3rd Quarter & 9 Mths Results
365 Corporation PLC
17 February 2000
Third Quarter and nine month Results
unique users exceed 1 million
internet revenues up 57%
nine month revenues over £15m
365 Corporation plc ('365' or the 'Company'), the provider of destination
content, community and communication services, today announces results for the
third quarter and nine months ended 31 December 1999. Highlights of the
results include:
Third quarter ended 31 December 1999
total unique users(1) increased to 1,031,282 for December, a 32% increase
on September (779,591 users);
turnover of £5,566,000, a 13% increase over the previous quarter
(£4,926,000);
operating losses (before amortisation of goodwill, provisions for National
Insurance contributions on share options and charges in respect of shares
issued at par) of £2,815,000 compared to £371,000 for the quarter ended 31
December 1998.
internet revenue increased 57% to £460,000 compared to the previous quarter
(£293,000).
audiotext revenue increased 5% to £3,186,000;
total business customers(4) as at 31 December 1999 increased 14% to 2,484,
business service revenue increased by 21% to £1,920,000 and business
minutes(5) increased by 17% on the previous quarter;
successful flotation on London Stock Exchange;
£1m 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);
launch of Personals365 (www.personals365.com) and 'The Switch'
(www.theswitch.com);
acquisition of e-Merchants Inc. (www.RugbyRugby.com)
Nine months ended 31 December 1999
turnover increased to £15,101,000 compared to £159,000 in the nine months
to 31 December 1998;
operating losses (before amortisation of goodwill, provisions for National
Insurance contributions on share options, and charges in respect of
shares issued at par) of £3,048,000 compared to £1,171,000 for the nine
months ended 31 December 1998.
Recent developments
agreement to acquire Datanet Marketing Services on 3 February 2000,
bringing total combined users in January to over 1.4 million on a pro-
forma basis;
formation of 365Television and creation of its first digital television
broadcast for the BBC;
sponsorship deal with Fox Sports World in the US;
launch of www.soccer365.com;
WAP content deal with BT Cellnet;
continued growth in users, customers and revenues.
Notes:
1,3,4,5. See note 2 to interim financial statements.
Dan Thompson, Chief Executive Officer, commented today:
'Breaking the one million unique user barrier so rapidly underlines our belief
that quality content and services will continue to attract and retain regular
users. Our recent acquisition of Datanet, believed to be the largest UK
internet content acquisition to date, has increased unique users to over 1.4
million in January on a pro-forma basis. This increase in users, combined
with the even faster increase in internet revenues, has contributed to an
extremely strong third quarter performance across the group.
Since 365's flotation we have moved aggressively to expand the range and
distribution of our content and services with the acquisitions of Datanet and
e-Merchants Inc. The successful launch of our television arm, together with
today's announcement of our first WAP product, demonstrates our ability to
deliver our content over multiple channels and to maximize the revenue streams
from our proprietorial content and brands'
For further enquiries, please contact
365 Corporation plc Tel: 0207 505 7800
Dan Thompson, Chief Executive Officer
Martin Turner, Finance Director
www.365corp.com
Financial Dynamics Tel: 0207 831 3113
Giles Sanderson
Fiona Meiklejohn
Financial and Operating Data Highlights
Quarter Quarter 9 months 9 months
ended 31 ended 31 ended 31 ended
December December December 31 December
1999 1998 1999 1998
£'000 £'000 £'000 £'000
Turnover 5,566 75 15,101 159
Operating expenses (8,381) (446) (18,149) (1,330)
before amortisation
of goodwill,
provision for NIC on
share options
and shares issued at par
Operating loss (2,815) (371) (3,048) (1,171)
before amortisation of
goodwill, provision for
NIC on share options
and shares issued at
par
Operating loss (8,546) (371) (10,163) (1,171)
Operating data from April 1999 to January 2000
April May June July Aug Sept
Consumer Division 352,612 385,935 401,146 526,892 658,996 779,591
unique users (1)
Business Division 1,410 1,492 1,613 1,740 1,838 2,170
customers (4)
Oct Nov Dec Jan
Consumer Division 934,270 944,267 1,031,282 1,093,995*
unique users (1)
Business Division 2,366 2,475 2,484 2,592
customers (4)
* excludes Datanet unique users which were approximately 327,000
Notes:
1,4 See note 2 to quarterly financial statements
Chief Executive Officer's Review
Total unique users increased to 1,031,282 in December 1999, a 32% increase on
the September total of 779,591 users, and a 215% increase on the March 1999
total of 326,954 users. Our acquisition of Datanet on 3 February 2000 brings
a further 327,000 users to 365 (based on January 2000 operating data) and
increases our combined January total to over 1.4 million unique users on a
pro-forma basis. In addition to users, the Datanet acquisition has brought
us complementary content and services (particularly in the area of
statistically-based sports content), new distribution channels, including a WAP
content deal with BT Cellnet, and additional management resources.
Internet Services
Growth in users and customers continued during the third quarter and a £1m
brand building and content marketing campaign, initiated in October,
successfully contributed to this increase, particularly with regard to
football and music
Our commitment to producing quality content also resulted in new commercial
opportunities during the quarter. We developed, maintained and hosted ITV's
1999 Rugby World Cup web site, were also selected to produce all of the
content for'G', a new internet e-zine, on behalf of Guinness (www.getG.com)
and have created and launched the official British Record Industry ('BRIT')
Awards web site (www.brits.co.uk) in preparation for the 2000 BRIT Awards.
In October, we successfully 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. Both products have quickly attracted a large and growing
unique user base and related revenue streams.
Internet revenue increased to £460,000, a 57% increase on the previous quarter
(£293,000) and over six times the revenue in the same quarter in 1998
(£75,000). This revenue includes a contribution from our new Net@Work
business internet product.
e-Merchants Inc.
In December we established a presence in the North American market through the
acquisition of US-based e-Merchants Inc., the owners and operators of
RugbyRugby.com. Through RugbyRugby.com we now provide a range of services for
players, fans, and administrators, including a 24-hour news service, an on-
line match scheduling service, club listings, fixtures, results, a rugby
merchandise store and a comprehensive rugby club search engine.
RugbyRugby.com is the official Rugby web site of Fox Sports World ('Fox'), the
US Sports television channel. Fox is the primary broadcaster of rugby in the
United States and its broadcasts can be seen in up to 65 million US homes.
RugbyRugby.com is exclusively promoted during every Fox rugby broadcast, which
will include coverage of this year's Six Nations, Tri-Nations, European Cup,
Super 12 and Currie Cup competitions. RugbyRugby.com also has an exclusive
arrangement with the United States men's national rugby team, the Eagles.
This relationship with Fox has been expanded to include the sponsorship of
their soccer coverage in the United States.
The total consideration for RugbyRugby.com was US$250,000 in cash and 351,562
shares, with contingent consideration of up to 195,313 shares being payable if
e-Merchants achieves certain revenue targets during the year to 31 January
2001. Based on our share price on 31 December 1999 of 250p, this equates to
an effective initial consideration of approximately $1.65 million.
Audiotext Services
Effective 1 December, we entered into our first major contract to provide
network and audiotext termination services to a third party, LSH, a leading
provider of companionship services in the UK. The provision of such bureau
services, and the associated increase in our overall call termination and
handling capacity, will put us in a strong position to support major national
audiotext promotions, such as TV voting and competitions.
During the quarter, audiotext revenues increased by 5% to £3,186,000 (second
quarter - £3,040,000).
Business Services
The launches of business mobile phone services and internet access via
Net@Work, have exceeded our expectations during the third quarter and we
intend to expand our infrastructure and distribution capabilities to meet
customer demand. Both products form part of our core strategy to provide a
'one-stop-shop', or single point of contact for all of our business 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.
Business service turnover increased to £1,920,000, compared to £1,593,000 in
the previous quarter, an increase of 21%. As at 31 December 1999, we had
2,484 business customers, an increase of 14% on 30 September 1999 (2,170
customers) and 94% on 31 March 1999 (1,280 customers).
Recent and Forthcoming Developments
365Television
In January, we announced the formation of 365Television. In line with our
multi-channel strategy, 365Television will make programmes and interactive
content for digital television, and further looks to exploit our existing
brands and content over the broadband and television platforms. 365Television
will also be creating audiovisual content to enhance our services on other
platforms, such as the internet and mobile phones.
To spearhead 365Television, we hired a team of three former BBC producers all
of whom have been at the forefront of simultaneous TV and internet
broadcasting, developments which will accelerate with the advent of broadband
delivery. Our first 365Television production was a documentary on boxer Mike
Tyson's controversial visit to Britain ('Mike Tyson in the UK'), and was
broadcast on the BBC during the week of 31 January 2000. We also use clips
from this programme to augment our internet offerings.
Datanet Acquisition
On 3 February we announced that we had entered into an agreement to acquire
the entire issued share capital of Datanet Holdings Limited, the holding
company of Datanet Marketing Services Limited ('Datanet').
Datanet, which was founded in 1995, is one of the most successful and well-
established publishers of high quality digital sports and entertainment
content on the internet. Its extensive content portfolio includes Planet
Rugby (www.planet-rugby.com), one of the foremost rugby sites on the web and
other high quality sports products in Cricket (www.cricketline.com), Formula 1
(www.planet-f1.com) and Horse Racing (www.racetips.com) with unique
statistical and editorial content. Datanet's entertainment division runs a
network of live multi-player trivia games under the Planet Trivia brand
(www.planet-trivia.com) which enables thousands of users to compete against
each other in real time in a global trivia challenge.
Datanet has content distribution deals with a number of the leading portals
and ISPs (e.g. Yahoo, Freeserve and Lycos) and is currently producing the
software and technology to deliver its content across multiple platforms.
Datanet currently provides cricket and rugby content to WAP enabled mobile
phones under a deal with BT Cellnet. We plan to increase our range of WAP
content offerings to be a leader in the provision of content to mobile phones.
The total consideration for Datanet was £2,208,000 in cash and 12.42 million
shares. Based on the closing mid-market price of £2.325 as at 2 February 2000,
this equates to an effective consideration of £31,084,500. The acquisition is
conditional upon receipt of certain clearances from the Inland Revenue to the
current Datanet shareholders, which are expected to be received shortly.
Other
Following on from our successful partnership with ITV during the 1999 Rugby
World Cup, we have developed and are hosting the ITV Six Nations web site
(www.itv-rugby.co.uk). The Six Nations championship started on 5 February and
finishes on 2 April.
The business services division has expanded its successful Joint Venture
program to include two more partners; Advanced Network Services Limited (based
in West London) and MTV Telecom plc, a national distributor of telephone
systems and related hardware (based in Egham, Surrey).
Current Trading
User growth has continued to rise in the fourth quarter, increasing to
1,093,955 unique users in January. We believe that this trend will continue
during the fourth quarter and expect to significantly add to our regular rugby
users during the Six Nations championship. In particular, the acquisition of
Datanet, with over 300,000 unique users in January 2000 and the Planet Rugby
web site, will result in a step-change increase in users. Internet revenues
continue to grow strongly.
We have also seen a strong growth in audiotext revenues during January as our
new media deals and product launches in the previous quarter have started to
drive revenues.
Finally, business services revenue has recovered strongly following the
traditionally quiet Christmas period and the effect of Y2K concerns, and we
are looking forward to solid fourth quarter increases in both customer numbers
and revenues per customer as we expand our product portfolio.
We continue to seek new acquisitions and business opportunities and 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 third quarter ended 31 December 1999 was £5,566,000,
representing a 13% increase from £4,926,000 in the second quarter ended 30
September 1999.
365 currently derives internet turnover from advertising, sponsorship, e-
commerce, contract publishing and business internet services. These revenues
increased by 57% to £460,000 during the third quarter (second quarter-
£293,000), reflecting continued increases in advertising and sponsorship
during the period. Internet turnover for the comparable period in 1998 was
£75,000.
Audiotext turnover increased during the quarter by 5% to £3,186,000 (second
quarter - £3,040,000). Audiotext was not provided by 365 in 1998.
Business services turnover increased to £1,920,000 (second quarter -
£1,593,000) in the third quarter, an increase of 21%. As at 31 December 1999,
365 had 2,484 business customers, an increase of 14% during the third quarter.
December revenues were depressed by the usual seasonal factors, which this
year included the Millennium. Business services were not provided by 365 in
1998.
Cost of sales increased by 18% in the third quarter to £3,047,000 (second
quarter - £2,591,000) and gross margin reduced to 45% (second quarter - 47%).
The decline in gross margin during the quarter was primarily due the provision
of lower margin audiotext services to LSH in December and costs involved in
developing new media outlets.
Administrative expenses (before amortisation of goodwill, National Insurance
provisions in relation to staff share options and shares issued at under
value) rose to £5,334,000 during the third quarter (second quarter -
£2,845,000). The major elements of this increase were a £1m 365 brand
building and content marketing campaign initiated in October, increased
investment in new content and services, expansion of our infrastructure and
technology (including Y2K preparedness), significant non-recurring
professional expenses (particularly in preparing 365 for flotation) and
necessary increases in personnel to meet the demands of operating as a public
company.
Goodwill amortisation increased to £659,000 during the third quarter compared
to £622,000 in the second quarter. Charges in relation to the provision of
National Insurance contributions on employee share options increased to
£2,811,000 compared to £255,000 in the previous quarter. This increase was
expected and is largely due to an increase in 365's share price to 250p as at
31 December 1999.
On 10 November 1999, the Company allotted 400,000 shares of 1p each to two
Directors at nominal value (prior to the 4 for 1 share split). This resulted
in a National Insurance liability of £184,000 (paid during the third quarter),
and a non-cash charge of £2,077,000 in the profit and loss account.
Interest income increased to £240,000 during the quarter (second quarter -
£69,000) and arose from the investment of net proceeds from 365's flotation in
short-term interest bearing deposit accounts.
Liquidity and Capital Resources
Prior to flotation on 2 December 1999, 365 had financed its operations
primarily through the private placement of ordinary shares and during the nine
months ended 31 December 1999 the Company raised £2,603,000 (net of expenses)
by these means.
365's initial public offering raised net proceeds of £58,269,000, after
deduction of flotation expenses totaling £5,326,000 which have been charged
against the Company's share premium account. The total amount raised includes
the exercise of the over-allotment option by the Company's Sponsor, Cazenove &
Co., under which it purchased an additional 5,184,375 shares on 15 December
1999 to raise a further £7.9m for the Company, net of expenses.
During the three months ended 31 December 1999, net cash outflow from
operating activities totalled £1,874,000, compared with £272,000 for the
previous quarter. At 31 December 1999, the Company had £1,947,000 of cash at
bank and in hand, compared to £6,729,000 at the end of the second quarter and
£5,316,000 at 31 March 1999. Funds on short term deposit amounted to
£61,000,000 at 31 December 1999.
Consolidated profit and loss account
for the quarter and nine months ended 31 December 1999
Quarter Quarter 9 months 9 months
ended 31 ended 31 ended 31 ended 31
December December December December
1999 1998 1999 1998
unaudited unaudited unaudited unaudited
Note £'000 £'000 £'000 £'000
Turnover 3 5,566 75 15,101 159
Cost of sales (3,047) (2) (8,210) (5)
Gross profit 2,519 73 6,891 154
Administrative expenses 5,334 444 9,939 1,325
before the following:
Amortisation of goodwill 659 - 1,788 -
Provision for NIC on share 2,811 - 3,066 -
options
Shares issued at par 2,261 - 2,261 -
Total administrative 11,065 444 17,054 1,325
expenses
Operating loss before 3 (2,815) (371) (3,048) (1,171)
goodwill amortisation,
provision for NIC on share
options and shares issued
at under value
Operating loss (8,546) (371) (10,163) (1,171)
Net interest receivable 240 4 372 25
Loss on ordinary (8,306) (367) (9,791) (1,146)
activities before taxation
Taxation - (1) - (5)
Loss on ordinary (8,306) (368) (9,791) (1,151)
activities after taxation
Minority interests 23 - 82 -
Retained loss for the (8,283) (368) (9,709) (1,151)
period
Loss per ordinary share 4
Basic loss per share 1.6p 0.8p 1.8p 2.4p
before amortisation of
goodwill, provision for
NIC on share options and
shares issued at par
Diluted loss per share 1.5p 0.7p 1.7p 2.4p
before amortisation of
goodwill, provision for
NIC on share options and
shares issued at par
Basic loss per share 5.3p 0.8p 6.8p 2.4p
Diluted loss per share 5.0p 0.7p 6.2p 2.4p
Statement of total recognised gains and losses
for the quarter and nine months ended 31 December 1999
Quarter ended Quarter 9 months 9 months
31 December ended 31 ended 31 ended 31
1999 December December December
unaudited 1998 1999 1998
£'000 unaudited unaudited unaudited
£'000 £'000 £'000
Retained loss for the period (8,283) (368) (9,709) (1,151)
Exchange adjustments 15 - 19 -
Total recognised losses for
the period (8,268) (368) (9,690) (1,151)
Consolidated balance sheet
As at 31 December 1999
31 31 31 March
December December 1999
1999 1998 audited
unaudited unaudited £'000
£'000 £'000
Note
Fixed assets
Intangible fixed assets 10,101 - 9,798
Tangible fixed assets 1,122 89 728
11,223 89 10,526
Current assets
Stock - goods for resale 43 - 16
Debtors 5,437 99 2,482
Investments - short term 61,000 - -
deposits
Cash at bank and in hand 1,947 171 5,316
68,427 270 7,814
Creditors: amounts falling due (6,986) (170) (3,750)
within one year
Net current assets 61,441 100 4,064
Total assets less current 72,664 189 14,590
liabilities
Creditors: amounts falling due (11) - (25)
after more than one year
Provisions for liabilities and 9 (3,066) - -
charges
Net assets 69,587 189 14,565
Capital and reserves 5
Called up share capital 458 123 319
Shares to be issued 1,001
Share premium account 72,262 1,729 11,517
Other reserves 5,770 - 4,937
Profit and loss account (9,757) (1,663) (2,144)
Total equity shareholders' funds 6 69,734 189 14,629
Minority interests (147) - (64)
Capital employed 69,587 189 14,565
Consolidated cash flow statement
for the quarter and nine months ended 31 December 1999
Quarter Quarter 9 months 9 months
ended 31 ended 31 ended 31 ended 31
December December December December
1999 1998 1999 1998
unaudited unaudited unaudited unaudited
Note £'000 £'000 £'000 £'000
Net cash outflow from 7 (1,870) (307) (2,782) (1,171)
operating activities
Returns on investment and
servicing of finance
Net interest 240 4 372 24
Capital expenditure and
financial investment
Purchase of tangible fixed (271) (12) (676) (50)
assets
Acquisitions
Net cash acquired with - - 12 -
subsidiaries
Purchase of subsidiaries 8 (155) - (172) -
(155) - (160) -
Cash outflow before use of (2,056) (315) (3,246) (1,197)
liquid resources and
financing
Management of liquid
resources
Increase in short-term (61,000) - (61,000) -
deposits
Financing
Issue of shares 63,600 - 66,203, 559
Expenses on issue of shares (5,326) - (5,326) -
(Decrease)/increase in cash (4,782) (315) (3,369) (638)
in the period
Notes to the quarterly financial statements
1. Basis of preparation
The quarterly financial statements for the third quarter and nine months ended
31 December 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 nine months ended 31 December
1998 has 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 third quarter ended 31 December 1999
were approved by the Board on 16 February 2000 and will be posted to
shareholders on 21 February 2000.
2. Operating data for April 1999 to January 2000
April May June July Aug
Consumer Division
Unique users(1)
Sport
Football 173,894 191,393 186,537 266,472 366,401
Cricket 78,803 92,179 101,688 143,835 145,745
Rugby 6,759
Other
Total Sport 252,697 283,572 288,225 410,307 518,905
Entertainment 33,189 33,485 34,919 34,110 46,894
Lifestyle 66,726 68,878 78,002 82,475 93,197
Total unique users 352,612 385,935 401,146 526,892 658,996
User sessions(2)
Sport
Football 1,874,676 2,102,564 2,182,961 2,681,722 3,196,288
Cricket 2,364,090 2,857,549 3,050,625 4,458,870 4,518,080
Rugby 16,796
Other
Total Sport 4,238,766 4,960,113 5,233,586 7,140,592 7,731,164
Entertainment 133,753 150,628 147,952 156,347 187,589
Lifestyle 481,852 484,024 526,092 518,980 577,147
Total user sessions 4,854,371 5,594,765 5,907,630 7,815,919 8,495,900
Audiotext minutes(3) 5,829,453 5,339,713 6,097,658 6,152,836 6,136,871
Business Division
Business customers(4) 1,410 1,492 1,613 1,740 1,838
Business minutes(5) 5,495,010 6,434,351 6,948,406 8,118,687 7,910,244
Sept Oct Nov Dec Jan
Consumer Division
Unique users(1)
Sport
Football 376,161 394,449 439,945 478,057 486,065
Cricket 148,354 146,807 148,128 156,595 167,334
Rugby 38,719 128,811 66,107 25,508 62,085
Other 2,540 833 413 248 15,478
Total Sport 565,774 670,900 654,593 660,408 730,962
Entertainment 117,837 143,402 151,201 224,962 204,935
Lifestyle 95,980 119,968 138,473 145,912 158,058
Total unique users 779,591 934,270 944,267 1,031,282 1,093,955
User sessions(2)
Sport
Football 3,275,769 3,482,203 3,633,080 3,734,444 3,970,551
Cricket 4,598,974 4,551,017 4,443,840 4,697,850 5,020,020
Rugby 69,603 402,091 279,699 107,715 236,053
Other 3,429 1,029 488 269 18,795
Total Sport 7,947,775 8,436,340 8,357,107 8,540,278 9,245,419
Entertainment 248,240 457,136 462,265 558,999 561,572
Lifestyle 571,906 662,849 770,147 792,391 809,857
Total user sessions 8,767,921 9,556,325 9,589,519 9,891,668 10,616,848
Audiotext minutes(3) 6,072,885 6,758,761 5,874,780 6,063,240 6,397,747
Business Division
Business customers(4) 2,170 2,366 2,475 2,484 2,592
Business minutes(5) 10,047,227 10,348,644 10,969,562 9,243,583 10,630,120
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 provision for NIC
on share options and charges in respect of shares issued at par 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 ended 31 December 9 months ended 31 December
1999 1998 1999 1998
Geographical analysis
United Kingdom 5,460 75 14,736 159
France 32 - 49 -
Germany 1 - 93 -
Chile 66 - 216 -
South Africa - - - -
USA 7 - 7 -
5,566 75 15,101 159
Business Analysis
Audiotext 3,186 - 9,492 -
Business services 1,920 - 4,712 -
Internet 460 75 897 159
Total 5,566 75 15,101 159
(Loss)/profit before goodwill amortisation, NIC on
share options
and shares issued at par
Quarter ended 31 9 months ended 31 December
December
1999 1998 1999 1998
Geographical analysis (2,425) (371) (2,456) (1,171)
United Kingdom (241) - (365) -
France (19) - (16) -
Germany 9 - 9 -
Chile (146) - (227) -
South Africa 7 - 7 -
USA (2,815) (371) (3,048) (1,171)
Business Analysis 733 - 2,678 -
Audiotext (358) - (651) -
Business services (3,190) (371) (5,075) (1,171)
Internet (2,815) (371) (3,048) (1,171)
Total
4. Loss per ordinary share of 0.25p each
Quarter ended Quarter 9 months 9 months
31 December ended 31 ended 31 ended 31
December December December December
1999 1998 1999 1998
£'000 £'000 £'000 £'000
Loss for the period
before the
following: (2,552) (368) (2,594) (1,151)
Goodwill
amortisation (659) - (1,788) -
Provision for NIC
on share options (2,811) - (3,066) -
Shares issued at par (2,261) - (2,261) -
Loss for the period (8,283) (368) (9,709) (1,151)
Weighted average number of shares
in the period:
Basic 155,109,419 49,017,648 142,707,734 47,272,193
Diluted 164,614,390 50,598,980 157,011,614 48,853,603
Basic loss per share before 1.6p 0.8p 1.8p 2.4p
amortisation of goodwill,
provision for NIC on share options
and shares issued at par
Goodwill amortisation 0.4p - 1.3p -
Provision for NIC on share options 1.8p - 2.1p -
Shares issued at par 1.5p - 1.6p -
Basic loss per share 5.3p 0.8p 6.8p 2.4p
Diluted loss per share before 1.5p 0.7p 1.7p 2.4p
amortisation of goodwill,
provision for NIC on share options
and shares issued at par
Goodwill amortisation 0.4p - 1.1p -
Provision for NIC on share options 1.7p - 2.0p -
Shares issued at par 1.4p - 1.4p -
Diluted loss per share 5.0p 0.7p 6.2p 2.4p
The weighted average number of shares have been restated to reflect the
4-for-1 share split in November 1999.
5. Share capital and reserves
Ordinary Shares to Share Other Profit
share be issued premium reserves and loss
capital account account
£'000 £'000 £'000 £'000 £'000
At 1 October 1999 355 - 14,091 5,770 (3,566)
Retained loss for - - - - (8,283)
the period
Exchange adjustments - - - - 15
Shares issued in respect
of various fund raising 103 - 58,171 - -
exercises, net of costs
Shares to be issued - 1,001 - - -
Shares issued at par - - - - 2,077
At 31 December 1999 458 1,001 72,262 5,770 (9,757)
On 2 December 1999 the company was floated on the London Stock Exchange. The
company issued 39,746,875 new ordinary shares of 0.25p each at an issue price
of 160p which, after deduction of flotation expenses of £5,326,000, raised
net proceeds of £58,269,000. This includes the exercise of the over-allotment
of 5,184,375 shares on 15 December 1999.
On 10 November 1999 the Company allotted 400,000 ordinary shares of 1p each to
two Directors at nominal value. In accordance with UITF17 the difference
between the market value of the shares and the consideration paid has been
charged directly to the profit and loss account.
6. Reconciliation of movements in shareholders' funds
Quarter Quarter 9 months 9 months
ended 31 ended 31 ended 31 ended 31
December December December December
1999 1998 1999 1998
£'000 £'000 £'000 £'000
Opening shareholders' funds 16,650 557 14,629 782
Loss for the period (8,283) (368) (9,709) (1,152)
Proceeds from the issue of 58,274 - 61,717 559
shares
Charge in respect of shares 2,077 - 2,077 -
issued at par
Shares to be issued 1,001 - 1001 -
Exchange adjustments offset 15 - 19 -
in reserves
Closing shareholders' funds 69,734 189 69,734 189
7. Net cash outflow from operating activities
Quarter ended Quarter 9 months 9 months
31 December ended 31 ended 31 ended 31
1999 December December December
£'000 1998 1999 1998
£'000 £'000 £'000
Operating loss before (8,546) (372) (10,163) (1,172)
interest and minorities
Depreciation 110 10 299 25
Amortisation of goodwill 659 - 1,788 -
(Increase) in stock (10) - (27) -
(Increase)/decrease in (2,016) 6 (2,852) (14)
debtors
Increase/(decrease) in 5,856 49 6,096 (10)
creditors/provisions
Charge in respect of shares 2,077 - 2,077 -
issued at par
(1,870) (307) (2,782) (1,171)
8. Acquisitions
On 24 December 1999, 365 acquired 100% of the issued share capital of e-
Merchants Incorporated for an initial consideration of £1,034,000, consisting
of a consideration of £879,000 which was financed by the issue of 351,562
ordinary shares in the Company on 31 January 2000 and a cash consideration of
£140,000, and acquisition costs of £15,000. A further consideration of up to
195,313 shares is contingent on e-Merchants meeting certain revenue targets,
the fair value of which is currently assessed as £122,000.
£'000
Assets acquired 3
Goodwill 1,153
Cost of acquisition 1,156
Comprising:
Cash 140
Consideration satisfied by shares 879
issued
Contingent consideration to be 122
satisfied by issue of shares
Professional fees incurred on 15
acquisition
1,156
Goodwill arising on the acquisition of e-Merchants 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. The accounts for the fourth
quarter will include an adjustment arising from the movement in the Company's
share price between 31 December 1999 and 31 March 2000.
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