TIDMFFG
RNS Number : 9564O
Freedom4 Group PLC
17 March 2009
17 March 2009
Freedom4 Group plc (the "Company")
Preliminary results for the 12 months ended 31 December 2008
Freedom4 Group plc, (FFG), a provider of wireless telecommunications services,
today reports its preliminary results for the twelve months ended 31 December
2008.
Financial summary (including discontinued operations):
· Net assets at year end of GBP27.7 million (31 December 2007: GBP136.0
million), including
o GBP18.6 million Loan Note (including accrued interest),
o GBP4.6 million net cash * (2007: GBP47.0 million)
o GBP5.1 million carrying value of the joint venture
· Profit for the year of GBP39.4 million, including profit on disposal of
GBP49.9 million (2007: profit of GBP33.4 million including profit on disposal of
GBP51.6 million)
· Significant scaling back of run-rate costs which will benefit 2009
Strategic transactions completed:
· Hosting and Network Services Division sold for GBP120 million in April 2008
· GBP154.8 million of cash returned to shareholders via a tender offer in April
2008
Wireless broadband summary:
· Joint Venture partners invested GBP11.4 million in 2008
· WiMAX network coverage in Manchester, Milton Keynes and Warwick
· Achieved dual band mobile handover: a world first
· Launched a combined WiFi/3G broadband access service
· Application made for mobility addition to spectrum licence
Mike Read, Chief Executive Officer of Freedom4 Group, commented:
"Wireless broadband is becoming very popular and increasingly widely used.
Customers are using our 3G dongle and WiFi services and I believe that in 2009
we will add WiMAX services, greatly enhancing our product offering. Our joint
venture with Intel to develop these services, combined with our refocused
strategy, has resulted in the completion of successful mobile trials and we have
built a robust and scalable network from which to launch services."
*net cash is cash including restricted deposits less bank loans and finance
leases.
For further details, contact:
+--------------------------------------------------+---------------------+
| Freedom4 Group plc | 08703 860 403 |
| Mike Read, Chief Executive | |
| Stewart Porter, Chief Financial Officer | |
| | |
+--------------------------------------------------+---------------------+
| Collins Stewart | 020 7523 8350 |
| Hugh Field | |
| | |
+--------------------------------------------------+---------------------+
| Financial Dynamics | 020 7831 3113 |
| Juliet Clarke /Ed Bridges/Erwan Gouraud | |
+--------------------------------------------------+---------------------+
CHAIRMAN'S STATEMENT
In the first half of 2008 we realised the objectives that the Board had set,
following the review of the Company's strategic options which had been initiated
in March 2007. The hosting and network services division was sold in April 2008
and the proceeds from the sale, together with the net proceeds remaining from
the disposal of the broadband and voice businesses in 2007, enabled the Company
to return GBP154.8 million of cash to shareholders.
The remaining wireless broadband business has been re-focused to align resources
with the opportunities developing around mobility, as I indicated in my
statement accompanying the Company's interim report in 2008.
STRATEGIC TRANSACTIONS
Disposal of the Hosting and Network Services Division
The hosting and network services division was sold on 2 April 2008 to a
wholly-owned subsidiary of Oakley L.P. The consideration for the sale was GBP120
million satisfied by GBP92.5 million in cash, GBP17.5 million in Loan Notes and
the balance by assumption by the buyer of certain of the Company's debts.
Capital Reduction and Tender Offers
The disposal of the broadband and voice businesses and the hosting and network
services division created surplus capital which the Board wished to return to
shareholders by means of a tender offer. The tender offers closed on 3 April
2008 with the company buying-back, in aggregate, 1,490 million shares at a price
of 10.39p per share, at a total cost of GBP154.8 million.
OPERATIONAL REVIEW
Overview
Following the sale of the hosting and network services division, the remaining
trading businesses provide wireless broadband services and comprise the joint
venture with Intel (Freedom4 Limited) and a WiFi aggregation business (Freedom4
WiFi Limited).
The Company has a 52% share of the joint venture which owns licensed spectrum in
the 3.6GHz frequency band and has built a WiMAX network in three initial target
cities (Manchester, Milton Keynes and Warwick).
Business re-focus
As I disclosed at the time of the Company's interim report, a review of the
developing wireless broadband market had indicated that there were a number of
actions that should be undertaken in the short term to better position the group
to take advantage of the burgeoning opportunity. These were:
* Procuring the spectrum licence amendment that will enable the JV to offer
nomadic and mobile WiMAX services;
* Successfully developing the technical capability to deliver mobile WiMAX;
* Ensuring the quality of the WiMAX infrastructure roll-out in the selected target
markets (Manchester, Milton Keynes, Warwick);
* Developing a "multi-technology" mobile access capability i.e. WiMAX, WiFi, 3G;
* Aligning capex and opex profiles more closely with expected revenue growth.
I am pleased to report that we have made substantial progress on all of these
fronts. Since the reconfiguration of the Company, we have been focused on laying
the right foundations in order to be able to provide a full wireless broadband
offering in due course. We are on track with our plans, which the Board expects
to lead to the start of the roll out of the mobile network in late 2009.
Mobility
The last twelve months have seen a spectacular rise in the use of wireless
broadband, principally driven by services to laptops enabled by USB devices. The
company's review of the market suggested that WiMAX could be one of the access
technologies to address this growth in customer demand. The joint venture owns
the largest block of licensed wireless broadband spectrum in the UK.
Recognising the importance of mobility, the joint venture has submitted a
request to Ofcom for a variation to its licence to allow it to offer mobile
WiMAX services. In the meantime, the joint venture has been trialling mobile
broadband and achieved the world's first seamless mobile WiMAX session handover
between base stations operating at two different frequencies (2.5GHz and
3.6GHz). This dual band handover capability would allow inter-operator mobile
broadband roaming, underpinning the value of the joint venture's wholesale
services proposition.
The proposed release by Ofcom of spectrum in the so-called 3G expansion band at
2.6GHz has suffered significant delays. Objections had been raised to the first
phase proposal to re-farm existing GSM spectrum allowing it to be used for 3G
and these proceedings will need to be heard in the High Court before the 2.6GHz
auction can take place. It is now likely that the auction will be delayed well
into 2009, with potential for further slippage depending on the specific outcome
of the Court process. The delay enables the Company to continue to develop its
dual band operating capability to take advantage of 2.6GHz spectrum when it
becomes available. We believe that the size of Freedom4's spectrum holdings and
the ability to aggregate spectrum bands to deliver high capacity broadband
wireless are continuing sources of competitive advantage.
Towards the end of 2008 Freedom4 WiFi launched a service to enable customers to
get the best wireless broadband connection whilst on the move. The combined 3G
and WiFi software and plug-in dongle selects the highest quality connectivity at
any given location nationwide to provide users with the ultimate flexible
wireless service. Early interest in this service from a number of corporate
businesses and ISPs has been encouraging.
Network
The market review concluded that a fixed wireless access business would only
address a relatively small niche in the overall wireless broadband market. As a
result, we have curtailed our ambitious network roll-out plans until such time
as we are able to offer mobile services, concentrating our efforts on the three
cities we had previously targeted. This has significantly reduced the cash
demands of the business in the short-term both in terms of capital equipment
purchases and the operating cost of the infrastructure. The return to an
expansive network roll-out is also dependent upon the availability of additional
financing. We have continued to roll-out fixed services within our initial 3
target markets (Manchester, Milton Keynes and Warwick) in order to establish an
operating footprint (which can be software-only upgraded to mobile), to gain
insights into our commercial propositions, and to build partner and reseller
relationships.
To-date we have acquired 42 base station sites in and around the targeted areas,
which covers over 50,000 businesses and 275,000 homes. 15 sites are currently
live. Network availability is very high and stable. Geographic reach can be
extended using Freedom4 WiFi's branded network of hot-spots accessible through
its roaming agreements. In the UK the company has agreements with nearly all the
major WiFi operators, including BT and Spectrum Interactive, giving it access to
over 4,000 hot-spots including major hotel chains, such as Premier Inns and
Travelodge, as well as airports. Through its international roaming agreements
the coverage increases to 55,000 hot-spots worldwide.
Marketing
Sales activity is focused on wholesale and reseller models as effective routes
to market given the brand profile of the business and the wish to avoid
prohibitively high customer acquisition costs. Freedom4 WiFi has a number of
directly sold corporate customers for their WiFi only service but the success of
the combined WiFi and 3G dongle will be driven by wholesale sales.
The WiMAX enabled broadband service is available in limited geographical areas,
and sales effort is targeted around specific base station sites with a number of
business-oriented broadband packages. At the point that the joint venture
business is able to offer mobile services, marketing activity in the target
areas will be increased to recognise the greatly enhanced opportunity afforded
by mobility.
FINANCIAL OVERVIEW
The major efforts made to scale back costs, mentioned above, are not reflected
in the results for continuing operations in 2008 as the savings were implemented
principally in the last quarter of the year. EBITDA (earnings before
amortisation of intangibles, depreciation, impairment and share based costs)
losses of GBP3.8 million in 2008 reflect central costs and include higher
establishment costs in the period before the sale of the hosting and network
services division, the one-off costs of scaling back and deal associated costs.
Current run rate costs are approximately one third of this level, in line with
the current operational profile of the company.
The cost alignment initiative in the joint venture has limited the level of cash
consumption in the business going forward whilst allowing it to develop its
initial target markets. The share of the loss of the joint venture in 2008
(GBP9.4 million) includes a one-off charge of GBP4.5 million incurred as a
result of curtailing our roll-out plans as recommended by the wireless broadband
market review. Following implementation of the cost savings, the annualised rate
of monthly losses shared between the joint venture partners is significantly
lower than the 2008 run rate (having adjusted for the non-recurring charges).
Losses also include non-cash interest expense on the joint venture's redeemable
preference shares, the Group's share of which was GBP1.1 million in 2008.
Within the balance sheet at December 2008, the Group had cash of GBP4.6 million
(and no debt); GBP18.6 million receivable in the form of the Loan Notes, which
includes GBP1.1 million of accrued interest and GBP5.1 million as an investment
in the joint venture. The Loan Notes are due to be redeemed in October 2009, and
the intention remains to return this to shareholders. The investment in the
joint venture is carried at GBP5.1 million which reflects the original carrying
value of the licence and the Group's share of contributed cash less the Group's
share of accumulated losses. However, in the parent company's own accounts the
investment in the joint venture is GBP24.7 million, representing the value of
the licences contributed to the joint venture and subsequent cash investments.
Whilst the directors do not believe any impairment is required to this carrying
value the business is in an early stage of its development and there can be no
certainty that the mobility variation to the licence will be approved,
however, comparison with valuations that have arisen in spectrum auctions in
other jurisdictions provides the best estimate to support the carrying value of
our licenses.
The GBP10.5 million deferred consideration arising from the sale of the
broadband and voice division, and included in the 2007 balance sheet, has been
received.
STRATEGY
The focus of the Group remains on developing into a leading provider of wireless
broadband communications. In the short term, the management team will be
focussed on ensuring that Freedom4 is prepared to provide a full
multi-technology mobile broadband service in 2009, whilst continuing to align
the investment profile with the development of the growth drivers.
This focus will be on four areas of development:
* the spectrum license amendment to include mobility, which is in its final
stages, and which would enable us to provide mobile data services from 2009;
* continuing technical and commercial trials;
* preparation of the network for future products, with a range of customer devices
expected to be available from 2010; and
* full integration of Wifi / 3G into the WIMAX product and sales opportunities.
Achievement of these steps will enable us to deliver good quality WIMAX network
coverage in the initial target areas during 2009.
SUMMARY AND OUTLOOK
In 2008 we completed the fundamental restructuring of the group initiated in
March 2007 and successfully returned GBP154.8 million in cash to shareholders.
We are now focussed on wireless broadband which is rapidly gaining acceptance
and popularity and the Board continues to believe that WiMAX enabled services
could be a significant contributor to meeting that demand. With its new focus on
this market we believe that the group is well positioned to benefit from this
growth. We have exclusive wireless broadband spectrum; we have taken the
necessary action to forward our objective to provide mobile wireless broadband
services; and we have built a robust and scalable preparatory network from which
to launch services.
FREEDOM4 GROUP PLC (FORMERLY FREEDOM4 COMMUNICATIONS PLC)
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2008
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| | | | | Total | | | Total |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| | | Continuing | Discontinued | 2008 | Continuing | Discontinued | 2007 |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| |Note | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| | | | | | | | |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| | | | | | | | |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| REVENUE | 2 | 76 | 22,154 | 22,230 | - | 283,063 | 283,063 |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| Cost of sales | | (48) | (10,458) | (10,506) | - | (171,938) | (171,938) |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| GROSS PROFIT | | 28 | 11,696 | 11,724 | - | 111,125 | 111,125 |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| Operating costs before | | (3,819) | (10,693) | (14,512) | (3,720) | (94,680) | (98,400) |
| amortisation of | | | | | | | |
| intangibles, | | | | | | | |
| depreciation, impairments | | | | | | | |
| and share based payment | | | | | | | |
| costs | | | | | | | |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| EARNINGS BEFORE | | | | | | | |
| AMORTISATION OF | | | | | | | |
| INTANGIBLES, | | | | | | | |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| DEPRECIATION, IMPAIRMENT | | | | | | | |
| AND SHARE BASED | | | | | | | |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| PAYMENT COSTS | | (3,791) | 1,003 | (2,788) | (3,720) | 16,445 | 12,725 |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| Amortisation of | | (21) | - | (21) | - | (3,754) | (3,754) |
| intangibles | | | | | | | |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| Depreciation | | (7) | - | (7) | - | (12,795) | (12,795) |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| Impairment | | (315) | - | (315) | - | (1,000) | (1,000) |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| Share based payment costs | | (1,265) | - | (1,265) | (3,377) | - | (3,377) |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| TOTAL OPERATING COSTS | | (5,427) | (10,693) | (16,120) | (7,097) | (112,229) | (119,326) |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| Share of loss of joint | | (9,399) | - | (9,399) | (3,528) | - | (3,528) |
| venture | | | | | | | |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| OPERATING (LOSS)/PROFIT | | (14,798) | 1,003 | (13,795) | (10,625) | (1,104) | (11,729) |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| Finance income | | 3,523 | 101 | 3,624 | 2,233 | 886 | 3,119 |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| Finance costs | | (1) | (236) | (237) | (8,410) | (1,244) | (9,654) |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| Net finance expenses | | 3,522 | (135) | 3,387 | (6,177) | (358) | (6,535) |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| (Loss)/gain arising on | | (167) | - | (167) | 2,458 | - | 2,458 |
| joint venture | | | | | | | |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| (LOSS)/PROFIT BEFORE TAX | | (11,443) | 868 | (10,575) | (14,344) | (1,462) | (15,806) |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| Income tax | | 13 | (5) | 8 | - | (2,330) | (2,330) |
| credit/(expense) | | | | | | | |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| (LOSS)/PROFIT AFTER TAX | | (11,430) | 863 | (10,567) | (14,344) | (3,792) | (18,136) |
| BEFORE PROFIT FROM | | | | | | | |
| DISPOSAL OF DISCONTINUED | | | | | | | |
| OPERATIONS | | | | | | | |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| Profit from disposal of | 3 | - | 49,922 | 49,922 | - | 51,582 | 51,582 |
| discontinued operations, | | | | | | | |
| net of tax | | | | | | | |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| (LOSS)/PROFIT FOR THE | | (11,430) | 50,785 | 39,355 | (14,344) | 47,790 | 33,446 |
| YEAR | | | | | | | |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| | | | | | | | |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| Attributable to: | | | | | | | |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| Equity shareholders of | | (11,420) | 50,785 | 39,365 | (14,344) | 47,790 | 33,446 |
| the parent company | | | | | | | |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| Minority interests | | (10) | - | (10) | - | - | - |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| (LOSS)/PROFIT FOR THE | | (11,430) | 50,785 | 39,355 | (14,344) | 47,790 | 33,446 |
| YEAR | | | | | | | |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| | | | | | | | |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| Earnings per share: | | | | | | | |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| Basic - pence | | ( 0.81) | 3.60 | 2.79 | ( 0.60) | 1.99 | 1.39 |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
| Diluted - pence | | ( 0.81) | 3.60 | 2.79 | ( 0.60) | 1.99 | 1.39 |
+---------------------------+------+------------+--------------+----------+------------+--------------+-----------+
FREEDOM4 GROUP PLC (FORMERLY FREEDOM4 COMMUNICATIONS PLC)
CONSOLIDATED BALANCE SHEET
as at 31 December 2008
+------------------------------------------------+------+-----------+------------+
| | | 2008 | 2007 |
+------------------------------------------------+------+-----------+------------+
| |Note | GBP'000 | GBP'000 |
+------------------------------------------------+------+-----------+------------+
| | | | |
+------------------------------------------------+------+-----------+------------+
| ASSETS | | | |
+------------------------------------------------+------+-----------+------------+
| Non current assets | | | |
+------------------------------------------------+------+-----------+------------+
| Intangible assets | | 64 | - |
+------------------------------------------------+------+-----------+------------+
| Property, plant and equipment | | 32 | - |
+------------------------------------------------+------+-----------+------------+
| Investment in joint venture | | 5,142 | 7,608 |
+------------------------------------------------+------+-----------+------------+
| | | 5,238 | 7,608 |
+------------------------------------------------+------+-----------+------------+
| Current assets | | | |
+------------------------------------------------+------+-----------+------------+
| Inventories | | 3 | - |
+------------------------------------------------+------+-----------+------------+
| Trade and other receivables | | 19,295 | 11,243 |
+------------------------------------------------+------+-----------+------------+
| Cash and cash equivalents | | 4,595 | 60,750 |
+------------------------------------------------+------+-----------+------------+
| Assets classified as held for sale | | - | 100,954 |
+------------------------------------------------+------+-----------+------------+
| | | 23,893 | 172,947 |
+------------------------------------------------+------+-----------+------------+
| Current liabilities | | | |
+------------------------------------------------+------+-----------+------------+
| Trade and other payables | | (1,459) | (1,794) |
+------------------------------------------------+------+-----------+------------+
| Liabilities classified as held for sale | | - | (40,497) |
+------------------------------------------------+------+-----------+------------+
| Provisions | | - | (2,219) |
+------------------------------------------------+------+-----------+------------+
| | | (1,459) | (44,510) |
+------------------------------------------------+------+-----------+------------+
| | | | |
+------------------------------------------------+------+-----------+------------+
| Net current assets | | 22,434 | 128,437 |
+------------------------------------------------+------+-----------+------------+
| Non current liabilities | | | |
+------------------------------------------------+------+-----------+------------+
| Deferred tax liability | | (18) | - |
+------------------------------------------------+------+-----------+------------+
| | | (18) | - |
+------------------------------------------------+------+-----------+------------+
| | | | |
+------------------------------------------------+------+-----------+------------+
| NET ASSETS | | 27,654 | 136,045 |
+------------------------------------------------+------+-----------+------------+
| | | | |
+------------------------------------------------+------+-----------+------------+
| Equity attributable to the equity holders of | | | |
| the parent | | | |
+------------------------------------------------+------+-----------+------------+
| Share capital | 4 | 1,076 | 24,092 |
+------------------------------------------------+------+-----------+------------+
| Share premium reserve | 4 | 8,286 | 96,848 |
+------------------------------------------------+------+-----------+------------+
| Translation reserve | 4 | - | 25 |
+------------------------------------------------+------+-----------+------------+
| Other reserves | 4 | 753 | 8,119 |
+------------------------------------------------+------+-----------+------------+
| Retained earnings | 4 | 17,539 | 6,961 |
+------------------------------------------------+------+-----------+------------+
| Equity shareholders funds | | 27,654 | 136,045 |
+------------------------------------------------+------+-----------+------------+
| | | | |
+------------------------------------------------+------+-----------+------------+
| Minority interests | 4 | - | - |
+------------------------------------------------+------+-----------+------------+
| TOTAL EQUITY | | 27,654 | 136,045 |
+------------------------------------------------+------+-----------+------------+
FREEDOM4 GROUP PLC (FORMERLY FREEDOM4 COMMUNICATIONS PLC)
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2008
+------------------------------------------------+------+-----------+-----------+
| | | 2008 | 2007 |
+------------------------------------------------+------+-----------+-----------+
| |Note | GBP'000 | GBP'000 |
+------------------------------------------------+------+-----------+-----------+
| Profit for the year | | 39,355 | 33,446 |
+------------------------------------------------+------+-----------+-----------+
| Profit from disposal of discontinued | 3 | (49,922) | (51,582) |
| operations | | | |
+------------------------------------------------+------+-----------+-----------+
| Income tax (credit)/expense | | (8) | 2,330 |
+------------------------------------------------+------+-----------+-----------+
| Loss/(gain) arising on joint venture | | 167 | (2,458) |
+------------------------------------------------+------+-----------+-----------+
| Interest received | | (3,624) | (3,119) |
+------------------------------------------------+------+-----------+-----------+
| Interest payable | | 237 | 9,654 |
+------------------------------------------------+------+-----------+-----------+
| Operating loss before adjusting for: | | (13,795) | (11,729) |
+------------------------------------------------+------+-----------+-----------+
| Depreciation charge | | 7 | 12,795 |
+------------------------------------------------+------+-----------+-----------+
| Impairment of tangible fixed assets | | 315 | 1,000 |
+------------------------------------------------+------+-----------+-----------+
| Share of loss of joint venture | | 9,399 | 3,528 |
+------------------------------------------------+------+-----------+-----------+
| Amortisation of intangibles | | 21 | 3,754 |
+------------------------------------------------+------+-----------+-----------+
| Loss on sale of fixed assets | | 203 | 157 |
+------------------------------------------------+------+-----------+-----------+
| Share based payment costs | | 1,265 | 3,377 |
+------------------------------------------------+------+-----------+-----------+
| Operating cash flows before movements in | | (2,585) | 12,882 |
| working capital | | | |
+------------------------------------------------+------+-----------+-----------+
| (Increase)/decrease in inventories | | (3) | 31 |
+------------------------------------------------+------+-----------+-----------+
| (Increase)/decrease in receivables | | (3,085) | 4,197 |
+------------------------------------------------+------+-----------+-----------+
| Increase/(decrease) in payables | | 6,324 | (24,292) |
+------------------------------------------------+------+-----------+-----------+
| (Decrease/increase) in provisions | | (596) | 1,599 |
+------------------------------------------------+------+-----------+-----------+
| CASH GENERATED/(USED) FROM OPERATIONS | | 55 | (5,583) |
+------------------------------------------------+------+-----------+-----------+
| Interest paid | | (87) | (2,387) |
+------------------------------------------------+------+-----------+-----------+
| Bond interest paid | | - | (5,512) |
+------------------------------------------------+------+-----------+-----------+
| Interest element of finance lease repayments | | (150) | (827) |
+------------------------------------------------+------+-----------+-----------+
| Income taxes (paid)/received | | 14 | (270) |
+------------------------------------------------+------+-----------+-----------+
| NET CASH USED FROM OPERATING ACTIVITIES | | (168) | (14,579) |
+------------------------------------------------+------+-----------+-----------+
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
+------------------------------------------------+------+-----------+-----------+
| Acquisition of subsidiaries | | - | (958) |
+------------------------------------------------+------+-----------+-----------+
| Payment to acquire intangible assets | | (85) | (152) |
+------------------------------------------------+------+-----------+-----------+
| Cash left in disposal group | | (2,395) | - |
+------------------------------------------------+------+-----------+-----------+
| Investment in jointly controlled entity | | (6,118) | (2,058) |
+------------------------------------------------+------+-----------+-----------+
| Purchase of property, plant and equipment | | (3,977) | (13,450) |
| (held for sale) | | | |
+------------------------------------------------+------+-----------+-----------+
| Purchase of property, plant and equipment | | (33) | (10,256) |
+------------------------------------------------+------+-----------+-----------+
| Proceeds from sale of property, plant and | | 7,149 | 2,648 |
| equipment | | | |
+------------------------------------------------+------+-----------+-----------+
| Proceeds from sale of subsidiaries - hosting | | 87,856 | - |
| and networks division (net) | | | |
+------------------------------------------------+------+-----------+-----------+
| Proceeds from sale of subsidiaries - broadband | | 9,657 | 173,170 |
| and voice division (net) | | | |
+------------------------------------------------+------+-----------+-----------+
| Interest received | | 1,422 | 2,115 |
+------------------------------------------------+------+-----------+-----------+
| NET CASH GENERATED IN INVESTING ACTIVITIES | | 93,476 | 151,059 |
+------------------------------------------------+------+-----------+-----------+
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
+------------------------------------------------+------+-----------+-----------+
| Proceeds from the exercise of share options | | 8,443 | 795 |
+------------------------------------------------+------+-----------+-----------+
| Payment to buy back shares - tender offer | | (156,562) | - |
+------------------------------------------------+------+-----------+-----------+
| Payments to buy back shares - treasury | | (737) | - |
+------------------------------------------------+------+-----------+-----------+
| Payment to redeem convertible bonds | | - | (91,500) |
+------------------------------------------------+------+-----------+-----------+
| Repayments of short term borrowings | | - | (1,445) |
+------------------------------------------------+------+-----------+-----------+
| Proceeds from long term borrowings | | - | 2,255 |
+------------------------------------------------+------+-----------+-----------+
| Repayments of long term borrowings | | - | (35,506) |
+------------------------------------------------+------+-----------+-----------+
| Drawdown of new finance leases | | 396 | 5,700 |
+------------------------------------------------+------+-----------+-----------+
| Payment of finance lease liabilities | | (1,003) | (4,357) |
+------------------------------------------------+------+-----------+-----------+
| NET CASH USED FROM FINANCING ACTIVITIES | | (149,463) | (124,058) |
+------------------------------------------------+------+-----------+-----------+
| NET (DECREASE)/INCREASE IN CASH AND CASH | | (56,155) | 12,422 |
| EQUIVALENTS | | | |
+------------------------------------------------+------+-----------+-----------+
| CASH AND CASH EQUIVALENTS AT THE BEGINNING OF | | 60,750 | 48,328 |
| THE YEAR | | | |
+------------------------------------------------+------+-----------+-----------+
| CASH AND CASH EQUIVALENTS AT THE END OF THE | | 4,595 | 60,750 |
| YEAR | | | |
+------------------------------------------------+------+-----------+-----------+
FREEDOM4 GROUP PLC (FORMERLY FREEDOM4 COMMUNICATIONS PLC)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2008
1. ACCOUNTING POLICIES
Statement of compliance
The Group financial statements consolidate the results and assets
and liabilities of the Company and its subsidiaries (together referred to as the
'Group'). The parent company financial statements present information about the
Company as a separate entity and not about its group.
The Group financial statements have been prepared and approved by the Directors
in accordance with International Financial Reporting Standards as adopted by the
EU ('Adopted IFRSs').
The accounting policies set out below have, unless otherwise stated, been
applied consistently to all periods presented in these Group financial
statements.
Basis of preparation
This financial information has been prepared applying the accounting policies
and presentation that were applied in the preparation of the Company's published
consolidated financial statements for the year ended 31 December 2008.
The financial information set out herein does not constitute the Company's
statutory report and accounts for the year ended 31 December 2008. Statutory
accounts for 2008 will be delivered to the Registrar of Companies following the
Company's annual general meeting. The auditor has reported on those accounts;
their report was unqualified and did not contain statements under s237(2) or
(3)of the Companies Act 1985.
These are the Group's consolidated financial statements under IFRS.
Copies of the 2008 annual report and accounts or notification of the website
location of this document will be sent to shareholders in accordance with their
stated preference. They will also be available from the registered office of
the Company, 5 Roundwood Avenue, Stockley Park, Uxbridge UB11 1FF.
FREEDOM4 GROUP PLC (FORMERLY FREEDOM4 COMMUNICATIONS PLC)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2008
2. BUSINESS AND GEOGRAPHICAL SEGMENTS
Business segments
+----------------------------------------------------------------------------------+
| The group comprises the following main business segments: |
+----------------------------------------------------------------------------------+
| |
+----------------------------------------------------------------------------------+
| Wireless |
+----------------------------------------------------------------------------------+
| |
+----------------------------------------------------------------------------------+
| Includes the company's subsidiary WiFi and its investment in the joint venture. |
+----------------------------------------------------------------------------------+
| |
+----------------------------------------------------------------------------------+
| Other |
+----------------------------------------------------------------------------------+
| |
+----------------------------------------------------------------------------------+
| Includes the company and the group's financing. |
+----------------------------------------------------------------------------------+
| |
+----------------------------------------------------------------------------------+
| Broadband and voice services |
+----------------------------------------------------------------------------------+
| |
+----------------------------------------------------------------------------------+
| The group supplies internet access via broadband and narrowband, and voice |
| telephony services (carrier pre-select |
+----------------------------------------------------------------------------------+
| and wholesale line rental) to both residential and business customers through |
| different brands such as Pipex, |
+----------------------------------------------------------------------------------+
| Pipex Homecall, Toucan, Nildram and Freedom 2 Surf. (This division was sold in |
| September 2007.) |
+----------------------------------------------------------------------------------+
| |
+----------------------------------------------------------------------------------+
| Hosting services |
+----------------------------------------------------------------------------------+
| |
+----------------------------------------------------------------------------------+
| The group provides a comprehensive suite of hosting services from shared and |
| virtual private servers through to |
+----------------------------------------------------------------------------------+
| domain names and security. (This division was sold in April 2008.) |
+----------------------------------------------------------------------------------+
| |
+----------------------------------------------------------------------------------+
| Business services |
+----------------------------------------------------------------------------------+
| |
+----------------------------------------------------------------------------------+
| The group provides all aspects of network support for medium and large |
| businesses, with a range of services |
+----------------------------------------------------------------------------------+
| including voice, enterprise hosting, internet, IP VPNs and other IP network |
| applications and security solutions. |
+----------------------------------------------------------------------------------+
| (This division was sold in April 2008.) |
+----------------------------------------------------------------------------------+
| |
+----------------------------------------------------------------------------------+
| Post sale of the broadband and voice division in 2007 and hosting and networks |
| division in 2008, the continuing operations of the group is organised into |
| wireless and other. The segmental results for 2007 have therefore been restated |
| to provide a consistent presentation for all years. |
+----------------------------------------------------------------------------------+
| |
+----------------------------------------------------------------------------------+
FREEDOM4 GROUP PLC (FORMERLY FREEDOM4 COMMUNICATIONS PLC)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2008
2. BUSINESS AND GEOGRAPHICAL SEGMENTS (continued)
The segment information for these businesses in the income statement is as
follows:
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| | For the year ended 31 December 2008 |
+-------------------------+---------------------------------------------------------------------------------+
| | Broadband | | | | | |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| | and voice | Hosting | Business | Wireless | Other | |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| | services | services | services | | | TOTAL |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| | Discontinued | Discontinued | Discontinued | Continuing | Continuing | |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| | | | | | | |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| REVENUE | | | | | | |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| External sales | - | 10,804 | 11,350 | 76 | - | 22,230 |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| | | | | | | |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| RESULT | | | | | | |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| Segment result (i) | - | 2,802 | (1,799) | (353) | (3,438) | (2,788) |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| Amortisation of | - | - | - | (21) | - | (21) |
| intangibles | | | | | | |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| Depreciation charge | - | - | - | (7) | - | (7) |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| Impairment of tangible | - | - | - | - | (315) | (315) |
| fixed assets | | | | | | |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| Share based payment | - | - | - | - | (1,265) | (1,265) |
| costs | | | | | | |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| Share of loss of joint | - | - | - | (9,399) | | (9,399) |
| venture | | | | | | |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| Operating profit/(loss) | - | 2,802 | (1,799) | (9,780) | (5,018) | (13,795) |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| Finance income | - | 70 | 31 | 1,121 | 2,402 | 3,624 |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| Finance costs | - | (112) | (124) | - | (1) | (237) |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| Loss arising on joint | - | - | - | (167) | - | (167) |
| venture | | | | | | |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| Profit/(loss) before | - | 2,760 | (1,892) | (8,826) | (2,617) | (10,575) |
| tax | | | | | | |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| Income tax | - | - | (5) | - | 13 | 8 |
| (expense)/credit | | | | | | |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| Profit on disposal of | 1,157 | 36,033 | 12,732 | - | - | 49,922 |
| discontinued operations | | | | | | |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| | 1,157 | 38,793 | 10,835 | (8,826) | (2,604) | 39,355 |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| | | | | | | |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| OTHER INFORMATION | | | | | | |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| Property, plant and | - | 1,887 | 2,090 | 38 | - | 4,015 |
| equipment additions | | | | | | |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| | | | | | | |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| Intangibles | - | - | - | 85 | - | 85 |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| | | | | | | |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| BALANCE SHEET | | | | | | |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| Assets | | | | | | |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| Segment assets | - | - | - | 5,333 | 23,798 | 29,131 |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| | - | - | - | 5,333 | 23,798 | 29,131 |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| | | | | | | |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| Liabilities | | | | | | |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| Segment liabilities | - | - | - | (477) | (1,000) | (1,477) |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| | - | - | - | (477) | (1,000) | (1,477) |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
| (i) Segment result refers to earnings before amortisation of intangibles, | |
| depreciation, impairment and share based payments | |
+-------------------------+--------------+--------------+--------------+------------+------------+----------+
FREEDOM4 GROUP PLC (FORMERLY FREEDOM4 COMMUNICATIONS PLC)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2008
2. BUSINESS AND GEOGRAPHICAL SEGMENTS (continued)
The segment information for these businesses in the income statement is as
follows:
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| | For the year ended 31 December 2007 |
+------------------------+---------------------------------------------------------------------------------+
| | Broadband | Hosting | Business | Wireless | Other | TOTAL |
| | and voice | services | services | | | |
| | services | | | | | |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| | Discontinued | Discontinued | Discontinued | Continuing | Continuing | |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| | GBP'000 | GBP000s | GBP000s | GBP000s | GBP000s | GBP000s |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| | | | | (restated) | (restated) | |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| REVENUE | | | | | | |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| External sales | 210,776 | 36,111 | 36,176 | - | - | 283,063 |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| Inter-segment sales | - | - | - | - | - | - |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| | 210,776 | 36,111 | 36,176 | - | - | 283,063 |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| RESULT | | | | | | |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| Segment result (i) | 12,013 | 7,240 | (2,808) | - | (3,720) | 12,725 |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| Amortisation of | (3,663) | (90) | (1) | - | - | (3,754) |
| intangibles | | | | | | |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| Depreciation charge | (1,351) | (4,000) | (7,444) | - | - | (12,795) |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| Impairment of tangible | - | - | (1,000) | - | - | (1,000) |
| fixed assets | | | | | | |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| Share based payment | - | - | - | - | (3,377) | (3,377) |
| costs | | | | | | |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| Share of loss of joint | - | - | - | (3,528) | - | (3,528) |
| venture | | | | | | |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| Operating | 6,999 | 3,150 | (11,253) | (3,528) | (7,097) | (11,729) |
| profit/(loss) | | | | | | |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| Finance income | 629 | 197 | 60 | 747 | 1,486 | 3,119 |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| Finance costs | (91) | (372) | (781) | | (8,410) | (9,654) |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| Gain arising on joint | - | - | - | 2,458 | - | 2,458 |
| venture | | | | | | |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| Profit/(loss) before | 7,537 | 2,975 | (11,974) | (323) | (14,021) | (15,806) |
| tax | | | | | | |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| Income tax expense | (2,189) | (141) | - | - | - | (2,330) |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| Profit on disposal of | 51,582 | - | - | - | - | 51,582 |
| subsidiary | | | | | | |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| | 56,930 | 2,834 | (11,974) | (323) | (14,021) | 33,446 |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| | | | | | | |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| OTHER INFORMATION | | | | | | |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| Property, plant and | 1,259 | 8,997 | 13,450 | - | - | 23,706 |
| equipment additions | | | | | | |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| BALANCE SHEET | | | | | | |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| Assets | | | | | | |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| Segment assets | - | 47,085 | 53,869 | 7,608 | 71,993 | 180,555 |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| | - | 47,085 | 53,869 | 7,608 | 71,993 | 180,555 |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| Liabilities | | | | | | |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| Segment liabilities | - | (16,949) | (23,548) | - | (4,013) | (44,510) |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| | - | (16,949) | (23,548) | - | (4,013) | (44,510) |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
| (i) Segment result refers to earnings before amortisation of intangibles, | |
| depreciation, impairment and share based payments | |
+------------------------+--------------+--------------+--------------+------------+------------+----------+
FREEDOM4 GROUP PLC (FORMERLY FREEDOM4 COMMUNICATIONS PLC)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2008
2. BUSINESS AND GEOGRAPHICAL SEGMENTS (continued)
Geographical segments
The group's operations were located in the United Kingdom and Germany prior to
the disposal of the hosting and networks services division. Germany provided
mainly hosting services. After the disposal the group's operations are located
only in the United Kingdom.
+----------------+------------+---------+---------+---------+------------+---------+---------+---------+
| | Continuing | Discontinued | | Continuing | Discontinued | |
+----------------+------------+-------------------+---------+------------+-------------------+---------+
| | United | | United | TOTAL | United | | United | TOTAL |
+----------------+------------+---------+---------+---------+------------+---------+---------+---------+
| | Kingdom | Germany | Kingdom | 2008 | Kingdom | Germany | Kingdom | 2007 |
+----------------+------------+---------+---------+---------+------------+---------+---------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------+------------+---------+---------+---------+------------+---------+---------+---------+
| | | | | | | | | |
+----------------+------------+---------+---------+---------+------------+---------+---------+---------+
| Sales revenue | 76 | 4,265 | 17,889 | 22,230 | - | 12,568 | 270,495 | 283,063 |
+----------------+------------+---------+---------+---------+------------+---------+---------+---------+
| | | | | | | | | |
+----------------+------------+---------+---------+---------+------------+---------+---------+---------+
| Carrying | 29,131 | - | - | 29,131 | 79,601 | 16,186 | 84,768 | 180,555 |
| amount of | | | | | | | | |
| segment assets | | | | | | | | |
+----------------+------------+---------+---------+---------+------------+---------+---------+---------+
| | | | | | | | | |
+----------------+------------+---------+---------+---------+------------+---------+---------+---------+
| Additions to | 38 | 1,292 | 2,685 | 4,015 | - | 7,931 | 15,775 | 23,706 |
| property, | | | | | | | | |
| plant and | | | | | | | | |
| equipment | | | | | | | | |
+----------------+------------+---------+---------+---------+------------+---------+---------+---------+
The segment information for these geographical destinations which is not
materially different to its origin is as follows:
FREEDOM4 GROUP PLC (FORMERLY FREEDOM4 COMMUNICATIONS PLC)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2008
3. DISPOSAL OF SUBSIDIARIES
+-----------------------------------------------------------------------------------+
| During 2008 the company disposed of its hosting and network services division. |
+-----------------------------------------------------------------------------------+
| |
+-----------------------------------------------------------------------------------+
| On 14 March 2008, the company announced that it had entered into a conditional |
| agreement for the sale of the hosting and network services division to a |
| wholly-owned subsidiary of Oakley L.P. The agreement was completed on 2 April |
| 2008. |
+-----------------------------------------------------------------------------------+
| |
+-----------------------------------------------------------------------------------+
| The sale was of the share capital of GX Networks Limited, XTML Holdings Limited, |
| CIX Holdings Limited, Supanetwork Limited and Transigent Limited together with |
| the subsidiaries of these entities (all listed below), and which taken together |
| comprised the hosting and network services division. |
+-----------------------------------------------------------------------------------+
| |
+-----------------------------------------------------------------------------------+
| ? 123-Reg Limited |
+-----------------------------------------------------------------------------------+
| ? CIX Holdings Limited |
+-----------------------------------------------------------------------------------+
| ? Compulink Information Exchange Limited |
+-----------------------------------------------------------------------------------+
| ? Cypberpress Limited |
+-----------------------------------------------------------------------------------+
| ? Defries & Haim Limited |
+-----------------------------------------------------------------------------------+
| ? Donhost Limited |
+-----------------------------------------------------------------------------------+
| ? Drive Memory Limited |
+-----------------------------------------------------------------------------------+
| ? GX Networks (UK) Limited |
+-----------------------------------------------------------------------------------+
| ? GX Networks Limited |
+-----------------------------------------------------------------------------------+
| ? GXN Limited |
+-----------------------------------------------------------------------------------+
| ? Host Europe GMBH |
+-----------------------------------------------------------------------------------+
| ? Host Europe Limited |
+-----------------------------------------------------------------------------------+
| ? Magic Moments |
+-----------------------------------------------------------------------------------+
| ? Magic Moments Design Limited |
+-----------------------------------------------------------------------------------+
| ? Magic Moments Employee Benefits Limited |
+-----------------------------------------------------------------------------------+
| ? Magic Moments Internet Services Limited |
+-----------------------------------------------------------------------------------+
| ? Magic Moments Investments Limited |
+-----------------------------------------------------------------------------------+
| ? Supanetwork Limited |
+-----------------------------------------------------------------------------------+
| ? Transigient Limited |
+-----------------------------------------------------------------------------------+
| ? Vialtus Solutions Limited |
+-----------------------------------------------------------------------------------+
| ? Webfusion Internet Limitied |
+-----------------------------------------------------------------------------------+
| ? Webfusion Internet Services Limited |
+-----------------------------------------------------------------------------------+
| ? XTML Holdings Limited |
+-----------------------------------------------------------------------------------+
| ? XTML Limited |
+-----------------------------------------------------------------------------------+
| |
+-----------------------------------------------------------------------------------+
| The proceeds of the sale amounted to GBP110.0 million after adjusting for debt |
| assumed by the buyer, and before costs. The sale proceeds comprised GBP92.5 |
| million in cash and GBP17.5 million in loan notes. In addition, the buyer paid |
| GBP2.6 million in cash in respect of the bank and cash balance left in the |
| businesses at completion. This GBP2.6 million is not included in the cash and |
| cash equivalents below. The loan notes are repayable by October 2009, which is |
| within 18 months from the date of completion of the sale, and accrue interest at |
| the rate of 8.25% per annum for the first 12 months and 10.75% per annum |
| thereafter. For the period to 2 April 2008 the turnover attributable to the |
| division was GBP22.2 million (compared to a turnover of GBP72.3 million for the |
| full year in 2007) with an EBITDA (earnings before amortisation of intangibles, |
| depreciation, impairment and share based payment costs), of GBP1.0 million |
| (compared to GBP4.4 million for the full year in 2007). On 2 April 2008 the net |
| assets of the division were GBP56.6 million. |
+-----------------------------------------------------------------------------------+
FREEDOM4 GROUP PLC (FORMERLY FREEDOM4 COMMUNICATIONS PLC)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2008
3.DISPOSAL OF SUBSIDIARIES (continued)
+----------------------------------------------------------------+------------+
| The net assets of the above companies at the date of disposal | 2008 |
| were as follows: | |
+----------------------------------------------------------------+------------+
| | GBP'000 |
+----------------------------------------------------------------+------------+
| | |
+----------------------------------------------------------------+------------+
| Property, plant and equipment | 34,009 |
+----------------------------------------------------------------+------------+
| Intangible assets | 301 |
+----------------------------------------------------------------+------------+
| Trade and other receivables | 27,863 |
+----------------------------------------------------------------+------------+
| Cash and cash equivalents | 2,395 |
+----------------------------------------------------------------+------------+
| Long term borrowings | (5,415) |
+----------------------------------------------------------------+------------+
| Deferred tax liability | (144) |
+----------------------------------------------------------------+------------+
| Income tax liability | (106) |
+----------------------------------------------------------------+------------+
| Trade and other payables | (33,004) |
+----------------------------------------------------------------+------------+
| Obligations under finance leases | (7,886) |
+----------------------------------------------------------------+------------+
| Provisions | (956) |
+----------------------------------------------------------------+------------+
| Attributable goodwill | 39,534 |
+----------------------------------------------------------------+------------+
| | 56,591 |
+----------------------------------------------------------------+------------+
| | |
+----------------------------------------------------------------+------------+
| Cost on disposal | 4,644 |
+----------------------------------------------------------------+------------+
| Gain on disposal | 48,765 |
+----------------------------------------------------------------+------------+
| Total consideration | 110,000 |
+----------------------------------------------------------------+------------+
| | |
+----------------------------------------------------------------+------------+
| | |
+----------------------------------------------------------------+------------+
| Satisfied by: | |
+----------------------------------------------------------------+------------+
| Cash | 92,500 |
+----------------------------------------------------------------+------------+
| Deferred consideration | 17,500 |
+----------------------------------------------------------------+------------+
| | 110,000 |
+----------------------------------------------------------------+------------+
| | |
+----------------------------------------------------------------+------------+
| Net cash inflow arising on disposal: | |
+----------------------------------------------------------------+------------+
| Cash consideration | 92,500 |
+----------------------------------------------------------------+------------+
| Deferred consideration (due October 2009) | 17,500 |
+----------------------------------------------------------------+------------+
| | |
+----------------------------------------------------------------+------------+
| | |
+----------------------------------------------------------------+------------+
| The costs of disposal of GBP4.6 million consist of legal and professional |
| fees of GBP4.0 million, payroll costs of GBP0.3 million and |
+-----------------------------------------------------------------------------+
| other costs of GBP0.3 million. | |
+----------------------------------------------------------------+------------+
| | |
+----------------------------------------------------------------+------------+
| | |
+----------------------------------------------------------------+------------+
| Profit on disposal per income statement | |
+----------------------------------------------------------------+------------+
| Hosting and network division | 48,765 |
+----------------------------------------------------------------+------------+
| Broadband and voice division (disposed of in 2007) (i) | 1,157 |
+----------------------------------------------------------------+------------+
| Total profit on disposal | 49,922 |
+----------------------------------------------------------------+------------+
| | |
+----------------------------------------------------------------+------------+
| (i) The additional profit of GBP1,157,000 recorded on the broadband and |
| voice disposal was the result of the release of the escrow provision of |
| GBP2,000,000 made in 2007 less expenditure of GBP843,000 being utilisation |
| of the escrow provision (GBP480,000 related to migration of the Bulldog |
| database, another GBP187,000 relates to the surrender and legal fees |
| relating to the St Albans property and GBP176,000 relates to dilapidations |
| of the Milton Hollis property leases). |
+----------------------------------------------------------------+------------+
FREEDOM4 GROUP PLC (FORMERLY FREEDOM4 COMMUNICATIONS PLC)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2008
4. RESERVES
+---------------+-----+----+----+-------+----+-------------+---------+------------+---------+----------+--------+--------+----------+-----------+
| | | | Other Reserves | | | |
+--------------------------+-----------------+-------------+-------------------------------------------+-----------------+----------+-----------+
| | | Share | | Merger | Capital | | Treasury | | | |
| | | | | | Redemption | | | | | |
+---------------+----------+-----------------+-------------+ + +---------+----------+-----------------+----------+-----------+
| | Share | premium | Translation | | | Bond | shares | Retained | Minority | TOTAL |
| | | | | | | equity | | | | |
+---------------+----------+-----------------+-------------+---------+------------+---------+----------+-----------------+----------+-----------+
| | capital | reserve | reserve | reserve | Reserve | reserve | reserve | earnings | interest | EQUITY |
+---------------+----------+-----------------+-------------+---------+------------+---------+----------+-----------------+----------+-----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------+----------+-----------------+-------------+---------+------------+---------+----------+-----------------+----------+-----------+
| At 1 January | 23,931 | 96,215 | (61) | 17,638 | 207 | 7,692 | - | (39,773) | - | 105,849 |
| 2007 | | | | | | | | | | |
+---------------+----------+-----------------+-------------+---------+------------+---------+----------+-----------------+----------+-----------+
| Issue of | 161 | 633 | - | - | - | - | - | - | - | 794 |
| shares | | | | | | | | | | |
+---------------+----------+-----------------+-------------+---------+------------+---------+----------+-----------------+----------+-----------+
| Share based | - | - | - | - | - | - | - | 3,377 | - | 3,377 |
| payment costs | | | | | | | | | | |
+---------------+----------+-----------------+-------------+---------+------------+---------+----------+-----------------+----------+-----------+
| Share of | - | - | - | - | - | - | - | 185 | - | 185 |
| joint venture | | | | | | | | | | |
| share based | | | | | | | | | | |
| payment | | | | | | | | | | |
+---------------+----------+-----------------+-------------+---------+------------+---------+----------+-----------------+----------+-----------+
| Redemption of | - | - | - | - | - | (7,692) | - | - | - | (7,692) |
| convertible | | | | | | | | | | |
| bonds | | | | | | | | | | |
+---------------+----------+-----------------+-------------+---------+------------+---------+----------+-----------------+----------+-----------+
| Loss on | - | - | 86 | | - | - | - | - | - | 86 |
| translation | | | | | | | | | | |
| of foreign | | | | | | | | | | |
| subsidiary | | | | | | | | | | |
+---------------+----------+-----------------+-------------+---------+------------+---------+----------+-----------------+----------+-----------+
| Disposal of | - | - | - | (9,519) | (207) | - | - | 9,726 | - | - |
| subsidiary | | | | | | | | | | |
+---------------+----------+-----------------+-------------+---------+------------+---------+----------+-----------------+----------+-----------+
| Profit for | - | - | - | - | - | - | - | 33,446 | - | 33,446 |
| the year | | | | | | | | | | |
+---------------+----------+-----------------+-------------+---------+------------+---------+----------+-----------------+----------+-----------+
| At 31 | 24,092 | 96,848 | 25 | 8,119 | - | - | - | 6,961 | - | 136,045 |
| December 2007 | | | | | | | | | | |
| and 1 January | | | | | | | | | | |
| 2008 | | | | | | | | | | |
+---------------+----------+-----------------+-------------+---------+------------+---------+----------+-----------------+----------+-----------+
| Issue of | 157 | 8,286 | | | - | - | - | - | - | 8,443 |
| shares | | | | | | | | | | |
+---------------+----------+-----------------+-------------+---------+------------+---------+----------+-----------------+----------+-----------+
| Capital | (21,683) | (96,848) | - | (2,309) | - | - | - | 120,840 | - | - |
| reduction | | | | | | | | | | |
| scheme (i) | | | | | | | | | | |
+---------------+----------+-----------------+-------------+---------+------------+---------+----------+-----------------+----------+-----------+
| Capital | - | - | - | - | - | - | - | (1,774) | - | (1,774) |
| reduction and | | | | | | | | | | |
| tender offer | | | | | | | | | | |
| costs | | | | | | | | | | |
+---------------+----------+-----------------+-------------+---------+------------+---------+----------+-----------------+----------+-----------+
| Tender offer | (1,490) | - | - | - | 1,490 | - | - | (154,788) | - | (154,788) |
+---------------+----------+-----------------+-------------+---------+------------+---------+----------+-----------------+----------+-----------+
| Share buyback | | - | - | - | | - | (737) | - | - | (737) |
+---------------+----------+-----------------+-------------+---------+------------+---------+----------+-----------------+----------+-----------+
| Share based | - | - | - | - | - | - | - | 1,265 | - | 1,265 |
| payment costs | | | | | | | | | | |
+---------------+----------+-----------------+-------------+---------+------------+---------+----------+-----------------+----------+-----------+
| Share of | - | - | - | - | - | - | - | (140) | - | (140) |
| joint venture | | | | | | | | | | |
| share based | | | | | | | | | | |
| payment cost | | | | | | | | | | |
+---------------+----------+-----------------+-------------+---------+------------+---------+----------+-----------------+----------+-----------+
| Disposal of | - | - | (25) | (5,810) | - | - | - | 5,810 | - | (25) |
| subsidiaries | | | | | | | | | | |
+---------------+----------+-----------------+-------------+---------+------------+---------+----------+-----------------+----------+-----------+
| Acquisition | - | - | - | - | - | - | - | - | 10 | 10 |
| of minority | | | | | | | | | | |
| interest | | | | | | | | | | |
+---------------+----------+-----------------+-------------+---------+------------+---------+----------+-----------------+----------+-----------+
| Profit for | - | - | - | - | - | - | - | 39,365 | (10) | 39,355 |
| the year | | | | | | | | | | |
+---------------+----------+-----------------+-------------+---------+------------+---------+----------+-----------------+----------+-----------+
| At 31 | 1,076 | 8,286 | - | - | 1,490 | - | (737) | 17,539 | - | 27,654 |
| December 2008 | | | | | | | | | | |
+---------------+----------+-----------------+-------------+---------+------------+---------+----------+-----------------+----------+-----------+
| | | | | | | | | | | |
+---------------+----------+-----------------+-------------+---------+------------+---------+----------+-----------------+----------+-----------+
| (i) Following the tender offer on 1 April 2008 the nominal value of the shares was changed from 1.0p to 0.1p. |
+-----------------------------------------------------------------------------------------------------------------------------------------------+
| | | | | | | | | | | |
+---------------------+---------+-------+------------------+---------+------------+---------+----------+--------+-------------------+-----------+
| Merger reserve | | | | | | | | | | |
+---------------------+---------+-------+------------------+---------+------------+---------+----------+--------+-------------------+-----------+
| At 31 December 2007 this represents the share premium on shares issued to acquire XTML Limited and Compulink Information |
| Exchange Limited (GBP796,000), Donhost Limited (GBP1,542,000), Firstnet Services Limited (GBP2,309,000) and the premium on |
| shares issued as part of the consideration for the acquisition of Transigent Limited in 2002 (GBP3,472,000). |
+-----------------------------------------------------------------------------------------------------------------------------------------------+
| | | | | | | | | | | |
+---------------------+---------+-------+------------------+---------+------------+---------+----------+--------+-------------------+-----------+
| The disposal of subsidiaries in 2007, relates to the share premium issued at the time of the acquisition of Toucan |
| Residential Limited and Pipex Internet Limited, which were sold as part of the broadband and voice business disposal in |
| 2007. |
+-----------------------------------------------------------------------------------------------------------------------------------------------+
| Translation reserve | | | | | | | | | |
+-------------------------------+-------+------------------+---------+------------+---------+----------+--------+-------------------+-----------+
| Comprises foreign exchange difference arising on the translation of the accounts of, and investments in, foreign |
| operations. |
+---------------+-----+----+----+-------+----+-------------+---------+------------+---------+----------+--------+--------+----------+-----------+
FREEDOM4 GROUP PLC (FORMERLY FREEDOM4 COMMUNICATIONS PLC)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2008
4. RESERVES (continued)
Capital redemption reserve
In 2008 this arises on buy back of shares with a nominal value of GBP1,490,000.
The disposal of the capital reserves arises due to the disposal of the capital
reserve acquired as part of the Pipex Internet Limited which were sold as part
of the broadband and voice business disposal in 2007.
Treasury shares reserve
During October 2008 the company purchased 41,138,559 of it's own shares which
are being held in treasury for future resale
FREEDOM4 GROUP PLC (FORMERLY FREEDOM4 COMMUNICATIONS PLC)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2008
5.POST BALANCE SHEET EVENTS
There are no post balance sheet events.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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