RNS No 2146u
FREEPAGES GROUP PLC
22nd June 1998
PART 1 OF 2
Freepages Group plc/Second Quarter Results 1998
FREEPAGES GROUP PLC
("Freepages" or the "Company")
Results for the 6 month period ended 31 March 1998
* Revenues for the 6 month period ended 31 March 1998
amounted to #8.5 million, up 43 per cent. on the same period
last year.
* Gross new classified contract value in the period amounted
to #12.3 million, up 68 per cent. on the same period last year.
* The number of telephonic readouts during the period
increased significantly to 7.6 million, up 171 per cent. on the
same period last year and internet readouts increased
dramatically to 19 million, up 387 per cent. on the same period
last year.
* New products were introduced such as the successful
completion of mid-call transfer trials and the introduction of
Vodafone Scoot SMS ("Short Message Service") through the
internet and the Cinemail service.
* Strategic partnership agreements were announced with
Yahoo!, Excite and more recently with Microsoft Networks and
Cendant.
* Scoot (UK)s operations have traded cash flow positive at
an operating level (including marketing expenditures) since May
1998 as a result of increasing sales productivity, growing
renewal rates and operating efficiencies.
* Scoot Belgium was launched nationally on 1 June 1998 with
very encouraging early results.
Commenting on todays results, Robert Bonnier CEO said:
"In the first six months we have completed the UK
infrastructure, the build up of the classified sales force and
strengthened the senior management team. We successfully
rebranded to Scoot and introduced a number of important product
and service enhancements. We also announced complementary
partnership agreements with a number of leading industry players
in distribution, content and technology. The most notable
partnership is with Cendant which will enable us to further
intensify and commercialise the relationship with our rapidly
growing consumer base. After a period of significant
investment, Scoot (UK)s operations have traded cash flow
positive at an operating level since May 1998."
For further information contact:
Freepages Group plc
Robert Bonnier
CEO
Ronald Dorjee 0171 368 3900
CFO
Miranda Cleverdon
Director Corporate Communications
Buchanan Communications Limited 0171 466 5000
Mark Edwards
Review of UK operations
During the six months ended 31 March 1998 the Company completed
its main investments in the UK infrastructure, the build up of
the classified sales force and the strengthening of the senior
management team. The service was successfully rebranded to
Scoot and a number of important product and service enhancements
were introduced. Complementary partnership agreements with a
number of leading industry players in distribution, content and
technology were announced. After a period of significant
investment, Scoot (UK)s operations traded cash flow positive
(including marketing expenditure) at an operating level since
May 1998.
During the period, the Company recruited 103 additional
classified sales executives and 148 call centre operators. At
the end of 31 March 1998 the number of full time equivalent
employees was 845.
Sales productivity was influenced during the latter part of
quarter one and most of quarter two by the substantial increase
in the number of executives. The one-off recruitment, training
and salary cost for each new sales executive is around #7,500
with net sales contribution only starting two months after
completing the sales training programme. With the higher than
expected renewal rates and improved operating efficiencies, the
number of sales executives is expected in the foreseeable future
to remain stable at around 310 people. The result of this
stabilisation and increased efficiency is likely to lead to
significantly higher productivity figures per sales executive.
Consumer usage continues to increase at a very high quarterly
sequential growth rate as a result of improved brand awareness,
additional service features and repeat usage. The number of
telephonic readouts during the period increased significantly to
7.6 million, an increase of 171 per cent. on the same period
last year and internet readouts increased dramatically to 19
million, an increase of 387 per cent. on the same period last
year.
Classified advertising gross new classified contract revenue in
quarter two amounted to #6.8 million and was 24 per cent. higher
than the #5.5 million in quarter one. Return on base has
continued to increase and amounted to 57 per cent. during the
second quarter compared to 51 per cent. in the first quarter.
The growth in gross contract value and the return on base is
expected to continue to grow.
Customer management processes and MIS were substantially
improved during the latter part of the period and are expected
to produce the following additional benefits. First, higher
revenue from improved conversion rates through the introduction
of targeted sales leads. Secondly, a reduction in the time
required for processing orders and thirdly, a reduction in
administrative costs as a result of greater operational
efficiencies. It is expected that the benefits arising from
these changes will begin to become apparent as the year
progresses.
Product development remains focused on facilitating the buying
and selling process between consumers and advertisers in the
most efficient manner. Mid-call transfer has now been
successfully tested and is expected to be commercially rolled
out initially with a core group of corporate advertisers in
August 1998. Mid-call transfer will allow those using Scoots
services to be immediately transferred to the point of sale.
Sales leads to advertisers will grow substantially in value and
further increases in consumer usage should therefore immediately
benefit Scoot.
Other product enhancements included Vodafone Scoot SMS ("short
messages service") which can now also be accessed through the
internet, allowing users to directly transfer data from the
internet to their mobile phone handset. In addition, Scoot
internet users can now register their individual interest in
movies or cinema events. With Scoot Cinemail push technology,
members are informed automatically by E-mail of new releases and
other relevant information. More than 5,000 individuals joined
this service within two weeks of its introduction. It is
expected that Cinemail will help in building brand loyalty as
well as further developing our consumer database.
Part 1 of 2 Key Performance Indicators (UK)
Jun-96 Sep-96 Dec-96 Mar-97
Gross new classified
revenue #m 2.9 3.0 3.3 4.0
Growth percentage +58 +2 +11 +23
Gross new classified
contract value
per sales executive #15,349 #15,349 #16,876 #19,400
Growth percentage +32 0 +10 +15
Return on base - - - -
Growth percentage - - - -
Telephone readouts(M) 0.5 0.7 1.1 1.7
Growth percentage +25 +40 +57 +56
Internet readouts(M) 0.5 0.7 1.4 2.5
Growth percentage +66 +40 +100 +78
Part 2 of 2 Key Performance Indicators (UK)
Jun-97 Sep-97 Dec-97 Mar-98
Gross new classified
revenue #m 5.4 5.0 5.5 6.8
Growth percentage +35 -7 +10 +24
Gross new classified
contract value
per sales executive #25,600 #21,500 #22,500 #21,250
Growth percentage +32 -16 +5 -6
Return on base - - 51% 57%
Growth percentage - - - 12%
Telephone readouts(M) 2.1 2.6 3.4 4.2
Growth percentage +24 +24 +31 +24
Internet readouts(M) 2.5 3.4 6.7 12.3
Growth percentage 0 +36 +97 +84
Partnership agreements with a number of leading industry players
in distribution, content and technology were announced such as
Yahoo!, Excite and more recently Microsoft Networks and Cendant.
The most notable partnership agreement is with Cendant, the
worlds leading marketer and provider of consumer and business
services, broadening the Scoot product and allowing the Company
to further intensify and commercialise its relationship with its
rapidly growing consumer and advertiser base. Scoot will receive
a percentage of the annual membership fee for each fully signed
up member in perpetuity. In a twelve week trial, and using a
restricted number of call centre operators, Scoot provided
approximately 30,000 new members to the Scoot Home Shopping
Service. It is anticipated that other initiatives with Cendant
will be launched in due course. In addition the Company
is actively pursuing opportunities to establish its Scoot
services in other markets.
Review of the Dutch operations
Classified advertising gross new classified contract revenue
during quarter two amounted to #1.6million versus #2 million in
quarter one. The number of sales executives employed during quarter
two fluctuated which had a negative impact on the gross new
contract value achieved in the quarter. This situation was
resolved during quarter three. Early indications have shown that
renewals have been better than expected. Corporate contract
value amounted to #0.16 million during the six month period.
At the end of the period the number of full time equivalent
employees was 248.
Consumer usage continued to show rapid growth in the period.
Telephone readouts have grown from 0.5 million in the first
quarter to 1.0 million in the second quarter. Internet readouts
grew from 1.0 million in the first quarter to 1.8 million in the
second quarter.
In March 1998 Scoot (NL) signed an agreement with AND Publishing
enabling Scoot (NL)s internet service to deliver mapping data.
In addition, it is expected that Cendant and Scoot (NL) will
commence testing a service similar to the Scoot Home Shopping
Service in the UK in due course.
Key Performance Indicators (NL)
Sep-97 Dec-97 Mar-98
Gross new classified
revenue #m 1.5 2.0 1.6
Growth percentage +33% -20%
Gross new classified
contract value per
sales executive #27,400 #26,100 #22,500
Growth percentage -5% -14%
Telephone readouts
millions 0.2 0.5 1.0
Growth percentage +150% +100%
Internet readouts
millions 0.9 1.0 1.8
Growth percentage +11% +80%
Review of the Belgian operations
Scoot (B) was launched nationally on 1 June 1998 following a
successful test-marketing campaign in Ghent and Namen. Initial
results have been very positive with revenue and usage rates
rising substantially faster than expected. Telephone readouts
are averaging 5,000 per day and internet readouts have averaged
4,000 per day, both metrics exceed those experienced by Scoot
(NL) at a similar stage in its development.
Scoot (B) now employs 125 people, approximately 50 of whom are
sales executives. Although the national marketing campaign only
commenced on 1 June 1998, early indications are that the Belgian
market has reacted favourably to the introduction of the Scoot
concept.
Scoot (B) has entered into a number of strategic partnership
agreements. The first relates to the Belgacom subsidiary,
Proximus, which is the dominant mobile phone operator in
Belgium, to provide services to its customers similar to the
Vodafone Scoot service in the UK. In addition, agreements have
been entered into with the two leading Belgian internet
providers, Belcast and Ad Valvas whereby the Scoot service is
made available to their users in a similar way to Scoot (UK)s
relationship with Virgin.net.
It is intended that key performance indicators for Scoot (B)
will be provided to shareholders once it has traded for a
sufficient period of time.
Financial Results
Revenue for the six month period ended 31 March 1998 was #8.5
million compared to #5.9 million for the equivalent period in
the previous year, an increase of 43 per cent.
The return on base figure (advertiser renewals) was 57 per cent.
in the three months ended 31 March 1998 compared to 51 per cent.
during the three months ended 31 December 1997. This figure is
calculated by comparing the annual advertising subscription
value coming up for renewal against the new advertising renewal
contract value sold. Management expect this figure to increase
as a result of improved customer management processes, the
increasing experience of the sales force and the increased usage
and profile of the Scoot service.
Operating loss amounted to #11.3 million for the period with a
loss per share of 2.8p. The marketing expenditure amounted to
#4.3 million largely related to the rebranding exercise.
Net cash outflow from operating activities amounted to #16.7
million during the six months primarily as a result of capital
expenditure, equity investments and UK marketing expenditure of
in aggregate #(10.6) million. Since May 1998 Scoot (UK) has
traded cash flow positive at an operation level (including
marketing expenditures). This has already substantially reduced
the cash outflow, which is now primarily driven by investment in
Scoot (NL), Scoot (B) and additional working capital
expenditures. At the end of the period the net cash balance was
#17.4 million.
Part 1 of 2 Key Financial Statistics
Mar-96 Jun-96 Sep-96 Dec-96 Mar-97
Revenue UK
only #m
Classified 0.7 1.4 2.0 2.4 2.9
Corporate - - 0.0 0.1 0.2
Other - - - - 0.4
SG& A* 2.8 2.7 3.7 3.9 5.2
Marketing 0.7 1.3 0.7 0.7 1.7
EBIT UK (2.8) (2.6) (2.4) (2.1) (3.4)
(Cost-revenue
ratio)** (400%) (186%) (120%) (84%) (97%)
International - - - - 0.1
Associates
(expense)
Scoot (NL) - - - - (0.1)
Scoot (B) - - - - -
TDS Group - - - (0.1) (0.2)
RequesT - - - - -
Net cash - - - 1.4 41.6
Part 2 of 2 Key Financial Statistics
Jun-97 Sep-97 Dec-97 Mar-98
Revenue UK
only #1m
Classified 3.9 3.9 3.6 3.9
Corporate 0.4 0.2 0.2 0.2
Other 0.5 0.4 0.7 -
SG& A* 5.8 6.9 6.9 6.8
Marketing 0.9 0.9 2.8 1.5
EBIT UK (1.9) (3.3) (5.2) (4.2)
(Cost-revenue (40%) (73%) (116%) (102%)
ratio) **
International 0.3 0.4 0.5 1.3
Associates
(expense)
Scoot (NL) (0.4) (1.2) (0.7) (1.0)
Scoot (B) - - (0.4) (0.3)
TDS Group (0.4) (0.2) (0.2) (0.6)
RequesT - - (0.1) (0.1)
Net cash 39.2 34.6 24.4 17.4
* 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.
- Total gross new contract value are all new and renewal
contracts entered into prior or during the periods where the
contract starting date relates to the period.
- Renewal sales are typically made 45 days prior to the contract
expiry date. This has a delaying effect of recognising gross new
contract value and accounting revenue whilst costs are expensed
when incurred. In normal circumstances the actual gross new
contract value sold during the period will be higher than the
reported gross new contract value since this figure does not
include sales made during the period where the starting date of
the contract relates to the next period.
Unaudited Consolidated Income Statement for
the 3 and 6 Months to 31 March 1998
Part 1 of 2 3 months 3 months 3 months
ended ended ended
31 Mar 31 Mar 31 Mar
1998 1998 1997
(Note 1)
$000 #000 #000
Sales 6,778 4,043 3,472
Operating costs
Cost of Sales (681) (406) (199)
Selling, General and
Administrative
Expenses (15,467) (9,226) (6,789)
--------------------------------
Operating Loss (9,370) (5,589) (3,516)
Share of losses
of Associated
Companies (3,452) (2,059) (251)
Net Interest Income 607 362 115
--------------------------------
Loss before taxes
on income (12,215) (7,286) (3,652)
Taxes on income - - -
--------------------------------
Retained loss for
the period
attributable to
equity
shareholders (12,215) (7,286) (3,652)
================================
Loss per share (2.48)c (1.48)p (0.9)p
Weighted average
no of shares
millions 492.2 492.2 407.46
---------------------------------
6 months 6 months 6 months
ended ended ended
31 Mar 31 Mar 31 Mar
1998 1998 1997
(Note 1)
$000 #000 #000
Sales 14,329 8,547 5,976
Operating costs
Cost of Sales (1,299) (775) (295)
Selling, General and
Administrative
Expenses (32,013) (19,095) (11,316)
-------------------------------
Operating Loss (18,983) (11,323) (5,635)
Share of losses
of Associated
Companies (5,784) (3,450) (430)
Net Interest Income 1,484 885 152
--------------------------------
Loss before taxes
on income (23,283) (13,888) (5,913)
Taxes on income - - -
---------------------------------
Retained loss for
the period
attributable to
equity
shareholders (23,283) (13,888) (5,913)
=================================
Loss per share (4.73)c (2.82)p (1.49)p
Weighted average
no of shares
millions 492.2 492.2 395.73
----------------------------------
1.
Unaudited Consolidated Balance Sheets at 31 March 1998
31 Mar 31 Mar 31 Mar
1998 1998 1997
Unaudited Unaudited Unaudited
(Note 1)
#000 #000 $000
Assets
Current Assets
Cash at bank and in hand 29,151 17,388 41,647
Accounts Receivable 2,915 1,739 1,347
Prepaid expenses 1,583 944 646
Other current assets 5,532 3,300 775
----------------------------
Total Current Assets 39,181 23,371 44,415
Fixed Assets
Property, plant
and equipment 5,199 3,101 1,714
Intangible assets 1,309 781 257
Share of net assets of
assocciated companies 825 492 495
-----------------------------
Total Assets 46,514 27,745 46,881
=============================
Liabilities and Shareholders equity
Current Liabilities
Accounts payable and
accrued expenses 8,083 4,822 3,380
Deferred income 3,831 2,285 1,670
Other taxation including
social security 3,586 2,139 653
-----------------------------
Total current liabilities 15,500 9,246 5,703
Other long term liabilities 1,254 748 173
----------------------------
Total Liabilities 16,754 9,994 5,876
----------------------------
Shareholders equity
Deferred Shares 335 200 200
Ordinary shares fully paid
par value 2p per share:
492,200,098 shares at 31
March 1998 (484,126,742
shares at 31 March 1997) 16,503 9,844 9,683
Premiums in excess of par
value 92,596 55,232 55,702
Shares to be issued 832 496 496
Merger reserve (10,424) (6,218) (6,218)
Retained deficit (70,082) (41,803) (18,858)
------------------------------
Shareholders equity 29,760 17,751 41,005
------------------------------
Total liabilities and
Shareholders equity 46,514 27,745 46,881
==============================
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