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Future Integrated (FUR)

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Thursday 28 February, 2002

Future Integrated

Cancellation of listing

Future Integrated Telephony PLC
28 February 2002

FUTURE INTEGRATED TELEPHONY PLC ('future' or  the 'company')

CANCELLATION OF LISTING

The Board has separately announced that it has received an approach which may or
may not lead to a formal offer being made for the Company.

Despite this approach, as the Company has been unable to publish its accounts
for the year ended 31 May 2001, it regrettably announces that the listing of the
Company's shares on the Alternative Investment Market of the London Stock
Exchange plc ('AIM') are to be cancelled with effect from the close of the
market today, 28 February 2002.

The Company's shares have been suspended from trading on AIM since 3 August
2001, following the announcement of the possible acquisition of  Eurotel Systems
Limited ('Eurotel'). The Company announces that it has been unable to complete
this transaction and hence all negotiations have ceased.

In this announcement the Board will explain the circumstances leading to this
event.

On the 21 December 2001, the Company held its Annual General Meeting for 2001,
although it was not in the position to issue its accounts for the year ended 31
May 2001. The Board stated at that time that it hoped it would be able to
resolve a number of important matters that were being discussed at that time
which would have a material effect on those accounts and the acquisition of
Eurotel.

ACCOUNTS FOR THE YEAR ENDED 31 MAY 2001

Whilst the Group increased its turnover by over 25 per cent when compared to
2000, it continued to make considerable losses, for the reasons set out below.
The accounts for the year ended 31 May 2001 could not be finalised until certain
key matters had been resolved including the raising of further finance, the
resolution of a dispute with a major supplier, Viatel Limited ('Viatel'), and
the rescheduling or re-negotiation of agreements with other suppliers, in order
that the accounts could be prepared on a going concern basis. Further details of
these various matters are described below.

FUND RAISING

Prior to this approach, the Company had successfully concluded many of the key
matters noted above and had been presenting to potential investors for some time
in order to raise the necessary finance for the Company. The Board had received
verbal support for the majority of the targeted fundraising but regrettably the
recent publicity surrounding the telecoms sector caused some of   those
potential investors to withdraw their support and therefore the Company has been
seeking alternative funding support.

REVIEW OF OPERATIONS

Whilst the telecoms market generally has had an extremely difficult time there
are specific events that have compounded the losses incurred by Future.

Independent Energy Holdings plc ('Independent Energy')

Just over two years ago the Company announced that it had entered into a
marketing agreement with Independent Energy, a supplier of gas and electricity,
to jointly promote the additional provision of telephone services. At that time
it was anticipated that this relationship would deliver approximately 57,000 new
connections in the calendar year 2000. Under this agreement Independent Energy
were to subscribe for up to 2,500,000 new shares, raising approximately £4.0
million, upon the achievement of a targeted number of connections. In order to
provide additional working capital to fund expansion, Future announced a placing
and open offer in February 2000 to raise £8.15 million, net of expenses, at a
price of 665 pence per share. The issue was fully subscribed.

Based on the anticipated increase in the number of customers, Future expanded
its operations by recruiting and training additional staff with the resultant
increase in its overhead base. Independent Energy announced in May 2000 that it
was experiencing problems with its billing systems and this was causing it cash
flow difficulties. Whilst this was having a marked effect on the number of new
customers being signed up, the Board believed that the forecast numbers of
connections would still be achieved as the Company had established direct
relationships with Independent Energy's sales contacts and the ownership of the
customers, and the responsibility for billing remained with Future. For this
reason the Board decided to maintain staffing and overhead levels.

Unfortunately, the problems at Independent Energy were not resolved and in
September 2000 it was placed into receivership. Consequently the anticipated new
connections did not materialise and none of the anticipated £4.0 million
subscription monies for new shares was ever received, which put an additional
strain on the Group's cash flows.

Future reported that it had incurred a loss of £1.987 million, before
exceptional operating items, in the six months ended 30 November 2000.

Alan Stephens Associates Limited ('ASA')

As was reported at the time of the February 2000 fund raising, the Board's
strategy was to broaden the Group's activities from being a telecommunications
service supplier into a full Business Services Supplier by adding other services
via a business to business portal. As part of this strategy, the Company
announced the acquisition of ASA in June 2000 for a consideration of £850,000 in
cash and the allotment of 230,000 shares, valuing ASA at approximately £2.0
million. The objective of the acquisition was to provide the Group with the
necessary expertise to launch an Internet portal and associated services aimed
specifically at the SME market. The Group launched the 'www.fit4business.com'
portal in November 2000 which was capable of delivering a wide range of online
services to our SME customers. In line with the general experiences of the
market, on-line trading via the Internet has not developed as quickly as was
anticipated and ASA itself did not generate sufficient income to cover its
increased overheads. Whilst the portal remains operational, the Board decided to
close ASA to stop the drain this was causing on the Group's cash flows with the
resultant large write off of goodwill to the profit and loss account.

Relationship with Viatel

With the number of channels to market increasing, the Group carefully reviewed
the suppliers it used for its least cost routing services. In September 2000,
agreement was reached with Viatel, who provided better rates, and the Group
routed a substantial number of its customers through the Viatel network. In the
first quarter of 2001, the service and quality of billing information provided
by Viatel deteriorated to such a degree that substantial revenues could not be
billed to customers. Errors in billing information provided to customers led to
a significant increase in customer churn over the level the Group had previously
encountered.

The service levels did not improve in the second quarter of the year causing
further cash flow difficulties for Future. In September 2001, Viatel went into
administration and its business was sold to ntl Limited. At this time Future
owed a significant amount of money to Viatel for calls but it lodged a claim
with the administrator for compensation for the failure of Viatel to provide the
required level of services and for the consequential losses the Group suffered
as a result. After negotiations with the administrator, a settlement has been
reached to the satisfaction of the Board. The claim was settled by the payment
of a lump sum in February 2002 to Ernst &Young as joint administrators of Viatel
provided the balance of £50,000 is paid by no later than 4 August 2002. These
arrangements are accepted by both the Company and the joint administrators of
Viatel in full and final settlement of the claims they may have against each
other.

Proposed acquisition of Eurotel

In the summer of 2001, the Board reviewed a number of options to enable the
Group to exploit the opportunities it had created. The Board held discussions
with several parties with a view to purchasing or merging with another company,
the combination of which, the Board believed, would provide greater resources to
grow the enlarged business. The Board entered into discussions with Eurotel with
the view to acquiring that company. News of the transaction was leaked and
posted on to an Internet bulletin board shortly after both Boards had reached
outline agreement to proceed. Both Boards considered that this breach of
security could jeopardise the likely success of the transaction and for that
reason Future requested that its shares be suspended from trading on AIM, in
accordance with the AIM Rules. The timing was particularly unfortunate because
the suspension occurred very early in the process when a great deal of the
preparatory work had still to be completed. Eurotel commenced its due diligence
shortly thereafter and then set out a number of conditions that had to be
satisfied before it was prepared to progress the transaction. These conditions
included resolving under-performing business areas within Future, including ASA,
and reaching settlement with the administrator of Viatel. All of these matters
have taken a considerable time to resolve.

As part of the ongoing discussions, the Company agreed to sell to Eurotel the
assets, maintenance, least cost routing and mobile airtime contracts relating to
the Company's PABX customer base. The consideration received was £800,000,
increasing the Group's working capital which had been severely reduced as a
result of the continuing losses and the lack of subscription from Independent
Energy. In addition, Eurotel took over almost half of the Group's employees,
which significantly reduced the Group's overheads.

Whilst the majority of Eurotel's conditions have now been satisfied, the Board
has been unable to conclude these discussions.

REASONS WHY A FURTHER FUND RAISING WAS NECESSARY

The Group's strategy led to investment in staff, training, overheads and other
businesses to provide the expertise needed to take advantage of market changes.
The Group has enhanced the quality of the services it offers, however the
management team has had to expend substantial amounts of time and energy trying
to resolve problems caused by the failure of suppliers or business partners,
including Independent Energy and Viatel. As a result, the Group has been running
at overhead levels that could not be sustained in the long term because the
increase in activity did not achieve anticipated levels. A number of initiatives
have, therefore, been implemented to reduce headcount and costs whilst
sustaining an ability to serve an increasing number of customers.

The result of this has caused the Group to incur substantial losses with the
consequential drain on cash resources.

Despite all of these hurdles, the Company has continued to refine and expand its
business. Whilst customer churn peaked at 7.4 per cent. due, in the main, to the
operational problems caused by our former supplier, Viatel, changes in
technology and the improvement in the quality of service means that this churn
has now been reduced to budgeted levels and is targeted to reduce further. The
technology changes principally relate to the adoption of 'Calls and Access' as
well as 'Carrier Pre-selection' ('CPS'). Under the 'Calls and Access' procedure
Future takes over responsibility for the line rental as well as the call
traffic. Future is an early adopter of this technology such that, in January
2002, BT statistics indicated that the Group had secured 25 per cent. of all '
Calls and Access' customers. This has had the benefit of increasing the revenue
and margin while also simplifying connection procedures. This reduces connection
cost sharply and increases conversion rates from initial order to final
connection from 20 per cent. to over 85 per cent. with the time from order to
connection reduced from up to three months to consistently under 14 days. The
Directors also expect that customer churn will be further reduced as the single
bill from Future breaks the relationship between BT and  the customer.

Under the CPS programme, currently under trial, the BT network uses Future's own
routing code allowing total capture of call traffic and a stronger position with
respect to carrier relationships so that call traffic can be routed to optimise
margin and quality.

As I have noted earlier in this statement, we decided to close certain parts of
the business and sell others. The Board deemed this necessary to release cash,
reduce overhead and focus the business on areas which had more prospects. In the
case of the PABX business the Board felt that the introduction of IP based
services in replacement of stand alone PABX systems meant that a far greater
scale was needed to be successful and that we were better to focus on
telecommunications services supply. The Internet development was proceeding at a
slower rate than predicted so the elimination of the ASA overhead was necessary
to bring the overhead more in line with the revenues. The progress we have made
in developing other areas of business, including our affinity deals with the FSB
and Northern Electric plc, with sales of least cost routing and mobile
telephones with airtime contracts, is encouraging.

Whilst we have successfully negotiated a settlement with the administrator of
Viatel, re-negotiated payment terms with other suppliers and obtained a
substantial line of credit with a principal supplier, the Company still requires
additional equity funding in order to carry on the recovery, whilst leaving
headroom for contingencies against further unexpected problems or delays.

CURRENT TRADING

The Company has been through a torrid time over the last eighteen months. We
have significantly improved the business model through the adoption of new
technology as well as now having a streamlined operation focused on the
Company's chosen market sector. The Group has also made progress in securing
other routes to market, particularly through affinity alliances. The Directors
are of the opinion that these commercial initiatives provide an opportunity for
future progression of the business if the Company can obtain the necessary
financial support.

Acquisition of the business of Synergie.net plc ('Synergie')

In March 2001, the Board announced that it had acquired the business of two
subsidiaries of Synergie, comprising the trade, debtors and certain liabilities
of that company for a consideration of £832,000, satisfied by the issue of
2,600,000 shares in Future. The principal asset acquired in this transaction was
the agreement with the Federation of Small Businesses ('FSB') to offer to supply
telephone services to its members. The FSB has around 120 recruiters in the
field signing up new members and they use the lower cost of telecommunications
provided through Future as a 'closing mechanism' in this process. The Company
has, and continues to, provide training and support to the FSB recruiters. In
addition the FSB has approximately 150,000 members who are targeted by telephone
sales to convert to a telecommunications supply from Future. A telemarketing
company nominated by the FSB carries out this telesales activity.

Affinity deal with Northern Electric plc

On 5 November 2001, the Group successfully completed its negotiations with
Northern Electric plc, to act as the exclusive provider of telecom services
under the Northern Electric and Yorkshire Electricity brands in the UK for an
initial period of 12 months. The agreement provides for the supply by the Group
of fixed line, mobile and internet services under the Northern Electric and
Yorkshire Electricity brands. The Directors believe that this arrangement will
provide the Group with access to a potential customer base of some 200,000 SMEs
and provides an affinity channel with the potential to add new customers and
line revenues throughout 2002.

Sales and marketing initiatives have been agreed within the terms of the
contract. A dedicated telemarketing team has been recruited and is now managing
direct sales into the regional business base. Telemarketing is supported by
marketing activity and co-branded billing. This allows us the opportunity to
build greater brand awareness of our own business through association with this
key affinity partner.

Sales have already been achieved through this new affinity channel, and are
building, since operations began on 15 January 2002.

ACTION REQUIRED BY SHAREHOLDERS

Shareholders are not required to take any action at present. If the Board
receives notification of a firm intention to make an offer for the Company, a
circular comprising an offer document, will be sent to all Future shareholders.

There are no current plans to re-apply to the London Stock Exchange plc, or any
other market, to have a trading facility for Future's shares.

PETER HOWELL-DAVIES
Chairman
28 February 2002

                      This information is provided by RNS
            The company news service from the London Stock Exchange
                                                                                                                                          

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