4th Qrtr & Final Results-Pt.2
365 Corporation PLC
31 May 2000
PART 2
Notes to the quarterly and full year financial statements
1. Basis of preparation
The quarterly financial statements for the fourth quarter and year ended 31
March 2000 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 8 months ended 31 March 1999
has been extracted from the accounting records of the Company and the
consolidated 1999 statutory accounts. It consolidates the 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 preliminary announcement for the fourth quarter and year ended 31 March
2000 was approved by the Board on 30 May 2000 and will be posted to
shareholders on 5 June 2000. The statutory accounts for the year ended 31
March 2000 will be finalized on the basis of the financial information
presented by the Directors in this preliminary announcement and will be
delivered to the Registrar of Companies following the Company's Annual General
Meeting.
2. Operating data for July 1999 to April 2000
July Aug Sept
Consumer Division
Unique users(1)
Sport
Football 266,472 366,401 376,161
Cricket 143,835 145,745 148,354
Rugby 6,759 38,719
Other 2,540
Total Sport 410,307 518,905 565,774
Entertainment 34,110 46,894 117,837
Lifestyle 82,475 93,197 95,980
Total unique users 526,892 658,996 779,591
User sessions(2)
Sport
Football 2,681,722 3,196,288 3,275,769
Cricket 4,458,870 4,518,080 4,598,974
Rugby 16,796 69,603
Other 3,429
Total Sport 7,140,592 7,731,164 7,947,775
Entertainment 156,347 187,589 248,240
Lifestyle 518,980 577,147 571,906
Total user sessions 7,815,919 8,495,900 8,767,921
Audiotext minutes(3) 6,152,836 6,136,871 6,072,885
Business Division
Business 1,740 1,838 2,170
customers(4)
Business minutes(5) 8,118,687 7,910,244 10,047,227
Oct Nov Dec
Consumer Division
Unique users(1)
Sport
Football 394,449 439,945 478,057
Cricket 146,807 148,128 156,595
Rugby 128,811 66,107 25,508
Other 833 413 248
Total Sport 670,900 654,593 660,408
Entertainment 143,402 151,201 224,962
Lifestyle 119,968 138,473 145,912
Total unique users 934,270 944,267 1,031,282
User sessions(2)
Sport
Football 3,482,203 3,633,080 3,734,444
Cricket 4,551,017 4,443,840 4,697,850
Rugby 402,091 279,699 107,715
Other 1,029 488 269
Total Sport 8,436,340 8,357,107 8,540,278
Entertainment 457,136 462,265 558,999
Lifestyle 662,849 770,147 792,391
Total user sessions 9,556,325 9,589,519 9,891,668
Audiotext minutes(3) 6,758,761 5,874,780 6,063,240
Business Division
Business 2,366 2,475 2,484
customers(4)
Business minutes(5) 10,348,644 10,969,562 9,243,583
Jan Feb Mar Apr
Consumer Division
Unique users(1)
Sport
Football 486,065 522,521 606,562 606,753
Cricket 167,334 169,136 224,147 258,812
Rugby 62,085 108,999 186,646 166,281
Other 15,478 13,554 196,394 211,670
Total Sport 730,962 814,210 1,213,749 1,243,516
Entertainment 204,935 263,762 365,726 322,146
Lifestyle 158,058 141,019 172,297 242,478
Total unique 1,093,955 1,218,991 1,751,772 1,808,140
users
User
sessions(2)
Sport
Football 3,970,551 3,693,553 3,978,832 4,112,883
Cricket 5,020,020 5,074,080 5,348,137 5,516,242
Rugby 236,053 338,357 896,534 911,175
Other 18,795 20,430 427,077 454,682
Total Sport 9,245,419 9,126,420 10,650,580 10,994,982
Entertainment 561,572 529,264 760,129 724,539
Lifestyle 809,857 766,527 920,990 1,101,860
Total user 10,616,848 10,422,211 12,331,699 12,821,381
sessions
Audiotext 6,397,747 5,823,731 5,783,772 6,076,274
minutes(3)
Business
Division
Business 2,592 2,808 2,989 3,114
customers(4)
Business 10,630,120 13,630,006 14,447,806 15,314,675
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 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, loss or profit before taxation and net assets are classified below
by class of business and by geographical area by origin, which is not
materially different from geographical area by destination.
(a) Full year analysis
Consumer Division Business Division
Business Analysis Year to 31 8 months to Year to 31 8 months to
March 2000 31 March March 2000 31 March
1999 1999
£'000
Turnover
Consumer internet 1,537 228 - -
Audiotext 13,139 1,711 - -
Business services - - 7,701 649
Other 43 - - -
14,719 1,939 7,701 649
Continuing 14,555 1,939 7,083 649
operations
Acquisitions 164 - 618 -
Cost of sales 7,235 1,116 5,375 464
Gross profit 7,484 823 2,326 185
Administrative
expenses before
goodwill
amortisation, NIC
and similar taxes on
share options and 9,382 1,353 3,884 283
shares issued at
below market value
Operating loss
before goodwill
amortisation, NIC
and similar taxes on
share options and (1,898) (530) (1,558) (98)
shares issued at
below market value
Goodwill
amortisation 4,338 270 759 68
Provision for NIC
and similar taxes on 814 - 691 -
share options
Shares issued at
below market value - - - -
Operating loss (7,050) (800) (3,008) (166)
Continuing (3,426) (800) (2,203) (166)
operations
Acquisitions (3,624) - (805) -
Net interest 20 1 (9) -
receivable/(payable)
Loss on ordinary
activities before (7,030) (799) (3,017) (166)
taxation
Net assets
Net assets/ 36,337 10,799 6,671 (347)
(liabilities),
including allocated
goodwill
Continuing 8,674 10,799 1,632 (347)
operations
Acquisitions 27,663 - 5,039 -
Group Overhead Total Group
Business Analysis Year to 31 8 months Year to 31 8 months to
March 2000 to 31 March March 2000 31 March 1999
1999
Turnover
Consumer internet - - 1,537 228
Audiotext - - 13,139 1,711
Business services - - 7,701 649
Other - - 43 -
- - 22,420 2,588
Continuing - - 21,638 2,588
operations
Acquisitions - - 782 -
Cost of sales - - 12,610 1,580
Gross profit - - 9,810 1,008
Administrative
expenses before
goodwill
amortisation, NIC
and similar taxes on
share options and 2,453 235 15,719 1,871
shares issued at
below market value
Operating loss
before goodwill
amortisation, NIC
and similar taxes on
share options and (2,453) (235) (5,909) (863)
shares issued at
below market value
Goodwill - - 5,097 338
amortisation
Provision for NIC 1,191 - 2,696 -
and similar taxes on
share options
Shares issued at 2,261 - 2,261 -
below market value
Operating loss (5,905) (235) (15,963) (1,201)
Continuing (5,905) (235) (11,534) (1,201)
operations
Acquisitions - - (4,429) -
Net interest 1,197 46 1,208 47
receivable/(payable)
Loss on ordinary (4,708) (189) (14,755) (1,154)
activities before
taxation
Net assets
Net assets/ 49,788 4,113 92,796 14,565
(liabilities),
including allocated
goodwill
Continuing 49,788 4,113 60,094 14,565
operations
Acquisitions - - 32,702 -
The 1999 comparatives include the results of the Symphony group for the two
month period since acquisition in February 1999.
Segmental analysis (Continued)
(a) Full year analysis (Continued)
Turnover Loss before taxation
Geographical Year to 31 8 months to Year to 31 8 months to 31
analysis March 2000 31 March March 2000 March 1999
1999
Continuing
operations
United Kingdom 21,281 2,480 (9,750) (1,160)
Germany 93 51 (45) (6)
Chile 263 57 (41) 12
South Africa 1 - (489) -
21,638 2,588 (10,325) (1,154)
Acquisitions
United Kingdom 672 - (2,508) -
France 90 - (1,624) -
USA 20 - (298) -
782 - (4,430) -
Total group 22,420 2,588 (14,755) (1,154)
Net assets/(liabilities)
Geographical analysis At 31 March 2000 At 31 March 1999
Continuing operations
United Kingdom 60,109 14,634
Germany 31 (67)
Chile 24 (2)
South Africa (70) -
60,094 14,565
Acquisitions
United Kingdom 31,605 -
France 125 -
USA 972 -
32,702 -
Total group 92,796 14,565
(b) Quarterly segmental analysis
Turnover
Quarter Quarter ended 31 Year ended 31 8 months ended
ended 31 March 1999 March 31 March 1999
March 2000 2000
Geographical
analysis
United Kingdom 7,217 2,384 21,953 2,480
France 41 - 90 -
Germany - 51 93 51
Chile 47 57 263 57
South Africa 1 - 1 -
USA 13 - 20 -
7,319 2,492 22,420 2,588
Business Analysis
Audiotext 3,647 1,711 13,139 1,711
Consumer 701 132 1,537 228
internet
Other 43 - 43 -
Consumer 4,391 1,843 14,719 1,939
division
Business 2,928 649 7,701 649
division
Group - - - -
overhead
Total 7,319 2,492 22,420 2,588
Continuing 6,960 2,492 21,638 2,588
operations
Acquisitions 359 - 782 -
Profit/(loss) before goodwill amortisation, provision for
NIC and similar taxes on share options and shares issued at
below market value
Quarter Quarter ended Year ended 31 8 months ended
ended 31 31 March 1999 March 31 March
March 2000 2000 1999
Geographical analysis
United Kingdom (2,209) (252) (4,665) (869)
France (293) - (658) -
Germany (29) (6) (45) (6)
Chile (37) 12 (28) 12
South Africa (195) - (422) -
USA (98) - (91) -
(2,861) (246) (5,909) (863)
Business Analysis
Audiotext 538 279 3,216 279
Consumer (1,850) (192) (5,114) (809)
internet
Other - - - -
Consumer (1,312) 87 (1,898) (530)
division
Business (907) (98) (1,558) (98)
division
Group overhead (642) (235) (2,453) (235)
Total (2,861) (246) (5,909) (863)
Continuing (2,770) (246) (4,651) (863)
operations
Acquisitions (91) - (1,258) -
4. Loss per ordinary share of 0.25p each
Quarter ended 31 Quarter ended 31
March March
2000 1999
£'000 £'000
Loss for the period before the (1,955) (175)
following:
Goodwill amortisation (3,309) (338)
Provision for NIC and similar taxes on 370 -
share options
Shares issued at below market value - -
Loss for the period (4,894) (513)
Weighted average number of shares in
the period:
Basic and diluted 188,609,005 98,658,704
Basic and diluted loss per share before 1.0p 0.2p
amortisation of goodwill, provision for
NIC and similar taxes on share options
and shares issued at below market value
Goodwill amortisation 1.8p 0.3p
Provision for NIC and similar taxes on (0.2p) -
share options
Shares issued at below market value - -
Basic and diluted loss per share 2.6p 0.5p
Year 8 months
ended 31 March ended 31 March
2000 1999
£'000 £'000
Loss for the period before the (4,549) (782)
following:
Goodwill amortisation (5,097) (338)
Provision for NIC and similar taxes on (2,696) -
share options
Shares issued at below market value (2,261) -
Loss for the period (14,603) (1,120)
Weighted average number of shares in
the period:
Basic and diluted 154,120,345 67,941,356
Basic and diluted loss per share before 3.0p 1.2p
amortisation of goodwill, provision for
NIC and similar taxes on share options
and shares issued at below market value
Goodwill amortisation 3.3p 0.5p
Provision for NIC and similar taxes on 1.7p -
share options
Shares issued at below market value 1.5p -
Basic and diluted loss per share 9.5p 1.7p
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 year.
5(a) Share capital and reserves - full year
Share Shares Merger
capital to be Share reserve
issued premium Profit and
account loss account
£'000 £'000 £'000 £'000 £'000
Balance at 1 April 319 - 11,517 4,937 (2,144)
1999
Loss for the year - - - - (14,603)
Exchange differences - - - - (17)
Shares issued at 4 - - - 2,076
below market value
Shares issued as
part of fundraising 126 - 66,221 - -
exercises
Costs incurred on
issue of shares as
part of fundraising 2 - (5,527) - -
exercises
Shares issued under - - 9 - -
the share option
schemes
Shares issued in
connection with the
acquisition of 42 - - 29,907 -
subsidiary
undertakings
Contingent share - 80 - - -
consideration in
respect of the
acquisition of a
subsidiary
undertakings
Balance at 31 March 493 80 72,220 34,844 (14,688)
2000
5(b) Share capital and reserves - 4th quarter
Ordinary Shares to Share Merger Profit and
share be issued premium reserve loss
capital account account
£'000 £'000 £'000
£'000 £'000
At 1 January 2000 458 1,001 72,262 5,770 (9,757)
Retained loss for the
period - - - - (4,894)
Exchange adjustments - - - - (37)
Shares issued in
respect of share - - 9 - -
options exercised
Shares issued for 35 (879) - 29,074 -
acquisitions
Movement in fair value
of contingent share
consideration - (42) - - -
Additional IPO costs - - (51) - -
At 31 March 2000 493 80 72,220 34,844 (14,688)
On 31 January 2000 the Company issued 351,562 ordinary shares as part of the
consideration for the acquisition of e-Merchants in December 1999. The
difference between the fair value and nominal value of the shares has been
transferred to the merger reserve.
On 24 February 2000 the Company acquired the entire issued share capital of
Datanet Holdings Limited. The consideration for the acquisition was
£27,713,200 satisfied by £2,128,000 in cash and £25,585,200 by the allotment
of 12,420,000 ordinary shares of 0.25p each. Costs of £230,000 were
capitalised as part of the investment.
On 29 February 2000 the Company acquired the entire issued share capital of
Fenfones Limited. The consideration for the acquisition was £4,984,200
satisfied by £2,520,000 in cash and £2,464,200 by the allotment of 1,193,317
ordinary shares of 0.25p each. Costs of £68,510 were capitalised as part of
the investment.
On 13 March 2000 the Company acquired the entire issued share capital of
Oxalis Limited. The consideration for the acquisition was £224,930 satisfied
by £45,000 in cash and £179,930 by the allotment of 69,204 ordinary shares of
0.25p each. Costs of £1,125 were capitalised as part of the investment.
On 22 March 2000 the Company issued 32,000 ordinary shares to employees
following the exercise of share options granted in 1998.
On 31 March 2000 the Company issued 80,500 ordinary shares to employees
following the exercise of share options granted in 1998.
6. Reconciliation of movements in shareholders' funds
Quarter Quarter Year ended 8 months
ended 31 ended 31 31 March ended 31
March March 1999 2000 March
2000 £'000 £'000 1999
£'000 £'000
Opening shareholders' 69,734 189 14,629 796
funds
Loss for the period (4,894) (513) (14,603) (1,120)
New share capital (net
of expenses) issued for
cash (51) 9,922 60,826 9,922
Shares issued for
acquisitions 29,109 5,000 29,949 5,000
Reversal of charge in - - 2,076 -
respect of shares issued
at below market value
Movement in contingent (921) - 80 -
share consideration
Employee share options 9 - 9 -
exercised
Exchange adjustments (37) 31 (17) 31
offset in reserves
Closing shareholders' 92,949 14,629 92,949 14,629
funds
7. Net cash outflow from operating activities
Quarter Quarter Year 8 months
ended 31 ended 31 ended 31 ended 31
March March 1999 March 2000 March 1999
2000 £'000 £'000 £'000
£'000
Operating loss (5,800) (584) (15,963) (1,201)
Depreciation 109 57 408 72
Amortisation of intangible 3,342 338 5,130 338
assets
(Increase)/decrease in (159) 6 (186) 6
stock
(Increase)/decrease in (817) (653) (3,669) (622)
debtors
(Decrease)/increase in (1,366) 655 4,733 705
creditors/provisions
Share issue in lieu of - 1 - 1
directors' fees
Loss on disposal of fixed 8 - 8 -
assets
Charge in respect of - - 2,076 -
shares issued at below
market value
(4,683) (180) (7,463) (701)
8. Acquisitions
(a) Datanet Holdings Limited
On 24 February 2000, 365 acquired the entire issued share capital of Datanet
Holdings Limited and its subsidiary Datanet Marketing Services Limited
('Datanet') for a total consideration of £27,943,000, consisting of a
consideration of £25,585,000 which was financed by the issue of 12,420,000
ordinary shares in the Company on 24 February 2000, a cash consideration of
£2,128,000 and acquisition costs of £230,000.
£'000
Fair value of net liabilities (291)
acquired
Goodwill 28,234
Cost of acquisition 27,943
Comprising:
Cash 2,128
Shares issued 25,585
Acquisition costs 230
27,943
Goodwill arising on the acquisition of Datanet is being amortised on a
straight line basis over the estimated economic useful life of 18 months.
(b) Fenfones Communications Limited
On 29 February 2000, 365 acquired the entire issued share capital of Fenfones
Communications Limited and the remaining 50% of the issued share capital of
Datacom Networks Limited for a consideration of £5,053,000, consisting of a
consideration of £2,464,000 which was financed by the issue of 1,193,317
ordinary shares in the Company on 29 February 2000, a cash consideration of
£2,520,000 and acquisition costs of £69,000.
£'000
Book value of net assets acquired 171
Accounting policy alignment (4)
Goodwill 4,886
Cost of acquisition 5,053
Comprising:
Cash 2,520
Shares issued 2,464
Acquisition costs 69
5,053
The fair value adjustment for alignment of accounting policies reflects the
write off of capitalised software licences and development costs in accordance
with the group's policy.
Goodwill arising on the acquisition of Fenfones is being amortised on a
straight-line basis over the estimated economic useful life of 5 years.
(c) Oxalis Limited
On 14 March 2000, 365 acquired 100% of the issued share capital of Oxalis
Limited for a consideration of £226,000, consisting of a consideration of
£180,000, which was financed by the issue of 69,204 ordinary shares in the
Company on 31 March 2000, a cash consideration of £45,000 and acquisition
costs of £1,000. A further cash consideration of up to £225,000 is contingent
on Oxalis meeting certain revenue targets, the fair value of which is
currently assessed as being immaterial.
£'000
Fair value of net liabilities (2)
acquired
Goodwill 228
Cost of acquisition 226
Comprising:
Cash 45
Shares issued 180
Acquisition costs 1
226
Goodwill arising on the acquisition of Oxalis 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 and similar foreign taxes 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 and similar
foreign taxes upon exercise of the options, which are exercisable over a
period of up to ten 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 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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