RNS Number : 6182U
Freedom4 Communications PLC
16 May 2008
16 May 2008
FREEDOM4 Communications plc (the "Company")
(formerly Pipex Communications plc)
Results for the 12 months ended 31 December 2007
FREEDOM4 Communications plc, (FFC), a provider of wireless telecommunications services, today reports its results for the twelve months
ended 31 December 2007.
2007 Financial summary (including discontinued operations):
· Turnover £283.1 million (2006: £294.4 million)
· Operating loss £11.7 million (2006: operating profit £0.6 million)
· Profit for the year £33.4 million (2006: £0.0 million)
· Basic earnings per share 1.39 pence (2006: 0.0 pence)
· Year-end net cash/(debt)* £47.0 million (2006: £(81.1) million)
Strategic transactions completed:
· broadband and voice businesses sold for £210 million on a debt free basis
· Outstanding Convertible Bonds redeemed for £93.3 million
Post year-end:
· Hosting and Network Services Division sold for £120 million
· £154.8 million of cash returned to shareholders via a tender offer
· Company renamed FREEDOM4 Communications plc
· WiFi roaming service provider BOZII acquired
Wireless Joint Venture update:
· WiMAX trials in Warwick and Milton Keynes completed successfully
· Manchester WiMAX network roll-out commenced
Post year-end:
· Commercial WiMAX services launched in Milton Keynes, Warwick and Manchester
· Company invested US$7.7 million in joint venture with up to an additional US$14.3 million available
· New re-seller agreements signed, with Mumtel and Konnex Networks
* Year end net cash/(debt) comprises cash and cash equivalents of £60.8 million (2006: £48.3 million) less long and short term
borrowings of £13.8 million (2006: £129.6 million)
Peter Dubens, Chairman of FREEDOM4, commented:
"The 2007 strategic review and the transactions that resulted crystallised significant value for shareholders, enabling the Company to
return £154.8 million of cash in April 2008. The Board aims also to return to shareholders a minimum of £17.5 million from the company's
present cash and cash equivalents, escrow and loan note amount of £30 million.
"The wireless broadband joint venture with Intel continues to represent a significant long-term growth opportunity for the Company.
Successful customer trials using WiMAX technology were completed in 2007 and the business has now launched a range of attractive commercial
services targeting business customers in Manchester, Milton Keynes and other markets."
For further details, contact:
Pipex Communications plc 08703 860 403
Peter Dubens, Chairman
Mike Read, Chief Executive
Stewart Porter, Finance
Director
Collins Stewart 020 7523 8350
Hugh Field
Financial Dynamics 020 7831 3113
Juliet Clarke / Ed
Bridges/Erwan Gouraud
CHAIRMAN'S STATEMENT
STRATEGIC TRANSACTIONS
Disposal of the Broadband and Voice business
On 13 July 2007, the company announced that it had entered into an agreement for the sale, subject to shareholder approval and
competition clearance, of the companies which comprised the group's broadband and voice businesses to Tiscali UK Limited. The consideration
for the disposal on a cash and debt free basis was £210 million, which sum was subject to adjustment in accordance with the terms of the
sale agreement. The agreement was completed on 13 September 2007.
The Board believed that although the broadband and voice businesses had experienced significant growth, this was not expected to
continue due to the declining adoption rate of broadband in the UK and increasing levels of competition in the sector. These factors were
considered likely to result in a higher cost of customer acquisition and ongoing margin erosion which would limit the business's ability to
increase profitability. In addition, opportunities for growth through acquisition had declined considerably as a result of the significant
consolidation which has occurred in the sector.
For the period to 13 September 2007 the broadband and voice businesses contributed turnover of £210.8 million, compared to turnover of
£232.9 million for the full year in 2006. The operating profit attributable to the business for the period to 13 September 2007 was £7.0
million, compared to £8.7 million for the full year in 2006. The transaction gave rise to a profit on disposal of £51.6 million.
Redemption of 3.875% Guaranteed Convertible Bonds and repayment of bank debt
On 17 September 2007, the company announced that it would redeem all of the £91,500,000 3.875% guaranteed convertible bonds due 2011.
This was implemented on 12 October 2007, with the bonds being redeemed at their principal amount plus accrued interest together with payment
of a premium of £20 per £1,000 denomination of bonds. The repayment of the bonds utilised approximately £93.3 million of the cash
generated by the broadband disposal. A further £35 million of the proceeds of the broadband and voice disposal was utilised in repayment of
bank borrowings.
POST YEAR-END
Disposal of the Hosting and Network Services businesses
Following the disposal of the broadband and voice businesses the Board believed that there was no longer a compelling strategic fit
between the remaining businesses within the group.
Therefore, following receipt of a number of indicative offers the company initiated a competitive sales process and on 14 March 2008
announced that it had entered into a conditional agreement for the sale of the hosting and network services businesses division to a
wholly-owned subsidiary of Oakley L.P. The agreed consideration was £120 million (on an Enterprise Value basis), to be satisfied by £20
million in loan notes (issued by a wholly owned subsidiary of Oakley L.P.), the assumption by the buyer of certain debt/liabilities, and the
balance in cash. The disposal, which was approved by shareholders, was completed on 2 April 2008, with the final consideration satisfied by
£92.5 million in cash, £17.5 million in loan notes and the assumption by the buyer of certain of the company's debts/liabilities.
For the year ended 31 December 2007 the hosting and network services businesses generated revenues of £72.3 million (2006: £61.5
million) and a loss before tax of £9.0 million (2006: loss of £3.4 million). As at 31 December 2007 the net assets of the hosting and
network services businesses were £60.5 million (2006: £65.8 million).
The Board believes that the sale of the hosting and network services businesses, in conjunction with the capital reduction and tender
offers, crystallised for shareholders the substantial value created in this business over the previous three years.
Capital reduction and tender offers
The Board recognised that following the disposal of the broadband and voice businesses and the hosting and network services division,
the company would have capital that was surplus to its requirements, and in addition that the ongoing capital requirements of the group
would reduce. As a consequence of this, on 15 March 2008 the company proposed to effect a capital reduction to create distributable
reserves, and subsequently to return capital of up to £156.9 million to shareholders by means of a tender offer. The Board believed that
the capital reduction and tender offers were an appropriate means of returning cash to shareholders in a manner that enabled shareholders to
choose whether or not to participate, and when to participate, in the return of capital.
The capital reduction required approval of shareholders at a General Meeting of the company, and the approval of the High Court. These
were received such that the capital reduction became effective on 1 April 2008. The tender offers opened on 15 March 2008 and closed on 3
April 2008. In aggregate the company bought back 1,489,775,339 shares at a price of 10.39 pence per share, at a total cost of £154.8
million. Following completion of the tender offers the company has 1,070,541,017 ordinary shares in issue.
Following completion of the tender offers and subsequent payment of all transaction costs and certain other payables the net cash
resources of the company currently comprise approximately £3.0 million of net cash and £10.5 million held in an escrow account subject to
warranty and indemnity claims in respect of the broadband and voice disposal. In addition the company has the benefit of the £17.5 million
loan notes. It is the board's intention to distribute to shareholders the proceeds of the redemption of the loan notes, due to be repaid
within 18 months.
OPERATIONAL REVIEW - WIRELESS DIVISION
Following completion of the strategic transactions, the company owns 52% of a joint venture established with Intel in 2006. The joint
venture, which was re-branded from Pipex Wireless to "FREEDOM4" in October 2007, owns five radio spectrum licences and is currently building
a WiMAX network using licensed spectrum in the 3.6GHz frequency band.
Customer trials
During 2007 FREEDOM4 successfully completed technical and commercial trials in Milton Keynes and Warwick. These indicated significant
customer interest in high speed wireless broadband services, in both business and consumer markets. Customers valued in particular the ease
of network connection and the network access speed provided by the service, and the fact that no fixed land-line subscription was required
to receive the service. In Warwick the Council extended the use of the trial network to home workers, and is trialling WiMAX-based CCTV.
Network roll-out
By the end of March 2008 FREEDOM4 had rolled out a total of 11 live base sites, providing WiMAX coverage to approximately 50,000
premises in Manchester, Milton Keynes and Warwick. Contracts have been let, and site roll-out is currently under way, for the next phase of
network expansion, to cover up to approximately 500,000 premises. The network roll-out is being focused on areas where a high concentration
of target customers has been identified, and significant direct and indirect sales leads are being generated. Major network vendors to
FREEDOM4 include Airspan, Ericsson, and National Grid Wireless.
Commercial roll-out
From late 2007 FREEDOM4 launched commercial services in Milton Keynes, Warwick and Manchester, offering a range of WiMAX access products
through the wholesale channel, including:
"JustData" - delivering high-speed, symmetrical upload and download speeds of up to 1Mb; companies save both time and money when home
workers can access the Internet with a reliable, fast, and secure wireless connection.
"DataMax" - delivering high-speed, symmetrical upload and download speeds of up to 4Mb; for companies that have more demanding bandwidth
needs such as hosting their own mail/web servers, connecting multiple users to a high-speed network, or regularly sending and receiving
large data files.
FREEDOM4's WiMAX network could become an integral part of a number of new public sector telecommunications network initiatives,
following successful cooperation with Milton Keynes Council to develop an economic, sustainable wireless service, part of delivering the
Council's "Digital Milton Keynes" objective. A number of other local and district councils have subsequently approached FREEDOM4 to develop
and deliver unique services.
In addition the education sector is a potentially significant market opportunity. In Milton Keynes FREEDOM4 successfully developed a
project with a local school providing WiMAX access to enable pupils to access e-learning platforms. Several further opportunities in this
market have been identified, and are being pursued in collaboration with a sector specialist service provider.
Distribution agreements
FREEDOM4 has now signed distribution agreements with a number of new re-sellers, which will enhance FREEDOM4's presence in the small
business sector. Mumtel Limited will begin by reselling services in the Manchester area, while Konnex Networks Ltd will be the first
reseller in Warwick. These agreements, signed in April 2008, follow the agreement previously signed with ConnectMK to provide WiMAX-based
services in Milton Keynes, and the agreement in place with Vialtus Solutions (formerly Pipex Network Services).
WiFi Acquisition
In April the company completed the acquisition of BOZII, a provider of WiFi roaming services. With access to over 40,000 wireless
hotspots in 80 countries, BOZII works with leading Internet Service Providers to aggregate services to deliver high speed internet
connectivity without restrictive download limits, and to provide customers with one account, one bill and one simple log-on to wireless
internet connectivity. Wi-Fi will be an important component in the roll-out of integrated wireless service, both in terms of supporting the
WiMAX infrastructure and attracting new customers to FREEDOM4.
Spectrum licence developments
In January 2008 FREEDOM4 participated in an Ofcom auction of spectrum in the 28GHz frequency band and successfully acquired an
additional licence which extends its geographic coverage in this frequency band across the whole of Great Britain. FREEDOM4 now has 112MHz
of contiguous spectrum with national coverage in the 28GHz frequency band, which will enable economic microwave backhaul to be provided for
its WiMAX base stations.
In February 2008 FREEDOM4 applied to Ofcom for an amendment to its 3.6 MHz licence to permit deployment of nomadic and mobile services
on this frequency. This change would enable FREEDOM4 to provide services to mobile WiMAX devices when these become available.
Mobile WiMAX trials
FREEDOM4 and Airspan collaborated to demonstrate the application of mobile WiMAX (802.16e) in the 3.6GHz frequency band, using a USB
device. Following this successful initial technical test, a more extensive mobile WIMAX services trial programme will be implemented in the
second and third quarters, to enable FREEDOM4 to potentially launch initial mobile services in early 2009, if the licence amendment change
is granted.
SUMMARY AND OUTLOOK
The company believes that the UK wireless broadband market represents a major long-term growth opportunity. Mobile network operators are
reporting strong growth in the volumes of wireless data traffic being carried on their networks, and new data-centric wireless devices are
being adopted by an increasing number of business and residential customers.
In 2007 the joint venture successfully completed technical and commercial trials of high-speed, high capacity WiMAX wireless access
technology, and is now rolling out WiMAX network coverage in its initial target markets. The company believes that WiMAX technology delivers
an attractive combination of range and access speed and bandwidth that will enable FREEDOM4 to capture a material part of the growing market
for wireless broadband services.
Focusing initially on services for business customers, marketed through wholesale channels, during 2008 the company expects to expand
network coverage in Manchester, Milton Keynes and certain other targeted areas, and to start to build a solid customer base and generate an
ongoing revenue stream in these markets.
Conditional on the successful execution of its initial network and service roll-out, the joint venture then plans to extend its service
offerings into the consumer market, using new direct sales channels, as well as an expanded range of indirect channel partners. Under its
current business plan the joint venture plans to offer a range of fixed and mobile wireless broadband services in 50 towns and cities by
2011.
The company has committed to invest a further US$7.7 million in cash in the joint venture, which expected to take place before the end
of the second quarter. A further US$6.6 million in cash will be made available should the joint venture require it. The longer-term funding
of the joint venture will be dependent on the successful implementation of the first phase of the joint venture's network and services
roll-out. The Board believes that the working capital available to the company is sufficient for its requirements, including its current
commitments to fund the joint venture, until at least the end of the second quarter of 2009.
FREEDOM4 COMMUNICATIONS PLC (FORMERLY PIPEX COMMUNICATIONS PLC)
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2007
_________________________________________________________________________ ________________________
Total Total
Continuing Discontinued 2007 Continuing Discontinued 2006
Note £'000 £'000 £'000 £'000 £'000 £'000
Restated (note 7) Restated (note 7)
REVENUE 2 - 283,063 283,063 - 294,359 294,359
Cost of sales - (171,938) (171,938) - (182,067) (182,067)
Operating costs before
amortisation of
intangibles,
depreciation,
impairments
and share based
payment costs
(3,720) (94,680) (98,400) (1,662) (87,533) (89,195)
EARNINGS BEFORE
AMORTISATION OF
INTANGIBLES,
DEPRECIATION, `
IMPAIRMENT AND
SHARE BASED
PAYMENT COSTS (3,720) 16,445 12,725 (1,662) 24,759 23,097
Amortisation of
Intangibles - (3,754) (3,754) - (6,645) (6,645)
Depreciation charge - (12,795) (12,795) - (12,033) (12,033)
Impairment of
tangible fixed
assets
- (1,000) (1,000) - - -
Share based
payment costs (3,377) - (3,377) (2,206) - (2,206)
TOTAL OPERATING
COSTS (7,097) (112,229) (119,326) (3,868) (106,211) (110,079)
Share of loss of
joint venture (3,528) - (3,528) (1,596) - (1,596)
OPERATING
(LOSS)/PROFIT 2 (10,625) (1,104) (11,729) (5,464) 6,081 617
Finance income 2,233 886 3,119 472 546 1,018
Finance costs (8,410) (1,244) (9,654) (5,658) (1,148) (6,806)
Net finance expenses (6,177) (358) (6,535) (5,186) (602) (5,788)
Gain arising on
joint venture 2,458 - 2,458 1,032 - 1,032
(LOSS)/PROFIT
BEFORE
TAX
(14,344) (1,462) (15,806) (9,618) 5,479 (4,139)
Income tax expense - (2,330) (2,330) - 4,144 4,144
(LOSS)/PROFIT
AFTER
TAX BEFORE PROFIT
FROM DISPOSAL OF
DISCONTINUED
OPERATIONS
(14,344) (3,792) (18,136) (9,618) 9,623 5
Profit from disposal of
discontinued operations,
net of tax
3 - 51,582 51,582 - - -
(LOSS)/PROFIT FOR
THE YEAR
ATTRIBUTABLE TO
EQUITY
SHAREHOLDERS
OF THE PARENT
(14,344) 47,790 33,446 (9,618) 9,623 5
Earnings per share:
Basic (pence) ( 0.60) 1.99 1.39 ( 0.41) 0.41 0.00
Diluted (pence) ( 0.60) 1.90 1.33 ( 0.41) 0.39 0.00
FREEDOM4 COMMUNICATIONS PLC (FORMERLY PIPEX COMMUNICATIONS PLC)
CONSOLIDATED BALANCE SHEET
as at 31 December 2007
_________________________________________________________________________ _________________
2007 2006
Note £'000 £'000
Restated
(note 7)
ASSETS
Non current assets
Goodwill - 165,183
Intangible assets - 23,726
Property, plant and equipment - 47,069
Investment in joint venture 7,608 5,688
7,608 241,666
Current assets
Inventories - 47
Trade and other receivables 11,243 44,679
Cash and cash equivalents 60,750 48,328
Assets classified as held for sale 4 100,954 -
172,947 93,054
Current liabilities
Short term borrowings - (4,461)
Trade and other payables (1,794) (95,793)
Liabilities classified as held for sale 4 (40,497) -
Tax liabilities - (278)
Provisions (2,219) (337)
(44,510) (100,869)
Net current assets/(liabilities) 128,437 (7,815)
Non current liabilities
Long term borrowings - (125,013)
Provisions - (1,224)
Deferred tax liability - (1,765)
- (128,002)
NET ASSETS 136,045 105,849
Equity attributable to the equity holders of the
parent
Share capital 5 24,092 23,931
Share premium reserve 5 96,848 96,215
Translation reserve 5 25 (61)
Other reserves 5 8,119 25,537
Retained earnings 5 6,961 (39,773)
EQUITY SHAREHOLDERS FUNDS 136,045 105,849
FREEDOM4 COMMUNICATIONS PLC (FORMERLY PIPEX COMMUNICATIONS PLC)
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2007
2007 2006
Note £'000 £'000
Restated
(note 7)
Profit for the year 33,446 5
Profit from disposal of discontinued operations 3 (51,582) -
Income tax expense 2,330 (4,144)
Gain arising on joint venture (2,458) (1,032)
Interest received (3,119) (1,018)
Interest payable 9,654 6,806
Operating (loss)/profit (11,729) 617
Adjustments for:
Depreciation charge 12,795 12,033
Impairment of tangible fixed assets 1,000 -
Share of loss of joint venture 3,528 1,596
Amortisation of intangibles 3,754 6,645
Loss on sale of fixed assets 157 13
Share based payment costs 3,377 2,206
Operating cash flows before movements in working 12,882 23,110
capital
Decrease in inventories 31 16
Decrease in receivables 4,197 865
(Decrease)/increase in payables (24,292) 10,465
Increase/(decrease) in provisions 1,599 (444)
CASH (USED)/GENERATED FROM OPERATIONS (5,583) 34,012
Interest paid (2,387) (2,553)
Bond interest and redemption premium (5,512) (1,776)
Interest element of finance lease repayments (827) (668)
Income taxes (paid)/received (270) 230
NET CASH (USED)/GENERATED FROM OPERATING ACTIVITIES (14,579) 29,245
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of subsidiaries (958) (76,520)
Payment to acquire intangible assets (152) -
Investment in jointly controlled entity (2,058) (797)
Purchase of property, plant and equipment (23,706) (27,093)
Proceeds from sale of property, plant and equipment 2,648 -
Proceeds from sale of subsidiaries 3 173,170 -
Interest received 2,115 546
NET CASH GENERATED/(USED) IN INVESTING ACTIVITIES 151,059 (103,864)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issue of share capital - 13,634
Proceeds from the exercise of share options 795 2,161
Proceeds from the issue of convertible bonds - 88,279
Payment to redeem convertible bonds (91,500) -
Repayments of short term borrowings (1,445) -
Proceeds from long term borrowings 2,255 76,746
Repayments of long term borrowings (35,506) (74,310)
Drawdown of new finance leases 5,700 5,016
Payment of finance lease liabilities (4,357) (2,543)
NET CASH (USED)/GENERATED FROM FINANCING ACTIVITIES (124,058) 108,983
NET INCREASE IN CASH AND CASH EQUIVALENTS 12,422 34,364
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF THE YEAR 48,328 13,964
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 60,750 48,328
FREEDOM4 COMMUNICATIONS PLC (FORMERLY PIPEX COMMUNICATIONS PLC)
EXTRACTS FROM THE FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION
for the year ended 31 December 2007
_________________________________________________________________________ _________________
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 Group has adopted IFRS 7 'Financial Instruments: Disclosures', and the complementary amendment to IAS 1 'Presentation of Financial
Statements - Capital Disclosures' which introduces new disclosures relating to financial instruments.
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 2006, together with the new and newly relevant
policies noted below.
The financial information set out herein does not constitute the Company's statutory report and accounts for the year ended 31 December
2007. Statutory accounts for 2007 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 first consolidated financial statements under IFRS and IFRS1 First-time adoption of International Financial
Reporting Standards have been applied.
An explanation of how the transition to IFRS has affected the reported financial position, financial performance and cash flows of the
Group is provided in note 7.
Copies of the 2007 annual report and accounts will be made available on our website and mailed to shareholders. They will also be
available from the registered office of the Company, 5 Roundwood Avenue, Stockley Park, Uxbridge UB11 1FF.
2. BUSINESS AND GEOGRAPHICAL SEGMENTS
Business segments
For management purposes, the group is currently organised into three operating divisions - broadband and voice services, hosting
services and business services. These divisions are the basis on which the group reports its primary segment information.
The principal activities of each of the divisions are as follows:
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.
Hosting services
The group provides a comprehensive suite of hosting services from shared and virtual private servers through to domain names and
security.
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.
All segments are regarded as discontinued, with the exception of the company and the joint venture, which are regarded as continuing
operations.
Other
Includes the company, its investment in the joint venture and the group's financing.
The segment information for these businesses in the income statement is as follows:
For the year ended 31 December 2007
Broadband
and voice Hosting Business
services services services
Other TOTAL
Discontinued Discontinued Discontinued Continuing
£'000 £000s £000s £000s £000s
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 intangibles (3,663) (90) (1) - (3,754)
Depreciation charge (1,351) (4,000) (7,444) - (12,795)
Impairment of tangible
fixed assets - - (1,000) - (1,000)
Share based payment costs - - - (3,377) (3,377)
Share of loss of
joint venture - - - (3,528) (3,528)
Operating profit/(loss) 6,999 3,150 (11,253) (10,625) (11,729)
Finance income 629 197 60 2,233 3,119
Finance costs (91) (372) (781) (8,410) (9,654)
Gain arising on
joint venture - - - 2,458 2,458
Profit/(loss) before tax 7,537 2,975 (11,974) (14,344) (15,806)
Income tax expense (2,189) (141) - - (2,330)
Profit on disposal
of subsidiary 51,582 - - - 51,582
56,930 2,834 (11,974) (14,344) 33,446
OTHER INFORMATION
Property, plant and
equipment additions 1,259 8,997 13,450 - 23,706
BALANCE SHEET
Assets
Segment assets - 47,085 53,869 79,601 180,555
- 47,085 53,869 79,601 180,555
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
The segment information for these businesses in the income statement is as follows:
For the year ended 31 December 2006
Broadband
and voice Hosting Business
services services services Other
Discontinued Discontinued Discontinued Continuing TOTAL
Restated (note 7) Restated (note 7)
£'000 £'000 £'000 £'000 £'000
REVENUE
External sales 232,905 30,822 30,632 - 294,359
RESULT
Segment result (i) 18,750 9,285 (3,276) (1,662) 23,097
Amortisation of intangibles (5,832) (89) (724) - (6,645)
Depreciation charge (4,177) (2,997) (4,859) - (12,033)
Share based payment costs - - - (2,206) (2,206)
Share of loss of
joint venture - - - (1,596) (1,596)
Operating profit/(loss) 8,741 6,199 (8,859) (5,464) 617
Finance income 409 137 - 472 1,018
Finance costs (282) (246) (620) (5,658) (6,806)
Gain arising on
joint venture - - - 1,032 1,032
Profit/(loss) before tax 8,868 6,090 (9,479) (9,618) (4,139)
Income tax expense 4,152 (10) 2 - 4,144
13,020 6,080 (9,477) (9,618) 5
OTHER INFORMATION
Property, plant and
equipment additions 9,923 8,400 9,480 - 27,803
BALANCE SHEET
Assets
Segment assets 225,681 53,688 49,750 5,601 334,720
225,681 53,688 49,750 5,601 334,720
Liabilities
Segment liabilities (70,051) (13,118) (24,475) (121,227) (228,871)
(70,051) (13,118) (24,475) (121,227) (228,871)
(i) Segment result refers to earnings before amortisation of intangibles, depreciation, impairment and share based payments
Geographical segments
The group's operations are located in the United Kingdom and Germany. Germany provides mainly hosting services.
The segment information for these geographical destinations which is not materially different to its origin is as follows:
Continuing Discontinued Continuing Discontinued
United United TOTAL United United TOTAL
Kingdom Germany Kingdom 2007 Kingdom Germany Kingdom 2006
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Sales
revenue - 12,568 270,495 283,063 - 9,572 284,787 294,359
Carrying 180,555
amount of
segment
assets
79,601 16,186 84,768 5,601 10,212 318,907 334,720
Additions to
property,
plant and
equipment
- 7,931 15,775 23,706 - 7,603 20,200 27,803
3. DISPOSAL OF SUBSIDIARIES
On 13 September 2007 FREEDOM4 Communications plc (formerly Pipex Communications plc) sold its broadband and voice businesses to Tiscali
UK Limited for £210 million on a debt free basis, before adjustments. The sale was of the share capital of Pipex Internet Limited, Pipex
Homecall Limited, Toucan Residential Limited, Toucan Residential Ireland Limited and Switch2 Telecoms Limited, together with the
subsidiaries of these entities (all listed below), and which taken together comprised the broadband and voice businesses.
* Accent UK Limited
* Freedom to Surf Limited
* Freedom to Surf Consumer Services Limited
* Freedom to Surf Registration Services Limited
* GX Networks Twelve Limited
* Highway One Limited
* Homecall Payment Services Limited
* Homecall UK Limited
* Toucan Residential Ireland Limited
* Nildram Limited
* Pipex Broadband Limited
* Pipex Communication Services Limited
* Pipex Homecall Limited
* Pipex Internet Limited
* Pipex Networks Limited
* Switch2 Telecoms Limited
* Toucan Residential Limited
* Trinite Limited
* Trinite Services Limited
At completion, the proceeds of the sale amounted to £195.5 million after adjusting for debt and other adjustments, before costs and
after making a provision against the escrow receivable. The sale proceeds comprised £171.25 million in cash, £10.5 million in deferred
consideration, payable over a fixed term up to 18 months, and £15.75 million held in an escrow account to meet any claims arising under the
Sale and Purchase Agreement. At 31 December 2007, the Company had received £6.5 million of the deferred consideration leaving £4 million
as a receivable and had recovered £5.25 million from the escrow account. The balance of £10.5 million outstanding on the escrow account is
expected to be recovered on 30 June 2008, subject to any claims arising by that date. A provision of £2 million has been made for any
future claims that may arise.
For the period to 13 September 2007 the revenues attributable to the division were £210.8 million (2006: £232.9 million) with an
EBITDA of £12.0 million (2006: £18.8 million) and a profit before tax of £7.5 million (2006: £8.9 million). On 13 September 2007 the net
assets of the division were £134.1 million.
The net assets of the above companies at the date of disposal were as follows:
2007
£'000
Property, plant and equipment 12,421
Customer lists 19,824
Inventories 15
Trade receivables 23,974
Deferred tax asset 1,453
Bank and cash -
Deferred tax liability (5,019)
Income tax liability (443)
Trade payables (44,571)
Provisions (88)
Lease creditor (95)
Attributable goodwill 126,607
134,078
Cost on disposal 9,830
Gain on disposal 51,582
Total consideration 195,490
Satisfied by:
Cash 171,250
Deferred consideration 10,500
Escrow account 15,740
Provision against the escrow account (2,000)
195,490
Net cash inflow arising on disposal:
Cash consideration 171,250
Deferred consideration received 6,500
Escrow account received 5,250
183,000
The balance of the deferred consideration of £4 million which is held for sale, will be settled in cash by the purchaser on or before
December 2008. The balance of £10.5 million outstanding on the escrow account is expected to be recovered on 30 June 2008 and is included
in other receivables.
4. ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE
Following the sale of the broadband and voice businesses the directors believed there was no longer a compelling strategic fit between
the remaining businesses in the group. At the time of the publication of the interim results on 25 September 2007, it was announced that the
board intended to initiate a process leading to the demerger of the wireless joint venture and the sale of the remaining group, comprising
the hosting and network services division, together with the proceeds from the broadband and voice sale.
Following the receipt of a number of expressions of interest during 2007 in the hosting and network services division the directors
decided to pursue this sale and, on 8 February 2008, the company announced that it was at an advanced stage in the sale process with a
single potential purchaser. The sale was completed on 2 April 2008 to Host Europe WVS Limited for £120 million (on an enterprise value
basis). The assets and liabilities of the hosting and network services division were held for sale from December 2007.
For the year to 31 December 2007 the revenues attributable to the division were £72.3 million (2006:£61.5 million) with an earnings
before amortisation of intangibles, depreciation, impairment and share based payments of £4.4 million (2006: £6.0 million) and a loss
before tax of £9.0 million (2006:£3.4 million). On 31 December 2007 the net assets of the division were £60.5 million (2006: £65.8
million).
The major classes of the assets and liabilities in relation to the hosting and network services businesses classified as held for
sale are as follows:
2007
£'000
Property, plant and equipment 42,828
Goodwill 39,534
Intangible assets 300
Inventories 1
Trade and other receivables 18,291
Total assets classified as held for sale 100,954
Long term borrowings (9,541)
Short term borrowings (4,208)
Trade and other payables (25,801)
Provisions (853)
Current tax liabilities (94)
Total liabilities classified as held for sale (40,497)
Net assets of disposal group 60,457
5. RESERVES
Other Reserves
Share Bond
Share premium Translation Merger Capital equity Retained TOTAL
capital reserve reserve reserve reserve reserve earnings EQUITY
Restated Restated
(note 7) (note 7)
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2006 22,101 81,818 - 13,319 207 - (42,430) 75,015
Issue of shares 1,522 12,544 - 4,319 - - - 18,385
Exercise share
options issued 308 1,853 - - - - - 2,161
Share based
payment
costs
- - - - - - 2,206 2,206
Share of joint
venture share
based payment
- - - - - - 446 446
Issue of convertible
bonds - - - - - 7,692 - 7,692
Exchange
differences
on translating
foreign
operations
- - (61) - - - - (61)
Profit for the year - - - - - - 5 5
At 31 December
2006 and 1 January
2007
23,931 96,215 (61) 17,638 207 7,692 (39,773) 105,849
Issue of shares 161 633 - - - - - 794
Share based
payment
costs
- - - - - - 3,377 3,377
Share of joint
venture share
based payment
- - - - - - 185 185
Redemption of
convertible bonds - - - - - (7,692) - (7,692)
Loss on translation
of foreign
subsidiary
- - 86 - - - - 86
Disposal of
subsidiary - - - (9,519) (207) - 9,726 -
Profit for the year - - - - - - 33,446 33,446
At 31 December
2007 24,092 96,848 25 8,119 - - 6,961 136,045
The merger reserve at 31 December 2007 represents the share premium on shares issued to acquire XTML Limited and Compulink Information
Exchange Limited (£796,000), Donhost Limited (£1,542,000), Firstnet Services Limited (£2,309,000) and the premium on shares issued as
part of the consideration for the acquisition of Transigent Limited in 2002 (£3,472,000).
The disposal of subsidiary in the merger and capital reserves relates to the share premium issued at the time of the acquisition of
Toucan Residential Limited and Pipex Internet Limited, the capital reserve acquired relating to Pipex Internet Limited which were both sold
as part of the broadband and voice businesses disposal in 2007.
6. POST BALANCE SHEET EVENTS
On 24 January 2008, in accordance with shareholder agreement, Intel Capital (Cayman) Corporation contributed an additional £3,309,000
and FREEDOM4 Communications plc (formerly PIPEX Communications plc) an additional £3,913,000 to the FREEDOM4 Limited (formerly Pipex
Wireless Limited) joint venture.
On 14 March 2008, the company announced that it had entered into an agreement for the sale of the Hosting and Network Services Division
to Host Europe WVS Limited (a wholly owned subsidiary of Oakley Capital Private Equity L.P.) for £120 million. On 2 April 2008, the company
sold the division to Host Europe WVS Limited a wholly owned subsidiary of Oakley Capital Private Equity L.P. Consideration for the sale was
£120 million satisfied by £92.5million in cash, £17.5 million in loan notes (issued by a wholly owned subsidiary of Oakley L.P.) and the
assumption by the buyer of the division's debts.
On 15 March 2008, the company made a conditional offer to its shareholders to buy back 58% of their shareholdings for a minimum price of
10p per share, capped at 11p per share, by way of two tender offers. On 19 March 2008 the court approved a capital reduction scheme to
eliminate the deficit on the company's profit and loss account and create distributable reserves to facilitate the return of cash to
shareholders. The take up by shareholders of the offers was high such that 95.8% of those shares capable of being tendered were tendered and
the tender price was set at 10.39p. On 4 April 2008 Collins Stewart acquired 1,459,600,083 shares by means of an on market transaction at
the tender price as a result of the First Tender Offer. On 7 April 2008 Collins Stewart acquired 30,175,256 shares by means of an on-market
transaction at the tender price as a result of the Second Tender Offer. Following the cancellation of the tendered shares the company had
1,070,541,017 shares left in issue.
During April 2008, the company acquired BOZII, a Wi-Fi roaming service provider.
The group has not incurred any capital commitments nor has any capital contingencies post balance date.
7. EXPLANATION OF TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS
This is the first year that the company has presented its group financial statements in accordance with International Financial
Reporting Standards ("IFRS") as adopted by the European Union for the first time. The disclosures required by IFRS 1 concerning the
transition from United Kingdom Generally Accepted Accounting Practice ("UK GAAP") to IFRS are given in this note.
The last set of group financial statements presented by the company under UK GAAP were for the year ended 31 December 2006. The date of
the transition to IFRS was therefore 1 January 2006.
Exemptions applied by the group in the year of transition
The group has taken the exemption in respect of business combinations from the requirement to restate combinations occurring before the
date of transition.
The group has also elected to apply the foreign exchange exemption and set cumulative exchange translation differences to zero at the
date of transition.
Main changes in the basis of preparation between IFRS and UK GAAP
In accordance with the requirements of IFRS 3, goodwill has been frozen at its brought forward net book value at the date of transition,
and amortisation charged under UK GAAP for the period ended 31 December 2006 has been reversed.
In addition, under the requirements of IFRS 3, the fair values of customer lists acquired with the business combinations arising during
the period ended 31 December 2006 has been recognised separately from goodwill and classified as intangible assets to be amortised over
their expected useful economic lives of 36 months.
Adoption of IFRS also results in a number of minor changes such as holiday pay accruals, rebasing of residual values on certain property
assets, changes to the definition of cash and cash equivalents, and changes to the reclassifications of provisions between current and
non-current.
The adoption of IFRS has not however had an impact on the amount of cash previously disclosed under UK GAAP in any of the periods of
account in the financial statements.
Accounting policies as set out have been used on a consistent basis on transition to IFRS.
Consolidated balance sheet reconciliation at 1 January 2006 (transition date)
Effect of
UK GAAP UK GAAP
in prior Effect of
IFRS year transition Reported
format adjustmen to IFRS under
ts IFRS
Adjustments £'000 £'000 £'000 £'000
ASSETS
Non current assets
Goodwill 99,231 - - 99,231
Intangible assets 4,424 - - 4,424
Property, plant and
equipment 25,251 - - 25,251
128,906 - - 128,906
Current assets
Inventories 63 - - 63
Trade and other
receivables 18,953 - - 18,953
Cash and cash
equivalents 13,964 - - 13,964
32,980 - - 32,980
Current liabilities
Short term borrowings (16,815) - - (16,815)
Trade and other
payables a (42,605) - (130) (42,735)
Corporation tax (446) - - (446)
Current provisions b - - (619) (619)
(59,866) - (749) (60,615)
Net current
liabilities (26,886) - (749) (27,635)
Total assets less
current liabilities 102,020 - (749) 101,271
Non current liabilities
Long term
borrowings (24,871) - - (24,871)
Long term
provisions b (2,004) - 619 (1,385)
(26,875) - 619 (26,256)
NET ASSETS 75,145 - (130) 75,015
Equity attributable to the equity holders of the parent
Share capital 22,101 - - 22,101
Share premium
reserve c 84,127 (2,309) - 81,818
Other reserves c 11,217 2,309 - 13,526
Retained earnings a (42,300) - (130) (42,430)
EQUITY
SHAREHOLDERS
FUNDS
75,145 - (130) 75,015
a Holiday pay adjustments as at 31 December 2005 (£130,000)
b Reclassifications of provisions between current and non-current as at 31 December 2005 (£619,000)
Effect of UK GAAP prior year adjustments
c On 28 August 2003, FREEDOM4 Communications plc (formerly Pipex Communications plc) purchased Firstnet Services Limited for
consideration that consisted of cash and shares within FREEDOM4 Communications plc (formerly Pipex Communications plc). The £2,309,000
premium arising on the shares issued to vendor parties was credited to the share premium account in error instead of the merger reserve. The
share premium and merger reserve accounts have been restated to reflect the correct accounting treatment.
This UK GAAP prior year adjustment had £nil effect on income tax.
Consolidated balance sheet reconciliation at 31 December 2006
UK
GAAP in Effect of
IFRS UK GAAP Effect of
format prior transitio Reported
n
year adjustments to IFRS under IFRS
Adjustments £'000 £'000 £'000 £'000
ASSETS
Non current assets
Goodwill d 170,692 - (5,509) 165,183
Intangible assets e,g 6 - 23,720 23,726
Property, plant and equipment c 46,989 - 80 47,069
Investment in joint venture f,i (5,620) 11,037 271 5,688
212,067 11,037 18,562 241,666
Current assets
Inventories 47 - - 47
Trade and other receivables 44,679 - - 44,679
Cash and cash equivalents 48,328 - - 48,328
93,054 - - 93,054
Current liabilities
Short term borrowings (4,461) - - (4,461)
Trade and other payables a (95,569) - (224) (95,793)
Tax liabilities (278) - - (278)
Current provisions b - - (337) (337)
(100,308) - (561) (100,869)
Net current liabilities (7,254) - (561) (7,815)
Total assets less
current liabilities 204,813 11,037 18,001 233,851
Non current liabilities
Long term borrowings (125,013) - - (125,013)
Long term provisions b (1,561) - 337 (1,224)
Deferred tax liability g - - (1,765) (1,765)
(126,574) - (1,428) (128,002)
NET ASSETS 78,239 11,037 16,573 105,849
Equity attributable to the
equity holders of the parent
Share capital 23,931 - - 23,931
Share premium reserve h 98,524 (2,309) - 96,215
Translation reserve (61) - - (61)
Other reserves h 23,228 2,309 - 25,537
Retained earnings a,c,d,e,f,g,i (67,383) 11,037 16,573 (39,773)
EQUITY SHAREHOLDERS
FUNDS 78,239 11,037 16,573 105,849
Consolidated balance sheet reconciliation at 31 December 2006 (continued)
Effect of transition to IFRS
a Holiday pay adjustments as at 31 December 2006 (£224,000).
b Reclassifications of provisions between current and non-current as at 31 December 2006 (£337,000).
c Reduction in the depreciation charge for the year arising as a result of rebasing the residual value of a property asset (£80,000).
d Reversing of amortisation charged in the year on goodwill (£18,152,000), and reclassifying customer list values previously included
in the value of goodwill arising on consolidation (£29,578,000).
e After recognition of customer list values at 31 December 2006 as per note 'd' above, the amortisation charge thereon for the year was
£5,858,000.
f The group's share of development costs recognised as a capital asset as at 31 December 2006 in the joint venture (£271,000)
g As a result of the purchase accounting for entities acquired in a business combination during 2006, a number of deferred tax
adjustments needed to be made on conversation to IFRS:
Deferred tax liabilities recognised in respect of the intangible assets acquired as part of the business combinations totalling
£7,266,000 together with a deferred asset in respect of losses carried forward and temporary differences in respect of property, plant and
equipment totalling £1,349,000 which results in a net adjustment to goodwill of £5,917,000. In addition, deferred tax liabilities arose
from property revaluations on the above business combinations and capitalisation of development costs by the joint venture totalling
£671,000 which is offset by an equal deferred tax asset arising from trading losses carried forward.
As a result of these acquisitions, a £2,524,000 deferred tax asset could be recognised in respect of the existing group's temporary
differences resulting in a credit to the income statement of £2,524,000.
The movements in the deferred tax liabilities and assets set-up on acquisition above which were unwound during 2006 resulted in a net
credit to the income statement at year end of £1,628,000.
Effect of UK GAAP prior year adjustments
h On 28 August 2003, FREEDOM4 Communications plc (formerly Pipex Communications plc) purchased Firstnet Services Limited for
consideration that consisted of cash and shares within FREEDOM4 Communications plc (formerly Pipex Communications plc). The £2,309,000
premium arising on the shares issued to vendor parties was credited to the share premium account in error instead of the merger reserve. The
share premium and merger reserve accounts have been restated to reflect the correct accounting treatment.
This UK GAAP prior year adjustment had £nil effect on income tax.
i On 22 March 2006 FREEDOM4 Communications plc (formerly Pipex Communications plc) entered into a joint venture with Intel Capital
(Cayman) Corporation, known as FREEDOM4 Limited (formerly Pipex Wireless Limited). During 2006, FREEDOM4 Limited issued £14,185,000
convertible redeemable preference shares to FREEDOM4 Communications plc (formerly Pipex Communications plc) in exchange for the sale of
Pipex Communications Business Solutions Limited and Faultbasic Limited and $1,000,000 cash. At the same time FREEDOM4 Limited also issued
convertible redeemable preference share to Intel Capital (Cayman) Corporation in exchange of $5,000,000 cash. During 2006 the group held a
84.04% equity interest in FREEDOM4 Limited.
During the year to and as at 31 December 2006 the company had not previously accounted for the convertible redeemable preference shares
totalling £10,565,000 within its investment in the joint venture on the balance sheet, and as a result recorded an equivalent loss within
the Statement of Recognised Gains and Losses on the original recognition of the joint venture. However, since approving last year's
financial statements, the directors have formed the opinion that under UK GAAP the company should have also recognised this amount as a loan
to the joint venture. In addition the company did not record an interest receivable amount in relation to the loan amounting to £472,000.
The company has restated the prior year by increasing its value in investment in joint venture by £11,037,000 with a corresponding credit
of £10,565,000 to the Statement of Recognised Gains and Losses and a credit to the Income Statement for £472,000. The unrealised gain on
the set up of the joint venture has been adjusted to £1,032,000 from a loss of £9,533,000.
This UK GAAP prior year adjustment had £nil effect on income tax.
Reconciliation of the consolidated income statement for the year ended 31 December 2006
Effect of UK
UK GAAP GAAP Effect of
in IFRS prior year transitio
format adjustments n Reported
to IFRS under
IFRS
Adjustments £'000 £'000 £'000 £'000
REVENUE 294,359 - - 294,359
Cost of sales a (182,004) - (63) (182,067)
Operating costs before
amortisation of intangibles,
depreciation, impairments
and share based payment costs
b (89,164) - (31) (89,195)
EARNINGS BEFORE
AMORTISATION
OF INTANGIBLES,
DEPRECIATION,
IMPAIRMENT AND
SHARE BASED
COSTS
23,191 - (94) 23,097
Amortisation of intangibles c (18,939) - 12,294 (6,645)
Depreciation d (12,113) - 80 (12,033)
Share based payment costs (2,206) - - (2,206)
TOTAL OPERATING COSTS (122,422) - 12,343 (110,079)
Share of (loss)/profit of e,g (1,421) (446) 271 (1,596)
joint venture
OPERATING (LOSS)/PROFIT (11,488) (446) 12,551 617
Finance income i 546 472 - 1,018
Finance costs (6,806) - - (6,806)
Net finance expenses (6,260) 472 - (5,788)
Gain arising on contribution
of
intangible assets to joint
venture h - - 1032 1,032
LOSS BEFORE TAX (17,748) 26 13,583 (4,139)
Income tax expense f (8) - 4,152 4,144
LOSS FOR THE YEAR (17,756) 26 17,735 5
Effect of transition to IFRS
a Holiday pay accruals recognised as at 31 December 2005 (£106,000) and as at 31 December 2006 (£169,000)
b Holiday pay accruals recognised as at 31 December 2005 (£24,000) and as at 31 December 2006 (£55,000)
c Reversing amortisation charged in the year on goodwill (£18,152,000), and recognising the amortisation charge on customer list
values for the year (£5,858,000)
d Reduction in the depreciation charge for the year arising as a result of rebasing the residual value of a property asset (£80,000)
e The group's share of development costs recognised as a capital asset as at 31 December 2006 in the jointly controlled entity
(£271,000).
f Credit of £2,524,000 in respect of the recognition of deferred tax assets which was triggered as a result of the acquisitions which
occurred in 2006 together with a £1,628,000 credit following the release of deferred tax liabilities due to the amortisation of intangible
assets as at 31 December 2006, producing a net income tax credit (£4,152,000). See point 'g' of the notes to the consolidated balance sheet
reconciliation at 31 December 2006 for details.
g In accordance with the guidance provided by SIC 13, Jointly Controlled Entities - Non-Monetary Contributions by Ventures the
unrealised gain on forming FREEDOM4 Limited (formerly Pipex Wireless Limited), a joint venture with Intel Capital (Cayman) Corporation, of
£1,032,000 which was recognised in the Statement of Recognised Gains and Losses under UK GAAP is recognised in the Income Statement. The
guidance in SIC 13 sets out criteria as to when a gain may be recognised in this situation although it does not distinguish between
unrealised and realised gains as it indicates that all gains should be recognised in the income statement.
Effect of UK GAAP prior year adjustments
h Restatement of prior year in relation to the group's share of the joint venture's share option charge of £446,000. The company did
not account for its share of the charge recognised by the joint venture in relation to share options that were granted by the joint venture
for shares in the joint venture. The company has restated its share of joint venture loss for £446,000 with a corresponding credit to the
retained earnings account.
This UK GAAP prior year adjustment had £nil effect on income tax.
i Restatement of prior year in relation to interest receivable on the convertible redeemable preference shares outstanding from the
joint venture amounting to £472,000. See point 'i' of the notes to the consolidated balance sheet reconciliation at 31 December 2006 for
further details.
This UK GAAP prior year adjustment had £nil effect on income tax.
Reconciliation of the consolidated cash flow statement for the year ended 31 December 2006
UK Effect of
GAAP in UK GAAP Effect of Reported
IFRS prior year Transitio under
format adjustments n IFRS
to IFRS
Adjustments £'000 £'000 £'000 £'000
Profit for the year (17,756) 26 17,735 5
Income tax expense f 8 - (4,152) (4,144)
Gain arising on joint venture g - - (1,032) (1,032)
Interest received i (546) (472) - (1,018)
Interest payable 6,806 - - 6,806
Operating (loss)/profit (11,488) (446) 12,551 617
Adjustments for:
Amortisation of intangibles c 18,939 - (12,294) 6,645
Depreciation charge d 12,113 - (80) 12,033
Share of joint venture e,h 1,421 446 (271) 1,596
Loss on sale of fixed assets 13 - - 13
Share based payment costs 2,206 - - 2,206
Operating cash flows before
movements in 23,204 - (94) 23,110
working capital
Decrease in inventories 16 - - 16
(Increase)/decrease in 865 - - 865
receivables
(Decrease)/increase in a,b 10,371 - 94 10,465
payables
Decrease in provisions (444) - - (444)
Cash generated from operations 34,012 - - 34,012
Interest paid (4,997) - - (4,997)
Income taxes received 230 - - 230
NET CASH GENERATED FROM
OPERATING 29,245 - - 29,245
ACTIVITIES
CASH FLOWS FROM INVESTING
ACTIVITIES
Acquisition of subsidiaries (66,152) - - (66,152)
net of cash acquired
Acquisition of businesses net (10,368) - - (10,368)
of cash acquired
Investment in joint venture (797) - - (797)
Purchase of property, plant (22,077) - - (22,077)
and equipment
Interest received 546 - - 546
NET CASH USED IN INVESTING (98,848) - - (98,848)
ACTIVITIES
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from the issue of 13,634 - - 13,634
share capital
Proceeds from the exercise of 2,161 - - 2,161
share options
Proceeds from the issue of 88,279 - - 88,279
convertible bonds
Proceeds from long-term 76,746 - - 76,746
borrowings
Repayments of long-term (74,310) - - (74,310)
borrowings
Payment of finance lease (2,543) - - (2,543)
liabilities
NET CASH GENERATED FROM
FINANCING 103,967 - - 103,967
ACTIVITIES
NET INCREASE IN CASH AND CASH
EQUIVALENTS 34,364 - - 34,364
CASH AND CASH EQUIVALENTS AT
THE 13,964 - - 13,964
BEGINNING OF THE YEAR
CASH AND CASH EQUIVALENTS AT
THE END 48,328 - - 48,328
OF THE YEAR
Reconciliation of the consolidated cash flow statement for the year ended 31 December 2006 (continued)
Effect of transition to IFRS
a Holiday pay accruals recognised as at 31 December 2005 (£106,000) and as at 31 December 2006 (£169,000).
b Holiday pay accruals recognised as at 31 December 2005 (£24,000) and as at 31 December 2006 (£55,000).
c Reversing amortisation charged in the year on goodwill (£18,152,000), and recognising the amortisation charge on customer list
values for the year (£5,858,000).
d Reduction in the depreciation charge for the year arising as a result of rebasing the residual value of a property asset (£80,000).
e The group's share of development costs recognised as a capital asset as at 31 December 2006 in the jointly controlled entity
(£271,000), and the group's share of the deferred tax liability arising thereon (£81,000)
f Credit of £2,524,000 in respect of the recognition of deferred tax assets which was triggered as a result of the acquisitions which
occurred in 2006 together with a £1,628,000 credit following the release of deferred tax liabilities due to the amortisation of intangible
assets as at 31 December 2006, producing a net income tax credit (£4,152,000). See point 'g' of the notes to the consolidated balance sheet
reconciliation at 31 December 2006 for details.
g In accordance with the guidance provided by SIC 13, Jointly Controlled Entities - Non-Monetary Contributions by Ventures the
unrealised gain on forming FREEDOM4 Limited (formerly Pipex Wireless Limited), a joint venture with Intel Capital (Cayman) Corporation, of
£1,032,000 which was recognised in the Statement of Recognised Gains and Losses under UK GAAP is recognised in the Income Statement. The
guidance in SIC 13 sets out criteria as to when a gain may be recognised in this situation although it does not distinguish between
unrealised and realised gains as it indicates that all gains should be recognised in the income statement.
Effect of UK GAAP prior year adjustments
h Restatement of prior year in relation to the group's share of the joint venture's share option charge of £446,000. See point 'h' of
the notes to the consolidated balance sheet reconciliation at 31 December 2006 for further details.
i Restatement of prior year in relation to interest receivable on the convertible redeemable preference shares outstanding from the
joint venture amounting to £472,000. See point 'i' of the notes to the consolidated balance sheet reconciliation at 31 December 2006 for
further details.
None of the above adjustments had an effect of income tax.
Reconciliation of the consolidated statement of total recognised gains and loss for the year ended 31 December 2006
UK Effect of Effect of
GAAP in UK GAAP Transitio Reported
n
IFRS prior year to under
format Adjustment IFRS IFRS
s
£'000 £'000 £'000 £'000
Loss for the financial year a (17,756) 26 17,735 5
Unrealised loss on joint b,c (9,533) 10,565 (1,032) -
venture
Translation difference in
respect of
net investment in overseas
subsidiary (61) - - (61)
undertaking
Total recognised losses in the (27,350) 10,591 16,703 (56)
year
a See points 'a' - 'i' the notes to the consolidated income statement reconciliation at 31 December 2006 for further details.
Effect of UK GAAP prior year adjustments
b See point 'i' of the note to the consolidated balance sheet reconciliation at 31 December 2006 for details.
Effect of transition to IFRS
c See point 'g' of the notes of the consolidated income statement reconciliation at 31 December 2006 for details.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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過去 株価チャート
から 12 2023 まで 12 2024
