Preliminary Results for year ended 31 March 2014

RNS Number : 0804P

Spark Ventures PLC

14 August 2014

 



SPARK Ventures plc

Preliminary Announcement of Unaudited Annual Results for the year ended 31 March 2014

SPARK Ventures plc ('SPARK' or the 'Company' or the 'Group'), the investor in early stage digital information and technology companies, is pleased to announce its unaudited preliminary results for the year ended 31 March 2014.

Highlights

•           Investment disposals concluded for both notonthehighstreet and Kobalt music, amongst others, bringing in £33m of cash.

•           Kobalt sale resulted in a money multiple of 4.8.Total proceeds from Kobalt amounted to £19.2m with £15.4m received in the year ended 31 March 2014.

•           IMImobile ("IMI") successfully listed on AIM in June 2014. Spark sold 22% of stake raising £3.5m proceeds, although £3.1m held in escrow pending tax guidance.

•           Shareholders received a cash return of £8.3m in the year (2p per share) and £18.9m (4.5p per share) after the balance sheet date taking total returns since 2009 to 13p per share (£54m in total).

•           Aspex liquidation completed with £4.1m received in the year.

•           Net asset value ("NAV") per share decreased by 18% to 10.65p when the published 31 March 2013 NAV is adjusted for the 2p shareholder return.

•           Decrease largely due to realised loss over March 13 book value for OpenX (£2.6m loss) and unrealised loss of £2.3m relating to Mind Candy. Overall, these have been successful investments with the realisation proceeds from the sale of OpenX representing a multiple of 7x the cost of the investment and the realisation proceeds and residual book value of the Company's investment in Mind Candy representing a multiple of 10x the cost of the investment.

•           NAV per share was also reduced by a provision for a £2.2m payment to the D shareholders following the achievement of targeted realisations.

•           Aside from the realisation of the remaining shareholding in the newly listed IMI, 4 significant unquoted investments are left to be realised.

•           Total proceeds from realisations amount to £50m compared with September 2009 valuations for these investments of approx. £14m.

•           Property leases terminated on 31 January 2014.

For further information, please contact:

Andrew Betton / David Potter

SPARK Ventures plc

Tel: [phone]

Matt Goode / Christopher Raggett

finnCap

Tel: [phone]

Chairman's statement

Dear Shareholder,

I am glad to report very significant progress on our main task of gaining the best value from your portfolio.

During 2013/2014 we disposed of the whole of our stakes in Kobalt, Notonthehighstreet and OpenX and made a partial sale of Academia, all at significant multiples to cost. We were founder investors in all these businesses.

Since the end of the year we have seen the successful flotation on the Stock Exchange of IMI Mobile ("IMI"). The successful earlier acquisitions IMI made over the years under our guidance have played a key role in the company's success and Jay Patel, from SVMH, who left our board to become CEO of IMI, played a key role in the IPO. As part of this flotation we sold 22% of our stake for a consideration of £3.5m.Pending certain tax clearances an amount of £3.1m is being held in escrow.

During the last 12 months we have made distributions of 6.5p per share bringing the total cash returned to shareholders (by way of dividend or return of capital, according to their choice) of 13.0p per share since the new direction was set in 2009 when the share price was around 5p.

We also disposed of our 15 year lease at 33 Glasshouse Street and therefore removed the risk of incurring dilapidations costs at the end of the lease.

As always the income statement is heavily dependent on valuation adjustments and this time, the balance sheet has been impacted by the need to provide for a £2.2m payment to the D shareholders (see Note 4 below).

Whilst focusing on this primary aim of maximizing cash value, we have worked hard to continue to reduce costs (and consequently the manager's fee has declined in line with the remaining portfolio), whilst preparing for the company to become more of a pure investment company looking for new opportunities. We have however incurred some unforeseen legal costs as a result of litigation initiated by a former director, details of which (to the extent that they can be disclosed) are included in Note 3 below.

The Board has also spent much time analysing the options for the future now that the present mandate is close to completion.  Many of our 7,000 private shareholders (who have seen these impressive returns) have indicated a willingness to re-invest in our business model of backing early stage disruptive internet and technology companies. The Board is considering what would be the best structure for this, including remaining a listed company, becoming a Venture Capital Trust or becoming an Investment Trust. We intend to consult widely amongst our investor community as well as with financial advisers.

Following the year end, Andrew Carruthers stepped down from the board to focus on his interests in Africa. Andrew was a founder director of the company and has rendered a very high level of service and commitment to the company; we shall miss his participation and wise advice. Tom Teichman, the Chairman of the manager SVMH and an original founder of SPARK Ventures plc has rejoined the board in Andrew's stead as a representative of the management company. Tom is also one of our largest private shareholders.

Our manager, SVMH, has done an excellent job in their exit timing and consequently maximizing the value of the portfolio for shareholders. They remain committed to realising the remainder of the portfolio.

I would like to take this opportunity to thank shareholders for their continued support.

Yours faithfully

David Potter, Chairman

7 August 2014

Investment Manager's Report

Introduction

This is our first report following the completion of the originally anticipated managed realisation period that expired on 31 March 2014. In comparison with all the alternatives considered by the Board and shareholders in 2009, we believe the overall result to have been very beneficial to shareholders.

Since we last reported, the remaining stake in Kobalt Music was sold, the stake in OpenX was sold, the liquidation of Aspex completed and 40% of the stake in Academia was sold. These collectively added £11.0m to the Group's cash balances.

Additionally, since the balance sheet date, the company's largest remaining investment, IMI, - accounting for 78% of the remaining portfolio by value - has listed on the AIM market of the London Stock Exchange. Whilst this was only a limited exit, it does mean that exiting the remaining stake at values close to book value, is more likely in the short to medium term.

The table below sets out the book values of the material investments as at 30 September 2009 and the current value or sales proceeds achieved from these investments

Investment	Value at 30 Sep 2009*	Proceeds (net of any additional investment)	Current book value (Mar 14)	Total	Gain / (loss)
	£m	£m	£m	£m	£m
IMImobile	13.0	0.0	16.2	16.2	3.2
Kobalt Music	6.8	18.4	0.0	18.4	11.6
DEM Solutions	1.9	0.2	1.3	1.5	(0.4)
Notonthehighstreet	1.6	12.8	0.0	12.8	11.2
Complinet	1.5	3.2	0.0	3.2	1.7
MyDeco	1.5	(0.1)	0.1	0.0	(1.5)
OpenX	1.2	2.4	0.0	2.4	1.2
Aspex	1.0	9.4	0.0	9.4	8.4
Skinkers	1.0	0.0	0.0	0.0	(1.0)
Gambling Compliance	1.0	(0.1)	1.5	1.4	0.4
Firebox	0.7	0.0	0.0	0.0	(0.7)
Academia	0.7	0.6	0.8	1.4	0.7
Mind Candy	0.7	3.1	0.8	3.9	3.2
Others	1.2	0.2	0.2	0.4	(0.8)
Totals	33.8	50.1	20.9	71.0	37.2

*Note that "Value at 30 Sep 2009" is not necessarily the Company's original cost

The value of the portfolio has more than doubled in this period and is equivalent to an IRR of approximately 18%.

Whilst the task is not yet complete, only two unquoted investments remain with book values in excess of £1m, and we hope to complete the realisation process in the 12 month extension which was approved by shareholders at the General Meeting held on April 25 2014.

In the period since 30 September 2013, NAV per share has fallen from 11.4p at 30 September to 10.7p at 31 March 2014. This is due to operating losses exceeding the recovery in investment values since this date, and the requirement to provide for the payment to the D shareholders.

The total shareholder return made since August 2009 now stands at 13.0p per share, or £53.4m and there remains net asset value of 6.1p per share.

The loss for the year to 31 March 2014 is £7.6m compared with a profit of £6.6m in the previous year. This change is primarily due to the overall investment valuation performance being negative in the year compared with a positive performance in the previous year. More detail on the portfolio valuation changes is provided in the following narrative and summarised in the investment note.

Portfolio valuation performance

In the year to 31 March 2014 the Group has made net unrealised losses of £3.5m. This is essentially due to one significant valuation reduction - Mind Candy (£2.3m reduction) together with five valuation reductions on other investments amounting to £1.5m in total. This was partially offset by one valuation increase relating to Academia of £0.3m. Of the realised investment loss of £1.2m, £2.6m is due to a loss on OpenX offset by gains from the sale of notonthehighstreet (£0.8m), from the sale of a partial stake in Academia (£0.2m), a £0.5m gain on the completion of the Aspex liquidation and other small losses of £0.1m.

At 31 March 2014 only one of SPARK's larger investments remains in the portfolio - IMImobile. The valuation reduction we took on this investment at the half year has been reversed at the year end when it was found to be unnecessary in the light of the IPO of IMImobile, in which SPARK sold approximately 22% of its stake.

The only business to receive further funding in the year from SPARK was Gambling Compliance which received £70k as part of a modest funding round.

IMImobile

IMImobile ("IMI") is a global technology company providing software and services which help businesses capitalise on the growth in mobile communication. Its solutions help its clients engage and transact with their customers more efficiently through smarter mobile engagement. IMI has developed a suite of software applications and services targeted at both mobile operators and enterprises marketed principally under the DaVinci brand. IMI is headquartered in London, has a development centre in Hyderabad (India) and works with a large number of mobile operators and blue-chip enterprises worldwide.

SPARK first invested in 2000 and was the first institutional investor in the company.

SPARK's total valuation of its stake in IMI has increased in the last six months by £1.4m from £14.8m to £16.2m. The £16.2m reflects the value obtained from selling part of SPARK's stake in IMI's IPO which completed on June 27 2014. IMI had steady growth for the first half of their financial year and has traded in line with expectations since then with revenue growing at a consistent rate and with stable margins. In recent years, IMI has become much more of a global business than simply an Indian one, and in recognition of this, IMI recently chose to list in London.

This listing raised £30m at a pre-money valuation of £64m, with £20m of the proceeds going towards selling shareholders. SPARK received proceeds, net of costs, of £3.5m from the listing but has needed to put £3.1m of these funds into an Escrow account until it can satisfy IMI that withholding tax was not due on the transaction. SPARK's remaining shares (10.8m) were listed at £1.20 per share and currently trade at £1.34, approximately 12% up on the IPO price, however SPARK, and the other Venture Capital backers of IMI, are subject to a lock-up agreement for 12 months after the IPO and can only sell shares subject to there being sufficient demand and with the consent of IMI's brokers.

Whilst the task of exiting is not complete, SPARK is in a much better position to liquidate our holding now that we hold listed UK stock.

Kobalt Music

In the last six months, SPARK sold its remaining shares in Kobalt Music ("Kobalt") at the same price per share as the previous sale in July 2013. In total, SPARK has received proceeds from Kobalt of £19.2m (with £15.4m of this in the year to March 14) from a total investment of £4m, a multiple of 4.8 times the investment and an IRR of 16%.

SPARK was the founding investor in Kobalt in 2001 together with management.

This result in particular has demonstrated the merits of waiting until investments have achieved maturity before realising SPARK's shareholding. We congratulate the founder, Willard Ahdritz, and the board for their success in growing Kobalt so successfully over many years.

Gambling Compliance

Gambling Compliance provides critical regulatory, legal and market analysis to the gaming industry. It has a worldwide client base of more than 800 top gaming executives and regulatory bodies and is a subscription based information service. It is based in London and employs 30 staff.

We have reduced the valuation of SPARK's share in the business from £1.6m at 31 March 2013 to £1.5m at 31 March 2014 as we now think it less likely that a transaction will take place for the whole company and have therefore reduced SPARK's valuation to reflect what we believe to be achievable from selling our minority stake. Gambling Compliance raised a modest amount of funding in the year with £70k of this coming from SPARK. Sales have continued to grow steadily with 13% revenue growth recorded for the year to December 2013 and growth continuing in 2014.

Gambling Compliance expects to be cash generative in the year to December 2014.

DEM Solutions

DEM Solutions ('DEM') is a leading provider of particle simulation software (using discrete element modelling) for simulating and analysing industrial processes. DEM is based in Scotland and employs 23 staff.

DEM had a relatively disappointing year to June 2013 (largely as a result of a decline in the mining industry in which many of its customers operate) with sales down on the previous year and a loss incurred, so we have reduced our valuation of SPARK's stake in the business by 25% from £1.7m at 31 March 2013 to £1.3m to reflect the increasing likelihood that we may sell our minority stake rather than be part of a bigger corporate transaction. It is worth noting that the business grew revenue again in the year to June 2014 and returned to profitability and should benefit from some Board changes that we have overseen.

Mind Candy

Mind Candy, through its Moshimonsters product range, has become one of the world's leading developers of social multi-player children's games, helping children around the world to play skill enhancing games and connect with each other safely via its unique children's social network. Mind Candy is headquartered in London.

SPARK was a founder investor and led the founding round of investment. To date SPARK has received cash proceeds of £3.1m from an initial investment of £0.4m, and has a residual stake which we have reduced in value in the year from £3.1m to £0.8m.

This reduction is on the basis of lower sales in 2013 compared with its performance in the hugely successful 2012 and a disappointing start for the first quarter of 2014. Mind Candy's results for 2014 are heavily dependent upon the successful launch of new games for the very competitive mobile and tablet markets, and it is too early to predict whether these will be successful.

OpenX

SPARK sold its stake in OpenX in March 2014 to other venture capital buyers, including existing shareholders, for £2.4m. As no transaction was likely for the whole company in SPARK's realisation period, we needed to approach other financial buyers to sell SPARK's shares, and the best price available was considerably less than the last investor (Samsung) had paid for a strategic stake upon which we had valued the business. As a consequence SPARK recorded a loss of £2.6m as compared with the March 2013 book value.

Over the life of the investment, the investment in OpenX has been a considerable success however with SPARK having an effective "in-price" of only £0.3m - meaning that the sales proceeds represented a money multiple of 7x and an IRR of 43%. SPARK was a founding investor in OpenX.

Academia

Academia is a social networking site for the academic research community. It targets academics and scientists in the research and development (R&D) community and enables them to create their own research webpages, network with their peers and discover new research and conferences. SPARK was the founding investor in Academia.

SPARK's stake in Academia has reduced from £0.9m at 31 March 2013 to £0.8m at 31 March 2014. However, in this period SPARK sold approximately 40% of its stake at a 22% premium to the previous book value and therefore increased the value of its remaining stake by £0.3m. In the year to 31 March 2014, Academia raised $11m of funding from new and existing investors at a significant premium (>50%) to the last round thereby giving it funding for the foreseeable future. Revenues remain low as Academia has been focussing on user growth which is growing at 12% per month and it now has over 10 million registered and regular users.

Cash balances and operations

Following the termination of the Glasshouse Street leases on 31 January 2014, all cash balances that were previously restricted have been freed up and added to the unrestricted cash balance. This brought to an end the loss-making serviced office activity and ensured that there would not be any unexpected liabilities that otherwise could have arisen at the end of the original 15 year lease term. SPARK consequently no longer has any property and will have no property costs in future accounts.

During the year, the Company has collected more cash from selling investments than in any other year of its history, bringing in £33.6m and taking cash balances to £25.7m compared with £1.9m at the start of the financial year. Cash received from the sale of investments includes the sale of SPARK's investments in Kobalt (£15.5m), Notonthehighstreet (£11.0m), OpenX (£2.4m), Academia (£0.6m) together with the final proceeds from the Aspex liquidation (£4.1m).

Operating losses of £3.1m have increased slightly from £2.4m in the corresponding period in the previous year. Whilst investment management fees were lower than in the previous year (£0.9m vs £1.1m), reduced fund management income and increased professional fees more than offset this. The other expenses line is considerably higher due to the company making a provision of £0.5m for a contingent liability in respect of a dispute with a former director.

In the absence of property costs and with the Manager on a significantly reduced management fee of £400k for the year to March 15, it is expected that cash outflows for the next financial year will be significantly reduced. New incentive arrangements are in place with the Manager, but these are only payable from future realisations.

With the inclusion of the return of cash made in April 2014 (4.5p per share), the Company has, since August 2009, returned £53m (13.0p per ordinary share) to its shareholders. Further returns to shareholders require the remaining investments to be realised into cash, the timing of which is difficult to predict and currently looks likely to be no earlier than the final quarter of 2014.

Conclusion

In the period from August 2009 until now, SPARK shareholders have received 13p of cash per share and there remains value left in the portfolio as yet not realised. 89% of the March 2009 NAV of 14.6p has now been returned to shareholders in cash. The returns are more impressive when compared with the 31 March 2009 share price (5p) or the bids received for the Company as a whole at the time. We believe that the £33.6m of realisations achieved in the year is an endorsement of the strategy of allowing investments to mature fully before being sold. All the realisations in the period were to financial buyers and, in each case, the transaction was led and executed by SVML investment managers.  Whilst current economic conditions appear to be healthy again, the early years of the realisation period were tough years to be growing early stage companies, and the outstanding successes of so many companies are demonstrative of the quality of the portfolio created by SVML and of the management teams and entrepreneurs that we backed. Of the 10 investments valued in September 2009 at £1m or greater, five resulted in cash proceeds at least double the September 2009 book value (and in some cases considerably more) one failed (Skinkers), myDeco remains to prove itself, IMI has recently listed and two healthy investments remain in the portfolio (DEM and Gambling Compliance).

SPARK Venture Management Limited

7 August 2014

Group statement of comprehensive income

Year ended 31 March 2014

	Year ended 31 March 2014		Year ended 31 March 2013
	£'000		£'000
	Unaudited		Audited
Continuing operations
Gains on investments at fair value through profit and loss
- Realised (losses) / gains	(1,163)		98
- Net unrealised (losses) / gains -  note 2	(3,518)		8,953
	(4,681)		9,051
Revenue
Bank interest receivable	26		72
Management fee income	338		605
Portfolio dividends and interest	175		167
Other income	827		1,560
	1,366		2,404
Administrative expenses
Salaries and other staff costs	(206)		(90)
Depreciation of property, plant and equipment	(99)		(78)
Other costs -  note 3	(4,013)		(4,639)
Total administrative expenses	(4,318)		(4,807)
(Loss) / Profit before taxation	(7,633)		6,648
Taxation	-		-
(Loss) / Profit and total comprehensive income for the year	(7,633)		6,648
Attributable to:
- Equity shareholders of the parent	(7,633)		6,648

 

Group statement of financial position

As at 31 March 2014

	Year ended 31 March 2014		Year ended 31 March 2013
	£'000		£'000
	Unaudited		Audited
Non-current assets
Property, plant and equipment	-		99
Investments at fair value through profit and loss (note 2)	20,876		59,123
	-		-
	20,876		59,222
Current Assets
Trade and other receivables	555		996
Restricted cash	-		1,581
Cash and cash equivalents	25,663		1,900
	26,218		4,477
Total assets	47,094		63,699
Current liabilities
Trade and other payables	(653)		(1,516)
Amount due to D shareholders	(2,200)		-
	(2,853)		(1,516)
Net current assets	23,365		2,961
Provision for liabilities - see note 3	(500)		(340)
Net assets	43,741		61,843
Equity
Issued capital	1,360		1,585
Share premium	9		9
Revenue reserve	31,904		50,006
Capital Redemption Reserve	10,468		10,243
Total equity attributable to ordinary shareholders of the parent	43,741		61,843
	Number		Number
	'000		'000
Ordinary shares in issue	450,000		450,000
Shares held in Treasury	(39,245)		(39,245)
Shares in issue for net asset value per share calculation	410,755		410,755
NAV per ordinary share (pence)	10.65		15.06

Statement of changes in equity

Year ended 31 March 2014

	D shares	C Shares / Deferred shares	B shares	Ordinary share capital	Share Premium	Revenue Reserve	Capital Redemption reserve	Own shares	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 April 2012 (audited)	10	-	-	1,800	9	53,702	10,018	(175)	65,364
Profit and total comprehensive income for the financial period	-	-	-	-	-	6,648	-	-	6,648
Release of own share reserve following closure of EBT								175	175
New share split into 2013 B & C shares	-	75	150	(225)	-	-	-	-	-
Share buy-backs of 2013 B shares	-	-	(150)	-	-	(7,573)	150	-	(7,573)
Dividend on 2013 C shares	-	-	-	-	-	(2,771)	-	-	(2,771)
Cancellation of deferred C shares	-	(75)	-	-	-	-	75	-	-
Balance at 31 March 2013 (audited)	10	-	-	1,575	9	50,006	10,243	-	61,843
Loss and total comprehensive income for the financial period	-	-	-	-	-	(7,633)	-	-	(7,633)
New share split into 2013 B & C shares	-			(225)	-	-	225	-	-
Share buy-backs of 2013 (B shares)	-			-	-	(5,448)		-	(5,448)
Dividend on 2013 C Shares	-	-	-	-	-	(2,821)	-	-	(2,821)
Cancellation of deferred C shares	-		-	-	-	-		-	-
Amount due to D shareholders						(2,200)			(2,200)
Balance at 31 March 2014 (unaudited)	10	-	-	1,350	9	31,904	10,468	-	43,741

There are no other items of comprehensive income other than loss for the year as recorded in the Group Statement of Comprehensive Income.

 

Group statement of cash flows

Year ended 31 March 2014

	Year ended 31 March 2014		Year ended 31 March 2013
	£'000		£'000
	Unaudited		Audited
Cash flows from operating activities
Cash flow from operations	(3,118)		(1,912)
Net cash outflow from operating activities	(3,118)		(1,912)
Cash flows from investing activities
Purchase of financial investments	(70)		(100)
Sale of financial investments	33,639		8,773
Receipt of deferred consideration	-		37
Net cash inflow from investing activities	33,569		8,710
Cash flows from financing activities
Dividend paid (C shares)	(2,821)		(2,771)
Share buy-backs (B shares)	(5,448)		(7,573)
Net cash outflow from financing activities	(8,269)		(10,344)
Management of liquid resources
Decrease in restricted cash	1,581		454
Change in cash and cash equivalents	23,763		(3,092)
Opening cash and cash equivalents	1,900		4,992
Closing cash and cash equivalents	25,663		1,900

Reconciliation of operating loss to net cash outflow from operating activities

	Year ended 31 March 2014		Year ended 31 March 2013
	£'000		£'000
	Unaudited		Audited
Bank interest receivable	26		72
Portfolio dividends and interest	175		167
Other revenue	1,165		2,165
Total revenue	1,366		2,404
Administrative expenses	(4,318)		(4,807)
Operating loss	(2,952)		(2,403)
Decrease / (increase) in trade and other receivables	437		(505)
(Decrease) / Increase in trade and other trade payables	(702)		743
Non-cash expense relating to own share reserve write off	-		175
Depreciation of property, plant and equipment	99		78
Amortisation/impairment of other intangible assets	-		-
Net cash outflow from operations	(3,118)		(1,912)

Notes

1.   Basis of preparation

SPARK Ventures plc is a company incorporated in the UK under the Companies Act 1985. The information for the year ended 31 March 2014 and 31 March 2013 does not constitute statutory accounts for the purposes of section 435 of the Companies Act 2006, but is derived from and has been prepared on the same basis as those financial statements.

Statutory accounts for the year ended 31 March 2013, which were prepared under International Financial Reporting Standards, have been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

Whilst the financial information included in this unaudited preliminary announcement has been computed in accordance with IFRS, this preliminary announcement does not itself contain sufficient information to comply with IFRS. The audit of the statutory accounts for the year ended 31 March 2014 is not yet complete. The accounts will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. This unaudited preliminary announcement was approved by the Board on 7 August 2014 for release. This unaudited preliminary announcement has been prepared in accordance with the accounting policies set out in the 2013 Annual Report and Accounts.

The group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Investment Manager's Report. In assessing the group as a going concern, the directors' have considered the forecasts which reflect the directors proposed strategy for portfolio investments and the current uncertain economic outlook. The group's forecasts and projections, taking into account reasonably possible changes in performance, show that the group is able to operate within its available working capital.

The directors have considered the use of the going concern basis for the preparation of these financial statements within the context of the company's recently amended strategy of realising its remaining portfolio over the period to 31 March 2015.  Although one possible scenario is the piecemeal disposal of the portfolio and the company then ceasing to trade, essentially becoming a cash shell, other alternative ways forward are under consideration which do not involve the cessation of trade.  The Board has made no decision in this regard but will seek the most beneficial route to enhance shareholder value.  Accordingly the directors remain of the view that the going concern basis of preparation is appropriate.

2.   Investments at fair value through profit and loss

Portfolio company name	Value at 31/03/13	Additions	Disposals at valuation	Revaluations	Value at 31/03/14
	Audited	Unaudited	Unaudited	Unaudited	Unaudited
	£'000	£'000	£'000	£'000	£'000
IMIMobile	16,200	-	-	-	16,200
notonthehighstreet.com	10,200	-	(10,200)	-	-
Kobalt Music	15,463	-	(15,463)	-	-
OpenX	5,000	-	(5,000)	-	-
Aspex	3,600	-	(3,600)	-	-
Mind Candy	3,153	-	-	(2,365)	788
Gambling Compliance	1,645	70	-	(257)	1,457
DEM Solutions	1,722	-	-	(431)	1,291
Academia	924	-	(375)	295	844
Other < £500k	1,216		(160)	(760)	296
	59,123	70	(34,799)	(3,518)	20,876

In April 2014 a new management agreement with SPARK Venture Management Ltd was entered into. This provided the manager with a fixed fee for 12 months of £400k together with an incentive for achieving future realisations. The IMI float in June 2014 resulted in the Manager becoming eligible for an incentive fee but no bonus is actually due until sufficient IMI shares have been sold, and cash received that is not locked up, above a hurdle. If all the IMI shares held on 31 March 2014 were sold at the book value, it is estimated that the Manager would be due an incentive payment of approximately £2.2m.

3. Other expenses

	Year ended 31 March 2014	Year ended 31 March 2013
	£'000	£'000
	Unaudited	Audited
Property costs	1,703	1,971
Provisions	500	340
Professional fees	478	349
Management fee of Quester Venture Partnership	338	538
Management and secretarial fees of SPARK Ventures plc	897	1,089
Non-cash elimination of own share debit balance reserve	-	175
Other general overheads	97	177
	4,013	4,639

Provisions

There is a potential liability to a former director under a 2003 incentive scheme. The directors have considered it reasonable to set aside a provision of £500k for legal and settlement costs relating to this matter.

The provision in the previous year related to losses expected in the current year from the termination of the Glasshouse Street leases that were considered to be onerous. This provision was utilized in the year.

Note 4 - D Shares

Following the passing of a special resolution at the General Meeting of the Company on 2 October 2009, a new class of shares were created, being D shares. The Company's D shares were created to incentivise the manager to maximise the value of the portfolio in cash and make this cash available to shareholders. D shares are entitled to receive the D share distribution, which is triggered once payments to ordinary shareholders from 7 August 2009 have exceeded £49.3m. This hurdle could also be reduced by £820k for each £4.1m returned to shareholders before 31 March 2012. We have estimated that this lower hurdle should be £45.1m. Above this revised hurdle, D share holders receive 15% of distributions to shareholders above £45.1m up to £57.5m and 20% above £57.5m.   In accordance with the terms of the Management Buy Out, 200,000 D shares were issued at a price of 5p per share on 2 December 2009 and 1,800,000 D shares were issued on 26 March 2010 at par. The par value of each D share is 0.5p

The holders of D shares are not entitled in their capacity as holders of such shares to attend, speak at or vote at a General Meeting of the Company. The D shares have no conversion rights into other classes of share. The D shareholders have no rights to distributions other than D share distributions and only have rights to D share distributions once the initial target has been reached. The D shareholders only accrue value up to and including the year ending 31 March 2014 after which they accrue no further value.

In accordance with the articles of association and the management agreement we have calculated that the amount due to the D shareholders is £2.2m. Payment will be made once the annual report has been finalized. The amount due has been deducted from the net assets at 31 March 2014 to arrive at net assets attributable to the ordinary shareholders.

As payments to D shareholders were conditional upon returns to ordinary shareholders they are accounted for as equity and were previously not accrued for on the balance sheet as a liability as the conditions for there to be a payment had not been met. Now that the payment to D shareholders is not conditional, the amount due has been deducted from ordinary shareholders equity and included within creditors.

 

END

 

 

FR BLGDIIGBBGSX