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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| H.E.R.C. Products Incorporated | AMEX:HER | AMEX | Ordinary Share |
| Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.00 | - |
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RNS Number:1522Q
Host Europe PLC
25 September 2003
HOST EUROPE PLC
("HOST EUROPE" OR "THE GROUP")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2003
Host Europe Plc, the internet hosting provider is pleased to announce its
interim results for the six months ended 30 June 2003.
Highlights
* Turnover increased by 26% to #8.2m (2002: #6.5m)
* Gross profit margin maintained at 75% (2002:75%)
* EBITDA before exceptionals increased to #1.5m (2002:#0.9m)
* Exceptional reorganisation costs of #0.8m
* Operating cash flow before exceptionals of #1.9m (2002:#1.1m)
* Dedicated server development driving significant corporate sales
success
* Continued improvements in data centre infrastructure
Garry Southern, Chairman of Host Europe, said:
"These are the first results since my appointment in May and I am delighted to
report that the company has produced an impressive set of figures showing
significant organic growth.
Shareholders will be aware that a number of changes took place within the senior
management team towards the end of this period and the Board is united and
focused on delivering future growth. The company is now well placed to further
strengthen its position as a leading provider of hosting services to the SME
market. I look forward to the remainder of 2003 with confidence."
25 September 2003
Enquiries:
Host Europe
Stephen Sadler, Chief Financial Officer Tel: 020 8896 7503
E-mail: invest@hosteurope.com
Walters associates
Alex Walters Tel: 07771 713608
E-mail: alex@waltersassociates.uk.com
CHIEF EXECUTIVE'S STATEMENT
Introduction
During the first half of 2003 the Group has continued to make strong progress.
Customer acquisition has been good both in the UK and in Germany and we are able
to report continued turnover and EBITDA growth in both territories.
In May we announced a Board reorganisation following a negotiated settlement
with the outgoing directors. This settlement avoided the need to hold an
Extraordinary General Meeting and allowed for the formation of a new, unified
Board. The costs of the reorganisation, which include the full cost of
termination payments to the outgoing directors, are shown as an exceptional item
in the profit and loss account. I was delighted to be able to welcome Garry
Southern, Jonathan Willis-Richards, Victor Gareh, Uwe Braun and Stephen Sadler
to the Board and I firmly believe that having a strengthened and unified Board
in place will be beneficial to the Group's future performance.
These results demonstrate Host Europe's continuing ability to produce strong
organic growth while taking advantage of cost control opportunities arising from
greater integration and improved technology.
Results
The following table summarises the Group's performance over the past 2 1/2
years:
1st Half 2nd Half 1st Half 2nd Half 1st Half
2001 2001 2002 2002 2003
#'000 #'000 #'000 #'000 #'000
Turnover 4,174 5,355 6,488 7,220 8,162
Gross Profit 3,164 4,148 4,860 5,463 6,128
EBITDA (before exceptionals) 60 440 929 1,150 1,532
EBITA (before exceptionals) (546) (232) 24 77 405
Operating cash flow (before exceptionals) (16) 822 1,066 2,171 1,864
Performance by territory:
UK - Turnover 3,727 4,305 5,263 5,387 6,091
- EBITDA (before exceptionals) 146 367 920 1,125 1,202
Germany - Turnover 447 1,050 1,225 1,833 2,071
- EBITDA (86) 73 9 25 330
The Group has generated significant sales growth in the period allowing us to
report turnover of #8.2m, up 26% on the first half of 2002. In particular we
have seen strong growth in Germany with turnover up 69% at #2.1m (2002: #1.2m).
Our more established UK business is operating in a market showing increasing
maturity but was still able to achieve good revenue growth, improving by 16% on
2002.
The major component of cost of sales is domain name registration costs, which
are directly linked to sales. As a result, costs of sales increased in line with
turnover and was #2.0m (2002: #1.6m). The rest of cost of sales is made up of
bandwidth costs. New bandwidth contracts have been negotiated since the end of
June and will result in reduced costs in the latter part of 2003 and through
2004. Gross profit of #6.1m represents a margin of 75% (2002: 75%).
A key part of the Group's strategy is to leverage its established infrastructure
so that revenue can be increased without a commensurate rise in operating costs.
Administrative expenses before exceptionals of #6.0m (2002: #5.1m) for the
period increased by 18% compared with turnover growth of 26%. The business is
now well established at its three main sites in London, Nottingham and Cologne.
Data centre capacity can be increased with minimal cost and our customer
implementation and maintenance systems mean that, despite strong customer
growth, we do not expect to grow headcount significantly during 2003. Headcount
at 30 June 2003 was 104 in the UK and 36 in Germany compared to 100 and 36 at
the end of 2002. Depreciation for the period was #1.1m (2002: #0.9m). This 25%
increase reflects the investment in improved data centre facilities and the
increase in customer related hardware.
Board reorganisation costs of #777,000 have been shown as an exceptional item.
This figure represents the full cost of the reorganisation. Included in these
costs are deferred payments of #275,000 which will be paid over in the second
half of 2003.
Earnings before interest, tax, depreciation and amortisation, and before
exceptionals were #1.5m (2002: #0.9m). This EBITDA margin of 19% reflects the
Group's increasing ability to translate strong sales growth into earnings. The
retained loss for the period was #507,000 representing a loss per share of
0.04p. Excluding exceptional items the group reported its first profit before
tax of #120,000.
Included in creditors due within one year of #6.7m (2002: #4.1m) is deferred
income of #2.1m (2002: #1.7m). Also included is #2m relating to loan notes due
to former directors following the acquisition of WebFusion. A matching amount of
#2m is included in deposits. These loan notes were redeemed in July 2003.
The Group had cash balances of #2.7m at 30 June 2003 (2002: #1.5m). The increase
in cash is due to increased profitability and improvements in operating cash
flows. Customers pay in advance for their service and debtor collection
processes have been improved during the half-year. Cash inflow from operating
activities for the period was #1.3m (2002: #1.1m).
Operational review
Through the first half of 2003 the Group has continued to refine its product
offerings and invest in its sales teams in order to maximise revenue
opportunities. At the same time we have continued to improve our infrastructure
and systems so that increased operational efficiencies allow for better control
of costs. This emphasis on earnings will continue throughout the second half of
the year.
Strategy
Host Europe remains committed to a focused product and marketing strategy,
providing hosting solutions to small and medium sized enterprises in the UK and
Germany. We believe that demand for hosting is set to continue growing, with the
majority of European demand driven by these two territories.
We will continue to seek market penetration through focused marketing and new
product development. Increasingly we are noticing customers moving from
entry-level products to our higher specification services. Many customers who
joined us using our shared hosting products are migrating to dedicated servers.
Since May we have increased the number of direct sales staff and have set up an
account development team to better exploit these opportunities.
Customer retention is key to maintaining our revenue streams and maximising the
potential for service upgrades. To this end we place considerable emphasis on
the quality of our customer care and our support teams are available 24 hours a
day, 7 days a week. All our support staff are in house employees with an in
depth knowledge of the Group and its products.
Products
Domain name registration
Through the first half of the year we have continued to see strong growth in
customer numbers in the UK, through our 123-reg brand, and in Germany. The Group
had in excess of 560,000 domain names under management at 30 June 2003. July saw
the introduction of enhanced Webmail services to the 123-reg product set.
Dedicated servers
Our dedicated server range has been key to driving the growth in corporate
customers that we have experienced in 2003. In Germany the launch of high
availability enterprise hosting solutions has helped to attract 6 of the DAX 30
companies to Host Europe. In the UK investment in our dedicated sales team has
seen us win contracts with Somerfield, Stagecoach, T-Mobile and many other
corporate and high end SME customers. In August we introduced a new range of
dedicated servers running the Windows 2003 Web edition software.
Shared hosting
During the half year we completed the implementation of the MyServerWorld
control panel. All our shared hosting customers have now been successfully
migrated on to this platform and are able to rapidly configure their service via
a web link.
Infrastructure
The first half of the year has seen continued improvements to our data centre
infrastructure. In London a new electrical substation was installed giving an
increased dedicated high voltage supply and our air cooling capacity was
increased by 30%. Back up generator capacity was increased in London and
Nottingham. An additional 2,500 sq ft of data centre space has been partially
fitted out in London. This space will be brought live as sales growth demands
and is expected to be utilised in the first quarter of 2004.
Outlook
The Group has again demonstrated strong organic growth in the first half of the
year. We are confident that this growth in turnover and EBITDA will continue
through the remainder of 2003. As well as working for organic growth the Board
will continue to consider suitable acquisition targets as a means of maintaining
its market leading position. We now have the infrastructure and team in place to
allow us to take full advantage of the opportunities available to us in our
market.
Abby Hardoon
Chief Executive Officer
25 September 2003
Consolidated profit and loss account
FOR THE SIX MONTHS ENDED 30 JUNE 2003
Unaudited Unaudited Audited year
ended 31
6 month period 6 month period December 2002
ended ended
June 2003 30 June 2002
Note #'000 #'000 #'000
Group turnover 8,162 6,488 13,708
Cost of sales (2,034) (1,628) (3,385)
Gross profit 6,128 4,860 10,323
Administrative expenses
General administrative expenses (4,596) (3,931) (8,244)
Depreciation (1,127) (905) (1,978)
Amortisation of goodwill and development costs ( 288) (261) (532)
Exceptional item - costs of board reorganisation (777) - -
(6,788) (5,097) (10,754)
Operating loss (660) (237) (431)
Interest receivable 67 58 130
Interest payable (64) (90) (204)
Loss on ordinary activities before taxation (657) (269) (505)
Taxation on loss from ordinary activities 150 - 250
Loss on ordinary activities after taxation (507) (269) (255)
Minority interest - 62 92
Retained loss for the period (507) (207) (163)
Loss per share - basic and diluted 2 (0.04)p (0.02)p (0.01)p
All amounts relate to continuing activities. All recognised gains and losses are
included in the profit and loss account.
Consolidated balance sheet
As at 30 JUNE 2003
Unaudited Unaudited Audited 31
30 June 30 June December
2003 2002 2002
#'000 #'000 #'000
Fixed assets
Intangible assets 9,247 9,424 9,534
Tangible assets 3,679 3,907 3,770
12,926 13,331 13,304
Current assets
Debtors 1,419 1,470 1,378
Deposits 2,170 2,870 2,170
Cash at bank and in hand 2,668 1,453 2,520
6,257 5,793 6,068
Creditors: amounts falling due within one year (6,680) (4,056) (6,301)
Net current assets/(liabilities) (423) 1,737 (233)
Total assets less current liabilities 12,503 15,068 13,071
Creditors: amounts falling due after more than one year (128) (2,516) (212)
Provisions for liabilities and charges (149) (149) (149)
12,226 12,403 12,710
Called up share capital 11,637 11,212 11,637
Share premium account 7,427 7,351 7,427
Share scheme reserve 56 176 56
Merger reserve 42,917 42,916 42,917
Profit and loss account (49,811) (49,500) (49,327)
Shareholders' funds - equity 12,226 12,155 12,710
Minority interest - equity - 248 -
12,226 12,403 12,710
Consolidated cash flow statement
FOR THE SIX MONTHS ENDED 30 JUNE 2003
Unaudited 6 Unaudited 6 Audited year
month period month period to 31
ended 30 ended 30 December
June 2003 June 2002 2002
Note #'000 #'000 #'000
Net cash inflow from operating activities 4 1,320 1,066 3,273
Returns on investments and servicing of finance
Interest received 67 58 130
Interest paid (42) (37) (92)
Interest element of finance lease rental payments (22) (53) (112)
3 (32) (74)
Capital expenditure and financial investment
Payments to develop intangible assets - - (101)
Purchase of tangible fixed assets (987) (447) (1,263)
(987) (447) (1,364)
Net cash inflow before use of liquid resources and 336 587 1,835
financing
Management of liquid resources
Decrease in long term deposits - - 700
Financing
Increase/ (decrease) in short term bank loans (104) 250 104
Capital element of finance lease repayments 3 (84) (321) (1,056)
Net cash (outflow) from financing (188) (71) (952)
Increase in cash 148 516 1,583
Notes to the unaudited interim report
1. Basis of preparation
The unaudited 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 year ended 31 December 2002. The financial information for the year ended 31
December 2002 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. Loss per ordinary share
Unaudited 6 Unaudited 6 month Audited year to 31
month period period ended 30 December 2002
ended 30 June June 2002
2003
Weighted average number of shares 1,163,650,619 1,058,090,869 1,105,625,273
Loss after tax and minority interest - 507 207 163
#'000
Basic loss per share - pence per share 0.04 0.02 0.01
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.
3. Reconciliation of net cash flow to movement in net funds
Unaudited 6 Unaudited 6 Audited year
month period month period to 31
ended 30 June ended 30 June December 2002
2003 2002
#'000 #'000 #'000
Increase in cash 148 516 1,583
Decrease in long term deposits - - (700)
Decrease/(increase) in short term bank loans 104 (250) (104)
Decrease in lease financing 84 105 1,056
Change in net funds resulting from cash flows 336 371 1,835
New finance leases - (426) (567)
Movement in net funds in the period 336 (55) 1,268
Net funds at the beginning of the period 2,192 924 924
Net funds at the end of the period 2,528 869 2,192
4. Reconciliation of operating loss to net cash inflow from operating activities
Unaudited 6 Unaudited 6 Audited year
month period month period to 31
ended 30 June ended 30 June December 2002
2003 2002
Operating loss (660) (237) (431)
Depreciation 1,127 905 1,978
Amortisation of goodwill and development 288 261 535
Decrease in debtors 109 67 400
Increase in creditors 456 70 791
Net cash inflow from operating activities 1,320 1,066 3,273
5. 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. Further copies of the interim
report are available, free of charge, from Host Europe's registered office Host
Europe House, Kendal Avenue, London W3 0XA.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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