Interim Results - Part 2
365 Corporation PLC
29 November 2000
PART 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 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.
1. Segmental analysis - for the quarter ended 30 September 2000
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.
Consumer Business
Division Division
Business Analysis Quarter Quarter Quarter Quarter
(£'000) ended ended ended ended
30 September 30 30 September 30
2000 September 2000 September
1999 1999
Turnover
Consumer internet 1,563 293 - -
Audiotext 5,447 3,040 - -
Business services - - 4,529 1,593
Other 487 - - -
7,497 3,333 4,529 1,593
Continuing 7,165 3,333 4,428 1,593
operations
Acquisitions 332 - 101 -
Cost of sales 4,133 1,477 3,053 1,114
Gross profit 3,364 1,856 1,476 479
Administrative 4,798 1,977 2,212 641
expenses before
goodwill
amortisation and
NIC and similar
taxes on share
options
Operating loss (1,434) (121) (736) (162)
before goodwill
amortisation and
NIC and similar
taxes on share
options
Goodwill 5,869 502 443 120
amortisation
Provision for NIC - - - -
and similar taxes
on share options
Operating loss (7,303) (623) (1,179) (282)
Continuing (7,260) (623) (1,179) (282)
operations
Acquisitions (43) - - -
Net interest 7 8 29 -
receivable
Loss on ordinary (7,296) (615) (1,150) (282)
activities before
taxation
Group Total Group
Overhead
Business Analysis Quarter Quarter Quarter Quarter
(£'000) ended ended ended ended
30 September 30 30 September 30
2000 September 2000 September
1999 1999
Turnover
Consumer internet - - 1,563 293
Audiotext - - 5,447 3,040
Business services - - 4,529 1,593
Other - - 487 -
- - 12,026 4,926
Continuing - - 11,593 4,926
operations
Acquisitions - - 433 -
Cost of sales - - 7,186 2,591
Gross profit - - 4,840 2,335
Administrative 846 227 7,856 2,845
expenses before
goodwill
amortisation and
NIC and similar
taxes on share
options
Operating loss (846) (227) (3,016) (510)
before goodwill
amortisation and
NIC and similar
taxes on share
options
Goodwill - - 6,312 622
amortisation
Provision for NIC (49) 70 (49) 70
and similar taxes
on share options
Operating loss (797) (297) (9,279) (1,202)
Continuing (797) (297) (9,236) (1,202)
operations
Acquisitions - - (43) -
Net interest 663 61 699 69
receivable
Loss on ordinary (134) (236) (8,580) (1,133)
activities before
taxation
Geographical Turnover Operating profit/(loss)
analysis before goodwill amortisation
(£'000) and provision for NIC and
similar taxes on share
options
Quarter Quarter Quarter ended Quarter
ended 30 ended 30 30 September ended 30
September September 2000 September
2000 1999 1999
United Kingdom 11,818 4,807 (2,152) (298)
France 96 17 (585) (124)
Germany - 19 (3) (14)
Chile 45 83 (13) 7
South Africa 16 - (151) (81)
USA 51 - (112) -
12,026 4,926 (3,016) (510)
2. Segmental analysis - for the 6 months ended 30 September 2000
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.
Consumer Business
Division Division
Business Analysis 6 months 6 months 6 months 6 months
(£'000) ended ended ended ended
30 30 30 30
September September September September
2000 1999 2000 1999
Turnover
Consumer internet 2,647 437 - -
Audiotext 10,429 6,306 - -
Business services - - 8,125 2,792
Other 827 - - -
13,903 6,743 8,125 2,792
Continuing operations 11,281 6,743 8,024 2,792
Acquisitions 2,622 - 101 -
Cost of sales 7,716 3,218 5,469 1,945
Gross profit 6,187 3,525 2,656 847
Administrative 8,921 3,020 4,441 1,139
expenses before
goodwill amortisation
and NIC and similar
taxes on share options
Operating (2,734) 505 (1,785) (292)
(loss)/profit before
goodwill amortisation
and NIC and similar
taxes on share options
Goodwill amortisation 11,312 908 832 221
Provision for NIC and (152) - (143) -
similar taxes on share
options
Operating loss (13,894) (403) (2,474) (513)
Continuing operations (14,131) (403) (2,474) (513)
Acquisitions 237 - - -
Net interest 153 11 53 (1)
receivable/(payable)
Loss on ordinary (13,741) (392) (2,421) (514)
activities before
taxation
Group Total
Overhead Group
Business Analysis 6 months 6 months 6 months 6 months
(£'000) ended ended ended ended
30 30 30 30
September September September September
2000 1999 2000 1999
Turnover
Consumer internet - - 2,647 437
Audiotext - - 10,429 6,306
Business services - - 8,125 2,792
Other - - 827 -
- - 22,028 9,535
Continuing operations - - 19,305 9,535
Acquisitions - - 2,723 -
Cost of sales - - 13,185 5,163
Gross profit - - 8,843 4,372
Administrative 1,885 446 15,247 4,605
expenses before
goodwill amortisation
and NIC and similar
taxes on share options
Operating (1,885) (446) (6,404) (233)
(loss)/profit before
goodwill amortisation
and NIC and similar
taxes on share options
Goodwill amortisation - - 12,144 1,129
Provision for NIC and (295) 70 (590) 70
similar taxes on share
options
Operating loss (1,590) (516) (17,958) (1,432)
Continuing operations (1,590) (516) (18,195) (1,432)
Acquisitions - - 237 -
Net interest 1,235 122 1,441 132
receivable/(payable)
Loss on ordinary (355) (394) (16,517) (1,300)
activities before
taxation
Geographical Turnover Operating profit/(loss)
analysis before goodwill amortisation
(£'000) and provision for NIC and
similar taxes on share
options
6 months 6 months 6 months 6 months
ended ended ended ended
30 30 30 September 30
September September 2000 September
2000 1999 1999
United Kingdom 21,691 9,276 (4,667) (31)
France 167 17 (1,144) (124)
Germany - 92 (5) 3
Chile 84 150 (33) -
South Africa 19 - (313) (81)
USA 67 - (242) -
22,028 9,535 (6,404) (233)
3. Loss per ordinary share of 0.25p each
Quarter Quarter ended
ended 30 September 1999
30 September £'000
2000
£'000
Loss for the period before the (2,314) (405)
following:
Goodwill amortisation (6,312) (622)
Provision for NIC and similar taxes on 49 (70)
share options
Loss for the period (8,577) (1,097)
Weighted average number of shares in
the period:
Basic and diluted 199,537,382 140,603,609
Basic and diluted loss per share (1.2p) (0.3p)
before amortisation of goodwill and
provision for NIC and similar taxes on
share options
Goodwill amortisation (3.1p) (0.4p)
Provision for NIC and similar taxes on 0.0p (0.1p)
share options
Basic and diluted loss per share (4.3p) (0.8p)
6 months ended 6 months ended
30 September 2000 30 September 1999
£'000 £'000
Loss for the period before the (4,932) (42)
following:
Goodwill amortisation (12,144) (1,129)
Provision for NIC and similar 590 (70)
taxes on share options
Loss for the period (16,486) (1,241)
Weighted average number of shares
in the period:
Basic and diluted 198,986,953 136,473,008
Basic and diluted loss per share (2.5p) (0.0p)
before amortisation of goodwill
and provision for NIC and similar
taxes on share options
Goodwill amortisation (6.1p) (0.8p)
Provision for NIC and similar 0.3p (0.1p)
taxes on share options
Basic and diluted loss per share (8.3p) (0.9p)
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.
Share capital and reserves
Ordinary Shares Share Merger Profit and
share to be premium reserve loss
capital issued account account
£'000 £'000 £'000 £'000
£'000
At 1 April 2000 493 80 72,220 34,844 (14,688)
Prior year - - - - 1,992
adjustment
Retained loss - - - - (16,486)
for the period
Exchange - - - - 22
adjustments
Shares issued in - - 13 - -
respect of share
options
exercised
Shares issued 7 - - 2,684 -
for acquisitions
Premium on - - 87 - -
shares issued to
employees
Contingent share - 1,802 - - -
consideration
for acquisitions
Movement in fair - (60) - - -
value of
contingent share
consideration
At 30 September 500 1,822 72,320 37,528 (29,160)
2000
Shares were issued for the acquisitions detailed in Note 9. The difference
between the fair value and nominal value of the shares has been transferred
to the merger reserve.
5. Reconciliation of movement in shareholders' funds
Quarter ended Quarter 6 months 6 months
30 September ended ended ended
2000 30 30 30
£'000 September September September
1999 2000 1999
£'000 £'000 £'000
Opening 89,848 16,523 94,941 14,629
shareholders'
funds*
Loss for the (8,577) (1,097) (16,486) (1,241)
period
New share capital - 1,401 - 3,443
(net of expenses)
issued for cash
Shares issued for 318 - 2,691 -
acquisitions
Premium on shares - - 87 -
issued to
employees
Net movement in 1,352 - 1,742 -
contingent share
consideration
Employee share - - 13 -
options exercised
Exchange 69 8 22 4
adjustments
offset in
reserves
Closing 83,010 16,835 83,010 16,835
shareholders'
funds
* opening shareholders' funds on 1 April 2000 were originally £92,949,000
before adding prior year adjustment of £1,992,000.
6. Net cash outflow from operating activities
Quarter Quarter 6 months 6 months
ended ended ended ended
30 30 30 30
September September September September
2000 1999 2000 1999
£'000 £'000 £'000 £'000
Operating loss (9,279) (1,202) (17,958) (1,432)
Depreciation 248 111 563 189
Amortisation of 6,356 622 12,228 1,129
intangible assets
(Increase) in stock (381) (10) (390) (17)
(Increase) in debtors (336) (257) (1,974) (836)
(Decrease)/increase in (113) 464 (51) 55
creditors/provisions
(3,505) (272) (7,582) (912)
7. Acquisitions
(a) Compass Communications Technical Services Limited and Compass Telecom
Limited
On 29 August 2000, 365 acquired the entire issued share capital of Compass
Communications Technical Services Limited and the remaining shares in Compass
Telecom Limited for a total estimated consideration of £1,478,000.
£'000
Book value of net liabilities acquired (124)
Goodwill 1,602
Cost of acquisition 1,478
Comprising:
Cash 430
Shares issued 318
Contingent share consideration 365
Contingent cash consideration 350
Acquisition costs 15
1,478
Goodwill arising on the acquisition Compass Communications and the remaining
shares in Compass Telecom is being amortised on a straight-line basis over
the estimated economic useful life of 5 years.
b. Phones Express Limited
On 8 September 2000, 365 acquired the entire issued share capital of Phones
Express Limited for a total estimated consideration of £2,420,000.
£'000
Fair value of net assets acquired 368
Goodwill 2,052
Cost of acquisition 2,420
Comprising:
Cash 1,175
Shares to be issued 486
Contingent cash consideration 184
Contingent share consideration 501
Acquisition costs 74
2,420
Goodwill arising on the acquisition of Phones Express is being amortised on a
straight line basis over the estimated economic useful life of 18 months.
1. 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 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 of
£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 first
quarter and six months ended 30 September 2000 include adjustments arising
from the movement in the Company's share price between 31 March 2000 and 30
September 2000 and the exercise or lapsing of options.