Interim Results
e-district.net PLC
3 October 2000
3rd October 2000
Interim Results for the six month period to 30 June 2000
e-district.net plc a leading provider of global interactive entertainment
services and related applications, announces its first set of results since
its flotation on the Alternative Investment Market in March of this year.
Key Highlights
Six months ended Six months ended Six months ended
30 June 2000 31 December 1999 30 June 1999
Turnover (£) 1,038,069 530,597 250,974
Pre tax profit
before charges
in respect of
share options(£) 58,124 55,953 25,106
Pre tax(loss)/profit(£) (67,646) 55,953 25,106
Global million
registered users 2.1 million 1.5 million 1.1 million
Global monthly
page impressions 163 million 101 million 69 million
* Significant growth in footprint and reach due to success in signing
distribution deals with Worldgate Communications, Telewest, Cable &
Wireless, Bush Internet and Planetweb
* Continued roll-out of service onto new platforms resulting in growth to
2.71 million registered users generating 273.2 million page impressions for
the month ended 30 September 2000
Commenting on the results, Steve Laitman, Chief Executive, said:
'We remain on target to achieve our strategic goals, in terms of developing
our service offering, signing up delivery partners, and recruiting users. We
are delighted by the enthusiastic reaction of new and potential partners, and
we are confident of our ability to deliver a range of new multi-platform
service offerings, and exploit the commercial opportunities they present.
e-district continues to be at the leading edge of interactive technology and
multi-platform functionality, and we retain our commercial and competitive
advantage.'
Enquiries:
e-district.net plc Tel: 020 8515 2800
Steve Laitman, Chief Executive
Eddie Abrams, Finance Director
Gavin Anderson & Company Tel: 020 7457 2345
Graham Prince
Rob Gurner
Victoria Jackson
Chairman's Review
e-district's first trading period as a public company has been a busy and
eventful one. We have seen the pace of change in our operating arena continue
to accelerate, and have moved equally quickly to seize the opportunities that
this has generated for us.
It was also a period of extreme volatility in the financial markets. Almost
immediately after our flotation in March our shares were caught in the
significant downturn that affected valuations in the technology sector. The
Directors are confident that the true value of the business will be recognised
as we continue to deliver our development and growth strategies.
Results
In the period under review the Company reported turnover of £1,038,069 (net
of commissions of £186,822), an increase of 96% on the six month period to
31 December 1999. Turnover gross of commissions reached £1,224,891, an
increase of 131% over the previous six months.
As highlighted in the Trading Update issued on 7th August 2000, turnover
growth was affected by a slower than expected roll-out of marketing to US
advertisers. The appointment in May 2000 of Engage, a leading provider of
online advertising solutions, has enabled us to sell advertising more
effectively in both the US and Europe.
Before UITF 17 and NIC charges in respect of share options (see Note 1 to the
Financial Statements), the Company made a profit before taxation of £58,124
(six month period to 31 December 1999: £55,953). After the charges in respect
of share options, the company sustained a loss before taxation of £67,646.
Significant growth in users and traffic
Registered users, all of whom have been active within the four months to 30
June 2000, totalled 2.1 million at that date (31 December 1999: 1.5 million).
September saw further growth in registered users to 2.7 million.
Global monthly page impressions have increased from 101 million to 163 million
over the period under review. Page impressions have continued to grow
significantly, reaching 273 million in September 2000. We have achieved a
monthly average compound growth rate for traffic of 11.7% for the year to
date.
Our growth in the period has been achieved with an average attrition rate of
only 0.1% of registered users per month. We will continue to report our
traffic statistics on a quarterly basis.
Establishing partnerships
We have rigorously pursued our strategy of developing partnerships with cable
and other broadcast network operators. The agreements signed with Cable &
Wireless Communications and Telewest added to our existing partnership with
Worldgate. We have also recently signed agreements with Bush Internet and
Planetweb Inc. Under these agreements, we will make our entertainment content
and community available to users of the Bush Internet interactive TV portal in
the UK and Sega Dreamcast users in the US respectively. A number of similar
new distribution partnerships are currently being negotiated, both in Europe
and the US.
Exciting progress has been made in the provision of our entertainment services
to internet-based service providers. We have entered into an agreement with
Freeserve under which we will provide, for a trial period, an enhanced branded
LeisureDistrict PC service over their new broadband service. We are also
providing, under a separate agreement, chat room services and games to the
Wireless Group Plc via their TalkSport service.
In June we announced a partnership with eToys, to include their childrens' toy
ranges in the end-user LeisureDistrict PC e-commerce retail offering. They
join our existing e-commerce partners, including WH Smith and Expedia.
The combination of our original end-user LeisureDistrict online service with
branded PC and TV LeisureDistrict services produced in partnership with major
network operators, creates a firm distribution base for the provision of
consumer entertainment services. We call this 'the LeisureDistrict Network'.
Infrastructure
Our team has grown to 42 people as at 30 September 2000, necessitating a move
to larger premises. Consequently, we incurred significant recruitment costs
and this is reflected in administrative expenses for the period under review.
Our core team provides us with essential skills in the areas of technology,
design, marketing, business development and financial control.
We have increased the scalability of our delivery platform, ensuring that
existing performance levels are maintained, despite ever-increasing user
numbers generated through hosted services. This enables us to provide
enhanced content for broadband environments, and facilitates more
sophisticated profiling of our users. In addition, we have introduced
sophisticated accounting, customer management and ad serving solutions to
provide for continued expansion of our commercial activities.
Strategy
We have established our credentials as a global provider of interactive
entertainment services and consumer focused applications delivered through
convergent interactive technologies. We believe that our major sustainable
competitive advantage in this space is the LeisureDistrict Network, a growing
network of technically and geographically diverse user bases, drawn from
distribution partnerships and our own end-user services. Our distribution
partnerships are expanding the reach of the LeisureDistrict Network, enabling
us to grow our user base rapidly with minimal advertising spend.
We will further expand the LeisureDistrict Network through the integration of
other networks and platforms. To this end, we continuously review emerging
technologies, including wireless, with a view to incorporating support for
them into the LeisureDistrict Network. Delivery of high quality content will
continue to be a priority - we will collaborate with content, commerce and
technology partners in developing services for delivery over the
LeisureDistrict Network.
In June we announced the launch of our range of next generation advertising
tools aimed primarily at interactive television, cable and broadband internet
services. These tools enable the delivery of TV-style full screen
advertisements combined with the best targeting and measurability
characteristics of the Web. Initial industry response has been positive,
confirming the prospect of a significant premium over online banner
advertising. Next generation advertising will shortly be launched through
LeisureDistrict TV services with a campaign for Domino's Pizza, a leading
multi-national pizza delivery company.
Next generation advertising will be the first of several consumer-focused
applications to be made available to third party network operators and
destination sites as a business-to-business Hosted Solution.
Prospects
Our flotation has given us the financial resources to grow the business
aggressively in line with the strategy we set out in our prospectus. Progress
over the period, in terms of traffic and revenue growth, further vindicates
this strategy. Although the opportunities we envisaged for the company in the
prospectus remain essentially the same and continue to be exploited, the
market is continually evolving and we believe that we have the flexibility to
respond and adapt to market changes as required.
Frank Lewis F.C.A.
Executive Chairman
3 October 2000
Profit and loss account for the half year to 30 June 2000
Reviewed Unaudited Audited
Six months Six months Period ended
Note ended 30 ended 30 31 December
June 2000 June 1999 1999
£ £ £
======= ======= =======
Turnover 2 1,038,069 250,974 781,571
Cost of sales (349,850) (109,240) (336,541)
======= ======= =======
Gross profit 688,219 141,734 445,030
======= ======= =======
Sales and
marketing expenses (44,917) (2,400) (14,639)
Platform and
development costs (139,307) (37,217) (116,754)
Administrative
expenses before
provision for
NIC and UITF 17
charge on share options (708,324) (79,141) (236,883)
Provision for
NIC on share options (41,041) - -
UITF 17 charge 1 (84,729) - -
======= ======= =======
Net operating expenses (1,018,318) (118,758) (368,276)
======= ======= =======
Operating (loss)/ profit (330,099) 22,976 76,754
Net interest receivable 262,453 2,130 4,305
======= ======= =======
(Loss)/ profit on
ordinary activities
before taxation (67,646) 25,106 81,059
Tax 3
credit/(charge)
on (loss)/profit
on ordinary activities 20,970 (6,195) (20,000)
======= ======= =======
(Loss)/retained profit
for the financial period (46,676) 18,911 61,059
======= ======= =======
Earnings per 10p share
======= ======= =======
Basic and 4
diluted (loss)/earnings
per share (0.0620p) 0.0393p 0.1402p
======= ======= =======
Earnings per 10p share
before provision for
NIC and UITF 17
charges on share options
======= ======= =======
Basic and 4
diluted earnings
per share 0.1050p 0.0393p 0.1402p
======= ======= =======
The results for the period above are derived entirely from
continuing operations.
There is no difference between the (loss)/profit on ordinary activities
before taxation and the results for the period stated above, and their
historical cost equivalents.
The company has no recognised gains and losses other than the loss
above, therefore no separate statement of total recognised gains and losses
has been presented.
Balance sheet as at 30 June 2000
Reviewed Unaudited Audited
Six months Six months Period ended
ended 30 ended 30 31 December
June 2000 June 1999 1999
Note
£ £ £
======= ======= =======
Fixed assets
Intangible assets 48,324 77,313 62,818
Tangible assets 618,560 108,006 94,916
======= ======= =======
666,884 185,319 157,734
Current assets
Debtors 1,181,076 189,261 389,541
Cash at bank
and in hand 13,820,792 159,574 89,884
======= ======= =======
15,001,868 348,835 479,425
======= ======= =======
Creditors - Amounts falling
due within one year (399,707) (57,006) (113,980)
======= ======= =======
Net current assets 14,602,161 291,829 365,445
======= ======= =======
Total assets less current
liabilities 15,269,045 477,148 523,179
Provisions for
liabilities and
charges (5,625) (1,742) (5,625)
======= ======= =======
Net assets 15,263,420 475,406 517,554
======= ======= =======
Capital and reserves
Called-up share capital 7,675,806 86 86
Share premium account 7,033,171 456,409 456,409
Capital redemption
reserve 455,331 - -
Profit and loss account 99,112 18,911 61,059
Equity 5
shareholders' funds 15,263,420 475,406 517,554
Cash flow statement for the half year ended 30 June 2000
Reviewed Unaudited Audited
Six months Six months Period ended
ended 30 ended 30 31 December
June 2000 June 1999 1999
£ £ £
======= ======= =======
Continuing activities
Operating (loss)/profit (330,099) 22,976 76,754
UITF 17 charge 84,729 - -
Depreciation charge 42,764 13,026 34,121
Amortisation of goodwill 14,495 9,663 24,158
Increase in debtors (770,565) (189,261) (389,541)
Increase in creditors 299,771 36,483 85,561
======= ======= =======
Net cash
outflow from
operating activities (658,905) (107,113) (168,947)
Returns on investments and
servicing of finance
Interest received 262,571 2,130 4,305
Interest paid (118) - -
======= ======= =======
Net cash inflow
from returns on
investments and
servicing of finance 262,453 2,130 4,305
Capital expenditure and financial investments
Purchase of tangible
fixed assets (566,409) (5,016) (15,047)
======= ======= =======
Net cash outflow for
capital expenditure and
financial investment (566,409) (5,016) (15,047)
Acquisitions
Purchase of assets and trade - (200,966) (200,966)
======= ======= =======
Net cash outflow for
acquisitions - (200,966) (200,966)
======= ======= =======
Net cash outflow before
management of liquid
resources and financing (962,861) (310,965) (380,655)
Management of liquid resources
Increase in
short term
deposits with banks (13,764,411) - -
Financing
Issue of ordinary share
capital 16,446,546 500,056 500,056
Expenses of share issue (1,738,733) (43,561) (43,561)
Repayment of loan (14,044) - -
New loan - 14,044 14,044
======= ======= =======
Net cash inflow
from financing 14,693,769 470,539 470,539
======= ======= =======
(Decrease)/increase
in net cash (33,503) 159,574 89,884
======= ======= =======
Cash flow statement for the half year ended 30 June 2000 (continued)
Reviewed Unaudited Audited
Six months Six months Period ended
ended ended 30 31 December
June 2000 June 1999 1999
£ £ £
Reconciliation to net funds
(Decrease)/increase in net cash (33,503) 159,574 89,884
Movement in deposits 13,764,411 - -
Borrowings 14,044 (14,044) (14,044)
======= ======= =======
Movement in net
funds for the period 13,744,952 145,530 75,840
Net funds at commencement
of period 75,840 - -
======= ======= =======
Net funds at
end of period 13,820,792 145,530 75,840
======= ======= =======
Notes to the financial statements for the period ended 30 June 2000
1 Basis of preparation
Unless stated otherwise, the interim financial information has been prepared
on the basis of the accounting policies set out in the Company's
financial statements for the period ended 31 December 1999. Turnover is
stated net of commission where appropriate (see note 2).
The Company operates a scheme whereby certain employees obtain
unconditional share options. In accordance with UITF 17 (Employee Share
Schemes), the Company recognises a charge in the profit and loss account in
respect of this share option scheme. The charge is the difference between
the directors' estimate of the market value of the shares at the date of
issue and the option price. The charge of £84,729 is notional in that there
is no underlying cashflow or other financial liability associated with the
charge, nor does it give rise to a reduction in assets or shareholders'
funds. In addition, there is no impact on distributable profits.
On 26 January 2000 the shareholders agreed to an increase in the
authorised share capital from £1,000 to £601,000, consisting of 1,803,000
A ordinary shares and 4,207,000 B ordinary shares. On the same date, the C
ordinary shares issued in March 1999 were redesignated as B ordinary shares.
On 26 January 2000, the Company applied part of the share premium account
in issuing fully paid bonus shares (with a total nominal value of £51,600) on
the basis of 600 A or B ordinary shares for each existing A or B ordinary
share held. On 28 February 2000, the authorised share capital of the
Company was increased from £601,000 to £10,455,331 by the creation of
25,242,000 A ordinary shares, 47,118,400 B ordinary shares and 26,182,916
new ordinary shares. The Company applied part of the share premium account
in issuing fully paid bonus shares (with a total nominal value of
£7,236,040) on the basis of 140 new A ordinary shares and B ordinary shares
for each existing A or B ordinary share held. On the same date 4,553,316 A
ordinary shares were converted into deferred shares of 10p each. On
Admission, all remaining issued A and B ordinary shares were converted into
ordinary shares of 10p each and the Company bought in the deferred
shares. On the same date, the Company issued 8,434,127 ordinary shares
of 10p each at £1.95 per share raising cash proceeds of £16,446,546
before expenses.
The Company did not commence trading until 1 March 1999.
Accordingly, comparatives for the corresponding half year to 30 June 1999
represent only four months of trading. The financial information for the
half year to 30 June 1999 has not been audited.
The financial information contained in this interim report is unaudited but
has been reviewed by the auditors. It does not constitute statutory
accounts as defined in section 240 of the Companies Act 1985. The
comparative financial information for the period ended 30 June 1999 was
neither audited nor reviewed by the auditors. Statutory accounts for the
period from 4 August 1998 to 31 December 1999 incorporating an unqualified
audit report have been filed with the Registrar of Companies.
Further copies of this report are available from our registered
office: Hillgate House, 26 Old Bailey, London, EC4M 7HW.
2 Turnover
Advertising revenue in the period was generated under the terms of
several agency arrangements. Turnover is included either gross or net of
related agency commissions, depending on the commercial substance of each
underlying agency arrangement. A reconciliation of turnover gross and net of
all commissions is presented below.
Reviewed Unaudited Audited
Six months Six months Period ended
ended 30 ended 30 31 December
June 2000 June 1999 1999
£ £ £
======= ======= =======
Gross turnover before 1,224,891 250,974 781,571
commissions
Agency commissions (186,822) - -
======= ======= =======
Turnover 1,038,069 250,974 781,571
======= ======= =======
3 Taxation
The corporation tax credit for the six months ended 30 June 2000 has been
calculated at the estimated annual effective rate of 31%.
4 (Loss)/Earnings per share
The basic (loss)/earnings per share has been calculated by dividing the
net (loss)/profit for the period by the weighted average number of
75,342,969 shares in issue during the six months ended 30 June 2000 (six
months ended 30 June 1999: 48,101,052, period ended 31 December 1999:
43,517,966). The company had no dilutive potential ordinary shares in any of
the periods, and therefore there is no difference between the loss per
ordinary share and the diluted loss per ordinary share.
5 Reconciliation of movement in shareholders' funds
Reviewed Unaudited Audited
Six months Six months Period ended
ended 30 ended 30 31 December
June 2000 June 1999 1999
£ £ £
(Loss)/profit
for the period (46,676) 18,911 61,059
New share capital
issued 16,446,546 500,056 500,056
Expenses of share issue (1,738,733) (43,561) (43,561)
UITF 17 charge 84,729 - -
======= ======= =======
Net addition to
shareholders funds 14,745,866 475,406 517,554
Opening shareholders'
funds 517,554 - -
======= ======= =======
Closing shareholders'
funds 15,263,420 475,406 517,554
======= ======= =======
Independent review report to e-district.net plc
Introduction
We have been instructed by the Company to review the financial information
set out on pages 5 to 11 and we have read the other information contained in
the interim report and considered whether it contains any apparent
misstatements 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.
Review work performed
We conducted our review in accordance with guidance contained in
Bulletin 1999/4 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 excludes audit procedures such as tests of controls and
verification of assets, liabilities and transactions. It 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 30 June 2000.
PricewaterhouseCoopers
Chartered Accountants
Reading
3 October 2000
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