Exhibit 99.1
ANNUAL REPORT
for the year ended
31 December 2000
[LOGO]
brightstation.
technology born for business
Bright Station plc
CONTENTS
1 Chairman's Statement
3 Report of the Chief Executive Officer
4 Operating and Financial Review
8 Corporate Governance and Internal Financial Control
11 Report of the Remuneration Committee
13 Report of the Directors
16 Statement of Directors' Responsibilities
17 Report of the Auditors
19 Consolidated Profit and Loss Account
20 Consolidated Statement of Total Recognised Gains and Losses
21 Consolidated Balance Sheet
22 Company Balance Sheet
23 Consolidated Cash Flow Statement
24 Reconciliation of Net Cash Flow to movement in Net Funds (Debt)
25 Notes to the Financial Statements
64 Five Year Financial Summary
65 Accounting Glossary
66 Notice of Annual General Meeting
68 Shareholder Contacts
70 Information for Investors
Bright Station plc
CHAIRMAN'S STATEMENT
On 30 April 2001, the Company announced a radical reorganisation of its
operations and capital structure. The reorganised Company will operate as a
focused, "pure play" knowledge management business, under the leadership of
David Jefferies, Stephen Hill and Simon Canham. The Company will be renamed
Smartlogik Group plc and I and the other members of the Bright Station Board
(other than Robert Lomnitz, who will continue to serve as an Executive Director)
will step down. I now am happy to report that as a result of the proposed
Placing and Open Offer, and subject to shareholder approval and completion, the
Company has secured sufficient funding to implement the restructuring and secure
the future of Smartlogik Group plc.
As you will remember, following the disposal of the Information Services
Division ("ISD") to Thomson Corporation in May 2000 and the repayment of its
outstanding indebtedness, the Company was restructured as a technology
infrastructure business. At that time, the strategy of Bright Station was to
utilise the Group's proprietary search, structuring and e-commerce technologies
to build early stage technology businesses. It was intended to supplement Bright
Station's limited internal capital by taking advantage of what the Board then
perceived to be a substantial outside market for investment capital in such
early stage technologies.
During the year, revenues fell short of expectations, and in an effort to drive
revenues, costs were accelerated. This adversely impacted on the Group's cash
position, and in response the Group actively sought additional external
financing. However, the market for outside investment in businesses like those
of the Group moved dramatically away from Bright Station's requirements. It was
not possible to attract outside investment into Bright Station itself, or into
any of its operating subsidiaries. In particular, an advanced initiative to
bring outside capital into WebTop failed in mid-year and an attempt to float
Smartlogik had to be postponed. Other initiatives to secure external funding
similarly failed, despite great effort on the part of the Bright Station
management.
As a result of the increased cash demands of the business and the failure to
secure further external funding the Board was required to adjust its underlying
business models and forecasts several times throughout the year. As a result,
the year 2000 was difficult and disappointing.
On 28 February, the Board confirmed that it would continue to review options to
ensure that additional capital was available for further investment in the
business and to take whatever action was necessary to ensure that the Group
continued to operate within its available cash resources. On 30 April, the Board
announced its conclusion that, given its cash constraints, shareholder value
would be best served by repositioning the Company as a focused, `pure play',
knowledge management business through its Smartlogik subsidiary (incorporating
WebTop) and that it had decided to rationalise immediately the e-commerce
business of the Group by the sale or closure of Sparza and OfficeShopper, and to
reduce corporate overheads. On 31 May, the Board made a preliminary announcement
of its proposed Placing and Open Offer and on 13 June issued a Circular and
Notice of an Extraordinary General Meeting of Shareholders with respect to the
proposed transaction.
Smartlogik (including WebTop)
Smartlogik is a leading provider of search and categorisation solutions,
enabling unstructured information to be presented and accessed with a high
degree of precision and relevance. Smartlogik's principal customers are users
and developers of corporate intranets and portals in the USA and Europe, either
directly or in conjunction with a growing number of strategic partners.
During the year 2000, an experienced senior management team was recruited to
manage the business. That team is led by Stephen Hill, CEO, formerly Managing
Director (Europe) of Inktomi Corporation, and Simon Canham, CFO, formerly FD of
Ridgeway Systems and Software. They are supported by David Jefferies, Chairman,
formerly Chairman of National Grid Group plc, and Jim Bair, Non-executive
Director, Senior Vice President of Strategy Partners International.
The technologies that underpin Smartlogik's product range, Muscat Discovery and
Muscat Structure, are being supplemented with applications and templates geared
to the specific needs of vertical markets. With the incorporation of WebTop into
Smartlogik, Smartlogik has secured a client-based desktop `drag and drop' search
engine tool to include in its product line. These developments are aimed at
ensuring that the Company remains at the forefront of technology in the
knowledge management market.
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Bright Station plc
CHAIRMAN'S STATEMENT (continued)
Smartlogik has developed a strong and growing client list, including such names
as the BBC, Yell, Virgin Group, the Department of Trade & Industry, NASA and
Thomson Corporation. Smartlogik currently has more than 100 customers.
In addition, during the year and subsequently, Smartlogik has announced
important distribution partnership agreements with Norcontrol, Germinus and
Horizon, and enjoys a technology partnership with Fujitsu.
eCommerce
Following its announced business strategy at the time of the ISD disposal, the
Company invested substantially in the expansion of the Sparza sales and
marketing teams and the development of the Sparza technology, including the
purchase of the boo.com technology. Nevertheless, as the year progressed, it
became clear that the short to medium term industry growth projections regarding
e-commerce would not be met and that retailer spending on infrastructure would
reduce or be delayed. As a result, the financial performance of the eCommerce
division was below expectations which accelerated the need for external funding
and exacerbated the difficulty in securing such funding.
Similarly with OfficeShopper, although a management structure and a customer
base were built during the year, neither could be sustained to profitability
without outside funding, which was not forthcoming in the prevailing market.
Ventures
Towards the end of the year, it became clear that the climate for early stage
technology investment was changing and that there was insufficient cash in the
Company to sustain the Company's strategy for a meaningful Ventures division.
Accordingly, the division reduced in size and at the year end took a provision
of (Pounds)1.2 million against the investments held by the division. Focus then
switched to supporting the Company's existing businesses, particularly
Smartlogik, both operationally and in terms of assisting in the various
fundraising initiatives.
With the benefit of hindsight, it is now clear that in light of the
deteriorating market conditions for early stage technology companies, the Bright
Station model was untimely. Nevertheless, I can assure you that the Board's
judgements were made in good faith, based on the information available to it at
the time.
The efforts of management and staff throughout this difficult period have been
extraordinary. Short staffing in all departments, limited cash resources, and a
constant need to amend the business plan to meet the requirements of a shifting
and deteriorating market, resulted in long hours and heavy pressures upon
management and staff at all levels. For this great effort, I thank each of our
employees and wish them well in the future.
To our shareholders, I thank you for your patience and support. The present
Board has organised a fresh start for the Company under a new management and
Board, with a new focus on a `pure play' knowledge management business, and with
an augmented capital structure. We believe - and I note that we too are
shareholders - that, as restructured, the Company is a company of potential and
that its management, if adequately funded and free from legacy issues associated
with the current Bright Station structure, is capable of delivering value for
shareholders.
/s/ Allen L. Thomas
Allen L. Thomas,
Chairman
13 June 2001
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Bright Station plc
REPORT OF THE CHIEF EXECUTIVE OFFICER
Dear Shareholder,
2000 was a year of considerable change and development with the sale of the
Information Services Division to Thomson, the simultaneous restructuring as a
technology infrastructure group, and the more recent focus on the `pure play'
knowledge management business.
It has clearly been a challenging year for an investment focused technology
company against the backdrop of the volatile capital markets. However, the
infrastructure developed throughout 2000 has provided Smartlogik with a solid
foundation of technology solutions, international presence and quality
management. The Company is now well placed to take advantage of the multi-
billion dollar knowledge management marketplace.
I have great faith in the Smartlogik management team for delivering shareholder
value and growth over the coming years and therefore feel comfortable, indeed
enthusiastic, in stepping down from my role as CEO to allow the Company to
fulfil its considerable promise in the public arena. As a significant
shareholder myself, I am banking on it.
Yours sincerely,
/s/ Dan Wagner
Dan Wagner
CEO
12 June 2001
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Bright Station plc
OPERATING AND FINANCIAL REVIEW
Summary
On 4 May 2000, the Company completed the disposal of its Information Services
Division (ISD) to Thomson Corporation for $275 million ((Pounds)176 million) and
raised a further (Pounds)27.9 million through equity subscription. The results
for the year therefore include the operating results of ISD, for the first four
months of the year amounting to revenues of (Pounds)49.1 million and a loss on
disposal of (Pounds)101.7 million. The proceeds from the disposal were used to
repay the Company's indebtedness in its entirety such that no interest has been
payable for the continuing operations after May 2000 and the majority of
interest receivable of (Pounds)762,000 for the year arose after that date.
Following the disposal of ISD, the Company was restructured as a technology
infrastructure business focused on the remaining eCommerce and Web Solutions
Divisions. In addition, the Company established a new investment business,
Bright Station Ventures, to invest in and assist promising Internet and
eCommerce start-ups, leveraging the Company's leading edge technologies,
management experience and capital.
Turnover
Group turnover of (Pounds)57.6 million has fallen significantly compared with
reported turnover in 1999 of (Pounds)174.5 million. The decrease was driven by
the disposal of ISD, which contributed (Pounds)165.1 million in revenues in
1999.
Information Services Division
This division, sold to Thomson on 4 May 2000, represented the core online
information business offered to information professionals and end-users.
Web Solutions Division
This division is the "search and structure" technology division. It owns the
intellectual property rights for the Company's proprietary InfoSort (now renamed
Muscat Discovery) automatic indexing and Muscat probabilistic search
technologies. The focus of the division is to leverage these technology assets
individually or together in the form of various commercial applications such as
its WebTop Internet search engine and Smartlogik's suite of knowledge management
solutions.
Turnover of (Pounds)5.9 million for 2000 shows a 25% decrease against turnover
in 1999 of (Pounds)7.9 million. The main reason for the decrease is that in 1999
the division entered into a strategic partnership with Fujitsu and received
revenue from Fujitsu for a technology licence of (Pounds)4.0 million. Other
revenues in WSD during 2000 arose from the Company's contracts with the British
Broadcasting Corporation (BBC) and Department of Trade and Industry (DTI) as
well as ongoing sales of Smartlogik's suite of knowledge management solutions.
eCommerce division (eCD)
Following on from the Company's acquisition of Write Works Limited in November
1998, the division consists of OfficeShopper, one of the UK's first fully
integrated online providers of over 40,000 office products and Sparza, a
business created to exploit the Group's proprietary e-transaction processing
technologies in order to create an infrastructure solution geared towards the
growing number of e-tailers.
Turnover in 2000 for OfficeShopper and Sparza amounted to (Pounds)1.6 million
(1999: (Pounds)918,000) and (Pounds)852,000 (1999: (Pounds)484,000)
respectively. OfficeShopper was initially limited by the cash constraints under
which the Company was operating with the result that very little cash was made
available for sales and marketing expenditure. Following the disposal of ISD, a
new management team was recruited and OfficeShopper refocused its activities
through the acquisition of Fairway in July 2000, a bricks and mortar office
supplies retailer which was integrated into the OfficeShopper platform by the
year end.
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Bright Station plc
OPERATING AND FINANCIAL REVIEW (continued)
For Sparza, 2000 was expected to be a fairly modest year in terms of revenue
growth as management focused on consolidating and growing its technical
resources. Sparza generated revenues of (Pounds)852,000 in 2000 (1999:
(Pounds)484,000).
Following the decision by management in April 2001 to refocus the activities of
the Group on WSD, the decision has been taken to curtail the eCommerce division.
The OfficeShopper assets, brand name and customer list were sold and the Sparza
operations are in the process of being closed.
Geographical analysis of turnover
ISD had operations and offices throughout the United States, Europe and Asia.
Following the disposal of ISD to Thomson, substantially all of the Company's
revenues have been generated in the United Kingdom. However, Smartlogik has
invested in the development of its US and European operations and is confident
that these markets will be further developed in 2001.
Cost of sales
Cost of sales decreased from (Pounds)68.2 million in 1999 to (Pounds)24.1
million in 2000 although cost of sales for continuing operations increased from
(Pounds)1.3 million in 1999 to (Pounds)2.0 million in 2000.
Cost of sales within ISD consisted primarily of royalties paid by the Company to
content publishers, whose information is downloaded by a user through the
Company's services.
Cost of sales for WSD is much lower than ISD as technology-based sales, which
consist of licence fees and royalties, have minimal associated direct costs.
Costs of sales within eCD relate solely to the costs of goods sold by
OfficeShopper. Sales made by Sparza have negligible associated direct costs.
Distribution costs
Distribution costs consist of salaries and commissions paid to sales staff and
account managers, travel and entertainment and similar expenses incurred by
sales personnel, and marketing expenses, including advertisements, marketing
literature and trade shows.
Distribution costs decreased from (Pounds)22.1 million in 1999 to (Pounds)10.3
million in 2000 largely due to the disposal of ISD. Distribution costs for
continuing operations increased by 131% from (Pounds)1.1 million in 1999 to
(Pounds)2.6 million in 2000 reflecting the increased investment in sales and
marketing personnel throughout all of the Group's continuing businesses.
Administrative expenses
Administrative expenses consist of all facilities costs, remuneration for all
employees other than persons directly involved in selling or account management,
and operating expenses for ISD's data centres (other than telecommunications and
processing charges included in cost of sales as described above). Additionally,
following the change of accounting policy discussed below, administrative
expenses also include all product development costs.
Administrative expenses decreased from (Pounds)55.8 million in 1999 to
(Pounds)37.7 million in 2000 primarily due to the disposal of ISD.
Administrative expenses for continuing operations increased by 164% from
(Pounds)8.3 million in 1999 to (Pounds)21.9 million in 2000, reflecting the
increased headcount (and associated costs such as facilities) across all of the
Group's continuing businesses. Development expenses for Sparza also increased
significantly during the year.
Amortisation of product development costs/goodwill
Historically it has been the Group's policy to capitalise costs associated with
the development of the host computer systems and the development of new
products. Following the disposal of ISD, the Group's business comprised the
eCommerce, Web Solutions and Ventures divisions. In recognition of
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Bright Station plc
OPERATING AND FINANCIAL REVIEW (continued)
the fact that these divisions are not mature and in light of changing industry
practice, the Group decided to change its accounting policy such that
development costs associated with these divisions are expensed to the profit and
loss account as incurred.
The results for 2000 have been prepared on this revised basis, while the results
for 1999 have been restated to reflect this change in policy.
In addition, following a review of the performance of OfficeShopper during the
year, the Company has made an exceptional provision of (Pounds)4.1 million
against the remaining carrying value of goodwill associated with the Write Works
acquisition. As noted above, the OfficeShopper assets, brand name and customer
list were sold in May 2001.
Amounts written off investments
Amounts written off investments in 2000 totalled (Pounds)1.9 million, a decrease
of 55% on 1999's charge of (Pounds)4.6 million. The charge for 2000 represents a
provision against the carrying value of its portfolio of minority investments
arising following the significant change in market conditions and sentiment
towards early stage Internet companies.
Exceptional items
On 4 May 2000, the Company disposed of ISD realising a loss on disposal of
(Pounds)101.7 million. This loss on disposal takes into account the write-back
of goodwill arising on the acquisition of Knight-Ridder Information, Inc. (KRII)
amounting to (Pounds)227.9 million that had previously been written off to
reserves.
Interest receivable and interest payable
Net interest payable of (Pounds)6.6 million relates almost exclusively to
interest paid on both senior and high-yield debt taken out at the time of the
acquisition of KRII. The net proceeds of the sale of ISD on 4 May 2000 were used
to repay these balances in full.
Interest receivable of (Pounds)762,000 relates to interest earned on cash
deposits.
Taxation
The Company's tax charge for 2000 relates mainly to the tax arising on the
profitable performance of its foreign sales subsidiaries prior to the disposal
of ISD.
No tax arises in the UK, US or Switzerland as a result of past tax losses. The
tax losses in the US and Switzerland were passed to Thomson along with the
disposal of ISD.
A capital loss of approximately (Pounds)51.3 million arose as a result of the
disposal of ISD.
Earnings per share (EPS)
After accounting for discontinued activities, restructuring costs and other
exceptional items, the Company realised a loss per share of 79.2 pence for the
year ended 31 December 2000, compared to a loss per share of 3.9 pence in 1999.
Liquidity and capital resources
The Company's operating activities utilised net cash of (Pounds)11.2 million
during the year ended 31 December 2000, compared to (Pounds)33.6 million
generated in 1999.
The Company incurred net capital expenditure of (Pounds)7.3 million in 2000
compared to (Pounds)15.9 million in 1999, the reduction largely due to cash
constraints experienced by the Company, and the fact that post the disposal of
ISD, the continuing businesses within the Group are not as capital intensive.
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Bright Station plc
OPERATING AND FINANCIAL REVIEW (continued)
During April 2001 the Board of Directors having reviewed the funding
requirements of the Group, has proposed a radical restructuring to ensure that
the Group has sufficient funds to continue operating for the foreseeable future.
The Group is proposing a placing and open offer of 270,000,000 shares of 1p each
subject to approval by the shareholders at an Extraordinary General Meeting of
the Company to be held on 6 July 2001. The estimated proceeds of the placing and
open offer are approximately (Pounds)12 million net of expenses.
The Company had cash at bank and in hand on 31 December 2000 of (Pounds)16.3
million compared to (Pounds)10.5 million on 31 December 1999. The Company had no
bank facilities in place at 31 December 2000. As at 18 May 2001, the cash
balance stood at (Pounds)2.2 million.
Investments
Bright Station Ventures (BSV) was created in April 2000, as the Corporate
venturing arm of the Group, primarily looking to identify investment and
acquisition opportunities which are synergistic with the operations and growth
strategies of the underlying businesses of the Group.
As noted above, in order to account for changes in the technology market in
general, the Board prudently provided (Pounds)1.9 million against the portfolio
of minority investments managed and acquired by BSV.
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Bright Station plc
CORPORATE GOVERNANCE AND INTERNAL FINANCIAL CONTROL
The Board's policy is to manage the affairs of the Company in accordance with
the principles set out in the Combined Code on Corporate Governance ("the
Combined Code"), as described in this Report. The Company has been in compliance
with the provisions set out in Section 1 of the Combined Code throughout the
year ended 31 December 2000, save for the exceptions below:
. Following the appointment of Allen Thomas as Chairman in May 1999, the
Company does not currently have a nominated Senior Non-executive Director
(other than the Chairman).
. Prior to the sale of the ISD, Patrick Sommers was employed on a two-year
rolling contract as an Executive Director. On completion of the sale,
Patrick Sommers became a Non-executive Director of the Company and no
longer has a service contract.
. As disclosed in the Internal Control Section below, the Company became
compliant with the Turnbull recommendations on 26 September 2000.
The Board
The Board normally meets 12 times a year to make and review major business
decisions and to monitor current trading against approved budgets. The Board has
a formal schedule of matters specifically reserved to it for decision, including
the Group's commercial strategy, major capital projects beyond certain
predetermined limits and the approval of contracts not in the ordinary course of
business. Once a year the Board meets in conference to consider long-term
strategy and industrial developments affecting the Company. All Directors have
access to the advice and services of the Company Secretary and may, if necessary
take independent, professional advice at the Company's expense.
Chairman and Chief Executive
The roles of Chairman and Chief Executive are separate. The Chairman is
primarily responsible for running the Board and for ensuring that all Directors
are able to play their full part in its activities. The Chief Executive's task
is to run the Company's business and to implement the policies and strategies
adopted by the Board.
Following the retirement of Michael Mander as Chairman of the Company in May
1999, Allen Thomas, previously Deputy Chairman and Senior Non-executive
Director, was appointed as Chairman. In view of the size and constitution of the
current Board, the Directors have not considered it necessary or appropriate to
nominate a Senior Non-executive Director other than the Chairman.
Board balance
There are three Executive Directors and three Non-executive Directors on the
Board. Patrick Sommers was an Executive Director of the Company until completion
of the sale of the ISD to Thomson, whereupon he became a Non-executive Director.
The Non-executive Directors are independent of management and free from any
business or other relationship with the Company, with the exceptions of share
ownership or as disclosed in note 9 to the financial statements.
Supply of information
The Board is provided with comprehensive reports on the Company's affairs in
order that informed decisions can be reached in a timely manner. Regular reports
by management are supplemented with more detailed information on any important
issues and frequent contact is maintained with the Non-executive Directors
between Board meetings.
Appointments to the Board
There is a Nomination Committee, which is chaired by Allen Thomas and currently
includes Ian Barton and David Mattey as members. A majority of the members are
Non-executive. The Committee is responsible for overseeing the selection process
for Executive and Non-executive Directors and for making recommendations to the
Board on all new appointments.
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Bright Station plc
CORPORATE GOVERNANCE AND INTERNAL FINANCIAL CONTROL (continued)
Re-election
Pursuant to the Company's Articles, at present the nearest number to, but not
exceeding one third of the Board shall retire each year by rotation. In
practice, all directors are required to offer themselves for re-election at
least every three years, therefore a Special Resolution proposing a
corresponding amendment to the Articles has been included in the Notice of this
year's AGM.
Directors' remuneration
The remuneration policy for the Executive Directors is determined by the
Remuneration Committee, comprising Allen Thomas and Ian Barton, being chaired by
Allen Thomas. The Committee's Report is set out on pages 11 and 12.
Shareholder relations and AGM
The Company is proactive in maintaining a close relationship with its principal
investors and encourages all shareholders to participate in the AGM, whether
voting in person or by proxy. The Company provides copies of all shareholder
communications on request and beneficial owners are welcome to attend the AGM.
Accountability and audit
The responsibilities of the Directors and the Auditors are set out on pages 16
and 17.
Internal Control
The Board is responsible for the Company's system of internal control and for
reviewing its effectiveness. The policies and procedures implemented by the
Board are designed to manage rather than eliminate the risk of failure to
achieve business objectives and can provide reasonable, but not absolute
assurance against material misstatement or loss.
There is an ongoing process to identify, evaluate and manage significant risks
faced by the Company.
During the second half of the year, the Directors conducted a detailed review of
the Company's internal control systems, identifying all of the Group's
significant risk areas and enhancing its internal systems and procedures to
ensure that risk is identified, managed and reported on, in accordance with the
Turnbull recommendations. The Company attained full compliance with the Turnbull
recommendations from 26 September 2000. The review process formed the basis for
new procedures that will be kept under continuous review. The main features of
this process are as follows:
Financial
The respective responsibilities of the Board and business unit management for
financial and operational matters are clearly defined. There are also detailed
rules governing expenditure, incorporating details of procedures and authority
levels. Financial information on trading performance and cash flow is produced
monthly from corporate systems for each business and for the Group, comparing
results with budgets. The Board and business management boards also receive
regular reports on a range of other key performance indicators.
Control Procedures
Control procedures ensure accounting for financial transactions is complete,
accurate and consistent, that reports are reliable and timely, and that risk is
managed. These procedures include the setting of budgets, written authorisation
limits, corporate capital expenditure approval procedures and policies.
Identification of business risk
Managers are required to identify and assess risks that might prevent them
meeting their objectives, and then to take timely action to manage or eliminate
them. The effectiveness of these actions is monitored and reviewed.
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Bright Station plc
CORPORATE GOVERNANCE AND INTERNAL FINANCIAL CONTROL (continued)
Compliance
The Board assumes overall responsibility for compliance and is briefed on
regulatory requirements and Group compliance matters by the Company Secretary
and the Company's advisors.
Effectiveness of Internal Control
The Board has reviewed the effectiveness of the system of internal financial
control in operation during the year through the monitoring processes set out
above.
In addition, during December, each business unit, including Group head office,
prepared an assessment of its risk exposures and internal control framework. A
summary of the findings was considered by executive management and the
conclusions reported to the Board.
Audit Committee and Auditors
The Audit Committee consists of Ian Barton, Allen Thomas and Patrick Sommers,
being chaired by Ian Barton. The Committee meets with the Chief Financial
Officer in order to review the effectiveness of the system of internal financial
controls, and discusses with the Auditors the control matters identified during
the course of their audit work. It also reviews the annual accounts and the
interim and preliminary announcements prior to submission to the Board,
compliance with accounting standards and the scope and extent of the external
audit programme. The Chairman of the Audit Committee reports to the Board on
matters discussed at the Audit Committee meeting. The Audit Committee is
responsible for selecting the firm of accountants to be recommended to
shareholders for appointment as independent Auditors each year, and reviewing
the overall financial relationship between the company and its Auditors. The
Company does not have an internal audit function at present, although the Board
will keep this matter under review. The Auditors' Report is set out on pages 17
and 18.
Going concern
Company law requires the Group's Directors to consider whether it is appropriate
to prepare financial statements on the basis that the Group is a going concern.
In considering this matter, the Directors have reviewed the Group's performance
for 2000; it's budget for 2001 and 2002. This included consideration of the cash
flow implications of the budget including the proposed capital expenditure and
comparison of these with the Group's existing funds and the funds to be raised
by the placing and open offer referred to in the Chairman's Statement. Subject
to the receipt of the aforementioned funds also referred to in note 1 to the
financial statements the Directors see no reason why the Group and the Company
should not continue in operational existence for the foreseeable future and for
this reason they continue to adopt the going concern basis in preparing the
Group's financial statements.
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Bright Station plc
REPORT OF THE REMUNERATION COMMITTEE
Remuneration Committee
The Remuneration Committee ("the Committee") consists of Allen Thomas and Ian
Barton, both of whom are Non-executive Directors.
Details of each Director's remuneration package, together with their share
options and interests in Ordinary shares of the Company, are set out in note 9
to the financial statements.
Remuneration policy
The Remuneration Committee seeks to provide remuneration packages of a suitable
structure and value to attract, retain, motivate and reward Executive Directors
of the quality required to manage the business of the Group. The Committee
endeavours to avoid paying more than the market rate for this purpose. In
establishing the level of remuneration for each Director, the Committee pays
careful regard to the packages offered by comparable companies and has access to
external remuneration consultants, enabling wide-ranging comparisons to be made.
Salaries and performance-related remuneration
The salaries of the Executive Directors are reviewed annually. As part of the
review process, the Committee considers individual performance and experience,
the size and nature of the role, the Group's performance as a whole and salaries
offered for similar positions elsewhere.
Wherever possible, the Committee seeks to align the interests of executives with
those of shareholders through performance-related remuneration. Bonuses are
based on successful performance and are only paid on achievement of carefully
considered targets. All bonuses are capped. Bonus payments and any gains under
share option schemes are not pensionable.
Benefits
Executive Directors are eligible for a range of taxable benefits including the
provision of a company car or car allowance (taken in the form of additional
salary) and payment of related operating expenses such as fuel for business use.
Additional benefits include a contributory pension scheme, a private medical
insurance scheme and reimbursement of professional subscriptions and of
business-related home telephone charges up to specified limits.
Pension Contributions
All UK employees of Bright Station plc are eligible to join the Group Personal
Pension Scheme provided by Scottish Equitable, from their 4th month of
employment. The pension is a matched contributory scheme whereby the Company
contributes up to 5% of the employee's basic salary and the employee is required
to make an equivalent matching contribution. Employees may make further
contributions, up to the Inland Revenue limits.
Prior to the disposal of ISD there was a defined contribution pension scheme in
the US. Only one director was a member of this scheme and the scheme was not in
operation at the year end.
Notice periods
The current Executive Directors are employed on rolling contracts with a notice
period of not more than one year.
The Remuneration Committee considers that notice periods of one year are
reasonable and proper, being in the interests of the Company and its Executive
Directors and having regard to prevailing market conditions and current practice
amongst public companies.
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Bright Station plc
REPORT OF THE REMUNERATION COMMITTEE (continued)
Change of control provisions
The Executive Directors' service agreements contain certain provisions which
would take effect in the event that any person or persons acting in concert
acquires or acquire a Controlling Interest (as defined within Part 1 of Schedule
13 of the Companies Act 1985) in the Company. These provisions include the
payment of salary equivalent to the contractual notice period as well as payment
in lieu of a bonus of 75% of salary in the event of termination of employment
within 12 months following a change of control of the Company.
Share schemes
The Company operates a number of share related schemes for employees, details of
which are set out in notes 21 and 22 to the financial statements. In granting
discretionary share awards to Executive Directors, the Remuneration Committee
has regard to guidelines published by investor protection bodies, the provisions
of the Combined Code and the individual performance of participants, as well as
the particular circumstances of the Company.
Grants under the Bright Station Executive and Unapproved share option schemes
are generally made at the prevailing market share price and are subject to a
vesting period of three years. Awards under the subsidiary share option schemes
are granted at a price which is not less than the market value of the subsidiary
concerned and vest incrementally over a three-year period.
The new Long Term Incentive Plan was adopted by the Company on 5 September 2000.
Key executives selected by the Remuneration Committee received a deferred
promise by the Company to provide shares at no cost. The value of an award is
calculated by reference to the average mid-market price of an Ordinary share in
the Company over a period of no longer than 12 months prior to the date of the
grant and awards do not exceed 200% of a participant's basic salary. Release of
initial awards under the Long Term Incentive Plan is contingent upon the
achievement of certain pre-determined share price targets three years after
grant.
US stock option plan grants are subject to incremental vesting after an initial
one-year period in order to reflect current US market practice.
Non-executive Directors
The remuneration of Non-executive Directors consists of fees for their services
in connection with Board and Board committee meetings. Fee levels are determined
by the Executive Directors with regard to remuneration surveys and levels
offered by comparable companies and, in the case of the Chairman's fees, in
consultation with the other Non-executive Directors. The Non-executive Directors
do not have service contracts, neither do they participate in Group bonus
schemes.
/s/ Allen L. Thomas
Allen L. Thomas,
Chairman
12 June 2001
12
Bright Station plc
REPORT OF THE DIRECTORS
The Directors present their report and the audited financial statements for the
year ended 31 December 2000.
Principal activity and business review
A description of the principal activities of the Company and its subsidiaries,
and a review of the business is set out in the Operating and Financial Review.
Post balance sheet events
As outlined in note 32 to the financial statements, on 30 April the Group
announced its intention to refocus the activities of the Group with the
resultant sale and closure of its eCommerce activities.
The Group is proposing a placing and open offer of 270,000,000 new shares of 1p
each subject to the approval by the shareholders at an Extraordinary General
Meeting of the Company to be held on 6 July 2001. The estimated proceeds of the
placing and open offer are required by the Group to be able to continue in
operational existence for the foreseeable future.
Following the decision by the Group as described above, an impairment review of
the carrying value of fixed assets held in the balance sheet at 31 December 2000
has been performed and an adjustment to the carrying value was made as described
in note 32 to the financial statements. As a result the loss before tax for the
year has been increased by (Pounds)2.2 million as compared to the amount
reported in the preliminary announcement dated 28 February 2000.
Future Developments
On 30 April 2001, the Company announced a radical reorganisation of its
operations and capital structure. The reorganised Company will operate as a
focused, "pure play" knowledge management business. The Company will be renamed
Smartlogik Group plc.
Research and Development
The Group has continued to invest in the development of new products for the
eCommerce and Web Solutions Divisions. Following the disposal of ISD, the
accounting policy for development costs has changed (as disclosed in note 1 to
the accounts) in order to reflect the changing structure of the business and
latest industry practice.
Results and Dividends
The profit and loss account set out on page 19 shows the results for the year.
The Directors do not recommend the payment of a dividend (1999: (Pounds)nil).
The accumulated deficit of (Pounds)132,002,000 has been transferred to reserves.
Fixed assets
The changes in fixed assets are shown in notes 12 to 15 to the financial
statements.
Share capital
The authorised and issued share capital of the Company, together with details of
the shares issued during the year, are shown in note 21 to the financial
statements.
13
Bright Station plc
REPORT OF THE DIRECTORS (continued)
Substantial shareholdings
Other than the Directors' interests (see note 9 to the financial statements),
substantial interests notified to the Company are as follows:
Ordinary % of issued
shares held share capital
at 21 May at 21 May
2001 2001
Prudential plc 12,799,914 7.38
Thomson Finance SA 9,297,290 5.36
Merill Lynch & Co, Inc* 8,099,880 4.67
Newton Investment Management Ltd 6,069,090 3.50
* During the year JIYU Holdings Ltd transferred their holding of 7,038,123
shares to B D Holdings Ltd, another company within the same group. These
shares are presently held in a pool account operated by N Y Nominees Ltd, of
which the ultimate parent company is Merrill Lynch & Co, Inc.
Issued share capital at 31 December 2000 was 172,614,502 (see note 21) and at 21
May 2001 was 173,327,461. For US reporting purposes, it is confirmed that the
Company's major shareholders have the same voting rights.
There are no arrangements known to the Company, the operation of which may at a
subsequent date result in a change of control of the Company.
Directors and their interests
The Directors who served during the year were as follows:
Name Age Position Position held since
I Barton 55 Non-executive Director 1986
M Hussey 77 Non-executive Director 1996 (resigned 5 September 2000)
R Lomnitz 36 Director 2000 (appointed 22 December 2000)
S Maller 42 Chief Technology Officer (EMEA-AP) 1996*
D Mattey 38 Chief Financial Officer 1992
J Molle 36 President - The Americas 1997*
C Morton 37 President - EMEA AP 1997*
P Sommers 53 Non-executive Director 1998 (Executive director to May 2000)
R Swank 69 Non-executive Director 1999 (resigned 4 December 2000)
A Thomas 61 Non-executive Chairman 1999
D Wagner 37 Chief Executive Officer 1985
* resigned and transferred with the ISD on 4 May 2000
Having been appointed to the Board during the year, Robert Lomnitz offers
himself for election at the forthcoming EGM on 6 July 2001. On completion of the
proposed placing and open offer, Ian Barton, David Mattey, Patrick Sommers,
Allen Thomas and Daniel Wagner will resign from the Board. It is proposed that
the following Directors of Smartlogik Limited will then be appointed to the
Company's Board:
James Bair, Simon Canham, Stephen Hill and David Jefferies CBE.
The interests of Directors and their immediate families in the Company's share
capital and Directors' share options are disclosed in note 9 to the financial
statements. The interests of Directors in contracts with the Company are also
set out in note 9 to the financial statements.
The Company purchased Directors' and Officers' liability insurance for the year
ended 31 December 2000, which has been renewed for the current financial year.
Employee communication and involvement
It is the Group's policy to communicate regularly and frequently with all
employees, to enable them to take a wider interest in the affairs of their
employing company and the Group. Matters of concern are communicated in a
variety of ways, including announcements, briefing sessions and Company
newsletters.
14
Bright Station plc
REPORT OF THE DIRECTORS (continued)
The majority of employees are either shareholders in the Company or hold options
through the Group share option schemes. This provides employees with the
opportunity to participate directly in the success of the business. The Group
provides training and career development programmes.
Employment policies
The Group is committed to the principle of equal opportunity in employment,
regardless of a person's race, creed, colour, nationality, sex, marital status
or disability. Employment policies have been devised to be fair, equitable and
consistent with the skills and abilities of employees and the needs of the
Group. These policies ensure that everyone is accorded equal opportunity for
recruitment, training and promotion.
Employees with disabilities
It is Group policy that people with disabilities should have full and fair
consideration for all vacancies and thereafter, throughout their employment.
Where an employee becomes disabled whilst employed by a Group company, every
effort is made to assist with and adapt to their needs.
Creditor Payment Terms
It is the Group's normal procedure to have mutually beneficial relationships
with our suppliers and we seek to agree to terms of transactions, including
payment terms, in advance. Payment terms vary depending on local practice
throughout the world, and payment is made on time provided that suppliers
perform in accordance with their agreed terms. As at 31 December 2000, trade
creditors of the Company represented 90 days (1999: 55 days) equivalent of
annual purchases invoiced for the Group.
Charitable and political donations
During the year ended 31 December 2000, the Group made (Pounds)7,500 corporate
donations for charitable purposes (1999: (Pounds)nil). No political donations
were made during the year (1999: (Pounds)nil).
Auditors
PricewaterhouseCoopers have expressed their willingness to continue in office
and a resolution to reappoint them will be proposed at the Annual General
Meeting.
Annual General Meeting
Notice of the Annual General Meeting to be held at 10:00 a.m. on 11 September
2001 at 150 Aldersgate Street, London EC1A 4EJ is set out on pages 66 to 67.
Resolutions 1 and 2 to be proposed at the meeting deal with Ordinary Business.
Resolutions 3 and 4 deal with Special Business as explained below and in further
detail in the notes to the Notice of the Annual General Meeting.
Pursuant to the Company's Articles of Association, currently the nearest number
to, but not exceeding one third of the Board shall retire each year by rotation.
In practice, all Directors are required to offer themselves for re-election at
least every three years. To demonstrate the Company's commitment to the Combined
Code, Resolution 3 seeks authority to amend the Articles to reflect this
practice.
Resolution 4 also seeks authority to make several amendments to the Company's
Articles for the main purpose of enabling the Company to participate in
electronic communications with its shareholders. Having changed the Articles of
Association, the Company would be in a position to issue invitations to all
shareholders offering the opportunity to receive shareholder documents by
electronic means and to participate in electronic proxy voting.
The Directors believe these resolutions should be approved and recommend
shareholders to vote accordingly, as they will in respect of their own
beneficial holdings.
By order of the Board
/s/ Jonathan Ball
Jonathan Ball
Company Secretary
12 June 2001
15
Bright Station plc
STATEMENT OF DIRECTORS' RESPONSIBILITIES
Company law requires the Directors to prepare financial statements for each
financial year which give a true and fair view of the state of affairs of the
Company and the Group as at the end of the financial year and of the profit or
loss for that period. In preparing the financial statements, the Directors
consider that they have:
. selected suitable accounting policies and applied them consistently;
. made reasonable and prudent judgements and estimates;
. followed applicable accounting standards, subject to any material
departures disclosed and explained in the financial statements
The Directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company and to enable them to ensure that the financial statements comply with
the Companies Act 1985. They are also responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the Group
website. The Directors understand that uncertainty regarding legal requirements
is compounded as information published on the Internet is accessible in many
countries with different legal requirements relating to the preparation and
dissemination of financial statements.
By order of the Board
/s/ Jonathan Ball
Jonathan Ball
Company Secretary
12 June 2001
16
Bright Station plc
REPORT OF THE AUDITORS
AUDITORS' REPORT TO THE MEMBERS OF BRIGHT STATION PLC
We have audited the financial statements which comprise the profit and loss
account, the balance sheet, the cash flow statement, the statement of total
recognised gains and losses and the related notes, which have been prepared
under the historical cost convention and the accounting policies set out in note
1 to the financial statements.
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the Annual Report and the
financial statements, in accordance with applicable United Kingdom law and
accounting standards are set out in the statement of Directors'
responsibilities.
Our responsibility is to audit the financial statements in accordance with
relevant legal and regulatory requirements, United Kingdom Auditing Standards
issued by the Auditing Practices Board and the Listing Rules of the Financial
Services Authority.
We report to you our opinion as to whether the financial statements give a true
and fair view and are properly prepared in accordance with the United Kingdom
Companies Act. We also report to you if, in our opinion, the directors' report
is not consistent with the financial statements, if the company has not kept
proper accounting records, if we have not received all the information and
explanations we require for our audit, or if information specified by law or the
Listing Rules regarding directors' remuneration and transactions is not
disclosed.
We read the other information contained in the Annual Report and consider the
implications for our report if we become aware of any apparent misstatements or
material inconsistencies with the financial statements. The other information
comprises only the Directors' report, the Chairman's Statement, the Operating
and Financial Review and the Corporate Governance Statement.
We review whether the Corporate Governance Statement reflects the company's
compliance with the seven provisions of the Combined Code specified for our
review by the Financial Services Authority, and we report if it does not. We are
not required to consider whether the board's statements on internal control
cover all risks and controls, or to form an opinion on the effectiveness of the
company's or group's corporate governance procedures or its risk and control
procedures.
Basis of audit opinion
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements. It
also includes an assessment of the significant estimates and judgements made by
the directors in the preparation of the financial statements, and of whether the
accounting policies are appropriate to the company's circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Fundamental Uncertainty: Going Concern
In forming our opinion, we have considered the adequacy of the disclosures made
in the financial statements concerning the basis of preparation. The financial
statements have been prepared on the going concern basis and the validity of
this depends on the successful execution of the restructuring plan and the
Company receiving the anticipated (Pounds)12.0 million of funds (net of
expenses) from the
17
Bright Station plc
REPORT OF THE AUDITORS (CONTINUED)
placing and open offer, which is conditional, inter alia, on approval by the
shareholders at an Extraordinary General Meeting. The financial statements do
not include any adjustments that would result from failure to obtain such funds.
Details of the circumstances relating to this fundamental uncertainty are
described in note 1 to the financial statements. Our opinion is not qualified in
this respect.
Opinion
In our opinion the financial statements give a true and fair view of the state
of affairs of the Company and the Group at 31 December 2000 and of its loss and
cash flows for the year then ended and have been properly prepared in accordance
with the Companies Act 1985.
PricewaterhouseCoopers
Chartered Accountants and Registered Auditors
London
12 June 2001
18
Bright Station plc
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For The Year Ended 31 December 2000
Restated
------------------------------------------
Continuing Discontinued Continuing Discontinued
Notes Operation Operation Total Operation Operation Total
2000 1999
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
------------------------------------------ ------------------------------------------
Turnover 2 8,498 49,144 57,642 9,319 165,133 174,452
Cost of sales (2,044) (22,100) (24,144) (1,389) (66,785) (68,174)
- -----------------------------------------------------------------------------------------------------------------------------------
Gross Profit 6,454 27,044 33,498 7,930 98,348 106,278
Distribution costs (2,646) (7,613) (10,259) (1,144) (20,974) (22,118)
Administrative expenses ----------------------------------------- --------------------------------------
Recurring | (21,875) (15,789) (37,664) | | (8,290) (47,483) (55,773)|
Exceptional provision for | | | |
diminution in value of goodwill 4 | (4,084) - (4,084) | | - - - |
Amortisation of development costs | - (3,656) (3,656) | | - (9,142) (9,142)|
----------------------------------------- --------------------------------------
Total administrative expenses (25,959) (19,445) (45,404) (8,290) (56,625) (64,915)
- -----------------------------------------------------------------------------------------------------------------------------------
Operating (loss)/profit before ----------------------------------------- --------------------------------------
exceptional item 2,4 | (18,067) (14) (18,081) | | (1,504) 20,749 19,245 |
Exceptional item | (4,084) - (4,084) | | - - - |
----------------------------------------- --------------------------------------
Operating (loss)/profit (22,151) (14) (22,165) (1,504) 20,749 19,245
Loss on disposal of ISD 5 - (101,688) (101,688) - - -
Loss on termination of subsidiary 5 - - - - (911) (911)
- -----------------------------------------------------------------------------------------------------------------------------------
(Loss)/profit on ordinary activities (22,151) (101,702) (123,853) (1,504) 19,838 18,334
------------------------- ---------------------
Interest receivable 762 305
Amounts written off investments 7 (1,944) (4,619)
Interest payable and similar charges 8 (6,659) (18,366)
- -----------------------------------------------------------------------------------------------------------------------------------
Loss on ordinary activities before
taxation (131,694) (4,346)
Taxation on loss on
ordinary activities 10 (271) (1,478)
- -----------------------------------------------------------------------------------------------------------------------------------
Loss on ordinary activities after
taxation (131,965) (5,824)
Minority equity interests (37) (50)
- -----------------------------------------------------------------------------------------------------------------------------------
Retained deficit 25 (132,002) (5,874)
- -----------------------------------------------------------------------------------------------------------------------------------
Loss per share (pence) 11 (79.2) (3.9)
The notes on pages 25 to 63 form part of these financial statements.
19
Bright Station plc
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Restated
2000 1999
(Pounds)'000 (Pounds)'000
Loss for the financial year (132,002) (5,874)
Consolidated translation differences on foreign
currency net investments (4,008) (5,491)
- --------------------------------------------------------------------------------------------
Total recognised losses for the financial year (136,010) (11,365)
-----------
Prior year adjustment (776)
- -------------------------------------------------------------------------
Total losses since last annual report (136,786)
- -------------------------------------------------------------------------
The prior year adjustment results from the change in accounting policy relating
to development costs. (see note 1).
The profit and loss accounts shown above have been prepared on a historical cost
basis.
The notes on pages 25 to 63 form part of these financial statements
20
Bright Station plc
CONSOLIDATED BALANCE SHEET
For the year ended 31 December 2000
Restated
2000 1999
Notes (Pounds)'000 (Pounds)'000
Fixed assets
Intangible assets 12 - 26,254
Goodwill 13 2,364 9,805
Tangible assets 14 1,445 14,338
Investments 15 600 9,635
- ----------------------------------------------------------------------------------------------------
4,409 60,032
- ----------------------------------------------------------------------------------------------------
Current assets
Stock - 60
Debtors 16 3,310 36,690
Cash and bank deposits 16,334 10,521
- ----------------------------------------------------------------------------------------------------
19,644 47,271
Creditors (amounts falling due within one year) 17 (7,354) (71,574)
- ----------------------------------------------------------------------------------------------------
Net current assets/(liabilities) 12,290 (24,303)
- ----------------------------------------------------------------------------------------------------
Total assets less current liabilities 16,699 35,729
Creditors (amounts falling due after more than one year) 18 (17) (137,370)
Provisions for liabilities and charges 19 - (1,430)
- ----------------------------------------------------------------------------------------------------
Net assets/(liabilities) 16,682 (103,071)
- ----------------------------------------------------------------------------------------------------
Capital and reserves - equity
Called up share capital 21 1,726 1,549
Share premium account 23 184,057 154,949
Shares to be issued 24 134 967
Profit and loss account 25 (169,235) (261,079)
- ----------------------------------------------------------------------------------------------------
Equity shareholders' funds 26 16,682 (103,614)
Minority equity interest 27 - 543
- ----------------------------------------------------------------------------------------------------
Total equity shareholders' funds 16,682 (103,071)
- ----------------------------------------------------------------------------------------------------
The financial statements were approved by the Board of Directors on 12 June 2001
and signed on its behalf by:
/s/ D Wagner /s/ D Mattey
D Wagner D Mattey
Chief Executive Chief Financial Officer
The notes on pages 25 to 63 form part of these financial statements
21
Bright Station plc
COMPANY BALANCE SHEET
For the year ended 31 December 2000
Restated
2000 1999
Notes (Pounds)'000 (Pounds)'000
Fixed assets
Intangible assets 12 - 4,340
Tangible assets 14 1,073 2,183
Investments 15 8,746 186,522
- ----------------------------------------------------------------------------------------------------------------------
9,819 193,045
- ----------------------------------------------------------------------------------------------------------------------
Current assets
Stock - 27
Debtors 16 4,253 35,258
Cash at bank and in hand 15,751 1,634
- ----------------------------------------------------------------------------------------------------------------------
20,004 36,919
Creditors (amounts falling due within one year) 17 (5,450) (57,935)
- ----------------------------------------------------------------------------------------------------------------------
Net current assets/(liabilities) 14,554 (21,016)
- ----------------------------------------------------------------------------------------------------------------------
Total assets less current liabilities 24,373 172,029
Creditors (amounts falling due after more than one year) 18 (17) (135,745)
- ----------------------------------------------------------------------------------------------------------------------
Net assets 24,356 36,284
- ----------------------------------------------------------------------------------------------------------------------
Capital and reserves - equity
Called up share capital 21 1,726 1,549
Share premium account 23 184,057 154,949
Shares to be issued 24 134 967
Profit and loss account 25 (161,561) (121,181)
- ----------------------------------------------------------------------------------------------------------------------
Total shareholders' funds 26 24,356 36,284
- ----------------------------------------------------------------------------------------------------------------------
The financial statements were approved by the Board of Directors on 12 June 2001
and signed on its behalf by:
/s/ D. Wagner /s/ D. Mattey
D Wagner D Mattey
Chief Executive Chief Financial Officer
The notes on pages 25 to 63 form part of these financial statements
22
Bright Station plc
CONSOLIDATED CASH FLOW STATEMENT
For The Year Ended 31 December 2000
Restated
2000 1999
Notes (Pounds)'000 (Pounds)'000
Net cash (outflow)/inflow from operating activities 29 (11,229) 32,807
- ----------------------------------------------------------------------------------------------------------------------
Returns on investments and servicing of finance
Interest received 782 303
Interest paid on bank loans and overdrafts (7,798) (16,945)
Interest paid on finance leases (25) (106)
- ----------------------------------------------------------------------------------------------------------------------
(7,041) (16,748)
- ----------------------------------------------------------------------------------------------------------------------
Taxation paid (248) (911)
- ----------------------------------------------------------------------------------------------------------------------
Capital expenditure
Payments to acquire and develop intangible assets (2,896) (11,402)
Payments to acquire tangible fixed assets (2,747) (4,536)
Payments to acquire fixed asset investments (1,824) -
Receipts from sale of tangible fixed assets 99 78
- ----------------------------------------------------------------------------------------------------------------------
(7,368) (15,860)
- ----------------------------------------------------------------------------------------------------------------------
Acquisitions and disposals
Purchase of subsidiary undertakings (257) -
Payments to acquire minority interests in a subsidiary undertaking - (428)
Investment in joint venture - (1,235)
Proceeds from sale of assets held for resale/investments 2,537 777
Expenses in connection with the sale of assets held for resale - (303)
Payment of deferred consideration (1,430) -
Cash transferred with sale of ISD 6 (4,813) -
Expenses in relation to sale of ISD 6 (4,910) -
Proceeds from sale of ISD 6 185,474 -
- ----------------------------------------------------------------------------------------------------------------------
176,601 (1,189)
- ----------------------------------------------------------------------------------------------------------------------
Cash inflow/(outflow) before the use of liquid resources and financing 150,715 (1,901)
- ----------------------------------------------------------------------------------------------------------------------
Financing
Net proceeds on issue of Ordinary Share Capital 28,299 142
Debt due within one year - Increase in borrowings - 13,187
Debt due within one year - Increase in finance leases - 1,549
Debt due within one year - Repayment of loans (172,559) (22,004)
Debt due after one year - New secured loan - 15,593
Debt due after one year - Increase in finance leases - 1,509
Expenses on raising of Senior Credit Facility and Senior
Subordinated Notes - (1,246)
Repayment of capital element of finance leases (642) (525)
- ----------------------------------------------------------------------------------------------------------------------
(144,902) 8,205
- ----------------------------------------------------------------------------------------------------------------------
Increase in cash 5,813 6,304
- ----------------------------------------------------------------------------------------------------------------------
The notes on pages 25 to 63 form part of these financial statements
23
Bright Station plc
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS/(DEBT)
For The Year Ended 31 December 2000
Restated
2000 1999
Notes (Pounds)'000 (Pounds)'000
Increase in cash in the period 5,813 6,304
Cash used to decrease lease financing 642 525
Cash acquired from issue of debt (net of expenses) - (27,533)
Cash used to repay loans 172,559 22,004
Cash acquired from sale and leaseback - (3,058)
- ----------------------------------------------------------------------------------------------------------------------
Change in net funds/(debt) from cash flows 179,014 (1,758)
Other non-cash changes (6,125) (1,274)
New finance leases (37) (3,614)
Finance lease obligations transferred to ISD 5,724 -
Effect of foreign exchange rate changes (5,300) (5,242)
- ----------------------------------------------------------------------------------------------------------------------
Movement in net funds/(debts) in period 173,276 (11,888)
Net debt at beginning of period (156,979) (145,091)
- ----------------------------------------------------------------------------------------------------------------------
Net funds/(debt) at end of period 30 16,297 (156,979)
- ----------------------------------------------------------------------------------------------------------------------
The notes on pages 25 to 63 form part of these financial statements
24
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
The financial statements have been prepared under the historical cost convention
and in accordance with accounting standards applicable in the United Kingdom.
Going Concern
The financial statements have been prepared on the going concern basis in
anticipation of the receipt of the estimated proceeds of approximately
(Pounds)12.0 million, net of expenses, from the proposed placing and open offer
which was formally approved by the Directors on 12 June 2001. Further details
are contained in the Chairman's Statement and in note 32 to the financial
statements.
The placing and open offer is conditional, inter alia, on approval by
shareholders at an Extraordinary General Meeting to be held on 6 July 2000.
Without the above injection of capital the Group would be unable to continue in
operational existence for the foreseeable future and the going concern basis
would be inappropriate. Adjustments would then have to be made to reduce the
balance sheet amounts of assets to their recoverable amounts, to provide for
further liabilities that might arise and to reclassify fixed assets and long-
term liabilities as current assets and liabilities.
Whilst there is uncertainty at present as to the outcome of the matter mentioned
above, the Directors believe that it is appropriate for the financial statements
to be prepared on the going concern basis.
Accounting estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Group accounts
The consolidated financial statements incorporate the financial statements of
the Company and its subsidiaries (the "Group"). All intercompany transactions
and balances have been eliminated. The accounts include the results of
subsidiaries acquired during the year from the relevant date of acquisition
other than those subsidiaries acquired with a view to resale. They also include
the results of subsidiaries disposed of during the year up to the relevant date
of disposal.
Goodwill
Prior to 1 January 1998, goodwill arising as the difference between the cost of
acquisition of a subsidiary and the fair value of its net assets at the date of
acquisition was written off to reserves in the year of acquisition. Goodwill
arising on acquisitions since 1 January 1998 is capitalised and subsequently
written off over its estimated useful life, which currently ranges from 10-20
years. Where necessary, adjustments to provisional fair values of net assets
acquired are adjusted to goodwill in the first full year following the
acquisition. Impairment reviews on the carrying amount of goodwill are performed
on an annual basis and any permanent diminutions in value identified is charged
to the profit and loss account.
Turnover and revenue recognition
Turnover includes licence fees for technology sales, ongoing maintenance fees
and consultancy work. Revenues on such items are recognised when the Company has
fulfilled all of its significant performance obligations.
25
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
Turnover also arises on the provision of long term government contracts and the
sale of office goods and supplies.
Turnover relating to discontinued activities represents database subscription
sales, online and usage charges and design and implementation fees at invoiced
amounts, exclusive of value added and other sales taxes. Subscription revenues
are recognised when contractually due and invoiced. The costs of fulfilling
obligations under the terms of the subscription contract are accrued at the time
the income is recognised. Online and usage charges are recognised as the service
is provided. Most subscriptions are due and invoiced either annually or semi-
annually in advance and recognised in full at the commencement of the
subscription term. Some of the Group's US operations billed monthly under their
`modular pricing' scheme, whereby subscriptions for access to the Group's
services were raised on a monthly basis and accounted for accordingly. Annual
CD-ROM usage fees are deferred and amortised over the life of the contract.
Fixed assets
Fixed assets are stated at cost. Depreciation is provided to write off the cost,
less estimated residual value, of all tangible fixed assets over their expected
useful lives. It is calculated at the following rates:
Equipment including personal computers - 33% straight line
Motor vehicles - 25% straight line
Fixtures and fittings - 20% straight line
Leasehold improvements - shorter of remaining lease period and
20% straight line
Mainframe computers - 20% straight line
Leasehold improvements relate to the cost of refurbishment of the Group's short
leasehold properties.
Stocks
Stocks, which comprise consumable items, are stated at the lower of cost and net
realisable value.
Foreign currency
Transactions denominated in foreign currencies are recorded at the exchange rate
prevailing at the date of the transaction. Transactions to be settled at a
contract rate are recorded at that rate. Any gains or losses from the
translation of transactions denominated in foreign currencies are included in
the results of the operation. Assets and liabilities denominated in foreign
currencies are translated at the exchange rate ruling at the year end. Profit
and losses of overseas companies are translated at average rates of exchange for
the period. Exchange differences arising out of the translation of accounts of
foreign subsidiaries, net of associated borrowings, are taken to reserves.
Financial Instruments
Changes in the value of forward foreign exchange contracts are recognised in the
results in the same period as changes in the values of the assets and
liabilities they are intended to hedge. Any interest receipts arising from the
interest rate cap are matched to those arising from the underlying debt
position.
Intangible fixed assets
Historically it has been the Group's policy to capitalise costs associated with
the development of the host computer systems and the development of new
products. In the year 2000, following the disposal of ISD, the Group's business
comprised the eCommerce, Web Solutions and Ventures divisions. In recognition of
the fact that these divisions are not mature and in light of changing industry
practice, the Group decided to change its accounting policy such that
development costs associated with these divisions are expensed to the profit and
loss account as incurred.
The results for 2000 have been prepared on this revised basis, while the results
for 1999 have been restated to reflect this change in policy. The impact of the
restatement on the comparative profit and
26
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
1. ACCOUNTING POLICIES (continued)
loss account for 1999 is an increase to the loss of (Pounds)489,000 and the
cumulative effect on the Group's reserves as at 1 January 2000 amounts to a
decrease of (Pounds)776,000. No such costs were capitalised during the year
ended 31 December 2000 and it would therefore be inappropriate to estimate the
effect of the restatement on the profit and loss account for this period.
Fixed asset investments
Investments in subsidiaries and other fixed asset investments are stated in the
balance sheet at cost. Provision is made in full for diminution in value if
considered permanent.
Deferred taxation
Provision is made for timing differences between the treatment of certain items
for taxation and accounting purposes, to the extent that it is probable that a
liability or asset will crystallise.
Leased assets
Where assets are financed by leasing agreements that give rights approximating
to ownership (`finance leases'), the assets are treated as if they had been
purchased outright. The amount capitalised is the present value of the minimum
lease payments payable over the term of the lease. The corresponding leasing
commitments are shown as amounts payable to the lessor. Depreciation on the
relevant assets is charged to the profit and loss account, except for that
proportion relating to assets wholly used for ISD product development.
Lease payments are analysed between capital and interest using the actuarial
method. The interest is charged to the profit and loss account, except for that
proportion relating to assets wholly used for ISD product development. The
capital part reduces the amounts payable to the lessor.
All other leases are treated as operating leases. Their annual rentals are
charged to the profit and loss account on a straight line basis over the lease
term except where the costs are capitalised as development costs.
Pension costs
For the year ended 31 December 2000, the Group operated defined contribution
pension schemes in the UK, US and Switzerland. The amount of contributions
payable to the pension schemes are charged to the profit and loss account as
incurred.
Finance costs
Borrowings are stated net of the associated costs of raising the finance. Such
finance costs are charged to the profit and loss account over the term of the
related borrowing, increasing the outstanding borrowing to the amount of the
debt at the maturity date.
Warrants
Net proceeds from the issue of warrants are credited to equity upon issue. Where
warrants are issued in conjunction with debt, the net proceeds are allocated
between equity and debt based upon their respective fair values at the time of
issue.
27
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
2. SEGMENTAL ANALYSIS
Analyses by class of business of turnover, operating (loss)/profit and net
assets/(liabilities) are stated below.
The Information Services Division (ISD) was sold to Thomson Corporation in May
2000 and all segmental information disclosed below in respect of Information
Services is discontinued.
The composition of turnover is analysed as follows:
2000 1999
(Pounds)'000 (Pounds)'000
Information Services:
- - Usage sales 41,604 132,631
- - Subscription sales 2,605 8,891
- - CD-ROM sales 2,005 7,465
- - Other sales/(1)/ 2,930 16,146
------------ ------------
49,144 165,133
Web Solutions 5,947 7,917
eCommerce 2,496 1,402
Corporate 55 -
------------ ------------
57,642 174,452
============ ============
(1) Includes (Pounds)12.6 million in respect of the sale of exclusive
distribution rights in 1999.
The composition of operating (loss)/profit is analysed as follows:
Restated
2000 1999
(Pounds)'000 (Pounds)'000
Information Services (14) 18,258
Web Solutions (6,217) 2,220
eCommerce (9,509) (1,233)
Corporate (6,425) -
------------ ------------
(22,165) 19,245
============ ============
In 2000 the `Corporate' category relates to the Ventures division and corporate
overheads. Following the disposal of ISD, corporate overheads, including those
of the Ventures division, have been reported separately from the other
divisions.
The composition of net assets/(liabilities) is analysed as follows:
Restated
2000 1999
(Pounds)'000 (Pounds)'000
Information Services - 57,632
Web Solutions (5,501) 1,294
eCommerce (7,526) (318)
Corporate 13,180 -
------------ ------------
153 58,608
Unallocated net assets/(liabilities) 16,529 (161,679)
------------ ------------
16,682 (103,071)
============ ============
Unallocated net assets/(liabilities) comprise cash deposits and borrowings.
28
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
2. SEGMENTAL ANALYSIS (continued)
The geographical composition of turnover by source is analysed as follows:
2000 1999
(Pounds)'000 (Pounds)'000
United Kingdom 11,414 22,764
North America 38,697 131,997
Continental Europe 7,531 15,271
Rest of the World - 4,420
------------ ------------
57,642 174,452
============ ============
The geographical composition of turnover by destination is analysed as follows:
2000 1999
(Pounds)'000 (Pounds)'000
United Kingdom 11,892 21,661
North America 30,289 80,626
Continental Europe 9,390 26,234
Rest of the World 6,071 45,931
------------ ------------
57,642 174,452
============ ============
The geographical composition of operating (loss)/profit is analysed as follows:
Restated
2000 1999
(Pounds)'000 (Pounds)'000
United Kingdom (24,279) (9,859)
North America 882 31,559
Continental Europe 1,325 (2,088)
Rest of the World (93) (367)
------------ -----------
(22,165) 19,245
============ ===========
The operating (loss)/profit for the United Kingdom for the periods under review
includes the central costs associated with the Group's worldwide head office
functions.
The composition of net assets/(liabilities) by location is presented on a basis
consistent with the segmental analysis of operating profit/(loss). The assets in
any location are not necessarily matched with the turnover in that location. The
net assets and total assets for the United Kingdom for the periods under review
include those associated with the Group's worldwide head office functions.
29
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
The geographical composition of net assets/(liabilities) is analysed as follows:
Restated
2000 1999
(Pounds)'000 (Pounds)'000
United Kingdom (127) 14,971
North America 293 40,756
Continental Europe (13) 2,460
Rest of the World - 421
----------- -----------
Net operating assets 153 58,608
Unallocated net liabilities 16,529 (161,679)
----------- -----------
16,682 (103,071)
=========== ===========
3. STAFF NUMBER AND COSTS
Staff costs (including Directors) consist of:
2000 1999
(Pounds)'000 (Pounds)'000
Wages and salaries 18,024 34,091
Social security costs 1,887 3,878
Other pension costs 499 945
----------- -----------
20,410 38,914
=========== ===========
The average number of full-time employees during the year was:
2000 1999
Number Number
United Kingdom 250 308
North America 178 560
Continental Europe 37 110
Rest of the World 11 74
----------- -----------
476 1,052
=========== ===========
Pension arrangements
The Group operates defined contribution pension schemes in the UK. The pension
cost charge represents contributions payable by the Group to the funds and
amounted to (Pounds)499,000 (1999: (Pounds)945,000). The assets of all the
schemes are held by independent custodians and kept entirely separate from the
assets of the Group.
30
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
4. OPERATING (LOSS)/PROFIT
This is arrived at after charging/(crediting):
Restated
2000 1999
(Pounds)'000 (Pounds)'000
Hire of plant and machinery - operating leases 1,163 60
Hire of other assets - operating leases 1,990 4,613
Depreciation:
- - on owned assets 2,707 6,964
- - on leased assets 2 518
- - impairment of tangible fixed assets 953 -
Amortisation/write-off:
- - of development costs 3,623 9,047
- - of goodwill 617 415
- - impairment of intangible fixed assets 295 -
Auditors' remuneration 110 252
Exceptional provision for diminution of goodwill 4,084 -
Gain on foreign currency translations 48 (119)
Loss on disposal of fixed assets 195 631
=========== ===========
The auditors' remuneration includes amounts in respect of the parent company for
the year ended 31 December 2000 of (Pounds)60,000 (1999: (Pounds)100,000)
Additional fees paid to PricewaterhouseCoopers for non-audit services amounted
to (Pounds)978,000 in 2000 (1999: (Pounds)52,000)
The exceptional provision of (Pounds)4.1 million is against the carrying value
of goodwill in it's eCommerce division, arising principally in the Write Works
acquisition (see note 13).
The loss for the year attributable to shareholders, dealt with in the accounts
of Bright Station plc, is:
Restated
2000 1999
(Pounds)'000 (Pounds)'000
(35,027) (103,843)
----------- -----------
As permitted by Section 230 of the Companies Act 1985, the profit and loss
account of the company is not presented.
5. EXCEPTIONAL ITEMS CHARGED AFTER OPERATING (LOSS)/PROFIT
2000
The Information Services Division was disposed of on 4 May 2000. The loss on
disposal of this division was (Pounds)101.7 million. Further information on this
loss is provided in note 6 to these financial statements.
It is estimated that this disposal gives rise to a tax capital loss of
approximately (Pounds)51 million.
1999
The provision for closure of business of (Pounds)911,000 booked during the year
ended 31 December 1999 relates to the closure of its former subsidiary
distributor in Japan, KMK DigiTex Co. Limited.
31
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
6. LOSS ON DISPOSAL OF INFORMATION SERVICES DIVISION
On 4 May 2000, the Company disposed of its Information Services Division to
Thomson and realised a loss on disposal of (Pounds)101.7 million. The loss arose
as follows:
2000
(Pounds)'000
Net proceeds 175,428
Less:
Net assets disposed of (see below) (43,637)
Goodwill previously written off to reserves (227,854)
Unamortised finance costs (5,625)
-----------
(101,688)
===========
Net assets disposed of:
Fixed assets 45,569
Current assets 41,302
Current liabilities (34,567)
Long-term liabilities (8,087)
Minority interests (580)
-----------
43,637
===========
7. AMOUNTS WRITTEN OFF INVESTMENTS
2000
For the year ended 31 December 2000, the Company has reviewed the carrying
amount of its investments, and has provided (Pounds)1.9 million against the
carrying value of its portfolio of minority investments.
1999
The amounts written off investments during the year ended 31 December 1999
comprised (Pounds)3.2 million in respect of the Company's remaining investment
in eHotel (formerly 4th Network), reflecting further delays in its proposed
initial public offering. In addition, a provision of (Pounds)1.4 million was
made against the Company's investment in Frost and Sullivan Electronic
Distribution LLC reflecting concerns over the value of certain of its exclusive
online distribution rights.
8. INTEREST PAYABLE AND SIMILAR CHARGES
2000 1999
(Pounds)'000 (Pounds)'000
Bank loans and overdrafts:
- - on Senior Subordinated Notes 4,151 12,268
- - on Senior Credit Facility 1,769 4,585
- - amortisation of debt fees 500 1,274
- - on bank overdrafts 46 78
- - other 168 59
----------- -----------
6,634 18,264
Finance leases 25 105
Exchange gains on foreign currency deposits - (3)
----------- -----------
6,659 18,366
=========== ===========
32
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
9. DIRECTORS' EMOLUMENTS AND INTERESTS IN ORDINARY SHARES
2000 1999
(Pounds)'000 (Pounds)'000
Aggregate emoluments 2,248 1,233
Compensation to past Directors for loss of office/(1)/ - 154
Amounts paid to third parties/(2)/ - 33
Amounts paid to former Directors for consultancy work/(3)/ 22 11
Contributions to defined contribution pension schemes 14 25
----------- -----------
2,284 1,456
=========== ===========
/(1)/ Derek Smith resigned on 2 February 1999 and received (Pounds)153,600 in
respect of the termination of his service contract.
/(2)/ The amounts disclosed as paid to third parties were fees for the Non-
executive services of Michael Mander, paid to his primary employer, Close
Brothers Corporate Finance Ltd.
/(3)/ Michael Mander resigned as a Non-executive Director on 1 July 1999. He
was paid (Pounds)22,000 during 2000 for services provided under a
consultancy agreement (1999: (Pounds)11,000).
Details of the full cost of the remuneration package of each of the Director's
for the year ended 31 December 2000 are as follows:
Emoluments Pension
Fees Salary Benefits Bonus contributions 2000 1999
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
I Barton 25,000 - - - - 25,000 25,000
M Hussey
(to 5 September 2000) 16,955 - - - - 16,955 25,000
R Lomnitz/(1)/
(from 22 December 2000) - 3,000 140 - 157 3,297 -
S Maller (to 4 May 2000) - 40,000 2,333 50,000 - 92,333 127,026
D Mattey/(1)/ - 166,666 17,676 236,500 6,892 427,734 183,262
J Molle (to 4 May 2000) - 62,285 2,304 96,000 - 160,589 176,296
C Morton/(1)/
(to 4 May 2000) - 50,000 3,688 100,000 2,000 155,688 161,705
P Sommers/(2)(3)(4)/ 27,072 76,651 4,460 673,120 2,044 783,347 228,868
R Swank
(to 4 December 2000) 27,670 - - - - 27,670 20,233
A Thomas 65,000 - - - - 65,000 51,664
D Wagner/(1)/ - 196,666 25,096 280,000 2,500 504,262 214,407
-------- -------- -------- --------- -------- --------- ---------
161,697 595,268 55,697 1,435,620 13,593 2,261,875 1,213,461
======== ======== ======== ========= ======== ========= =========
/(1)/ Four Directors were members of the Company's defined contribution pension
scheme in the UK.
/(2)/ One Director was a member of the Company's defined contribution pension
scheme in the US.
The Company made contributions totalling (Pounds)11,549 to the UK scheme and
(Pounds)2,044 to the US scheme on behalf of Directors in 2000.
On 4 May 2000 the Company completed the sale of the ISD to Thomson Corporation.
On this date, Stephen Maller, Jason Molle and Ciaran Morton transferred to
Thomson Corporation and resigned as Directors of the Company. At the same date,
Patrick Sommers became a Non-executive Director of the Company upon the transfer
of his employment to Thomson Corporation. During the year, bonuses were paid to
the Executive Directors in respect of the sale of the ISD, the successful
repayment of the Company's debt and, where applicable, the restructuring and
formation of Bright Station plc. Bonuses payable in 2001 but relating to 2000
are also included in the table, being (Pounds)90,000 to Daniel Wagner and
(Pounds)76,500 to David Mattey.
/(3)/ Patrick Sommers' bonus includes a sum of (Pounds)480,800 paid on
completion of the ISD sale. In addition, he was issued with 71,361 ADSs,
credited as fully paid at a price of $10.51 per ADS.
33
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
This is equivalent to 285,444 Ordinary shares. Patrick Sommers was
restricted from disposing of these shares for a period of 12 months from
the date of issue.
(4) Patrick Sommers was the highest paid Director on the Board during the year
ended 31 December 2000.
Benefits include P11D benefits (non-cash compensation) for the UK Directors, as
discussed in the Remuneration Committee Report.
The following beneficial interests of the Directors of the Company are shown in
the register maintained by the Company in accordance with the Companies Act
1985:
Interests in Ordinary Shares
1 January 31 December % of issued
2000 or, if 2000, or if shares as at
later, on earlier, on 31 December
Name of beneficial owner appointment Acquisitions retirement 2000
I Barton/(1)/ 479,139 - 479,139 0.28
M Hussey (to 5 September 2000) 242,610 - 242,610 0.14
R Lomnitz/(1)/ (from 22 December 2000) 94,500 - 94,500 0.05
S Maller (to 4 May 2000) 25,441 - 25,441 0.02
D Mattey/(1)/ 2,335,200 - 2,335,200 1.35
J Molle (to 4 May 2000) 135,116 - 135,116 0.08
C Morton (to 4 May 2000) 202,001 - 202,001 0.12
P Sommers/(1)/(2)/ 48,000* 290,496 338,496 0.20
R Swank (to 4 December 2000) 32,000* - 32,000 0.02
A Thomas/(1)/ 100,000 - 100,000 0.06
D Wagner/(1)/ 17,434,780 - 17,434,780 10.10
----------- ----------- ----------- ------------
Total 21,128,787 290,496 21,419,283 12.42
----------- ----------- ----------- ------------
* held as American Depositary Shares, one ADS being equivalent to four Ordinary
shares
(1) The interests of the current Directors in the Company's share capital
remained unchanged at 12 June 2001.
(2) On exercise of his options under offers 3 and 4 of the Employee Stock
Purchase Plan, Patrick Sommers had unrealised net gains of (Pounds)248 and
(Pounds)1,225 respectively.
Apart from Daniel Wagner, Prudential plc and Thomson Finance S.A., to the
Company's knowledge, no other person is the owner of more than 5% of the
outstanding Ordinary Shares nor is the Company directly or indirectly owned or
controlled by any other corporation or any government.
The percentages of shares held by each Director are shown based on the Ordinary
Share Capital outstanding of 172,614,502 as at 31 December 2000.
34
Bright Station Plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
9. DIRECTORS' EMOLUMENTS AND INTERESTS IN ORDINARY SHARES (continued)
Options over Ordinary Shares
At
At 1 January 31 December
2000, or if 2000, or if
later, on Granted earlier, on Exercise Exercis- Exercis-
Scheme appointment (Cancelled) Exercised retirement price able from able to
I Barton - - - - - - - -
M Hussey - - - - - - - -
R Lomnitz Executive Scheme 32,000 - - 32,000 (Pounds)0.935 04/05/03 04/05/10
Unapproved Scheme 23,000 - - 23,000 (Pounds)0.935 04/05/03 04/05/07
S Maller SAYE Scheme/(3)/ 7,040 - - 7,040 (Pounds)0.490 01/12/99 31/05/00
SAYE Scheme/(3)/ 2,156 - - 2,156 (Pounds)0.640 04/05/00 04/11/00
SAYE Scheme/(3)/ 308 - - 308 (Pounds)2.240 04/05/00 04/11/00
SAYE Scheme/(3)/ 766 - - 766 (Pounds)1.800 04/05/00 04/11/00
SAYE Scheme/(3)/ 569 - - 569 (Pounds)1.370 04/05/00 04/11/00
SAYE Scheme/(3)/ 1,174 - - 1,174 (Pounds)0.990 04/05/00 04/11/00
Unapproved Scheme/(4)/ 30,000 - - 30,000 (Pounds)1.885 14/03/00 04/05/01
Unapproved Scheme/(4)/ 30,000 - - 30,000 (Pounds)1.730 04/05/00 30/04/02
Unapproved Scheme/(4)/ 120,000 - - 120,000 (Pounds)1.500 04/05/00 08/10/02
Executive Scheme/(4)/ 62,727 - - 62,727 (Pounds)1.100 24/03/97 04/05/01
Executive Scheme/(4)/ 20,000 - - 20,000 (Pounds)0.800 25/04/98 04/05/01
Executive Scheme/(4)/ 17,500 - - 17,500 (Pounds)2.480 04/10/98 04/05/01
Unapproved Scheme/(4)/ 250,000 - - 250,000 (Pounds)4.000 04/05/00 02/07/03
D Mattey SAYE Scheme 17,045 (17,045) - - (Pounds)0.990 01/07/04 31/12/04
SAYE Scheme - 31,839 - 31,839 (Pounds)0.530 01/12/00 31/05/06
Unapproved Scheme 30,000 - - 30,000 (Pounds)1.730 30/04/01 30/04/05
Unapproved Scheme 120,000 - - 120,000 (Pounds)1.500 08/10/01 08/10/05
Unapproved Scheme - 50,000 - 50,000 (Pounds)0.935 04/05/03 04/05/07
Executive Scheme 122,727 - - 122,727 (Pounds)1.100 24/03/97 24/03/04
Unapproved Scheme 325,000 - - 325,000 (Pounds)4.000 02/07/02 02/07/06
J Molle Unapproved Scheme/(4)/ 54,545 - - 54,545 (Pounds)1.100 24/03/97 04/05/01
Unapproved Scheme/(4)/ 17,500 - - 17,500 (Pounds)2.480 04/10/98 04/05/01
Unapproved Scheme/(4)/ 30,000 - - 30,000 (Pounds)1.885 14/03/00 04/05/01
US Stock Option Plan/(1)/ 30,000 - - 30,000 (Pounds)1.730 30/04/99 30/04/02
US Stock Option Plan/(1)/ 120,000 - - 120,000 (Pounds)1.500 08/10/99 08/10/02
Employee Stock Purchase
Plan/(2)/ 5,276 - - 5,276 (Pounds)0.560 05/05/00 05/05/00
US Stock Option Plan/(1)/ 250,000 - - 250,000 (Pounds)4.000 04/05/00 02/07/03
Unapproved Scheme/(4)/ 50,000 - - 50,000 (Pounds)4.000 04/05/00 02/07/03
C Morton SAYE Scheme/(3)/ 35,204 - - 35,204 (Pounds)0.490 01/12/99 31/05/00
Unapproved Scheme/(4)/ 17,500 - - 17,500 (Pounds)2.480 04/10/98 04/05/01
Unapproved Scheme/(4)/ 30,000 - - 30,000 (Pounds)1.885 14/03/00 04/05/01
Unapproved Scheme/(4)/ 30,000 - - 30,000 (Pounds)1.730 04/05/00 30/04/02
Unapproved Scheme/(4)/ 120,000 - - 120,000 (Pounds)1.500 04/05/00 08/10/02
Executive Scheme/(4)/ 61,364 - - 61,364 (Pounds)1.100 24/03/97 04/05/01
Unapproved Scheme/(4)/ 300,000 - - 300,000 (Pounds)4.000 04/05/00 02/07/03
P Sommers US Stock Option Plan/(1)/ 200,000 - - 200,000 (Pounds)1.500 08/10/99 08/10/08
US Stock Option Plan/(1)/ 200,000 - - 200,000 (Pounds)0.900 02/07/00 02/07/09
US Stock Option Plan/(1)/ - 200,000 - 200,000 (Pounds)0.935 04/05/01 04/05/10
Employee Stock Purchase
Plan/(2)/ 2,352 (428) (1,924) - (Pounds)0.820 05/05/00 05/05/00
Employee Stock Purchase
Plan/(2)/ 5,276 (2,148) (3,128) - (Pounds)0.560 05/05/00 05/05/00
Unapproved Scheme/(4)/ 600,000 - - 600,000 (Pounds)4.000 04/05/00 02/07/03
Individual arrangement - 285,444 - 285,444 (Pounds)1.700 05/05/01 05/05/07
R Swank Individual arrangement 26,844 - - 26,844 (Pounds)2.200 14/11/98 14/11/04
Individual arrangement 16,928 - - 16,928 (Pounds)1.850 08/09/99 08/09/05
A Thomas - - - - - - - -
D Wagner SAYE Scheme 17,045 (17,045) - - (Pounds)0.990 01/07/04 31/12/04
SAYE Scheme - 31,839 - 31,839 (Pounds)0.530 01/12/00 31/05/06
Unapproved Scheme 30,000 - - 30,000 (Pounds)1.730 30/04/01 30/04/05
Unapproved Scheme 130,000 - - 130,000 (Pounds)1.500 08/10/01 08/10/05
Unapproved Scheme - 50,000 - 50,000 (Pounds)0.935 04/05/03 04/05/07
Executive Scheme 163,636 - - 163,636 (Pounds)1.100 24/03/97 24/03/04
--------- -------- ------- ---------
Grand Total 3,755,482 612,456 (5,052) 4,362,886
========= ======== ======= =========
35
Bright Station Plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
/(1)/ Under the terms of the US Stock Option Plan, options are granted in the
form of ADSs at an exercise price expressed in US Dollars. Options
granted under the US Stock Option Plan become exercisable in cumulative
increments as determined by the Remuneration Committee of the Board of
Directors. For the purpose of uniformity, all options detailed above are
expressed in Ordinary shares and in Pounds Sterling.
On 4 May 2000, when Jason Molle transferred to Thomson, his options held under
the US Stock Option Scheme became immediately exercisable, remaining so until
the later of:
. 12 months after the date of transfer, being 4 May 2001, or;
. the fourth anniversary after the date of grant
/(2)/ Under the terms of the Employee Stock Purchase Plan, rights were granted
for eligible US employees to acquire beneficial ownership of Ordinary
shares of the Company by purchasing ADSs. The purchase price may not be
less than the lower of 85% of the fair market value of the ADSs on:
. the offering date, or;
. the purchase date
The total purchase price is met by accumulated payroll deductions over the
course of the offering. All rights to purchase ADSs under the ESPP matured on
completion of the ISD sale, whereupon they lapsed. For the purpose of
uniformity, all rights to purchase ADSs under the ESPP detailed above are
expressed in Ordinary shares and in Pounds Sterling. On exercise of his options
under the ESPP3 and ESPP4 plans, Patrick Sommers made net gains of (Pounds)248
and (Pounds)1,225 respectively.
/(3)/ Following the transfer of Stephen Maller and Ciaran Morton to Thomson,
all outstanding options under the SAYE Scheme became immediately
exercisable (to the value of accumulated savings at the date of transfer)
and remained exercisable for six months, whereupon they lapsed.
/(4)/ On completion of the ISD sale, options held under the Executive Scheme
and Unapproved Scheme by Stephen Maller, Jason Molle, Ciaran Morton and
Patrick Sommers became immediately exercisable and remain so for a period
of 12 months commencing on the later of:
. the date of transfer, being 4 May 2000, or;
. the third anniversary after the date of grant
Long Term Incentive Plan Awards
Granted At 31
during December Exercisable Exercisable
2000 2000 from to
R Lomnitz 382,353 382,353 29/09/03 29/10/03
D Mattey 500,000 500,000 29/09/03 29/10/03
D Wagner 588,235 588,235 29/09/03 29/10/03
The first grant under the Long Term Incentive Plan was made on 29 September
2000. Release of the Restricted Share Awards detailed above is contingent on
achievement of the pre-determined performance criteria set out in note 21 and on
payment by the LTIP-holder to the Company of any employer's National Insurance
liability arising thereon.
The mid market price of the Company's Ordinary shares on 29 December 2000, the
last trading day in 2000, was 23.5(pence) per share and the range during 2000
was 23.5(pence) to 232.5(pence) per share. Further details of the Company's
share option schemes are set out in note 21 to the financial statements.
None of the Directors have notified the Company of a beneficial interest in any
other shares, transactions or arrangements that would require disclosure in the
financial statements.
36
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS(continued)
10. TAXATION ON LOSS ON ORDINARY ACTIVITIES
2000 1999
(Pounds)'000 (Pounds)'000
UK Corporation tax at 30% (1999: 31%) 10 (65)
Overseas tax 166 1,413
Adjustment relating to earlier years 71 156
Deferred tax charge/(credit) 24 (26)
----------- -----------
Tax charge 271 1,478
============ ===========
11. (LOSS)/EARNINGS PER SHARE
Restated
2000 1999
Attributable loss ((Pounds)) (132,002,000) (5,874,000)
Weighted average number of ordinary shares in issue (no.) 166,572,662 151,928,606
=========== ===========
Loss per share (pence) (79.2) (3.9)
=========== ===========
12. INTANGIBLE FIXED ASSETS
Group Company
(Pounds)'000 (Pounds)'000
Cost
At 31 December 1999 - as previously reported 55,840 17,360
Prior year adjustment (see note 12a) (1,152) (818)
----------- -----------
As restated at 31 December 1999 54,688 16,542
Additions 2,896 489
Disposed of with ISD (58,346) (16,665)
Exchange adjustments 1,128 -
----------- -----------
At 31 December 2000 366 366
=========== ===========
Amortisation
At 31 December 1999 - as previously reported 28,810 12,461
Prior year adjustment (see note 12a) (376) (259)
----------- -----------
As restated at 31 December 1999 28,434 12,202
Provision for year 3,918 926
Disposed of with ISD (32,583) (12,762)
Exchange adjustments 597 -
----------- -----------
At 31 December 2000 366 366
=========== ===========
Net book amount
At 31 December 2000 - -
=========== ===========
As restated at 31 December 1999 26,254 4,340
=========== ===========
(a) During the year the Company changed its accounting policy for the
eCommerce, Web Solutions and Ventures divisions, as disclosed in note 1 to
these financial statements, such that development costs associated with
these divisions are expensed to the profit and loss account as incurred.
The results for 2000 have been prepared on this revised basis, while the
results for 1999 have been restated to reflect this policy change.
(b) The Company continues to capitalise intangible fixed assets that are
acquired from outside of the Group together with their associated purchase
costs.
37
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS(continued)
13. GOODWILL
Group
(Pounds)'000
Cost
At 31 December 1999 10,281
Additions 257
Disposed of with ISD (1,841)
Deferred consideration adjustment (1,342)
Exchange Adjustment 73
-----------
At 31 December 2000 7,428
===========
Amortisation
At 31 December 1999 476
Disposed of with ISD (113)
Provision for year 617
Exceptional provision for diminution in value 4,084
-----------
At 31 December 2000 5,064
===========
Net book amount
At 31 December 2000 2,364
===========
At 31 December 1999 9,805
===========
Write Works
On 18 November 1998, the Company acquired 100% of the share capital of Write
Works Limited in an agreement that capped the maximum consideration (payable in
cash and new Ordinary shares) at (Pounds)6,015,000, based on the achievement of
certain earnings targets over the following two financial years (see note 24).
An initial payment of (Pounds)2,152,000 was made on 18 November 1998 (consisting
of cash of (Pounds)1,000,000 and the issue of 694,025 new Ordinary shares at a
price of (Pounds)1.66 per share).
Due to the failure to meet certain of the earnings targets, the remaining
deferred consideration was reduced and further consideration of
(Pounds)1,674,000 (consisting of (Pounds)1,260,000 in cash and the issue of
428,796 new Ordinary shares at a price of (Pounds)0.96 per share) was paid on 11
May 2000. A supplemental agreement was made with the vendors on 20 July 2000
leading to a further cash payment of (Pounds)156,000 on 20 July 2000 and a final
consideration of (Pounds)584,000 (consisting of (Pounds)450,180 in cash and the
issue of 712,959 new Ordinary shares at a price of 18.8 pence per share) on 15
April 2001.
These adjustments to the consideration gave rise to a reduction of
(Pounds)1,342,000 to goodwill.
In view of the trading performance of the eCommerce division, subsequently
supported by the decision to terminate the eCommerce operations, the Company has
made an exceptional provision of (Pounds)4,084,000 against the carrying value of
the remaining goodwill balance associated with the acquisition of Write Works
Limited.
Muscat
The residual goodwill relates to Muscat Limited, which was acquired on 14 August
1997. On 1 December 1999, the Company announced that it had acquired the
remaining 30% minority interest in its UK subsidiary, Muscat Limited. The
consideration of (Pounds)2,500,737 was satisfied by the issue of 3,012,936
Ordinary Shares at (Pounds)0.83 per share.
The resultant goodwill of (Pounds)2,490,000 has been capitalised and will
subsequently be written off over 10 years as set out in Note 1.
38
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
14. TANGIBLE FIXED ASSETS
Leasehold Fixtures & Motor
improvements Equipment fittings vehicles Total
GROUP (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
COST
At 31 December 1999 3,219 29,914 2,774 362 36,269
Exchange adjustments 49 270 49 (3) 342
Additions 10 2,526 9 - 2,545
Disposals (376) (798) (158) (142) (1,474)
Disposed of with ISD (1,857) (26,842) (2,127) (189) (31,015)
-------- -------- -------- -------- ---------
At 31 December 2000 1,022 5,070 547 28 6,667
======== ======== ======== ======== =========
Depreciation
At 31 December 1999 2,154 18,059 1,420 298 21,931
Exchange adjustments 12 115 16 (3) 140
Provided for the year 106 3,358 171 22 3,657
Disposals (358) (666) (65) (137) (1,226)
Disposed of with ISD (1,177) (16,907) (1,041) (155) (19,280)
-------- -------- -------- -------- ---------
At 31 December 2000 737 3,959 501 25 5,222
======== ======== ======== ======== =========
Net book amount
At 31 December 2000 285 1,111 46 3 1,445
======== ======== ======== ======== =========
At 31 December 1999 1,065 11,855 1,354 64 14,338
======== ======== ======== ======== =========
The provision for depreciation in the year ended 31 December 2000 includes an
amount of (Pounds)953,000 for the impairment of tangible fixed assets following
a review of the business by the Board of Directors resulting in a decision to
sell or terminate the Group's eCommerce division.
On 10 November 1999, the Company entered into an agreement with International
Computers Limited ("ICL") to outsource the operations of its data center in Palo
Alto, California for a period of seven years. In connection with this
transaction, the Company sold certain assets in the Palo Alto data centre with a
net book value of (Pounds)3,475,000 in return for cash of (Pounds)3,058,000 and
a reduction in outsourcing charges of (Pounds)1,451,000. As part of the disposal
of ISD any obligations arising under this arrangement will be recharged to
Thomson Corporation.
Equipment includes assets under finance leases of (Pounds)49,000 and
(Pounds)12,809,000 at 31 December 2000 and 1999, respectively. Accumulated
depreciation relating to equipment under finance leases totalled (Pounds)2,000
and (Pounds)7,554,000 at 31 December 2000 and 1999, respectively.
39
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
Leasehold Fixtures & Motor
improvements Equipment fittings vehicles Total
Company (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
Cost
At 31 December 1999 1,002 11,357 591 318 13,268
Transfers (to)/from
subsidiary undertakings (401) 126 123 (14) (166)
Additions 4 2,126 15 - 2,145
Disposals - (47) - (128) (175)
Disposed of with ISD (16) (8,814) (158) (163) (9,151)
--------- --------- --------- --------- ---------
At 31 December 2000 589 4,748 571 13 5,921
========= ========= ========= ========= =========
Depreciation
At 31 December 1999 657 9,664 498 266 11,085
Transfers (to)/from
subsidiary undertakings (247) 174 73 (14) (14)
Provided for the year 49 1,879 79 18 2,025
Disposals - (11) - (123) (134)
Disposed of with ISD 7 (7,872) (112) (137) (8,114)
--------- --------- --------- --------- ---------
At 31 December 2000 466 3,834 538 10 4,848
========= ========= ========= ========= =========
Net book amount
At 31 December 2000 123 914 33 3 1,073
========= ========= ========= ========= =========
At 31 December 1999 345 1,693 93 52 2,183
========= ========= ========= ========= =========
The net book amounts of assets held under finance leases at 31 December 2000 was
(Pounds)47,000 (1999: (Pounds)nil).
15. FIXED ASSET INVESTMENTS
(Pounds)'000
Group
At 31 December 1999 9,635
Additions 1,832
Amounts written off (note 7) (1,944)
Disposals (2,580)
Disposed of with ISD (6,343)
--------
At 31 December 2000 600
========
The additions during the year ended 31 December 2000 relate to minority
investments made by Bright Station Ventures in Internet related businesses.
The Company has provided (Pounds)1,944,000 against the carrying value of its
portfolio of minority investments in the year ended 31 December 2000.
Included within investments is the Company's investment in Sopheon plc, a
company listed on the Alternative Investment Market in London. This holding
arose following the acquisition of Teltech Resources Network Corporation (in
which the Company had an equity interest) by Sopheon plc for gross cash proceeds
of (Pounds)2,699,000 and the issue of 429,127 shares by Sopheon. At 31 December
2000 the carrying amount of the Company's investment in Sopheon was
(Pounds)300,000 and the market value was (Pounds)687,000.
40
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
15. FIXED ASSET INVESTMENTS (continued)
Long term
loans to
group
Investments companies Total
(Pounds)'000 (Pounds)'000 (Pounds)'000
Company
At 31 December 1999 63,221 123,301 186,522
Amounts written off (4,693) - (4,693)
Additions 3,291 - 3,291
Deferred consideration adjustment (1,342) - (1,342)
Disposals (2,581) (123,301) (125,882)
Disposed of with ISD (48,706) - (48,706)
Provisions for impairment (344) - (344)
Transfers to subsidiary undertakings (100) - (100)
----------- ----------- -----------
At 31 December 2000 8,746 - 8,746
=========== =========== ===========
The following companies were the Group's principal subsidiary undertakings as at
31 December 2000 and have all been included in the consolidated accounts. Each
subsidiary primarily does business in the country of its
incorporation/registration and all equity is in the form of Ordinary shares or
their equivalent.
Country of
incorporation/ Proportion of Nature of
Company name registration equity held business
Bright Station Ventures Ltd England 100% 1
Bright Station Contracts Ltd England 100% 2
KMK DigiTex Co. Ltd Japan 100% 3
OfficeShopper.com Holdings plc England 100% 4
OfficeShopper.com Ltd England 100% 5
Smartlogik Holdings plc England 100% 4
Smartlogik Inc USA 100% 6
Smartlogik Ltd England 100% 6
Sparza Ltd England 100% 7
WebTop.com Holdings plc England 100% 4
WebTop Search Ltd (formerly WebTop.com Ltd) England 100% 8
Key - Nature of business
1 Investment company
2 Dormant company
3 Dormant company in process of liquidation
4 Holding company
5 Provision of on-line office supplies
6 Provision of knowledge management technology
7 Provision of eCommerce procurement systems
8 Provision of indexing and search technology
41
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
16. DEBTORS
Group Company
2000 1999 2000 1999
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
Amounts falling due within one year
Trade debtors 1,268 30,362 435 6,417
Amounts owed by subsidiary undertakings - - 1,491 26,488
Other debtors 922 1,657 712 673
Prepayments and accrued income 1,067 4,671 777 1,680
----------- ----------- ----------- -----------
3,257 36,690 3,415 35,258
Amounts falling due in more than one year
Other debtors 53 - - -
----------- ----------- ----------- -----------
3,310 36,690 3,415 35,258
=========== =========== =========== ===========
Trade debtors for the Group are stated net of the allowance for doubtful trade
debtor balances which amounted to (Pounds)97,975 at 31 December 2000 (1999:
(Pounds)2,184,000).
Trade debtors for the Company are stated net of the allowance for doubtful trade
debtor balances which amounted to (Pounds)69,975 at 31 December 2000 (1999:
(Pounds)364,000).
17. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Group Company
2000 1999 2000 1999
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
Senior Credit Facility - 30,075 - 30,075
Amounts owed to subsidiary undertakings - - - 14,052
Trade creditors 2,914 8,095 1,878 2,806
Obligations under finance leases 20 1,813 20 1,729
Other creditors 952 4,030 945 3,704
Taxation and social security 958 1,008 704 782
Corporation tax - 556 - -
Accruals and deferred income 2,060 24,560 1,453 3,350
Deferred consideration - purchase of subsidiary
(see note 24) 450 1,437 450 1,437
----------- ----------- ----------- -----------
7,354 71,574 5,450 57,935
=========== =========== =========== ===========
18. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Group Company
2000 1999 2000 1999
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
$180 million 11% Senior Subordinated Notes due 2007 - 108,231 - 108,231
Senior Credit Facility - 22,835 - 22,835
Other creditors - 355 - -
Deferred consideration - purchase of subsidiary
(see note 24) - 1,396 - 1,396
Obligations under finance leases 17 4,553 17 3,283
---------- ----------- ---------- -----------
17 137,370 17 135,745
========== =========== ========== ===========
42
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
18. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR (continued)
Obligations under finance leases are due as follows:
Group Company
2000 1999 2000 1999
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
Within 1 year 20 1,813 20 1,729
Within 1 - 2 years 17 3,629 17 3,283
Within 2 - 5 years - 924 - -
----------- ----------- ----------- -----------
37 6,366 37 5,012
=========== =========== =========== ===========
19. PROVISION FOR LIABILITIES AND CHARGES
Termination
Deferred of property
taxation leases Legal Total
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
Group
At 31 December 1999 89 566 775 1,430
Reclassification to creditors - - (545) (545)
Transfer from/(to) profit and loss account 24 - (230) (206)
Disposed of with ISD (113) (566) - (679)
----------- ----------- ----------- -----------
At 31 December 2000 - - - -
=========== =========== =========== ===========
Deferred taxation
2000 2000 1999 1999
Potential Provided in Potential Provided in
Liability accounts Liability accounts
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
Group
Fixed asset related - - 2,704 -
Other timing differences - - 89 89
----------- ----------- ----------- -----------
- - 2,793 89
=========== =========== =========== ===========
At completion, the Group retains significant tax losses. The quantum of these is
not yet agreed with the Inland Revenue. Subject to the agreement of the Inland
Revenue, the total tax losses accrued at 31 December 2000 and their potential
future benefit can be summarised as follows:
. (Pounds)56 million of capital losses available to offset future capital
profits
. (Pounds)30 million of trading losses available to carry forward against
profits arising from the same trade, as determined by the Inland Revenue
. (Pounds)12 million of non-trading deficits available to offset future non-
trading profits.
2000 2000 1999 1999
Potential Provided in Potential Provided in
Liability accounts Liability accounts
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
Company
Fixed asset related - - 1,470 -
Other timing differences - - - -
----------- ----------- ----------- -----------
- - 1,470 -
=========== =========== =========== ===========
At 31 December 2000, the Company had approximately (Pounds)86.3 million of tax
losses carried forward (1999: (Pounds)13.2 million) giving rise to an unprovided
potential deferred tax asset of (Pounds)27.4 million (1999: (Pounds)3.9
million). Approximately (Pounds)56 million of these tax losses relate to the
capital loss arising on the disposal of ISD (see note 6).
43
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
20. FINANCIAL INSTRUMENTS
The Group's principal financial instruments comprise cash and short-term
deposits and finance leases as well as other financial instruments, such as
trade debtors and trade creditors, that arise directly from its operations.
The Group is exposed to a number of different market risks including interest
rates and foreign currency rates. The Board reviews and agrees policies to
manage each of these risks as follows:
Interest rate risk
The Group deposits surplus funds at fixed rates of interest for relatively short
maturities (less than one month).
Foreign currency risk
Given the relatively small scale of overseas operations, the Group has limited
foreign currency exposure. Foreign currencies are purchased in the spot market
as and when required.
Credit risk
The Group's policy is to place its cash and investments with high-quality
financial institutions in order to limit the amount of credit exposure. The
Group performs ongoing evaluations of its customers' financial condition and
maintains provisions against potential credit losses. Such losses, in the
aggregate, have not exceeded management expectations. Financial instruments
which expose the Group to credit risk are cash, investments and trade debtors,
which generally are not collateralised.
Liquidity risk
The Group maintains a balance between continuity of funding and flexibility
through the use of deposits with a short maturity of less than one month.
Short-term debtors and creditors have been excluded from this note as permitted
under FRS 13.
Interest rate risk profile of financial liabilities
The interest rate risk profile of financial liabilities of the Group at 31
December 2000 was as follows:
Fixed Floating
rate rate
financial financial Finance
liabilities liabilities leases Total
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
At 31 December 2000
Sterling - - (37) (37)
----------- ----------- ----------- -----------
Total - - (37) (37)
=========== =========== =========== ===========
At 31 December 1999
US Dollar 114,550 52,910 - 167,460
Euro related 47 - - 47
----------- ----------- ----------- -----------
Total 114,597 52,910 - 167,507
=========== =========== =========== ===========
44
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
20. FINANCIAL INSTRUMENTS (continued)
Interest rate risk profile of financial assets
The interest rate risk profile of financial assets of the Group at 31 December
2000 was as follows:
2000 1999
Cash and Cash and
bank bank
deposits deposits
(Pounds)'000 (Pounds)'000
Currency
Sterling 15,193 4,404
Euro related - 797
Japanese Yen 717 5,055
US Dollar 424 265
----------- -----------
Total 16,334 10,521
=========== ===========
At 31 December 2000, no deposits had a maturity of greater than one month. As
such, the Company considers the interest rate exposure of cash and bank deposits
to be floating.
The maturity profile of the Group's financial liabilities at 31 December 2000 is
shown in note 18 to the financial statements.
Fair values of financial assets and financial liabilities
In the opinion of the Directors, the carrying amount of cash and bank deposits
is a reasonable estimate of fair value and the market value of the finance lease
obligations approximates the carrying amount, having regard to the interest
rates available to the Group for similar borrowings at the balance sheet date.
45
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
21. SHARE CAPITAL
2000 1999
Number (Pounds)'000 Number (Pounds)'000
Authorised:
Ordinary shares of 1 pence each 250,000,000 2,500 199,827,000 1,998
=========== ===== =========== =====
Allotted, called up and fully paid:
Ordinary shares of 1 pence each 172,614,502 1,726 154,943,398 1,549
=========== ===== =========== =====
During the two years ended 31 December 2000, the following movements occurred in
the Ordinary Shares of the Company:
Shares Shares
Dates Event Number (Pounds)'000 Notes
As at 31 December 1998 151,467,107 1,514
01/02/99 to 02/12/99 Allotment of shares under the 401(k) Plan 246,620 3 (2)
29/06/99 Employee Stock Purchase Plan 132,248 1 (4)
29/11/99 to 17/12/99 Save As You Earn share option exercises 84,487 1 (5)
30/11/99 Acquisition of outstanding Muscat Ltd
share capital 3,012,936 30 (6)
----------- ------
As at 31 December 1999 154,943,398 1,549
04/01/00 to 05/05/00 Allotment of shares under the 401(k) Plan 68,844 1 (2)
10/01/00 to 19/07/00 Save As You Earn share option exercises 155,335 2 (5)
03/03/00 to 15/03/00 Exercise of share options 194,318 2 (1)
06/03/00 to 06/05/00 Exercise of stock options 31,196 - (7)
27/03/00 Exercise of Muscat share options 84,038 1 (8)
05/05/00 Allotment to JIYU Holdings Ltd 7,038,123 70 (9)
05/05/00 Allotment to Thomson Finance SA 9,297,290 93 (10)
05/05/00 Employee Stock Purchase Plan 87,720 1 (4)
10/05/00 Allotment to Patrick Sommers 285,444 3 (11)
11/05/00 Write Works Ltd acquisition - deferred
consideration 428,796 4 (3)
----------- ------
As at 31 December 2000 172,614,502 1,726
=========== ======
(1) Exercise of share options
A number of eligible employees exercised their share options at various dates
throughout 2000 in accordance with the Company's share option schemes.
Ordinary Total
Shares issued Price range consideration
Year
2000 194,318 (Pounds)1.10 to (Pounds)1.885 (Pounds)267,637
=========== ============================= ===============
(2) 401(k) Investment Savings Plan contributions
Until 2 May 2000, the Company operated a defined contribution pension scheme in
the US (the 401(k) Investment Savings Plan). The Company matched employee
contributions to this Plan at various dates throughout 1998, 1999 and 2000,
partially with the allotment of Ordinary shares valued at market price at the
time of issue and subsequently converted into ADSs.
Ordinary ADS Aggregate
Shares issued equivalent Price range market value
Year
1999 246,620 61,655 (Pounds)0.66 to (Pounds)1.24 (Pounds)203,596
2000 68,844 17,211 (Pounds)0.92 to (Pounds)1.63 (Pounds)80,108
============= ========== ============================ ===============
The Plan was terminated on 5 May 2000 due to the transfer of participants to
Thomson Corporation.
(3) Acquisition of Write Works Ltd
On 11 May 2000 interim consideration of (Pounds)1,674,000 (consisting of
(Pounds)1,260,000 in cash and the issue of 428,796 new Ordinary shares at a
price of (Pounds)0.96 per share) was paid (see note 13).
46
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
21. SHARE CAPITAL (continued)
(4) Employee Stock Purchase Plan
The Company operated an Employee Stock Purchase Plan for US employees as defined
by section 423(b) of the United States Internal Revenue Code of 1986.
Ordinary ADS Aggregate
Shares issued equivalent market value
Year
1999 132,248 33,062 (Pounds)120,346
2000 87,720 21,930 (Pounds)57,850
========== ========== ===============
(5) Save As You Earn option exercises
At various dates throughout 1999 and 2000, in accordance with the Company's Save
As You Earn Option Scheme, a number of eligible employees exercised their share
options.
Ordinary Total
Shares issued Price range consideration
Year
1999 84,487 (Pounds)0.49 (Pounds)41,399
2000 155,335 (Pounds)0.49 to (Pounds)0.64 (Pounds)79,348
=========== ============================ ==============
(6) Acquisition of outstanding Muscat share capital
On 1 December 1999, the Company announced the acquisition of the remaining 30%
interest in the share capital of Muscat Ltd. The purchase consideration was
(Pounds)2,500,737, satisfied by the issue of 3,012,936 Ordinary shares of the
Company. The Ordinary shares were valued at (Pounds)0.83 each, being the average
mid-market price of Ordinary shares of the Company over the five trading days
prior to 30 November 1999. The Company originally acquired 70% of Muscat Ltd in
1997.
(7) Exercise of stock options
A number of eligible employees exercised their options over ADSs at various
dates throughout 2000 in accordance with the Company's US Stock Option Scheme.
The options were exercised at prices between (Pounds)0.78 and (Pounds)1.87 per
share for a total consideration of (Pounds)31,019.
(8) Exercise of Muscat share options
On 27 March 2000, 84,038 share options were exercised in accordance with the
Muscat Unapproved Share Option Scheme at a price of (Pounds)0.43, representing a
total consideration of (Pounds)36,136.
(9) JIYU Holdings Ltd
On completion of the ISD sale, JIYU Holdings Ltd, a private investment company
unconnected to any of the Company's existing shareholders or investors,
subscribed for 7,038,123 new Ordinary shares at a price of 170.5p per share, for
an aggregate cash consideration of (Pounds)12.0 million. During the year, JIYU
Holdings Ltd transferred their holding to B D Holdings Ltd, another company in
the same Group.
(10) Thomson Finance SA
Following the ISD sale, Thomson Finance SA agreed to subscribe for 9,297,290 new
Ordinary shares in the Company at 170.5p per share, representing an aggregate
cash consideration of (Pounds)15.9 million.
(11) Patrick Sommers
As shown in note 9 to the financial statements, Patrick Sommers was allotted
71,361 ADSs on completion of the ISD sale credited as fully paid at a price of
$10.51 per ADS, being the average mid-market closing price for ADSs during the
period 2 March 2000 to 13 April 2000. This allotment is equivalent to 285,444
ordinary shares. Patrick Sommers was restricted from disposing of these shares
for a period of 12 months from the date of issue.
47
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
As at 31 December 2000, the Company had in place five option plans; the 1994
Executive Share Option Scheme, the 1994 Savings Related Share Option Scheme, the
1994 Unapproved Executive Share Option Scheme, the 1997 US Stock Option Plan and
the 1998 Employee Stock Purchase Plan. Options over the Company's Ordinary
shares were also granted as part of a rollover arrangement with employees of
Muscat Ltd and options over American Depositary Shares were granted to certain
Non-executive Directors of a US subsidiary under individual arrangements.
Additionally, restricted share awards have been made under the Long Term
Incentive Plan established on 5 September 2000.
At 31 December 2000, the following options are outstanding over the Company's
shares:
Executive Scheme
Date of Exercise Normal exercise ISD employee Options Options
Grant price period exercise period outstanding outstanding
2000 1999
24/03/1994 (Pounds)1.10 24/03/97 to 24/03/04 350,454 680,863
24/03/1994 (Pounds)1.10 24/03/97 to 04/05/01 263,591 -
25/04/1995 (Pounds)0.80 25/04/98 to 25/04/05 - 20,000
25/04/1995 (Pounds)0.80 25/04/98 to 04/05/01 20,000 -
04/10/1995 (Pounds)2.48 04/10/98 to 04/10/05 40,500 134,500
04/10/1995 (Pounds)2.48 04/10/98 to 04/05/01 91,000 -
14/03/1997 (Pounds)1.89 14/03/00 to 14/03/07 47,980 103,880
14/03/1997 (Pounds)1.89 14/03/00 to 04/05/01 32,500 -
09/04/1998 (Pounds)1.58 09/04/01 to 09/04/08 67,950 214,900
09/04/1998 (Pounds)1.58 04/05/00 to 09/04/02 123,450 -
01/04/1999 (Pounds)1.21 01/04/02 to 01/04/09 36,892 158,832
01/04/1999 (Pounds)1.21 04/05/00 to 01/04/03 96,940 -
02/07/1999 (Pounds)0.91 02/07/02 to 02/07/09 25,000 53,450
02/07/1999 (Pounds)0.91 04/05/00 to 02/07/03 8,450 -
25/08/1999 (Pounds)0.74 25/08/02 to 25/08/09 - 30,000
25/08/1999 (Pounds)0.74 04/05/00 to 25/08/03 20,000 -
04/05/2000 (Pounds)0.94 04/05/03 to 04/05/10 436,550 -
05/09/2000 (Pounds)0.70 05/09/03 to 05/09/10 69,805 -
---------- ----------
Total 1,731,062 1,396,425
========== ==========
48
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
21. SHARE CAPITAL (continued)
Unapproved Scheme
Date of Exercise Normal exercise ISD employee Options Options
Grant price period exercise period outstanding outstanding
2000 1999
24/03/1994 (Pounds)1.10 24/03/97 to 24/03/01 - 128,863
24/03/1994 (Pounds)1.10 24/03/97 to 04/05/01 128,863 -
04/10/1995 (Pounds)2.48 04/10/98 to 04/10/02 7,500 105,500
04/10/1995 (Pounds)2.48 04/10/98 to 04/05/01 90,500 -
02/01/1996 (Pounds)2.29 02/01/99 to 02/01/03 - 21,834
28/02/1996 (Pounds)1.75 28/02/99 to 28/02/03 15,000 15,000
16/08/1996 (Pounds)2.87 16/08/99 to 16/08/03 25,000 120,000
16/08/1996 (Pounds)2.87 16/08/99 to 04/05/01 60,000 -
14/03/1997 (Pounds)1.89 14/03/00 to 14/03/04 137,020 448,620
14/03/1997 (Pounds)1.89 14/03/00 to 04/05/01 265,000 -
26/03/1997 (Pounds)2.00 26/03/00 to 26/03/04 7,500 7,500
09/04/1998 (Pounds)1.58 09/04/01 to 09/04/05 146,050 376,600
09/04/1998 (Pounds)1.58 04/05/00 to 09/04/02 206,050 -
30/04/1998 (Pounds)1.73 30/04/01 to 30/04/05 90,000 150,000
30/04/1998 (Pounds)1.73 04/05/00 to 30/04/02 60,000 -
08/09/1998 (Pounds)1.70 08/09/01 to 08/09/05 10,000 10,000
08/10/1998 (Pounds)1.50 08/10/01 to 08/10/05 400,000 790,000
08/10/1998 (Pounds)1.50 04/05/00 to 08/10/02 240,000 -
01/04/1999 (Pounds)1.21 01/04/02 to 01/04/06 58,108 261,168
01/04/1999 (Pounds)1.21 04/05/00 to 01/04/03 173,060 -
02/07/1999 (Pounds)0.91 02/07/02 to 02/07/06 75,000 86,550
02/07/1999 (Pounds)0.91 04/05/00 to 02/07/03 11,550 -
02/07/1999 (Pounds)4.00 02/07/02 to 02/07/06 925,000 1,525,000
02/07/1999 (Pounds)4.00 04/05/00 to 02/07/03 600,000 -
04/05/2000 (Pounds)0.94 04/05/03 to 04/05/07 517,450 -
04/05/2000 (Pounds)0.94 04/05/00 to 04/05/04 53,000 -
05/09/2000 (Pounds)0.70 05/09/03 to 05/09/07 17,195 -
--------- ---------
Total 4,318,846 4,046,635
========= =========
Muscat Unapproved Scheme
Date of Exercise Normal exercise Options Options
Grant price period outstanding outstanding
2000 1999
01/10/1997 (Pounds)0.44 01/10/00 to 01/10/04 128,270 128,270
20/10/1997 (Pounds)0.43 20/10/99 to 20/10/04 - 168,077
01/01/1998 (Pounds)0.59 01/01/01 to 01/01/05 44,231 88,462
01/04/1998 (Pounds)0.67 01/04/01 to 01/04/05 103,206 132,693
01/09/1998 (Pounds)0.67 01/09/01 to 01/09/05 36,859 36,859
01/11/1998 (Pounds)0.67 01/11/01 to 01/11/05 - 58,974
01/12/1998 (Pounds)0.67 01/12/01 to 01/12/05 - 29,487
--------- ---------
Total 312,566 642,822
========= =========
49
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
Savings Related Share Option Scheme
Date of
Savings Exercise Normal exercise Options Options
Contract price period outstanding Outstanding
2000 1999
01/12/1994 (Pounds)0.49 01/12/99 to 31/05/00 - 133,774
01/06/1995 (Pounds)0.64 01/06/00 to 30/11/00 - 99,183
01/12/1995 (Pounds)2.24 01/12/00 to 31/05/01 - 2,464
01/06/1996 (Pounds)1.80 01/06/01 to 30/11/01 5,750 25,680
01/05/1997 (Pounds)1.74 01/05/02 to 31/10/02 - 2,378
01/07/1998 (Pounds)1.37 01/07/01 to 31/12/01 9,820 55,216
01/07/1998 (Pounds)1.37 01/07/03 to 31/12/03 7,554 37,869
01/07/1999 (Pounds)0.99 01/07/02 to 31/12/02 30,724 118,586
01/07/1999 (Pounds)0.99 01/07/04 to 31/12/04 21,135 128,108
01/12/2000 (Pounds)0.53 01/12/03 to 31/05/04 272,696 -
01/12/2000 (Pounds)0.53 01/12/05 to 31/05/06 84,054 -
--------- ---------
Total 431,733 603,258
========= =========
Long Term Incentive Plan Awards
Restricted Restricted
Share Share
Date of Exercise Normal exercise Awards Awards
Grant price/(1)/ period outstanding outstanding
2000 1999
29/09/2000 Fixed at time of exercise 29/09/03 to 29/10/03 2,926,470 -
19/12/2000 Fixed at time of exercise 19/12/03 to 19/01/04 260,000 -
--------- ---------
Total 3,186,470 -
========= =========
(1) The release of Restricted Share Awards is contingent on the achievement of
pre-determined performance criteria, set out in the latter part of this
note, and on payment by the employee to the Company of any employers'
National Insurance liability arising upon exercise.
At 31 December 2000, the following options are outstanding over the Company's
American Depositary Shares:
Employee Stock Purchase Plan
Date of
Savings Exercise Normal exercise Options Options
Contract price date outstanding outstanding
2000 1999
01/10/1998 $10.49 30/09/2000 - 4,577
23/04/1999 $ 8.50 22/04/2001 - 13,072
05/10/1999 $ 3.79 04/10/2000 - 32,134
--------- ---------
Total - 49,783
========= =========
50
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
21. SHARE CAPITAL (continued)
US Stock Option Plan
Date of Exercise Normal exercise ISD employee Options Options
Grant price period/(1)/ exercise period/(2)/ outstanding outstanding
2000 1999
09/04/1998 $ 11.00 09/04/99 to 09/04/08 8,625 94,375
09/04/1998 $ 11.00 09/04/99 to 09/04/02 3,125 -
30/04/1998 $ 11.88 30/04/99 to 30/04/08 - 7,500
30/04/1998 $ 11.88 30/04/99 to 30/04/02 7,500 -
08/09/1998 $ 11.81 08/09/99 to 08/09/08 - 18,000
08/10/1998 $ 9.90 08/10/99 to 08/10/08 65,000 110,000
08/10/1998 $ 9.90 08/10/99 to 08/10/02 30,000 -
01/04/1999 $ 8.00 01/04/00 to 01/04/09 10,000 147,750
01/04/1999 $ 8.00 01/04/00 to 01/04/03 11,250 -
02/07/1999 $ 5.75 02/07/00 to 02/07/09 50,000 90,000
02/07/1999 $ 25.74 02/07/02 to 02/07/06 37,500 162,500
02/07/1999 $ 25.74 04/05/00 to 02/07/03 62,500 -
25/08/1999 $ 4.75 25/08/00 to 25/08/09 - 6,250
04/05/2000 $ 3.74 04/05/01 to 04/05/10 58,000 -
----------- -----------
Total 343,500 636,375
=========== ===========
/(1)/ Options become exercisable in stages. After one year, up to 1/4 of the
number of options granted may be exercised. For the next three years 1/48
of the remaining options become exercisable each subsequent month.
/(2)/ Certain ISD employees' stock options became fully vested on 4 May 2000 and
remain exercisable during the periods shown, in accordance with change of
control provisions in their employment contracts. Options held by all
other employees who transferred to ISD became exercisable on completion,
thereafter they lapsed.
Individual US arrangements
Date of Exercise Options Options
Grant price Exercise period outstanding outstanding
2000 1999
14/11/1997 $ 14.90 14/11/98 to 14/11/04 6,711 6,711
12/12/1997 $ 10.63 12/12/97 to 05/08/00 /(1)/ - 6,250
08/09/1998 $ 11.81 08/09/99 to 08/09/05 4,232 4,232
01/04/1999 $ 8.00 01/04/99 to 05/08/00 /(1)/ - 6,250
05/05/2000 $ 10.51 05/05/01 to 05/05/07 71,361 -
----------- -----------
Total 82,304 23,443
=========== ===========
/(1)/ Options become exercisable in cumulative monthly increments during the
year following the date of grant.
Total outstanding options and awards granted over Ordinary share equivalents 11,683,893
1994 Executive Share Option Scheme
In March 1994, the Company adopted the Inland Revenue approved 1994 Executive
Share Option Scheme. Under the terms of the Executive Scheme, options to acquire
Ordinary shares may be granted at the discretion of the Remuneration Committee
of the Board of Directors to any employee, including full-time employee
Directors. The exercise price is determined at the date of grant of an option
and shall not be less than the higher of the par value of an Ordinary share and
the closing market price of
51
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
an Ordinary share on the day preceding the date of grant. Options under the
Executive Scheme generally become exercisable on the third anniversary of the
date of grant and lapse on the tenth anniversary of the date of grant. The
number of options which can be granted under the Executive Scheme and the
aggregate exercise price of options available to any individual under an
approved scheme was limited to (Pounds)30,000 in the Finance Act 1996.
Transactions under the Executive Scheme for the year ended 31 December 2000 were
as follows:
Number of
options Exercise Weighted
outstanding price average
000s (Pounds) (Pounds)
At 31 December 1999 1,396 0.74-2.48 1.36
Granted 585 0.70-0.94 0.91
Cancelled (176) 0.70-2.48 1.15
Exercised (74) 1.10-1.89 1.18
----------- ----------- -----------
At 31 December 2000 1,731 0.70-2.48 1.24
=========== =========== ===========
Exercisable at 31 December 1999 835 0.80-2.48 1.32
----------- ----------- -----------
Exercisable at 31 December 2000 1,095 0.74-2.48 1.37
=========== =========== ===========
On completion of the ISD sale, options held by employees who transferred to
Thomson became exercisable and remain so for a period of 12 months commencing on
the later of 4 May 2000 and the third anniversary of the date of grant of the
option.
1994 Unapproved Executive Share Option Scheme
In March 1994, the Company adopted the 1994 Unapproved Executive Share Option
Scheme (the "Unapproved Scheme"). Under the terms of the Unapproved Scheme,
options to subscribe for Ordinary shares may be granted at the discretion of the
Remuneration Committee of the Board of Directors to any employee, including
full-time employee Directors. The exercise price is determined at the date of
grant of an option and shall not be less than the higher of the par value of an
Ordinary share and the closing market price of an Ordinary share on the day
preceding the date of grant. Options under the Unapproved Scheme generally
become exercisable on the third anniversary of the date of grant and lapse on
the seventh anniversary of the date of grant. The number of shares over which
options may be granted under the Unapproved Scheme is consistent with
institutional investor guidelines on overall limits applicable to employee share
schemes. Transactions under the Unapproved Scheme for the year ended 31 December
2000 were as follows:
Number of
options Exercise Weighted
outstanding price average
000s (Pounds) (Pounds)
At 31 December 1999 4,046 0.91-4.00 2.53
Granted 589 0.70-0.94 0.93
Cancelled (196) 0.94-2.87 1.92
Exercised (120) 1.50 1.50
----------- ----------- -----------
At 31 December 2000 4,319 0.70-4.00 2.37
=========== =========== ===========
Exercisable at 31 December 1999 514 1.10-2.87 2.00
----------- ----------- -----------
Exercisable at 31 December 2000 737 0.94-4.00 2.35
=========== =========== ===========
On completion of the ISD sale, options held by employees who transferred to
Thomson became exercisable and remain so for a period of 12 months commencing on
the later of 4 May 2000 and the third anniversary of the date of grant of the
option.
52
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
21. SHARE CAPITAL (continued)
1998 Muscat Unapproved Share Option Scheme
The remaining 30% of the issued share capital of Muscat Ltd (see note 13) was
acquired in December 1999. Prior to the transaction, various Muscat employees
held a total of 436 options at exercise prices ranging from (Pounds)627 to
(Pounds)1,100. Under the 1998 Muscat Unapproved Share Option Scheme, these
employees were offered, and accepted a total of 642,822 replacement options over
Ordinary shares of the Company at exercise prices ranging from (Pounds)0.43 to
(Pounds)0.67 per share. Transactions under the Muscat Scheme for the year ended
31 December 2000 were as follows:
Number of
options Exercise Weighted
outstanding price average
000s (Pounds) (Pounds)
At 31 December 1999 643 0.43-0.67 0.55
Cancelled (246) 0.43-0.67 0.57
Exercised (84) 0.43 0.43
At 31 December 2000 313 0.44-0.67 0.56
====== ========= ======
Exercisable at 31 December 1999 42 0.43 0.43
------ --------- ------
Exercisable at 31 December 2000 128 0.44 0.44
====== ========= ======
On completion of the ISD sale, options held by employees who transferred to
Thomson became exercisable for a period of six months, whereupon they lapsed.
1994 Savings Related Share Option Scheme
In March 1994, the Company adopted the 1994 Savings Related Share Option Scheme
("SAYE Scheme"), which was subsequently approved by the Inland Revenue. Under
the rules of the SAYE Scheme, employees and full-time employee Directors with
more than six months' service are eligible to participate. All options are
linked to a contractual savings plan. Participants may save between (Pounds)5
and (Pounds)250 per month over a three or five year period, at the end of which
they are granted a tax-free bonus. Participants may withdraw from their savings
contract at any time (although their options will then lapse) and are not
obliged to exercise their options at the date of maturity. The exercise price is
determined at the date of grant of options and shall not be less than the par
value of an Ordinary share and 85% of the market value of an Ordinary share at
the date of invitation, which ever is the higher. Options under the SAYE Scheme
normally become exercisable on the bonus date and remain exercisable for a
period of six months. The number of shares over which options may be granted
under the SAYE Scheme is consistent with institutional investor guidelines on
overall limits applicable to a company's employee share schemes. Transactions
under the SAYE Scheme for the year ended 31 December 2000 were as follows:
Number of
options Exercise Weighted
outstanding price average
000s (Pounds) (Pounds)
At 31 December 1999 603 0.49-2.24 0.92
Granted 412 0.53 0.53
Cancelled (428) 0.53-2.24 0.98
Exercised (155) 0.49-0.64 0.51
----------- ----------- -----------
At 31 December 2000 432 0.53-1.80 0.64
=========== =========== ===========
Exercisable at 31 December 1999 134 0.49 0.49
----------- ----------- -----------
Exercisable at 31 December 2000 - - -
=========== =========== ===========
53
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS(continued)
On completion of the ISD sale, options held by employees who transferred to
Thomson became exercisable for a period of six months, whereupon they lapsed.
Long Term Incentive Plan
In September 2000, the Company adopted the Long Term Incentive Plan ("LTIP").
Under the rules of the LTIP, key executives selected by the Remuneration
Committee may receive a deferred promise by the Company to provide shares at no
cost. Awards under the LTIP will normally vest at the end of the "Restricted
Period" of three years, following the achievement of predetermined performance
criteria and on payment by the employee to the Company of any employers'
National Insurance liability arising thereon. There are two performance criteria
associated with all awards made to date:
The performance of the Company's share price over the Restricted Period must
equal or exceed the performance of the techMARK All Share Index for the same
period and the proportion of the award released at the end of the Restricted
Period is determined as detailed:
Company's final average share price
at the end of the Restricted Period Percentage of award released
Less than (Pounds)1.80 0%
(Pounds)1.80 25%
Between (Pounds)1.80 and (Pounds)2.20 Proportionate release between 25% and 100%
(Pounds)2.20 and above 100%
Transactions under the LTIP for the year ended 31 December 2000 were as follows:
000's
At 31 December 1999 -
Granted 3,186
-----------
At 31 December 2000 3,186
===========
Exercisable at 31 December 1999 -
-----------
Exercisable at 31 December 2000 -
===========
1998 US Employee Stock Purchase Plan
In June 1998 the Company adopted the 1998 US Employee Stock Purchase Plan (the
"ESPP"), which provides for the grant of "Rights" to purchase ADSs in the
Company. The Rights are intended to qualify as options issued under "employee
stock purchase plans" as defined in Section 423(b) of the Internal Revenue Code
of 1986, as amended ("the Code"). During the period June 1998 to 4 May 2000, all
US resident employees including full-time employee Directors were eligible to
participate. Rights under an offering were linked to accumulated payroll
deductions over the course of an offering. Participants were entitled to
withdraw from the ESPP at any time during an offering, although their Rights
would then lapse. The purchase price of the ADSs was not less than 85% of the
fair market value of ADSs on the offering date or on the purchase date, which
ever was the lower. The purchase price included any UK stamp duty reserve tax
payable in respect of the issue of ADSs.
Under US law, an individual may not purchase more than $25,000 worth of ADSs in
any calendar year (as determined by the fair market value on the offering date).
The number of shares over which Rights may be granted under the ESPP is
consistent with institutional investor guidelines in respect of overall limits
applicable to employee share schemes.
54
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS(continued)
21. SHARE CAPITAL (continued)
All rights to acquire ADSs under the ESPP matured on completion of the sale of
ISD to Thomson, whereupon 42 employees exercised their options. Transactions
under the ESPP for the year ended 31 December 2000 were as follows:
Number
of options
over ADSs Exercise Weighted
outstanding price average
000s $ $
At 31 December 1999 41 3.79-10.49 5.64
Cancelled (19) 3.79-10.49 5.49
Exercised (22) 3.46-5.08 4.06
---------- ----------- -----------
At 31 December 2000 - - -
========== =========== ===========
Exercisable at 31 December 1999 - - -
---------- ----------- -----------
Exercisable at 31 December 2000 - - -
========== =========== ===========
1997 US Stock Option Plan
In November 1997 the Company adopted the 1997 US Stock Option Plan (the
"USSOP"), which provides for the grant of both incentive and non-statutory stock
options to purchase ADSs in the Company. Incentive stock options granted under
the USSOP are intended to qualify as incentive stock options within the meaning
of Section 422 of the US Internal Revenue Code of 1986, as amended (the "Code").
Non-statutory stock options granted under the USSOP are not intended to qualify
as incentive stock options, as defined by the Code. Under the terms of the
USSOP, options to acquire ADSs may be granted by the Remuneration Committee to
any US resident employees including full-time employee Directors.
The exercise price of incentive stock and non-statutory options under the USSOP
may not be less than the fair market value of the ADSs subject to option on the
date of grant and, in some cases, may not be less than 110% of such fair market
value. Options granted under the USSOP vest in cumulative increments, as
determined by the Remuneration Committee, and lapse no later than the tenth
anniversary of the date of grant.
The number of shares over which options may be granted under the USSOP is
consistent with institutional investor guidelines on overall limits applicable
to employee share schemes. Transactions under the USSOP for the year ended 31
December 2000 were as follows:
Number
of options
over ADSs Exercise Weighted
outstanding price average
000s $ $
At 31 December 1999 637 4.75-25.74 13.11
Granted 58 3.74 3.74
Cancelled (343) 5.75-25.74 11.96
Exercised (8) 4.75-11.81 6.15
----------- ----------- -----------
At 31 December 2000 344 3.74-25.74 12.83
=========== =========== ===========
Exercisable at 31 December 1999 80 9.90-25.74 10.65
----------- ----------- -----------
Exercisable at 31 December 2000 186 5.75-11.88 8.71
=========== =========== ===========
55
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
Individual US arrangements
Between 1997 and 1999, options over ADSs were granted at the prevailing market
value to certain individuals who were Non-executive Directors of The Dialog
Corporation, the Company's North American subsidiary at the time. Additionally,
on 5 May 2000, Patrick Sommers was granted an option over 71,361 ADSs at a
strike price of $10.51 under an individual arrangement pursuant to an agreement
detailed in Note 9.Transactions under these individual US schemes up to 31
December 2000 were as follows:
Number
of options
over ADSs Exercise Weighted
outstanding price average
000s $ $
At 31 December 1999 23 8.00-14.90 11.36
Granted 71 10.51 10.51
Cancelled (12) 8.00-10.63 9.32
----------- ----------- -----------
At 31 December 2000 82 10.51-14.90 10.93
=========== =========== ===========
Exercisable at 31 December 1999 23 8.00-14.90 11.37
----------- ----------- -----------
Exercisable at 31 December 2000 11 11.81-14.90 13.71
=========== =========== ===========
Warrants
On 17 May 1999, the Company agreed a new term facility of $25 million with Chase
Manhattan Bank International Ltd ("Chase"); between May 1999 and November 1999,
the Company issued a total of 3.0 million warrants to Chase to subscribe for
Ordinary shares in the Company. 1.5 million of those warrants entitle Chase to
subscribe for Ordinary shares at any time before 11 October 2002 (the "2002
Warrants"). The remaining 1.5 million warrants entitle Chase to subscribe for
Ordinary shares at any time up to 14 May 2004 (the "2004 Warrants"). The
subscription price payable for an Ordinary share on exercise of a warrant is
90.6 pence.
The number of 2002 Warrants and 2004 Warrants and/or the exercise price are
adjustable on the occurrence of certain events, including a capital
reorganisation of the Company, a distribution of assets to shareholders or an
issue of Ordinary shares for cash at less than "Fair Market Value", being
defined (whilst the Ordinary shares are listed) as the average of the daily
market prices for an Ordinary share for the 30 consecutive dealing days
commencing 45 dealing days before the relevant date.
On 12 November 1999, warrants to subscribe for an additional 6 million Ordinary
shares (the "2009 Warrants") were issued to the Company's senior lenders, in
consideration of their agreement to relax the covenant arrangements related to
the refinancing of the Company's senior debt. The 2009 Warrants may be exercised
in whole or in part at any time before 12 November 2009, at a subscription price
of 90.6 pence per Ordinary share.
The terms of the 2009 Warrants contain provisions to protect the holders of
those warrants and, for adjusting the subscription price and the number of
warrants in certain circumstances, as discussed above in relation to the 2002
and 2004 Warrants.
At the date of this report, no warrants had been exercised into Ordinary shares
of the Company.
56
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
22. SUBSIDIARY COMPANY SHARE OPTIONS
On 5 September 2000, the Company adopted discretionary share option schemes in
respect of four designated subsidiaries; OfficeShopper, Smartlogik, Sparza and
WebTop, for the incentivisation and benefit of key management and staff within
each company.
Under the schemes, which are administered by the Board of Bright Station,
eligible employees may be granted options to acquire Ordinary shares in the
relevant subsidiary at a price no less than the higher of:
(a) the aggregate nominal value of the Ordinary shares under option; or
(b) the aggregate market value of the Ordinary shares under option at the date
of grant as determined by the Board.
1/12 of the number of options granted vest at three monthly intervals following
the date of grant, becoming fully vested on the third anniversary of grant.
Where a participant ceases to hold office within the Group, their vested options
remain exercisable for a period of three years, unless they leave for a
specified reason such as misconduct. However, neither employees nor former
employees may exercise their options unless pre-determined performance criteria
are met.
The aggregate number of shares issued and issuable pursuant to the subsidiary
share option schemes may not exceed 15% of the subsidiary's issued share capital
in any consecutive ten year period. Options not exercised before the expiry of
ten years from the date of grant shall lapse.
At 31 December 2000, the following options were outstanding over Ordinary shares
of subsidiary companies:
OfficeShopper Unapproved Scheme
Options Options
Date of Grant Exercise price outstanding outstanding
2000 1999
13/10/2000 (Pounds)0.17 3,000,000 -
----------- -----------
Total 3,000,000 -
=========== ===========
Smartlogik Unapproved Scheme
Options Options
Date of Grant Exercise price outstanding outstanding
2000 1999
13/10/2000 (Pounds)2.67 3,287,000 -
30/11/2000 (Pounds)2.67 388,500 -
----------- -----------
Total 3,675,500 -
=========== ===========
WebTop.com Unapproved Scheme
Options Options
Date of Grant Exercise price outstanding outstanding
2000 1999
13/10/2000 (Pounds)0.84 1,916,000 -
13/10/2000 (Pounds)0.75 1,600,000 -
30/11/2000 (Pounds)0.84 972,000 -
----------- -----------
Total 4,488,000 -
=========== ===========
No grants were made during the year under the Sparza Unapproved Scheme.
57
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS(continued)
The OfficeShopper.com Holdings plc 2000 Unapproved Share Options Scheme
Transactions under the Scheme for the year ended 31 December 2000 were as
follows:
Number
of options Exercise Weighted
outstanding price average
(Pounds) (Pounds)
At 31 December 1999 - - -
Granted 3,000,000 0.17 0.17
----------- ----------- -----------
At 31 December 2000 3,000,000 0.17 0.17
=========== =========== ===========
Exercisable at 31 December 1999 - - -
----------- ----------- -----------
Exercisable at 31 December 2000 - - -
=========== =========== ===========
The Smartlogik Holdings plc 2000 Unapproved Share Options Scheme
Transactions under the Scheme for the year ended 31 December 2000 were as
follows:
Number
of options Exercise Weighted
outstanding price average
(Pounds) (Pounds)
At 31 December 1999 - - -
Granted 3,911,500 2.67 2.67
Cancelled (236,000) 2.67 2.67
----------- ----------- -----------
At 31 December 2000 3,675,500 2.67 2.67
=========== =========== ===========
Exercisable at 31 December 1999 - - -
----------- ----------- -----------
Exercisable at 31 December 2000 - - -
=========== =========== ===========
The WebTop.com Holdings plc 2000 Unapproved Share Options Scheme
Transactions under the Scheme for the year ended 31 December 2000 were as
follows:
Number
of options Exercise Weighted
outstanding price average
(Pounds) (Pounds)
At 31 December 1999 - - -
Granted 4,516,000 0.75-0.84 0.81
Cancelled (28,000) 0.84 0.84
----------- ----------- -----------
At 31 December 2000 4,488,000 0.75-0.84 0.81
=========== =========== ===========
Exercisable at 31 December 1999 - - -
----------- ----------- -----------
Exercisable at 31 December 2000 - - -
=========== =========== ===========
58
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS(continued)
23. SHARE PERMIUM
2000 1999
(Pounds)'000 (Pounds)'000
Balance at 1 January 154,949 152,128
Premium arising on shares issued 28,085 -
Premium arising on shares issued on exercise of options 1,023 350
Premium arising on shares issued on placing/flotation
and acquisitions of fixed asset investments - 2,471
------------ ------------
Balance at 31 December 184,057 154,949
============ ============
24. SHARES TO BE ISSUED
On 18 November 1998, the Company acquired 100% of the share capital of Write
Works Limited in an agreement that capped the maximum consideration (payable in
cash and new Ordinary shares) at (Pounds)6,015,000, based on the achievement of
certain earnings targets over the following two financial years.
Due to the failure to meet certain of the earnings targets, the remaining
deferred consideration was reduced and further partial consideration of
(Pounds)1,674,000 (consisting of (Pounds)1,260,000 in cash and the issue of
428,796 new Ordinary Shares at a price of (Pounds)0.96 per share) was paid on 11
May 2000. A supplemental agreement was made with the vendors on 20 July 2000
leading to an interim cash payment of (Pounds)156,000 on 20 July 2000 and a
final consideration of (Pounds)584,000 (consisting of (Pounds)450,180 in cash
and the issue of 712,959 new Ordinary Shares at a price of (Pounds)0.19 per
share) on 17 April 2001. The shares to be issued do not have a dilutive impact
at the year end as they were issued at market value on the 17 April 2001. The
following table details the movement in shares to be issued in the year ended 31
December 2000:
(Pounds)'000
At 1 January 2000 967
Revision to deferred consideration (420)
Issue of shares on 11 May 2000 (413)
------------
At 31 December 2000 134
============
25. PROFIT AND LOSS ACCOUNT
Restated
2000 1999
(Pounds)'000 (Pounds)'000
Group
Balance at 1 January (261,079) (249,714)
Loss for the financial year (132,002) (5,874)
Effect of exchange rate movements on net investment in foreign
subsidiaries net of associated borrowings (4,008) 894
Write back of goodwill following disposal of ISD 227,854 -
Effect of exchange rate movements on goodwill written back - (6,385)
----------- -----------
Balance at 31 December (169,235) (261,079)
=========== ===========
Cumulative goodwill written off at 31 December 2000 amounted to balances
denominated in Pounds Sterling of (Pounds)5,737,000 (1999: (Pounds)226,267,000,
comprising balances denominated in US Dollars of $355,429,000 and balances
denominated in Pounds Sterling of (Pounds)5,737,000).
59
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS(continued)
Restated
2000 1999
(Pounds)'000 (Pounds)'000
Company
Balance at 1 January (121,181) (13,720)
Loss for the financial year (35,027) (103,843)
Effect of exchange rate movements on net debt (5,353) (3,618)
----------- -----------
Balance at 31 December (161,561) (121,181)
=========== ===========
26. RECONCILIATION OF MOVEMENT IN ORDINARY SHAREHOLDERS' FUNDS
Restated
2000 1999
(Pounds)'000 (Pounds)'000
Group
Loss for the financial year (132,002) (5,874)
Other recognised gains and losses relating to the year (net) (4,008) (5,491)
New share capital subscribed for cash 29,285 355
New share capital subscribed on acquisition of subsidiaries and
other fixed asset investments - 2,501
Decrease in shares to be issued (see note 24) (833) -
Write back of goodwill written back following disposal of ISD 227,854 -
----------- -----------
Net movement in ordinary shareholders' funds 120,296 (8,509)
Ordinary shareholders' funds at 1 January (103,614) (95,105)
----------- -----------
Ordinary shareholders' funds at 31 December 16,682 (103,614)
=========== ===========
Restated
2000 1999
(Pounds)'000 (Pounds)'000
Company
Loss for the financial year (35,027) (103,843)
New share capital subscribed for cash 29,285 355
New share capital subscribed on acquisition of subsidiaries and
other fixed asset investments - 2,501
Effect of exchange rate movements on net debt (5,352) (3,618)
Shares to be issued (833) -
----------- -----------
Net movement in ordinary shareholders' funds (11,928) (104,605)
Shareholders' funds at 1 January 36,284 140,889
----------- -----------
Shareholders' funds at 31 December 24,356 36,284
=========== ===========
27. MINORITY EQUITY INTERESTS
2000 1999
(Pounds)'000 (Pounds)'000
Balance at 1 January 543 1,077
Profit attributed to the minorities 37 50
ISD disposal (580) -
Exchange adjustments - 26
Arising from acquisitions during the year - (610)
----------- -----------
- 543
=========== ===========
60
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS(continued)
28. COMMITMENTS UNDER OPERATING LEASES AND FINANCE LEASES
As at 31 December 2000, the Group had annual commitments under non-cancellable
operating leases as set out below:
2000 1999
Land and Land and
buildings Other buildings Other
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
Operating leases which expire:
Within one year 6 186 31 -
In two to five years 697 57 1,970 40
After five years 332 - 3,700 -
----------- ----------- ----------- -----------
1,035 243 5,701 40
=========== =========== =========== ===========
29. RECONCILIATION OF OPERATING (LOSS)/PROFIT TO NET CASH
(OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES
Restated
2000 1999
(Pounds)'000 (Pounds)'000
Operating (loss)/profit (18,081) 19,245
Depreciation charges 2,704 7,482
Impairment of tangible fixed assets 953 -
Amortisation of intangible fixed assets 3,623 9,047
Impairment of intangible assets 295 -
Amortisation of goodwill 617 415
Loss on sale of tangible fixed assets 195 631
Decrease in stocks 1 167
(Increase)/decrease in debtors (2,298) 5,686
Increase/(decrease) in creditors 1,139 (7,607)
Exchange variances 95 401
Cash costs of restructuring (472) (2,660)
----------- -----------
Net cash (outflow)/inflow from operating activities (11,229) 32,807
=========== ===========
The comparative figures for 1999 have been restated to reflect the change in
disclosure of amounts written off investments.
61
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS(continued)
30. ANALYSIS OF CHANGES IN NET (DEBT)/FUNDS
Cash and Debt due Debt due
bank within one after one Finance
deposits year year lease Total
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
At 1 January 1999 4,494 (14,678) (133,779) (234) (144,197)
Reclassification of loan from
other creditors - (894) - - (894)
Cash flows 6,304 1,404 (6,933) (2,533) (1,758)
Exchange movements (277) (465) (4,515) 15 (5,242)
Other non-cash changes - - (1,274) (3,614) (4,888)
Other movements - (16,942) 16,942 - -
----------- ----------- ----------- ----------- -----------
At 1 January 2000 10,521 (31,575) (129,559) (6,366) (156,979)
Cash flows 5,813 32,441 140,118 642 179,014
Exchange movements - (866) (4,434) - (5,300)
Other non-cash changes - - (6,125) 5,687 (438)
----------- ----------- ----------- ----------- -----------
At 31 December 2000 16,334 - - (37) 16,297
=========== =========== =========== =========== ===========
31. CAPITAL COMMITMENTS
Capital commitments as at 31 December were as follows:
2000 1999
(Pounds)'000 (Pounds)'000
Authorised and contracted for - 403
=========== ===========
32. POST BALANCE SHEET EVENTS
On 28 February 2001, the Company made its preliminary announcement of its
results for the year ended 31 December 2000. The loss before tax for the year
reported was (Pounds)128,944,000. Certain adjustments to the figures reported in
the preliminary announcement have been made as follows:
(Pounds)'000
Original loss before tax per preliminary announcement (128,944)
Impairment adjustment (see below) (2,249)
Reclassification of capitalised development costs relating to ISD (501)
-----------
Loss before tax (131,694)
===========
On 30 April the Group announced its intention to refocus its activities on the
Web Services Division, with the resultant sale and closure of its eCommerce
activities, comprising OfficeShopper and Sparza, and curtailment of head office
activities.
The decision to refocus the activities of the business, as described above,
provided evidence of an impairment in value that had occurred prior to the
balance sheet date. An impairment review of the carrying value of the fixed
assets held in the balance sheet at 31 December 2000 has been performed and an
adjustment to the carrying value was made as follows.
62
Bright Station plc
NOTES TO THE FINANCIAL STATEMENTS(continued)
32. POST BALANCE SHEET EVENTS (continued)
The impairment of fixed assets was calculated as follows:
Original 31 Carrying Revised 31
December value December
2000 adjustments 2000
(Pounds)'000 (Pounds)'000 (Pounds)'000
Fixed assets
Intangible assets 295 (295) -
Goodwill 2,621 (257) 2,364
Tangible assets 2,398 (953) 1,445
Investments 1,344 (744) 600
----------- ----------- -----------
6,658 (2,249) 4,409
=========== =========== ===========
A change was also made to the exceptional loss on the disposal of ISD as a
result of a reclassification of capitalised development costs. The effect of
this change has also been detailed above.
The Group is proposing a placing and open offer of 270,000,000 new shares of
1pence each subject to approval by the shareholders at an Extraordinary General
Meeting of the Company to be held on 6 July 2001. The estimated proceeds of the
placing and open offer of approximately (Pounds)12.0 million net of expenses,
are required for the Group to be able to continue in operational existence for
the foreseeable future.
On 12 June 2001, the Company negotiated a secured (Pounds)1.5 million bridging
facility which is to be repaid from the proceeds of the placing and open offer.
63
Bright Station plc
FIVE YEAR FINANCIAL SUMMARY
Discon- Discon-
Continuing tinued Continuing tinued
Operations Operations Total Operations Operations Total
-------------------------------------------------------------------------------
2000 1999
-------------------------------------------------------------------------------
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
Turnover 8,498 49,144 57,642 9,319 165,133 174,452
Cost of sales (2,044) (22,100) (24,144) (1,389) (66,785) (68,174)
- ---------------------------------------------------------------------------------------------------------------------
Gross profit 6,454 27,044 33,498 7,930 98,348 106,278
Distribution costs (2,646) (7,613) (10,259) (1,144) (20,974) (22,118)
Administrative expenses
-------------------------------------------------------------------------------
Recurring | (21,875) (15,789) | (37,664) (8,290) (47,483) (55,773) |
Exceptional provision for | | |
diminution in value of goodwill | (4,084) - | (4,084) - - - |
Amortisation of | | |
development costs | - (3,656) | (3,656) - (9,142) (9,142) |
-------------------------------------------------------------------------------
Total administrative expenses (25,959) (19,445) (45,404) (8,290) (56,625) (64,915)
- ---------------------------------------------------------------------------------------------------------------------
Operating (loss)/profit
-------------------------------------------------------------------------------
Before exceptional item | (18,067) (14) | (18,081) (1,504) 20,749 19,245 |
Exceptional item | (4,084) - | (4,084) - - - |
-------------------------------------------------------------------------------
Operating (loss)/profit (22,151) (14) (22,165) (1,504) 20,749 19,245
Loss on disposal of ISD - (101,688) (101,688) - - -
Loss on termination of subsidiary - - - - (911) (911)
Gain on sale of fixed asset investment - - - - - -
- ---------------------------------------------------------------------------------------------------------------------
(Loss)/profit on ordinary activities (22,151) (101,702) (123,853) (1,504) 19,838 18,334
---------- ----------- --------- ----------
Interest receivable 762 305
Amounts written off investments (1,944) (4,619)
Interest payable and similar charges (6,659) (18,366)
- ---------------------------------------------------------------------------------------------------------------------
(Loss)/profit on ordinary activities
before taxation (131,694) (4,346)
Taxation on (loss)/profit on
Ordinary activities (271) (1,478)
- ---------------------------------------------------------------------------------------------------------------------
(Loss)/profit on ordinary activities
after taxation (131,965) (5,824)
Minority equity interests (37) (50)
- ---------------------------------------------------------------------------------------------------------------------
Retained (deficit)/profit (132,002) (5,874)
- ---------------------------------------------------------------------------------------------------------------------
(Loss)/Earnings per share (pence) (79.2) (3.9)
- ---------------------------------------------------------------------------------------------------------------------
Discon- Discon- Discon-
Continuing tinued Continuing tinued tinued
Operations Operations Total Operations Operations Total Operations
------------------------------------------------------------------------------------------
1998 1997 1996
------------------------------------------------------------------------------------------
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
Turnover 3,331 167,431 170,762 367 45,715 46,082 21,443
Cost of sales (82) (71,536) (71,618) (89) (17,077) (17,166) (7,237)
- ------------------------------------------------------------------------------------------------------------------------------
Gross profit 3,249 95,895 99,144 278 28,638 28,916 14,206
Distribution costs - (21,560) (21,560) - (17,013) (17,013) (9,933)
Administrative expenses
------------------------------------------------------------------------------------------
Recurring | (2,821) (44,354) (47,175) | (297) (22,365) (22,662) | (9,975) |
Exceptional provision for | | | |
diminution in value of goodwill | - - - | - - - | - |
Amortisation of | | | |
development costs | - (7,670) (7,670) | - (11,548) (11,548) | (2,170) |
------------------------------------------------------------------------------------------
Total administrative expenses (2,821) (52,024) (54,845) (297) (33,913) (34,210) (12,145)
- ------------------------------------------------------------------------------------------------------------------------------
Operating (loss)/profit
------------------------------------------------------------------------------------------
Before exceptional item | 428 22,311 22,739 | (19) (22,288) (22,307) | (7,872) |
Exceptional item | - - - | - - - | - |
------------------------------------------------------------------------------------------
Operating (loss)/profit 428 22,311 22,739 (19) (22,288) (22,307) (7,872)
Loss on disposal of ISD - - - - - - -
Loss on termination of subsidiary - - - - - - -
Gain on sale of fixed asset investment - 2,069 2,069 - 4,035 4,035 -
- ------------------------------------------------------------------------------------------------------------------------------
(Loss)/profit on ordinary activities 428 24,380 24,808 (19) (18,253) (18,272) (7,872)
------ -------- -------- ----------
Interest receivable 205 338 1,027
Amounts written off investments (2,300) - -
Interest payable and similar charges (17,436) (2,498) (189)
- ------------------------------------------------------------------------------------------------------------------------------
(Loss)/profit on ordinary activities
before taxation 5,277 (20,432) (7,034)
Taxation on (loss)/profit on
Ordinary activities (769) (323) (164)
- ------------------------------------------------------------------------------------------------------------------------------
(Loss)/profit on ordinary activities
after taxation 4,508 (20,755) (7,198)
Minority equity interests (356) 11 (28)
- ------------------------------------------------------------------------------------------------------------------------------
Retained (deficit)/profit 4,152 (20,744) (7,226)
- ------------------------------------------------------------------------------------------------------------------------------
(Loss)/Earnings per share (pence) 2.8 (20.5) (7.8)
- ------------------------------------------------------------------------------------------------------------------------------
64
Bright Station plc
ACCOUNTING GLOSSARY
Terms used in Annual Report US equivalent or brief description
Administration expenses General and administration expenses
Allotted Issued
Called up share capital Ordinary shares, issued and fully paid
Capital allowances Tax term equivalent to US tax depreciation
allowances
Cash at bank and in hand Cash
Class of business Industry segment
Creditors Accounts payable
Creditors: Amounts falling due after more Long-term liabilities
than one year
Creditors: Amounts falling due within one year Current liabilities
Debtors Accounts receivable
(Deficit)/retained profit Net (loss)/income
Distribution costs Selling and marketing expenses
Destination (of revenue) The geographical area to which goods or services
are supplied
Finance lease Capital lease
Interest payable and other similar charges Interest expense
Interest receivable Interest income
Operating (loss)/profit (Loss)/income from operations
Profit Income
Profit and loss account Income statement
Profit and loss reserve Retained earnings
(under 'capital and reserves')
Share Capital Ordinary shares, capital stock or common stock
issued and fully paid
Share Premium Account Additional paid-in capital or paid-in surplus (not
distributable)
Shares in issue Shares outstanding
Source (of revenue) The geographical area from which goods or
services are supplied to a third party or another
geographical area
Stocks Inventories
Tangible fixed assets Property and equipment
Taxation on (loss)/profit on ordinary activities (Provision)/benefit for income taxes
Turnover Revenues
65
Bright Station plc
BRIGHT STATION plc
Notice is hereby given that the Annual General Meeting of Bright Station plc
will be held at the offices of Theodore Goddard, 150 Aldersgate Street, London
EC1A 4EJ on 11 September 2001 at 10:00am for the following purposes:
Ordinary Business
1. To receive and adopt the Accounts of the Company for the year ended 31
December 2000 and the Reports of the Directors and Auditors thereon.
2. To re-appoint Auditors and to authorise the Directors to agree their
remuneration.
Special Business
To consider and, if thought fit, to pass the following resolutions which will be
proposed as Special Resolutions:
3. THAT the Article numbered 72, titled Rotational Retirement at Annual
General Meeting in the printed document submitted to the meeting and, for
the purpose of identification, signed by the Chairman, be approved and
adopted as Article 72 of the Articles of Association of the Company in
substitution for, and to the exclusion of, the existing Article 72.
4. THAT the regulations contained in the printed document submitted to the
meeting and, for the purpose of identification, signed by the Chairman,
such regulations having been adapted from the existing Articles for the
purpose of permitting electronic communications between the Company and its
members, be approved and adopted in substitution for, and to the exclusion
of, the existing Articles.
By order of the Board
JONATHAN BALL
Company Secretary
12 June 2001
Registered Office:
The Communications Building
48 Leicester Square
LONDON WC2H 7DB
Notes
1. Pursuant to Regulation 34 of the Uncertificated Securities Regulations
1995, the Company hereby specifies that a person must be the registered
holder of Ordinary shares of the Company at 10:00am on 9 September 2001 in
order to be entitled to attend and vote at the meeting or adjourned meeting
in respect of those shares. Changes to entries on the Register of Members
after 10:00am on 9 September 2001 will be disregarded in determining the
rights of any person to attend or vote at the meeting. The beneficial
owners of shares held in nominee accounts may attend the meeting on
production of a "S375 letter" from the registered holder, confirming
beneficial ownership.
2. A member entitled to attend and vote at the meeting may appoint a proxy or
proxies, who need not be members of the Company to attend and, on a poll to
vote instead of him or her.
3. If the proxy form accompanying this notice is submitted by a corporation or
executed under a Power of Attorney, in order to be valid, the authority
under which the proxy form is executed (or a copy of the authority
notarially certified) must be lodged together with Computershare Investor
Services plc, PO Box 457, Owen House, 8 Bankhead Crossway North, Edinburgh
EH11 0XG not later than 48 hours before the time appointed for the meeting.
Completion of a form of proxy will not preclude a member from attending and
voting in person at the meeting or any adjournment thereof.
4. In accordance with the Companies Act 1985 and with the requirements of the
London Stock Exchange, copies of the following documents will be available
for inspection at the Company's Registered Office during normal business
hours from the date of this notice until the date of the Annual General
Meeting and will also be available at the place of the meeting for
inspection for at least 15 minutes prior to and during the meeting:
(i) The Register of Directors' Interests in the share capital and
debentures of the Company; and
(ii) Copies of service agreements under which Directors of the Company are
employed and terms of engagement for Non-executive Directors; and
(iii) Copies of the current Articles of Association and of the proposed new
Articles of Association.
66
Bright Station plc
5. Amendment to the Company's Articles with respect to retirement by rotation
of Directors at Annual General Meetings (item 3 on the agenda). The Special
Resolution at item 3 seeks authority to amend the Articles in line with the
Combined Code recommendations on the frequency with which Directors should
offer themselves for re-election. Although the Company complies with the
Combined Code in practice, the Articles would currently permit a Director
to remain in office for more than three years without seeking re-election,
dependent on the size of the Board.
6. Amendments to the Company's Articles permitting electronic communications
(item 4 on the agenda). The Special Resolution at item 4 seeks authority to
make several amendments to the Articles in order to permit electronic
communications between the Company and its members. These amendments have
been drafted in line with the ICSA recommendations. The Company has also
taken the opportunity to make some minor "housekeeping" updates to the
Articles. The sections of the Articles requiring significant alteration are
"Definitions" (clause 1) "Proxies" (clauses 60 to 61), "Notice of Board
Meetings" (clause 99), "Accounts" (clause 133) and "Notices" (clauses 134
to 139).
67
Bright Station plc
SHAREHOLDER CONTACTS
Directors and Advisors Allen Thomas Non-executive Chairman
Dan Wagner Chief Executive
David Mattey Chief Financial Officer
Ian Barton Non-executive
Robert Lomnitz Director
Patrick Sommers Non-executive
Company Secretary and Jonathan Ball
Registered Office The Communications Building
48 Leicester Square
London WC2H 7DB
Registered Number 1890236
Auditors PricewaterhouseCoopers
1 Embankment Place
London WC2N 6RH
Principal Bankers The Royal Bank of Scotland plc
London Belgravia Branch
24 Grosvenor Place
London SW1X 7HP
Stockbroker Hoare Govett Ltd
250 Bishopsgate
London EC2M 4AA
Legal Advisors (UK) Theodore Goddard
150 Aldersgate Street
London EC1A 4EJ
Mishcon De Reya
21 Southampton Row
London WC1B 5HS
Legal Advisors (US) Shearman & Sterling
599 Lexington Avenue
New York
NY 10022 USA
Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan LLP
2500 First Union Capitol Center
PO Box 2611
Raleigh
North Carolina
NC 27602 USA
68
Bright Station plc
Investor Relations Campbell Macpherson
Bright Station plc
The Communications Building
48 Leicester Square
London WC2H 7DB
Tel: +44 (0) 20 7930 6900
Fax: +44 (0) 20 7925 7700
campbellmacpherson@brightstation.com
John Olsen
Hogarth Partnership Ltd
The Butlers Wharf Building
36 Shad Thames
London SE1 2YE
Tel: +44 (0) 20 7357 9477
Fax: +44 (0) 20 7357 8533
jolsen@hogarthpr.co.uk
David Collins/Robert Rinderman
Jaffoni & Collins Inc
14th Floor
104 Fifth Avenue
New York
NY 10011 USA
Tel: +1 212 835 8500
Fax: +1 212 835 8525
BSTN@jcir.com
Home pages www.brightstation.com
---------------------
www.smartlogik.com
------------------
www.tradeuk.com
---------------
www.webtop.com
--------------
Registrars (Ordinary shares) Computershare Investor Services plc
PO Box 435
Owen House
8 Bankhead Crossway North
Edinburgh EH11 4BR
Tel: +44 (0) 870 702 0010
Fax: +44 (0) 131 442 4924
Depositary (ADSs) The Bank of New York
Investor Relations Department
PO Box 11258
Church Street Station
New York
NY 10286-1258 USA
Tel: +1 402 963 9394
Fax: +1 212 815 4023
Toll free for US residents only:
Tel: 1-888-BNY-ADRS
(1-888-269-2377)
69
Bright Station plc
INFORMATION FOR INVESTORS
Securities and Exchange Commission filings
The Company from time to time files reports with the United States Securities
and Exchange Commission. A copy of each report filed within the preceding 12
months can be inspected by any shareholder or ADR holder during normal business
hours at the offices of Bright Station plc at The Communications Building, 48
Leicester Square, London WC2H 7DB.
Low-cost dealing service
Hoare Govett Ltd has established a low-cost dealing service which enables
investors to buy or sell holdings of the Company's Ordinary shares in a simple
economic manner. Basic commission is 1% with a minimum charge of (Pounds)10.
Transactions are executed and settled by Pershing Securities Ltd. Forms can be
obtained from Hoare Govett Ltd, 250 Bishopsgate, London EC2M 4AA. Tel: +44 (0)
20 7678 8000
Share price information
The Company's share price is available from the Investor Relations section of
www.brightstation.com
- ---------------------
Reuters RIC Code - BSN.L
London Stock Exchange Listing
Ordinary Shares
Symbol: BSN
NASDAQ Listing
American Depositary Shares
Symbol: BSTN
Shareholding information on the Internet
Holders of Ordinary shares in Bright Station plc can access details of their
shareholding at our Registrar's website, www.computershare.com (subject to
---------------------
Computershare identity checks) and download documents such as Stock Transfer
Forms and change of address forms. This site also includes information on recent
trends in the Company's share price and a facility for calculating the value of
shares.
Financial Diary for 2001
28 February Results for the year ended 31 December 2000 announced
31 May First quarter trading statement issued
13 June Annual Report posted to shareholders
6 July Extraordinary General Meeting
August Results for the six months to 30 June 2001 announced
11 September Annual General Meeting
November Third quarter trading statement issued
70
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