RNS Number:1522Q
Host Europe PLC
25 September 2003


                                HOST EUROPE PLC

                         ("HOST EUROPE" OR "THE GROUP")

             INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2003


Host Europe Plc, the internet hosting provider is pleased to announce its
interim results for the six months ended 30 June 2003.

Highlights

*         Turnover increased by 26% to #8.2m (2002: #6.5m)

*         Gross profit margin maintained at 75% (2002:75%)

*         EBITDA before exceptionals increased to #1.5m (2002:#0.9m)

*         Exceptional reorganisation costs of #0.8m

*         Operating cash flow before exceptionals of #1.9m (2002:#1.1m)

*         Dedicated server development driving significant corporate sales
          success

*         Continued improvements in data centre infrastructure


Garry Southern, Chairman of Host Europe, said:



"These are the first results since my appointment in May and I am delighted to
report that the company has produced an impressive set of figures showing
significant organic growth.



Shareholders will be aware that a number of changes took place within the senior
management team towards the end of this period and the Board is united and
focused on delivering future growth. The company is now well placed to further
strengthen its position as a leading provider of hosting services to the SME
market. I look forward to the remainder of 2003 with confidence."

                                                               25 September 2003



Enquiries:



Host Europe

Stephen Sadler, Chief Financial Officer            Tel: 020 8896 7503
E-mail: invest@hosteurope.com

Walters associates
Alex Walters                                       Tel: 07771 713608
E-mail: alex@waltersassociates.uk.com







                          CHIEF EXECUTIVE'S STATEMENT



Introduction



During the first half of 2003 the Group has continued to make strong progress.
Customer acquisition has been good both in the UK and in Germany and we are able
to report continued turnover and EBITDA growth in both territories.



In May we announced a Board reorganisation following a negotiated settlement
with the outgoing directors. This settlement avoided the need to hold an
Extraordinary General Meeting and allowed for the formation of a new, unified
Board. The costs of the reorganisation, which include the full cost of
termination payments to the outgoing directors, are shown as an exceptional item
in the profit and loss account. I was delighted to be able to welcome Garry
Southern, Jonathan Willis-Richards, Victor Gareh, Uwe Braun and Stephen Sadler
to the Board and I firmly believe that having a strengthened and unified Board
in place will be beneficial to the Group's future performance.



These results demonstrate Host Europe's continuing ability to produce strong
organic growth while taking advantage of cost control opportunities arising from
greater integration and improved technology.



Results



The following table summarises the Group's performance over the past 2 1/2
years:


                                                            1st Half  2nd Half  1st Half  2nd Half 1st Half
                                                                2001      2001      2002      2002     2003
                                                               #'000     #'000     #'000     #'000    #'000

Turnover                                                       4,174     5,355     6,488     7,220    8,162
Gross Profit                                                   3,164     4,148     4,860     5,463    6,128
EBITDA (before exceptionals)                                      60       440       929     1,150    1,532
EBITA (before exceptionals)                                    (546)     (232)        24        77      405
Operating cash flow (before exceptionals)                       (16)       822     1,066     2,171    1,864
Performance by territory:
UK               - Turnover                                   3,727     4,305     5,263     5,387    6,091
                 - EBITDA (before exceptionals)                 146       367       920     1,125    1,202
Germany          - Turnover                                     447     1,050     1,225     1,833    2,071
                 - EBITDA                                      (86)        73         9        25      330



The Group has generated significant sales growth in the period allowing us to
report turnover of #8.2m, up 26% on the first half of 2002. In particular we
have seen strong growth in Germany with turnover up 69% at #2.1m (2002: #1.2m).
Our more established UK business is operating in a market showing increasing
maturity but was still able to achieve good revenue growth, improving by 16% on
2002.



The major component of cost of sales is domain name registration costs, which
are directly linked to sales. As a result, costs of sales increased in line with
turnover and was #2.0m (2002: #1.6m). The rest of cost of sales is made up of
bandwidth costs. New bandwidth contracts have been negotiated since the end of
June and will result in reduced costs in the latter part of 2003 and through
2004. Gross profit of #6.1m represents a margin of 75% (2002: 75%).



A key part of the Group's strategy is to leverage its established infrastructure
so that revenue can be increased without a commensurate rise in operating costs.
Administrative expenses before exceptionals of #6.0m (2002: #5.1m) for the
period increased by 18% compared with turnover growth of 26%.  The business is
now well established at its three main sites in London, Nottingham and Cologne.
Data centre capacity can be increased with minimal cost and our customer
implementation and maintenance systems mean that, despite strong customer
growth, we do not expect to grow headcount significantly during 2003. Headcount
at 30 June 2003 was 104 in the UK and 36 in Germany compared to 100 and 36 at
the end of 2002.  Depreciation for the period was #1.1m (2002: #0.9m). This 25%
increase reflects the investment in improved data centre facilities and the
increase in customer related hardware.



Board reorganisation costs of #777,000 have been shown as an exceptional item.
This figure represents the full cost of the reorganisation. Included in these
costs are deferred payments of #275,000 which will be paid over in the second
half of 2003.



Earnings before interest, tax, depreciation and amortisation, and before
exceptionals were #1.5m (2002: #0.9m). This EBITDA margin of 19% reflects the
Group's increasing ability to translate strong sales growth into earnings. The
retained loss for the period was #507,000 representing a loss per share of
0.04p. Excluding exceptional items the group reported its first profit before
tax of #120,000.



Included in creditors due within one year of #6.7m (2002: #4.1m) is deferred
income of #2.1m (2002: #1.7m). Also included is #2m relating to loan notes due
to former directors following the acquisition of WebFusion. A matching amount of
#2m is included in deposits. These loan notes were redeemed in July 2003.



The Group had cash balances of #2.7m at 30 June 2003 (2002: #1.5m). The increase
in cash is due to increased profitability and improvements in operating cash
flows. Customers pay in advance for their service and debtor collection
processes have been improved during the half-year. Cash inflow from operating
activities for the period was #1.3m (2002: #1.1m).







Operational review



Through the first half of 2003 the Group has continued to refine its product
offerings and invest in its sales teams in order to maximise revenue
opportunities. At the same time we have continued to improve our infrastructure
and systems so that increased operational efficiencies allow for better control
of costs. This emphasis on earnings will continue throughout the second half of
the year.



Strategy



Host Europe remains committed to a focused product and marketing strategy,
providing hosting solutions to small and medium sized enterprises in the UK and
Germany. We believe that demand for hosting is set to continue growing, with the
majority of European demand driven by these two territories.



We will continue to seek market penetration through focused marketing and new
product development. Increasingly we are noticing customers moving from
entry-level products to our higher specification services. Many customers who
joined us using our shared hosting products are migrating to dedicated servers.
Since May we have increased the number of direct sales staff and have set up an
account development team to better exploit these opportunities.



Customer retention is key to maintaining our revenue streams and maximising the
potential for service upgrades. To this end we place considerable emphasis on
the quality of our customer care and our support teams are available 24 hours a
day, 7 days a week. All our support staff are in house employees with an in
depth knowledge of the Group and its products.



Products



Domain name registration

Through the first half of the year we have continued to see strong growth in
customer numbers in the UK, through our 123-reg brand, and in Germany. The Group
had in excess of 560,000 domain names under management at 30 June 2003. July saw
the introduction of enhanced Webmail services to the 123-reg product set.



Dedicated servers

Our dedicated server range has been key to driving the growth in corporate
customers that we have experienced in 2003. In Germany the launch of high
availability enterprise hosting solutions has helped to attract 6 of the DAX 30
companies to Host Europe. In the UK investment in our dedicated sales team has
seen us win contracts with Somerfield, Stagecoach, T-Mobile and many other
corporate and high end SME customers. In August we introduced a new range of
dedicated servers running the Windows 2003 Web edition software.



Shared hosting

During the half year we completed the implementation of the MyServerWorld
control panel. All our shared hosting customers have now been successfully
migrated on to this platform and are able to rapidly configure their service via
a web link.



Infrastructure



The first half of the year has seen continued improvements to our data centre
infrastructure. In London a new electrical substation was installed giving an
increased dedicated high voltage supply and our air cooling capacity was
increased by 30%. Back up generator capacity was increased in London and
Nottingham. An additional 2,500 sq ft of data centre space has been partially
fitted out in London. This space will be brought live as sales growth demands
and is expected to be utilised in the first quarter of 2004.



Outlook



The Group has again demonstrated strong organic growth in the first half of the
year. We are confident that this growth in turnover and EBITDA will continue
through the remainder of 2003. As well as working for organic growth the Board
will continue to consider suitable acquisition targets as a means of maintaining
its market leading position. We now have the infrastructure and team in place to
allow us to take full advantage of the opportunities available to us in our
market.


                                                                    Abby Hardoon
                                                         Chief Executive Officer
                                                               25 September 2003



                      Consolidated profit and loss account
                      FOR THE SIX MONTHS ENDED 30 JUNE 2003



                                                            Unaudited          Unaudited        Audited year
                                                                                                    ended 31
                                                      6 month period      6 month period       December 2002
                                                               ended               ended
                                                           June 2003        30 June 2002
                                              Note             #'000               #'000               #'000

Group turnover                                       8,162                6,488               13,708

Cost of sales                                       (2,034)              (1,628)              (3,385)

Gross profit                                         6,128                4,860               10,323

Administrative expenses
General administrative expenses                     (4,596)              (3,931)                      (8,244)
Depreciation                                        (1,127)                (905)                      (1,978)
Amortisation of goodwill and development costs       ( 288)                (261)                        (532)
Exceptional item - costs of board reorganisation      (777)                   -                            -
                                                              (6,788)    (5,097)                    (10,754)

Operating loss                                                  (660)    (237)                         (431)

Interest receivable                                                67    58                              130
Interest payable                                                 (64)    (90)                          (204)

Loss on ordinary activities before taxation                     (657)    (269)                         (505)
Taxation on loss from ordinary activities                         150    -                               250

Loss on ordinary activities after taxation                      (507)    (269)                         (255)
Minority interest                                                   -    62                               92

Retained loss for the period                                    (507)    (207)                         (163)

Loss per share - basic and diluted             2               (0.04)p   (0.02)p                     (0.01)p




All amounts relate to continuing activities. All recognised gains and losses are
included in the profit and loss account.



                         Consolidated balance sheet

                            As at 30 JUNE 2003


                                                                  Unaudited       Unaudited       Audited 31
                                                                    30 June         30 June         December
                                                                       2003            2002             2002
                                                                      #'000           #'000            #'000

Fixed assets
Intangible assets                                               9,247           9,424           9,534
Tangible assets                                                 3,679           3,907           3,770

                                                                12,926          13,331          13,304

Current assets
Debtors                                                         1,419           1,470           1,378
Deposits                                                        2,170           2,870           2,170
Cash at bank and in hand                                        2,668           1,453           2,520
                                                                6,257           5,793           6,068



Creditors: amounts falling due within one year                  (6,680)         (4,056)         (6,301)

Net current assets/(liabilities)                                (423)           1,737           (233)

Total assets less current liabilities                           12,503          15,068          13,071

Creditors: amounts falling due after more than one year         (128)           (2,516)         (212)
Provisions for liabilities and charges                          (149)           (149)           (149)

                                                                12,226          12,403          12,710

Called up share capital                                         11,637          11,212          11,637
Share premium account                                           7,427           7,351           7,427
Share scheme reserve                                            56              176             56
Merger reserve                                                  42,917          42,916          42,917
Profit and loss account                                         (49,811)        (49,500)        (49,327)
Shareholders' funds - equity                                    12,226          12,155          12,710
Minority interest - equity                                      -               248             -
                                                                12,226          12,403          12,710




                         Consolidated cash flow statement

                       FOR THE SIX MONTHS ENDED 30 JUNE 2003


                                                                 Unaudited 6     Unaudited 6    Audited year
                                                                month period    month period           to 31
                                                                    ended 30        ended 30        December
                                                                   June 2003       June 2002            2002

                                                         Note          #'000           #'000           #'000

Net cash inflow from operating activities                 4    1,320            1,066           3,273

Returns on investments and servicing of finance
Interest received                                              67               58              130
Interest paid                                                  (42)             (37)            (92)
Interest element of finance lease rental payments              (22)             (53)            (112)
                                                               3                (32)            (74)



Capital expenditure and financial investment
Payments to develop intangible assets                          -                -               (101)
Purchase of tangible fixed assets                              (987)            (447)           (1,263)
                                                               (987)            (447)           (1,364)



Net cash inflow before use of liquid resources and             336              587             1,835
financing

Management of liquid resources
Decrease in long term deposits                                 -                -               700

Financing
Increase/ (decrease) in short term bank loans                  (104)            250             104
Capital element of finance lease repayments               3    (84)             (321)           (1,056)
Net cash (outflow) from financing                              (188)            (71)            (952)

Increase in cash                                               148              516             1,583





Notes to the unaudited interim report



1. Basis of preparation



The unaudited interim financial statements have been prepared on the basis of
the accounting policies set out in the Group's Annual Report and Accounts for
the year ended 31 December 2002. The financial information for the year ended 31
December 2002 has been extracted from the Annual Report and Accounts, which have
been filed with the Registrar of Companies. The auditors' report on those
accounts was unqualified and did not contain any statements under section 237(2)
or (3) of the Companies Act 1985. The financial information contained in this
document does not constitute statutory financial statements as defined in
section 240 of the Companies Act 1985.



2. Loss per ordinary share



                                                       Unaudited 6  Unaudited 6 month   Audited year to 31
                                                      month period    period ended 30        December 2002
                                                     ended 30 June          June 2002
                                                              2003





Weighted average number of shares                    1,163,650,619      1,058,090,869        1,105,625,273

Loss after tax and minority interest -                         507                207                  163
#'000

Basic loss per share - pence per share                        0.04               0.02                 0.01


None of the company's potential ordinary shares are dilutive and therefore the 
loss per share is the same as the diluted loss per share.



3. Reconciliation of net cash flow to movement in net funds


                                                              Unaudited 6        Unaudited 6     Audited year
                                                             month period       month period            to 31
                                                            ended 30 June      ended 30 June    December 2002
                                                                     2003               2002
                                                                    #'000              #'000            #'000

Increase in cash                                                      148                516            1,583
Decrease in long term deposits                                          -                  -            (700)
Decrease/(increase) in short term bank loans                          104              (250)            (104)
Decrease in lease financing                                            84                105            1,056
Change in net funds resulting from cash flows                         336                371            1,835

New finance leases                                                      -              (426)            (567)
Movement in net funds in the period                                   336               (55)            1,268

Net funds at the beginning of the period                            2,192                924              924
Net funds at the end of the period                                  2,528                869            2,192





4. Reconciliation of operating loss to net cash inflow from operating activities


                                                               Unaudited 6       Unaudited 6      Audited year
                                                              month period      month period             to 31
                                                             ended 30 June     ended 30 June     December 2002
                                                                      2003              2002

Operating loss                                                       (660)             (237)             (431)
Depreciation                                                         1,127               905             1,978
Amortisation of goodwill and development                               288               261               535
Decrease  in debtors                                                   109                67               400
Increase in creditors                                                  456                70               791

Net cash inflow from operating activities                            1,320             1,066             3,273





5. Availability of Report



This interim report is being sent to all shareholders, and is also available on
the Host Europe web site at www.hosteurope.com. Further copies of the interim
report are available, free of charge, from Host Europe's registered office Host
Europe House, Kendal Avenue, London W3 0XA.


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

END
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