Final Results - Part 2

Future Network PLC 19 March 2001 Group Profit and Loss Account for the year ended 31 December 2000 Restated Restated Continuing Total Actual Actual Pro operations continuing 2000 1999 forma operations Discontinued Total Total 1999 operations Total Acquisitions Note £'000 £'000 £' 000 £'000 £'000 £'000 £'000 Turnover 4 229,005 7,022 236,027 17,962 253,989 172,919 197,470 Cost of sales (164,989) (5,494) (170,483) (26,356) (196,839)(114,807)(135,331) Gross profit/ 64,016 1,528 65,544 (8,394) 57,150 58,112 62,139 (loss) Distribution (13,865) (256) (14,121) (1,302) (15,423) (8,266) (10,926) expenses Administrative (84,336) (1,882) (86,218) (4,974) (91,192) (44,522) (55,785) expenses Operating 11,644 537 12,181 (14,670) (2,489) 22,119 20,242 profit/ (loss) excluding amortisation and impairment of intangible assets Amortisation (45,829) (1,147) (46,976) - (46,976) (16,795) (24,814) and impairment of intangible assets Operating (34,185) (610) (34,795) (14,670) (49,465) 5,324 (4,572) (loss) / profit Share of (450) - - operating loss of associates Operating (49,915) 5,324 (4,572) (loss) / profit including loss of associates (Loss)/profit (117) 1,962 10,895 on disposal of fixed asset investments Write down of (4,552) - - fixed asset investments Net interest (4,709) (10,812) (2,798) payable and similar charges (Loss)/ profit on ordinary activities 4 (59,293) (3,526) 3,525 before tax Tax on (loss)/ (1,473) (3,114) (6,413) profit on ordinary activities 6 Loss on (60,766) (6,640) (2,888) ordinary activities after tax Loss for the (60,766) (6,640) (2,888) financial year Adjustments to loss on ordinary activities after tax Restated Restated Actual Actual Pro forma 2000 1999 1999 £'000 £'000 £'000 Loss on ordinary activities after tax (60,766) (6,640) (2,888) Add: amortisation and impairment of intangible 46,976 16,795 24,814 assets Adjusted (loss) /profit on ordinary activities (13,790) 10,155 21,926 after tax Actual earnings per 1 p Ordinary Share (in pence) Restated Restated Note Actual Actual Pro forma 1999 2000 1999 Basic loss per share 7 (42.68) (6.51) (2.09) Adjusted basic (loss)/earnings per share 7 (9.69) 9.96 15.88 Diluted loss per share 7 (42.68) (6.51) (2.09) Adjusted diluted (loss)/earnings per 7 (9.69) 9.03 14.51 share Group Activity Analysis for the year ended 31 December 2000 Turnover by business unit Restated Restated Actual Actual Pro forma 2000 1999 1999 £'000 £'000 £'000 Magazine United Kingdom 109,112 99,819 99,819 United States 93,886 34,090 54,189 France 20,028 20,938 20,938 Italy 14,973 12,465 16,594 Germany 6,965 4,208 4,208 Poland 2,575 - - 247,539 171,520 195,748 Internet 6,450 1,399 1,722 Total 253,989 172,919 197,470 Results by business unit Restated Restated Actual Actual Pro forma 2000 1999 1999 £'000 £'000 £'000 Magazine United Kingdom 12,792 19,441 19,441 United States 7,533 6,391 3,906 France (4,570) 823 823 Italy 844 2,667 3,803 Germany (5,688) (2,123) (2,123) Poland 11 - - 10,922 27,199 25,850 Internet (10,400) (3,035) (3,563) Central operating costs (3,011) (2,045) (2,045) Operating (loss) /profit excluding amortisation and impairment of intangible assets (2,489) 22,119 20,242 Restated Restated Turnover by category Actual Actual Pro forma 2000 1999 1999 £'000 £'000 £'000 Circulation 127,830 109,998 122,765 Advertising 111,034 54,987 66,032 Internet 6,450 1,399 1,722 Other 8,675 6,535 6,951 Total 253,989 172,919 197,470 Statement of Total Recognised Gains and Losses For the year ended 31 December 2000 Restated Actual Actual 2000 1999 £'000 £'000 Loss for the financial year (60,766) (6,640) Exchange adjustments offset in reserves (70) (1,808) Reversion of rights pertaining to investments from departing 211 376 employees Unrealised gain arising from the provision of advertising in exchange for warrants to acquire unlisted investments 95 - Total losses recognised relating to the year (60,530) (8,072) Prior year adjustment (see note 3) (1,170) Total gains and losses recognised since last annual report (61,700) Reconciliation of movements in group shareholders' funds For the year ended 31 December 2000 Restated 2000 1999 Group Group Actual Actual £'000 £' 000 Loss for the financial year (60,766) (6,640) Proceeds from issue of shares 17 735 Premium on issue of shares (net of expenses) 1,861 135,582 Refund of costs on issue of shares previously offset against 378 - share premium Merger reserve arising in the year - 108,211 Exchange adjustments offset in reserves (70) (1,808) Deferred consideration not settled by the issue of shares (18,000) - Other reserve movements arising from acquisition of Imagine - 39,810 Media, Inc. Unrealised gain arising from the provision of advertising in exchange for warrants to acquire unlisted investments 95 - Adjustment for shares issued under share option schemes through share option trust (112) - Reversion of rights pertaining to investments from departing 211 376 employees Net movement in shareholders' (deficit) / funds (76,386) 276,266 Opening shareholders' funds /(deficit) restated 271,953 (4,313) Shareholders' funds as at 31 December 195,567 271,953 Balance Sheets As at 31 December 2000 Restated Restated Group Company Group Company 2000 2000 1999 1999 Note £'000 £'000 £' 000 £' 000 Fixed Assets Intangible assets 8 253,775 - 292,563 - Tangible assets 9,294 37 6,075 - Investments 9 - Investment in Group undertakings - 43,462 - 43,315 - Investments in associates 4,634 - - - - Other investments 1,071 - 2,445 - 5,705 43,462 2,445 43,315 268,774 43,499 301,083 43,315 Current Assets Stocks 8,778 - 5,872 - Debtors 60,634 185,858 48,149 175,085 Investments 10 - - 1,040 - Cash at bank and in hand 10,780 328 18,940 766 80,192 186,186 74,001 175,851 Creditors: amounts falling due within one year (102,298)(33,325) (61,667) (8,679) Net current (liabilities)/assets (22,106)152,861 12,334 167,172 Total assets less current liabilities 246,668 196,360 313,417 210,487 Creditors: amounts falling due after more than one year (49,896)(46,361) (39,910) (36,171) Provisions for liabilities and charges (1,205) - (1,554) (32) Net assets 195,567 149,999 271,953 174,284 Capital and reserves Called-up share capital 1,430 1,430 1,413 1,413 Share premium account 137,821 137,821 135,582 135,582 Merger reserve 109,015 - 109,015 - Other reserves 21,949 21,810 40,186 39,810 Profit and loss account (74,648)(11,062) (14,243) (2,521) Total equity shareholders' funds 195,567 149,999 271,953 174,284 Group Cash Flow Statement For the year ended 31 December 2000 Restated Actual Actual 2000 1999 Note £'000 £'000 Net cash (outflow)/inflow from operating activities 11 (1,627) 15,181 Returns on investments and servicing of finance Interest received 730 516 Interest paid (3,337) (9,720) Issue costs of bank loans - (1,602) Net cash outflow from returns on investments and (2,607) (10,806) servicing of finance Tax paid (2,236) (3,040) Capital expenditure and financial investment Purchase of tangible fixed assets (5,303) (2,682) Purchase of fixed asset investments (2,792) (1,185) Sale of tangible fixed assets 77 62 Sale of current asset investments 1,507 11,328 Net cash (outflow) / inflow for capital expenditure and financial investment (6,511) 7,523 Acquisitions Purchase of subsidiary undertakings (2,242) (1,691) Purchase of associates (5,373) - Cash proceeds on disposal of associate 409 - Net cash acquired with subsidiary undertakings - 319 Payment of deferred consideration (18,000) (15,388) Purchase of businesses (4,580) (29,210) Net cash outflow for acquisitions (29,786) (45,970) Net cash outflow before use of liquid resources and financing (42,767) (37,112) Management of liquid resources Decrease in short-term deposits - 1,000 Financing Proceeds from issue of ordinary share capital 442 150,131 Refund of expenses/(expenses ) of share issue 378 (11,492) Proceeds from issue of loan notes - 9,716 Repayment of loan notes - (68,411) Draw down of bank loans 41,008 65,611 Movement on discounted bills (636) 1,247 Repayment of shareholder loan (1,022) - Repayment of bank loans (6,000)(98,736) Net cash inflow from financing 34,170 48,066 (Decrease)/increase in cash in the year 12 (8,597) 11,954 Notes to the preliminary announcement for the year ended 31 December 2000 1. Basis of preparation The preliminary results for the year ended 31 December 2000 are unaudited and do not comprise statutory accounts within the meaning of section 240 of the Companies Act 1985. The profit and loss accounts, on an actual and pro forma basis, for the year ended 31 December 1999 are based on the profit and loss accounts included in the 1999 Annual Report as restated for the prior year adjustments as described in note 3. The 1999 pro forma profit and loss account is unaudited. The pro forma comparative profit and loss account for the twelve months to 31 December 1999 is based on a full twelve months trading for all companies which became part of the Group before and at flotation, and assume that the capital and financing structure of the Group at flotation applied throughout the year. The statutory accounts for the year ended 31 December 2000 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. 2. Accounting policies The Group's accounting policies are consistent with those disclosed in the Company's Annual Report for the period ended 31 December 1999 except for the change arising from the adoption of UITF 25: 'National Insurance contributions on share option gains' as detailed in note 3. 3. Prior year adjustment French accounting irregularities The Company discovered accounting irregularities in Future France SA, its French subsidiary in October 2000. The errors arose due to misstatements in the recognition of newsstand sales. This resulted in turnover and operating profit for the period ended 31 December 1999, and the year ended 31 December 1998 being overstated by £1,041,000 and £2,216,000 respectively, and trade debtors at 31 December 1999 being overstated by £3,034,000 (1998: £2,014,000). As a result of the errors Future France SA overpaid corporation tax totalling £1,286,000 of which £416,000 related to 1999. Adoption of UITF 25 'National Insurance contributions on share options gains' UITF 25 has been adopted with effect from 1 January 2000, and requires that the provision for employer taxes on share options and share related benefits should be recognised over the performance period of the options. Prior to 1 January 2000 the group's accounting policy was to provide for the employer taxes on share options on a full basis. The effect in the 12 months to 31 December 2000 from changing this accounting policy was to increase the loss for the year by £658,000 from £60,108,000 to £60,766,000 . The following tables summarise the effect of restating the 1999 consolidated accounts for the French accounting irregularity and the adoption of UITF 25: 1999 Profit and loss account Actual Pro forma As French As French previ accounting previ account ously irregularity UITF25 Restated ously ing UITF25 Restated repor reported irregu ted larity £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Turnover 173,960 (1,041) - 172,919 198,511 (1,041) - 197,470 Administration (45,172) - 650 (44,522) (56,435) - 650 (55,785) expenses Operating 5,715 (1,041) 650 5,324 (4,181) (1,041) 650 (4,572) profit /(loss) Tax (3,530) 416 - (3,114) (6,829) 416 - (6,413) Loss after tax (6,665) (625) 650 (6,640) (2,913) (625) 650 (2,888) 1999 Balance sheet As Discounted bills French previously reclassification accounting UITF25 Restated reported £'000 irregularity £'000 £'000 £'000 £'000 Trade 43,029 1,247 (3,034) - 41,242 debtors Corporate - - 1,214 - 1,214 tax recoverable Creditors (60,420) (1,247) - - (61,667) due within 1 year Provisions (2,204) - - 650 (1,554) for liabilities and charges Net assets 273,123 - (1,820) 650 271,953 Profit and (4,397) - (1,398) - (5,795) loss reserves as at 1 January 1999 Loss for (6,665) - (625) 650 (6,640) the year ended 31 December 1999 1999 net (2,011) - 203 - (1,808) exchange adjustments Profit and (13,073) - (1,820) 650 (14,243) loss account a at 1 January 2000 Total 273,123 - (1,820) 650 271,953 shareholders' funds The impact of adopting UITF 25 on the 1999 accounts of the Company is to reduce provision for liabilities and charges as at 31 December 1999 by £ 78,000. 4. Segmental reporting The Group is involved in one class of business, the publication of magazines and Internet web sites. The geographical analyses of turnover, profit/(loss) before tax, and net assets by origin, and turnover by destination were as follows: a) Turnover by origin Restated Restated Continuing Total Actual Actual Pro operations continuing Total Total forma operations Discontinued Turnover Turnover Total operations Turnover Acquisitions 2000 2000 2000 2000 2000 1999 1999 £'000 £'000 £'000 £'000 £'000 £'000 £'000 United 103,763 4,447 108,210 3,469 111,679 100,822 100,944 Kingdom United 88,612 - 88,612 10,531 99,143 35,076 55,498 States France 17,413 - 17,413 2,615 20,028 20,938 20,938 Italy 14,981 - 14,981 - 14,981 12,465 16,594 Germany 5,660 - 5,660 1,347 7,007 4,226 4,226 Poland - 2,575 2,575 - 2,575 - - Turnover between segments (1,424) - (1,424) - (1,424) (608) (730) Total 229,005 7,022 236,027 17,962 253,989 172,919 197,470 b) Profit/(loss) before tax by origin Restated Restated Actual Actual Pro Total forma Continuing continuing Total Total Operations operations Total Discontinued Profit/ Profit/ operations (Loss) (Loss) Profit/ (Loss) Acquisitions before before tax tax before tax 2000 2000 2000 2000 2000 1999 1999 £'000 £'000 £'000 £'000 £'000 £'000 £'000 United Kingdom 4,484 (621) 3,863 (948) 2,915 13,625 13,625 United (12,510) - (12,510) (9,303) (21,813) (2,640) (4,738) States France (16,301) - (16,301) (2,340) (18,641) (858) (858) Italy (897) - (897) - (897) 1,070 1,895 Germany (11,991) - (11,991) (2,079) (14,070) (2,704) (2,704) Poland - (106) (106) - (106) - - Central costs (6,681) - (6,681) - (6,681) (12,019) (3,695) Total (43,896) (727) (44,623) (14,670) (59,293) (3,526) 3,525 c) Net assets by origin Continuing Operations Restated Acquisitions Total Total 2000 1999 £'000 £'000 £'000 £'000 United Kingdom 102,750 4,447 107,197 116,838 United States 136,141 - 136,141 143,616 France 12,831 - 12,831 30,108 Italy 15,665 - 15,665 18,783 Germany 493 - 493 7,185 Poland - 2,370 2,370 - Interest bearing liabilities (79,130) - (79,130) (44,577) Total 188,750 6,817 195,567 271,953 Discontinued activities have no separately identifiable net assets. d) Turnover by destination Restated Restated Actual Actual Pro forma 2000 1999 1999 £'000 £'000 £'000 United Kingdom 100,939 90,114 90,236 United States 99,163 34,564 53,001 France 17,621 19,288 19,288 Italy 15,606 13,177 17,306 Germany 7,184 4,381 4,381 Poland 2,575 - - Rest of world 12,325 12,003 13,988 Inter-segmental (1,424) (608) (730) Total 253,989 172,919 197,470 5. Discontinued activities Actual Actual 2000 1999 Continuing Discontinued Total Continuing Discontinued Total £'000 £'000 £'000 £'000 £'000 £'000 Turnover 236,027 17,962 253,989 166,021 6,898 172,919 Cost of sales (170,483) (26,356)(196,839) (108,590) (6,217) (114,807) Gross profit 65,544 (8,394) 57,150 57,431 681 58,112 Distribution expenses (14,121) (1,302) (15,423) (8,189) (77) (8,266) Administration expenses (86,218) (4,974) (91,192) (43,003) (1,519) (44,522) Operating profit (34,795) (14,670) (49,465) 6,239 (915) 5,324 The effect of the discontinued operations on the 1999 pro forma profit and loss is as shown above for the actual 1999 profit and loss. 6. Tax on loss on ordinary activities Restated Restated Actual Actual Pro forma 2000 1999 1999 £'000 £' 000 £' 000 UK Current corporation tax at 30% (1999: 30.25%) 1,437 2,411 4,690 Overseas Current tax (6) 271 915 Deferred tax 42 432 808 1,473 3,114 6,413 The Group made a loss before tax of £59,293,000 (1999 restated:£3,526,000) and has a tax charge of £1,473,000 (1999 restated: charge £3,114,000) for the year. Eliminating the impact of amortisation and impairment of goodwill which has no impact on taxation, the loss before tax was £12,317,000 (1999 restated: profit £13,269,000). The principal reason for the difference between the actual effective rate and the UK standard rate of 30% in 2000 is the overseas tax losses arising in the year which are not available for offset against taxable profits in the UK. The comparative figures have been restated for the effects of the accounting irregularity in France as detailed in note 3. 7. Earnings per share Basic earnings per share are calculated using the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share have been calculated by taking into account the dilutive effect of shares that would be issued on conversion into ordinary shares of options held under employee share schemes. Restated Restated Actual Pro forma 2000 1999 1999 Weighted average number of shares outstanding during the period: - basic 142,372,731 101,965,968 138,105,284 - dilutive effect of share options 7,553,962 10,514,893 12,972,364 - diluted 149,929,693 112,480,861 151,077,648 Basic loss per share (in pence) (42.68) (6.51) (2.09) Adjusted basic (loss)/earnings per share (in (9.69) 9.96 15.88 pence) Diluted loss per share (in pence)* (42.68) (6.51) (2.09) Adjusted diluted (loss)/earnings per share (in (9.69) 9.03 14.51 pence)* The adjustments to profit have the following effects on EPS: Basic loss per share (in pence) (42.68) (6.51) (2.09) Amortisation and impairment of intangible assets 32.99 16.47 17.97 Adjusted basic (loss) earnings per share (in pence) (9.69) 9.96 15.88 Diluted loss per share (in pence) (42.68) (6.51) (2.09) Amortisation and impairment of intangible assets 32.99 15.54 16.60 Adjusted diluted (loss)/earnings per share (in pence) (9.69) 9.03 14.51 *The share options do not have a dilutive effect where there is a loss. 8. Intangible fixed assets Goodwill Group £'000 Cost At 1 January 2000 314,050 Exchange adjustments 682 Goodwill arising on acquisition of subsidiary 2,228 Goodwill arising on acquisition of businesses 4,952 At 31 December 2000 321,912 Amortisation At 1 January 2000 (21,487) Exchange differences (423) Charge for the year (26,744) Impairment write down (19,483) At 31 December 2000 (68,137) Net book amount at 31 December 2000 253,775 Net book amount at 31 December 1999 292,563 The goodwill arising on acquisitions is being amortised on a straight line basis over their estimated useful economic lives, being in the range one to twenty years. These periods are the periods over which the Directors estimate that the values of the underlying businesses acquired are expected to exceed the values of the underlying assets. The Director's have performed impairment reviews on the carrying value of goodwill arising from acquisitions, which took place in 1999 and relating to Future France SA. In performing these calculations the Directors applied a pre tax discount rate of 14% to forecast pre-tax operating profits with the growth rates used not exceeding 2.25% after five years. The results of the reviews are explained below: (i) In respect of the acquisition by Future Verlag GmbH of the shares of Weka Consumer Median 'WCM' and the assets relating to the Consumer Media business division of WCM's parent company, WEKA Firmengruppe GmbH and Co. KG the Directors have made a provision against the entire remaining balance of goodwill at 31 December 2000. (ii) In respect of the acquisition by Future Publishing Limited of the trade and assets of certain titles from Zone Limited the Directors have made a provision to reduce the net book value to the extent that the goodwill has been impaired. (iii) In respect of the acquisition by Future Publishing Limited of the trade and assets of Future Music in the Netherlands from Media Minded CV the Directors have made a provision against the entire remaining balance of goodwill at 31 December 2000. (iv) In respect of the acquisition by Future Publishing Holdings Limited of Future France SA (formerly known as Edicorp Publications SA), the Directors have made a provision to reduce the net book value to the extent that the goodwill has been impaired. 9. Investments Group 2000 1999 £'000 £'000 Interests in Associates at cost At 1 January - net assets - - - goodwill - - Additions - net assets 1,301 - - goodwill 5,476 - Disposals - net assets (1,383) - At 31 December - net liabilities (82) - - goodwill 5,476 - 5,394 - Amortisation of goodwill At 1 January - - Exchange difference (11) - Charge for year (749) - At 31 December (760) - Net book amount at 31 December - Net liabilities (82) - - Goodwill 4,716 - 4,634 - Other Investments at cost At 1 January 2,445 - Exchange differences 175 (183) At acquisition - 11,383 Additions in year 3,003 1,651 Disposals - (9,366) Transfer to current assets - (1,040) Write down of investments (4,552) - At 31 December 1,071 2,445 Total fixed asset investments 5,705 2,445 Company Shares in Group undertakings at cost 2000 1999 £'000 £'000 At 1 January 43,315 - Additions in year 147 43,315 At 31 December 43,462 43,315 The market value of the Group's investment in Snowball.com, Inc. is £174,000. Given the uncertain future for internet businesses we have fully provided against this investment. Associated Undertakings During the year Imagine Media, Inc. made the following investments in associated undertakings; (i) £1,383,000 was invested to acquire 49% of the share capital of SeeMeBuyMe, a company registered in Delaware, USA. The company ceased to trade on 26 September 2001, and the Group's share of the losses was £450,000. The loss on disposal of the investment was £515,000, which increased the tax losses of Imagine Media, Inc. (ii) £5,313,000 was invested to acquire 49% of the share capital of TED Conferences LLC a company registered in California, USA. The goodwill arising on this acquisition was £5,476,000 and the Group's share of net liabilities and profits at 31 December 2000 was £82,000 and £nil respectively. The consideration for the acquisition was made up of £3,990,000 in cash and £1,323,000 in new shares issued. In addition, Imagine Media, Inc. has a commitment to purchase the remaining 51%. The Group has a number of investments in internet related businesses, in light of the lower valuations given to internet based businesses generally, the Group has found it necessary to write down its fixed asset investments by £4,552,000. 10. Current asset investments Group 2000 £'000 Listed investments At 1 January 2000 1,040 Exchange differences 69 Disposals (1,109) At 31 December 2000 - At 31 December 1999 the investment in America Online, Inc. was transferred from fixed asset investments to current asset investments due to its impending sale. During the year the Group disposed of its shareholding in America Online, Inc. realising a profit of £398,000. There was no tax payable as a result of this disposal since tax losses have been utilised to offset the taxable gain arising. 11. Cash flow from operating activities The reconciliation of operating profit to net cash inflow from operating activities is as follows: Group Restated Group Continuing operations 2000 1999 £'000 £'000 Operating (loss)/profit (49,465) 5,324 Depreciation charge 2,669 1,777 Goodwill amortisation and impairment 46,976 16,795 (Increase) /decrease in stocks (2,629) 343 (Increase) in debtors (10,880) (11,778) Increase in creditors 11,702 2,720 Net cash (outflow) /inflow from operating activities (1,627) 15,181 Included in the net cash outflow from operating activities above is an amount of £662,000 in respect of acquisitions during 2000. 12. Analysis of net debt Restated Cash Exchange Other non At 31 At 1 inflow/ movements cash December January (outflow) £'000 changes 2000 2000 £'000 £'000 £'000 £'000 Cash at 18,940 (8,597) 437 - 10,780 bank and in hand Debt due (37,824) (10,154) (63) (156) (48,197) after one year Debt due (8,000) (23,535) (9) - (31,544) within one year (26,884) (42,286) 365 (156) (68,961) Other non cash changes are the amortisation of bank finance costs. 13. Reconciliation of movement in net debt 2000 Restated £'000 1999 £'000 Net debt at 1 January (26,884) (125,175) (Decrease)/increase in cash (8,597) 11,954 Borrowings net of short term deposits acquired with - (6,256) subsidiaries Movement in borrowings (33,845) 90,685 Movement in liquid resources - (1,000) Interest capitalised in 1998 and subsequently waived - 690 during 1999 Unamortised debt issue costs - (1,094) Exchange movements 365 3,312 Net debt at 31 December (68,961) (26,884)

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