RNS Number:8410K
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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