Madge Networks group revenues for the six months ended June 30, 2001 were US$44.2 million, compared to revenues for the six months ended June 30, 2000 of $70.4 million.
Group net income for the six months ended June 30, 2001 was $11.4 million, or $0.21 per share, compared to a net loss of $(38.0) million, or $(0.88) per share, for the six months ended June 30, 2000. Group net income for the 2001 period includes special gains of $9.3 million.
Pro forma revenues from continuing operations2 for the six months ended June 30, 2001 were $42.7 million, compared to revenues from continuing operations for the six months ended June 30, 2000 of $61.3 million.
Pro forma net income from continuing operations for the first half of 2001 was $13.7 million, or $0.25 per share, compared to a net loss from continuing operations of $(4.7) million, or $(0.11) per share, for the first half of 2000. Excluding special gains of $9.3 million, pro forma net income from continuing operations for the six months ended June 30, 2001 was $4.4 million, or $0.08 per share. The special gains relate primarily to the sale of Red-M shares, concluded in April 2001.
Earnings from pro forma continuing operations before interest, taxes, depreciation, amortization (EBITDA) and excluding special gains for the six months ended June 30, 2001 were $9.5 million, compared to $3.9 million for the same period in 2000.
Continuing operations exclude the results of Madge.web, Novations and Video Networking. In accordance with U.S. generally accepted accounting principles, Madge.web, must be presented as a discontinued operation. As previously announced, Madge.web”s U.K. and Singapore subsidiary companies, Madge.web Ltd. and Madge SE Asia Pte Ltd., were put into administration and interim judicial management, respectively, in accordance with their local laws, in processes broadly similar to chapter 11 in the United States. Madge.web”s Dutch subsidiary Madge.web B.V. is under insolvent liquidation. The Novations line of business was discontinued with Madge.web, and the Video Networking line of business was sold by Madge.connect in the third quarter of 2000.
The Red-M group, since April 12, 2001 when it secured external funding, is no longer a subsidiary of the Madge group but is classified as an associate company. In accordance with generally accepted accounting principles the results of Red-M, from April 12, 2001, are no longer fully consolidated into the accounts of Madge Networks and are now accounted for under equity accounting principles. Madge Networks recognizes its allocable percentage of Red-M”s net loss, which as at June 30, 2001 reduced the carrying value of its investment in Red-M to zero.
Madge Networks ended the second quarter with $14.7 million in cash, including $8.9 million that is restricted. The company”s liquidity position during the second quarter was reduced by the funds provided to the administrators of Madge.web, as previously announced, and to other Madge.web entities. While the financial outcome of the administration is not certain, the company expects a portion of the $6.3 million funding provided to be returned to Madge Networks. The timing and the amount of the returned funds are not certain, and our ability to mitigate our exposure to the Madge.web liabilities could materially impact our liquidity position. Management recognizes a requirement to increase short-term liquidity and is focused, during the third quarter of 2001, on addressing the issue by seeking additional sources of working capital and the possible sale of assets.
The first half of 2001 has been a period of substantial change for Madge Networks, said Martin Malina, CEO, Madge Networks. We are however pleased with the performance of our Madge.connect business; it continues to deliver profitability and generate cash. While the outcome of the administration of Madge.web Ltd. and the other Madge.web entities is not yet certain, we are focusing on the future plans for the company. We continue to streamline the cost base to underpin cash generation from our current operations and will be exploring new business opportunities to leverage our existing assets and core competencies and to position Madge Networks for the future.
