RNS Number:6917J
Host Europe PLC
10 September 2001
HOST EUROPE PLC
("HOST EUROPE" OR "THE GROUP")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2001
Host Europe (formerly Magic Moments Internet PLC) is one of Europe's leading
internet hosting providers to the SME market. Today's interim results show
turnover up over 280% to #4.2 million and EBITDA profit of #60,000 for the six
months ended 30 June 2001.
Highlights
Unaudited 6 Unaudited 6 Year ended
month period month period 31
ended 30 June ended 30 June December
2001 2000 2000
#'000 #'000 #'000
Turnover 4,174 1,080 4,160
Gross Profit 3,164 693 3,226
Earnings before 60 (1,157) (1,268)
interest, tax,
depreciation and
amortisation (EBITDA)
Net cash outflow from (16) (765) (797)
operating activities
Loss per share (0.99p)
(0.39p) (1.78p)
Cash at bank 946 5,304 2,642
* Turnover increased by over 280% to #4.2m (2000: #1.1m)
* EBITDA profit of #60,000 compared to an EBITDA loss of #1,157,000
for the same six month period in 2000
* Number of domain names under management up from 76,000 at 31
December 2000 to 190,000 at 30 June 2001
* Number of shared server hosting accounts totalled 51,000 compared
to 31,000 in December 2000
* Number of dedicated and co-located servers hosted by the Group
increased to 2,300 from 1,200 at December 2000
* Host Europe now boasts over 31,000 customers compared to 18,000 at
December 2000
* Acquisition of 51% of One-2-One Advertising & Telecommunications
GmbH, a significant player in the German hosting market
* Entered into a strategic partnership with Atlantic Telecom Group
plc ("Atlantic") and raised #2.5m before expenses by way of a placing
of new ordinary shares with Atlantic
* Chosen by Microsoft to launch its new Server Appliance Kit in the UK
* Launched a range of managed hosting services, such as data back
up, systems monitoring and firewall security, to add further value to
the range of dedicated servers offered by the Group
* Completed new 2,500 sq ft London data centre to meet the demand
for dedicated and co-located server products, bringing total Group
data centre space to 6,500 sq ft
* Signed leasing facilities for the purchase of up to #1.3m of IT
hardware and software
Graham J Duncan, Chairman of Host Europe, said:
"Whilst continuing our aggressive expansion, we have managed costs tightly and
enjoyed ever increasing contract renewal revenues from existing hosting
customers. The result is that we have achieved positive EBITDA. Moreover, we
approached operating cash flow breakeven during the first six months of the
year. I am confident our efforts will deliver further strong growth over the
rest of the year.
"We now have a strong platform of satisfied customers, a proven management
team, experienced staff, robust infrastructure and automated systems. Host
Europe is now well positioned for its next stage of growth. To become one of
the top three European providers of internet hosting solutions to the SME
market by 2002 remains our primary objective."
10 September 2001
Enquiries:
Host Europe Tel: 020 7457 2020 (today)
Abby Hardoon, Chief Executive Tel: 020 8896 7500 (thereafter)
Stephen Halstead, Chief Financial Officer
College Hill Tel: 020 7457 2020
Nicola Weiner nicola.weiner@collegehill.com
Andree Taylor andree.taylor@collegehill.com
HOST EUROPE PLC
("HOST EUROPE" OR "THE GROUP")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2001
CHAIRMAN'S STATEMENT
Introduction and Results
The Board of Host Europe is pleased to announce the Group's interim results
for the six months ended 30 June 2001.
It has been another encouraging start to the year and the Group has made
significant progress. With a combination of rapid organic growth and the
acquisition of One-2-One Advertising & Telecommunications GmbH ("One-2-One"),
Host Europe is now a leading provider of web hosting services to the European
small to medium sized enterprise ("SME") market. The acquisition of One-2-One
gives the Group exposure to the German market that is expected to be the
largest market in Europe for internet hosting by 2004 (Source:IDC). The Group
further developed its dedicated servers offering by adding a range of managed
hosting services to its product range and through the launch of the Microsoft
Server Appliance Kit.
The following table summarises the Group's performance over the past 18
months:
1st Half 2000 2nd Half 2000 1st Half 2001
Turnover - #'000 1,080 3,080 4,174
EBITDA - #'000 (1,157) (111) 60
Operating cash flow - #'000 (765) (32) (16)
Domain names managed - No. 36,000 76,000 190,000
Shared server accounts - No. 23,000 31,000 51,000
Dedicated and co-located servers - No. 370 1,200 2,300
Customers - No. 14,000 18,000 31,000
As the table shows, Host Europe has continued to achieve strong growth over
the first six months of 2001 with turnover up by over 280% for the six months
ended 30 June 2001 compared to the same period in 2000. Earnings before
interest, tax, depreciation and amortisation showed a profit of #60,000,
compared to a loss of #1,157,000 for the same period in the previous year,
reflecting the operational efficiency and synergies leveraged across the
Group, as well as the strong financial control exercised by the management
team. In addition, the revenues from contract renewals continue to build. The
ongoing investment being made by the Group in developing a large recurring
hosting revenue stream is starting to show returns and will continue to be the
focus for the Group. Retained loss for the period was #9,687,000, compared to
#2,725,000 for the same period in 2000, and includes a charge for goodwill
amortisation of #9,226,000. The Group has taken a prudent approach to the
amortisation of goodwill arising from acquisitions with goodwill being
amortised over 3 years.
The loss per share was 0.99p. Adjusted loss per share, excluding
amortisation, was 0.05p. Net cash as at 30 June 2001 was #946,000. Net cash
outflow from operating activities for the six month period was #16,000.
Having completed a significant expansion of our UK data centre facilities in
the first half of the year, our aim is to achieve operating profit (excluding
goodwill amortisation) and net cash flow breakeven on a quarterly basis by the
end of 2001 as the impact of high margin recurring hosting revenues becomes
even more significant.
Strategy
Host Europe intends to become a leading European provider of hosting solutions
to the SME market. Host Europe's strategy is to consolidate its leadership
position through the continual development of innovative products, the
provision of excellent customer service and tight cost control. These results
demonstrate the continuing success of this strategy with new business and
renewal business showing strong growth whilst our cost base has been
contained. Host Europe is intent on retaining customers and maintaining the
high renewal rates it currently enjoys by continually exceeding our customers'
expectations. The work that has been done to develop a comprehensive range of
scaleable hosting services provides a natural upgrade path to our customers
and a key aim of the Group is to seek to increase the revenue from each
customer by encouraging customers to follow this upgrade path.
In addition to pursuing strong organic growth, the Group continues to seek and
evaluate potential acquisition targets with a view to strengthening its
position as a leading European hosting company. By acquiring established
hosting companies in the major European markets and introducing the successful
products we have developed in the UK, the Group would be able to capitalise on
additional strong growth opportunities. Negative sentiment towards technology
investment has created an opportunity for the Group, as many private hosting
businesses across Europe do not have sufficient access to capital to fulfill
their growth plans. Host Europe aims to be at the forefront of the widely
predicted consolidation that is expected to take place in this marketplace
over the next few years.
Acquisitions and Business Development
In March 2001, the Group completed the acquisition of 51% of One-2-One for a
total consideration of #2.2 million. The acquisition represents a significant
step in the implementation of the Group's strategy, building on its position
as a leading provider of internet hosting services in the UK by gaining
exposure to the German market. A number of dedicated server products
previously developed in the UK have now been launched in Germany and we are
experiencing strong demand for these products. As a result, recent monthly
sales are more than double those achieved by the company six months
previously. Germany is forecast to become the largest market for hosting
services in Europe and, by replicating the products we have developed in the
UK, we are confident of capitalising on this market opportunity.
We are delighted with the progress of One-2-One to date, and it has been
subsequently renamed Host Europe GmbH. The company hosted more than 400
dedicated and co-located servers at 30 June 2001, up from less than 100
servers at the start of the year.
Following Mike Behrendt's departure on 17 August, he has signed an agreement
extending the lock-in arrangements relating to any shares that may be allotted
to him as consideration for the remaining 49% of the share capital of
One-2-One. Under the new agreement, Mike Behrendt may not sell any shares
within one year of allocation, and may only sell up to a maximum of 6 million
shares within two years. We are pleased to report that Uwe Braun, co-founder
of One-2-One, has been appointed Country Manager and, in addition to continued
strong growth, Host Europe GmbH has now achieved EBITDA profitability.
The acquisition of One-2-One was funded by way of a placing of new ordinary
shares with Atlantic Telecom Group plc ("Atlantic"). Atlantic
(www.atlantic-e.com) is a European provider of integrated communications using
fibre, fixed wireless and DSL (Digital Subscriber Line) technologies to
provide clients with networking and communication solutions. In order to
exploit the synergies in customer base, service offerings and geographical
reach, Host Europe and Atlantic have also entered into a strategic partnership
whereby the two companies are offering each others' services to their own
customers.
In June 2001, Host Europe announced that it had been chosen by Microsoft to
launch its new Server Appliance Kit ("SAK") in the UK. The partnership with
Microsoft to provide a new hosting offering based on the SAK allows businesses
to utilise the proven interoperability, reliability and scalability of the
Windows 2000 operating system within their hosting solution. Host Europe's
customers will benefit from the new features offered by SAK which include a
'watchdog' timer and reliability framework to ensure the continuous
availability of Windows-powered server appliances, and a new task-based user
interface that simplifies the administration and deployment of Windows powered
appliances. By working closely with Microsoft on the development of SAK, Host
Europe is in a strong position to capitalise on the hosting opportunities
presented by Microsoft's .Net services strategy.
The Group recently completed a new data centre facility in London, bringing to
6,500 sq ft the space provided for housing its servers. The additional space
is required to house the high growth in demand for dedicated servers and is
expected to meet the Group's UK data centre space requirements until the
second half of 2002. Data centre space in our London facility can be extended
by converting adjacent office space in stages and, as such, will represent a
relatively low capital cost to the Group. In the meantime, the Group has
secured a number of short-term licencees to occupy excess office space.
Maintaining our own data centre infrastructure is a key enabler in allowing
the Group to provide customers with the best possible service at a highly
competitive price. Having technical staff located at the same site as the
dedicated or shared server equipment allows the Group to resolve hardware or
network issues quickly as well as maintain the technical expertise and
proficiency of our staff. This crucial point differentiates Host Europe from
its competitors operating within the same markets. Building our own data
centres also allows us to provide a high quality infrastructure, including
multiple bandwidth providers, back up power, cooling, security, and fire
suppression systems, which are built to a level of sophistication appropriate
to our SME target customer base. The lower operating costs of our own data
centres, compared to rivals who host their equipment with third parties,
allows the Group to competitively price products whilst maintaining high
profit margins.
Leveraging on the successes Host Europe has experienced in delivering and
supporting dedicated servers, the Group has recently launched its suite of
managed hosting services such as back up services, systems monitoring,
firewalls, virtual private networks and security maintenance. This has
enabled the Group to increase the average revenue derived from each server, as
well as attract larger customers than has been the case to date. Moreover, a
technical architecture has been put in place to allow the Group to automate
the delivery of these managed services and hence the profit margins on these
value added services are high.
During the first half of the year, the Group completed the integration of the
Magic Moments and WebFusion businesses with the unification of the shared
server product ranges, operations and technical platforms. In conjunction
with other operational improvements, this has enabled the Group to achieve the
substantial growth in revenue reported whilst reducing the number of staff
employed in the UK.
Future Outlook
Our business has made impressive progress during the period. Whilst
broadening our portfolio of hosting products, extending our geographic reach
and attracting more customers, we continue to improve underlying profitability
and operating cash flows.
The business case for SME's to sub-contract hosting services to companies such
as Host Europe becomes even more compelling as the complexity of their hosting
requirements increases. Furthermore, the hosting sector will show substantial
growth over the medium term as more and more individuals and companies use the
internet in ever more sophisticated ways. Host Europe is in a strong position
to capitalise on this growth opportunity.
Despite the softening of the UK economy and an uncertain economic climate, the
outlook for the Group continues to be favourable and the Board remains
confident about the prospects for the full year.
Graham J Duncan
Chairman
10 September 2001
HOST EUROPE PLC
("HOST EUROPE" OR "THE GROUP")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2001
Consolidated Profit and Loss Account
Unaudited Unaudited Audited year
ended 31 December
6 month period 6 month 2000
ended 30 June period ended
2001 30 June
2000
#'000 #'000 #'000
Turnover
Continuing
operations:
Ongoing 3,727 767 1,723
Acquisition * 447 313 2,437
Group turnover 4,174 1,080 4,160
Cost of sales (1,010) (387) (934)
Gross profit 3,164 693 3,226
Administrative
expenses
General (3,104) (1,850) (4,494)
administrative
expenses
Depreciation (606) (76) (376)
Goodwill (9,226) (1,595) (12,914)
amortisation
(12,936) (3,521) (17,784)
Operating profit/
(loss)
Continuing
operations:
Ongoing (9,418) (1,277) (6,957)
Acquisition * (354) (1,551) (7,601)
Group operating loss (9,772) (2,828) (14,558)
Interest receivable 41 93 228
Interest payable (32) - (34)
Loss on ordinary (9,763) (2,735) (14,364)
activities before
taxation
Taxation on loss - - -
from ordinary
activities
Loss on ordinary (9,763) (2,735) (14,364)
activities after
taxation
Minority interest 76 10 -
Retained loss for (9,687) (2,725) (14,364)
the period
Loss per share - (0.99p) (0.39)p (1.78)p
Basic
* The period to 30 June 2001 includes the results of One-2-One Advertising and
Telecommunications GmbH from 9 March 2001. Comparative periods include the
results of WebFusion Internet Solutions Limited from the date of acquisition,
22 May 2000.
HOST EUROPE PLC
("HOST EUROPE" OR "THE GROUP")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2001
Consolidated Statement of Total Recognised Gains and Losses
Unaudited Unaudited Audited year
ended 31
6 month 6 month December 2000
period period
ended ended
30 June 30 June
2001 2000
#'000 #'000 #'000
Loss for the period (9,687) (2,725) (14,364)
Exchange difference on
retranslation of net assets of
subsidiary undertaking (3) - -
Total recognised gains and losses
relating to the period (9,690) (2,725) (14,364)
HOST EUROPE PLC
("HOST EUROPE" OR "THE GROUP")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2001
Consolidated Balance Sheet
Unaudited 30 Unaudited 30 Audited 31
June 2001 June 2000 December
2000
#'000 #'000 #'000
Fixed assets
Intangible assets 33,811 52,449 41,251
Tangible assets 3,531 985 2,144
Investments 276 155 156
37,618 53,589 43,551
Current assets
Debtors 1,595 489 1,102
Long term deposits 2,670 - 1,170
Cash at bank and in hand 946 5,304 2,642
5,211 5,793 4,914
Creditors: amounts falling (3,065) (1,596) (2,167)
due within one year
Net current assets 2,146 4,197 2,747
Total assets less current 39,764 57,786 46,298
liabilities
Creditors: amounts falling (2,301) (2,000) (2,000)
due after more than one year
Provision for liabilities (240) (49) (240)
and charges
37,223 55,737 44,058
Called up share capital 10,440 9,091 9,091
Share premium account 41,219 31,055 31,055
Shares to be issued - 9,800 18,800 18,800
deferred consideration
Share scheme reserve 176 176 176
Profit and loss account (24,754) (3,425) (15,064)
Shareholders' funds - equity 36,881 55,697 44,058
Minority interest - equity 342 40 -
37,223 55,737 44,058
HOST EUROPE PLC
("HOST EUROPE" OR "THE GROUP")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2001
Consolidated Cash Flow Statement
Unaudited 6 Unaudited 6 Audited year
month period month period to 31
ended 30 ended 30 December 2000
June 2001 June 2000
#'000 #'000 #'000
Net cash outflow from (16) (765) (797)
operating activities
Returns on investments
and servicing of finance
Interest received 41 93 228
Interest paid (32) - (34)
9 93 194
Taxation
Corporation tax paid - - (19)
Capital expenditure and
financial investment
Purchase of tangible (1,254) (498) (1,940)
fixed assets
Payments to acquire (120) (155) (156)
investments
Proceeds on disposal of - - 13
fixed assets
(1,374) (653) (2,083)
Acquisitions and
disposals
Purchase of subsidiary (2,175) (462) (475)
undertakings
Net cash acquired with 982 241 241
subsidiary undertakings
Net cash outflow for (1,193) (221) (234)
acquisitions and
disposals
Net cash outflow before (2,574) (1,546) (2,939)
use of liquid resources
and financing
Management of liquid
resources
Increase in long term (1,500) (1,000) (1,170)
deposits
Financing
Issue of ordinary share 2,500 4,900 4,900
capital
Expenses of issue of (50) (175) (174)
ordinary share capital
Exercise of share options 13 52 52
Cash inflow from - 100 -
subsidiary minority
shareholders
Capital element of (59) - -
finance lease repayments
Net cash inflow from 2,404 4,877 4,778
financing
(Decrease) / increase in (1,670) 2,331 669
cash
HOST EUROPE PLC
("HOST EUROPE" OR "THE GROUP")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2001
Notes to the Unaudited Interim Report
1. Basis of Preparation
The interim financial statements have been prepared on the basis of the
accounting policies set out in the Group's Annual Report and Accounts for the
period ended 31 December 2000. The financial information for the period ended
31 December 2000 has been extracted from the Annual Report and Accounts, which
have been filed with the Registrar of Companies. The auditors' report on those
accounts was unqualified and did not contain any statements under section 237
(2) or (3) of the Companies Act 1985. The financial information contained in
this document does not constitute statutory financial statements as defined in
section 240 of the Companies Act 1985.
2. Goodwill
Goodwill arising on an acquisition of a subsidiary undertaking is the
difference between the fair value of the consideration paid and the fair value
of the assets and liabilities acquired.
The goodwill arising on the acquisition of One-2-One Advertising and
Telecommunications GmbH is being amortised over its estimated useful economic
life of three years.
3. Loss per Ordinary Share
Unaudited Unaudited 6 Audited year to 31
6 month month period December 2000
period ended 30 June
ended 30 2000
June 2001
The calculation of basic loss
per ordinary share is based on
the effective weighted average
number of shares in issue
during the period - No 983,350,040 704,924,196 807,585,490
Loss after tax and 9,687 2,725 14,364
minority interest - #'000
Basic loss per share - 0.99 0.39 1.78
pence per share
Due to a loss being recorded for each of the above periods, none of the
company's potential ordinary shares are dilutive and therefore the loss per
share is the same as the diluted loss per share.
4. Reconciliation of Net Cash Flow to Movement in Net Funds
Unaudited 6 Unaudited 6 Audited
month period month period year to
ended 30 ended 30 31
June 2001 June 2000 December
2000
#'000 #'000 #'000
(Decrease) / increase in cash (1,670) 2,331 669
Exchange movement (26) - -
Increase in long term deposits 1,500 1,000 1,170
Net increase in finance lease (501) - -
creditor
Loan notes issued and expected
to be issued in connection
with acquisition of WebFusion - - (2,000)
Internet Solutions Limited
Movement in net funds (697) 3,331 (161)
Net funds at the beginning of 1,812 1,973 1,973
the period
Net funds at the end of the 1,115 5,304 1,812
period
5. Reconciliation of Operating Loss to Net Cash Outflow from Operating
Activities
Unaudited 6 month Unaudited 6 month Audited year
period ended 30 period ended 30 to 31
June 2001 June 2000 December 2000
Operating loss (9,772) (2,828) (14,558)
Depreciation 606 76 376
Amortisation of 9,226 1,595 12,914
goodwill
Profit on - - (2)
disposal of fixed
assets
Increase in (351) (23) (636)
debtors
Increase in 275 475 1,069
creditors
(Decrease) / - (60) 40
increase in
provisions
Net cash outflow (16) (765) (797)
from operating
activities
6. Availability of Report
This Interim Report is being sent to all shareholders, and is also available
on the Host Europe web site at www.hosteurope.com.
Independent Review Report to Host Europe PLC
Introduction
We have been instructed by the company to review the financial information set
out on pages 7 to 12 and we have read the other information contained in the
interim report and considered whether it contains any apparent misstatements
or material inconsistencies with the financial information.
Directors' Responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The Listing
Rules of the Financial Services Authority require that the accounting policies
and presentation applied to the interim figures should be consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review Work Performed
We conducted our review in accordance with guidance in Bulletin 1999/4 issued
by the Auditing Practices Board. A review consists principally of making
enquiries of group management and applying analytical procedures to the
financial information and underlying financial data and, based thereon,
assessing whether accounting policies and presentation have been consistently
applied unless otherwise disclosed. A review excludes audit procedures such as
tests of controls and verification of assets, liabilities and transactions. It
is substantially less in scope than an audit performed in accordance with
Auditing Standards and therefore provides a lower level of assurance than an
audit. Accordingly, we do not express an audit opinion on the financial
information.
Review Conclusion
On the basis of our review, we are not aware of any material modifications
that should be made to the financial information as presented for the six
months ended 30 June 2001.
BDO Stoy Hayward
London
10 September 2001
|
