Interim Results

Future Network PLC 28 September 2001 THE FUTURE NETWORK PLC Interim results for the six months ended 30 June 2001 The Future Network plc (LSE: FNET), the international specialist consumer publishing group, today announces its interim results for the six months ended 30 June 2001. These Interim results feature substantial non-recurring costs, as the business has undergone a major restructuring. Consequently, the Company is reporting both Actual Results but also, for clarity, those solely relating to the Continuing Operations. Key financials: * Turnover: £90.5m (2000: £110.2m) * Revenues from Continuing Operations: £70.3m (2000: £78.4m) * Adjusted Operating Profit from Continuing Operations: £1.9m (2000: £5.9m) * EBITA losses from Discontinued Operations: £14.5m * First half restructuring costs: £5.3m; refinancing costs: £2.6m * Goodwill write-down: £70m following impairment review and disposal * Reported loss before tax: £106.8m (2000: £14.2m) Business significantly restructured * Closure or sale of 39 magazines; closure of German and Dutch operations; * Closure of majority of group's internet activities; * Major operational restructuring of UK and US businesses; * Overall reduction of 39 per cent in group's workforce to c1,200 employees Board strengthened by several changes * Michael Penington appointed Interim Finance Director in March * Colin Morrison appointed Chief Operating Officer (announced in March) and as Managing Director of Future UK (announced today) * Patrick Taylor joined as a non-executive Director in April * John Bowman to join as Finance Director on 16 November (announced August) Commenting on the results, Greg Ingham, Future's Chief Executive said: 'We have taken extensive actions to reshape the group. Good progress has been made in sorting out the business, with tough actions taken to cut our cost base significantly and to reduce our risk profile. This restructuring, combined with the transition period currently affecting the computer games market, has inevitably had a significant impact on the group's results for the first half. 'Though revenues from both copy sales and advertising have tracked below expectation, the Continuing magazine portfolio recorded a small profit at the EBITA level before charging refinancing costs during the first six months. This was due to tighter management of direct costs and reductions in overheads. 'As announced in June, trading conditions remain challenging and are expected to remain so for at least the remainder of this year. Though we believe that we have made cautious assumptions about the second half of this year, current market conditions, both generally and resulting from the video games transition, make it difficult to forecast revenues. Our market share performance in the games market in our core UK and US operations continues to be strong. Publishing teams are in place for Official Xbox Magazine with preparations well-advanced for the magazine's launch in the US later this month, and in Europe in early 2002. 'The reduction of debt remains a priority for Future and, as announced on 2 August 2001, the Board has been undertaking a review of the alternatives relating to its capital structure. As announced separately the Company is in advanced discussions with respect to a refinancing. The Board expects to be in a position to make a further statement shortly. 'The outlook for the next twelve months may be affected by world economic and political factors. The specific factor most likely to impact our business is the timing of the expected upturn in the computer games market. In the meantime, we continue to focus on the tight management of the business and maintain a cautious view of our markets'. Enquiries: The Future Network plc Greg Ingham, Chief Executive Tel: 01225 442244 Michael Penington, Interim Finance Director Hogarth Partnership James Longfield/Georgina Briscoe Tel: 020 7357 9477 Definitions To help the understanding of our business the following definitions have been used throughout this report: Adjusted operating profit/(loss): Operating profit/(loss) excluding amortisation and impairment of intangible assets and refinancing costs. EBITA: Operating profit/(loss) excluding amortisation and impairment of intangible assets. Chief Executive's Review The impact of the worldwide slowdown in technology markets has been well documented over the past six months and its effects have been felt across a range of different industries. These difficult market conditions are reflected in the Group's results for the first half of this year. In addition to the slowdown in wider technology markets, the video games market, where Future is Europe's leading magazine publisher, is also in the midst of its own transition, with Sony's move from PlayStation1 to PlayStation2 and the impending launch of Microsoft's Xbox and Nintendo's GameCube platforms. This transition has had a significant negative impact on our business Partly as a result of an ambitious growth plan in 2000, the Group entered this period with a high level of debt and an expanded cost base. The tough actions necessary to change the business have inevitably resulted in the recognition of substantial losses associated with the closure of businesses, restructuring costs, and writedowns in the carrying value of assets. The first six months of 2001 have therefore been characterised by the extensive actions taken by management to reshape the business in response to these new challenging economic conditions to improve the structure and future profitability of the Group. Since the beginning of the year, we have undertaken major restructuring programmes in our core UK and US businesses. This has included the closure or sale of a number of loss-making magazines across the Group, the closure of the majority of the Company's Internet activities and the closure of our operations in Germany and the Netherlands. These actions have resulted in a reduction in our total workforce of 810, or 39 per cent. We have also strengthened the senior management team over the course of the year with the appointments of Colin Morrison as Chief Operating Officer and Managing Director of Future UK, Michael Penington as Interim Finance Director, and Patrick Taylor as a non-executive Director. Additionally, we were very pleased to be able to announce on 29 August 2001 the appointment of John Bowman as Finance Director with effect from 16 November 2001. We announced in June that we had reached agreement to sell our US-based magazine, Business 2.0, its global brand and related conference and online activities to eCompany Now, Inc., a subsidiary of AOL Time Warner, Inc. for an initial consideration of US$68m, together with a 5 year revenue sharing arrangement. eCompany Now, Inc. will combine Business 2.0 with its own magazine, eCompany Now to create a magazine under the Business 2.0 name with a monthly ratebase of 550,000 copies. Under the revenue sharing agreement, the Company will be entitled to receive payments for each of the five calendar years commencing 1 January 2002, equivalent to 25 per cent of the annual Net Revenues over US$50m achieved by the combined magazine and 25 per cent of the annual Net Revenues over US$10m from any branded websites and conferences or their successors. We believe this was a good deal for shareholders, given current market conditions in that sector. The Group's continuing operations have recorded an adjusted operating profit of £1.9m on revenues of £70.3m in the first half. In 2001, launch spending will be concentrated on the Official Xbox Magazine, primarily in the US. Our strategy is to continue to focus on publishing high quality magazines, with premium content for specialist sectors, including the video games sector and other technology areas. These markets still offer the potential for relatively low cost launches, good profitability from low circulation magazines and the opportunity for licensing content to other publishers through our worldwide network of licensees. They are also where the Group has had both its greatest experience and success. Future is Europe's leading publisher of video games titles, with market leadership positions in the UK, Italy and Poland, a strong position in the US and with over 40 licensed games magazines in a further 21 countries in the period. We have the rights to publish the Official magazines for the Playstation2 platform in the UK and Italy, and the worldwide rights (excluding Japan) to publish Official magazines for Microsoft's Xbox. We also publish 19 unofficial magazines for the various platforms and games formats. Following the launch of Playstation2 in November last year, the next 12 months promise to be a period of unprecedented activity in the computer games market. Launches of Microsoft's Xbox and Nintendo's GameCube consoles are both set for November this year in the US and the spring of 2002 in Europe. Latest figures from Screen Digest forecast that over 100 million consoles will be sold worldwide between 2001 and 2004, and that the UK installed base of next generation hardware will reach 3.5 million units in the UK by the fourth quarter of 2002. The historic relationship between sales of our magazines and active users of the hardware, particularly for 'Official' titles, offers encouragement that the medium term outlook for our business is becoming more positive. Revenue has fallen short of expectations in the first half of the year. This has been greater in advertising than in circulation, though both have been affected. We have been able to mitigate much of the effects of this on our Continuing Operations through cost-cutting initiatives. Current trading & prospects We have taken extensive actions to reshape the group. Good progress has been made in sorting out the business, with tough actions taken to cut our cost base significantly and to reduce our risk profile. This restructuring, combined with the transition period currently affecting the computer games market, has inevitably had a significant impact on the Group's results for the first half. Though revenues from both copy sales and advertising have tracked below expectation, the continuing magazine portfolio recorded a small profit at the EBITA level before charging refinancing costs during the first six months. This was due to tighter management of direct costs and reductions in overheads. As announced in June, trading conditions remain challenging and are expected to remain so for at least the remainder of this year. Though we believe that we have made cautious assumptions about the second half of this year, current market conditions, both generally and resulting from the video games transition, make it difficult to forecast revenues. Our market share performance in the games market in our core UK and US operations continues to be strong. Publishing teams are in place for Official Xbox Magazine with preparations well-advanced for the magazine's launch in the US later this month, and in Europe in early 2002. The reduction of debt remains a priority for Future and, as announced on 2 August 2001, the Board has been undertaking a review of the alternatives relating to its capital structure. As announced separately the Company is in advanced discussions with respect to a refinancing. The Board expects to be in a position to make a further statement shortly. The outlook for the next twelve months will be affected by world economic and political factors. The specific factor most likely to impact our business is the timing of the expected upturn in the computer games market. In the meantime, we continue to focus on the tight management of the business and maintain a cautious view of our markets. Greg Ingham Chief Executive Officer 28 September 2001 Review of operations United Kingdom £m 2001 2000 Continuing Discontinued Total Total % change Revenues 40.0 2.1 42.1 50.1 (16.0) EBITA 5.6 (3.6) 2.0 3.8 (47.4) UK: The UK business is the heart of Future, representing over half of the Group's revenues on an ongoing basis and the clear majority of its profits. It is also the most diversified business within the Group publishing other specialist consumer magazines that are focused outside of the games and technology sectors. In the Continuing UK business, revenues of £40m were below our own early-year expectations, but profits at EBITA level were in line, recording a small profit for the first half. The Continuing business had a respectable EBITA margin of 13.8 per cent. The UK business has undergone a major restructuring this year, culminating in July with the splitting of the business into three distinct divisions - Games; Computing; and Entertainment. This move is designed to simplify and streamline the business and to improve focus and control. United States £m 2001 2000 Continuing Discontinued Total Total % change Revenues 14.4 14.7 29.1 40.6 (28.3) EBITA (1.2) (8.0) (9.2) 1.2 (866) Income/ (loss) from associates 0.7 - 0.7 (0.3) 333.3 US: Since the first half restructuring and the sale of Business 2.0 in July, it is now solely focused on the video games and home computing sectors. On a Continuing basis, it represents 20.6 per cent of the Group by revenue. The US business underwent a major restructuring in 2001. In February, the Company closed 6 loss making titles, and in July completed the sale of our new economy magazine, Business 2.0. The Company's US business is now focused on its core areas of video games and home computing. Performance is in line with our own cautious assumptions, and each area has shown a small market share growth in terms of circulation. As with the UK, there has been a revenue shortfall offset by cost-cutting and tight financial management. Mainland Europe £m Restated 2001 2000 Continuing Discontinued Total Total % change Revenues France 7.9 0.4 8.3 9.9 (16.1) Italy 5.7 1.1 6.8 6.5 4.6 Germany - 1.8 1.8 3.1 (41.9) Poland 2.3 - 2.3 - - TOTAL 15.9 3.3 19.2 19.5 (1.5) EBITA France (0.5) (0.4) (0.9) (0.8) (12.5) Italy (0.3) (0.1) (0.4) 1.2 (133.3) Germany - (1.9) (1.9) (3.2) 40.6 Poland - - - - - TOTAL (0.8) (2.4) (3.2) (2.8) (14.2) Mainland Europe: The Continuing business in Mainland Europe represents 22.6 per cent of Group revenues, publishing 27 magazines and employing 338 staff. Virtually all of the activity is in the video games and home computing sectors. During the period we closed 18 magazines across Europe, including our entire German business with first half EBITA losses of £1.9m, and restructured our French business. The total revenues of the closed magazines in the first half amounted to £3.3m, and EBITA losses were £2.4m. The total costs of the reorganisation in mainland Europe were £2.1 m. As a result of the deterioration in the performance of the French business, the carrying value of goodwill relating to the acquisition of the French business has been reduced by £13.9m to zero. As a result of the tough trading conditions experienced in the first half the carrying value of goodwill relating to the acquisition of the Italian business has been reduced by £2.4m to £14m. Finance Director's report Continuing operations As a result of the significant changes in the business during the first half of the year, and in accordance with FRS 3, the operating results for the six months to 30 June are split between Continuing and Discontinued Operations. This presentation should assist in the comparison of the results with future periods as it clearly shows the operating results from those titles and operations that are Continuing, based on the Group's current cost structure. In the Company's press release of 8 June 2001 announcing the disposal of Business 2.0, we estimated that the Group would incur losses of approximately £28.6m in 2001 from a combination of losses on discontinued operations (including the sale of Business 2.0), closure and redundancy costs, and refinancing fees payable to the Group's banks and their advisors. The interim results include a total of £22.4m of such costs, divided into £14.5m of losses from Discontinued Operations included in 'Operating profit excluding amortisation and impairment of intangible assets and refinancing costs', £ 5.3m of closure and redundancy charges included in 'Loss on the sale or termination of operations', and £2.6m of refinancing costs. In the second half of 2001, we anticipate a further £4.5m of such costs from measures already announced, arising principally from closure costs resulting from the disposal of Business 2.0 in the United States and redundancy provisions for the programme announced in the United Kingdom on 13 July. In addition, a further £0.7m of refinancing charges will be incurred. The total charges therefore represent a reduction on the amounts previously envisaged of approximately £1.0m. On 8 June 2001, the Company announced it had agreed to sell the Business 2.0 title to a subsidiary of AOL Time Warner, Inc. for a total of US$68m plus the potential of a share of future revenues. Following clearance by the US competition authorities under the Hart-Scott-Rodino Act, the sale was completed on 12 July 2001. The proceeds of sale, less the expenses directly related to the sale and taxation arising as a result of the sale, will be recognised in the second half. As noted above, the costs of closing the business, including redundancy costs and a provision for leasehold property, now surplus to the Group's requirements, will be recognised in the second half. Goodwill In accordance with FRS 11 the Board has carried out an impairment review on the carrying value of the goodwill arising on the acquisition of the business in the United States following the disposal of Business 2.0. As a result of this review a write down of £49.6m is included in the results to 30 June. An amount of £14.4m which is directly attributable to Business 2.0 remains on the balance sheet as at 30 June. This amount will be eliminated in the second half against the proceeds from the disposal. The Board has also reviewed the carrying value of the goodwill arising on the acquisition of the European businesses taking into account the restructuring activity that has taken place during the year. The carrying value of the goodwill relating to the acquisition of the Italian business has been written down by £2.4m reflecting the tougher trading conditions being experienced. As a result of the review of the goodwill relating to the French business, the remaining balance amounting to £13.9m has been written off in the period. Acquisitions No acquisitions were completed within the period. On 24 August the Group acquired the remaining 51 per cent of TED Conferences LLC ('TED') not already held for a consideration of US$6m, pursuant to the exercise of a put option entered into at the time of the purchase of the initial 49 per cent interest in July 2000. The Group's results for the period include £0.7m as the share of the profit of TED. As the TED conference is held once a year in February, no earnings should be expected in the second half of the year. Debt Financing In March, the Company renegotiated its banking arrangements to provide for a new £100m multicurrency revolving credit facility. This facility was restated and amended in June in conjunction with the agreement to dispose of Business 2.0 , with a revised maximum facility amount of £76m. The maturity of the facility is September 2002. Taxation The Group currently anticipates a full year tax liability in the United States of $13.7m (£9.5m) as a result of the disposal of Business 2.0 in the United States. In all other jurisdictions, the Group anticipates that it will record tax losses in 2001. The tax credit for the half year has been calculated by applying the estimated effective rate for the year to the results to 30 June on a country by country basis. The Future Network plc Interim Report 2001 Consolidated Profit and Loss Account for the six months ended 30 June 2001 (£'000) Note Total 6 Restated 12 Months months to 6 months to 30 June Continuing Discontinued 2001 to 31 operations operations December 30 June 2000 2000 Turnover 3 70,317 20,136 90,453 110,196 253,989 Cost of sales (49,995) (25,172) (75,167) (84,040) (196,839) Gross profit/(loss) 20,322 (5,036) 15,286 26,156 57,150 Distribution costs (4,849) (1,873) (6,722) (6,702) (15,423) Administrative (98,344) (8,450) (106,794) (31,710) (91,192) expenses Operating profit/ (loss) excluding amortisation and impairment of intangible assets and 1,872 (14,454) (12,582) 1,063 (2,489) refinancing costs Amortisation and impairment of intangible assets (82,094) (905) (82,999) (13,319) (46,976) Refinancing costs (2,649) - (2,649) - - Operating loss (82,871) (15,359) (98,230) (12,256) (49,465) Share of operating profit/(loss) of associates 653 (267) (450) Operating loss including profit/ (loss) of associates (97,577) (12,523) (49,915) Loss on the sale or termination of operations (5,279) - - Loss on disposal of fixed asset investments (354) - (117) Write down of fixed asset investments - - (4,552) Net interest payable and similar charges (3,596) (1,718) (4,709) Loss on ordinary activities before tax 3 (106,806) (14,241) (59,293) Tax on loss on ordinary activities 6 5,405 (241) (1,473) Loss on ordinary (101,401) (14,482) (60,766) activities after tax Loss for the period (101,401) (14,482) (60,766) The Future Network plc Interim Report 2001 Consolidated Profit and Loss Account (continued) for the six months ended 30 June 2001 Adjustments to results after tax (£'000) Restated 6 months 6 months 12 Months to to to 31 December 30 June 30 June 2000 2001 2000 Loss on ordinary activities after (101,401) (14,482) (60,766) taxation Add: amortisation and impairment of 82,999 13,319 46,976 intangible assets Adjusted loss on ordinary activities after tax (18,402) (1,163) (13,790) Earnings per 1 p ordinary share (in Restated pence) 6 months 6 months 12 Months to to to 31 December 30 June 30 June 2000 2001 2000 Note Basic loss per share 5 (70.67) (10.22) (42.68) Adjusted basic loss per share 5 (12.82) (0.82) (9.69) Diluted loss per share 5 (70.67) (10.22) (42.68) Adjusted diluted loss per share 5 (12.82) (0.82) (9.69) Group Activity Analysis for the six months ended 30 June 2001 (£'000) Restated 6 months to 6 months to 12 Months to 30 June 2001 30 June 2000 31 December 2000 Turnover United Kingdom 42,109 50,080 110,405 United States 29,108 40,595 98,993 Mainland Europe 19,236 19,521 44,591 Total 90,453 110,196 253,989 (£'000) Restated 6 months 6 months 12 Months to to to 30 June 30 June 31 2001 2000 December 2000 Results United Kingdom 1,961 3,818 10,301 United States (9,245) 1,219 707 Mainland Europe (3,272) (2,829) (10,486) Central operating costs (2,026) (1,145) (3,011) Operating (loss)/profit excluding amortisation of intangible assets and refinancing costs (12,582) 1,063 (2,489) Turnover by category Restated 6 months to 6 months to 12 Months to 30 June 2001 30 June 2000 31 December 2000 Circulation 50,497 58,927 127,830 Advertising 35,898 47,644 117,484 Other 4,058 3,625 8,675 Total 90,453 110,196 253,989 Other turnover arises primarily from licensing of the Group's titles and income from exhibitions. Consolidated Balance Sheet at 30 June 2001 (£'000) Restated 30 June 30 June 31 December 2001 2000 2000 Fixed assets Intangible assets 171,007 284,482 253,775 Tangible assets 6,930 8,341 9,294 Investments: Investments in associates 4,240 295 4,634 Other investments 73 3,836 1,071 4,313 4,131 5,705 182,250 296,954 268,774 Current Assets Stocks 4,216 9,063 8,778 Debtors 42,783 50,311 60,634 Investments - 1,107 - Cash at bank and in hand 2,662 8,141 10,780 49,661 68,622 80,192 Creditors - amounts falling due within one year (53,623) (69,245) (102,298) Net current liabilities (3,962) (623) (22,106) Total assets less current liabilities 178,288 296,331 246,668 Creditors - amounts falling due after more than one year (80,896) (36,220) (49,896) Provisions for liabilities and charges (3,018) (1,810) (1,205) Net assets 94,374 258,301 195,567 Capital and Reserves Called up share capital 1,441 1,422 1,430 Share premium account 138,017 135,922 137,821 Merger reserve 109,015 109,015 109,015 Other reserves 21,856 40,297 21,949 Profit and loss account (175,955) (28,355) (74,648) Total equity shareholders' funds 94,374 258,301 195,567 Statement of Total Recognised Gains and Losses for the six months ended 30 June 2001 Restated (£'000) 6 months 6 months 12 months to to 30 June to 30 June 31 December 2001 2000 2000 Loss for the period (101,401) (14,482) (60,766) Exchange adjustments offset in reserves 1 454 (70) Other - 110 306 Total gains and losses recognised since last annual report (101,400) (13,918) (60,530) Reconciliation of Movements in Shareholders' Funds for the six months ended 30 June 2001 Restated (£'000) 6 months 6 months 12 months to 30 to 30 to June June 31 2001 2000 December 2000 Loss for the period (101,401) (14,482) (60,766) Proceeds from issue of shares 12 9 17 Premium on issue of shares (net of expenses) 195 340 1,861 Refund of costs on issue of shares previously offset against share premium - - 378 Exchange adjustments offset in reserves 1 454 (70) Deferred consideration not settled by issue of - - (18,000) shares Adjustment for shares issued under share option - (83) (112) schemes through share option trust Other - 110 306 Net change in shareholders' funds (101,193) (13,652) (76,386) Opening shareholders' funds 195,567 271,953 271,953 Shareholders' funds at end of period 94,374 258,301 195,567 Consolidated Cash Flow Statement for the six months ended 30 June 2001 (£'000) Restated 6 months 6 months 12 months to 30 to 30 to 31 June June December 2001 2000 2000 Net cash (outflow)/inflow from operating activities (6,968) 3,627 (1,627) Dividends from associates 618 - - Returns on investment and servicing of finance Interest received 237 328 730 Interest paid (2,995) (1,791) (3,337) Net cash outflow from returns on investment and servicing of finance (2,758) (1,463) (2,607) Taxation paid (689) (1,003) (2,236) Capital expenditure and financial investment Purchase of tangible fixed assets (506) (3,227) (5,303) Purchase of fixed asset investments - (963) (2,792) Sale of tangible fixed assets - 12 77 Sale of fixed asset investments 559 - 1,507 Net cash inflow/(outflow) for capital expenditure and financial investment 53 (4,178) (6,511) Acquisitions and disposals Purchase of subsidiary undertakings - (211) (2,242) Purchase of associates - (547) (5,373) Cash proceeds on disposal of associate - - 409 Cash proceeds from sale of operations 1,329 - - Payment of deferred consideration (820) - (18,000) Purchase of businesses - (4,756) (4,580) Net cash inflow/( outflow) for acquisitions and 509 (5,514) (29,786) disposals Net cash outflow before financing (9,235) (8,531) (42,767) Financing Proceeds from issue of ordinary share capital 207 267 442 Refund of expenses of share issue - - 378 Drawdown of bank loans 2,000 - 41,008 Movement on discounted bills (29) - (636) Repayment of shareholder loan - (863) (1,022) Repayment of bank loans (1,351) (2,000) (6,000) Net cash inflow /(outflow) from financing 827 (2,596) 34,170 Decrease in cash in the period (8,408) (11,127) (8,597) Notes to the Consolidated Cash Flow Statement For the six months ended 30 June 2001 A. Reconciliation of Movement in Net Debt (£'000) Restated 6 months to 6 months to 12 months to 31 December 2000 30 June 2001 30 June 2000 Net debt at start of (68,961) (26,884) (26,884) period Decrease in cash (8,408) (11,127) (8,597) Movement in borrowings (685) 2,863 (33,845) Exchange movements 196 81 365 Net debt at end of period (77,858) (35,067) (68,961) B. Cash Flow from Operating Activities (£'000) Restated 6 months 6 months 12 months to to 30 to 30 June June 31 December 2001 2000 2000 Operating loss (98,230) (12,523) (49,465) Loss on sale or termination of operations (5,279) - - Depreciation charge 1,446 1,204 2,669 Goodwill amortisation and impairment 82,999 13,319 46,976 Decrease/(Increase) in stocks 4,705 (2,959) (2,629) Decrease/(Increase) in debtors 22,665 (530) (10,880) (Decrease)/Increase in creditors (15,274) 5,116 11,702 Net cash (outflow)/inflow from operating (6,968) 3,627 (1,627) activities Notes to the Interim Statement 1. Basis of the preparation of accounts The results for the 6 months ended 30 June 2001 and 2000 are unaudited. The figures for the year ended 31 December 2000 are taken from the statutory accounts of The Future Network plc, which have been delivered to the Registrar of Companies and upon which an unqualified audit report was given. The accounting policies are as stated on pages 42 and 43 of the annual report for the year ended 31 December 2000. The preceding interim statement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. 2. Prior year adjustment As stated in the 2000 Annual Report, the Company discovered accounting irregularities in Future France SA, its French subsidiary, in October 2000. The errors arose due to misstatements in the recognition of newsstand sales. This resulted in turnover for the six months ended 30 June 2000 being overstated by £758,000, operating loss for the period being understated by £ 758,000, and trade debtors at 30 June 2000 being overstated by £2,325,000. As a result of the error the tax charge for the six months ended 30 June 2000 was overstated by £278,000. 30 June 2000 consolidated profit and loss account French accounting irregularity As previously reported Restated £'000 £'000 £'000 Turnover 110,954 (758) 110,196 Operating loss (11,765) (758) (12,523) Tax (519) 278 (241) Loss after tax (14,002) (480) (14,482) 30 June 2000 consolidated balance sheet As French previously accounting Discounted bills reported irregularity reclassification Restated £'000 £'000 £'000 £'000 Debtors 51,389 (2,325) 1,247 50,311 Creditors due within (67,998) - (1,247) (69,245) one year Profit and loss reserve (12,424) (1,820) - (14,244) as at 1 January 2000 Loss for the period (14,002) (480) - (14,482) ended 30 June 2000 2000 net exchange 479 (25) - 454 adjustments Other movement (83) - - (83) Profit and loss reserve (26,030) (2,325) - (28,355) as at 30 June 2000 Total shareholders' 260,626 (2,325) - 258,301 funds 3. Segmental Reporting The Group is involved in one class of business, the publication of magazines and internet websites. The geographical analyses of turnover, (loss)/profit before tax and net assets by origin, and turnover by destination were as follows: (a) Turnover by origin (£'000) Restated 6 months 6 months 12 months to to 30 June to 30 June 31 December 2001 2000 2000 United Kingdom 42,790 50,302 111,679 United States 29,135 40,595 99,143 Mainland Europe 19,236 19,701 44,591 Turnover between segments (708) (402) (1,424) Total 90,453 110,196 253,989 (b) (Loss)/profit before tax by origin (£'000) Restated 6 months 6 months 12 months to to 30 June to 30 June 31 December 2001 2000 2000 United Kingdom (6,065) 519 2,915 United States (70,374) (7,590) (21,813) Mainland Europe (23,258) (5,088) (33,714) Central Costs (7,109) (2,082) (6,681) Total (106,806) (14,241) (59,293) (c) Net assets by origin (£'000) 30 June 2001 Restated 30 June 31 December 2000 2000 United Kingdom 86,618 105,871 107,197 United States 73,660 137,941 136,141 Mainland Europe 14,032 56,450 31,359 Interest bearing liabilities (79,936) (41,961) (79,130) Total 94,374 258,301 195,567 (d) Turnover by destination (£'000) Restated 6 months to 6 months to 12 months to 31 December 2000 30 June 30 June 2001 2000 United Kingdom 39,930 46,512 100,939 United States 28,661 39,069 99,163 Mainland Europe 18,722 18,881 42,986 Rest of the World 3,848 5,956 12,325 Turnover between segments (708) (222) (1,424) Total 90,453 110,196 253,989 4. Discontinued activities (£'000) 30 June Restated 31 2001 30 June Dec- ember 2000 2000 Cont- Discont- Total Cont- Discont- Total Cont- Discont- Total inuing inued inuing inued inuing inued Turn- over 70,317 20,136 90,453 78,350 31,846 110,196 172,251 81,738 253,989 Cost of sales (49,995)(25,172)(75,167)(52,562)(31,478)(84,040)(115,826)(81,013)(196,839) Gross profit 20,322 (5,036) 15,286 25,788 368 26,156 56,425 725 57,150 Distr- ibu- tion (4,849) (1,873) (6,722)(4,259) (2,443)(6,702) (9,986) (5,437) (15,423) expenses Administra- tion (98,344) (8,450)(106,794)(27,684)(4,026)(31,710)(76,871) (14,321) (91,192) expenses Oper- ating 1,872 (14,454) (12,582) 5,898 (4,835) 1,063 7,820 (10,309) (2,489) profit/ (loss) excluding amortisation and impairment of fixed assets and refinancing costs Amortisa- tion (82,094) (905)(82,999)(12,053)(1,266)(13,319)(38,252) (8,724) (46,976) and impairment of intangible assets Refin- ancing (2,649) - (2,649) - - - - - - costs Operating loss (82,871) (15,359)(98,230) (6,155)(6,101)(12,256)(30,432) (19,033) (49,465) 5. Earnings per share Basic earnings per share are calculated using the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share have been calculated by taking into account the dilutive effect of shares that would be issued on conversion into ordinary shares of options held under employee share schemes. Restated 6 months to 6 months to 12 months to 31 30 June 2001 December 2000 30 June 2000 Weighted average number of ordinary Shares outstanding during the period - Basic 143,489,612 141,769,535 142,372,731 - Dilutive effect of share options 4,339,456 9,179,700 7,553,962 - Diluted 147,829,068 150,949,235 149,926,693 Basic loss per share (in pence) (70.67) (10.22) (42.68) Adjusted basic loss per share (in (12.82) (0.82) (9.69) pence) Diluted loss per share1 (in pence) (70.67) (10.22) (42.68) Adjusted diluted loss per share (in (12.82) (0.82) (9.69) pence) The adjustments to profit have the following effects on loss per share: Basic loss per share (in pence) (70.67) (10.22) (42.68) Amortisation and impairment of intangible assets 57.85 9.40 32.99 Adjusted basic loss per share (in pence) (12.82) (0.82) (9.69) Diluted loss per share (in pence) (70.67) (10.22) (42.68) Amortisation and impairment of intangible assets 57.85 9.40 32.99 Adjusted diluted loss per share (in pence) (12.82) (0.82) (9.69) 1 The share options do not have a dilutive effect where there is a loss. 6. Tax The tax credit for the six months ended 30 June 2001 is based on the estimated effective rate of tax for the full year assessed on a country by country basis. 7. Post balance sheet events On 12 July 2001 the Group disposed of its US -based magazine, Business 2.0, its global brand and related conference and online activities together with the UK Business 2.0 subscriber file. The initial gross consideration for the disposal was $68 million in cash. On 13 July 2001 the Group announced a further restructuring of its UK business in order to reduce fixed operating costs through reductions in staff levels and property overheads. On 24 August 2001 the Group acquired the remaining 51% membership interest in TED Conferences LLC, a Company registered in California, USA, for $6 million in cash.

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