Times and has since established itself as one of the leading
providers to newspapers of audiotext (voice services) to fixed and mobile
phones in the UK. 365 intends to continue to develop its proprietary
applications and services to deliver voice content to its users and regards
the ownership of audio content and voice services as essential in the
converging digital environment.
Betting and Gaming
365 continues to earn significant revenue from online betting. This has been
primarily achieved though a number of profitable advertising and sponsorship
deals with various major betting organisations including Coral Eurobet,
William Hill and Blue Square. In addition, we have instigated pools gaming as
evidenced by our recent '£1 million Euro2000 finals' pools game that we ran
in partnership with Zetters in June.
Our involvement and experience within this sector has reinforced our view
that online betting is a multi-dimensional opportunity which we are
implementing via a series of strategic partnerships and possible
acquisitions.
Distribution Deals
The quality of our multiple language digital content continues to be
recognised by third party distribution partners. In addition to the BT and
Vodafone agreements, distribution deals in the quarter have included a multi-
language (English, French, Spanish and German) deal with Excite for football
content and Spanish language deals with Terra Networks and UOL. 365 Sports
content services have also been prepared for distribution via Palm Pilots and
other PDAs and wireless devices.
Broadband and Television
In the broadband arena, 365's TV arm, 365television.com, had an impressive 3
months. The division, which was set up at the end of January, won its second
commission in March to produce an 8 x 30 minute series for BBC Choice, Mark
Owen's Celebrity Scooters. The series was a high-budget, ambitious travelogue
following 18 celebrity scooter-riders around the eight towns playing host to
Euro 2000 matches. It was filmed over just 3 weeks in April and May, aired
throughout June and acclaimed for its high production values.
The TV department has also begun to create stylish audio-visual content for
365's web products. Projects during the quarter included exclusive packaged
footage of the Barbarians rugby tour for the rugby sites, a daily 5 minute
video news package for the Eurofinals365 site, a multimedia launch for the
new Gardening365 site and the development of an animated version of
Football365's strip cartoon, Model Professionals.
BUSINESS DIVISION
365 is successfully implementing its strategy of providing a total
communications solution to the SME market and a single point of contact for
all of its customers' communication requirements. We continue to focus on
the telephone system as the 'gateway' product into our business customers.
The acquisition of Fenfones Communications Limited in February significantly
strengthened our position as a supplier, installer and maintainer of
telephone systems to the SME market. We are actively seeking further small
acquisitions in this area as a means of expanding our customer base, into
which we can cross-sell our portfolio of value-added telecommunications and
internet services.
Energis
On 29 June 2000 we announced that we had entered into a major three year
agreement with Energis. A key component of this relationship is the ability
of 365 to take advantage of Energis' high quality broadband network without
incurring the associated costs of ownership. In particular, this will allow
365 to offer a range of complex, value-added data services which were
previously unavailable to third party resellers. These data services
currently include the provision of leased lines, ISDN2, VPNs and Intelligent
Network services and will enable 365 to meet the fast growing data
requirements of its customers and also target larger business customers with
more complex telecommunication requirements.
Vodafone and BT Cellnet
For many of our customers mobile telecommunication costs now exceed fixed
line telephone costs and we have seen strong demand for mobile services from
our customers since we launched these services at the end of last year. As a
result of this demand, in June we signed direct contracts with both Vodafone
and BT Cellnet to become a mobile service provider in the UK, giving us a
broader product range and greater margins.
Joint Ventures
On 4 April 2000, 365 formed a joint venture, Island6, with MTV Telecom plc, a
telephone system distributor, giving 365 a national distribution capability,
through exclusive access to MTV Telecom's channel of over 2,000 active
dealers across the UK.
On 19 April 2000, we acquired the balance (52.5%) of the shares not owned by
the group in G Telecommunications, which was 365's joint venture with
Glamorgan Telecom in Cardiff. Over time, we aim to rationalise our joint
ventures by acquisition and consolidate our business customer base under one
'Symphony' brand.
DEVELOPMENTS SINCE QUARTER END
We have launched four new web sites since the end of June - Business365
(www.business365.co.uk), My365 (www.my365.com), Gay365 (www.gay365.com) and
Formula 1 in French (www.francais.planet-f1.com).
Business365
Business365 (www.business365.co.uk) is a portal for SMEs aiming to be their
online champion. It combines content and creative skills from our Consumer
Division with our telecommunication expertise from our Business Division to
produce a site specifically geared to the SME market. Unlike many
competitive business 'portals' which are simply e-commerce front-ends for
established, off-line businesses, Business365 aims to be the leading
independent business site appealing to the entire SME community.
My365
My365 (www.my365.com) is designed to offer users of the 365 network a central
point for all their content, communication and commerce requirements.
Statistics, Live Scores and Results
The increasing importance of the mobile phone channel and the ever-growing
breadth and depth of web content has created a growing requirement for
statistics, live scores and results. We have therefore set up a dedicated
resource to provide such content for our own distribution and for third party
commercial partners.
Compass
On 30 August 2000, we acquired the whole of the issue share capital of
Compass Communications Technical Services Limited, a telephone system
distributor, and the remaining 54% of shares in Compass Telecom Limited, our
joint venture with Compass Communications. Initial consideration is £0.75m
with further consideration dependent on operational and share price
performance of up to £1.0m.
CURRENT TRADING AND OUTLOOK
The Directors are excited and confident about the Company's future prospects.
We have set ourselves some very aggressive user, revenue and gross profit
targets for this financial year and are delighted that it has started so
well.
Our user levels continue to grow demonstrating the diversity and growth of
365's content across many different areas of interest and via different
channels. Within the bsuiness division we have demonstrated our ability to
succeed through acquisitions and we continue to seek new opportunities. The
division is growing as we expand our product portfolio into value added,
higher margin data services and widen our distribution channels to provide
business customers with all their communication needs.
Financial Review
Consumer Division
Users. During the quarter to 30 June 2000, Consumer Division users grew
strongly to 2.09m, a 19.3% increase from March 2000 (1.75m users) and a five-
fold increase compared to June 1999 (0.40m users).
Revenue. Consumer Division revenue for the quarter ended 30 June 2000 was
£6.41m, which includes £0.98m of revenue from the acquisition of Teletalk
which completed on 27 April 2000. This compares to £3.41m for the quarter to
30 June 1999 and £4.39m for the previous quarter. Internet revenue in
particular grew strongly to £1.08m, up 54.3% compared to the previous quarter
ended 31 March 2000 (£0.70m) and up 671.4% compared to the same period last
year (£0.14m).
Cost of Sales. Cost of sales relates primarily to the direct costs of
advertising 365's audiotext services in a variety of media totalling £1.22m
and freephone (0800) access charges, commissions and royalties payable to
third parties of £2.36m for the quarter. Consumer Division gross profit was
£2.82m for this quarter, representing 44.1% of revenue.
Administrative Expenses. 365 continues to invest in expanding its consumer
operations, which is reflected in administrative expenses (excluding
amortisation of goodwill and provision for NIC and similar taxes on share
options) of £4.12m for the first quarter, which includes £0.17m in relation
to Teletalk. This compares to £3.35m for the previous quarter. Also
included in administrative expenses are content and brand marketing costs of
£1.03m (£1.32m for the previous quarter).
Operating Loss. Operating losses (before amortisation of goodwill and
provision for NIC and similar taxes on share options) were £1.30m for this
quarter, which is a slight decrease from the previous quarter (£1.31m). This
reflected the increase in revenue during this quarter, combined with a
continued investment in new products and services as part of our growth
strategy.
Business Division
Customers. 365 increased its number of business customers to 3,473 as at 30
June 2000, an increase of 16.2% from 31 March 2000 (2,989) and over double
the prior year (1,613).
Revenue. Revenue during the quarter increased to £3.60m, 22.8% up on the
previous quarter (£2.93m) and triple the same period last year (£1.20m).
This growth reflects the impact of the acquisition of Fenfones which
completed on 29 February 2000, growth in the number of customers and
increasing average monthly revenue per customer as 365 expands its product
portfolio.
Cost of Sales. Cost of sales includes costs relating to the provision of
telephone system equipment, network access charges, mobile handsets and
airtime charges and internet service costs. Gross profit as a percentage of
revenue during the quarter was 32.8% compared to 30.0% for the previous
quarter.
Administrative Expenses. Administrative expenses totalling £2.23m (excluding
amortisation of goodwill and provision for NIC and similar taxes on share
options) include costs related to the development and management of 365's
infrastructure, customer services, sales and marketing expenses, general
operating expenses and personnel. This quarter's administrative expenses
also include costs relating to Fenfones for a full three-month period. Sales
and marketing costs for the quarter were £1.00m (£0.78m for the previous
quarter).
Operating Loss. Operating losses (before amortisation of goodwill and
provision for NIC and similar taxes on share options) for the quarter ended
30 June 2000 were £1.05m compared to £0.91m for the previous quarter.
Corporate
Administration. During the quarter ended 30 June 2000, 365's corporate
administrative costs increased to £1.04m, compared to £0.64m for the previous
quarter. These costs include ongoing expenditure in relation to the Board of
Directors and other corporate employees, compliance costs in respect of 365's
status as a listed company and corporate marketing.
Amortisation of Goodwill. In accordance with the provisions of FRS 10
'Goodwill and Intangible Assets', 365 recorded a goodwill amortisation charge
of £5.83m during the quarter.
Provision for NIC and similar taxes on share options. On exercise of share
options (which are exercisable over a period of up to seven years from the
date of the grant) issued after 6 April 1999, the Company will be required to
pay NIC and overseas equivalents on the difference between the exercise price
and market value of the shares issued. Following the issue of UITF25 the
Company is now required to spread the liability over the period to vesting.
Previously the Company made a full provision following the grant of options
and as a result has made a prior year adjustment of £1.99m to reflect the
change in accounting policy. Prior period comparatives have been restated to
reflect the new policy.
Net Interest Income. Investment income for the quarter was £0.74m arising
from the investment of 365's cash balance in a variety of interest-bearing
deposit accounts.
Taxation. 365 has incurred a cumulative net loss since inception and the
Company expects to incur additional net losses for the foreseeable future.
Retained Loss. The Company recorded a group net loss of £7.91m during the
quarter.
Liquidity and Capital Resources
During the quarter ended 30 June 2000, the Company's operating activities
used cash totalling £4.08m, primarily due to operating losses, compared to
£4.69m for the previous quarter. The cash outflow from capital expenditure
during the quarter totalled £0.65m, (relating primarily to the purchase of
telecommunications and computer equipment) as 365 expanded its operations.
The corresponding figure for the previous quarter was £0.55m. The
acquisitions of Teletalk on 27 April 2000 and the purchase of the balance of
shares in G Telecommunications on 19 April 2000 resulted in net cash outflows
during the quarter of £2.96m.
As at 30 June, 365's cash balance was £45.70m, compared to £52.63m as at 31
March 2000.
Consolidated profit and loss account
for the quarter ended 30 June 2000
Quarter Quarter Year ended
ended ended 31 March 2000
30 June 30 June 1999 restated
2000 unaudited £'000
unaudited £'000
Note £'000
Turnover
Continuing operations 9,024 4,609 22,420
Acquisitions 978 - -
3 10,002 4,609 22,420
Cost of sales (5,999) (2,572) (12,610)
Gross profit 4,003 2,037 9,810
Administrative expenses 7,391 1,760 15,719
before the following:
Amortisation of goodwill 5,832 507 5,097
Provision for NIC and (541) - 704
similar taxes on share
options
Shares issued at below - - 2,261
market value
Total administrative 12,682 2,267 23,781
expenses
Operating (loss)/profit 3 (3,388) 277 (5,909)
before goodwill
amortisation, provision
for NIC and similar taxes
on share options and
shares issued at below
market value
Continuing operations (8,840) (230) (13,971)
Acquisitions 161 - -
Operating loss (8,679) (230) (13,971)
Net interest receivable 742 63 1,208
Loss on ordinary (7,937) (167) (12,763)
activities before
taxation
Taxation (23) - (6)
Loss on ordinary (7,960) (167) (12,769)
activities after taxation
Minority interests 51 23 158
Retained loss for the (7,909) (144) (12,611)
period
(Loss)/earnings per 4
ordinary share
Basic and diluted (1.3p) 0.3p (2.9p)
(loss)/earnings per share
before amortisation of
goodwill, provision for
NIC and similar taxes on
share options and shares
issued at below market
value
Basic and diluted (4.0p) (0.1p) (8.2p)
(loss)/earnings per share
Statement of total recognised gains and losses
for the quarter ended 30 June 2000
Quarter ended Quarter Year
30 June ended ended
2000 30 June 31 March
unaudited 1999 2000
£'000 unaudited restated
£'000 £'000
Retained loss for the (7,909) (144) (12,611)
period
Exchange adjustments (47) (4) (17)
Total recognised losses 9 (7,956) (148) (12,628)
for the period
Prior year adjustment 1,992 - -
Total recognised losses (5,964) (148) (12,628)
since last quarter
Consolidated balance sheet
as at 30 June 2000
30 June 30 June 31 March
2000 1999 2000
unaudited unaudited restated
Note £'000 £'000 £'000
Fixed assets
Intangible fixed assets 41,705 9,291 40,660
Tangible fixed assets 2,127 716 1,675
43,832 10,007 42,335
Current assets
Stock - finished goods 596 23 587
Debtors 10,296 3,061 8,284
Investments - short term 43,260 - 49,500
deposits
Cash at bank and in hand 2,443 6,710 3,340
56,595 9,794 61,711
Creditors: amounts (9,403) (3,345) (8,309)
falling due within one
year
Net current assets 47,192 6,449 53,402
Total assets less 91,024 16,456 95,737
current liabilities
Creditors: amounts (1,217) (21) (245)
falling due after more
than one year
Provisions for 9 (163) - (704)
liabilities and charges
Net assets 89,644 16,435 94,788
Capital and reserves 5
Called up share capital 498 342 493
Shares to be issued 470 - 80
Share premium account 72,320 13,536 72,220
Merger reserve 37,212 4,937 34,844
Profit and loss account (20,652) (2,292) (12,696)
Total equity 6 89,848 16,523 94,941
shareholders' funds
Minority interests (204) (88) (153)
Capital employed 89,644 16,435 94,788
Consolidated cash flow statement
for the quarter ended 30 June 2000
Quarter Quarter Year
ended ended ended
30 June 30 June 1999 31 March
2000 2000
Note unaudited unaudited restated
£'000 £'000 £'000
Net cash outflow from 7 (4,077) (640) (7,463)
operating activities
Returns on investment
and servicing of
finance
Net interest 778 63 880
Taxation 2 - (265)
Capital expenditure and
financial investment
Purchase of tangible (650) (66) (819)
fixed assets
Purchase of intangible - - (410)
fixed assets
(650) (66) (1,229)
Acquisitions
Net cash/(overdraft) 311 - (192)
acquired with
subsidiary undertakings
Purchase of 8 (3,272) - (5,216)
subsidiaries
(2,961) - (5,408)
Cash outflow before use (6,908) (643) (13,485)
of liquid resources and
financing
Management of liquid
resources
Decrease/(increase) in 6,240 - (49,500)
short-term deposits
Financing
Issue of shares 13 2,037 66,362
Expenses on issue of - - (5,527)
shares
Capital element of (35) - (33)
finance lease payments
(22) 2,037 60,802
(Decrease)/increase in (690) 1,394 (2,183)
cash in the period
Notes to the quarterly financial statements
1. Basis of preparation
The financial statements for the quarter ended 30 June 2000 have been
prepared using accounting policies consistent with those set out in the
Company's consolidated 2000 statutory accounts, apart from those relating to
the costs of share option schemes. Following the issue of UITF25 the Company
is now required to spread employer's National Insurance contributions and
other similar taxes over the period to when the share options become
exercisable (see Note 9). 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 ended 30 June 1999 has been
extracted from the accounting records of the group.
The balances and results as at 31 March 2000 have been extracted from the
statutory accounts which have been filed with the Registrar of Companies,
restated to reflect the change in accounting policy above. The auditors'
report on those accounts was unqualified and did not contain any statement
under section 237 of the Companies Act 1985.
The results for the quarter ended 30 June 2000 were approved by the Board on
30 August 2000 and will be posted to shareholders in early September 2000.
2. Operating data June 1999 to June 2000
Jun Sep Dec
Consumer Division
Unique users(1)
Sport
Football 186,000 376,000 478,000
Cricket 102,000 148,000 156,000
Rugby - 38,000 26,000
Other - 3,000 -
Total Sport 288,000 565,000 660,000
Entertainment 35,000 118,000 225,000
Lifestyle 78,000 96,000 146,000
Total unique 401,000 779,000 1,031,000
users
User sessions(2)
Sport
Football 2,183,000 3,276,000 3,734,000
Cricket 3,051,000 4,599,000 4,698,000
Rugby - 70,000 108,000
Other - 3,000 -
Total Sport 5,234,000 7,948,000 8,540,000
Entertainment 148,000 248,000 559,000
Lifestyle 526,000 572,000 792,000
Total user 5,908,000 8,768,000 9,891,000
sessions
Audiotext 6,098,000 6,073,000 6,063,000
minutes(3)
Business Division
Business 1,613 2,170 2,484
customers(4)
Business 6,948,000 10,047,000 9,244,000
minutes(5)
Mar Jun
Consumer Division
Unique users(1)
Sport
Football 607,000 795,000
Cricket 224,000 252,000
Rugby 187,000 176,000
Other 196,000 261,000
Total Sport 1,214,000 1,484,000
Entertainment 366,000 318,000
Lifestyle 172,000 289,000
Total unique 1,752,000 2,091,000
users
User sessions(2)
Sport
Football 3,979,000 4,650,000
Cricket 5,348,000 5,267,000
Rugby 897,000 1,009,000
Other 427,000 490,000
Total Sport 10,651,000 11,416,000
Entertainment 760,000 721,000
Lifestyle 921,000 1,243,000
Total user 12,332,000 13,380,000
sessions
Audiotext 5,784,000 7,792,000
minutes(3)
Business Division
Business 2,989 3,473
customers(4)
Business 14,448,000 16,409,000
minutes(5)
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 365service 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 taxation are classified below by class of
business and by geographical area by origin, which is not materially
different from geographical area by destination.
Consumer Division Business Division
Business Quarter ended Quarter ended Quarter ended Quarter ended
Analysis 30 June 2000 30 June 1999 30 June 2000 30 June 1999
(£'000)
Turnover
Consumer 1,084 144 - -
internet
Audiotext 4,982 3,266 - -
Business - - 3,596 1,199
services
Other 340 - - -
6,406 3,410 3,596 1,199
Continuing 5,428 3,410 3,596 1,199
operations
Acquisitions 978 - - -
Cost of 3,583 1,741 2,416 831
sales
Gross profit 2,823 1,669 1,180 368
Administrati 4,123 1,043 2,229 498
ve expenses
before
goodwill
amortisation,
NIC and
similar
taxes on
share
options
Operating (1,300) 626 (1,049) (130)
(loss)/profit
before
goodwill
amortisation,
NIC and
similar
taxes on
share
options
Goodwill 5,443 507 389 -
amortisation
Provision (152) - (143) -
for NIC and
similar
taxes on
share
options
Operating (6,591) 119 (1,295) (130)
(loss)/profit
Continuing (6,752) 119 (1,295) (130)
operations
Acquisitions 161 - - -
Net interest 146 - 24 (1)
receivable/
(payable)
(Loss)/profit (6,445) 119 (1,271) (131)
on
ordinary
activities
before
taxation
Group Overhead Total Group
Business Quarter ended Quarter ended Quarter ended Quarter ended
Analysis 30 June 2000 30 June 1999 30 June 2000 30 June 1999
(£'000)
Turnover
Consumer - - 1,084 144
internet
Audiotext - - 4,982 3,266
Business - - 3,596 1,199
services
Other - - 340 -
- - 10,002 4,609
Continuing - - 9,024 4,609
operations
Acquisitions - - 978 -
Cost of - - 5,999 2,572
sales
Gross profit - - 4,003 2,037
Administrative 1,039 219 7,391 1,760
expenses
before
goodwill
amortisation,
NIC and
similar
taxes on
share
options
Operating (1,039) (219) (3,388) 277
(loss)/profit
before
goodwill
amortisation,
NIC and
similar
taxes on
share
options
Goodwill - - 5,832 507
amortisation
Provision (246) - (541) -
for NIC and
similar
taxes on
share
options
Operating (793) (219) (8,679) (230)
(loss)/profit
Continuing (793) (219) (8,840) (230)
operations
Acquisitions - - 161 -
Net interest 572 64 742 63
receivable/
(payable)
(Loss)/profit (221) (155) (7,937) (167)
on
ordinary
activities
before
taxation
Geographical
analysis
(£'000)
Profit/(loss) before goodwill
amortisation and provision for
NIC and similar taxes on share
Turnover options.
Quarter ended Quarter ended Quarter ended Quarter ended
30 June 2000 30 June 1999 30 June 2000 30 June 1999
United Kingdom 9,873 4,469 (2,515) 267
France 71 - (559) -
Germany - 73 (2) 17
Chile 39 67 (20) (7)
South Africa 3 - (162) -
USA 16 - (130) -
10,002 4,609 (3,388) 277
4. Loss per ordinary share of 0.25p each
Quarter ended Quarter Ended Year ended
30 June 30 June 31 March
2000 2000 2000
£'000 £'000 £'000
restated
(Loss)/profit for the (2,618) 363 (4,549)
period before the
following:
Goodwill amortisation (5,832) (507) (5,097)
Provision for NIC and 541 - (704)
similar taxes on share
options
Shares issued at below - - (2,261)
market value
Loss for the period (7,909) (144) (12,611)
Weighted average number of
shares in the period:
Basic and diluted 197,187,014 132,297,015 154,120,345
Basic and diluted (1.3p) 0.3p (2.9p)
(loss)/earnings per share
before amortisation of
goodwill, provision for
NIC and similar taxes on
share options and shares
issued at below market
value
Goodwill amortisation (3.0p) (0.4p) (3.3p)
Provision for NIC and 0.3p - (0.5p)
similar taxes on share
options
Shares issued at below - - (1.5p)
market value
Basic and diluted (4.0p) (0.1p) (8.2p)
(loss)/earnings per share
The weighted average number of shares has been restated to reflect the 4-for-
1 share split in November 1999.
None of the contingently issuable shares or share options gives rise to a
dilution in the loss per share due to the losses made in the period.
5 Share capital and reserves
Ordinary Shares to Share Merger Profit and
share be issued premium reserve loss account
capital account
£'000 £'000 £'000 £'000 £'000
At 1 April 2000 493 80 72,220 34,844 (14,688)
Prior year adjustment - - - - 1,992
Retained loss for the - - - - (7,909)
period
Exchange adjustments - - - - (47)
Shares issued in - - 13 - -
respect of share
options exercised
Shares issued for 5 - - 2,368 -
acquisitions
Premium on shares - - 87 - -
issued to employee
Contingent share - 450 - - -
consideration for
acquisitions
Movement in fair - (60) - - -
value of contingent
share consideration
At 30 June 2000 498 470 72,320 37,212 (20,652)
On 19 April 2000 the Company acquired the remaining 52.5% of shares in G-
Telecommunications Limited. The consideration for the acquisition was
£1,187,000 satisfied by £112,000 in cash, £619,000 by the allotment of
397,760 ordinary shares in the Company and a contingent consideration of up
to £450,000 of shares payable on meeting certain revenue targets. Costs of
£6,000 were capitalised as part of the investment. The difference between the
fair value and nominal value of the shares has been transferred to the merger
reserve.
On 27 April 2000 the Company acquired the entire issued share capital of
Teletalk Limited. The consideration for the acquisition was £5,891,000
satisfied by £3,000,000 in cash, £1,754,000 by the allotment of 1,308,900
ordinary shares in the Company and a further £1,000,000 in cash to be paid
over the following two years subject to performance targets being met. Costs
of £137,000 were capitalised as part of the investment. The difference
between the fair value and nominal value of the shares has been transferred
to the merger reserve.
6. Reconciliation of movement in shareholders' funds
Quarter ended Quarter ended Year ended
30 June 30 June 31 March
2000 1999 2000
£'000 £'000 £'000
Opening shareholders' funds 94,941 14,629 14,629
(originally £92,949 before
adding prior year adjustment
of £1,992)
Loss for the period (7,909) (144) (12,611)
New share capital (net of - 2,042 60,826
expenses) issued for cash
Shares issued for 2,373 - 29,949
acquisitions
Premium on shares issued to 87 - -
employees
Reversal of charge in respect - - 2,076
of shares issued at below
market value
Net movement in contingent 390 - 80
share consideration
Employee share options 13 - 9
exercised
Exchange adjustments offset (47) (4) (17)
in reserves
Closing shareholders' funds 89,848 16,523 94,941
7. Net cash outflow from operating activities
Quarter ended Quarter ended Year ended
30 June 30 June 31 March
2000 1999 2000
restated
£'000 £'000 £'000
Operating loss (8,679) (230) (13,971)
Depreciation 315 78 408
Amortisation of 5,872 507 5,130
intangible assets
(Increase)/decrease in (9) (7) (186)
stock
(Increase)/decrease in (1,638) (579) (3,669)
debtors
Increase/(decrease) in 62 (409) 2,741
creditors/provisions
Loss on disposal of - - 8
fixed assets
Charge in respect of - - 2,076
shares issued at below
market value
(4,077) (640) (7,463)
8. Acquisitions
(a) G-Telecommunications Limited
On 19 April 2000, 365 acquired the remaining issued share capital of G-
Telecommunications Limited for a total estimated consideration of £1,187,000.
£'000
Book value of net assets -
acquired
Goodwill 1,187
Cost of acquisition 1,187
Comprising:
Cash 112
Shares issued 619
Contingent share 450
consideration
Acquisition costs 6
1,187
Goodwill arising on the acquisition of the remaining 52.5% of G-
Telecommunications is being amortised on a straight-line basis over the
estimated economic useful life of 5 years.
(b) Teletalk Limited
On 27 April 2000, 365 acquired the entire issued share capital of Teletalk
Limited for a total consideration of £5,891,000.
£'000
Fair value of net assets acquired 186
Goodwill 5,705
Cost of acquisition 5,891
Comprising:
Cash 3,000
Shares issued 1,754
Contingent cash 1,000
consideration
Acquisition costs 137
5,891
Goodwill arising on the acquisition of Teletalk is being amortised on a
straight line basis over the estimated economic useful life of 5 years.
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