RNS Number:1198G
VirtualInternet.net PLC
24 February 2000
Contact Jason Drummond, Chief Executive 0171 460 4060
VirtualInternet.net plc jason.drummond@vi.net
David Bick/John Bick 0171 929 5599
Holborn Public Relations david_bick@holbornpr.co.uk
VIRTUALINTERNET.NET PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE 13 MONTHS ENDED 31 OCTOBER 1999
Revenue up 370% over 12 months; hosted and managed domains up by 250%
The Group is an international provider of domain based Internet
services, offering a diverse range of products and services, from domain
registration and web hosting to brand and trademark protection on the
Internet.
Highlights
* Group turnover increased by 370% over the previous 12 months. Pro-forma
revenue for the year ended 31st October 1999 was #2.1m
* 250% growth in the number of hosted domains over the previous 12 months.
Over 25,000 hosted and managed domains at the year end 31st October 1999
* Successful launch of the wholesale services business in the fourth quarter
providing substantial growth in income to the Group
* Completed the acquisition of Virtual Internet Limited and two further
acquisitions
* Provided services to over half of the FTSE 100 companies
* Awarded domain name registry licence for .com, .net, and .org by ICANN
Building strong foundations for growth
* New offices opened in France, the US, Italy and Australia
* Management team strengthened to sustain and control growth.
Appointment of a new non-executive chairman, chief financial officer, chief
operating officer and non-executive director
* Employee numbers increased from 14 to 70 at 31st October 1999
Formed strategic relationships
* AOL France and CompuServe France
* Microsoft Networks (MSN) in the UK
* European co-location agreement with Level 3 Communications
Commenting on today's results announcement, Jason Drummond,
Chief Executive of VirtualInternet.net said:
"This year has seen a major step change in our business, we
have built a strong base and infrastructure on which we can
continue to achieve significant levels of growth. We have
successfully completed and integrated a number of acquisitions
and have opened a further four international offices. We have
strengthened the team through a number of key appointments and
revenues continue to grow rapidly.
"As more and more businesses continue to want a presence on
the Internet, Virtual Internet's reputation and range of
products and services ensures that we are well placed to
benefit from this growth".
VIRTUALINTERNET.NET PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE 13 MONTHS ENDED 31 OCTOBER 1999
Revenue up 370% over 12 months; hosted and managed domains up
by 250%
Introduction
The Board of VirtualInternet.net plc ("VI.net" or "the Group")
is pleased to announce the preliminary results of the Group
for the 13 months ended 31 October 1999. VI.net has made
significant progress over the past year. The Group is now an
international provider of domain based Internet services,
offering a diverse range of products and services, from domain
registration and web hosting to brand and trademark protection
on the Internet.
Results
The Group has developed its customer base in each of the main
areas of operations. As at 31 October 1999, VI.net had over
25,000 hosted and managed domains and provided brand and trade
mark protection services to over 2,500 customers. In
addition, the Group provided services to over half of the FTSE
100 companies.
The acquisitions of VI.net are described below. The basis for
the pro-forma results discussed in the next paragraph is
explained in the accounting policies note.
In the year ended 31 October 1999, VI generated turnover of
#2.1m (#0.4m in 1998) with EBITDA before the employee benefit
trust charge being a loss of #1.16m (#0.03m in 1998).
Corporate activity
The Group as it is constituted today was established on 19
January 1999 when VI.net (then Charriol plc) acquired Virtual
Internet Limited ("VI"). The Group further expanded and
strengthened its product offerings through the acquisition in
April 1999 of Net Searchers International Limited ("Net
Searchers"), based in the UK, from its two founders, who now
form a key part of the management team that operates the
Group's Internet brand and trademark protection services
business. Also in April 1999, VI.net exercised its option to
acquire the outstanding 66 per cent. of Virtual Internet Sarl
based in France. The founder of Virtual Internet Sarl also
joined VI.net's management team.
These transactions have achieved the dual aims of further
enhancing the Group's products and services, whilst expanding
the geographic area over which these can be marketed.
Business services
The Group provides its customers with the following services:
* Retail domain-based services, such as domain name
registration, web site hosting, e-mail services, e-commerce
solutions, application server hosting and server co-location.
The majority of Group revenue has been derived historically
from simple domain registration, thereafter upgrading
customers over time to e-mail services and providing hosting
for their web sites. The Group increasingly offers a
comprehensive range of packages designed for customers with
different levels of Internet requirement. It is the Group's
expectation that over time the customer will be upgraded
from the basic package through to the more advanced
offerings such as managed application servers, whereby a
customer has its web site hosted on a dedicated, Internet-
specific server.
* Wholesale domain-based services, the provision of certain
of the Group's services (registry and domain services, hosting
application services and e-commerce services and solutions) to
a customer who then retails the service to its own, typically
large, customer base.
VI.net has for a number of years run the domain registry for
Gibraltar. The Board has always recognised that the
expansion of this business area would be an important part
of the Group's service offering in the future. During 1999,
VI.net was awarded a top level domain name registration
license by ICANN. As a result, VI is now entitled to
receive a significant portion of the relevant registration
fee directly for all .com, .net and .org registrations made
by the Group.
* Internet brand and trade mark protection services,
offering a range of services to enable customers to protect
their trade marks, brands and intellectual property on the
Internet. Services include worldwide domain registrations for
particular brands or company names and brand monitoring, for
example for infringement, on the Internet.
Brand owners are increasingly aware of their exposure to
potential Internet infringement. VI.net's dedicated teams
assist in the reclamation of domain names and/or the closure
of infringing web sites, and undertake, on a world-wide
basis, domain registration programmes and Internet policing.
The acquisition of Net Searchers International Limited
during the year has improved the Group's capacity in this
increasingly important market.
Business development
The Group has pursued and continues to pursue a strategy
comprising:
International expansion
Since January 1999, the Group has expanded from its core
London base and is now represented in France (offices in Paris
and Beauvais), the US (New York), Italy (Milan) and Australia
(Sydney). The majority of these offices were opened in the
second half of 1999 and, as a result, had a minimal impact on
Group trading in 1999. It is the Board's expectation that it
will take up to six months for each new office to build the
necessary management team, administrative base and market
awareness of the VI brand to make a meaningful contribution to
the Group.
VI.net continues actively to monitor other international
markets, to determine the potential for VI's service offerings
as Internet activity develops. Further European expansion is
planned, in combination with development in the Asia Pacific
region, initially focussed on the new Sydney office.
Strategic Relationships
The Group continues to see the benefit of building
partnerships and/or revenue share agreements with direct
Internet channels such as portals and access providers. Over
the past year VI.net has entered into a number of different
types of such arrangements, examples of which are set out
below:
- AOL France and CompuServe France (through Cegetel, one of
France's largest telecom providers);
- Level (3) in UK and other European markets; and
- Microsoft Networks (MSN) in the UK.
Board changes
The Group is pleased to announce a number of new Board
appointments with effect from 23rd February 2000:
William Slee (59) - has been appointed as non-executive
Chairman
He has over 30 years' experience in international investment
banking, having most recently been a Group Managing Director
of Schroders plc and Vice Chairman of J Henry Schroder & Co
Ltd. He is currently Chairman of De Nationale
Investeringsbank, a leading wholesale bank in the Netherlands;
Vice Chairman of Singulus Technologies AG, a German company,
quoted on the Neuermarkt, which manufactures machinery for the
optical disc storage industry; non-executive director of
Charles Vogele Holdings AG, a publicly quoted Swiss based
European outwear retailer; and a member of the Investment
Committee of Algemeen Burgerlijk Pensioenfonds, one of the
world's largest pension funds.
Frederick Mostert (40) - has been appointed as a non-executive
director.
He is a widely published international expert in trademarks
and intellectual property and currently serves on the Industry
Advisory Commission of the World Intellectual Property
Organisation in Geneva. He is the Intellectual Property
Counsel and executive director of Richemont SA which includes
Cartier, Montblanc, Alfred Dunhill and Van Cleef & Arples. He
is Honorary Chairman of the International Trademark
Association.
Jonathan Wales (43) - has been appointed as Group Finance
Director
He was a senior Partner at Wise and Co., a leading firm of
Chartered Accountants based in Surrey. In addition to being
responsible for a range of clients within the practice he has
led the corporate finance department handling a range of
corporate acquisitions, disposals and MBOs. Jonathan first
worked in the Internet industry in 1997 when he became the
Partner responsible for the affairs of Virtual Internet, being
involved in a range of acquisition work on its behalf.
In addition to these appointments Tom Turcan joined the Board
as Chief Operating Office in November 1999.
Tom Turcan (38) - Chief Operating officer
Tom Turcan joined VirtualInternet.net plc in November 1999.
Prior to this he was Business Development Director at News
International plc, the European arm of News Corporation where
he played a central role in a series of investment initiatives
in magazines, newspapers, radio, telemarketing and new media
in the UK and Continental Europe. After completing an MBA
from London Business School in 1991, Tom worked for a year as
a Strategy Associate for Gemini Consulting, and then spent
four years as a key member of the corporate development team
at Capital Radio plc. His career began in 1982 as a systems
consultant and project manager for Logica plc, specialising in
television and real-time communication systems. He holds a
first class honours degree in Computational Science from St
Andrews University.
These Board appointments reflect the changing nature of the
Group's business and, in particular, the progression of the
Virtual Internet Limited business since its acquisition by
Charriol plc during 1999. Chris Akers, Peter Williams and
David Rogers have all resigned from the Board effective from
23rd February 2000. The Board would like to thank them for
their contributions to the development of the Group and their
consistent support and encouragement.
Current trading and prospects
Over the coming months, management focus will continue to be
applied to the Group's strategy. The growth in the Group's
established markets is continuing and the prospects for both
the existing and new offices are encouraging. As part of the
Group's strategy, the Board will continue to appraise suitable
acquisition targets.
It is also expected that, as soon as practicable, the Group
will seek to move to a full listing on the London Stock
Exchange.
VIRTUALINTERNET.NET PLC
GROUP PROFIT AND LOSS ACCOUNT
for the 13 month period ended 31 October 1999
13 month Unaudited Unaudited
period Proforma Proforma
ended Year ended Year ended
31 October 31 October 31 October
1999 1999 1998
# # #
Turnover
Continuing operations:
ongoing - 1,515,417 438,566
acquisitions 1,885,553 555,801 -
--------- --------- --------
1,885,553 2,071,218 438,566
Cost of sales 695,819 721,700 20,390
--------- --------- --------
Gross profit 1,189,734 1,349,518 418,176
--------- --------- --------
Selling and distribution costs 640,862 700,693 127,035
Administrative expenses:
Before goodwill amortisation
and exceptional items 1,792,123 1,901,457 351,602
Goodwill amortisation 2,511,523 2,511,523 -
Employee Benefit Trust charge 635,500 635,500 -
--------- --------- --------
4,939,146 5,048,480 351,602
--------- --------- --------
(4,390,274) (4,399,655) (60,461)
Other operating income 12,728 22,003 9,600
--------- --------- --------
Operating loss
Continuing operations:
ongoing (3,528,136) (4,072,832) (50,861)
acquisitions (849,410) (304,820) -
Group operating loss (4,377,546) (4,377,652) (50,861)
Share of profit/(loss)
of associated undertaking 2,483 (7,817) (35,295)
--------- --------- --------
Total operating loss: Group and
share of associate (4,375,063) (4,385,469) (86,156)
Interest receivable and similar
income 13,105 13,105 37
Interest payable and
similar charges (44,385) (56,202) (42,658)
--------- --------- --------
Loss on ordinary activities
before taxation (4,406,343) (4,428,566) (128,777)
Tax on loss on ordinary activities - - 35
--------- --------- --------
Retained loss for the
period/year (4,406,343) (4,428,566) (128,812)
--------- --------- --------
--------- --------- --------
Loss per share - basic and diluted 25.61p
Note: The basis of preparation of the Proforma information is explained
in note 2.
VIRTUALINTERNET.NET PLC
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the 13 month period ended 31 October 1999
13 month Unaudited Unaudited
period Proforma Proforma
ended Year ended Year ended
31 October 31 October 31 October
1999 1999 1998
# # #
Loss for the financial period/year
attributable to members of the
parent company (4,406,343) (4,428,566) (128,812)
Exchange difference on
retranslation of net assets
of subsidiary undertakings (5,593) (2,444) -
--------- --------- --------
Total recognised loss relating
to the period/year (4,411,936) (4,431,010) (128,812)
--------- --------- --------
--------- --------- --------
GROUP BALANCE SHEET
at 31 October 1999
Unaudited
Proforma
31 October 31 October
1999 1998
# #
FIXED ASSETS
Intangible assets 13,912,103 -
Tangible assets 770,598 415,088
Investments - 1,698
---------- ---------
14,682,701 416,786
---------- ---------
CURRENT ASSETS
Stocks 20,000 -
Debtors 751,860 121,830
Cash at bank and in hand 828,815 808
---------- ---------
1,600,675 122,638
CREDITORS: Amounts falling due
within one year 1,595,411 471,315
---------- ---------
NET CURRENT ASSETS/(LIABILITIES) 5,264 (348,677)
---------- ---------
TOTAL ASSETS LESS CURRENT LIABILITIES 14,687,965 68,109
CREDITORS: Amounts falling due
after more than one year 165,565 188,405
PROVISIONS FOR LIABILITIES AND CHARGES 75,500 35,295
---------- ---------
14,446,900 (155,591)
---------- ---------
CAPITAL AND RESERVES
Called up share capital 5,330,966 10,000
Share premium account 1,862,838 -
Other reserves 11,665,032 -
Profit and loss account (4,411,936) (165,591)
---------- ---------
Shareholders' funds: Equity 14,446,900 (155,591)
---------- ---------
GROUP CASHFLOW STATEMENT
for the 13 month period ended 31 October 1999
13 month
period
ended
31 October
1999
#
NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES (1,323,427)
----------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received 13,105
Interest paid (44,385)
----------
(31,280)
----------
TAXATION
Corporation tax paid -
----------
CAPITAL EXPENDITURE
Payments to acquire tangible fixed assets (419,486)
----------
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertaking (574,222)
Net overdrafts acquired with subsidiary undertaking (24,892)
----------
(599,114)
----------
NET CASH (OUTFLOW)/INFLOW BEFORE USE OF MANAGEMENT
OF LIQUID RESOURCES AND FINANCING (2,373,307)
----------
MANAGEMENT OF LIQUID RESOURCES
Increase in short term deposits (279,224)
----------
FINANCING
Issue of ordinary share capital 3,598,836
New short-term loans -
Repayment of short-term loans (8,808)
Repayment of long-term loans (17,130)
New loan notes issued (650,000)
Repayment of loan notes 279,224
----------
3,202,122
----------
INCREASE IN CASH 549,591
----------
1. Publication of Non-Statutory Accounts
The financial information contained in this preliminary statement
does not constitute statutory accounts as defined in section 240
of the Companies Act 1985. The financial information for the
thirteen month period to 31 October 1999 is based on the statutory
accounts for that financial period. Those accounts, upon which
the auditors issued an unqualified opinion, have not yet been
delivered to the Registrar of Companies.
The proforma financial information has not been audited. The
basis of presentation is explained below.
Following are extracts from the notes to the statutory accounts
for the period ended 31 October 1999.
2. Accounting Policies
Basis of preparation
The financial information has been prepared under the historical
cost convention and in accordance with applicable United Kingdom
accounting standards.
Basis of consolidation
The group accounts consolidate the results of VirtualInternet.net
plc and its subsidiary undertakings from their respective dates
of acquisition.
Virtual Internet Limited, Net Searchers International Limited and
Virtual Internet SarL have been included in the financial information
using the acquisition method of accounting. Accordingly, the
group profit and loss account and statement of cash flows include
the results and cash flows of these entities for the periods from
acquisition on 19 January 1999, 19 April 1999 and 28 April 1999
respectively. The purchase consideration has been allocated to
assets and liabilities on the basis of fair value at the date of
acquisition.
Undertakings, other than subsidiary undertakings, in which the
group has an investment and over which it is in a position to
exercise a significant influence are treated as associated
undertakings. The financial information includes the
appropriate share of these undertakings' results and reserves.
Proforma information
The underlying ongoing trade of the group was carried out by
Virtual Internet Limited and its subsidiaries until 19 January
1999 and by VirtualInternet.net plc and its subsidiaries,
including Virtual Internet Limited, thereafter. Accordingly, the
directors have also presented proforma information for the year
ended 31 October 1998 and 31 October 1999. This proforma
information for the year ended 31 October 1998 is based on the
results of Virtual Internet Limited. The proforma information
for the year ended 31 October 1999 is based on the results of
Virtual Internet Limited for the period prior to its
acquisition by VirtualInternet.net plc on 19 January 1999 together
with the consolidated results of VirtualInternet.net plc and
its subsidiary undertakings, including Virtual Internet Limited,
for the period from 19 January 1999 to 31 October 1999. The
proforma results have been prepared under consistent
accounting policies with the current year. The directors
believe that this additional information provides shareholders
with more meaningful information than that given in the
statutory accounts alone.
Goodwill
Goodwill arising on consolidation represents the excess of
fair value of the consideration paid over the fair value of the
identifiable net assets acquired. Goodwill has been capitalised
and amortised on a straight line basis over its estimated useful
economic life. The expected useful economic life is five years.
Goodwill is reviewed for impairment at the end of the first full
financial year following the acquisition and in other periods
if events or changes in circumstances indicate that the carrying
value may not be recoverable.
Revenue recognition
Revenue relating to time based services which is invoiced in
advance is deferred in the balance sheet and released to the
profit and loss account in the periods in which the services are
provided. All other revenue is recognised on an earned basis.
Cost of share option scheme and employee benefit trust
In accordance with Urgent Issues Task Force Statement 17 (UITF 17),
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.
All the employees of the Company are potential beneficiaries of
shares or share options which may become available to the Employee
Benefit Trust of the Company established during the year. Although
no employee has an absolute right to receive any shares or interest
in shares, the company has recognised a charge for the full amount
of all potential entitlements communicated to employees as at 31
October 1999. In addition, provision is made for the estimated
liability for Employer's National Insurance on the expected number
of shares which will be issued using the market value of the
company's shares at the balance sheet date.
3. Notes to the statement of cash flows
(a) Reconciliation of operating loss to net cash (outflow)/inflow
from operating activities
Period ended
31 October
1999
#
Operating loss (4,375,063)
Depreciation 62,884
Amortisation of goodwill 2,511,523
Share of (profit)/loss in associated undertakings (2,483)
Increase in stocks (6,000)
Increase in debtors (525,934)
Increase in creditors 376,146
Increase in other provisions 75,500
Charge in connection with employee
benefits trust under UITF 17 560,000
----------
Net cash (outflow)/inflow from operating activities (1,323,427)
----------
(b) Analysis of changes in net funds
As at start As at end
of Cash Acquisitions/ of
Period Flow Disposals Period
# # # #
Cash at bank and in hand - 549,591 - 549,591
------- --------- -------- --------
Cash - 549,591 - 549,591
Short term deposits* - 279,224 - 279,224
Loans - 25,938 (256,347) (230,409)
Loan notes - 370,776 (650,000) (279,224)
------- --------- -------- --------
- 1,225,529 (906,347) 319,182
------- --------- -------- --------
* Short term deposits are included within cash at bank and in hand in the
balance sheet.
END
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