2nd Quarter & Interim Results

365 Corporation PLC 21 December 1999 365 Corporation plc Strong Second Quarter and Interim Results + unique users up 94% + internet revenues up 103% + business revenues up 33% 365 Corporation plc ('365' or the 'Company'), the provider of destination content, community and communication services, today announces results for the second quarter and the six months ended 30 September 1999 - the first set of results since admission to the Official List of the London Stock Exchange on 2 December 1999. Highlights of the results include: Second quarter ended 30 September 1999 + total unique users(1) increased to 779,591 for September, a 94% increase on June (401,146 users); + turnover of £4,926,000, a 7% increase over the previous quarter (£4,609,000); + internet revenue increased 103% to £293,000 compared to the previous quarter (£144,000); + audiotext minutes(3) increased 6% to 18.4m minutes, compared to 17.3m minutes in the previous quarter; + total business customers(4) as at 30 September 1999 increased 35% to 2,170, business service revenue increased by 33% to £1,593,000 and business minutes(5) increased by 38% on the previous quarter; + the French acquisitions in July of C-Sports Communication SA and Electron Libre SARL; + the creation and launch of new content and services, including Rugby365 and Win365. Six months ended 30 September 1999 + turnover increased to £9,535,000 compared to £84,000 in the six months to 30 September 1998; + operating losses (before amortisation of goodwill and provisions for National Insurance contributions on share options) of £233,000 compared to £800,000 for the six months ended 30 September 1998. Current trading + successful debut on the London Stock Exchange; + 944,267 unique users for November 1999; + brand building and content marketing campaign launched in October; + production of the 1999 ITV Rugby World Cup site; + created and launched the online entertainment e-zine for Guinness (www.getG.com); + continued growth in users, customers and revenues. Dan Thompson, Chief Executive Officer, commented today: 'I am delighted to present a strong set of results for our second quarter which demonstrates our position as a market leader in the creation and ownership of quality destination content and services. During this period, we have significantly increased our user base, increased revenues in line with our expectations and expanded our range of products and services through acquisition and internal growth. The successful flotation of 365 on the London Stock Exchange earlier this month was an important milestone for the Company, and provides us with both cash and a powerful acquisition currency to pursue our expansion plans and maintain our first-mover advantages.' Notes: 1,3,4,5. See note 2 to interim financial statements. For further enquiries, please contact 365 Corporation plc Tel: 0171 831 3113 today Dan Thompson, Chief Executive Officer Tel: 0171 505 7800 thereafter Martin Turner, Finance Director www.365corp.com Financial Dynamics Tel: 0171 831 3113 Giles Sanderson Edward Bridges Financial and Operating Data Highlights Quarter 6 months Quarter 6 months ended ended ended ended 30 September 30 September 30 September 30 September 1999 1999 1998 1998 £'000 £'000 £'000 £'000 Turnover 4,926 9,535 36 84 Operating expenses before amortisation of goodwill and provision for NIC on share options (5,436) (9,768) (418) (884) Operating loss before amortisation of goodwill and provision for NIC on share options (510) (233) (382) (800) Operating loss (1,387) (1,617) (382) (800) Operating data for 1999 March April May June July Consumer Division - unique users(1) 326,954 352,612 385,935 401,146 526,892 Business Division - customers(4) 1,280 1,410 1,492 1,613 1,740 Aug Sept Oct Nov Consumer Division - unique users(1) 658,996 779,591 934,270 944,267 Business Division - customers(4) 1,838 2,170 2,366 2,475 Notes: 1,4 See note 2 to interim financial statements. Chief Executive Officer's Review On 2 December 1999, we successfully completed our flotation on the London Stock Exchange. This is the culmination of a period of rapid development and expansion for 365, and our emergence as a market leader in the area of digital content creation and ownership. The results for the six months ended 30 September 1999 represent the results of our final period prior to becoming a quoted company. Since the acquisition of Symphony Telecommunications plc on 2 February 1999 and its integration into the 365 group, we have accelerated our content and convergence strategy. This is evidenced by a significant increase in users, customers and revenues from our established services, together with a number of new content and service launches during this period. We have also continued to ensure that the quality of our content is not only maintained, but also improved, and we have made significant additional investment in related personnel, technology and infrastructure. Total unique users increased to 779,591 in September 1999, a 94% increase on the June total of 401,146 users, and a 138% increase on the March 1999 total of 326,954 users. Internet Services In July, we completed the acquisition of C-Sports Communication SA ('CSports') and Electron Libre SARL ('Electron Libre'). CSports owns and operates Cfoot (www.cfoot.com), France's leading football web site and Electron Libre supplies web development and hosting services to a number of French companies, including CSports. 365 issued 700,000 shares (pre the 4-for-1 share split in November 1999) as consideration for the acquisition of CSports and Electron Libre. In August, we launched Rugby365 (www.rugby365.com), which is available in English, Afrikaans, French and Spanish. The Rugby365 operation is based in Cape Town, South Africa. Shortly after establishing Rugby365, we agreed to develop, maintain and host ITV's 1999 Rugby World Cup web site. Total rugby users reached a peak of 128,811 during the World Cup in October 1999, which contributed to a particularly strong increase in users for that month. The equivalent number of users for November was 66,107. In September, we launched Win365 (www.win365.co.uk), a multi-platform competition product Internet revenue increased to £293,000, a 103% increase on the previous quarter (£144,000) and over eight times the revenue in the same quarter in 1998 (£36,000). Audiotext Services We have continued to develop and expand our range of companionship services in the UK, and introduced a number of complementary and related brands. We are also looking to expand our UK telephony infrastructure in order to service greater volumes of audiotext traffic, which will enable us to provide bureau services to third parties. However, despite strong UK growth, second quarter audiotext revenue fell by 7% overall due to the decline in several short-term international audiotext contracts. In August, we launched TalkFootball365, an audiotext and web site (www.talkfootball.com) service which, amongst other things, leverages the content created by Football365. This allows callers the opportunity to listen to football content and interact with each other. In conjunction with Win365, we have also used our telephone infrastructure to generate revenue from users of some of our web-based competitions. Business Services Business service turnover increased to £1,593,000, compared to £1,199,000 in the previous quarter, an increase of 33%. As at 30 September 1999, 365 had 2,170 business customers, an increase of 35% on 30 June 1999 (1,613 customers) and 70% on 31 March 1999 (1,280 customers). We have continued to expand and develop our successful Joint Venture program and have concluded deals to form four new Joint Ventures - Essential Network Solutions Limited, Network Business Call Limited, Telenet Communications Limited and Unitel Network Services Limited. In September, we introduced and launched two new product ranges - business mobile phone services and internet access via our Net@Work product, an integrated internet access and e-mail service. These products are part of our core strategy to provide a 'one-stop-shop', or single point of contact for all of our customers' telecommunications and internet requirements. We believe that expanding our range of business services, with particular emphasis on the internet, will maximise revenues from our customer base, and further enhance customer loyalty. Recent and Forthcoming Developments The combination of the launch of new products and services with a marketing campaign which was initiated in October, has seen a strong growth in total unique users to 944,267 in November which reinforces our belief that quality content and services will continue to attract and retain regular users. Our commitment to producing quality content has also resulted in new commercial opportunities during the period. We created and hosted ITV's official rugby web site during the October 1999 Rugby World Cup. We are also the producers of all the content in 'G', a new internet e-zine, on behalf of Guinness (www.getG.com). Most recently we created and launched the official BRIT Awards web site (www.brits .co.uk) in preparation for the 2000 BRIT Awards. Our recent listing on the London Stock Exchange provides us with the strategic acquisition currency that we sought and we are actively searching for suitable acquisition targets that will enable us to accelerate our growth strategy and capitalise on our first-mover advantages. Current Trading Growth in users and customers has accelerated into the third quarter and the marketing campaign initiated in October has successfully contributed to the growth in users. In October, we launched two new internet lifestyle products - our first online companionship product, Personals365 (www.personals365.com) and 'The Switch' (www.theswitch.co.uk), a cross-platform convergence product (telephone and web site) offering companionship services on a regional or national basis. In November L!VETV closed and the audiotext business lost one of its sources of advertising space, but is in the process of securing alternative media outlets. Business services is maintaining its impressive rates of growth and the launch of mobile and internet access services have been well received by both existing and new customers. We also continue to seek acquisitions and distribution partners. We are confident about the future trading prospects of 365. Financial Review The Company's first accounting period ran from incorporation on 12 September 1997 to 31 July 1998. Following the acquisition of Symphony Telecommunications plc on 2 February 1999, the Company adopted 31 March as its financial year end, and its second financial period covered the eight months from 1 August 1998 to 31 March 1999. The results of 365 set out below fully consolidate the results of operations of Symphony Telecommunications plc from the date of its acquisition. Results of Operations Turnover for the second quarter ended 30 September 1999 was £4,926,000, representing a 7% increase from £4,609,000 in the first quarter ended 30 June 1999. 365 currently derives Internet turnover from advertising, sponsorship, e- commerce and contract publishing. These revenues increased by 103% to £293,000 during the second quarter (first quarter - £144,000), reflecting a significant increase in advertising and sponsorship during the period. Internet turnover for the comparable period in 1998 was £36,000. Audiotext turnover fell during the quarter by 7% to £3,040,000 (first quarter - £3,266,000) due to the expected decline in several short-term international audiotext contracts. These contracts accounted for turnover of £432,000 in the first quarter and £15,000 in the second quarter, and are not expected to generate significant turnover in subsequent financial periods. Excluding these contracts, audiotext turnover grew by 7% during the quarter. Audiotext was not provided by 365 in 1998. Business services turnover increased to £1,593,000 (first quarter - £1,199,000) in the second quarter, an increase of 33%. As at 30 September 1999, 365 had 2,170 business customers, and the increase in revenues was in line with a 35% increase in customers during the second quarter. Business services were not provided by 365 in 1998. Cost of sales increased by 1% in the second quarter to £2,591,000 (first quarter - £2,572,000) and gross margin increased to 47% from 44% in the first quarter. This reflects the significant decline of 365's low margin international audiotext contracts. Administrative expenses (before the amortisation of goodwill and National Insurance provisions in relation to staff share options) rose to £2,845,000 during the second quarter (first quarter - £1,760,000) as 365 increased its investment in new content and services, its internet publishing systems, infrastructure and technology, professional services and personnel. In particular, second quarter administrative costs include those incurred in connection with the construction of its My365 and Business365 content hubs, the opening of the South African office, expansion of the Chilean office in Santiago to produce a Spanish-language internet football service (Futbol365) and costs incurred in relation to the operations of CSports in France. Goodwill amortisation increased to £622,000 during the second quarter compared to £507,000 in the first quarter. This increase reflects the amortisation of goodwill in relation to the acquisition of CSports and Electron Libre, which is being written off over 18 months. Liquidity and Capital Resources Since inception in September 1997, 365 has financed its operations primarily through the private placement of ordinary shares and during the six months ended 30 September 1999 the Company raised £2,603,000 (net of expenses) by these means. During the three months ended 30 September 1999, net cash outflow from operating activities totalled £272,000, compared with £641,000 for the previous quarter. At 30 September 1999, the Company had £6,729,000 of cash at bank and in hand, compared to £5,316,000 at 31 March 1999. On 2 December 1999, 365 was admitted to the London Stock Exchange. The initial public offering raised net proceeds of approximately £50 million subject to finalisation of flotation expenses. In addition the Company's Sponsor, Cazenove & Co, exercised its over-allotment option to purchase an additional 5,184,375 shares on 15 December 1999 to raise a further £7.9m for the Company, net of expenses. 365 is using the net proceeds from the offer for the following purposes: + Content: investing to maintain and improve existing products and services and develop new products and services covering additional passion centres; + Convergence: developing 365's content and services to ensure they are compatible with, and provided across, relevant digital platforms; + International expansion: development and expansion of the Company's international structure and operations; + Marketing and brand development: investing in the promotion of 365's brands and products; + Acquisition and strategic partnerships: undertaking appropriate acquisitions, investments and strategic partnerships to complement the Company's strategy; + Infrastructure: investing in 365's infrastructure to support the Company's strategy; + General corporate purposes: increasing the working capital generally available to the Group. Consolidated profit and loss account for the quarter and 6 months ended 30 September 1999 Quarter 6 months Quarter 6 months ended 30 ended 30 ended 30 ended 30 September September September September 1999 1999 1998 1998 unaudited unaudited unaudited unaudited Note £'000 £'000 £'000 £'000 Turnover 3 4,926 9,535 36 84 Cost of sales (2,591) (5,163) (1) (3) Gross profit 2,335 4,372 35 81 Administrative expenses before amortisation of goodwill and provision for NIC on share options 2,845 4,605 417 881 Amortisation of goodwill 622 1,129 - - Provision for NIC on share options 255 255 - - Total administrative expenses 3,722 5,989 417 881 Operating loss before goodwill amortisation and provision for NIC on share options 3 (510) (233) (382) (800) Operating loss (1,387) (1,617) (382) (800) Net interest 69 132 10 20 Loss on ordinary activities before taxation (1,318) (1,485) (372) (780) Taxation - - (2) (4) Loss on ordinary activities after taxation (1,318) (1,485) (374) (784) Minority interests 36 59 - - Retained loss for the (1,282) (1,426) (374) (784) period Loss per ordinary share 4 Basic loss per share before amortisation of goodwill and provision for NIC on share options 0.3p 0.0p 0.8p 1.7p Diluted loss per share before amortisation of goodwill and provision for NIC on share options 0.3p 0.0p 0.7p 1.6p Basic loss per share 0.9p 1.0p 0.8p 1.7p Diluted loss per share 0.9p 1.0p 0.7p 1.6p Statement of total recognised gains and losses for the quarter and 6 months ended 30 September 1999 Quarter 6 months Quarter 6 months ended 30 ended 30 ended 30 ended 30 September September September September 1999 1999 1998 1998 unaudited unaudited unaudited unaudited £'000 £'000 £'000 £'000 Retained loss for the period (1,282) (1,426) (374) (784) Exchange adjustments 8 4 - - Total recognised losses for the period (1,274) (1,422) (374) (784) Consolidated balance sheet As at 30 September 1999 30 September 30 September 31 March 1999 1998 1999 unaudited unaudited audited Note £'000 £'000 £'000 Fixed assets Intangible fixed assets 9,611 - 9,798 Tangible fixed assets 957 87 728 10,568 87 10,526 Current assets Stock - goods for resale 33 - 16 Debtors 3,421 105 2,482 Cash at bank and in hand 6,729 485 5,316 10,183 590 7,814 Creditors: amounts falling due within one year (3,955) (120) (3,750) Net current assets 6,228 470 4,064 Total assets less current liabilities 16,796 557 14,590 Creditors: amounts falling due after more than one year (15) - (25) Provision for liabilities 9 and charges (255) - - Net assets 16,526 557 14,565 Capital and reserves 5 Called up share capital 355 123 319 Share premium account 14,091 1,729 11,517 Other reserves 5,770 - 4,937 Profit and loss account (3,566) (1,295) (2,144) Total equity shareholders' funds 6 16,650 557 14,629 Minority interests (124) - (64) Capital employed 16,526 557 14,565 Consolidated cash flow statement for the quarter and 6 months ended 30 September 1999 Quarter 6 months Quarter 6 months ended 30 ended 30 ended 30 ended 30 September September September September 1999 1999 1998 1998 unaudited unaudited unaudited unaudited Note £'000 £'000 £'000 £'000 Net cash outflow from 7 operating activities (272) (912) (387) (864) Returns on investment and servicing of finance Net interest 69 132 10 20 Capital expenditure and financial investment Purchase of tangible fixed assets (339) (405) (21) (38) Acquisitions Net cash acquired with subsidiaries 12 12 - - Purchase of subsidiaries 8 (17) (17) - - (5) (5) - - Cash outflow before financing (547) (1,190) (398) (882) Financing Issue of shares 566 2,603 559 559 Increase/(decrease) in cash in the period 19 1,413 161 (323) Notes to interim financial statements 1. Basis of preparation The interim financial statements for the second quarter and six months ended 30 September 1999 have been prepared using accounting policies consistent with those set out in the Company's consolidated 1999 statutory accounts. These statements do not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985 and are unaudited. Financial information for the three months and six months ended 30 September 1998 have been extracted from the accounting records of the Company, and is also unaudited. It does not consolidate any results of operations of Symphony Telecom, which was acquired on 2 February 1999. The balances as at 31 March 1999 have been extracted from the accountants' report included in the prospectus. The accountants' report was extracted from the statutory accounts which have been filed with the Registrar of Companies. The auditor's report on those accounts was unqualified and did not contain any statement under section 237 of the Companies Act 1985. The interim financial statements for the second quarter and six months ended 30 September 1999 were approved by the Board on 20 December 1999 and will be posted to shareholders on 23 December 1999. 2. Operating data for 1999 March April May Consumer Division Unique users(1) Sport Football 160,618 173,894 191,393 Cricket 69,157 78,803 92,179 Rugby Other Total Sport 229,775 252,697 283,572 Entertainment 31,750 33,189 33,485 Lifestyle 65,429 66,726 68,878 Total unique users 326,954 352,612 385,935 User sessions(2) Sport Football 1,831,348 1,874,676 2,102,564 Cricket 2,143,867 2,364,090 2,857,549 Rugby Other Total Sport 3,975,215 4,238,766 4,960,113 Entertainment 126,605 133,753 150,628 Lifestyle 559,254 481,852 484,024 Total user sessions 4,661,074 4,854,371 5,594,765 Audiotext minutes(3) 5,826,875 5,829,453 5,339,713 Business Division Business customers(4) 1,280 1,410 1,492 Business minutes(5) 5,631,912 5,495,010 6,434,351 June July Aug Consumer Division Unique users(1) Sport Football 186,537 266,472 366,401 Cricket 101,688 143,835 145,745 Rugby 6,759 Other Total Sport 288,225 410,307 518,905 Entertainment 34,919 34,110 46,894 Lifestyle 78,002 82,475 93,197 Total unique users 401,146 526,892 658,996 User sessions(2) Sport Football 2,182,961 2,681,722 3,196,288 Cricket 3,050,625 4,458,870 4,518,080 Rugby 16,796 Other Total Sport 5,233,586 7,140,592 7,731,164 Entertainment 147,952 156,347 187,589 Lifestyle 526,092 518,980 577,147 Total user sessions 5,907,630 7,815,919 8,495,900 Audiotext minutes(3) 6,097,658 6,152,836 6,136,871 Business Division Business customers(4) 1,613 1,740 1,838 Business minutes(5) 6,948,406 8,118,687 7,910,244 Sept Oct Nov Consumer Division Unique users(1) Sport Football 376,161 394,449 439,945 Cricket 148,354 146,807 148,128 Rugby 38,719 128,811 66,107 Other 2,540 833 413 Total Sport 565,774 670,900 654,593 Entertainment 117,837 143,402 151,201 Lifestyle 95,980 119,968 138,473 Total unique users 779,591 934,270 944,267 User sessions(2) Sport Football 3,275,769 3,482,203 3,633,080 Cricket 4,598,974 4,551,017 4,443,840 Rugby 69,603 402,091 279,699 Other 3,429 1,029 488 Total Sport 7,947,775 8,436,340 8,357,107 Entertainment 248,240 457,136 462,265 Lifestyle 571,906 662,849 770,147 Total user sessions 8,767,921 9,556,325 9,589,519 Audiotext minutes(3) 6,072,885 6,758,761 5,874,780 Business Division Business customers(4) 2,170 2,366 2,475 Business minutes(5) 10,047,227 10,348,644 10,969,562 Notes: 1. 365 defines the number of unique users in a month as the number of people who visit one of 365's web sites (including those web sites created and hosted by 365 for third parties) during a month, telephone one of 365's audiotext telephone services during a month or are registered to receive an e-mail product at a selected mid-month date. If a person uses the same 365 service more than once in a month they are counted only once as a unique user. If, however, that person uses more than one 365 service during that month, they are counted as a unique user once for each service used. 2. 365 defines the number of user sessions in a month as the number of times that each 365 service is used. If a user leaves a web site and returns more than 30 minutes later the return visit is counted as a separate user session. E-mail user sessions represent the number of registered subscribers at the date selected to determine the number of unique e-mail users multiplied by the number of issues in that month of the e-mail service they are registered to receive. Each incoming call to 365's audiotext telephone services represents a user session. 3. 365 defines the number of audiotext minutes in a month as the number of minutes recorded by 365 and its carriers in respect of calls to 365's audiotext services in that month. 4. 365 defines the number of business customers at each month end as the total number of customers at that month end who have been billed for that month. 5. 365 defines the number of business minutes in a month as the number of minutes tracked by the carriers' systems which are billed to the Business Division's customers in that month. 3. Segmental analysis Turnover and loss or profit before amortisation of goodwill and provision for NIC on share options are classified below by geographical area by origin, which is not materially different from geographical area by destination, and by class of business. Turnover Quarter 6 months Quarter 6 months ended 30 ended 30 ended 30 ended 30 September September September September 1999 1999 1998 1998 £'000 £'000 £'000 £'000 Geographical analysis United Kingdom 4,807 9,276 36 84 France 17 17 - - Germany 19 92 - - Chile 83 150 - - South Africa - - - - 4,926 9,535 36 84 Busines Analysis Audiotext 3,040 6,306 - - Business Services 1,593 2,792 - - Internet 293 437 36 84 4,926 9,535 36 84 (Loss)/profit before goodwill and NIC Quarter 6 months Quarter 6 months ended 30 ended 30 ended 30 ended 30 September September September September 1999 1999 1998 1998 £'000 £'000 £'000 £'000 Geographical analysis United Kingdom (298) (31) (382) (800) France (124) (124) - - Germany (14) 3 - - Chile 7 - - - South Africa (81) (81) - - (510) (233) (382) (800) Busines Analysis Audiotext 896 1,945 - - Business Services (162) (293) - - Internet (1,244) (1,885) (382) (800) (510) (233) (382) (800) 4. Loss per ordinary share of 0.25p each Quarter 6 months Quarter 6 months ended ended ended ended 30 30 September 30 30 September September 1999 September 1998 1999 £'000 1998 £'000 £'000 £'000 Loss for the period before amortisation of goodwill and provision for NIC on share options (405) (42) (374) (784) Goodwill amortisation (622) (1,129) - - Provision for NIC on (255) (255) - - share options Loss for the period (1,282) (1,426) (374) (784) Weighted average number of shares in the period: Basic 140,603,609 136,473,008 48,548,083 46,394,697 Diluted 142,505,126 138,338,174 50,159,172 47,961,354 Basic loss per share before amortisation of goodwill and provision for NIC on share options 0.3p 0.0p 0.8p 1.7p Goodwill amortisation 0.4p 0.8p - - Provision for NIC on share options 0.2p 0.2p - - Basic loss per share 0.9p 1.0p 0.8p 1.7p Diluted loss per share before amortisation of goodwill and provision for NIC on share options 0.3p 0.0p 0.7p 1.6p Goodwill amortisation 0.4p 0.8p - - Provision for NIC on share options 0.2p 0.2p - - Diluted loss per share 0.9p 1.0p 0.7p 1.6p The weighted average number of shares have been restated to reflect the effective 4-for-1 share split in November 1999. 5. Share capital and reserves Ordinary Share Merger Profit and share premium reserve loss capital account £'000 account £'000 £'000 £'000 At 1 April 1999 319 11,517 4,937 (2,144) Retained loss for the period - - - (1,426) Exchange adjustments - - - 4 Shares issued in respect of various fund raising exercises 29 2,574 - - Shares issued in respect of the acquisition of CSports and Electron Libre 7 - 833 - At 30 September 1999 355 14,091 5,770 (3,566) On 24 July 1999, 700,000 ordinary shares in the Company (prior to the 4-for-1 share split in November 1999) were issued in consideration for the acquisition of C-Sports Communication SA and Electron Libre SARL. The merger reserve reflects the difference between the fair value and nominal value of the shares issued. 6. Reconciliation of movements in shareholders' funds Quarter 6 months Quarter 6 months ended ended ended ended 30 30 30 30 September September September September 1999 1999 1998 1998 £'000 £'000 £'000 £'000 Opening shareholders' 16,523 14,629 931 782 funds Loss for the period (1,282) (1,426) (374) (784) Proceeds from the issue of shares 1,401 3,443 - 559 Exchange adjustments 8 4 - - offset in reserves Closing shareholders' funds 16,650 16,650 557 557 7. Net cash outflow from operating activities Quarter 6 months Quarter 6 months ended 30 ended 30 ended 30 ended 30 September September September September 1999 1999 1998 1998 £'000 £'000 £'000 £'000 Operating loss before interest and minorities 1,387) (1,617) (382) (800) Depreciation 111 189 9 15 Amortisation of goodwill 622 1,129 - - (Increase) in stock (10) (17) - - (Increase) in debtors (257) (836) (1) (20) Increase/(decrease) in 649 240 (13) (59) creditors/provisions (272) (912) (387) (864) 8. Acquisitions On 24 July 1999, 365 acquired 100% of the issued share capital of C-Sports Communication SA and Electron Libre SARL for a consideration of £857,423, consisting of a consideration of £840,000 which was financed by the issue of 700,000 ordinary shares in the Company (prior to the 4-for-1 share split in November 1999), and acquisition costs of £17,423. £'000 Assets acquired Electron Libre 25 CSports (81) (56) Goodwill 913 Cost of acquisition 857 Comprising: Consideration satisfied by shares issued 840 Professional fees incurred on acquisition 17 857 Goodwill arising on the acquisition of CSports and Electron Libre is being amortised on a straight line basis over the estimated economic useful life of 18 months. 9. Future liabilities On exercise of share options issued after 6 April 1999, the Company will be required to pay National Insurance on the difference between the exercise price and market value of the shares issued. The Company will become unconditionally liable to pay the National Insurance upon exercise of the options, which are exercisable over a period of up to seven years from the date of the grant. The Company therefore makes a provision following the grant of options, as opposed to on vesting or on exercise. The amount of the National Insurance payable will depend on the number of employees who remain with the Company and exercise their options, the market price of the Company's ordinary shares at the time of exercise and the prevailing National Insurance rates at the time. For the first quarter to 30 June 1999 no provision has been made in the accounts as any such provision was considered to be immaterial. In the second quarter to 30 September 1999 a provision of £255,000 has been made taking into account movements in the market value of the Company's shares up to 30 September 1999 and further share options issued during the second quarter. The accounts for the third quarter will include any adjustment required arising from any movement in the Company's share price between 30 September and 31 December 1999. Based on a the mid-market closing share price of 220.5 pence on 17 December 1999, this would result in a charge in the third quarter of £2,159,000. On 10 November 1999 the Company allotted 400,000 ordinary shares of 1p each to two Directors at nominal value (prior to the 4 for 1 share split). This will result in an employer's National Insurance liability of up to £300,000 (which is payable in the quarter ending 31 December 1999), and a non-cash charge of up to £2,500,000 in the profit and loss account in the third quarter.

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