RNS Number:9332F
Virtual Internet PLC
27 June 2001
Date 27 June 2001
Enquiries
Tom Turcan, CEO
Jonathan Wales, CFO
Virtual Internet plc Tel: 020 7460 4060
John Bick, Holborn Tel: 020 7929 5599
john.bick@holbornpr.co.uk
Virtual Internet plc
Results For The Six Month Period Ended 30 April 2001
Virtual Internet plc, a leading provider of Internet naming, hosting and
online intellectual property protection services for businesses
internationally, today announces its results for the six month period ended 30
April 2001.
Financial Highlights 3 month 6 month 6 month Year
period period period ended
ended ended ended 31 October
30 April 30 April 30 April
2001 2001 2000 2000
# # # #
Turnover 2,200,822 3,975,209 2,539,924 6,259,257
Gross profit 1,709,376 2,909,638 1,809,932 4,383,461
Adjusted loss before taxation* (1,543,005)(2,784,233)(1,796,296) (4,342,755)
Loss on ordinary activities
before taxation (2,442,482)(4,594,660)(4,247,334) (7,998,119)
Adjusted loss per share 6.17p 11.23p 8.34p 18.89p
Loss per share - basic and 9.76p 18.58p 19.71p 34.81p
diluted
Cash at bank 12,553,256 12,553,256 24,346,223 19,197,011
*Adjusted by excluding goodwill amortisation and employee share
incentive scheme.
- Turnover growth of 56 per cent for the six month period ended 30 April 2001
- against the six month period ended 30 April 2000
- Solid progress by Net Searchers, now the largest division within the Group
- Expanded Net Searchers product range, client base and geographical presence
- Sophisticated web hosting platform completed and launched
- Modest growth in the web hosting business requires a cautious outlook
- ICANN contract with RegistryPro joint venture nearing completion
- Tom Turcan, previously COO, appointed CEO with Jason Drummond remaining on
the Board as Managing Director of the Hosting division
- On-target to achieve profitability within existing financial resources
- Cash position of #12.55m at period end
Chairman's Report
Turnover for the six month period ended 30 April 2001 increased by 56 per cent
to #3.98m from #2.54m for the six month period ended 30 April 2000. Gross
profit was #2.91m compared with #1.81m for the six month period ended 30 April
2000. The gross profit margin in the period increased to 73% from 71% for the
six month period ended 30 April 2000. The loss before taxation, goodwill
amortisation and the employee share incentive scheme charge amounted to #2.78m
compared with #1.80m for the six month period ended 30 April 2000. The losses
reflect the ongoing investment in overseas offices. The Group had cash
resources of #12.55 million as at 30 April 2001 after capital expenditure of #
1.8m and the acquisition of WebControl Gmbh for #0.7m. The number of active
hosted and managed domains increased to 106,000 from 85,000 at start of
period.
Net Searchers
Net Searchers, the Group's online intellectual property protection business,
has made solid progress over the period. Net Searchers is now the largest
and fastest growing division of the Group and is central to the Group's future
strategy.
The successful integration of the Group's international domain name
capabilities into the Net Searchers division has been completed. This,
combined with Net Searchers' early-mover advantage in providing intellectual
property protection services to law firms and corporations, makes Net
Searchers a leader in this specialist market sector.
Net Searchers' services span worldwide domain name registrations, renewals
management, monitoring and recovery services, content and copyright searching
and infringer tracking. Typically clients are leading corporations or their
legal advisers. In the year 2000 we counted owners of a third of the world's
leading brands (as defined by Interbrand), and half the members of the
FTSE-100, as clients. New clients during the period under review include
Nestle SA, Gucci, ExxonMobil Corporation, Visa International, the Zippo
Manufacturing Company, Nortel Networks and Interbrew . Typical Net Searchers
clients place a premium on quality of service and the directors believe the
market opportunity worldwide for these services is large and relatively
undeveloped. Although scalable in terms of back-office systems and packaged
service delivery, it is notable that the Net Searchers business does not
require the levels of capital investment required by web hosting.
In April 2001 Net Searchers launched its latest service, the Name Console, a
proprietary web-based application that allows clients to distribute domain
name services within their organisations under central administrative control.
Early indications are encouraging, and Linklaters & Alliance, one of the
world's leading law firms, has contracted to use the service as its exclusive
provider of domain name services to its Blue Flag(R) e-commerce portal.
Interest in this new service is high, and we anticipate further customers to
be signed up over the coming months.
With its international perspective on intellectual property issues, the
directors believe Net Searchers has significant opportunities to earn revenues
from international markets. Over the period Net Searchers has expanded its
geographic coverage by establishing its North American headquarters in
Princeton, New Jersey and by opening an office in Los Angeles. The US offices
augment the existing European sales offices in London, Paris and Milan, and
are expected to make a positive net contribution early in the next financial
year. The Group continues to explore ways to service potential clients beyond
Europe and North America.
ICANN (the Internet Corporation for Assigned Names and Numbers) announced the
introduction of seven new generic Top Level Domains (gTLDs) in November 2000,
including .pro. The first of these new gTLDs - .biz and .info - are in the
process of being launched. Each new gTLD has its own system for protecting
intellectual property for which different strategies are required. This is
driving interest in our services. Through the Group's ICANN registrar
accreditation, Net Searchers is well-placed to offer its clients registration
and protection services in each of the new gTLDs.
Further information about Net Searchers services can be found at
www.netsearchers.com
Hosting Services
In a period of difficult market conditions the Hosting division has continued
to maintain revenue levels through new and existing customers taking a broader
range of higher value hosting services. The planned European rollout of the
Hosting division was completed in the period with the acquisition of
WebControl Gmbh in Germany.
In April the Group launched a range of shared hosting services based on our
new hosting infrastructure. The web hosting market for small and medium sized
enterprises (SMEs) continues to be price-sensitive. Through its new products,
the Group offers a premium technical specification, including Gigabit Ethernet
(1000Mbps) internet connectivity previously unavailable in Europe at SME price
points. Market research shows that SMEs consider security to be the most
important requirement for their web site and with its new platform, Virtual
Internet can now deliver very high levels of security at low cost.
In line with other companies in the sector, growth in web hosting revenues has
been adversely affected by the slowdown in IT investment. While the Board is
confident in its new product offering, it is also careful to ensure that the
ongoing costs of the hosting division properly reflect the business
opportunity and our goal of achieving profitability. Consistent with this
approach, and in view of the prevailing market conditions, the Board is
reviewing its strategic options for the hosting division and is taking action
to reduce operating costs where appropriate.
Further information about Virtual Internet's hosting services can be found at
www.vi.net.
RegistryPro
During the period under review, RegistryPro, the Group's 50:50 joint venture
with register.com, continued to progress its agreement with ICANN to run the
new .pro registry and to make technical and management structure preparations
for a planned launch of .pro in the Autumn of this year. Whilst .pro has
suffered similar delays to the other gTLDs awarded by ICANN in concluding its
licence to operate the name, the Board remains excited at the future
opportunity represented by .pro and the business of operating registries as a
whole.
Further information about RegistryPro can be found at www.registrypro.com .
Board changes
The Board is pleased to announce that with effect from today Tom Turcan has
been appointed Chief Executive Officer of the Group. Having been Chief
Operating Officer since November 1999, with direct responsibility for Net
Searchers since December 2000, Tom has a clear understanding of the strategic
challenges and opportunities facing the Group as a whole, as well as the
exciting platform for growth provided by Net Searchers.
Before joining the Group, Tom was business development director at News
International Plc and previously held positions at Capital Radio Plc, Gemini
Consulting and Logica Plc.
Jason Drummond, founder of the Group and the previous Chief Executive Officer,
will remain on the Board as Managing Director of the Hosting division.
These changes reflect the growing emphasis on Net Searchers in the Group and
the current stage of the Group's development.
Outlook
The stated objective of reaching profitability in the next financial year,
within existing financial resources, remains unchanged. Net Searchers is
expected to play an increasingly central role in the Group's activities. The
Board is encouraged by the increasing number of the world's leading brand
owners that are choosing to use its services and believes there is a
considerable market opportunity for Net Searchers to exploit.
Although we are pleased with the launch of our new hosting services, the Board
is cautious about the growth potential of the Hosting division during the
remainder of the financial year and the Board continues to balance the needs
for profitability and growth.
The Group will continue to develop and explore associated domain name
services, such as RegistryPro, and believes its expertise in all levels of
domain name activity will create further opportunities as the Internet
evolves.
William Slee
Chairman
27 June 2001
Unaudited Unaudited
6 month 6 month
period period Year
ended ended ended
30 April 30 April 31 October
Note 2001 2000 2000
# # #
Turnover 3,975,209 2,539,924 6,259,257
Cost of sales 1,065,571 729,992 1,875,796
_________ _________ _________
Gross profit 2,909,638 1,809,932 4,383,461
_________ _________ _________
Selling and distribution costs 2,362,369 473,550 2,068,456
Administrative expenses:
Before goodwill amortisation
and exceptional items 3,609,026 3,107,068 7,186,580
Goodwill amortisation 1,692,658 1,624,038 3,293,997
Employee share incentives 2 117,769 827,000 361,367
_________ _________ _________
5,419,454 5,558,106 10,841,944
_________ _________ _________
(4,872,184) (4,221,724)(8,526,939)
Other operating income - 10 -
_________ _________ _________
Group operating loss (4,872,184) (4,221,714)(8,526,939)
Share of loss of joint venture (104,221) - (70,264)
_________ _________ _________
Total operating loss: Group
and share of associate (4,976,405) (4,221,714)(8,597,203)
Interest receivable and
similar income 412,434 46,801 655,893
Interest payable and
similar charges (30,689) (72,421) (56,809)
_________ _________ _________
Loss on ordinary activities
before taxation (4,594,660) (4,247,334)(7,998,119)
Tax on loss on ordinary activities - - -
_________ _________ _________
Retained loss for the period (4,594,660) (4,247,334)(7,998,119)
__________ _________ _________
Loss per share - basic and diluted 18.58p 19.71p 34.81p
Loss per share - adjusted 11.23p 8.34p 18.89p
Unaudited Unaudited
6 month 6 month Year
period ended period ended ended
30 April 30 April 31 October
2001 2000 2000
# # #
Loss for the financial period
attributable to members
of the parent company (4,594,660) (4,247,334) (7,998,119)
Exchange difference on
retranslation of net assets of
subsidiary undertakings (6,044) 1,453 6,882
________ _________ _________
Total recognised loss relating to
the period (4,600,704) (4,245,881) (7,991,237)
Unaudited Unaudited
30 April 30 April 31 October
2001 2000 2000
# # #
FIXED ASSETS
Intangible assets 10,115,194 12,288,065 10,902,726
Tangible assets 3,184,242 1,128,528 1,708,569
_________ _________ _________
13,299,436 13,416,593 12,611,295
CURRENT ASSETS
Stocks 292,107 70,000 247,471
Debtors 3,773,760 1,115,555 2,523,330
Cash at bank and in hand 12,555,626 24,346,223 19,506,529
_________ _________ _________
16,621,493 25,531,778 22,277,330
CREDITORS: amounts falling due
within one year 2,463,056 2,713,457 3,194,674
NET CURRENT ASSETS 14,158,437 22,818,321 19,082,656
_________ _________ _________
TOTAL ASSETS LESS CURRENT LIABILITIES 27,457,873 36,234,914 31,693,951
CREDITORS: amounts falling due
after more than one year 157,149 213,100 179,710
PROVISIONS FOR LIABILITIES AND CHARGES 14,609 164,500 23,271
_________ _________ _________
27,286,115 35,857,314 31,490,970
CAPITAL AND RESERVES
Called up share capital 6,278,320 6,094,729 6,177,229
Share premium account 26,615,805 26,017,369 26,443,753
Other reserves 11,377,201 12,403,032 11,734,661
Profit and loss account (16,985,211) (8,657,816) (12,864,673)
__________ _________ __________
Shareholders' funds: Equity 27,286,115 35,857,314 31,490,970
Unaudited Unaudited
6 month 6 month
period period Year
ended ended ended
30 April 30 April 31 October
2001 2000 2000
Note # # #
NET CASH OUTFLOW FROM
OPERATING ACTIVITIES 4 (4,479,286) (829,466) (5,223,604)
_________ __________ __________
RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE
Interest received 412,434 46,801 655,893
Interest paid (30,689) (72,421) (56,809)
_________ __________ __________
381,745 (25,620) 599,084
_________ __________ __________
TAXATION
Corporation tax paid - - -
_________ __________ __________
CAPITAL EXPENDITURE
Payments to acquire tangible
fixed assets (1,798,079) (470,873) (1,283,795)
_________ __________ __________
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertaking (905,126) - (284,620)
Investment in joint venture (104,221) - (70,264)
_________ __________ __________
(1,009,347) - (354,884)
NET CASH OUTFLOW BEFORE USE OF
MANAGEMENT OF LIQUID RESOURCES
AND FINANCING (6,904,967) (1,325,959) (6,263,199)
_________ __________ __________
MANAGEMENT OF LIQUID RESOURCES
Decrease/(increase) in
short term deposits 7,200,000 (23,720,776) (18,420,776)
_________ __________ __________
FINANCING
Issue of ordinary share capital 286,143 24,918,294 27,013,763
Issue costs - - (2,098,085)
Repayment of short-term loans - (7,519) (19,204)
Repayment of long-term loans (22,561) 47,535 14,145
Repayment of loan notes - (279,224) (279,224)
_________ __________ __________
263,582 24,679,086 24,631,395
_________ __________ __________
INCREASE/(DECREASE) IN CASH 558,615 (367,649) (52,580)
============= ============ ============
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
Unaudited Unaudited
6 month 6 month
period period Year
ended ended ended
30 April 30 April 31 October
2001 2000 2000
# # #
Increase/(decrease) in cash 558,615 (367,649) (52,850)
Cash outflow from movement in loans 22,561 239,208 284,283
Cash (inflow)/outflow from
movement in liquid resources (7,200,000) 23,720,776 18,420,776
__________ __________ _________
Change in net funds resulting
from cash flows (6,618,824) 23,592,335 18,652,479
_________ _________ _________
Movement in net funds (6,618,824) 23,592,335 18,652,479
Net funds at beginning of period 18,971,661 319,182 319,182
_________ _________ _________
Net funds at end of period 12,352,837 23,911,517 18,971,661
=========== =========== ==========
1. BASIS OF PREPARATION OF INTERIM FINANCIAL INFORMATION
The interim financial information for all periods has been prepared on the
basis of the accounting policies set out in the group's statutory accounts for
the period ended 31 October 2000. Expenses are accrued in accordance with the
same principles used in the preparation of the annual accounts.
2. EMPLOYEE SHARE INCENTIVES
In accordance with UITF Abstract 17,"Employee Share Schemes", the company
recognises a charge to the profit and loss account for the amount by which the
fair market value of any share options or benefits likely to be issued exceeds
their respective exercise price on the date of the grant. These costs are
recognised on a straight line basis over the period to which they relate.
In accordance with UITF abstract 25, "National Insurance Contributions on
Share Option Gains", the Company provides for national insurance contributions
on options granted or benefits likely to be issued on or after 6 April 1999
under its Unapproved Share Option Schemes and Employee Benefit Trust.
Provision is made over the vesting period of the options on benefits likely to
be issued at the prevailing rate of Employers National Insurance on the
difference between the period end share value and the grant price, being the
directors' best estimate of the ultimate liability at each period end.
During the year ended 31 October 2000, the trustees of the Employee Benefit
Trust ("EBT") determined that the potential benefits which had been made
available to employees of the Group since the EBT was set up should be awarded
and that no more awards should be made under the scheme as the Group had set
up new employee share incentive schemes.
On the setting up of the EBT it was envisaged that the award to beneficiaries
would be made only in shares. However, some beneficiaries of the trust were
given the choice of whether to receive their award in shares or cash. As a
result of this change the UITF 17 charge associated with awards made in cash
has been reversed and replaced with a charge which reflects the cash to be
paid to the beneficiary.
Unaudited Unaudited
6 month 6 month
Period Period Year
ended ended ended
30 April 30 April 31 October
2001 2000 2000
# # #
Recognised in arriving at operating loss:
Employee Benefit Trust ("EBT")
- UITF 17 charge/(credit) - 738,000 (29,776)
- Employer's National Insurance - 89,000 (30,362)
- Benefits awarded in cash - - 248,829
Long Term Incentive Plan ("LTIP")
- UITF 17 charge 123,764 - 149,405
- Employer's National Insurance (5,995) - 23,271
_______ _______ _______
117,769 827,000 361,367
========== ========== =========
3. LOSS PER ORDINARY SHARE
Unaudited Unaudited
6 month 6 month Year
period period ended
ended ended 31
30 April 30 April October
2001 2000 2000
The calculation of basic loss per No. No. No.
ordinary share is based on the effective
weighted average number of
shares in issue during the period 24,788,971 21,544,131 22,978,598
---- ---- ----
The adjusted loss per share is
based on the loss after tax before
goodwill amortisation and the charge
in connection with the Employee Share
Incentives:
# # #
Loss after tax as reported 4,594,660 4,247,334 7,998,119
Less: Goodwill amortisation (1,692,658)(1,624,038)(3,293,997)
Charge in connection with Employee
Share Incentives (117,769) (827,000) (361,367)
---- ---- ----
2,784,233 1,796,296 4,342,755
---- ---- ----
The effective weighted average number of ordinary shares used in the adjusted
loss per share calculation are the same as used in calculating the basic loss
per share.
4. RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING
ACTIVITIES
Unaudited Unaudited
6 month 6 month
period period Year
ended ended ended
30 April 30 April 31 October
2001 2000 2000
# # #
Operating loss (4,872,184) (4,221,714)(8,526,939)
Depreciation 322,406 112,943 345,824
Amortisation of goodwill 1,692,658 1,624,038 3,293,997
Increase in stocks (44,636) (50,000) (227,471)
Increase in debtors (1,250,431) (363,695)(1,771,470)
(Decrease)/increase in creditors (422,658) 1,241,962 1,595,055
(Decrease)/increase in other provisions (8,662) 89,000 (52,229)
Charge in connection with UITF 17 104,221 738,000 119,629
________ ________ ________
Net cash outflow from operating
activities (4,479,286) (829,466) (5,223,604)
============ ========== ==========
5. PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information contained in this interim statement does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985. The financial information for the full preceding period is based on the
statutory accounts for the financial period ended 31 October 2000. Those
accounts, upon which the auditors issued an unqualified opinion, have been
delivered to the Registrar of Companies.
- ENDS -
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