RNS Number:8408Q
Virtual Internet PLC
1 February 2002
For Release at 07:00 hrs 1 February 2002
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
Preliminary results for the year ended 31 October 2001
Virtual Internet plc, a leading provider of online brand management services,
Internet hosting and domain naming, today announces its results for the year
ended 31 October 2001.
Financial Highlights Year ended Year ended
31 October 31 October
2001 2000
£000 £000
Turnover 9,332 6,259
Gross profit 6,459 4,383
Adjusted loss before taxation* (7,548) (4,343)
Loss on ordinary activities before taxation (19,658) (7,998)
Adjusted loss per share - basic and diluted 30.3p 18.9p
Loss per share - basic and diluted 79.0p 34.8p
Cash at bank 8,635 19,507
*Adjusted by excluding goodwill amortisation, goodwill impairment, and employee
share incentive charges
Commenting on last year's performance and prospects, Tom Turcan, CEO, said:
"The Group has made encouraging progress during the period considering the
difficulties experienced by the sector in which it operates as a whole. The
Board considers that Net Searchers has developed into one of the leading forces
in the corporate services sector for brand owners and is encouraged by its
future prospects."
CHAIRMAN'S STATEMENT
The Board of Virtual Internet plc ("the Group") presents the results of the
Group for the year ended 31 October 2001. The Group has made satisfactory
progress over the past year in developing its strategy of becoming a global
leader of Internet brand and trademark protection services. Progress within web
hosting has been more difficult, and a restructuring of that part of the Group
has been completed since the year end.
FINANCIAL REVIEW
Turnover for the year ended 31 October 2001 increased by 48 per cent to £9.3
million from £6.3 million for the year ended 31 October 2000. Gross profit was
£6.5 million compared with £4.4 million for the year ended 31 October 2000. The
loss before taxation, goodwill amortisation, exceptional items and the employee
share incentive charges amounted to £7.2 million compared with £4.3 million for
the year ended 31 October 2000.
As highlighted in the results for the nine months ended 31 July 2001, the Board
decided to write off goodwill of £10.1 million as part of its regular review of
goodwill impairment. In addition, the Group incurred costs of £370,000
restructuring its hosting division as described later in this report. The effect
of these two exceptional items has increased the reported loss before taxation
to £19.7 million compared with £8.0 million in 2000.
The operating losses reflect the cost of customer acquisition across the Group.
With regard to Net Searchers, in particular, the returns from such activity are
expected to be realised in the medium term.
At 31 October 2001 the Group had cash at bank of £8.6 million compared with
£19.5 million at 31 October 2000.
OPERATING REVIEW
Net Searchers
Net Searchers, the Group's online intellectual property protection division,
continued to make good progress throughout the period under review. Over the
past year it has successfully attracted a number of new clients, including
several major brand owners based in the US and continental Europe.
The Board is pleased to note the market for corporate services to brand owners
continued to expand over the period. It also saw an increased awareness of the
specialist services provided by the division generated by new domain name
developments such as the introduction of new top level domains, .info and .biz.
Net Searchers' share of the .info "sunrise" registrations (for intellectual
property owners) and .biz "landrush" registrations placed it well within the
world's top ten registrars for these types of registration.
In addition, Net Searchers successfully launched its new Name Console and this
has made encouraging progress. Name Console allows users to register and manage
a portfolio of domain names online and is targeted at law firms and large
corporate users. During the period Linklaters & Alliance selected Net
Searchers as its exclusive partner for its Blue Flag legal e-commerce portal.
Work with other leading law firms continues to grow. Shortly after the year end,
Net Searchers successfully renewed and extended its contract with BT under which
Net Searchers provides domain name services to BTopenworld.
Hosting services
In contrast the market for the services provided by the Virtual Internet hosting
division continued to be difficult throughout the year. Nevertheless the hosting
division completed a comprehensive upgrade of its hosting infrastructure to
ensure that it continues to offer a high specification product to its core
market.
As a result of the strategic review carried out by the Board during the year it
was decided to close the sales and support offices in France and Italy and to
dispose of the shares in WebControl GmbH, the German hosting operation bought
during the year, back to its founders. This restructuring has been successfully
implemented such that, combined with further cost reductions which took place in
the UK, the hosting division is now more closely aligned to the business
opportunity in the current economic climate.
RegistryPro
The launch of the new .pro Top Level Domain by RegistryPro, in which the Group
has a 50 per cent stake, suffered from delays in the negotiation of the licence
agreement with ICANN. However, the Board hopes to see a successful launch in
the coming financial year. Additional capital of approximately £350,000 was
invested in the joint venture vehicle in January 2002 in order to provide
further funding to launch the business.
OUTLOOK AND STRATEGY
The Group has made encouraging progress during the period considering the
difficulties experienced within the sector it operates. The restructuring of
the hosting business during the year should enable it to continue to exploit its
business opportunity. The Board considers that Net Searchers has developed into
one of the leading global providers of corporate services to brand owners and is
encouraged by its future prospects.
RECOMMENDED OFFER
Shareholders will have seen today, the announcement of the recommended cash
offer for the Company on behalf of Register.com, Inc. The document containing
details of the offer has been posted today and I encourage you to read its
contents.
William Slee
Chairman
1 February 2002
GROUP PROFIT AND LOSS ACCOUNT FOR VIRTUAL INTERNET PLC
FOR THE YEAR ENDED 31 OCTOBER 2001
2001 2000
Notes £000 £000
Turnover
Continuing operations 9,332 6,259
Cost of sales 2,873 1,876
Gross profit 6,459 4,383
Selling and distribution costs 5,402 2,068
Administrative expenses:
Before goodwill amortisation and exceptional items 8,715 7,187
Goodwill amortisation 1,638 3,294
Employee share incentives 2 344 361
Exceptional items:
Restructuring costs 3 370 -
Impairment of goodwill 3 10,128 -
21,195 10,842
Group operating loss
Continuing operations (20,138) (8,527)
Share of loss of joint venture (145) (70)
Total operating loss (20,283) (8,597)
Interest receivable and similar income 637 656
Interest payable and similar charges (12) (57)
Loss on ordinary activities before taxation (19,658) (7,998)
Tax on loss on ordinary activities - -
Transfer to reserves (19,658) (7,998)
Loss per share - basic and diluted 4 79.0p 34.8p
Adjusted loss per share - basic and diluted 4 30.3p 18.9p
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR VIRTUAL INTERNET PLC
FOR THE YEAR ENDED 31 OCTOBER 2001
2001 2000
£000 £000
Loss for the financial year attributable to
members of the parent company (19,658) (7,998)
Exchange difference on retranslation of net assets of
subsidiary undertakings 1 6
Total recognised loss relating to the year (19,657) (7,992)
GROUP BALANCE SHEET FOR VIRTUAL INTERNET PLC
AT 31 OCTOBER 2001
2001 2000
£000 £000
FIXED ASSETS
Intangible assets - 10,903
Tangible assets 3,089 1,708
Investments 127 -
3,216 12,611
CURRENT ASSETS
Stocks 295 248
Debtors 3,497 2,523
Cash at bank and in hand 8,635 19,507
12,427 22,278
CREDITORS: amounts falling due within one year 3,019 3,195
NET CURRENT ASSETS 9,408 19,083
TOTAL ASSETS LESS CURRENT LIABILITIES 12,624 31,694
CREDITORS: amounts falling due after more than one year 128 180
PROVISIONS FOR LIABILITIES AND CHARGES 29 23
12,467 31,491
CAPITAL AND RESERVES
Called up share capital 6,278 6,177
Share premium account 26,616 26,444
Other reserves 11,614 11,735
Profit and loss account (32,041) (12,865)
Shareholders' funds: equity 12,467 31,491
GROUP STATEMENT OF CASH FLOWS FOR VIRTUAL INTERNET PLC
FOR THE YEAR ENDED 31 OCTOBER 2001
2001 2000
£000 £000
NET CASH OUTFLOW FROM OPERATING ACTIVITIES (7,970) (5,223)
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received 637 656
Interest paid (12) (57)
625 599
TAXATION
Corporation tax paid - -
CAPITAL EXPENDITURE
Payments to acquire tangible fixed assets (2,344) (1,284)
Payments to acquire investments in own shares (91) -
(2,435) (1,284)
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertaking (617) (285)
Investment in joint venture (145) (70)
Net cash acquired with subsidiary undertaking 15 -
Net cash transferred with subsidiary undertaking on disposal (18) -
(765) (355)
NET CASH OUTFLOW BEFORE MANAGEMENT OF
LIQUID RESOURCES AND FINANCING (10,545) (6,263)
MANAGEMENT OF LIQUID RESOURCES
Decrease/(increase) in short term deposits 11,400 (18,421)
FINANCING
Issue of ordinary share capital 32 27,014
Issue costs - (2,098)
Movement in long-term borrowings (27) 14
Capital element of finance lease rental payments (25) (19)
Repayment of loan notes - (279)
(20) 24,632
INCREASE/(DECREASE) IN CASH 835 (52)
GROUP STATEMENT OF CASH FLOWS FOR VIRTUAL INTERNET PLC
FOR THE YEAR ENDED 31 OCTOBER 2001
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
2001 2000
£000 £000
Increase/(decrease) in cash 835 (52)
Cash outflow from movement in loans 52 284
Cash (inflow)/outflow from (decrease)/increase in liquid resources (11,400) 18,421
Change in net funds resulting from cash flows (10,513) 18,653
Loans acquired with subsidiaries - -
Other - -
Movement in net funds (10,513) 18,653
Net funds at beginning of year 18,972 319
Net funds at end of year 8,459 18,972
NOTES
1. ACCOUNTING POLICIES
Basis of preparation
The 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 year ended
31 October 2001. Expenses are accrued in accordance with the same principles
used in the preparation of the accounts.
2. EMPLOYEE SHARE INCENTIVES
Year ended Year ended
31 October 31 October
2001 2000
£000 £000
Recognised in arriving at operating loss:
Long Term Incentive Plan ("LTIP"):
-UITF 17 charge 360 149
-Employer's National Insurance (16) 23
Employee Benefit Trust ("EBT")
-UITF 17 (credit)/charge - (30)
-Employer's National Insurance - (30)
-Benefit awarded in cash - 249
344 361
This cost recognises the charge in the year in connection with the EBT and LTIP
in accordance with Urgent Issues Task Force Statement 17 ("UITF 17") and an
estimation of the related employer's national insurance liability on potential
share benefits under the scheme.
During the previous financial year, the trustees of the 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, 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 was reversed
and replaced with a charge which reflected the cash paid to the beneficiaries.
The charge in connection with UITF 17 is recognised as a movement in other
reserves within shareholders' funds. The estimated employer's national
insurance liability is recognised as a provision. This provision is calculated
based on the share price at the end of the year.
3. EXCEPTIONAL ITEMS
Year ended Year ended
31 October 31 October
2001 2000
£000 £000
Impairment of goodwill 10,128 -
Restructuring costs 370 -
10,498 -
In July 2001, in light of the continuing uncertainty in the economic climate as
a whole and the widespread fall in valuations of companies operating in the
internet services sector, the directors performed an impairment review of
goodwill and fixed assets. As a result, the remaining goodwill of £10,128,000
was written off.
Restructuring costs represent the cost of reorganising the hosting business in
the UK, and the closure of sales/support offices in France and Italy.
4. LOSS PER ORDINARY SHARE
The calculation of basic loss per ordinary share is based on the loss after tax
of £19,658,000 (2000 - £7,998,000) and 24,887,580 (2000 - 22,978,598) shares
being the effective weighted average number of ordinary shares in issue during
the year.
The loss attributable to ordinary shareholders and weighted average number of
ordinary shares for the purposes of calculating the diluted loss per share are
identical to those used for basic loss per ordinary share. This is because the
exercise of share options and other share benefits would have the effect of
reducing the loss per ordinary share and is therefore not dilutive under the
terms of FRS 14.
Year ended Year ended
31 October 31 October
2001 2000
No. No.
The calculation of basic loss per ordinary share is
based on the effective weighted average number
of shares in issue during the period 24,887,580 22,978,598
The adjusted loss per share is based on the loss after tax before goodwill
amortisation, goodwill impairment and the employee share incentive charges:
Year ended Year ended
31 October 2001 31 October 2000
£000 £000
Loss after tax as reported 19,658 7,998
Less:
Goodwill amortisation and impairment charge (11,766) (3,294)
Charge in connection with employee share incentives (344) (361)
7,548 4,343
The effective weighted average number of ordinary shares used in the adjusted
loss per share calculation is the same as used in calculating the basic loss per
share.
5. RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES
Year ended Year ended
31 October 31 October
2001 2001
£000 £000
Operating loss (including loss in joint venture) (20,283) (8,597)
Depreciation 963 346
Amortisation of goodwill 11,766 3,294
Increase in stocks (47) (227)
Increase in debtors (958) (1,771)
Increase in creditors 94 1,595
Increase/(decrease) in other provisions 6 (52)
Charge in connection with UITF 17 (see note 2) 344 119
Share of loss of associate 145 70
Net cash outflow from operating activities (7,970) (5,223)
6. DIVIDEND
No dividend was paid in the year and the directors do not propose to recommend
the payment of a final dividend.
7. PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information contained in this 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 year ended 31 October 2000. Those
accounts, upon which the auditors issued an unqualified opinion, have been
delivered to the Registrar of Companies. The financial information for the
current year is based on the statutory accounts for the financial year ended 31
October 2001, upon which the auditors have issued an unqualified opinion.
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