Interim Results - Part 2.

Future Network PLC 11 September 2000 Part 2 Consolidated Profit and Loss Account for the six months ended 30 June 2000 (£'000) Restated Restated 6 mths 6 mths 12 mths 6 mths 12 mths to to to to to 30 Jun 30 Jun 31 Dec 30 Jun 31 Dec 00 99 99 99 99 Note Actual Actual Actual Pro forma Pro forma --------------------------------------------------------------------------- Turnover including share of associate 110,954 61,760 173,960 86,195 198,511 Less: share of associate - - - - - Group Turnover 2 110,954 61,760 173,960 86,195 198,511 Cost of sales (84,040) (41,899) (114,807) (63,584) (135,331) --------------------------------------------------------------------------- Gross profit 26,914 19,861 59,153 22,611 63,180 --------------------------------------------------------------------------- Distribution costs (6,702) (2,243) (8,266) (4,905) (10,926) Administrative expenses (31,710) (14,791) (44,522) (25,188) (55,785) Operating profit excluding amortisation of intangible assets 1,821 6,730 23,160 4,329 21,283 Amortisation of Intangible assets (13,319) (3,903) (16,795) (11,811) (24,814) Group operating (loss)/ profit (11,498) 2,827 6,365 (7,482) (3,531) Share of operating loss of associate (267) - - - - Operating (loss)/profit including associate (11,765) 2,827 6,365 (7,482) (3,531) Profit on disposal of fixed asset investments - - 1,962 - 10,895 Net interest payable and similar charges (1,718) (9,188) (10,812) (1,663) (2,798) --------------------------------------------------------------------------- (Loss)/profit on ordinary activities before tax 2 (13,483) (6,361) (2,485) (9,145) 4,566 Tax on (loss)/profit on ordinary activities 4 (519) 742 (3,530) (1,815) 6,829) --------------------------------------------------------------------------- Loss for the period (14,002) (5,619) (6,015) (10,960) (2,263) --------------------------------------------------------------------------- ADJUSTMENTS TO RESULTS AFTER TAX Loss on ordinary activities after taxation (14,002) (5,619) (6,015) (10,960) (2,263) Add:amortisation of intangible assets 13,319 3,903 16,795 11,811 24,814 Less: profit on sale of fixed asset investments - - (1,962) - (10,895) --------------------------------------------------------------------------- Adjusted (loss)/profit on ordinary activities after tax (683) (1,716) 8,818 851 11,656 --------------------------------------------------------------------------- --------------------------------------------------------------------------- Earnings per 1 Restated Restated pence ordinary 6 mths 6 mths 12 mths 6 mths 12 mths share to to to to to 30 Jun 30 Jun 31 Dec 30 Jun 31 Dec Note 00 99 99 99 99 Actual Actual Actual Pro forma Pro forma --------------------------------------------------------------------------- Basic loss per ordinary share 3 (9.88) (8.75) (5.90) (8.02) (1.64) Adjusted basic (loss)/earnings 3 (0.48) (2.67) 8.65 0.62 8.44 per share Diluted loss per ordinary share 3 (9.88) (8.75) (5.90) (8.02) (1.64) Adjusted diluted (loss)/earnings per share 3 (0.48) (2.67) 7.83 0.57 7.71 --------------------------------------------------------------------------- Group Activity Analysis for the six months ended 30 June 2000 --------------------------------------------------------------------------- (£'000) 6 mths 6 mths 12 mths 6 mths 12 mths to to to to to 30 Jun 30 Jun 31 Dec 30 Jun 31 Dec 00 99 99 99 99 Actual Actual Actual Pro forma Pro forma --------------------------------------------------------------------------- Turnover by business unit Magazine United Kingdom 49,390 46,048 99,819 46,048 99,819 France 10,797 10,660 21,979 10,660 21,979 Italy 6,541 3,803 12,465 7,827 16,594 Germany 3,118 - 4,208 - 4,208 United States 38,712 1,119 34,090 21,212 54,189 --------------------------------------------------------------------------- 108,558 61,630 172,561 85,747 196,789 Internet 2,396 130 1,399 448 1,722 --------------------------------------------------------------------------- Total 110,954 61,760 173,960 86,195 198,511 --------------------------------------------------------------------------- --------------------------------------------------------------------------- (£'000) Restated Restated 6 mths 6 mths 12 mths 6 mths 12 mths to to to to to 30 Jun 30 Jun 31 Dec 30 Jun 31 Dec 00 99 99 99 99 Actual Actual Actual Pro forma Pro forma --------------------------------------------------------------------------- Results by business unit Magazine United Kingdom 4,751 7,270 19,441 7,270 19,441 France (113) 359 1,864 359 1,864 Italy 1,180 497 2,667 1,547 3,803 Germany (3,027) (90) (2,123) (90) (2,123) United States 3,744 181 6,391 (2,908) 3,906 --------------------------------------------------------------------------- 6,535 8,217 28,240 6,178 26,891 Internet (3,569) (420) (3,035) (878) (3,563) Central operating (1,145) (1,067) (2,045) (971) (2,045) costs --------------------------------------------------------------------------- Operating profit excluding amortisation of intangible assets 1,821 6,730 23,160 4,329 21,283 --------------------------------------------------------------------------- --------------------------------------------------------------------------- Turnover by category 6 mths 6 mths 12 mths 6 mths 12 mths to to to to to 30 Jun 00 30 Jun 99 31 Dec 99 30 Jun 99 31 Dec 99 Actual Actual Actual Pro forma Pro forma -------------------------------------------------------------------------- Circulation 59,685 43,916 111,039 56,494 123,806 Advertising 45,248 14,898 54,987 25,974 66,032 Internet 2,396 130 1,399 448 1,722 Other 3,625 2,816 6,535 3,279 6,951 -------------------------------------------------------------------------- Total 110,954 61,760 73,960 86,195 198,511 -------------------------------------------------------------------------- Other turnover arises primarily from licensing of the Group's titles and income from exhibitions. Consolidated Balance Sheet at 30 June 2000 (£'000) Restated Restated 30 June 2000 30 June 1999 31 Dec 1999 ------------------------------------------------------------------------- Fixed assets Intangible assets 284,482 294,860 292,563 Tangible assets 8,341 5,643 6,075 Investments: Investments in associates 295 - - Other investments 3,836 11,480 2,445 ------------------------------------------------------------------------- 4,131 11,480 2,445 ------------------------------------------------------------------------- 296,954 311,983 301,083 Current Assets Stocks 9,063 5,258 5,872 Debtors 51,389 36,633 48,722 Investments 1,107 - 1,040 Cash 8,141 16,121 18,940 ------------------------------------------------------------------------- 69,700 58,012 74,574 Creditors - Amounts falling due within one year (67,998) (41,343) (60,420) Net current assets 1,702 16,669 14,154 ------------------------------------------------------------------------- Total assets less current liabilities 298,656 328,652 315,237 ------------------------------------------------------------------------- Creditors - Amounts falling due after more than one year (36,220) (54,902) (39,910) Provisions for liabilities and charges (1,810) (1,088) (1,554) ------------------------------------------------------------------------- Net assets 260,626 272,662 273,773 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Capital and Reserves ------------------------------------------------------------------------- Called up share capital 1,422 1,367 1,413 Share premium account 135,922 134,766 135,582 Merger reserve 109,015 109,015 109,015 Other reserves 40,297 38,959 40,186 Profit and loss account (26,030) (11,445) (12,423) ------------------------------------------------------------------------- Total equity shareholders' Funds 260,626 272,662 273,773 ------------------------------------------------------------------------- Statement of Total Recognised Gains and Losses for the six months ended 30 June 2000 Restated (£'000) 6 months to 6 months to 12 months to 30 June 2000 30 June 1999 31 Dec 1999 ------------------------------------------------------------------------- Loss on ordinary activities after taxation (as previously reported) (14,002) (5,619) (6,665) Prior period adjustment (as explained in note 1) - - 650 ------------------------------------------------------------------------- Loss on ordinary activities after taxation as restated (14,002) (5,619) (6,015) Translation differences on foreign currency investments 479 (1,429) (2,011) Reversion of rights pertaining to investments from departing employees 110 - 376 ------------------------------------------------------------------------- Total recognised losses in the period (13,413) (7,048) (7,650) Total gains and losses recognised since last annual report (13,413) (7,048) (7,650) Reconciliation of Movements in Shareholders' Funds for the six months ended 30 June 2000 Restated (£'000) 6 months to 6 months to 12 months to 30 June 2000 30 June 1999 31 Dec 1999 ------------------------------------------------------------------------- Loss attributable to shareholders (as previously stated) (14,002) (5,619) (6,665) Prior period adjustment (note 1 ) - 650 ------------------------------------------------------------------------- Loss attributable to shareholders as restated (14,002) (5,619) (6,015) Proceeds from issue of ordinary shares 9 689 735 Premium on issue of ordinary shares (net of expenses) 340 134,766 135,582 Adjustment to other reserves to reflect the market price of options issued in period (83) - - Merger reserve arising in the period - 108,211 108,211 Exchange adjustments offset in reserves 479 (1,429) (2,011) Other reserve movements arising from the acquisition of Imagine - 38,959 39,810 Reversion of rights pertaining to investments from departing employees 110 - 376 ------------------------------------------------------------------------- Net change in shareholders' funds/(deficit) (13,147) 275,577 276,688 ------------------------------------------------------------------------- Opening shareholders' funds/(deficit) as restated 273,773 (2,915) (2,915) ------------------------------------------------------------------------- Shareholders' funds at end 260,626 272,662 273,773 of period ------------------------------------------------------------------------- Consolidated Cash Flow Statement for the six months ended 30 June 2000 (£'000) Restated 6 months to 6 months to 12 months to 30 June 2000 30 June 1999 31 Dec 1999 ------------------------------------------------------------------------- Net cash inflow from 3,627 10,362 16,428 operating activities ------------------------------------------------------------------------- Returns on investment and servicing of finance Interest received 328 - 516 Interest paid (1,791) (6,791) (9,720) Issue costs of new bank loan - (1,575) (1,602) ------------------------------------------------------------------------- Net cash outflow from returns on investment and servicing of finance (1,463) (8,366) (10,806) ------------------------------------------------------------------------- Taxation paid (1,003) (1,326) (3,040) ------------------------------------------------------------------------- Capital expenditure and financial investment Purchase of tangible fixed assets (3,227) (924) (2,682) Purchase of fixed asset investments (963) - (1,185) Sale of tangible fixed assets 12 8 62 Sale of fixed asset investments - - 11,328 ------------------------------------------------------------------------- Net cash (outflow)/inflow for capital expenditure and financial investment (4,178) (916) 7,523 ------------------------------------------------------------------------- Acquisitions Purchase of subsidiary undertakings (211) (1,695) (1,691) Net cash acquired with subsidiary undertakings - 305 319 Payment to acquire investment in associate (547) - - Payment of deferred consideration - (14,735) (15,388) Purchase of business (4,756) (16,457) (29,210) ------------------------------------------------------------------------- Net cash outflow for acquisitions (5,514) (32,582) (45,970) ------------------------------------------------------------------------- Net cash outflow before use of liquid resources and financing (8,531) (32,828) (35,865) ------------------------------------------------------------------------- Management of liquid resources Decrease in short-term deposits - 1,000 1,000 ------------------------------------------------------------------------- Financing Proceeds from issue of ordinary share capital 267 149,091 150,131 Expenses of share issue - (11,313) (11,492) Proceeds from issue of loan notes - 9,716 9,716 Repayment of loan notes - (68,411) (68,411) Drawdown of bank loans - 61,334 65,611 Repayment of loans (2,863) (96,736) (98,736) ------------------------------------------------------------------------- Net cash (outflow)/ inflow (2,596) 43,681 46,819 from financing ------------------------------------------------------------------------- (Decrease)/increase in cash in the period (11,127) 11,853 11,954 ------------------------------------------------------------------------- Notes to the Consolidated Cash Flow Statement For the six months ended 30 June 2000 A. Reconciliation of Movement in Net Debt (£'000) Restated Restated 6 months to 6 months to 12 months to 30 June 2000 30 June 1999 31 Dec 1999 ------------------------------------------------------------------------- Net debt at start of period (25,637) (125,175) (125,175) (Decrease)/increase in cash (11,127) 11,853 11,954 Borrowings net of short term deposits acquired with subsidiaries - (6,256) (6,256) Movement in borrowings 2,863 90,370 91,932 Movement in liquid resources - (1,000) (1,000) Interest accrued in 1998 and subsequently waived during the year - 690 690 Unamortised debt issue costs - (1,017) (1,094) Exchange movements 81 4,631 3,312 ------------------------------------------------------------------------- Net debt at end of period (33,820) (25,904) (25,637) ------------------------------------------------------------------------- B. Reconciliation of Operating Profit to Net Cash Flow from Operating Activities (£'000) Restated Restated 6 months to 6 months to 12 months to 30 June 2000 30 June 1999 31 Dec 1999 ------------------------------------------------------------------------- Operating (loss)/profit (11,765) 2,827 6,365 Depreciation charge 1,204 751 1,777 Goodwill amortisation 13,319 3,903 16,795 (Increase)/decrease in (2,959) (83) 343 stocks (Increase)/decrease in (1,288) 2,737 (11,573) debtors Increase in creditors 5,116 227 2,721 ------------------------------------------------------------------------- Net cash inflow from 3,627 10,362 16,428 operating activities ------------------------------------------------------------------------- Notes to the Interim Statement 1. Basis of the preparation of accounts The interim financial information has been prepared on the basis of the accounting policies set out in the Group's 1999 statutory accounts except for a change in accounting policy arising from the adoption of UITF 25 'National Insurance contributions on share option gains'. UITF 25 has been adopted with effect from 1 January 2000, and requires that the provision for National Insurance on share options should be spread over the performance period of the options. Prior to 1 January 2000 the group's accounting policy was to provide for the NI on share options in full. The effect in the 6 months to 30 June 2000 was to increase the loss before tax by £347,000 from £13,136,000 to £13,483,000. The comparative information on an actual and pro forma basis is based on the statutory accounts for the financial year ended 31 December 1999 as restated for the adoption of UITF 25. These accounts, upon which the auditors have issued an unqualified opinion, have been delivered to the Registrar of Companies. The pro forma comparative information for the six months to 30 June 1999 and twelve months 31 December 1999 is based on full six and twelve months trading respectively for all companies which became part of the Group before and at flotation, and assume that the capital and financing structure of the Group at flotation applied throughout the respective periods. The comparative information for 30 June 1999 has been restated for the reclassification of: deferred consideration from creditors due in less than one year to other reserves since the consideration could have been settled in either cash or shares at the Group's option; and, cash flow movements relating to the bank and other loan financing that existed prior to the flotation of the company. The figures for the 6 months 30 June 1999 and 2000 are unaudited. The preceding financial information does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. All the turnover and operating profits are generated from continuing operations. 2. Segmental Reporting The group is involved in one class of business, the publication of magazines and internet websites. The geographical analyses of turnover, profit/(loss) before tax and net assets by origin, and turnover by destination were as follows: (a) Turnover by origin --------------------------------------------------------------------------- 6 mths 6 mths 12 mths 6 mths 12 mths to to to to to 30 Jun 00 30 Jun 99 31 Dec 00 30 Jun 99 31 Dec 99 Actual Actual Actual Pro forma Pro forma --------------------------------------------------------------------------- United Kingdom 50,302 46,423 100,822 46,423 100,944 France 10,797 10,660 21,979 10,660 21,979 Italy 6,541 3,803 12,465 7,827 16,594 Germany 3,121 - 4,226 - 4,226 United States* 40,595 1,119 35,076 21,530 55,498 Turnover between (402) (245) (608) (245) (730) segments --------------------------------------------------------------------------- Total 110,954 61,760 173,960 86,195 198,511 --------------------------------------------------------------------------- * The share options have a dilutive effect where earnings are positive. (b) Profit/(loss) before tax by origin --------------------------------------------------------------------------- (£'000) Restated Restated 6 mths 6 mths 12 mths 6 mths 12 mths to to to to to 30 Jun 00 30 Jun 99 31 Dec 00 30 Jun 99 31 Dec 99 Actual Actual Actual Pro forma Pro forma --------------------------------------------------------------------------- United Kingdom 519 4,740 13,625 4,740 13,625 France (936) (465) 183 (465) 183 Italy 437 (367) 1,071 688 1,895 Germany (3,831) (90) (2,704) (90) (2,704) United States (7,590) (125) (2,640) (11,777) (4,738) Central Costs (2,082) (10,054) (12,020) (2,241) (3,695) --------------------------------------------------------------------------- Total (13,483) (6,361) (2,485) (9,145) 4,566 --------------------------------------------------------------------------- (c) Net assets by origin --------------------------------------------------------------------------- (£'000) Restated 6 mths to 6 mths to 12 mths to 30 Jun 00 30 June 1999 31 Dec 00 Actual Actual Pro forma --------------------------------------------------------------------------- United Kingdom 105,871 134,770 116,839 France 32,061 35,966 31,928 Italy 19,336 805 18,783 Germany 7,378 (302) 7,185 United States 137,941 143,447 143,616 Interest bearing (41,961) (42,024) (44,578) liabilities --------------------------------------------------------------------------- Total 260,626 272,662 273,773 --------------------------------------------------------------------------- (d) Turnover by destination --------------------------------------------------------------------------- (£'000) 6 mths 6 mths 12 mths 6 mths 12 mths to to to to to 30 Jun 00 30 Jun 99 31 Dec 00 30 Jun 99 31 Dec 99 Actual Actual Actual Pro forma Pro forma --------------------------------------------------------------------------- United Kingdom 46,512 41,466 90,114 41,466 90,236 France 9,843 9,855 20,329 9,855 20,329 Italy 6,617 4,133 13,177 8,263 17,306 Germany 3,179 104 4,381 104 4,381 United States 39,069 1,890 34,564 20,326 53,001 Rest of the world 5,956 4,557 12,003 6,426 13,988 Turnover between (222) (245) (608) (245) (730) segments --------------------------------------------------------------------------- Total 110,954 61,760 173,960 86,195 198,511 --------------------------------------------------------------------------- The results of the United States for the 6 months to 30 June 2000 include losses of £271,000 and net assets of £261,000 related to an associate. 3. Earnings per ordinary share Basic earnings per ordinary share are calculated using the weighted average number of ordinary shares outstanding during the period. Diluted earnings per ordinary share have been calculated by taking into account the dilutive effect of shares that would be issued on conversion into ordinary shares of warrants and options held under employee share schemes and in respect of the deferred consideration arising on the Imagine acquisition. The calculations are in accordance with Financial Reporting Standard No. 14 'Earnings per Share'. Earnings per ordinary share --------------------------------------------------------------------------- Restated Restated 6 mths 6 mths 12 mths 6 mths 12 mths to to to to to 30 Jun 00 30 Jun 99 31 Dec 00 30 Jun 99 31 Dec 99 Actual Actual Actual Pro forma Pro forma --------------------------------------------------------------------------- Earnings (£'000) (14,002) (5,619) (6,015) (10,960) (2,263) --------------------------------------------------------------------------- Adjusted earnings (£'000) (683) (1,716) 8,818 851 11,656 --------------------------------------------------------------------------- Weighted average number of ordinary Shares outstanding during the period - Basic 141,769,535 64,230,265 101,965,968 136,663,881 138,105,284 - Dilutive effect of share options* 9,179,700 9,184,823 10,514,893 11,986,741 12,972,364 - Diluted 141,769,535 64,230,265 112,480,861 148,650,622 151,077,648 Basic loss Per ordinary share (pence) (9.88) (8.75) (5.90) (8.02) (1.64) Adjusted Basic (loss)/earn ings per ordinary share (pence) (0.48) (2.67) 8.65 0.62 8.44 Diluted loss per ordinary share* (pence) (9.88) (8.75) (5.90) (8.02) (1.64) Adjusted Diluted (loss)/earn ings per ordinary share (pence) (0.48) (2.67) 7.83 0.57 7.71 --------------------------------------------------------------------------- * The share options have a dilutive effect where earnings are positive. The adjustments to profit on page 8 have the following effects on earnings per ordinary share: --------------------------------------------------------------------------- Restated Restated 6 mths 6 mths 12 mths 6 mths 12 mths to to to to to 30 Jun 00 30 Jun 99 31 Dec 99 30 Jun 99 31 Dec 99 Actual Actual Actual Pro Pro forma forma --------------------------------------------------------------------------- Basic loss per ordinary share (pence) (9.88) (8.75) (5.90) (8.02) (1.64) Amortisation of intangible assets 9.40 6.08 16.47 8.64 17.97 Profit on sale of fixed asset investments - - (1.92) - (7.89) --------------------------------------------------------------------------- Adjusted basic loss per ordinary share (pence) (0.48) (2.67) 8.65 0.62 8.44 --------------------------------------------------------------------------- Diluted loss per ordinary share (pence) (9.88) (8.75) (5.90) (8.02) (1.64) Adjustment for dilutive effect of share options (see* above) - - 0.54 0.73 0.14 Amortisation of intangible assets 9.40 6.08 14.93 7.86 16.42 Profit on sale of fixed asset investments - - (1.74) - (7.21) --------------------------------------------------------------------------- Adjusted diluted (loss)/earnings per ordinary share (pence) (0.48) (2.67) 7.83 0.57 7.71 4. Tax The tax charge for the six months ended 30 June 2000 is based on the estimated effective rate of tax for the full year assessed on a country by country basis.

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