Interim Results - Part 2

365 Corporation PLC
29 November 2000


PART 2 
 
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.

 
1.     Segmental analysis - for the quarter ended 30 September 2000

  
 
Turnover and loss before taxation are classified below by class of business
and by geographical area by origin, which is not materially different from
geographical area by destination. 
 

                                                                              
                        Consumer                     Business                 
                        Division                     Division                 
  Business Analysis   Quarter        Quarter       Quarter        Quarter     
  (£'000)             ended          ended         ended          ended       
                      30 September   30            30 September   30          
                      2000           September     2000           September   
                                     1999                         1999        
  Turnover                                                                    
      Consumer internet   1,563           293              -             - 
      Audiotext           5,447         3,040              -             - 
      Business services       -             -          4,529         1,593 
      Other                 487             -              -             - 
                          7,497         3,333          4,529         1,593 
  Continuing              7,165         3,333          4,428         1,593 
  operations                                                                  
  Acquisitions              332             -            101             - 
  Cost of sales           4,133         1,477          3,053         1,114 
  Gross profit            3,364         1,856          1,476           479 
  Administrative          4,798         1,977          2,212           641 
  expenses before                                                             
  goodwill                                                                    
  amortisation and                                                            
  NIC and similar                                                             
  taxes on share                                                              
  options                                                                     
  Operating loss         (1,434)         (121)          (736)         (162) 
  before goodwill                                                             
  amortisation and                                                            
  NIC and similar                                                             
  taxes on share                                                              
  options                                                                     
  Goodwill               5,869           502            443           120 
  amortisation                                                                
  Provision for NIC         -             -              -             - 
  and similar taxes                                                           
  on share options                                                            
  Operating loss        (7,303)         (623)        (1,179)         (282) 
  Continuing            (7,260)         (623)        (1,179)         (282) 
  operations                                                                  
  Acquisitions             (43)             -              -             - 
  Net interest               7             8             29             - 
  receivable                                                                  
  Loss on ordinary      (7,296)         (615)        (1,150)         (282) 
  activities before                                                           
  taxation                                                                    
 
 

                                                                              
                      Group                    Total Group                
                      Overhead                                              
  Business Analysis   Quarter        Quarter       Quarter        Quarter     
  (£'000)             ended          ended         ended          ended       
                      30 September   30            30 September   30          
                      2000           September     2000           September   
                                     1999                         1999        
  Turnover                                                                    
     Consumer internet    -             -          1,563           293 
     Audiotext            -             -          5,447         3,040 
     Business services    -             -          4,529         1,593 
     Other                -             -            487             - 
                          -             -         12,026         4,926 
  Continuing              -             -         11,593         4,926 
  operations                                                                  
  Acquisitions            -             -            433             - 
  Cost of sales           -             -          7,186         2,591 
  Gross profit            -             -          4,840         2,335 
  Administrative        846           227          7,856         2,845 
  expenses before                                                             
  goodwill                                                                    
  amortisation and                                                            
  NIC and similar                                                             
  taxes on share                                                              
  options                                                                     
  Operating loss       (846)         (227)        (3,016)         (510) 
  before goodwill                                                             
  amortisation and                                                            
  NIC and similar                                                             
  taxes on share                                                              
  options                                                                     
  Goodwill                -             -          6,312           622 
  amortisation                                                                
  Provision for NIC     (49)            70           (49)            70 
  and similar taxes                                                           
  on share options                                                            
  Operating loss       (797)         (297)        (9,279)       (1,202) 
  Continuing           (797)         (297)        (9,236)       (1,202) 
  operations                                                                  
  Acquisitions           -             -           (43)             - 
  Net interest          663            61            699            69 
  receivable                                                                  
  Loss on ordinary     (134)         (236)        (8,580)       (1,133) 
  activities before                                                           
  taxation                                                                    
 
 
 

                                                                              
  Geographical              Turnover            Operating profit/(loss)       
  analysis                                      before goodwill amortisation  
  (£'000)                                       and provision for NIC and     
                                                similar taxes on share        
                                                options                       
                         Quarter       Quarter     Quarter ended       Quarter
                        ended 30      ended 30      30 September      ended 30
                       September     September             2000      September
                           2000          1999                            1999 
  United Kingdom         11,818         4,807           (2,152)         (298) 
  France                     96            17             (585)         (124) 
  Germany                     -            19               (3)          (14) 
  Chile                      45            83              (13)             7 
  South Africa               16             -             (151)          (81) 
  USA                        51             -             (112)             - 
                         12,026         4,926           (3,016)         (510) 
 

 
2.     Segmental analysis - for the 6 months ended 30 September 2000

  
 
Turnover and loss before taxation are classified below by class of business
and by geographical area by origin, which is not materially different from
geographical area by destination. 
 
 

                                                                              
                             Consumer                  Business               
                            Division                   Division               
  Business Analysis        6 months      6 months     6 months     6 months   
  (£'000)                  ended         ended        ended        ended      
                           30            30           30           30         
                           September     September    September    September  
                           2000          1999         2000         1999       
  Turnover                                                                    
      Consumer internet      2,647          437            -            - 
      Audiotext             10,429        6,306            -            - 
      Business services         -            -        8,125        2,792 
      Other                    827            -            -            - 
                            13,903        6,743        8,125        2,792 
  Continuing operations     11,281        6,743        8,024        2,792 
  Acquisitions               2,622            -          101            - 
  Cost of sales              7,716        3,218        5,469        1,945 
  Gross profit               6,187        3,525        2,656          847 
  Administrative             8,921        3,020        4,441        1,139 
  expenses before                                                             
  goodwill amortisation                                                       
  and NIC and similar                                                         
  taxes on share options                                                      
  Operating                 (2,734)          505      (1,785)        (292) 
  (loss)/profit before                                                        
  goodwill amortisation                                                       
  and NIC and similar                                                         
  taxes on share options                                                      
  Goodwill amortisation     11,312          908          832          221 
  Provision for NIC and       (152)            -        (143)            - 
  similar taxes on share                                                      
  options                                                                     
  Operating loss           (13,894)        (403)      (2,474)        (513) 
  Continuing operations    (14,131)        (403)      (2,474)        (513) 
  Acquisitions                 237            -            -            - 
  Net interest                 153           11           53          (1) 
  receivable/(payable)                                                        
  Loss on ordinary         (13,741)        (392)      (2,421)        (514) 
  activities before                                                           
  taxation                                                                    
 
 
 

                                                                              
                           Group                      Total                
                           Overhead                    Group                 
  Business Analysis        6 months      6 months     6 months     6 months   
  (£'000)                  ended         ended        ended        ended      
                           30            30           30           30         
                           September     September    September    September  
                           2000          1999         2000         1999       
  Turnover                                                                    
  Consumer internet                  -            -        2,647          437 
  Audiotext                          -            -       10,429        6,306 
  Business services                  -            -        8,125        2,792 
  Other                              -            -          827            - 
                                     -            -       22,028        9,535 
  Continuing operations              -            -       19,305        9,535 
  Acquisitions                       -            -        2,723            - 
  Cost of sales                      -            -       13,185        5,163 
  Gross profit                       -            -        8,843        4,372 
  Administrative                 1,885          446       15,247        4,605 
  expenses before                                                             
  goodwill amortisation                                                       
  and NIC and similar                                                         
  taxes on share options                                                      
  Operating                    (1,885)        (446)      (6,404)        (233) 
  (loss)/profit before                                                        
  goodwill amortisation                                                       
  and NIC and similar                                                         
  taxes on share options                                                      
  Goodwill amortisation              -            -       12,144        1,129 
  Provision for NIC and          (295)           70        (590)           70 
  similar taxes on share                                                      
  options                                                                     
  Operating loss               (1,590)        (516)     (17,958)      (1,432) 
  Continuing operations        (1,590)        (516)     (18,195)      (1,432) 
  Acquisitions                       -            -          237            - 
  Net interest                   1,235          122        1,441          132 
  receivable/(payable)                                                        
  Loss on ordinary               (355)        (394)     (16,517)      (1,300) 
  activities before                                                           
  taxation                                                                    
 

                                                                              
  Geographical              Turnover            Operating profit/(loss)       
  analysis                                      before goodwill amortisation  
  (£'000)                                       and provision for NIC and     
                                                similar taxes on share        
                                                options                       
                       6 months      6 months          6 months      6 months 
                          ended         ended             ended         ended 
                              30            30     30 September             30
                       September     September             2000      September
                           2000          1999                            1999 
  United Kingdom         21,691         9,276           (4,667)          (31) 
  France                    167            17           (1,144)         (124) 
  Germany                     -            92               (5)             3 
  Chile                      84           150              (33)             - 
  South Africa               19             -             (313)          (81) 
  USA                        67             -             (242)             - 
                         22,028         9,535           (6,404)         (233) 
 
 

                                                                              
 
3.     Loss per ordinary share of 0.25p each

 
 

                                                                              
                                           Quarter         Quarter ended      
                                           ended           30 September 1999  
                                           30 September    £'000              
                                           2000                               
                                           £'000                              
  Loss for the period before the                 (2,314)                (405) 
  following:                                                                  
  Goodwill amortisation                          (6,312)                (622) 
  Provision for NIC and similar taxes on              49                 (70) 
  share options                                                               
  Loss for the period                            (8,577)              (1,097) 
  Weighted average number of shares in                                        
  the period:                                                                 
  Basic and diluted                          199,537,382          140,603,609 
  Basic and diluted loss per share                (1.2p)               (0.3p) 
  before amortisation of goodwill and                                         
  provision for NIC and similar taxes on                                      
  share options                                                               
  Goodwill amortisation                           (3.1p)               (0.4p) 
  Provision for NIC and similar taxes on            0.0p               (0.1p) 
  share options                                                               
  Basic and diluted loss per share                (4.3p)               (0.8p) 
 
 

                                                                              
                                      6 months ended       6 months ended     
                                      30 September 2000    30 September 1999  
                                      £'000                £'000              
  Loss for the period before the                 (4,932)                 (42) 
  following:                                                                  
  Goodwill amortisation                         (12,144)              (1,129) 
  Provision for NIC and similar                      590                 (70) 
  taxes on share options                                                      
  Loss for the period                           (16,486)              (1,241) 
  Weighted average number of shares                                           
  in the period:                                                              
  Basic and diluted                          198,986,953          136,473,008 
  Basic and diluted loss per share                (2.5p)               (0.0p) 
  before amortisation of goodwill                                             
  and provision for NIC and similar                                           
  taxes on share options                                                      
  Goodwill amortisation                           (6.1p)               (0.8p) 
  Provision for NIC and similar                     0.3p               (0.1p) 
  taxes on share options                                                      
  Basic and diluted loss per share                (8.3p)               (0.9p) 
 
The weighted average number of shares has been restated to reflect the
4-for-1 share split in November 1999. 

None of the contingently issuable shares or share options gives rise to a
dilution in the loss per share due to the losses made in the period.  
 
 
 
 
 
     Share capital and reserves

                                                                              
                       Ordinary     Shares       Share     Merger   Profit and
                          share      to be     premium  reserve           loss
                       capital     issued     account                 account 
                                                                              
                                    £'000       £'000      £'000        £'000 
                         £'000                                                
  At 1 April 2000          493         80      72,220     34,844     (14,688) 
  Prior year                 -          -           -          -        1,992 
  adjustment                                                                  
  Retained loss              -          -           -          -     (16,486) 
  for the period                                                              
  Exchange                   -          -           -          -           22 
  adjustments                                                                 
  Shares issued in           -          -          13          -            - 
  respect of share                                                            
  options                                                                     
  exercised                                                                   
  Shares issued              7          -           -      2,684            - 
  for acquisitions                                                            
  Premium on                 -          -          87          -            - 
  shares issued to                                                            
  employees                                                                   
  Contingent share           -      1,802           -          -            - 
  consideration                                                               
  for acquisitions                                                            
  Movement in fair           -       (60)           -          -            - 
  value of                                                                    
  contingent share                                                            
  consideration                                                               
  At 30 September          500      1,822      72,320     37,528     (29,160) 
  2000                                                                        
 
 
Shares were issued for the acquisitions detailed in Note 9. The difference
between the fair value and nominal value of the shares has been transferred
to the merger reserve. 
 
 
 
 
 
 
 
5.     Reconciliation of movement in shareholders' funds

                                                                              
                      Quarter ended   Quarter       6 months      6 months    
                      30 September    ended         ended         ended       
                      2000            30            30            30          
                      £'000           September     September     September   
                                      1999          2000          1999        
                                      £'000         £'000         £'000       
  Opening                    89,848        16,523        94,941        14,629 
  shareholders'                                                               
  funds*                                                                      
  Loss for the              (8,577)       (1,097)      (16,486)       (1,241) 
  period                                                                      
  New share capital               -         1,401             -         3,443 
  (net of expenses)                                                           
  issued for cash                                                             
  Shares issued for             318             -         2,691             - 
  acquisitions                                                                
  Premium on shares               -             -            87             - 
  issued to                                                                   
  employees                                                                   
  Net movement in             1,352             -         1,742             - 
  contingent share                                                            
  consideration                                                               
  Employee share                  -             -            13             - 
  options exercised                                                           
  Exchange                       69             8            22             4 
  adjustments                                                                 
  offset in                                                                   
  reserves                                                                    
  Closing                    83,010        16,835        83,010        16,835 
  shareholders'                                                               
  funds                                                                       
 
 
* opening shareholders' funds on 1 April 2000 were originally £92,949,000
before adding prior year adjustment of £1,992,000. 
 
 
 
 
 
 
 
 
6.     Net cash outflow from operating activities

                                                                              
                           Quarter       Quarter      6 months     6 months   
                           ended         ended        ended        ended      
                           30            30           30           30         
                           September     September    September    September  
                           2000          1999         2000         1999       
                           £'000         £'000        £'000        £'000      
  Operating loss               (9,279)      (1,202)     (17,958)      (1,432) 
  Depreciation                     248          111          563          189 
  Amortisation of                6,356          622       12,228        1,129 
  intangible assets                                                           
  (Increase) in stock            (381)         (10)        (390)         (17) 
  (Increase) in debtors          (336)        (257)      (1,974)        (836) 
  (Decrease)/increase in         (113)          464         (51)           55 
  creditors/provisions                                                        
                               (3,505)        (272)      (7,582)        (912) 
 
 
 
 
7.     Acquisitions

 
 
(a)     Compass Communications Technical Services Limited and Compass Telecom
Limited 
 
On 29 August 2000, 365 acquired the entire issued share capital of Compass
Communications Technical Services Limited and the remaining shares in Compass
Telecom Limited for a total estimated consideration of £1,478,000. 

                                                                 
                                                           £'000 
                Book value of net liabilities acquired     (124) 
                Goodwill                                   1,602 
                Cost of acquisition                        1,478 
                Comprising:                                      
                Cash                                         430 
                Shares issued                                318 
                Contingent share consideration               365 
                Contingent cash consideration                350 
                Acquisition costs                             15 
                                                           1,478 
 
Goodwill arising on the acquisition Compass Communications and the remaining
shares in Compass Telecom is being amortised on a straight-line basis over
the estimated economic useful life of 5 years. 
 
 
 
 
b.     Phones Express Limited

  
On 8 September 2000, 365 acquired the entire issued share capital of Phones
Express Limited for a total estimated consideration of £2,420,000.  

                                                              
                                                        £'000 
                  Fair value of net assets acquired       368 
                  Goodwill                              2,052 
                  Cost of acquisition                   2,420 
                  Comprising:                                 
                  Cash                                  1,175 
                  Shares to be issued                     486 
                  Contingent cash consideration           184 
                  Contingent share consideration          501 
                  Acquisition costs                        74 
                                                        2,420 
 
Goodwill arising on the acquisition of Phones Express is being amortised on a
straight line basis over the estimated economic useful life of 18 months. 
 
 
 
 
 
1.     Future liabilities

  
On exercise of share options issued after 6 April 1999, the Company will be
required to pay National Insurance and similar foreign taxes 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
and similar foreign taxes upon exercise of the options, which are exercisable
over a period of up to seven years from the date of the grant. Following the
issue of UITF25 the Company is now required to spread the liability over the
period to vesting. Previously the Company made a full provision following the
grant of options and as a result has made a prior year adjustment of
£1,992,000 to reflect the change in accounting policy. Prior year and quarter
comparatives have been restated to reflect the new policy. 
 
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. The accounts for the first
quarter and six months ended 30 September 2000 include adjustments arising
from the movement in the Company's share price between 31 March 2000 and 30
September 2000 and the exercise or lapsing of options.