RNS Number:7924K
Interactive Investor Intl PLC
18 May 2000
SECOND QUARTER AND INTERIM RESULTS
interactive investor international plc ("Interactive Investor"), one of the
UK's leading online Internet personal financial services, today announces its
results for the second quarter and the six months ended 31 March 2000. These
are the first set of results since the Company's admission to the Official
List of the London Stock Exchange and the NASDAQ National Market in February
2000.
Financial Highlights
Second quarter ended 31 March 2000
* 88% increase in revenues on the previous quarter to #1.8m
* 491% increase in transaction-related revenues on the previous quarter to
#680,000
* 141% increase in registered accounts to 939,441 since 31 December 1999
* 461% increase in gross profit on the previous quarter to #611,000
* 301% increase in page impressions to 93.5m in March 2000 (31 December *
1999: 23.3m)
* 62% decrease in acquisition cost per user on the previous quarter to
#14.19
Six months ended 31 March 2000
* 150% increase in revenues on the six months to 31 March 1999 to #2.8m
* 268% increase in transaction-related revenues on the six months to 31
March 1999 to #795,000
* 392% increase in registered accounts since 31 March 1999
* 53% increase in gross profit on the six months to 31 March 1999 to
#720,000
* 1846% increase in page impressions to 93.5m in March 2000 (31 March
1999: 4.8m)
Operational Highlights
* Approximately one million registered accounts
* UK Securities and Futures Authority (SFA) regulatory status granted in
October 1999 allowing consumers to buy and sell selected financial
service products online
* Launch of new services:
* ISANow!, Stakeholder Pension service, UK Trading Gateway, IPO Centre
* Key agreements signed to provide additional transaction systems later in
the year include:
* IFOnline, Cap Gemini and Policymaster
* Strategic alliances, partnerships and commercial arrangements formed
with:
* AOL UK, Excite UK, Netscape, Cable & Wireless and BT's Genie Internet
* Initial Public Offerings:
* Acted as placing agent, managing elements of online retail offerings of
StepStone, lastminute.com and Amerindo Internet Fund
* Roll out of service across new platforms:
* WAP service launched on 29 March with BT's Genie Internet
* Interactive television - agreement with Cable & Wireless signed
Financial Summary
Quarter Quarter % Change % Change
ended ended from quarter from six
31 Dec 31 March ended months
1999 2000 #000 31 Dec 1999 ended
#000 31 March
1999
Revenue:
Commission-share,
referral fees and
subscriptions 115 680 491% 268%
Advertising 480 772 61% 277%
Website
development,
hosting and
consulting 361 343 (5%) 27%
Total revenue 956 1,795 88% 150%
Gross profit 109 611 461% 53%
Operating loss (3,105) (7,197)** 132% 401%
Cost of user
acquisition (6) #9.87 #6.19 (37%) *
- First visits #37.00 #14.19 (62%) *
- Registered
accounts
* cannot be calculated as we do not have audited operating statistics at 30
September 1998
**includes a charge of #4,101,000 of option related compensation charges
Operating Statistics
Month Month Month Month % Change
ended ended ended ended March 2000
31 Dec 31 Jan 29 Feb 31 March compared
1999 2000 2000 2000 with
Dec 1999
Page impressions
(000s) (1)
23,329 42,973 66,591 93,527 301%
First visits (2) 738,358 1,179,172 1,659,245 1,999,468 171%
Total visits (3) 1,938,822 3,169,753 4,605,708 6,282,154 224%
Registered
accounts (4) 389,211 521,861 659,683 939,441 141%
Average page
impressions per
visit (5) 12.03 13.56 14.46 14.89 24%
The figures above are audited by ABC Electronic. Please refer to definitions
set out below.
Commenting on the results, Tomas Carruthers, Chief Executive of Interactive
Investor, said:
"These results, our first as a public company, demonstrate that we are now a
market leading destination for UK investors. This was further confirmed in
March of this year when we were rated the best financial services portal in
Europe in a survey by Lafferty Internet Ratings. Rewards in the Internet
industry go to the biggest players and we are the biggest in our field in
terms of the size of our userbase and the level of activity through our site.
"We believe that our scale in the UK market, our innovation in new product
areas and our continued commitment to the development of our site, ideally
position us to take advantage of further growth in the online financial
services market."
Enquiries:
interactive investor international plc
Tomas Carruthers, Chief Executive Officer Tel: 0207 404 5959 on 18.05.00
Max Ashton, Chief Financial Officer thereafter 0207 618 1110
Brunswick
Tom Kyte / Katharine Sharkey Tel: 0207 404 5959
A conference call facility for those analysts and investors unable to attend
this morning's analyst meeting, is in place at 9.30 a.m. UK time.
To gain access, please quote interactive investor international and Mr.
Carruthers.
UK: 020 8240 8247.
A replay version will also be made available for 48 hours following the
presentation:
UK: 020 8288 4459, access code: 652 632.
Europe: +44 (0) 20 8288 4459, access code: 652 632.
US: +1 703 736 7336, access code: 652 632.
Notes to editors:
* Interactive Investor was founded in August 1995 and the website launched in
October of the same year. The company is an Internet personal financial
service that provides individuals with the capability to identify, compare
and monitor a number of financial products and services. The company also
designs and constructs websites and online trading systems and enables
investors to access, via third party data providers, the information and
resources they need to execute on the Internet financial transactions with
third party providers.
For more information on the Company, news, events, financial results,
shareholder information, metrics and corporate information, please go to our
Investor Relations site.
(www.iii.co.uk/investor_relations)
Definitions:
(1) Page Impressions
As defined by the Internet industry, a unique request for information from a
site by a user. A visit typically involves a number of page impressions.
(2) First Visits
Represents the number of first visits to our site during the period by all
users. If a user visits the site more than once during the period, only the
first visit by that user is counted. This provides our management with an
approximation of the number of individuals using our site in a period.
(3) Total Visits
Represents all visits to our sites during the period by all users.
(4) Registered Accounts
Represents the cumulative number of accounts registered with our site since
inception. A particular individual may have one or more accounts. A registered
account may be used by more than one individual. Therefore, the term
"registered accounts" does not represent the number of users on our site.
(5) Average Page Impressions
Is the number obtained by dividing "page impressions" during the period by the
number of "total visits" during the period.
(6) Cost of user acquisition
Is the number obtained by dividing total operating expenses during the period
by the increase in the number of "first visits" and "registered accounts"
during the period.
RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2000
CHAIRMAN'S STATEMENT
With approximately one million registered accounts, and as a consumer champion
in personal finance, interactive investor international ("Interactive
Investor") now serves the largest most active net-based community of investors
outside the US. On 17 February 2000, Interactive Investor floated on the
London Stock Exchange and on the NASDAQ National Market raising #68 million
after expenses. These results represent our first as a publicly traded
company.
Results
We believe that our dedication to simplifying the personal financial decision
making process of consumers has created a step change in the adoption and use
of our services. We have experienced strong financial growth in the first half
year. This is consistent with our past five years' performance and the
seasonality of the personal financial services industry in general.
Operationally, we have seen an acceleration in both customer acquisition and
usage. We attribute this acceleration to our product enhancements, marketing
efforts and the publicity we received as a result of our flotation.
Revenue
Revenue for the half year ended 31 March 2000 increased to #2,751,000,
representing an increase of 150% over the first half of last year. Split into
our different revenue streams, we saw strong growth in commission-shares,
referral fees and subscriptions ("transaction-related revenues") and
advertising revenues, with a smaller percentage increase in revenue derived
from website development, hosting and consulting revenues ("consulting
revenues"), as predicted at the time of our IPO. Transaction-related revenue
increased to #795,000 (six months ended 31 March 1999: #216,000), which
represented an increase of 268% from the first half of last year. Advertising
revenues increased to #1,252,000 (six months ended 31 March 1999: #332,000),
which represented an increase of 277% from the first half of last year.
Consulting revenues increased to #704,000 (six months ended 31 March 1999:
#554,000), which represented an increase of 27% from the first half of last
year.
Customer Acquisition and Activity
Page impressions in March 2000 increased to 93.5 million (March 1999: 4.8
million), representing an 18-fold increase over March 1999. This reflected
strong interest in financial products ahead of the end of the tax year and a
surge of interest in IPOs. Our total number of registered accounts increased
to 939,441 (as at 31 March 1999: 190,948), representing an increase of 392%
since March 1999. First visits to our services in March 2000 totalled
1,999,468, over six times higher than the comparable number in March 1999
(280,128). In March 2000, visitors to the site generated 14.89 page
impressions per visit, compared to 6.39 page impressions per visit in March
1999, an increase of 133%. This clearly indicates increased loyalty to our
services, or "stickiness".
New Initiatives and Innovations
Interactive Investor has introduced a number of key service improvements
during the first half of the year, in line with our overall strategy.
Transactions
One of our core strategic goals is that the purchase of an equity, an ISA, a
mortgage, a pension, a life insurance policy or any other financial product
should be as straightforward and simple as any other item needed in a
consumer's life. If it is easy to search for and buy books online, then it
should be just as easy for someone to buy and sell equities, or compare unit
trust performance online.
In line with this goal, Interactive Investor took a large step forward in its
development in October 1999, when our subsidiary, interactive investor trading
limited, became licensed as a category D brokerage by the Securities and
Futures Authority ("SFA"). This is important to our shareholders because it
underpins our ability to earn revenue from transactions in addition to our
historical advertising and consulting revenue streams.
Mobile Commerce and Interactive Television
Interactive Investor remains committed to platform independence and believe
that it is critical for our customers to be able to access and act on their
investments via mobile phones, television, and the Internet; 24 hours a day,
seven days a week. We are delighted with the leading position we have
established through the partnerships formed with leading mobile and
interactive digital television players in the UK. Not only does this bring us
one step closer to our goal of 'one-click' investing for our customers, but
also it brings us closer to ensuring that they can make that click from any
location in which they find themselves. Again, this is exactly how things
should be, but have not been before.
Management
During the period, we were delighted to announce the appointments of Charles
Young, Michael Giles, Vincent Lynch, Jr. and Anthony Rawlinson to the Board as
non-executive directors. Together, they will enhance Interactive Investor's
skills and experience, enabling us to more easily continue our strategic
development.
Charles Young's experience as former President of Citibank Canada and Citibank
France and Vincent Lynch's experience as head of Lehman Brothers' European
Investment Banking Division, will assist us in driving forward our European
expansion plans. Michael Giles, as past Chairman of the International Private
Banking Group at Merrill Lynch contributes in-depth knowledge of international
joint ventures and high net worth customers. In addition, Anthony Rawlinson's
current position as Strategic Director of Hollinger Telegraph New Media, and
his past joint venture and banking experience will prove additional assets for
both of these objectives. We very much look forward to working with them in
the future.
I am also pleased with the appointments you will read about in Tomas's review.
The appointments made to the operational management of the firm will fuel our
ability to derive the revenues we expect from our customers.
Prospects
For the past five years our goal has been to be the leading online personal
finance service outside the US. We believe that the way to achieve this is by
ensuring that financial products relevant to key events in a consumer's
lifetime are easy to research, purchase and monitor through our services.
Whether buying shares in a company, participating in IPOs, buying an ISA,
selecting a mortgage, planning to fund a child's education or planning for
retirement, a consumer should be able to do so with ease. That we continue to
make excellent progress towards this goal is evident by the number of
individuals who choose to use our services each month.
Continued improvement to our revenue will result from ensuring consumers use
our services for their purchases and that advertising clients continue to find
our customer demographics attractive. We are devoting our efforts to three key
areas: direct marketing campaigns to encourage users, registered accounts, and
existing customers to purchase equities, investments, mortgages, loans etc
over our services; deals with third parties to ensure consumers can use our
services from wherever they find themselves, be this on an Internet portal, a
mobile phone or in front of a television; and improvements to the usability of
our service so that 'one-click' investing in all lifestyle categories becomes
a reality. We are delighted that we now serve more than a million registered
accounts and they choose to use our services as much as they do. We remain
more determined than ever to lead further innovations in the field of consumer
personal finances on their behalf.
Sherry Coutu, Chairman
18 May 2000
CHIEF EXECUTIVE'S REVIEW
At the time of our Initial Public Offering, we made it clear that we had two
goals - to increase the number of individuals who access and use our site to
capture information on or make decisions about financial products and to
convert those persons to purchasers of financial products through our site.
In the last six months, we have acquired 637,084 new registered accounts at a
rate in excess of our own expectations, as a result of the surge in interest
in online personal financial services, in Internet-related IPOs and through
our own marketing efforts. This success has accelerated our stated goal of
changing our revenue mix towards transactions as we focus on developing a
market-leading service for consumers.
Our strategy is firmly on track. Not only are we recognised as the largest
online personal financial service in the UK in terms of the size of our
userbase and the level of activity through our site, but we have successfully
grown the revenues we generate from transaction-related activity on our
website. Revenues derived from transaction-related services in the first half
of the year formed 29% of our revenue (six months to 31 March 1999: 20%),
advertising comprised 45% (six months to 31 March 1999: 30%), and consulting
represented 26% of revenues (six months to 31 March 1999: 50%).
Transactions
The SFA regulated status of our subsidiary, interactive investor trading
limited, has enabled the following new services to be launched within the last
six months:
* The ISANow! service, in which we act as an execution-only broker for
twenty fund groups;
* The Stakeholder Pension service, which allows a stakeholder pension to be
initiated through our site;
* The UK Trading Gateway, which allows users of our service to click
through to a broker to place their order from our site; and
* The IPO centre, in which we acted as a placing agent and managed elements
of online retail equity offerings.
We continue to focus on driving revenue growth from these areas of activity.
We have also announced completion of key agreements to provide additional
transaction systems later this year:
* Agreement with IFOnline, who have already won the backing of 75 lenders
and about 2000 brokers, to provide a mortgage quotation and transaction
platform;
* Agreement with Cap Gemini, a European leader in management consulting and
IT services, to co-develop an open standard mutual fund transaction
platform; and
* Agreement with Policymaster, an international organisation, headquartered
in the UK, with 900 broker, agent, direct marketer and insurance company
customers in 50 countries, to co-develop a general insurance platform.
Delivery of these core applications will further enable us to originate and
support the transactions of our users.
Initial Public Offerings
In keeping with our consumer advocate strategy, we are delighted to have
handled retail access and online administration for the initial public
offerings of a number of companies including our own and those of
lastminute.com, StepStone, and the Amerindo Internet Fund. We have developed
and delivered an electronic platform which provides private investors' access
to these new issues and look forward to offering more of these services in the
future.
Marketing and Distribution Initiatives
During the six months ended 31 March 2000, Interactive Investor has continued
a highly targeted brand building campaign which has included television and
radio advertisements for the first time. We also initiated our interactive
Customer Relationship Management ("iCRM") programme. ICRM involves building
relationships with our customers, through direct marketing campaigns, so that
it is easier for them to purchase financial products through us. We are
continuing to invest most of our efforts on converting customers through our
iCRM initiatives and have progressed the staffing and infrastructure
associated with scaling these critical efforts.
Strategic Alliances
Strategic alliances are important to us in order to make it easy for consumers
to find and use our services. During the last six months we concluded new
distribution alliances with the following portals: AOL UK, Excite UK and
Netscape Inc. (Interactive Investor is part of "My Sidebar", a new Netscape 6
Customisation.). Our partners are increasingly important to us as we move
onto new delivery platforms. In March we announced a commercial arrangement
with BT's Genie Internet and a key alliance with Cable & Wireless to rollout
our service across new channels on both Wireless Application Protocol ("WAP")
and digital interactive television.
On 29 March, we launched the first of our mobile Internet offerings. This
service provides instant access to share price data from any mobile phone
handset that supports WAP. Longer term, we plan to enable users to have full
access to the Interactive Investor service on wireless digital channels.
Management
During the period, we were pleased to announce the appointments of Christine
Melian as European Business Development Director and Anil Raval as Head of
Legal & Compliance. Christine joins us from BT&T Asset Management AG where
she was Head of IT and IT Operations and Anil joins us from the LC department
of Morgan Stanley Dean Witter where he was European Private Wealth Management
Counsel. We are also delighted to welcome to the Company Stephen McDowell,
former editor of Money Marketing, as new Editor in Chief of all online
editorial content. All three senior appointments strengthen our existing
management team.
Current Trading and Outlook
Our customers and their activity on our services provide us with a strong
basis on which to build our business. Interest in both our own flotation and
those of the other companies whose retail offers we administered has been
particularly strong, enabling us to continue growing our registered account
base at a low cost per user acquired. March user activity reflects heightened
activity on our service. This was driven by keen investor interest in new
issues, the tax year end and heavy retail share dealing activity. In line
with our expectations, the overall level of activity through the site in April
has fallen from the levels seen in March, but the underlying growth in
activity remains strong. We expect to see continued growth in our userbase as
we implement new marketing campaigns and our iCRM programme.
We will continue to focus on driving transaction-related revenues by building
on our capability to execute transactions on our service, as well as the
capacity to search, select and compare from a wide range of products. As the
full range of transaction applications comes on stream during the year, we
will be increasingly well equipped to capture value from user activity on our
services. We plan to launch our German and French services during the second
half of 2000. We believe that our scale in the UK market, the regulated
status of our subsidiary, interactive investor trading limited, our innovation
in new product areas and our continued commitment to the development of our
site, ideally position us to take advantage of further growth in the online
financial services market.
Tomas Carruthers, Chief Executive Officer
18 May 2000
CHIEF FINANCIAL OFFICER'S REVIEW
Results
The second quarter of the current year has seen a marked acceleration in the
adoption of our services brought about by a heightened public awareness of our
services during our flotation, and also due to an enthusiastic response to
some of the more innovative services we have launched in the past six months.
Revenue
Revenue for the three months ended 31 March 2000 was #1,795,000, representing
a 88% increase from #956,000 for the three months ended 31 December 1999, and
a 139% increase over the comparable 1999 period turnover of #751,000.
Revenue for the three months ended 31 March 2000 is split by main business
activity as follows: Commission-shares, referral fees and subscriptions
("transaction-related revenues") #680,000; advertising #772,000; website
development, hosting and consulting ("consulting") #343,000.
Transaction-related revenues for the quarter ended 31 March 2000 increased by
491% from the previous quarter and 264% from the comparable 1999 period. This
has been driven by our brochure request service and our online IPO service,
where we administered the retail online IPO process for lastminute.com,
StepStone and the Amerindo Internet Fund.
Advertising revenue for the quarter ended 31 March 2000 increased by 61% from
the previous quarter and 277% from the comparable 1999 period. There has
been significant demand from organisations for both banner adverts and
sponsorship of product centres on the service. In addition, sponsorship of
the portfolio centre, in the form of "buttons" that direct traffic to client
websites, has generated additional revenue over the comparable 1999 period.
We continue to be able to charge premium rates for our advertising.
Consulting for the quarter ended 31 March 2000 decreased by 5% from the
previous quarter and 6% from the comparable 1999 period and now represents
only 26% of our total revenues compared to 50% in the six months to 31 March
1999.
Costs
We have continued to invest heavily in developing our brand, systems and
infrastructure in order to ensure that we continue to offer premium services
despite increasingly heavy traffic through our site. This has contributed to
our loss on ordinary activities before taxation has increased to #9,631,000
(including provision for option related expenses of #4,101,000) from
#2,087,000 in the first half of last year. However, we are pleased to report
that the cost of acquiring new users has significantly declined in the period.
The cost of acquisition of first visits to the site fell by 39% in the quarter
to #6.19 for the quarter ended 31 March 2000 compared to #9.87 for the quarter
ended 31 December 1999. Similarly, the cost of acquisition of new registered
accounts fell by 62% for the quarter to #14.19 compared to #37.00 for the
quarter ended 31 December 1999.
Cost of revenues increased to #1,184,000 in the quarter ended 31 March 2000
from #847,000 in the previous quarter and #364,000 in the comparable 1999
period. This increase is partly due to increased sales and website activity
and partly due to website development work. All development costs are written
off as incurred and as such can result in fluctuations on a quarter-by-quarter
basis. In the period we commenced investment in our iCRM functionality.
Sales and marketing expenses increased to #1,553,000 in the quarter ended 31
March 2000 from #1,332,000 in the previous quarter and #543,000 in the
comparable 1999 quarter. The increase in expenditure over the previous year
relates primarily to increased advertising activity in the quarter. In
April 2000 we commenced advertising on television and radio for the first
time. The campaign runs from 1 April to 30 June and will cost approximately
#2 million which will be reflected in our accounts to 30 June 2000.
Technology and development costs increased to #1,028,000 in the quarter ended
31 March 2000 from #798,000 in the previous quarter and #554,000 in the
comparable 1999 quarter. This is a result of increased staff and contractor
costs arising from expansion and development of the website.
General and administration costs increased to #1,126,000 in the quarter ended
31 March 2000 from #1,093,000 in the previous quarter and #665,000 in the
comparable 1999 quarter. Again, this is due to increased staff and related
costs as well as advisors' costs and professional fees (unrelated to our
flotation).
The reported results include a charge of #4,101,000 relating to the National
Insurance expense on options granted and the accounting cost of providing
share-based compensation to employees. These costs have arisen for the first
time in the quarter ended 31 March 2000. The National Insurance provision of
#1,794,000 is based on the difference between the market value (194p at 31
March 2000) and the exercise price of options granted. The expense is
recognised in the accounts on a fully provided basis in accordance with ASB
practice note 162 issued on 28 April 2000. Share-based compensation charged
in the quarter of #2,307,000 represents an accounting adjustment to recognise
the deemed cost for providing share options to employees. The charge does not
represent a cash liability.
Net loss for the quarter ended 31 March 2000 was #6,515,000 (after the option
charges detailed above) compared to #3,116,000 in the previous quarter and
#1,341,000 in the comparable 1999 quarter.
Max Ashton, Chief Financial Officer
18 May 2000
interactive investor international plc
Consolidated Income Statement
for the second
quarter and six
months ended 31 March 2000
Six months Six months
Quarter ended Quarter ended ended ended
31 March 1999 31 March 2000 31 March 1999 31 March
2000
Unaudited Unaudited Unaudited Unaudited
#'000 #'000 #'000 #'000
Net revenues 751 1,795 1,102 2,751
Cost of revenues (364) (1,184) (630) (2,031)
----------- ----------- --------- ---------
Gross profit 387 611 472 720
----------- ----------- --------- ---------
Operating
expenses (1,762) (7,808) (2,612) (11,022)
----------- ----------- --------- ---------
Operating loss (1,375) (7,197) (2,140) (10,302)
Net interest
receivable 34 682 53 671
Loss on ordinary
activities
----------- ----------- --------- ---------
before taxation (1,341) (6,515) (2,087) (9,631)
Tax on loss on
ordinary
activities - - - -
----------- ----------- --------- ---------
Retained loss (1,341) (6,515) (2,087) (9,631)
============= =========== =========== ==========
The consolidated results for each of the periods shown above are derived from
continuing operations
Net revenues
above analysed
as:
Commission-
shares, referral
fees and
subscriptions 187 680 216 795
Advertising 201 772 332 1,252
Web site
development,
hosting
and consulting 363 343 554 704
------------ ----------- ----------- ----------
751 1,795 1,102 2,751
Operating ------------ ------------ ----------- ----------
expenses above
analysed as:
Sales and
marketing 543 1,553 732 2,885
Technology and
development 554 1,028 798 1,817
General and
administration 665 1,126 1,082 2,219
Options -
National
Insurance
charge - 1,794 - 1,794
Options -
compensation
expense - 2,307 - 2,307
------------ ---------- ----------- ---------
1,762 7,808 2,612 11,022
------------ ---------- ----------- ---------
Loss per equity
share (basic and
diluted) (1)
Loss after
taxation 1,341 6,515 2,087 9,631
Weighted average
number of
ordinary shares
outstanding
('000) 77,291 119,148 68,369 111,097
Net loss per
share - basic and
diluted 1.7 5.5 3.1 8.7
(1) Prior period comparatives restated to reflect the effective 3-for-1
share split in January 2000
interactive investor
international plc
Consolidated Balance Sheet
at 31 March 2000
As at As at As at
30 September 31 March 1999 31 March 2000
1999
Audited Unaudited Unaudited
#'000 #'000 #'000
Fixed assets
Tangible fixed assets 932 631 1,695
--------- ----------- ------------
Current assets
Debtors 881 1,168 2,662
Cash at bank and in hand 109 1,776 72,770
----------- ----------- -----------
990 2,944 75,432
Creditors: amounts
falling due
within one year
Creditors and provisions (2,430) (1,280) (9,839)
Other loans (900) - -
------------ ----------- ------------
(3,330) (1,280) (9,839)
------------ ----------- ------------
Net current
assets/(liabilities) (2,340) 1,664 65,593
--------- ----------- -----------
Net assets/(liabilities) (1,408) 2,295 67,288
============ ============== ============
Capital and reserves
Share capital 260 258 1,648
Shares to be issued 532 199 -
Share premium 6,714 6,579 81,878
Warrant reserve 48 - 48
Profit and loss account (8,962) (4,741) (16,286)
----------- ----------- -----------
Equity shareholders'
funds/(deficit) (1,408) 2,295 67,288
=========== =========== ==========
interactive investor
international plc
Unaudited Consolidated Cashflow statement
for the six months ended
31 March 2000
Six months Six months
Year ended ended ended
30 September 31 March 31 March
1999 1999 2000
Audited Unaudited Unaudited
#'000 #'000 #'000
Net cash inflow from
operating activities (4,261) (2,026) (5,522)
Returns on investment
and servicing of finance
Interest received 73 53 694
Interest paid - - (44)
-------------- ------------ ----------
Net cash (inflow/outflow
from returns on
investment and servicing
of finance) 73 53 650
-------------- ------------ ----------
Capital expenditure and
financial investment
Payments to acquire
tangible fixed assets (892) (354) (1,037)
-------------- ------------ -----------
Cash outflow before
management of liquid
resources and financing (5,080) (2,327) (5,909)
Management of liquid
resources
Cash on short term
deposit - - (60,000)
-------------- ------------ -----------
Net cash outflow after
management of liquid
resources (5,080) (2,327) (65,909)
Financing
Issue of ordinary shares
less expenses 5,751 5,566 85,830
Expenses paid in
connection with share
issues - - (6,360)
Issue/(redemption) of
debt (288) (1,188) (900)
------------- ----------- -----------
Net cash
inflow/(outflow) from
financing 5,463 4,378 78,570
------------ ------------ ------------
Increase/(decrease) in
cash 383 2,051 12,661
============== ============ ===========
Notes to the Interim Financial Statements
1. Basis of preparation
The consolidated financial statements have been prepared in conformity with
accounting principles generally accepted in the United Kingdom (UK GAAP),
under the historical cost convention, and in accordance with applicable
accounting standards. The accounting policies are consistent with those
adopted in the Initial Public Offering prospectus and prior year financial
statements except for those identified below.
The information in this Interim Report is unaudited and does not constitute
statutory accounts within the meaning of Section 240 of the Companies Act
1985. The statutory accounts for the year ended 30 September 1999 have been
delivered to the Registrar of Companies in England and Wales in accordance
with Section 242 of the Act. The auditor has reported on those accounts; its
report was unqualified and did not contain a statement under Section 237 (2)
or (3) of the Act.
2. Earnings per share
Comparative earnings per share figures for the six months ended March 31, 1999
have been restated to reflect the Company's effective 3-for-1 bonus issue in
January 2000 and calculated in accordance with FRS14.
3. National Insurance on stock options
Full provision is made on the grant of employee share options for any National
Insurance liability in accordance with ASB practice note 162, which may be
incurred on a gain in the Company's share price. This provision is revised to
take account of the movement in the company's share price at each reporting
date.
4. Reconciliation of operating loss to net cash outflow from operating
activities
Six months Six months
ended ended
31 March 31 March
1999 2000
#000 #000
Operating loss (2,140) (10,302)
Depreciation charges 190 312
Expenditure paid by the
issue of shares 199 467
Deferred compensation
expense - 2,307
Increase in debtors (558) (1,760)
Increase in creditors 283 3,454
----------- ------------
Net cash outflow form
operating activities (2,026) (5,522)
============= ===========
5. Reconciliation of movement in net cash flows to movement in net debt
Six months
ended
31 March 2000
#000
Increase in cash in the period 12,661
Cash used to repurchase debt 900
Cash used to increase liquid
resources 60,000
---------------
Change in net debt 73,561
Net debt as at 30 September 1999 (791)
---------------
Net funds as at 31 March 2000 72,770
===============
6. Summary of significant differences between United Kingdom and United States
generally accepted accounting principles
Share option schemes
Under US GAAP (APB No 25, Accounting for Stock Issued to Employees)
compensation expense on variable option plans is calculated as the difference
between the exercise price of the option and the market price at the date of
the exercise of the option. The market price at date of exercise is derived
using the Black Scholes model. Under UK GAAP the compensation expense on
variable option plans is calculated as the difference between the exercise
price of the option and the market value at the date of granting the option.
Under both methods the compensation expense is recognised over the vesting
period as the options are issued in exchange for future services.
Advertising acquired with stock warrants
In connection with the Hollinger financing on November 24, 1998, the company
agreed to issue 1,613,344 ordinary shares in exchange for advertising service
totalling #1,000,000. The fair value of the shares was #3,371,889, as
determined by reference to an independent valuation of 70 pence per share.
This results in an additional charge of #2,371,889 under US GAAP. In the
period ended March 31, 2000 advertising services with an invoice cost of
#467,000 (#199,000) were provided to the Group, and recorded in the financial
statements as expenses under UK GAAP. Under US GAAP, expenses totalling
#1,108,000 (#472,000) should be recorded for that period based on the fair
market value of the shares to be issued on the date the services are provided
as specified by EITF 96-18.
Interest expense
Under US GAAP, additional interest expense of #270,520 has been recorded for
the difference between the conversion price and the fair market value of
shares issued to holders of convertible loan stock. This difference represents
a 20% discount from the per share amount paid on November 24, 1998 by
Hollinger Digital Inc. in order to provide an incentive to the convertible
bond holders to approve the Hollinger Digital, Inc. financing. Under UK GAAP,
no expense is recorded in relation to this discount.
National Insurance
Under UK GAAP, a full provision is made for the national insurance liability
on all unexercised options granted after 5 April 1999 in accordance with ASB
practice note 162. Under US GAAP, the provision for this liability has been
accrued over the vesting period of the options in accordance with best
practice in the US.
7. Reconciliation of movement in shareholders' (deficit)/funds
As at
31 March 2000
#'000
Opening shareholders' deficit (1,408)
Shares issued prior to IPO 8,300
IPO proceeds 78,000
IPO costs offset against share
premium (10,280)
Write back of deferred compensation
expense 2,307
Loss for the period (9,631)
---------------
Closing shareholders' funds 67,288
================
8. Effect on net profit/(loss) of difference between UK and US GAAP
Six months Six months
ended ended
31 March 1999 31 March 2000
#'000 #'000
Loss on ordinary activities
before taxation under UK GAAP (2,087) (9,631)
US GAAP adjustments:
Interest expense (271) -
Share compensation expense (171) (8,543)
National Insurance - 961
Advertising purchased with stock
warrants (472) (1,108)
-------------- -------------
Loss on ordinary activities
before taxation under US GAAP (3,001) (18,321)
============== ============
Weighted average shares
outstanding adjusted to reflect
13 January 2000 bonus issue 68,368,758 111,097,162
Net loss per ordinary share (p)
basic and diluted under US GAAP
(APB 25) adjusted
to reflect 13 January 2000 bonus
issue 4.4 16.5
=============== ===============
9. Shareholders funds
As at As at
31 March 1999 31 March 2000
#'000 #'000
Shareholders' funds/(deficit)
reported under UK GAAP 2,295 67,288
US GAAP adjustments* - 961
-------------- --------------
Shareholders' funds/(deficit) in
conformity with US GAAP 2,295 68,249
============ ==============
Total assets under US GAAP 3,668 78,030
============ =============
*The only difference between UK GAAP and US GAAP affecting
shareholders funds relates to the National Insurance provision.
In all other instances there was no effect on shareholders funds as
these differences resulted in recording an increase to expense and a
corresponding increase to additional share premium account.
10. Statement of cashflows under US GAAP
As at As at
31 March 1999 31 March 2000
#'000 #'000
Net cash provided by operating
activities (1,973) (4,872)
Net cash used in investing
activities (354) (1,037)
Net cash provided by financing
activities 4,378 78,570
--------------- -------------
Net increase/(decrease) in cash
and cash equivalents 2,051 72,661
============== ============
Cash and cash equivalents at
beginning of year (275) 109
============= =============
Cash and cash equivalents at end
of period 1,776 72,770
============= =============
Independent review report by KPMG Audit Plc to interactive investor
international plc
Introduction
We have been instructed by the company to review the financial information set
out on pages 13 to 19 and we have read the other information contained in the
interim report and considered whether it contains any apparent mis-statements
or material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The Listing
Rules of the Financial Services Authority require that the accounting policies
and presentation applied to the interim figures should be consistent with
those applied in preparing the preceding annual accounts except where they are
to be changed in the next annual accounts in which case any changes, and the
reasons for them, are to be disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin
1999/4: Review of Interim financial information issued by the Auditing
Practices Board. A review consists principally of making enquiries of group
management and applying analytical procedures to the financial information and
underlying financial data and, based thereon, assessing whether the accounting
policies and presentation have been consistently applied unless otherwise
disclosed. A review is substantially less in scope than an audit performed in
accordance with Auditing Standards and therefore provides a lower level of
assurance than an audit. Accordingly we do not express an audit opinion on
the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 March 2000.
KPMG Audit Plc 18 May 2000
Chartered Accountants
END
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