Final Results - Part 2
365 Corporation PLC
31 May 2001
PART 2
Notes to the fourth quarter and full year results
1. Basis of preparation
The financial statements for the quarter and year ended 31 March 2001 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 quarter and year ended 31 March 2001 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 detailed 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 and preliminary results for the year ended 31
March 2001 were approved by the Board on 30 May 2001 and will be posted on the
Company's web site, www.365corp.com, on 31 May 2001
2. Operating data March 2000 to March 2001
Consumer Division Mar Jun Sep Dec Mar
Unique users(1)
Sport 1,214,000 1,484,000 1,645,000 1,846,000 2,164,000
Entertainment 366,000 318,000 436,000 614,000 390,000
Lifestyle 172,000 289,000 310,000 404,000 397,000
Total unique users 1,752,000 2,091,000 2,391,000 2,864,000 2,951,000
User sessions(2)
Sport 10,651,000 11,416,000 11,829,000 11,258,000 13,638,000
Entertainment 760,000 721,000 917,000 1,251,000 1,101,000
Lifestyle 921,000 1,243,000 1,219,000 1,167,000 1,230,000
Total user sessions 12,332,000 13,380,000 13,965,000 13,676,000 15,969,000
Voice services minutes 5,784,000 7,792,000 6,968,000 5,869,000 5,949,000
(3)
Business Division
Business customers(4) 2,989 3,473 3,945 4,518 5,159
Business minutes(5) 14,448,000 16,409,000 17,488,000 14,188,000 20,388,000
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 voice
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 voice services represents a user
session.
3. 365 defines the number of voice services minutes in a month as the number
of minutes recorded by 365 and its carriers in respect of calls to 365's voice
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 - for the quarter ended 31 March 2001
Turnover and loss 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.
Business Analysis (£'000) Consumer Division Business Division
Quarter Quarter Quarter Quarter
ended 31 ended 31 ended 31 ended 31
Mar 2001 Mar 2000 Mar 2001 Mar 2000
Turnover
Consumer internet+ 1,398 701 - -
Voice services*+ 5,801 3,647 - -
Business services+ - - 6,774 2,928
Other+ 554 43 - -
7,753 4,391 6,774 2,928
Cost of sales 5,188 2,346 4,515 2,054
Gross profit 2,565 2,045 2,259 874
Administrative expenses (excluding sales &
marketing costs) before goodwill
amortisation and impairment, NIC and
similar taxes on share options and shares
issued at under value 4,392 2,037 1,516 999
Operating (loss)/profit (excluding sales &
marketing costs) before goodwill
amortisation and impairment, NIC and
similar taxes on share options and shares
issued at under value (1,827) 8 743 (125)
Sales and marketing costs 1,815 1,319 2,453 783
Operating loss before goodwill amortisation
and impairment, NIC and similar taxes on
share options and shares issued at under
value (3,642) (1,311) (1,710) (908)
Goodwill amortisation 5,857 2,926 563 383
Goodwill impairment 5,900 - - -
Provision for NIC and similar taxes on (5) (44) (5) 65
share options
Shares issued at under value - - - -
Operating loss (15,394) (4,193) (2,268) (1,356)
Net interest receivable (payable) 6 5 4 (8)
(Loss)/profit on ordinary activities before (15,388) (4,188) (2,264) (1,364)
taxation
Business Analysis (£'000) Group Overhead Total Group
Quarter Quarter Quarter Quarter
ended 31 ended 31 ended 31 ended 31
Mar 2001 Mar 2000 Mar 2001 Mar 2000
Turnover
Consumer internet+ - - 1,398 701
Voice services*+ - - 5,801 3,647
Business services+ - - 6,774 2,928
Other+ - - 554 43
- - 14,527 7,319
Cost of sales - - 9,703 4,400
Gross profit - - 4,824 2,919
Administrative expenses (excluding sales &
marketing costs) before goodwill
amortisation and impairment, NIC and
similar taxes on share options and shares
issued at under value 1,128 642 7,036 3,678
Operating (loss)/profit (excluding sales &
marketing costs) before goodwill
amortisation and impairment, NIC and
similar taxes on share options and shares
issued at under value (1,128) (642) (2,212) (759)
Sales and marketing costs - - 4,268 2,102
Operating loss before goodwill amortisation
and impairment, NIC and similar taxes on
share options and shares issued at under
value (1,128) (642) (6,480) (2,861)
Goodwill amortisation - - 6,420 3,309
Goodwill impairment - - 5,900 -
Provision for NIC and similar taxes on (16) 23 (26) 44
share options
Shares issued at under value - - - -
Operating loss (1,112) (665) (18,774) (6,214)
Net interest receivable (payable) 372 839 382 836
(Loss)/profit on ordinary activities before (740) 174 (18,392) (5,378)
taxation
* previously described as audiotext - this area has expanded to include other
voice services
+ in view of the convergent nature of 365's Consumer Division activities, the
Company is reviewing the appropriateness and feasibility of reporting
segmented turnover in future periods.
All operations during the quarter were continuing.
Operating loss before goodwill amortisation
and impairment, provision for NIC and similar
taxes on share options and shares issued at
under value
Turnover
Geographical
analysis (£
'000)
Quarter Quarter Quarter ended 31 Mar Quarter ended 31 Mar
ended 31 ended 31 2001 2000
Mar 2001 Mar 2000
United 14,231 7,217 (5,936) (2,209)
Kingdom and
Ireland
France 77 41 (405) (293)
Germany - - (2) (29)
Chile 74 47 (15) (37)
South Africa 29 1 (82) (195)
USA 116 13 (40) (98)
14,527 7,319 (6,480) (2,861)
4. Segmental analysis - for the year ended 31 March 2001
Turnover and loss 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.
Business Analysis (£'000) Consumer Business
Division Division
Year Year Year Year
ended ended ended ended
31 Mar 31 Mar 31 Mar 31 Mar
2001 2000 2001 2000
Turnover
Consumer internet 5,777 1,537 - -
Voice services 21,368 13,139 - -
Business services - - 20,961 7,701
Other 2,036 43 - -
29,181 14,719 20,961 7,701
Continuing operations 22,438 14,719 16,641 7,701
Acquisitions 6,743 - 4,320 -
Cost of sales 17,001 7,235 13,972 5,375
Gross profit 12,180 7,484 6,989 2,326
Administrative expenses (excluding sales & 15,270 6,576 4,977 1,731
marketing costs) before goodwill amortisation
and impairment, NIC and similar taxes on share
options and shares issued at under value
Operating (loss)/profit (excluding sales &
marketing costs) before goodwill amortisation
and impairment, NIC and similar taxes on share
options and shares issued at under value (3,090) 908 2,012 595
Sales and marketing costs 5,493 2,806 6,450 2,153
Operating loss before goodwill amortisation
and impairment, NIC and similar taxes on share
options and shares issued at under value (8,583) (1,898) (4,438) (1,558)
Goodwill amortisation 23,272 4,338 2,121 759
Goodwill impairment 5,900 - - -
Provision for NIC and similar taxes on share (181) 198 (164) 175
options
Shares issued at under value - - - -
Operating loss (37,574) (6,434) (6,395) (2,492)
Continuing operations (35,846) (6,434) (6,032) (2,492)
Acquisitions (1,728) - (363) -
Net interest receivable/(payable) 11 20 82 (9)
Loss on ordinary activities before taxation (37,563) (6,414) (6,313) (2,501)
Business Analysis (£'000) Group Overhead Total Group
Year Year Year Year
ended ended ended ended
31 Mar 31 Mar 31 Mar 31 Mar
2001 2000 2001 2000
Turnover
Consumer internet - - 5,777 1,537
Voice services - - 21,368 13,139
Business services - - 20,961 7,701
Other - - 2,036 43
- - 50,142 22,420
Continuing operations - - 39,079 22,420
Acquisitions - - 11,063 -
Cost of sales - - 30,973 12,610
Gross profit - - 19,169 9,810
Administrative expenses (excluding sales & 3,845 2,453 24,092 10,760
marketing costs) before goodwill amortisation
and impairment, NIC and similar taxes on share
options and shares issued at under value
Operating (loss)/profit (excluding sales &
marketing costs) before goodwill amortisation
and impairment, NIC and similar taxes on share
options and shares issued at under value (3,845) (2,453) (4,923) (950)
Sales and marketing costs - - 11,943 4,959
Operating loss before goodwill amortisation
and impairment, NIC and similar taxes on share
options and shares issued at under value (3,845) (2,453) (16,866) (5,909)
Goodwill amortisation - - 25,393 5,097
Goodwill impairment - - 5,900 -
Provision for NIC and similar taxes on share (347) 331 (692) 704
options
Shares issued at under value - 2,261 - 2,261
Operating loss (3,498) (5,045) (47,467) (13,971)
Continuing operations (3,498) (5,045) (45,376) (13,971)
Acquisitions - - (2,091) -
Net interest receivable/(payable) 2,272 1,197 2,365 1,208
Loss on ordinary activities before taxation (1,226) (3,848) (45,102) (12,763)
Geographical Operating loss before goodwill amortisation and
analysis (£ impairment, provision for NIC and similar taxes
'000) on share options and shares issued at under
value
Turnover
Year Year Year ended 31 Mar 2001 Year ended 31 Mar 2000
ended 31 ended 31
Mar 2001 Mar 2000
United 49,241 21,953 (13,738) (4,665)
Kingdom and
Ireland
France 335 90 (2,082) (658)
Germany - 93 (25) (45)
Chile 210 263 (74) (28)
South Africa 78 1 (524) (422)
USA 278 20 (423) (91)
50,142 22,420 (16,866) (5,909)
5. Loss per ordinary share of 0.25p each
Quarter Quarter Year Year
ended 31 ended 31 ended ended
March March
2001 2000 31 31
March March
2001 2000
£'000 £'000 £'000 £'000
Loss for the period before the following: (6,056) (1,955)(14,439) (4,549)
Goodwill amortisation (6,420) (3,309)(25,393) (5,097)
Goodwill impairment (5,900) - (5,900) -
Provision for NIC and similar taxes on share 26 (44) 692 (704)
options
Shares issued at under value - - - (2,261)
Loss for the period (18,350) (5,308)(45,040)(12,611)
Weighted average number of shares in the
period:
Basic and diluted 201,550,957 188,609,005 200,196,253 154,120,345
Basic and diluted loss per share before 3.0p 1.0p 7.2p 3.0p
goodwill amortisation and impairment,
provision for NIC and similar taxes on share
options and shares issued at under value
Goodwill amortisation and impairment 6.1p 1.8p 15.6p 3.3p
Provision for NIC and similar taxes on share 0.0p 0.0p (0.3p) 0.4p
options
Shares issued at under value - - - 1.5p
Basic and diluted loss per share 9.1p 2.8p 22.5p 8.2p
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.
6. Share capital and reserves
Ordinary Shares to Share Merger Profit and
share be issued premium reserve loss
capital account 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 period - - - - (45,040)
Exchange adjustments - - - - (120)
Shares issued in respect of 2 - 44 - -
share options exercised
Shares issued for 9 (50) - 3,692 -
acquisitions
Shares issued in part 1 - 74 - -
settlement of purchase of
intangible asset
Premium on shares issued to - - 87 - -
employees
Contingent share - 795 - - -
consideration for
acquisitions
Movement in fair value of - (73) - - -
contingent share
consideration
At 31 March 2001 505 752 72,425 38,536 (57,856)
Shares were issued for the acquisitions during the year. The difference
between the fair value and nominal value of the shares has been transferred to
the merger reserve.
7. Reconciliation of movement in shareholders' funds
Quarter Quarter Year ended Year ended
ended 31 ended 31 31 March 31 March
March 2001 March 2000 2001 2000
£'000 £'000 £'000 £'000
Opening shareholders' funds* 73,326 72,139 94,941 14,629
Retained loss for the period (18,350) (5,308) (45,040) (12,611)
New share capital (net of - (51) - 60,826
expenses) issued for cash
Charge in respect of shares - - - 2,076
issued at under value
Shares issued for - 29,109 3,701 29,949
acquisitions
Shares issued in part 75 - 75 -
settlement of purchase of
intangible asset
Premium on shares issued to - - 87 -
employees
Net movement in contingent (607) (921) 672 80
share consideration
Employee share options 33 9 46 9
exercised
Exchange adjustments (115) (36) (120) (17)
Closing shareholders' funds 54,362 94,941 54,362 94,941
* opening shareholders' funds on 1 April 2000 were originally £92,949,000
before adding the prior year adjustment of £1,992,000.
8. Net cash outflow from operating activities
Quarter ended Quarter ended Year ended Year ended
31 March 2001 31 March 2000 31 March 2001 31 March
2000
£'000 £'000 £'000 £'000
Operating loss (18,774) (6,214) (47,467) (13,971)
Depreciation 299 109 1,213 408
Amortisation and 12,342 3,342 31,456 5,130
impairment of intangible
assets
Decrease/(Increase) in 564 (159) (356) (186)
stock
(Increase) in debtors (457) (817) (5,483) (3,669)
Increase in creditors/ 434 (941) 821 2,741
provisions
Charge in respect of - - - 2,076
shares issued at under
value
(Profit) on disposal of (312) - (312) -
intangible fixed assets
Loss on disposal of 76 8 76 8
tangible fixed assets
(5,828) (4,672) (20,052) (7,463)
9. National Insurance and similar taxes on share options
On exercise of share options issued after 6 April 1999, the Company is
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 seven years from the date of the grant. 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 to reduce the
provision by £1,992,000 to reflect the change in accounting policy. Prior year
and quarter comparatives have been restated to reflect the new policy.
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 and year ended 31 March 2001 include adjustments arising from the
movement in the Company's share price between 31 March 2000 and 31 March 2001
and the granting, exercise or lapsing of options.