Interim Results - 6 Months to 30 September 1999
Phonelink PLC
16 December 1999
PhoneLink plc
Interim Results for the Six Months Ended 30 September 1999
Highlights
- Strategy to establish PhoneLink as an Internet, E
commerce and Business Services enterprise is showing
significant progress.
- Underlying business of the Group continued to show
strong growth during the period.
- Gross sales rose to £23.8m (1998: £9.9m).
- Turnover increased to £6.4m (1998: £3.5m).
- Cash balances of the Group at 10 December 1999 were
£4.4m.
- Loss for the half year before goodwill was £1.1 million
(1998: £1.6m) a significant improvement and evidence
of the Group's recovery.
- Placing to raise £1 million in November 1999 will be
used for marketing and promotion of Internet and E
Commerce businesses.
Commenting on the results, Sir Gordon Brunton, Chairman,
said: 'We now have a Group of impressive businesses
generating profitable revenues together with enviable
Internet and E Commerce opportunities each of which are
capable of transforming the performance of the Group.
Most important of all we have the management resources to
exploit them.'
For further information, please contact:
PhoneLink plc On 16 December 17 December onwards
Graham Ramsey,
Chief Executive 0171 283 9666 0171 283 9666
Richard Law,
Finance Director 0171 283 9666 0151 608 0205
Web-site: www.phonelink.com
Ludgate Communications
Richard Hews 0171 253 2252
Victoria Martin
PHONELINK PLC
Chairman's Statement - Six Months to 30 September 1999
During the six months under review, your company has
continued to build upon the strategy of the last two years
to establish itself as an Internet, E Commerce and
Business Services centric enterprise. This strategy is
now showing significant progress.
Internet and E Commerce
Our proactive Internet and E Commerce strategy within our
Online Services Division produced tangible results with
the launch of Tel-Me Global Traveller (www.telme.com) in
August 1999. This move was consolidated in early November
with the acquisition of Farebase Limited ('Farebase'), a
specialist provider of discount flights and holidays over
the Internet (www.farebase.net). The content of Tel-Me
Global Traveller and Farebase is currently being combined
and the new service is scheduled for launch early next
year. This service which incorporates a number of unique
features now competes effectively with existing operators
in this market. Based on early market experience, your
directors believe that its prospects for both UK and
International expansion are excellent. A vigorous
marketing campaign to promote this service will commence
early in the new year.
In the Chief Executive's review in June 1999, Graham
Ramsey indicated that PhoneLink had been retained by
SmithKline Beecham to specify an E Commerce system based
on PhoneLink's open platform technology which would also
make use of the company's advanced mobile communications
software to enable remote access. I am pleased to
announce that PhoneLink was awarded the contract to tailor
and supply this E Commerce system in July 1999 and it is
now installed and working successfully. Another major
contract to provide an E Commerce system to the Builders'
Merchants Federation has been completed and further sales
of PhoneLink's E Commerce technology are imminent.
Business Services
PhoneLink's Customer Information and Database Management
business ('CIDM') has pursued its strategy of
diversification during the period and has firmly
established itself as a provider of database outsourcing
and consultancy services in addition to its core
competency as a provider of address management and
marketing tools. The database outsourcing market, in
which major corporates place their databases with
outsourcing businesses such as ours, has seen significant
growth in the last 12 months because of the increasingly
specialist skills involved in database maintenance and
interpretation. This market is poised for further growth
in the coming year.
The database management skills within this area of the
Groups business are being applied to support our E
Commerce and Internet activities and will enable the Group
to provide further valuable services to its system and
software clients.
The integration of PhoneLink's DataCare telephone
numbering business into the CIDM business in July of this
year has enabled the product range of services offered to
be expanded to include telephone number and directory
services and we are currently examining ways of overlaying
PhoneLink's Internet and E Commerce technology to add
further value to this business. Recent client wins for
this area of the Groups business include BSkyB, Trinity
Mirror Plc and Scottish Power.
Corporate Travel
PhoneLink's Corporate Travel activities have shown strong
recovery during the half year and have now re-established
the level of business and profitability experienced before
the downturn in the oil industry last year which affected
a number of its major customers. This part of the Group
provides the fulfilment for the Tel-Me Global Traveller
and Farebase Internet services and is expected to expand
significantly from the combined Tel-Me Global Traveller
and Farebase services. A leisure travel fulfilment centre
is currently being established in Aberdeen to manage the
internet operation.
Placing
PhoneLink conducted a placing in November 1999 to raise
approximately £1 million. These funds are to be used
principally for the marketing and promotion of our
Internet and E Commerce businesses over the coming months.
Trading
The underlying business of the Group continued to show
strong growth during the period with gross sales of £23.8
million and turnover of £6.4 million (1998: £9.9 million
and £3.5 million respectively). This was achieved
despite our CIDM business being adversely affected
during the period by customer sentiment over Year 2000
and a temporary fall in the price of oil which affected
some of our major clients in the Corporate Travel business.
These external factors which were discussed in my
statement to you in June 1999 impacted on the trading
performance of the Group in the early months of the half
year. Since that time, underlying sales have grown
strongly. This recovery has enabled the Group to generate
profits before goodwill and cash from trading over the
last three months to 30 November 1999. Cash balances of
the Group at 10 December 1999 were £4.4 million. Short
term borrowings were £1.4 million giving net cash balances
available to the Group of £3 million.
The loss for the half year of £1.1 million before goodwill
represents a significant improvement on last year's loss
before goodwill of £1.6 million and is further evidence of
the recovery of the Group. As we move into the second
half of the year, discounting the quiet Christmas period,
we expect the recent positive progress to continue.
Our performance in the second half will be dependent on
the financial resource we commit to sales, marketing and
development of our Internet, E Commerce and Business
Services markets. It is our view that we should be bold
in this regard following the impressive growth of business
through Tel-Me Global Traveller since its launch in August
which has seen the annualised value of bookings exceed £1
million.
Name Change
In line with the repositioning of the Group the Company
has taken the decision to seek shareholder approval to
change its name to the Tel-Me Group plc. The Company will
be communicating with shareholders regarding this in the
new year.
Prospects
The directors believe that the prospects of your company
are good. We now have a Group of impressive businesses
generating profitable revenues together with enviable
Internet and E Commerce opportunities each of which are
capable of transforming the performance of the Group.
Most important of all we have the management resources to
exploit them.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 1999
Unaudited Unaudited Audited
6 Months to 6 Months to Year to
Note 30 September 30 September 31 March
1999 1998 1999
£'000 £'000 £'000
Gross sales 2
Customer Information
and Database Management 4,124 2,026 6,398
On-line Services 607 714 1,238
Corporate Travel 19,023 7,205 24,079
-------- -------- -------
23,754 9,945 31,715
-------- -------- -------
Turnover 2
Customer Information
and Database Management 4,124 2,026 6,398
On-line Services 607 714 1,238
Corporate Travel 1,629 739 2,378
-------- -------- -------
6,360 3,479 10,014
Cost of sales (1,606) (1,025) (2,492)
-------- -------- -------
Gross profit 4,754 2,454 7,522
Other operating expenses
(excluding goodwill
amortisation) (5,892) (4,220) (10,708)
Goodwill amortisation (284) (121) (411)
-------- -------- -------
Operating loss 3
Customer Information
and Database Management (303) 105 383
On-line Services (524) (1,561) (2,896)
Corporate Travel (202) (44) (310)
Central costs (393) (387) (774)
-------- -------- -------
(1,422) (1,887) (3,597)
Loss from interest in
associated undertakings - (3) (3)
Interest receivable less
payable 10 189 219
-------- -------- --------
Loss on ordinary activities
before taxation (1,412) (1,701) (3,381)
Taxation - - -
-------- -------- --------
Loss on ordinary
activities after taxation (1,412) (1,701) (3,381)
Dividend - - -
-------- -------- --------
Amount transferred
from reserves (1,412) (1,701) (3,381)
======== ======== ========
Loss per 2.5p ordinary
share (pence) 5 (2.0) (3.0) (5.4)
-------- -------- --------
Loss per 2.5p ordinary
share (pence) -
diluted 5 (2.0) (3.0) (5.4)
-------- -------- --------
Adjusted loss per 2.5p
ordinary share (pence) -
before goodwill
amortisation and
exceptional costs 5 (1.6) (1.8) (3.0)
======== ======== ========
CONSOLIDATED BALANCE SHEET
AS AT 30 SEPTEMBER 1999
Unaudited Unaudited Audited
Note 30 September 30 September 31 March
1999 1998 1999
£'000 £'000 £'000
Fixed assets
Intangible assets 11,824 12,237 12,388
Tangible assets 2,178 2,947 2,273
Investments - 6 -
-------- -------- --------
14,002 15,190 14,661
-------- -------- --------
Current assets
Stocks 11 12 11
Debtors 6,636 6,507 5,996
Cash and short term
deposits 3,201 4,604 4,033
-------- -------- --------
9,848 11,123 10,040
Creditors: amount falling
due within one
year 6 (9,646) (7,220) (6,616)
-------- -------- --------
Net current assets 202 3,903 3,424
-------- -------- --------
Total assets less
current liabilities 14,204 19,093 18,085
Creditors: amounts due
in greater than one year (484) (2,491) (2,953)
-------- -------- --------
13,720 16,602 15,132
======= ======== =======
Capital and reserves
Called up share capital 1,718 1,718 1,718
Share premium account 30,294 30,294 30,294
Merger reserve 7,389 7,389 7,389
Shares not yet issued 1,190 980 1,190
Profit and loss account (26,871) (23,779) (25,459)
-------- -------- --------
13,720 16,602 15,132
======== ======== ========
CONSOLIDTED CASHFLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 1999
Unaudited Unaudited Audited
6 Months to 6 Months to Year to
Note 30 September 30 September 31 March
1999 1998 1999
£'000 £'000 £'000
Net cash outflow
from operating
activities 4(a) (884) (1,824) (1,793)
-------- -------- -------
Returns on
investments and
servicing of
finance
Interest received 102 242 390
Interest paid (88) (46) (157)
Interest element of
finance lease rental
payments (4) (7) (14)
-------- -------- --------
10 189 219
-------- -------- -------
Taxation
Corporation tax paid - - (237)
-------- -------- -------
Capital expenditure and
financial investment
Payments to acquire
tangible fixed assets (198) (187) (575)
Receipts from the sale
of tangible fixed assets 25 59 213
-------- -------- --------
(173) (128) (362)
-------- -------- --------
Acquisitions and disposals
Disposal of associated
undertaking - - 2
Acquisition of subsidiary
undertakings - (2,533) (2,557)
Net overdrafts acquired
with subsidiary
undertakings - (194) (194)
-------- -------- --------
- (2,727) (2,749)
-------- -------- --------
Cash outflow before use
of liquid resources and
financing (1,047) (4,490) (4,922)
-------- -------- --------
Management of liquid resources
Cash withdrawn from short
term deposits 1,302 4,646 5,714
-------- -------- --------
Financing
Share issue costs - (250) (250)
Repayment of capital
element of finance leases
and loans (92) (46) (60)
-------- -------- --------
(92) (296) (310)
-------- -------- --------
Increase/(decrease)
in cash 4(b) 163 (140) 482
======== ======== ========
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
The interim financial statements are prepared on the
basis of the accounting policies set out in the annual
report and accounts for the year ended 31 March 1999.
2. GROSS SALES
Gross sales represents the value of goods and services
invoiced to customers exclusive of value added tax. This
additional disclosure is included to illustrate the
impact on the value of amounts invoiced to customers of
bought in services from airlines and other operators
which are charged on to customers by the corporate travel
division. Turnover for the corporate travel division
represents commission income net of the cost of bought in
services invoiced out to customers.
3. EXCEPTIONAL COSTS
The operating loss is stated after charging exceptional
costs as follows:
Unaudited Unaudited Audited
6 Months to 6 Months to Year to
30 September 30 September 31 March
1999 1998 1999
£'000 £'000 £'000
Provision against tangible
fixed assets - 369 884
Redundancy costs - 100 100
Cost of aborted acquisition - 100 100
------- ------- ------
- 569 1,084
======= ======= ======
4. OPERATING LOSS
a) Reconciliation of operating loss to operating cash
flows
Unaudited Unaudited Audited
6 Months to 6 Months to Year to
30 September 30 September 31 March
1999 1998 1999
£'000 £'000 £'000
Operating loss (1,422) (1,887) (3,597)
Depreciation 269 432 840
Amortisation of intangible
fixed assets 80 33 113
Provision against tangible
fixed assets - 369 884
Goodwill amortisation 284 121 411
(Profit) on disposal of
fixed assets (1) (10) (26)
(Increase)/decrease in
debtors (640) (99) 270
Decrease in stocks - 1 3
Increase/(decrease) in
creditors 546 (784) (691)
------ ------ ------
(884) (1,824) (1,793)
====== ====== ======
b) Reconciliation of net cashflow to movement in funds
Unaudited Unaudited Audited
6 Months to 6 Months to Year to
30 September 30 September 31 March
1999 1998 1999
£'000 £'000 £'000
At the beginning of the
period 2,277 8,144 8,144
Loans arising on acquisition - - (406)
Finance leases arising on
acquisition - (289) (289)
Decrease in debt 92 46 60
Increase/(decrease) in cash 163 (140) 482
Movement in short term
deposits with banks (1,302) (4,646) (5,714)
------ ------ ------
At the end of period 1,230 3,115 2,277
====== ====== ======
c) Analysis of net funds
At 31 March Cashflow At 30 September
1999 6 Months 1999
£'000 £'000 £'000
Cash 1,830 470 2,300
Short term deposits 2,203 (1,302) 901
--------- --------- ---------
4,033 (832) 3,201
Bank overdraft (1,121) (307) (1,428)
--------- --------- ---------
2,912 (1,139) 1,773
Finance leases (160) 63 (97)
Loans (475) 29 (446)
--------- --------- ---------
2,277 (1,047) 1,230
========= ========= =========
5. EARNINGS PER SHARE
Earnings per share has been calculated in accordance with
Financial Reporting Standard 14 by reference to the
following;
Earnings per share are based on
Unaudited 6 Months Unaudited 6 Months
to 30 September to 30 September
1999 1998
pence £'000 pence £'000
Loss after taxation (2.0) (1,412) (3.0) (1,701)
Add exceptional items - - 1.0 569
Add goodwill 0.4 284 0.2 121
------- ------- ------- -------
Adjusted loss after
taxation (1.6) (1,128) (1.8) (1,011)
------- ------- ------- -------
Audited Year to
31 March
1999
pence £'000
Loss after taxation (5.4) (3,381)
Add exceptional items 1.7 1,084
Add goodwill 0.7 411
------- -------
Adjusted loss after
taxation (3.0) (1,886)
------- -------
Weighted average number
of shares in issue 68,733,884 56,802,996 62,768,440
Diluted weighted
average number of
shares in issue 6,311 - -
----------- ---------- -----------
68,740,195 56,802,996 62,768,440
=========== ========== ==========
6. The earn out in respect of the acquisition of GB
Mailing Systems Limited operates based on the
period from 1 August 1999 to 31 July 2000. Under
the earn out agreement the former shareholders of
GB Mailing Systems Limited can earn up to a maximum
additional £6.0 million. A provision has been made
in the Group accounts relating to this contingent
consideration of £3.4 million. A minimum of 35% of
the contingent consideration will be paid in shares
in accordance with the purchase agreement.
Therefore, £2.2 million has been disclosed in
creditors amounts due in less than one year and
£1.2 million has been disclosed as shares which may
be issued. The earn out agreement, however,
provides that the full value of the earn out
consideration may be satisfied by the issue of
shares at the option of PhoneLink plc. The
directors will determine the proportion of earn out
which will be paid in shares at the end of the earn
out period.
AUDITOR'S REPORT
TO THE DIRECTORS OF PHONELINK PLC
We have reviewed the interim financial information for
the six months ended 30 September 1999 set out on pages 5
to 10 which is the responsibility of, and has been
approved by, the Directors. Our responsibility is to
report on the results of our review.
Our review was carried out having regard to the Bulletin,
Review of interim financial information, issued by the
Auditing Practices Board. This review consisted
principally of obtaining an understanding of the process
for the preparation of the interim financial information,
applying analytical procedures to the underlying
financial data, assessing whether accounting policies
have been consistently applied, and making enquiries of
the group management responsible for financial and
accounting matters. The review excluded audit procedures
such as tests of controls and verification of assets and
liabilities, and was therefore substantially less in
scope than an audit performed in accordance with Auditing
Standards. Accordingly, we do not express an opinion on
the interim financial information.
On the basis of our review:
- we are not aware of any material modifications that
should be made to the interim financial information as
presented; and
- in our opinion the interim financial information has
been prepared using accounting policies consistent with
those adopted by the group in its accounts for the year
ended 31 March 1999.
Ernst & Young
Manchester
16 December 1999
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