RNS No 7372p
FREEPAGES GROUP PLC
2nd March 1998
FREEPAGES GROUP plc
("Freepages" or the "Company")
Results for the 1st quarter ended 31 December 1997
* Revenues for the quarter amounted to # 4.5 million* up 80
per cent on the same period last year.
* Gross new classified contract value in the UK amounted to
#5.5 million up 68 per cent on the same period last year.
* The compounded quarterly growth rate of gross new
classified contract value in the last financial year amounted to
13.6% and it is expected that the rate for this financial year
will significantly exceed this percentage.
* Announced for the first time, the average return on base
(advertiser renewals) during the quarter was 51 per cent and is
expected to increase.
* The number of telephonic readouts during the quarter
increased significantly to 3.4 million an increase of 210 per
cent on the same period last year.
* The number of internet readouts during the quarter
increased dramatically to 6.7 million, an increase of 380 per
cent on the same period last year.
* Following the rebranding campaign the unprompted brand
awareness of Scoot in the UK at the end of December 1997 was 6
per cent, more than three times the level of the Freepages brand
in September 1997.
* The Company announced partnership agreements with leading
internet companies Yahoo! and Excite.
* The Company announced an agreement to launch Scoot in
Belgium through a #10 million joint venture with VNU.
* Scoot (UK) recently received the prestigious Milia dOr
honour as the worlds best internet reference site and Scoot
(NL) was voted best product introduction of the year.
* The change over to a new financial accounting system resulted
in a reduction of the number of classified accounting weeks in
the first quarter. The quarterly classified revenue for the
period ended 31 December 1997 was calculated on 10 weeks
rather than a normalised 13 weeks. On a normalised basis the
total accounting revenue would have approximately #5.6 million
for the period ending 31 December 1997
Commenting on todays results, Robert Bonnier CEO said:
"We are pleased with the continued progress we made during the
quarter particularly in connection with the successful
rebranding which required an extraordinary effort from all our
employees. Our consumer useage continued to increase rapidly and
it is likely to be fuelled by recent partnership annoucements.
Historically our second and third quarters typically show
the strongest growth in revenue. During the second quarter
we have already experienced a significant acceleration in gross
new classified contract value. In addition our corporate
sales team has recently won a number of large new accounts which
will immediate contribute to the revenue line".
For further information contact:
Buchanan Communications Limited 0171 466 5000
Mark Edwards
Review of UK operations
The primary focus of the Company during the quarter was on the
rebranding initiative. This included the retraining of all
sales and call centre staff, delivery of new sales support
material and contracts as well as pro-active communication to
all existing advertisers and suppliers. The overall service
levels during this period were maintained and are expected to
show improvement during the remainder of the year.
The new brand 'Scoot' has been well received by consumers and
has already led to higher renewal and conversion rates of
classified and corporate advertisers. Following the rebranding
campaign the unprompted brand awareness of Scoot at the end of
December 1997 was 6 per cent, more than three times the level of
the Freepages brand in September 1997.
Alongside the rebranding process the Company recruited more than
100 new classified sales executives and 192 call centre
operators. At the end of 31 December 1997 the number of full
time equivalent employees was 680.
To enable investors to better analyse the growth and development
of the Companys business the Company has provided a number of
key performance indicators. These are presented on a quarterly
basis in the countries in which the company operates.
Key Performance Indicators (UK)
Mar-96 Jun-96 Sep-96 Dec-96 Mar-97 Jun-97 Sep-97 Dec-97
Gross new
classified
revenue #m* 1.8 2.9 3.0 3.3 4.0 5.4 5.0 5.5
Growth
percentage +58 +58 +2 +11 +23 +35 -7 +10
Gross new
Classified
Contract value
per sales
executive #11,585 #15,349 #15,349 #16,876 #19,400 #25,600 #21,500 22,500
Growth
percentage +27 +32 0 +10 +15 +32 -16 +5
Return on base - - - - - - - 51%
Growth percentage
Telephone
readouts
millions 0.4 0.5 0.7 1.1 1.7 2.1 2.6 3.4
Growth
percentage +100 +25 +40 +57 +56 +24 +24 +31
Internet
readouts
millions 0.3 0.5 0.7 1.4 2.5 2.5 3.4 6.7
Growth
percentage - +66 +40 +100 +78 0 +36 +97
*Total gross value of all new contracts entered into during the
period. Due to defaults and cancellations, not all the gross
contract value may ultimately be realised by Scoot (UK)
Limited.
The number of telephonic readouts during the quarter increased
significantly to 3.4 million an increase of 210 per cent on the
same period last year. The repeat usage further increased, and
averaged 85 per cent during the quarter. The number of internet
readouts during the quarter increased dramatically to 6.7
million, an increase of 380 per cent on the same period last
year; growth is further fuelled by recently announced
partnership agreements with leading internet companies Yahoo!
and Excite. In addition, Scoot (UK) recently received the
prestigious Milia d'Or honour as the worlds best internet
reference site.
In March 1998, John Coleman (40) will join the Company as
Managing Director of Scoot (UK) responsible for the operational
activities and reporting directly to CEO Robert Bonnier. John
was previously Managing Director of Brinks (UK) Ltd, prior to
joining Brinks he was with Managing Consultants McKinsey and
received an MBA from INSEAD.
Review of the Dutch operations
On the 1st of September 1997 Scoot (NL) was successfully
launched through a national marketing campaign. To date the
results have substantially exceeded expectations leading to a
reduction in the forecasted investment commitment for Freepages
from #7 million to approximately #5 million.
During the 6 month period ended 31 December 1997 total new
classified contract value amounted to NLG 11.3 million (#3.5
million) and corporate contract value amounted to NLG 0.2
million. At the end of the period the number of full time
equivalent employees was 234.
Call traffic and internet usage increased significantly
throughout the period and repeat usage is already above 40 per
cent. The Company recently announced a strategic internet
partnership with Lycos, one of the leading internet companies.
In the three month period ended 31 December 1997 the Company
recruited a substantial number of new sales staff. This
resulted in a slight overall reduction in the productivity per
sales executive.
In January 1998 Scoot was voted the most successful
Introduction of the Year 1997 by Management Scope magazine.
Key Performance Indicators (NL)
Sep-97 Dec-97
Gross new classified revenue #m* 1.5 2.0
Growth percentage +33%
Gross new classified
contract value per sales executive 27,400 26,100
Growth percentage -5%
Return on base
Growth percentage
Telephone readouts
millions 0.2 0.5
Growth percentage +150%
Internet readouts
millions 0.9 1.0
Growth percentage +11%
- Total gross value of all new contracts entered into during
the period. Due to defaults and cancellations, not all the
gross contract value may ultimately be realised by Scoot (NL).
NB Dutch operations launched nationally in September 1997.
Review of the Belgian operations
Freepages and VNU recently announced an agreement to launch the
Scoot service in Belgium through a 50:50 joint venture. The
total investment requirement is estimated to amount to
approximately # 10 million during a three-year period.
Prior to the launch in Belgium Freepages and VNU jointly
conducted an extensive feasibility study, which indicated a high
level of interest from both consumers and advertisers in the
Scoot services. The Belgian advertising market has one of the
highest levels of directory expenditures in Europe.
During the last months in 1997 the key management team was
formed and is led by Mark de Smedt (ex Citicorp and Apple). The
head office is established in Brussels. It is expected that
test marketing in French, Walloon and Flemish speaking areas
will take place during April and May and the national launch is
planned for June 1998.
Discussions with VNU, in relation to a possible extension of
joint ventures following the purchase of World Directories are
still continuing and an announcement will be made when
appropriate.
Financial Results
Revenue for the three months to 31 December 1997 was #4.5
million compared to #2.5 million for the previous year and
represented an increase of 80 per cent. The change over to a new
financial accounting system resulted in a reduction of the
number of classified accounting weeks in the first quarter. The
quarterly classified accounting revenue for the period ended 31
December 1997 of #3.6m was calculated on 10 weeks rather than
the normal 13 weeks and on a normalised basis the classified
accounting revenue would have amounted to #4.7 million. The
difference in accounting revenue will be recorded during the
remainder of the 1998 financial year.
For the first time the Company reported its return on base
figure (advertiser renewals) which amounted to 51 per cent
during the quarter. This figure is calculated by comparing
the annual advertising subscription value coming up for renewal
against the new advertising renewal contract value sold.
The return on base increased by a few percentage points per
month as a result of the significant increase in usage,
increasing sales experience and the positive response to the
Scoot brand and is expected to continue to increase.
Operating loss amounted to #5.7 million for the period. Loss
per share for the period was 1.34p on a weighted average number
of ordinary shares of 492.2 million. SG&A, excluding marketing
and international costs, remained at the same level during the
first quarter in comparison to the fourth quarter of 1997
financial year. As a result of the re-branding marketing
expenditure was significantly increased to #2.8 million in the
first quarter of 1998 from #0.9 million in the fourth quarter of
1997. The marketing expenditure was primarily focused on above
the line advertising to continue our brand building strategy.
Cash outflow amounted to #10.1 million during the quarter
primarily as a result of capital expenditure of #0.6 million,
equity investments in TDS Group, Scoot Netherlands and Scoot
Belgium of #2.0 million, UK marketing expenditure of #3.5
million and an increase in working capital of #2.0 million. It
is anticipated that the cash outflow for the remainder of this
year will be very substantially lower compared with the first
Quarter. At the end of the period the net cash balance was #
24.4 million.
Key Financial Statistics
Mar-96 Jun-96 Sep-96 Dec-96 Mar-97 Jun-97 Sep-97 Dec-97
Revenue UK only
Classified 0.7 1.4 2.0 2.4 2.9 3.9 3.9 3.6*
Corporate - - 0.0 0.1 0.2 0.4 0.2 0.2
Other - - - - 0.4 0.5 0.4 0.7
SG&A** 2.8 2.7 3.7 3.9 5.2 5.8 6.9 6.9
Marketing 0.7 1.3 0.7 0.7 1.7 0.9 0.9 2.8
EBIT UK (2.8) (2.6) (2.4) (2.1) (3.4) (1.9) (3.3) (5.2)
(Cost/revenue
ratio)*** (400%) (186%) (120%) (84%) (97%) (40%) (73%) (116%)
International - - - - 0.1 0.3 0.4 0.5
Associates income (expense)
Scoot (NL) - - - - (0.1) (0.4) (1.2) (0.7)
Scoot (B) - - - - - - - (0.4)
TDS Group - - - (0.1) (0.2) (0.4) (0.2) (0.2)
RequesT - - - - - - - (0.1)
Net cash (debt) - - - 1.4 41.6 39.2 34.6 24.4
- The change over to a new financial accounting system
resulted in an adjustment of the number of accounting weeks in
the first quarter. The quarterly classified revenue for the
period ended 31 December 1997 was calculated on 10 weeks rather
than the normal 13 weeks. Revenues for a 13 week period based
on the average revenue for the 10 week period ended 31 December
1997 would have amounted to #4.7m.
** SG&A includes cost of sales and excludes marketing and
international costs. Marketing and
international costs are represented separately above.
*** Total UK costs (excluding international) divided by total
accounting revenue generated during the period.
Unaudited Consolidated Income Statement for the 3 Months to 31
December 1997
3 months 3 months 3 months 12 months 12 months 12 months
ended ended ended ended ended ended
31 Dec 31 Dec 31 Dec 30 Sep 30 Sep 30 Sep
1997 1997 1996 1997 1997 1996
(Note 1) (Note 1)
$000 #000 #000 $000 #000 #000
Sales 7,400 4,505 2,504 24,805 15,359 4,722
Operating costs
Cost of Sales (605) (368) (96) (1,298) (804) (230)
Selling, General and
Administrative
Expenses
Normal (16,213) (9,870) (4,529) (42,121) (26,081) (14,624)
Exceptional - - - (3,634) (2,250) -
Operating
Loss (9,418) (5,733) (2,121) (22,248) (13,776) (10,132)
Share of losses
of Associated
Companies (2,285) (1,391) (179) (4,165) (2,579) (13)
Gain on disposal
of fixed assets - - - - - (23)
Net Interest
Income 857 522 36 2,237 1,385 95
Loss before
taxes on income
and Exceptional
items (10,846) (6,602) (2,264) (24,176) (14,970) (10,073)
Taxes on
income - - - - - -
Net Loss (10,846) (6,602) (2,264) (24,176) (14,970) (10,073)
Finance cost
of non-equity
shares - - - - - (23)
Retained loss
for the year
attributable
to equity
shareholders (10,846) (6,602) (2,264) (24,176) (14,970) (10,096)
Loss per share (2.20)c (1.34)p (0.59)p (5.46)c (3.38)p (3.03)p
Weighted
average
no of
shares 492,200,098 492,200,098384,126,742 443,113,209 443,113,209 333,588,289
Notes to the Income Statement
1. The announcement of results, which is unaudited, has been
prepared on the basis of the accounting policies set out in the
Groups 1996/97 Annual Report and Accounts. The information
presented herein does not constitute statutory accounts within
the meaning of Section 240 of the Companies Act 1985 (as
amended).
2. Copies of the results for the quarter ended 31 December
1997 are available to the public from the Company Secretary,
Information House, Parkway Court, Oxford, OX4 2JY.
Consolidated Balance Sheets at 31 December 1997
31 Dec 31 Dec 31 Dec
1997 1997 1996
Unaudited Unaudited Unaudited
(Note 1)
$000 #000 #000
Assets
Current Assets
Cash at bank and in hand 40,235 24,493 1,358
Accounts Receivable 2,768 1,685 778
Prepaid expenses 1,219 742 429
Other current assets 6,753 4,111 250
Total Current Assets 50,975 31,031 2,815
Fixed Assets
Property, plant and equipment 4,839 2,946 1,920
Intangible assets 1,321 804 -
Share of net assets
of associated companies 82 50 520
Total Assets 57,217 34,831 5,255
Liabilities and shareholders equity
Current Liabilities
Accounts payable and
accrued expenses (9,764) (5,944) (1,880)
Deferred income (3,051) (1,857) (1,306)
Other taxation including
social security (2,045) (1,245) (905)
Total current liabilities (14,860) (9,046) (4,091)
Other long term liabilities (1,229) (748) (173)
Total Liabilities (16,089) (9,794) (4,264)
Shareholders equity
Deferred Shares (328) (200) (200)
Ordinary shares fully
paid par value two
pence per share:
492,200,098 shares
at 31 December 1997
(shares at 31
December 1996) (16,171) (9,844) (7,683)
Premiums in excess of
par value (90,730) (55,232) (13,917)
Shares to be issued (814) (496) (496)
Merger reserve 10,214 6,218 6,099
Retained deficit 56,701 34,517 15,206
Shareholders equity (41,128) (25,037) (991)
Total liabilities and
shareholders equity (57,217) (34,831) (5,255)
Unaudited Consolidated Cash Flow Statement for the 3 Months to 31
December 1997
31 Dec 31 Dec 31 Dec
1997 1997 1996
Unaudited Unaudited Unaudited
(Note 1)
$000 #000 #000
Net cash outflow from
operating activities (12,455) (7,582) (1,959)
Return on investments and
servicing of finance
Interest received 859 523 36
Interest paid - - -
Finance lease interest paid (8) (5) (4)
Net cash inflow from returns
on investments
and servicing of finance 851 518 32
Capital expenditure and
financial investment
Purchase of tangible fixed assets (938) (571) (444)
Purchase of intangible fixed assets - - -
Purchase of investments (1,789) (1,089) -
Convertible loan to
associate company (1,610) (980) -
Net cash outflow from
capital expenditure and
financial investment (4,337) (2,640) (444)
Net cash outflow before
management of
liquid resources and financing (15,941) (9,704) (2,371)
Management of liquid resources
Cash on short-term deposit 9,457 5,757 -
Net cash outflow from
management of liquid resources 9,457 5,757 -
Financing
Issue of ordinary shares
less expenses (490) (298) -
Capital element of finance
lease payments (164) (100) (15)
Net cash outflow from financing (654) (398) (15)
Net (decrease) in cash (7,138) (4,345) (2,386)
Notes to the Unaudited Consolidated Financial Statements
1. Basis of Preparation
The Group results include four associated companies: the
Freepages/VNU Joint Venture in the Netherlands, the
Freepages/VNU Joint Venture in Belgium, TDS Group Limited
and RequesT (UK) Limited. The results of these associated
companies are included in the Group results under the
equity method.
Whilst the Joint Venture in the Netherlands operates in
Dutch Guilders (NLG), the main currency in which the
Company operates is UK Pounds Sterling. The financial
statements are therefore stated in UK Pounds Sterling(#).
Merely for convenience, the financial statements contain
translations of certain pound sterling amounts into US
Dollars at $1.6427 per #1.00, the Noon Buying Rate of the
Federal Reserve Bank of New York on 31 December 1997.
2. Notes to the Consolidated Balance Sheets
The figures for the year ended 30 September 1997 are an
extract from the Groups Annual Report and Accounts which
are to be delivered to the Registrar of Companies. The
auditors opinion on the financial statements was not
qualified and did not include any statement under Section
237(2) or (3) of the Companies Act 1985.
3. Commitments and Contingencies
The Company is party to various legal proceedings in the
ordinary course of business which it does not believe will
result, in aggregate, in any material adverse effect on
its balance sheet position and results.
4. Movement in Equity Shareholders funds
In November 1997 and December 1997 costs amounting to
#298,000, incurred during the global equity offering and
NASDAQ listing, which was completed on 10 March 1997 have
been written off to share premium.
5. Unaudited Movement in Equity Shareholders Funds
#1 Ordinary Shares Premiums Shares Merger Retained Total
deferred In excess to be reserve deficit
shares of par issued
#000 Number #000 #000 #000 #000 #000 #000
Balance
at 30
Sept 1997 200 492,200,098 9,844 55,530 496 (6,218) (27,915) 31,937
Net loss 3
months to
December
1997 (6,602) (6,602)
Additional
costs of
global
equity
offering (298) (298)
Balance
at 31
December
1997 200 492,200,098 9,844 55,232 496 (6,218) (34,517) 25,037
6. Notes to Cashflow Statement
3 months ended 3 months ended 3 months ended
31 Dec 31 Dec 31 Dec
1997 1997 1996
(Note 1)
$000 #000 #000
Operating Loss (9,418) (5,733) (2,121)
Depreciation and
amortisation charge 255 155 86
Increase in debtors and other
current assets (2,224) (1,354) (449)
(Decrease)/increase in
creditors and accruals (1,068) (650) 525
Net cash outflow from
operating activities (12,455) (7,582) (1,959)
7. Notes to the Cash Flow Statement
Reconciliation of net cash flow to movement in net funds
3 months
ended
31 Dec
1997
#000
Decrease in cash in the period (4,345)
Cash inflow from increase in lease financing 100
Cash outflow from decrease in liquid resources (5,757)
Change in net funding resulting from cashflows (10,002)
Net funding at 30 September 1997 33,424
Net funding at 31 December 1997 23,422
8. Note to the Cash Flow Statement
Analysis of net funding
At Cash At
30 Sept flow 31 Dec
1997 1997
#000 #000 #000
Cash at bank and in hand 5,111 (4,345) 766
Cash on deposit 29,484 (5,757) 23,727
Finance leases (1,171) 100 (1,071)
Total 33,424 (10,002) 23,422
9. Nasdaq Reporting Schedules
The Groups consolidated interim results are prepared in
accordance with generally accepted accounting principles
applicable in the United Kingdom ("UK GAAP") which differs
in certain significant respects from the applicable in the
United States ("US GAAP"). These differences relate
primarily to those items which were set out in the Groups
financial statements for the year ended 30 September 1997.
The approximate affect of the adjustments on net income and
shareholders equity is set out below.
Approximate affect on net income of differences between UK and
US GAAP
#000 #000
Quarter ended 31 December 1997
Net Loss in accordance with UK GAAP (6,602)
Adjustments
Acquisition accounting - Goodwill (202)
Net Loss in accordance with US GAAP (6,804)
12 months ended 30 September 1997
Net Loss in accordance with UK GAAP (14,970)
Adjustments
Acquisition accounting - Goodwill (798)
Associated undertaking 157
Stock Compensation Expense (64) (705)
Net Loss in accordance with US GAAP (15,675)
Approximate cumulative effect on Shareholders equity of
differences between UK and US GAAP
#000 #000
As at 31 December 1997
Shareholders equity in
accordance with UK GAAP 25,037
Acquisition accounting - Goodwill 1,345
Associated undertaking 172 1,517
Shareholders equity in
accordance with US GAAP 26,554
Reconciliation of Shareholders Equity in accordance with US GAAP
Shareholders equity at 30 September 1997 33,656
Net Loss for the 3 months ended 31 December 1997 (6,804)
Associated costs of global equity offering (298)
Shareholders equity at 31 December 1997 26,554
US GAAP RECONCILATION
10. Interest Income/Expenses
Net interest increased from #36,000 for the 3 months ended 31
December 1996 to #521,406 for the 3 months ended 30 December
1997. Most of this increase was due to higher cash balances
resulting from the global equity offering in March 1997.
11.Losses from Associated Companies
The Groups share of losses in associated companies for the 3
month period to 31 December 1997 was #1,390,696.
These losses related to the TDS Group Limited (#195,902) (3
months to 31 December 1996 #179,000), the joint venture in
the Netherlands with VNU (Verenigde Nederlandse
Uitgeversbedrijven BV) (#740,667). (3 months to 31 December
1996: nil), the joint venture partnership in Belgium with VNU
(#375,000) (3 months to 31 December 1996: nil) and RequesT
(UK) Limited (#79,127) (3 months to 31 December 1996: nil).
The losses of the TDS Group Limited arose mainly from new
product development and recruitment of new sales staff.
Losses from the VNU Joint Venture were due to the cost of
establishment and launch of the Freepages business in the
Netherlands. The losses from RequesT (UK) Limited arose
mainly from the cost of establishing the marketing technology
business in the UK. The losses from Belgium were due
entirely to the establishment of the database in that
territory.
12.Liquidity and Capital Resources
The Company incurred an operating cash flow deficit of
#7,582,000 for the 3 months to 31 December 1997 (#1,959,000
for the corresponding period in 1996). The Company also
invested #2,640,000 in capital expenditure during the same
period (#444,000 for the corresponding period in 1996).
These increases reflect the continued expansion of the
business.
13. Disclosure regarding forward looking statements
All statements other than statements of historical fact
included in this report are, or may be deemed to be forward-
looking statements within the meaning of the US securities
laws. Important factors that could cause actual results to
differ materially from those discussed in such forward-
looking statements include, among other things: acceptance by
advertisers and consumers of the companys classified
information content, services and distribution channels: the
ability of the company to successfully develop and market new
products and services and distribution channels: the ability
of the company to respond to changes or increases in
competition: the ability of the company to manage its future
growth and to increase the number and effectiveness of its
sales staff: the ability of the company to successfully
introduce market sell and deliver its services in markets
outside the UK; the ability of the company to manage the
risks associated with joint ventures and potential
acquisitions in the UK and abroad; the ability of the company
to attract and retain necessary technical and management
personnel: and the ability of the company to protect its
intellectual property rights. All subsequent written and
oral forward-looking statements attributable to the company
or persons acting on behalf of the company are expressly
qualified in their entirety by such cautionary statements.
END
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