PHRM.L Regulatory News (PHRM)

30 Sep 2005 07:31

30 September 2005 121Media, Inc Interim results for the six months ended 30 June 2005 121Media, Inc. ("121Media"), the online contextual advertising company,announces its interim results for the six months ended 30 June 2005.Results highlights * Continued growth in revenue to $2.61 million (2004: $1.94 million); * Operating losses of $1.36 million (2004 loss: $0.22 million), reflecting significant investment in PageSense Javascript application, launched commercially in Q2 2005; * Pre-tax loss of $1.37 million (2004 loss: $0.22 million); * Significant partnering agreement being finalised with one of largest ISPs in the US, to deploy PageSense Javascript application within their solutions; * Placing in July raised ‚£950,000 (net) ($1.75 million), primarily to fund accelerated implementation of its arbitrage strategy for PageSense Javascript; * Revenue per user on targeted advertising, the measure of our software and operational effectiveness, has almost doubled; * Continued investment in management, sales and marketing infrastructure in the UK and US. * Growth in revenues from the desktop application will be lower than expected, due to reduced opportunities for freeware distribution, which are affecting the desktop segment as a whole. * Shift of emphasis from Desktop to Javascript application being accelerated. Kent Ertugrul, Chief Executive of 121Media, said:"The first half of 2005 has seen progress on many fronts and, importantly, asignificant shift in our strategic emphasis. We have increasingly recognisedthe substantially greater potential returns available from our newly launchedPageSense Javascript technology compared to our traditional Desktopapplication, and this is now the focus of our efforts."We are making good progress in using the information generated by PageSenseJavascript to exploit the arbitrage opportunity between the prices foruntargeted and targeted advertisements. We are also close to finalising apartnership agreement with one of the largest ISPs in the US, which we believewill set an important precedent for the deployment of PageSense throughout theISP market."Growth in revenues from our desktop application is expected to be lower thanexpected, due to reduced opportunities for freeware distribution, which areaffecting the desktop segment as a whole. The current financial year willtherefore result in a loss. Going forward, we will be accelerating ouractivities in the Javascript space."Whilst this accelerated strategic reorientation will delay the point at whichwe reach sustained profitability, we are pleased with the strategic progressmade in the year to date. The market for targeted online advertising is growingfast, and we remain confident of the long term prospects for the company."Full Chairman's statement attached.For further information please contact:121Media 0870 405 7727 Kent Ertugrul, Chief Executive Hogarth Partnership 020 7357 9477 John Olsen / Edward Westropp Interim results for six months ended 30 June 2005CHAIRMAN'S STATEMENTIntroductionThe first half of 2005 has seen progress on many fronts and, importantly, asignificant shift in our strategic emphasis. We have increasingly recognisedthe substantially greater potential returns available from our newly launchedPageSense Javascript technology compared to our traditional Desktopapplication, and this is now the focus of our efforts.The investment in our Javascript application, and the lower revenues from ourdesktop application are reflected in these results, and will impact the outturnfor the full year. However, the accelerated strategic reorientation, theinherent quality of our technologies, and the enhanced operationalinfrastructure all point to a highly encouraging longer term outlook for thecompany.Results and dividendThe company generated turnover for the six months ended 30 June 2005 of $2.61million (2004: $1.94 million).Despite this top line growth, operating losses widened to $1.36 million (2004loss: $0.22 million), as a result of the significant investment in PageSenseJavascript application, launched commercially in Q2 2005.Losses before taxation were $1.37 million (2004 loss: $0.22 million).No dividend is proposed for the period.Operational reviewPageSense JavascriptThe first half of the year has been marked by progress on many fronts, mostparticularly the launch of the company's Javascript application.The PageSense Javascript application analyses the meaning and context of a webpage being viewed by the user in real time, allowing us to deliver targetedadvertisements to that user. PageSense allows us and our partners to optimisethe value of untargeted advertising, which comprises most of today's onlinemarket, by turning it into targeted advertising at a premium rate.We are beginning to use the information generated by PageSense JavaScript todirectly purchase inventory from medium to small sites which are currentlyrelying on untargeted advertising networks to fill their unsold advertisingopportunities at very low prices. We are applying the proceeds of our fundraising in July to buy a substantial portion of these sites' inventory atuntargeted prices and showing targeted advertising instead. We anticipate thatover the course of the next year we will be able to use this method to build alarge portfolio of arbitrage properties.An important element of our growth strategy for the JavaScript applicationentails recruiting major ISPs as distribution partners, allowing targetedadvertisements to be delivered to that ISP's user base. In return, the ISPearns a share of the advertising revenue, thereby allowing them to offer morecompetitive connection fees to their customers. This relationship model is madepossible by 121Media's precision targeting, which results in an acceptablelevel of advertising being shown to users with the potential to generate valuefor the advertiser, and therefore the ISP.In this context, we are close to finalising, after almost a year of discussion,the first of such agreements, with one of the largest ISPs in the UnitedStates.Once concluded, we anticipate that this agreement will accelerate the rate atwhich ISPs embrace the concept of precisely targeted advertising being providedas a part of a more competitively priced offering. We are currently indiscussions with a number of other ISPs about similar agreements. Partnering with advertising networks represents another important element ofour strategy for capitalising on our Javascript technology. We are veryencouraged by the discussions taking place with a number of such parties aboutintegrating our PageSense technology with their ad tags across their network ofpublishers.Overall, our technology has evolved significantly and our revenue per user ontargeted advertising, the measure of our software and operationaleffectiveness, has almost doubled.PageSense DesktopOur PageSense Desktop application has formed the bulk of our revenue generatedto date. However, growth of this application is being restricted by the reducedopportunities for freeware distribution, a trend that is affecting the desktopsegment as a whole. As a consequence, we expect revenues from this applicationto fall short of current expectations. Against this background, we areaccelerating our diversification away from desktops and into the Javascriptspace.Management and operational infrastructureWe have continued to develop our management and operational infrastructure, inorder to ensure that we have the capability to convert the growth opportunitiesthat we see ahead. We now have in place a strong US sales and marketingpresence, included within a global headcount of 42, up from 26 as at the end ofDecember.In addition, we have recently recruited David Gwozdz to the position of SeniorVice President, Sales and Business Development to further build the ad salesteam and our business development efforts.David was one of the founding team of DoubleClick, the NASDAQ-listed internetadvertising solutions corporation recently acquired by a private equityconsortium for ‚£1.1 billion. He devised and implemented DoubleClick's originalmedia sales products and strategies, and built, trained and managed multipleindustry leading sales teams in all areas of online advertising, sponsorships,promotions and e-mail. He also initiated and managed high level relationshipswith some of the US's top marketers including IBM, Disney, Intel, Gap,Microsoft, Coca-cola, Dell, American Airlines, and their advertising agencies.Current trading and outlookThe increased losses in the first half of the year reflect the significantinvestment in the Javascript effort and we anticipate that returns from thiswill begin to show in the last quarter of the year.However, due to the fact that our revenue growth in the desktop space will fallshort of current market expectations, the current financial year will result ina loss.Going forward, we will be accelerating our activities in the Javascript spacewhere we see the potential for substantially greater returns. Whilst thisaccelerated strategic reorientation will delay the point at which we reachsustained profitability, we are pleased with the strategic progress made in theyear to date. The market for targeted online advertising is growing fast, andwe remain confident of the long term prospects for the company. - Ends - Consolidated Profit and Loss Account for the period ended 30 June 2005 Unaudited Unaudited Audited 6 months 6 months Year ended ended ended 30 June 2005 30 June 2004 31 Dec 2004 $ $ $ Turnover 2,606,975 1,939,493 4,165,203 Cost of sales Cost of distribution partners (280,194) (597,374) (912,559) Commissions paid to Conducive - (840,613) (1,305,339)LLC ________ ________ ________ Gross profit 2,326,781 501,506 1,947,305 Administrative expenses (3,693,242) (717,892) (2,063,848) ________ ________ ________ Operating loss (1,366,461) (216,386) (116,543) Interest receivable and similar 8,112 - 82,274income Interest payable and similar (16,016) (100) (10,961)charges ________ ________ ________ Operating loss before taxation (1,374,365) (216,486) (45,230) Taxation on loss on ordinary - (130) (130)activities ________ ________ ________ Group loss on ordinary activities after taxation (1,374,365) (216,616) (45,360) ________ ________ ________ Basic loss per share ($0.19) ($0.04) ($0.01) ________ ________ ________ Diluted loss per share ($0.14) ($0.03) ($0.01) ________ ________ ________ Consolidated Balance Sheet at 30 June 2005 Unaudited Unaudited Audited 6 months 6 months Year ended ended ended 30 June 2005 30 June 2004 31 Dec 2004 $ $ $ Fixed assets Tangible assets 536,877 351,747 676,591 ________ ________ ________ 536,877 351,747 676,591 ________ ________ ________ Current assets Debtors 1,432,165 82,723 2,641,929 Cash at bank and in hand 754,613 17,849 878,327 ________ ________ ________ 2,186,778 100,572 3,520,256 Creditors: amounts falling due within one year (415,647) (910,411) (508,000) ________ ________ ________ Net current assets/(liabilities) 1,771,131 (809,839) 3,012,256 ________ ________ ________ Net assets/(liabilities) 2,308,008 (458,092) 3,688,847 ________ ________ ________ Capital and reserves Called up share capital 7,503 5,160 7,104 Share premium account 4,846,365 1,428,981 4,731,608 Other reserves 647,762 98,280 769,392 Profit and loss account (3,193,622) (1,990,513) (1,819,257) ________ ________ ________ Shareholders' funds 2,308,008 (458,092) 3,688,847 ________ ________ ________ Cash flow statement for the period ended 30 June 2005 Unaudited Unaudited Audited 6 months 6 months Year ended ended ended 30 June 2005 30 June 2004 31 Dec 2004 $ $ $ Net cash (outflow)/inflow from (12,725) 225,908 (1,923,196)operating activities ________ ________ ________ Returns on investments and servicing of finance Interest (7,904) (100) (10,949) Taxation - (130) (130) Capital expenditure (103,085) (423,471) (898,349) ________ ________ ________ Net cash outflow before financing (123,714) (197,793) (2,832,624) Financing Issue of ordinary share capital - 200,001 3,695,310 ________ ________ ________ (Decrease)/Increase in cash in the (123,714) 2,208 862,686period ________ ________ ________ Notes forming part of the accounts for the period ended 30 June 20051 Basis of preparationThe results for the six-month period ended 30 June 2005 are unaudited. Theyhave been prepared on accounting bases and policies that are consistent withthose used in the preparation of the financial statements of the Group for theyear ended 31 December 2004 and 6 months ended 30 June 2004.The financial information contained in this report does not constitutestatutory accounts within the meaning of Section 240 of the Companies Act 1985.The financial information for the period ended 31 December 2004 has beenextracted from the audited financial statements for that year, that has beenfiled with the Registrar of Companies and that contains an unqualified auditreport.The financial statements have been prepared in US dollars as the majority ofthe group's trade occurs in this currency.2 Profit per shareThe calculation of the basic earnings per share and diluted earnings per shareis based on the loss attributable to ordinary shareholders of $1,374,365 (2004:$45,360) divided by the weighted average number of shares in issue during theyear.The weighted average number of shares used in the calculations are set outbelow: 6 months 6 months Year ended ended ended 30 June 2005 30 June 2004 31 Dec 2004 Number of Number of Number of Shares Shares Shares 7,414,022 5,059,331 5,400,638 * Reconciliation of operating loss to net cash (outflow)/inflow from operating activities Unaudited Unaudited Audited 6 months 6 months Year ended ended ended 30 June 2005 30 June 2004 31 Dec 2004 $ $ $ Operating loss (1,366,461) (216,386) (116,543) Depreciation charges 242,799 80,469 230,503 Share & warrant issue/issue (6,474) 64,968 527,604(costs) Decrease/(increase) in 1,209,764 611 (2,558,595)debtors (Decrease)/increase in (92,353) 296,246 (6,165)creditors ________ ________ ________ Net cash (outflow)/inflow from operating activities (12,725) 225,908 (1,923,196) ________ ________ ________4 Reconciliation of net cash flow to movement in net funds Unaudited Unaudited Audited 6 months 6 months Year ended ended ended 30 June 2005 30 June 2004 31 Dec 2004 $ $ $ (Decrease)/increase in cash in the (123,714) 2,208 862,686period Cash inflow from decrease in debt - - 100,000financing ________ ________ ________ Change in net funds resulting from (123,714) 2,208 962,686cash flows New finance leases - - - ________ ________ ________ Movement in net funds in the period (123,714) 2,208 962,686 Net funds/(debt) at start of period 878,327 15,641 (84,359) ________ ________ ________ Net funds 754,613 17,849 878,327 ________ ________ ________5 Analysis of changes in net funds Opening Closing balance balance 1 Jan 2005 Cash flows 30 June 2005 $ $ $ Cash at bank and in hand 878,327 (123,714) 754,613 ________ ________ ________ Net funds 878,327 (123,714) 754,613 ________ ________ ________ 6 DividendThe directors do not propose to pay an interim dividend.Copies of this statement will be sent to shareholders, and will be availablefrom the Company's UK principal office at Golden Cross House, 8 DuncannonStreet, London WC2N 4JF.END121 MEDIA INC