RNS No 1247d
FREESERVE PLC
28 September 1999
Freeserve announces strong first quarter growth
Freeserve plc, the UK's leading Internet business, today announces its first
set of results since admission to the London Stock Exchange and Nasdaq, for
the sixteen week quarter ended 21 August 1999 (comparisons are with the
twelve week quarter ended 1 May 1999). Salient features are as follows:
First Quarter Results
* 1.406 million active registered accounts* as at 21 August 1999, a 19%
increase on the previous quarter end;
* over 2.2 billion minutes of use for the 16 week period (1.5 billion for
the 12 week quarter ended 1 May 1999);
* average four-weekly churn ** continued to decline from 11.9% in the
previous quarter to 9.5% in this quarter;
* 76 million page impressions in August (64 million in May);
* turnover of #3.4 million, and loss on ordinary activities before
exceptional items and taxation of #5.0 million;
* 104% increase in turnover for the 16 weeks compared to the last (12
week) quarter of 1998/1999;
* e-commerce and advertising have overtaken connectivity as the principal
source of revenue;
* a host of new content services, entertainment and commerce opportunities
(see Quarter One Events);
* strategic investments made in GlobalNet, TelePost and Babyworld;
* joint venture to establish UK on-line share trading.
Current Trading
* 1.478 million active registered accounts* as at 26 September;
* active registered accounts have increased by 14,000 per week since the
quarter end, compared to 11,000 per week during July and August;
* 594 million minutes of use in the first four weeks of the new quarter
(557 million in the prior four weeks to 21 August);
* churn has continued to fall since the quarter end.
* An active registered account is one which has been used in the last 40
days
** Churn is defined as those accounts which have become inactive during a
period, expressed as a percentage of total active accounts at the
beginning of that period
John Pluthero, Chief Executive Officer, Freeserve plc, commented:
"I am delighted to present a strong set of results which clearly endorse our
position as the UK's pre-eminent Internet brand. We have made good progress
in building our active user base, introducing exciting new content and
establishing commerce partnerships. Since the holiday period, this has been
reflected, in particular, in the growth in the number of users and time spent
on-line."
For further enquiries, please contact:
Freeserve plc
John Pluthero, Chief Executive Officer
Nicholas Backhouse, Chief Financial Officer
Elena Shalneva, Media Relations
Citigate Dewe Rogerson
Julian Walker/Patrick Toyne-Sewell +44 (0)20 7638 9571
Financial and Operating Data Highlights
Quarter 1 Quarter 4 Total
1999/00 1998/99 (1) 1998/99 (1)
16 weeks ended 12 weeks ended Approx 32 weeks ended
21 August 1999 1 May 1999 1 May 1999
#000 $000 (2) #000 $000 (2) #000 $000 (2)
------- -------- ------ ------- ------ ------
Turnover 3,382 5,469 1,654 2,660 2,737 4,402
Operating
expenses before
exceptional
items (8,608) (13,920) (2,464) (3,963) (4,248) (6,832)
------ ------- ------ ------ ------ ------
Operating loss
before
exceptional
items (5,226) (8,451) (810) (1,303) (1,511) (2,430)
------ ------- ------ ------ ------ ------
Quarter 1 Quarter 4 Total
1999/00 1998/99 1998/99
000 000 000
--------- --------- ---------
Number of gross sign-ups
in the period (3) 710 671 1,776
Number of active
registered accounts at
period end (4) 1,406 1,181 1,181
Minutes of use (5) 2,213,331 1,495,320 2,632,654
--------- --------- ---------
Million
---------
Page views for the month of August 1999:
Freeserve 45.3
Content partners 30.8
---------
Total 76.1
---------
(1) Freeserve commenced business on 22 September 1998 and as
such it presents no results for the sixteen weeks ended
21 August 1998. Freeserve prepares quarterly reports to
the end of the sixteenth, twenty-eighth, fortieth and
fifty-second financial week.
(2) The financial statements of Freeserve plc are published
in pounds sterling. Translation into dollars is solely
for convenience and is at the period end exchange rate.
(3) Gross sign-ups are defined as the number of new
registered accounts that have accessed Freeserve's site
within 28 days of registration.
(4) An active registered account is defined as a registered
account at the period end that has been used within 40
days prior to the period end.
(5) Minutes of use is the total minutes during the period
that users were connected to the Internet through
Freeserve, including time spent on the Freeserve Web
site and time spent on other Web sites after connecting
to the Internet through Freeserve.
Chief Executive's Review
On the first anniversary of our launch, we have made
Freeserve the leading Internet brand in the UK, built the
largest active user base in the country, achieved more than
twice the market share of our nearest rival, completed a
listing on the London Stock Exchange and Nasdaq, and we are
continuing to build on this success each week by providing
our users with an ever growing range of content and services.
Freeserve the Pioneer
On 2 August 1999, Freeserve became the first major Internet
stock to float on the London Stock Exchange. The flotation
was more than thirty times subscribed, raised net proceeds
of over #120 million and has provided Freeserve with a powerful
acquisition currency.
Freeserve the ISP
During the quarter, and despite the expected seasonal
slowdown over the summer period, we have added a further
225,000 active registered accounts, taking our total as at
21 August to more than 1.4 million. Minutes of usage per day
increased by 11 per cent overall compared to our previous quarter.
The latest Internet surveys from both NOP and Fletcher over
the summer confirmed Freeserve's number one position in the
UK as the most used home Internet service provider with
approximately 30% market share.
We continue to make progress on retention, with the average
four-weekly churn rate declining from 11.9% in the last
quarter to 9.5% in this quarter.
We have received many awards for the quality of our product
and service offering. Recent awards include the Grand Prix
award at the New Media Age Effectiveness Awards 1999, the
Best Consumer ISP at the 1999 ISPA awards and the On-line
Service Provider award at the PC Direct Awards 1999.
Freeserve the Portal
As shown in the list of Quarter One Events following this
review, the quarter has been characterised by intensive
product development and the launch of a wide range of
innovative and exciting services and content for our users.
We have substantially increased our content in education,
finance, job-hunting, music, technology and travel; added
new entertainment through the introduction of chat, fantasy
football, funfinder and songplayer and announced new e-
commerce opportunities and initiatives including on-line
business cards, DVDs, foreign exchange, insurance, loans,
Thorntons' chocolates and a range of professional quality
communications tools. These include Speechmail, a service
which allows customers to access their e-mail messages over
the telephone without switching on their computer; Telserve,
a communications suite providing business-class unified
messaging, Web-based presentations and Web-initiated
conferencing; and Freeserve Virtual Office which allows
businesses quickly and easily to build web sites. These
tools provide excellent functionality for our business and
home office users.
All these activities have continued to drive higher page
impressions within our site, rising from 64 million in the
month of May to 76 million in the month of August.
Freeserve Investments
During the quarter we made the first of our strategic
investments in companies that provide products and services
on the Freeserve site. We invested in GlobalNet
Financial.com, the provider of our Money Channel under the
brand name UK-iNvest.com, and TelePost, a provider of low-
cost teleconferencing and telecommunications services. We
acquired 100 per cent. of Babyworld, an Internet business
targeting families that are planning, expecting or recently
have had a baby. Babyworld provides quality proprietary
content and will form an important part of our strategy to
build a dominant women's franchise in the UK.
In addition we have entered into an agreement with three
partners, GlobalNet, First Marathon and Mesirow Financial,
to establish a joint venture for UK on-line share trading.
We expect to launch this service early next year subject to
authorisation from the Securities and Futures Authority.
Recent and Forthcoming Developments
The high level of activity in developing content and
services has continued in September with the launch of
Sportszine, a sports search engine, Cricketline and Planet
Trivia, and the announcement of the introduction of instant
messaging, e.notifier (for forwarding Freeserve e-mails to
pagers), and the formation of InsuranceCity.com, an on-line
provider of competitive personal insurance. Freeserve is
also hosting The Labour Party's official website. Further
significant launches in the quarter will include the
Freeserve women's portal, the Freeserve auction site and the
Freeserve credit card. Freeserve will participate in The
ITV Year of Promise, the year long national charitable
event, supported by all the ITV companies.
We have also announced two new access propositions.
Freeserve Time, a newly established service, enables
Freeserve users to earn up to ten hours of free Internet
calls per month, by spending money on national and
international voice calls on the Energis network. In
addition, from November we will be trialling high speed
Internet access via BT's ADSL platform. ADSL technology
will allow our users to send and receive data over existing
copper wires at speeds of up to 20 times faster than a
normal telephone connection, and will enable Freeserve to be
among the first to introduce broadband Internet services
using enhanced video and audio functionality. The new
service will offer permanent connection to the Internet at a
fixed cost, with no call charges, and permits simultaneous
use of the telephone.
Current Trading
Since the quarter end we have been adding active registered
accounts at the rate of 14,000 per week, compared to less
than 11,000 during July and August. As at 26 September 1999
we had 1.48 million active registered accounts with churn
continuing to fall. Total minutes of use in the four weeks
to 18 September were 594 million compared to 557 million in
the prior four week period. We expect this positive trend
to continue as we move into the autumn.
Quarter One Events
May Purchase of 13% of GlobalNet, a leading provider
of investment-related information services
primarily in the UK and the US and the provider
of the Freeserve Money Channel under the brand
name UK-iNvest.com
Acquisition of notes and warrants in TelePost, a
provider of teleconferencing and
telecommunications services
Launch of free revision guide on the Education
Channel, with endorsement from the National
Associations of Head Teachers
Launch of Thorntons' site on the Shopping Channel
June Agreement to develop and launch server-side e-mail
with World Telecom
Launch of Prestophone, a low cost telephone
service with on-line monthly billing
Launch of the Freeserve Reference Centre, an on-
line encyclopaedia, dictionary and atlas
Launch of Freeserve chat
Launch of Jobsite on the Careers Channel
July Launch of Funfinder, a family activity finder for
the summer
Launch of Music 365 on the Music Channel
Real-time share quotes offered on the Money
Channel
Launch of the Freeserve Technology Channel
News, sport, weather and business content launched
for Psion users
Launch of Premium Petcare (The Pet's Pyjamas) on
the Shopping Channel
Launch of low cost loans provided by HFC Bank with
on-line application
In partnership with Netopia, launch of Freeserve's
Virtual Office which allows businesses quickly and
easily to build Web sites to showcase their companies
August Freeserve plc floated on the London Stock Exchange
and Nasdaq
Acquisition of Babyworld, an Internet business
targeting families that are planning, expecting or
recently have had a baby
Agreement to develop and launch an Internet-based
credit card with a leading co-branded credit card
issuer, HFC Bank
Agreement with three partners, GlobalNet, First
Marathon and Mesirow Financial, to establish a
securities trading and clearing business in the UK
Launch of on-line DVD sales
Launch of Freeserve Fantasy Football League
Launch of Songplayer which allows users to
download music and software to teach themselves
how to play their favourite songs on guitar and keyboard
Worldwide travel guides launched on the Travel
Channel
Launch of Travelex which allows users to order
foreign currency and travellers
cheques on-line, commission free, for collection
at the airport
Launch of on-line business card ordering in
conjunction with the Card Corporation
Launch of Speechmail, a service which allows
customers to access their e-mail messages over the
telephone without switching on their computers
Launch of Telserve, a communications suite
providing business-class unified messaging, Web-
based presentations and Web-initiated conferencing
Financial Review
Results of Operations
Turnover for the sixteen weeks to 21 August 1999 was #3.4
million, more than double the turnover for the last twelve
weeks of 1998/99 and an increase of 24 per cent on turnover
for the 52 weeks ended 1 May 1999 during which Freeserve
operated for approximately 32 weeks. E-commerce and
advertising have overtaken connectivity as the principal
source of revenue, representing 52 per cent. of turnover
compared to approximately 41 per cent. for 1998/99 as a
whole and 47 per cent. for the prior quarter.
Operating expenses have risen from #2.5 million in the
previous quarter to #8.6 million for the first quarter of
1999/00. This is largely a result of increasing marketing
and brand development, an increase in the commission payable
for disc distribution, improvement in web site content and
design and the recruitment of personnel. As at 21 August
1999, Freeserve employed 68 employees compared to 16 as at 1
May 1999.
Exceptional operating items comprise #3.6 million of
flotation fees, expenses and one-off marketing costs in
connection with the initial public offer of a minority
interest in Freeserve.
Liquidity and Capital Resources
On 2 August 1999, Freeserve was admitted to the London Stock
Exchange and Nasdaq. The initial public offer raised net
proceeds of #122.9 million after deducting issue costs,
flotation fees, expenses and marketing costs of #12.1
million. Freeserve intends to use the net proceeds from the
offer for general corporate purposes, including marketing,
brand and content development, acquisitions and strategic
investments. The proceeds are invested in short-term
interest bearing securities.
On 12 May 1999, Freeserve made an investment in GlobalNet
Financial.com of #9.1 million. On 22 July 1999, Freeserve
exercised its anti-dilution rights for #0.2 million to
maintain its 13 per cent. stake in GlobalNet. In addition,
Freeserve has been granted options over equity sufficient to
take its total shareholding up to 19.9 per cent. GlobalNet
provides investment-related information services primarily
in the US and UK and is the provider of Freeserve's Money
Channel under the brand name UK-iNvest.com.
During the quarter, Freeserve made a series of investments
in the loan notes of TelePost Holdings SA, a company that
provides Web-initiated unified messaging and telephony
services. At 21 August 1999, Freeserve held $8.3 million of
loan notes, to which are attached warrants over equity that,
if fully exercised would give Freeserve 29.1 per cent. of
TelePost Holdings SA.
On 26 July 1999, Freeserve's employee benefit trust acquired
seven million Freeserve shares from Dixons Group at the
initial offer price.
On 6 August 1999, Freeserve acquired 100 per cent. of
Babyworld.com Limited for #3.8 million.
At the quarter end Freeserve had cash of #97.7 million.
Consolidated Profit and Loss Account
for the 16 weeks ended 21 August 1999
16 weeks 52 weeks
ended ended
21 August 1 May
1999 1999
unaudited audited
-------------------------------- ----------
Before
exceptional Exceptional
items items Total Total
Note #000 #000 #000 #000
-------------------------------- ----------
Turnover 2 3,382 - 3,382 2,737
---------------------------------------
Operating loss 2 (5,226) (3,560) (8,786) (1,511)
Net interest 4 231 - 231 -
---------------------------------------
Loss on ordinary activities
before taxation (4,995) (3,560) (8,555) (1,511)
Taxation credit on loss on
ordinary activities 5 1,461 - 1,461 467
---------------------------------------
Retained loss for the period (3,534) (3,560) (7,094) (1,044)
---------------------------------------
Loss per Ordinary share (pence)
Basic and diluted 6 (1.6)p (5,220.0)p
Adjusted basic and diluted 6 (0.8)p (5,220.0)p
---------------------------------------
There are no recognised gains and losses other than the loss for the
period.
The Freeserve business commenced trading on 22 September 1998.
Consolidated Balance Sheet
as at 21 August 1999
21 August 22 August 1 May
1999 1998 1999
#000 #000 #000
Note unaudited unaudited audited
-------------------------------------
Fixed assets
Intangible assets 3,684 - -
Tangible assets 249 - 137
Investments 20,017 - -
------------------------------------
23,950 - 137
Current assets
Debtors 3,650 - 1,846
Investments 6,879 - -
Cash at bank and in hand 97,720 - -
------------------------------------
108,249 - 1,846
Creditors - due within one year
Other creditors (11,953) (9) (3,026)
------------------------------------
Net current assets/(liabilities) 96,296 (9) (1,180)
------------------------------------
Total assets less current liabilities 120,246 (9) (1,043)
Provisions for liabilities and charges (9) - (10)
------------------------------------
120,237 (9) (1,053)
------------------------------------
Equity shareholders' funds
Ordinary share capital 7 101 - -
Share premium account 7 127,945 - -
Shares to be issued 7 188 - -
Profit and loss account 7 (8,147) (9) (1,053)
------------------------------------
120,087 (9) (1,053)
Non-equity shareholders' funds
Preference share capital 7 150 - -
------------------------------------
Shareholders' funds/(deficit) 8 120,237 (9) (1,053)
------------------------------------
Consolidated Cash Flow Statement
for the 16 weeks ended 21 August 1999
16 weeks ended 52 weeks ended
21 August 1 May
1999 1999
#000 #000
Note unaudited audited
-------------------------------
Net cash outflow from operating
activities 9 (2,061) (1,706)
Returns on investments and servicing
of finance
Interest received 291 -
Capital expenditure and financial
investment
Purchase of fixed asset investments (9,612) -
Purchase of tangible fixed assets (107) (141)
Purchase of own shares (10,500) -
Purchase of loan notes (5,354) -
------------------------------
(25,573) (141)
Acquisitions
Cash consideration for acquisition of
subsidiary (2,038) -
Net cash acquired with subsidiary 117 -
------------------------------
(1,921) -
------------------------------
Net cash outflow before management of
liquid resources and financing (29,264) (1,847)
Financing
Issue of Ordinary share capital 3,7 135,092 -
Issue costs in respect of the initial
public offer (6,411) -
Issue of Preference share capital 7 150 -
Working capital funding from the
Dixons Group (1,847) 1,847
------------------------------
126,984 1,847
------------------------------
Increase in cash in the period 97,720 -
------------------------------
Notes to the Quarterly Financial Report
1 Basis of preparation
Freeserve plc commenced trading on 22 September 1998 and as such it
presents no profit and loss account or cash flow statement for the
sixteen weeks ended 21 August 1998.
The quarterly financial report has been prepared using accounting
policies consistent with those set out in the financial statements
for the 52 weeks ended 1 May 1999. The quarterly financial report
does not constitute statutory accounts within the meaning of section
240 of the Companies Act 1985 and it is unaudited.
The financial information for the 52 weeks ended 1 May 1999 has been
extracted from the financial statements for that period. Those
statements, which contain an unqualified auditors' report, have been
delivered to the Registrar of Companies.
The quarterly financial report for the 16 weeks ended 21 August 1999
was approved by the directors on 27 September 1999.
2 Operating loss
Freeserve plc reports on a four weekly basis so that the financial
period is split into thirteen periods of four weeks. It prepares
quarterly reports at the end of the sixteenth, twenty-eight, fortieth
and fifty-second week.
16 52
weeks weeks
ended ended
21 August 1 May
1999 1999
-----------------------------------
Before
exceptional Exceptional
items items Total Total
#000 #000 #000 #000
-------------------------------------
Turnover
- connectivity 1,617 - 1,617 1,608
- e-commerce and advertising 1,765 - 1,765 1,129
----------------------------------------
3,382 - 3,382 2,737
Sales and marketing (6,100) - (6,100) (2,722)
Product technology and
development (802) - (802) (510)
----------------------------------------
Selling and distribution costs (6,902) - (6,902) (3,232)
Administrative expenses (1,706) (3,560) (5,266) (1,016)
----------------------------------------
Operating loss (5,226) (3,560) (8,786) (1,511)
----------------------------------------
Freeserve plc is engaged in one line of business as a U.K. Internet
portal. All operations are derived from activities in the U.K.
Operating loss includes #18,000 loss in respect of acquisitions
during the period. This comprises: turnover #2,000; sales and
marketing expense #6,000; product technology and development expense
#13,000; and administrative expense #1,000.
Administrative expenses include #57,000 of goodwill amortisation
arising on the acquisition of Babyworld.com Limited and #95,000 in
respect of non-cash compensation relating to the shares conditionally
allocated under Freeserve's long term share incentive plan.
The exceptional item for the sixteen weeks ended 21 August 1999
represents flotation fees, expenses and one-off marketing costs
incurred in respect of the initial public offer of Freeserve plc.
3 Initial public offer of Freeserve plc
On 2 August 1999, Freeserve plc was admitted to the London Stock
Exchange and Nasdaq, with an initial public offer of a minority
interest in Freeserve plc. The Ordinary shares were offered at 150
pence per share ($23.67 per American Depositary Share (ADS), each
representing 10 Ordinary shares). The offer comprised 153,043,478
shares in the form of Ordinary shares or ADSs of which 90,000,000 were
new shares issued by Freeserve plc and 63,043,478 were shares sold by
the Dixons Group. In addition, the joint global co-ordinators
exercised their over-allotment option to purchase an additional
22,956,522 shares. The offer was allocated to institutional and
retail investors.
From this initial public offer, Freeserve plc received gross proceeds
of #135.0 million before issue costs of #8.5 million and flotation
fees, expenses and marketing costs of #3.6 million.
On completion of the offer and exercise of the over-allotment option,
the Dixons Group held 80.11% of the Ordinary shares of Freeserve plc.
4 Net interest
16 weeks 52 weeks
ended ended
21 August 1 May
1999 1999
#000 #000
------------------------
Interest receivable and similar income 231 -
------------------------
5 Taxation
The taxation credit on the loss on ordinary activities before
exceptional items is based on the estimated effective rate of
taxation of 29 per cent for the 52 weeks ending 29 April 2000.
Freeserve has a tax sharing arrangement with the Dixons Group,
whereby tax losses incurred by Freeserve plc can be surrendered to
the Dixons Group at a price at least equal to the U.K. statutory rate
of taxation.
6 Loss per Ordinary share
16 weeks 52 weeks
ended ended
21 August 1 May
1999 1999
#000 #000
-------------------------
Basic and diluted loss (7,094) (1,044)
-------------------------
Number Number
-------------------------
Basic and diluted weighted average
number of shares in the period 442,616,985 20,000
-------------------------
pence pence
-------------------------
Basic and diluted loss per Ordinary share (1.6) (5,220.0)
Exceptional items, net of taxation 0.8 -
-------------------------
Adjusted basic and diluted loss per
Ordinary share (0.8) (5,220.0)
-------------------------
Adjusted basic and diluted loss per Ordinary share exclude
exceptional items. In the opinion of the directors, adjusted basic
and diluted loss per Ordinary share provides a clearer indication of
the underlying performance of the Group than basic and diluted loss
per Ordinary share. Basic and diluted loss per Ordinary share is
calculated in accordance with U.K. Financial Reporting Standard 14
"Earnings Per Share" which is not materially different from the U.S.
Statement of Financial Accounting Standard 128 "Earnings Per Share".
The weighted average number of shares has been restated for the share
split on 29 June 1999, whereby the two existing Ordinary shares of #1
each were split into 20,000 Ordinary shares of 0.01 pence each.
Basic and diluted loss per Ordinary share are equal as all potential
Ordinary shares are anti-dilutive.
7 Share capital and reserves
Ordinary Share Preference
share premium Shares to be Profit and share
capital account issued loss account capital
#000 #000 #000 #000 #000
-------------------------------------------------------
At 1 May 1999 - - - (1,053) -
Retained loss for the
period - - - (7,094) -
Share reorganisation and
subscription of additional
shares by the Dixons Group
prior to the initial
public offer 90 - - - 150
Gross proceeds from the
initial public offer 9 134,991 - - -
Issue costs in respect of
the initial public offer - (8,520) - - -
Shares issued to Energis
Holdings Limited 2 - - - -
Shares issued/to be issued
in respect of the
acquisition of
Babyworld.com Limited - 1,474 188 - -
--------------------------------------------------
At 21 August 1999 101 127,945 188 (8,147) 150
--------------------------------------------------
On 29 June 1999, the two existing Ordinary shares of #1 each were
split into 20,000 Ordinary shares of 0.01 pence each. On 29 June
1999, the Dixons Group subscribed for 899,980,000 new Ordinary shares
at par and on 5 July 1999 for 150,000 new preference shares of #1.00
each.
On 2 August 1999, Freeserve plc issued 90,000,000 new Ordinary shares
at #1.50 each in an initial public offer. Issue costs of #8.5
million have been charged to the share premium account.
Upon closing of the initial public offer, Energis Holdings Limited, a
subsidiary of Energis plc, Freeserve's network infrastructure
provider, subscribed for 17,325,000 new Ordinary shares at par.
On 6 August 1999, 983,158 new Ordinary shares were issued, in part
consideration for the acquisition of Babyworld.com Limited. Provided
certain conditions are not breached regarding restriction of the
vendor's business activities, confidentiality and continued service, a
further 125,086 new Ordinary shares will be issued on 6 August 2001.
8 Reconciliation of movements in shareholders' funds/(deficit)
21 August 22 August 1 May
1999 1998 1999
#000 #000 #000
-------------------------------
Opening shareholders' funds/(deficit) (1,053) (9) (9)
-------------------------------
Retained loss for the period (7,094) - (1,044)
Ordinary shares issued 128,234 - -
Preference shares issued 150 - -
-------------------------------
Net addition/(reduction) to shareholders'
funds/(deficit) 121,290 - (1,044)
-------------------------------
Closing shareholders'funds/(deficit) 120,237 (9) (1,053)
-------------------------------
9 Net cash outflow from operating
activities
16 weeks 52 weeks
ended ended
21 August 1 May
1999 1999
#000 #000
----------------------------
Operating loss before exceptional
operating items (5,226) (1,511)
Exceptional flotation fees, expenses and
marketing costs paid (1,724) -
Depreciation 18 4
Amortisation of goodwill 57 -
Amortisation of own shares 95 -
Increase in debtors (321) (1,369)
Increase in creditors 5,040 1,170
----------------------------
(2,061) (1,706)
----------------------------
10 Current asset investments
During the quarter, Freeserve made a series of investments in the
loan notes of TelePost Holdings SA, a company that provides Web-
initiated unified messaging and telephony services. At 21 August
1999, Freeserve held $8.3 million of loan notes, to which are
attached warrants over equity that, if fully exercised would give
Freeserve 29.1 per cent. of TelePost Holdings SA. Since the quarter
end Freeserve has provided additional short-term financing totalling
$2.5 million.
11 Acquisitions
On 6 August 1999, Freeserve plc acquired 100% of the issued share
capital of Babyworld.com Limited.
Provisional
fair value
Book value adjustments Fair value
#000 #000 #000
-------------------------------------
Tangible fixed assets 33 (10) 23
Net current assets 56 - 56
-------------------------------------
89 (10) 79
Goodwill acquired 3,741
-----------
Purchase consideration 3,820
-----------
Purchase consideration satisfied by:
Issue of 1,108,244 Ordinary shares at #1.50 each 1,662
Cash 2,158
-----------
3,820
-----------
Fair value adjustments mainly represent the write down of fixtures and
fittings to fair value. The contribution to Group cash flows for the
period was not material.
Pending finalisation of the completion accounts, all intangible assets
arising on the acquisition of Babyworld.com Limited have been
disclosed as goodwill.
12 Summary of differences between U.K. and U.S. GAAP
16 weeks 52 weeks
ended ended
21 August 1 May
1999 1999
#000 #000
------------------------
Net loss as reported in accordance with
U.K. GAAP (7,094) (1,044)
Non-employee stock-based compensation to
Energis (327) -
------------------------
Net loss as reported in accordance with
U.S. GAAP (7,421) (1,044)
------------------------
pence pence
------------------------
Basic and diluted loss per Ordinary share
in accordance with U.S. GAAP (1.7) (5,220.0)
------------------------
The quarterly financial report has been prepared in accordance with
U.K. generally accepted accounting principles (U.K. GAAP) which differ
in certain significant respects from U.S. GAAP.
On completion of the initial public offer, Energis subscribed for
17,325,000 new Ordinary shares at par value. For U.S. GAAP purposes
the difference between the par value and the fair market value at the
date Freeserve plc shares began trading on the London Stock Exchange
is recognised in the income statement over the term of the contract
with Energis. Under U.K. GAAP there is no charge to income.
END
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Freeplay Energy (LSE:FRE)
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