RNS Number:7787H
Flextech PLC
23 March 2000
Flextech plc
Preliminary results for the year ended 31 December 1999
Flextech plc, the pay-television and new media group, today announced
preliminary results for the year ended 31 December 1999.
Financial Highlights
* Total turnover, including Flextech's share of UKTV's revenue, increased
6% to #161m
* Profit before taxation of #5.1m (1998: loss of #5.1m) after exceptional
profits of #14.8m
* Operating loss of #14m (1998: loss of #3.5m), reflecting increased
investment in transactional and interactive services and the costs of
digital migration
* Flextech's share of UKTV losses down from #12.2m to #4.4m
* Advertising revenue (including share of UKTV's) 27% per cent higher at
#50m
* Flextech Interactive revenue increased fivefold to #1.8m
Operational Highlights
* Major carriage agreements concluded with Telewest and NTL
* Agreement signed to launch up to five shops on the Open..interactive
shopping platform
* SceneOne launched on CWC digital TV platform and on Orange's WAP mobile
service
* Acquisitions of Minotaur International; 77.5% of Way Ahead; and 25% of
Multimap
* Disposal of 38% stake in TV Travel Shop (valuing the company at more
than #50m)
Adam Singer, chairman and chief executive of Flextech plc, said:
"In 1999, Flextech made significant progress, especially in our key
interactive division. Now, through our proposed merger with Telewest, we are
poised to create an integrated digital media group that combines our branded
content with their broadband network. Together we will aim to develop new
broadband products and services and exploit the potential for e-commerce ."
For Further Information
Adam Singer Flextech plc 020 7299 5210
John Murray Flextech plc 020 7299 5128
Alison Hogan Brunswick 020 7404 5959
Introduction
The year ended with Flextech and Telewest in talks about a possible merger
to create an integrated digital media group, which will combine the power
of branded content and a broadband signal delivery network. Since then,
Telewest has made a recommended offer for Flextech's issued share capital
on the basis of 3.78 new Telewest shares for each Flextech share and offer
documents have been dispatched to shareholders. The first closing date for
acceptances is 4 April 2000.
The new entity will combine content in the form of television channels,
websites, voice telephony and data, a powerful broadband network and access
to substantial cross-promotion. The new group will be in a position to
supply consumers and businesses with branded digital signal, while
providing a return path through which e-commerce transactions can flow. It
also allows for the creation of a broadband incubator in which added-value
products and services can be developed and subsequently rolled out to
other platforms.
Review of 1999
In 1999, Flextech made considerable progress in its core business.
Carriage deals with both Telewest and NTL secured the distribution of our
wholly owned channels, while greatly improving the availability of the
UKTV channels. The multichannel universe grew 19 % in 1999 from 6.4
million subscribers to 7.6 million. The number of digital subscribers
increased by 2.3 million to end the year at 2.6 million.
UKTV, Flextech's joint venture with BBC Worldwide, made progress during
1999 not only by gaining wider distribution for its channels, but also
seeing a 42% rise in advertising revenues to #37.7m.
Flextech Interactive, the new media and e-commerce division, increased
revenues by 397% to #1.8m. The division has continued to develop products
and services, accessible over all platforms. The board believes that it is
well positioned to capitalise on the growth of internet, interactive
television and WAP mobile usage.
An agreement to launch up to five shops on the Open.. interactive shopping
platform was concluded in 1999 and SceneOne, Flextech's online
entertainment and listings guide (www.sceneone.co.uk) , was launched as a
shop on Open.. in the first quarter of 2000. It is also a content provider
to the Orange WAP mobile telephone platform and is carried on CWC's
digital TV platform. A SceneOne video channel will be launched in the
second quarter .
Flextech Interactive's product portfolio was further enhanced by the
acquisitions of a 25% stake in Multimap, an on-line map company
(www.multimap.com) and a 77.5% stake in Way Ahead, a ticketing group
(www.tickets-online.co.uk).
TV Travel Shop (TVTS), the transactional holidays channel launched by
Flextech in 1998, sold holidays worth #72m in 1999. The sale of a 38 %
stake to Barclays Private Equity valued TVTS at more than #50m. Since the
year end a further 12.5 % stake was sold to Kuoni, a trade partner.
In December 1999, Flextech agreed to buy independent distributor and
rights company Minotaur International. The deal enhances Flextech's
programming distribution, co-production and rights acquisition capability,
particularly in international markets.
Financial Review
Total turnover, including Flextech's share of joint ventures turnover,
increased by 6% to #161m.
The turnover from our wholly-owned channels increased from #79.7m to #80.2m.
Advertising revenue for these channels increased by 19% to #31.2m, which more
than offset the lower subscription revenue that resulted from the migration
to digital.
Total transactional and interactive revenues increased by 9% to #23.8m.
Flextech Interactive revenues, incorporating our UK based interactive and new
media operations, increased by 397% to #1.8m.
Profit on ordinary activities after exceptional items and before tax was #5.1m
(1998: #5.1m loss). The disposal of the 38% holding in TV Travel Shop to
Barclays Private Equity, produced a profit of #13.5m. We also disposed of our
entire holding in Playboy, recognising a profit of #1.3m.
Operating loss was #14m (1998: #3.5m loss), reflecting increased investment in
transactional and interactive services, costs associated with digital
migration and corporate expenses.
The share of operating losses from the UKTV joint venture with BBC Worldwide
fell from #12.2m to #4.4m. UKTV turnover increased from #51.2m to #74.2m,
reflecting greater numbers of subscribers and strong growth in advertising
revenues.
Scottish Media Group, in which Flextech holds an 18.2 per cent stake,
continued its growth following a number of acquisitions in the year. Profit
before tax and exceptional items, increased from #46m to #50m.
The Future
The merger of Flextech with Telewest will create a major new vertically
integrated platform and content company in the UK. It brings together
Telewest's growing network and subscriber base with Flextech's content and
branding skills with the objective of exploiting the opportunities provided by
the likely growth in demand for digital broadband products and services.
With ability to bundle telephony and content, the new company will be able to
drive broadband connections and create the platform for interactivity and e-
commerce. The directors believe that by merging Flextech's new media unit with
Telewest's interactive TV unit the combined entity will have the foremost
broadband content creation engine in the UK.
Moreover, Flextech's wholly-owned and joint venture TV channels should
continue to benefit from the growth of the multichannel television market,
which has still just reached approximately a third of TV homes. Emphasis on
the development of new channels, websites and interactive products and
services will continue strongly.
Adam N Singer, Chairman and Chief Executive
23rd March 2000
Preliminary Results
Unaudited
Consolidated Profit and Loss Account
Year ended 31 December 1999
Notes Year ended Year ended
31 December 31 December
1999 1998
#'000 #'000
__________ __________
Turnover
Group and share of joint ventures
Continuing activities 160,151 149,213
Discontinued activity 821 3,263
Total turnover 160,972 152,476
__________ __________
Less: share of joint ventures' (37,102) (25,612)
turnover
Group turnover 123,870 126,864
__________ __________
Cost of sales 1(d) (58,625) (60,224)
Gross profit 65,245 66,640
========== ==========
Operating loss
Continuing activities (13,428) (730)
Discontinued activity (615) (2,795)
__________ __________
Operating loss (14,043) (3,525)
__________ __________
Share of operating (loss)/profit
Joint ventures (4,416) (12,182)
Associated undertakings 8,802 10,028
========== ==========
Profit on part disposal of continuing
activities 1(b) 13,513 -
Profit on disposal of discontinued
activity 1(a) 1,261 -
========== =========
Profit/(loss) on ordinary activities
before interest 5,117 (5,679)
__________ __________
Interest receivable and similar income
Group 12,839 11,599
Joint ventures 178 210
Associates 33 -
__________ __________
13,050 11,809
__________ _________
Interest payable and similar charges
Group (6,222) (5,356)
Joint ventures (5,943) (5,411)
Associated undertakings (939) (486)
__________ _________
(13,104) (11,253)
========== =========
Profit/(loss) on ordinary activities
before taxation 5,063 (5,123)
Tax on profit/(loss) on ordinary 1(c)
activities 4,883 (1,438)
__________ _________
Profit/(loss) on ordinary activities
After taxation 9,946 (6,561)
Equity minority interests 2,930 3,704
__________ _________
Profit/(loss) on ordinary activities
attributable to the members 12,876 (2,857)
_________ _________
Dividends - -
_________ _________
Retained profit/(loss) for the period
transferred to reserves 12,876 (2,857)
========= =========
Earnings per equity share 8.17p (1.82)p
Fully diluted earnings per equity
share 8.12p (1.82)p
========= =========
There is no material difference between the profit/(loss) as stated above
and the profit/(loss) calculated on a historical costs basis.
Preliminary Results
Unaudited
Consolidated Statement of Total Recognised Gains and Losses
Year ended 31 December 1999
Year ended Year ended
31 December 31 December
1999 1998
#'000 #'000
__________ __________
Profit/(loss) for the financial year 12,876 (2,857)
Foreign exchange movements (44) 153
__________ __________
Total recognised gains and losses
relating to the year 12,832 (2,704)
___________ __________
Group Activity Analysis
Year ended 31 December 1999
Year ended Year ended
31 December 31 December
1999 1998
Total Total
#'000 #'000
__________ __________
Turnover
Core business 99,208 101,805
Transactional and Interactive
- International 11,160 18,573
- Domestic 12,681 3,223
Premium channel - discontinued activity 821 3,263
_________ _________
123,870 126,864
_________ _________
Operating loss
Core business 18,179 21,118
Transactional and Interactive
- International (2) 2,355
- Domestic (18,358) (13,266)
Corporate and development (13,247) (10,937)
Premium channel - discontinued activity (615) (2,795)
________ ________
(14,043) (3,525)
________ ________
Share of operating (loss)/profit - joint
ventures
UKTV (12,151) (15,729)
UK Gold 9,735 5,547
Management fee (2,000) (2,000)
_________ _______
(4,416) (12,182)
_________ _______
Core business represents the Group's basic channel portfolio together with
the provision of associated management and infrastructure services.
Transactional and Interactive represents the Group's activity in the home-
shopping, travel, interactive television markets and ticketing services.
The Premium channel represents the Group's discontinued interest in Playboy
TV. Corporate and development represents the overhead related to the
management of both the established and emerging aspects of the business.
Preliminary Results
Unaudited
Consolidated Balance Sheet
31 December 1999
1999 1999 1998 1998
#'000 #'000 #'000 #'000
________ _______ ________ _______
Fixed assets
Intangible assets 10,609 50
Tangible assets 14,266 13,721
Investments:
Investments in joint ventures:
Share of gross assets 29,143 19,773
Share of gross liabilities (129,132) (109,581)
________ ________ ________ ________
(99,989) (89,808)
Loans to joint ventures 226,384 194,581
________ ________ ________ ________
Total investment in joint
ventures 126,395 104,773
Investments in associated
undertakings 33,731 14,861
________ ________ ________ ________
160,126 119,634
________ ________ ________ ________
185,001 133,405
Current assets
Programming inventory 42,879 42,184
Stock 830 606
Debtors (all falling due
within one year) 21,760 21,294
Investments - 167
Cash at bank and in hand 12,460 6,190
________ ________ ________ ________
77,929 70,441
Creditors: amounts falling
due within one year (72,951) (65,194)
________ ________ ________ ________
Net current assets 4,978 5,247
________ ________ ________ ________
Total assets less current
liabilities 189,979 138,652
Creditors: amounts falling
due after more than one
year (75,465) (37,422)
Provisions for liabilities
and charges (3,569) (10,303)
________ ________ ________ ________
Net assets 110,945 90,927
________ ________ ________ ________
Capital and reserves
Called up share capital 15,808 15,729
Share premium account 172,485 169,679
Merger relief reserve 2,588 -
Revaluation reserve 14,505 14,505
Other reserve 1,345 1,345
Profit and loss account (93,773) (106,870)
________ ________ ________ ________
Total equity shareholders'
funds 112,958 94,388
Equity minority interests (2,013) (3,461)
________ ________ ________ ________
110,945 90,927
________ ________ ________ ________
Preliminary Results
Unaudited
Consolidated Cash Flow Statement
Year ended 31 December 1999
Notes Year ended Year ended
31 December 31 December
1999 1998
#'000 #'000
__________ __________
Net cash (outflow)/inflow from
operating activities 2 (6,119) 6,122
__________ __________
Dividends from joint ventures and
associates 3,112 3,413
__________ __________
Returns on investments and
servicing of finance (3,160) (2,080)
__________ __________
Taxation (87) 282
__________ __________
Capital expenditure and financial
investment (30,668) (26,790)
__________ __________
Acquisitions and disposals 1,578 -
__________ __________
Equity dividends paid - -
__________ __________
Cash outflow before use of liquid
resources and financing (35,344) (19,053)
__________ __________
Management of liquid resources 232 -
Financing
Issue of shares for cash 2,868 793
Increase in debt 38,000 13,840
Loans from minority shareholders 514 1,756
_________ _________
Net cash inflow from financing 41,614 16,389
_________ _________
Increase/(Decrease) in cash in
the period 6,270 (2,664)
_________ _________
Reconciliation of Net Cash Flow to Movement in Net Debt
Year ended 31 December 1999
Notes Year ended Year ended
31 December 31 December
1999 1998
#'000 #'000
__________ __________
Increase/(Decrease) in cash in
the period 6,270 (2,664)
Cash inflow from increase in
debt (38,000) (13,840)
Rolled up interest on long term
loan facility and other
movements (1,115) (1,323)
Issue of loan stock (7,119) -
Sale of investment (167) -
Cash outflow from debt repayment 144 -
_________ _________
Movement in net debt in the
period (39,987) (17,827)
Net debt at 1 January (46,066) (28,239)
_________ _________
Net debt at 31 December 3 (86,053) (46,066)
________ ________
Preliminary Results
Notes to the Accounts
Year ended 31 December 1999
1 Exceptional items
(a)On 31 March 1999, the Company completed the sale of its 51% interest in
Playboy TV UK/Benelux Limited to the Home Video Channel Limited recognising
a profit on disposal of #1.3 million.
(b)On 6 December 1999, Flextech plc announced its decision to sell 38% of its
holding in TV Travel Shop (reducing Flextech's holding to 49.5%) to
Barclays Private Equity for a consideration of #5.0 million. The resulting
profit on disposal of #13.5 million has been shown as an exceptional item.
(c)The deferred taxation provision of #8.3 million on the possible remittance
of overseas earnings has been released in full as it is no longer
considered likely that this will crystallise.
(d)On 15 August 1998, after a brief illness, Flextech's Group Chief
Executive, Roger Luard died. At the same time as the announcement of his
illness, it was announced that the Board had unanimously agreed that, in
the circumstances and in recognition of his contribution to the development
of the company, it would be appropriate to offer Mr Luard a financial
package totalling #3.5 million. This agreement was approved at the Annual
General Meeting on 24 June 1998. The approved settlement and certain other
entitlements to Mr Luard's estate totalled #3.9 million. Of this total,
#0.9 million has been included in the long term incentive plan provision
made in previous years,#2.2 million has been recognised as an exceptional
item in 1998 and #0.8 million has been satisfied by the gain on the
exercise of Mr Luard's share options in 1999.
2
Reconciliation of operating loss to net Year ended Year ended
cash (outflow)/inflow from operating 31 December 31 December
activities 1999 1998
#'000 #'000
___________ __________
Operating loss (14,043) (3,525)
Depreciation 3,682 2,971
Amortisation of intangible assets 101 300
Amortisation of programming inventory 19,698 16,985
Increase in cost of programming
inventory (20,393) (22,494)
Decrease in debtors 1,959 5,689
Increase in stock (124) (11)
Increase in creditors 3,001 6,204
Loss on disposal of fixed assets - 3
__________ __________
Net cash(outflow)/inflow from operating
activities (6,119) 6,122
__________ __________
3 Analysis of changes in net At 1 Cash Other At 31
debt January Flows Changes December
1999 #'000 #'000 1999
#'000 #'000
________ ________ _______ ________
Cash in hand 6,190 6,270 - 12,460
Debt due within 1 year (15,001) 144 (8,086) (22,943)
Debt due after 1 year (37,422) (38,000) (148) (75,570)
Current asset investment 167 (232) 65 -
________ ________ _______ ________
Total (46,066) (31,818) (8,169) (86,053)
________ ________ _______ ________
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 December 1999 or 1998. Statutory
accounts for 1998 have been delivered to the Registrar of Companies, and
those for 1999 will be delivered following the Company's Annual General
Meeting. The Auditors have reported on those accounts; their reports were
unqualified and did not contain statements under section 237 (2) or (3) of
the Companies Act 1985.
END
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