Preliminary Results
NewMedia SPARK PLC
25 July 2007
For Immediate Release 25 July 2007
NewMedia SPARK plc
Preliminary Announcement of Preliminary Results for the year ended 31 March 2007
NewMedia SPARK plc (SPARK), the technology venture capital company is pleased to
announce its Preliminary Results for the year ended 31 March 2007
Key Highlights:
•Highly successful sale of Mergermarket to The Financial Times yields
proceeds of £27.8m and a return of 23.7 times SPARK's invested capital in
the year to 31 March 2007.
•The acquisition of Quester after the year end brings the management of an
additional £200m into the group (making a total of £275m), a seasoned
investment team, a platform for managing further third party funds and a
positive contribution to SPARK running costs going forward.
•Strong deal flow adds eight new investments to the portfolio diversified
as to stage and sector (of which three were after the year end), including
Mydeco.com, a new initiative from the founders of lastminute.com, backed
first by the SPARK investment team in 1998.
•Several of the more mature investments in the portfolio show strong
underlying performance, even where valuations remain unchanged.
•Net Assets per share increase from 17.7p to 17.8p in the year to March
2007.
•The adoption of International Financial Reporting Standards and the
consolidation of portfolio companies where holdings exceed 50%,
substantially alters the presentation of our financial information.
•Net results for the financial year, which was a loss of £0.2m in 2007 and
a profit of £18.2m in 2006, would have been a profit of £4.1m in 2007 and a
larger profit of £23.2m in 2006 were it not for the consolidation of the
major holdings in Aspex and DX3.
Andrew Carruthers, Chief Executive of NewMedia SPARK, commented:
'The last year has contained many successful developments and much change for
SPARK. In the first instance, the sale of our investment in Mergermarket
generated £25.9m of cash resources. Throughout the year we have continued to
invest in first class early stage businesses as well as start-up companies, when
these are being launched by proven, serial entrepreneurs such as Brent Hoberman
and Martha Lane-Fox with their new start-up Mydeco.com.
'Following the year end we announced the acquisition of Quester which has
established SPARK as the largest quoted early-stage investor in Europe,
providing both a seasoned investment team and giving us the regulatory,
administrative and reporting platform for the management of third party funds.'
Enquiries:
Andrew Carruthers, Chief Executive Officer 020 7851 7777
Isabel Podda, Buchanan Communications 020 7466 5000
Overview
The year to March 2007 has contained many successful developments and much
change for SPARK. In the first instance, the sale of our investment in
Mergermarket generated £25.9m of cash resources (with another £1.9m deferred),
thereby enabling both share buy-backs of £3.5m in the year as well as further
funds for the development of our portfolio. Then, after the year end, the
acquisition of Quester established SPARK as the largest quoted early-stage
investor in Europe, providing both a seasoned investment team and giving us the
regulatory, administrative and reporting platform for the management of third
party funds. Finally, the substantial holdings we have in two of our
investments, Aspex Semiconductors and DX3, have been consolidated within our
results rather than being shown as investments as in prior years.
Acquisition of Quester
In May 2007, SPARK purchased 100% of the share capital of Querist Ltd, the
parent company of the Quester group of companies. Quester manages funds of over
£200m in the form of the Quester VCT's, Quester Venture Partners and several
University Technology Transfer funds, £175m of which are on long-term or rolling
contracts. It has links with leading UK Universities, including the Oxford
University Colleges. Across the funds there are 49 investments made between 1996
and 2007, of which approximately one third are in Life Sciences and two thirds
in Technology. In the year ended 31 March 2007, Quester had an unaudited
consolidated turnover of £5.1 million and profit of £0.1 million after deducting
£1.4 million of non-recurring expenditure. The consideration paid was cash of
£4m plus the value of positive net assets (£0.4m), and an earn-out of up to £1m
over two years depending on revenue targets being met.
This acquisition strengthens SPARK's position as one of the leading early-stage
European venture investors, significantly expanding its funds under management
and securing a team and platform that is capable of managing additional funds
from a number of different sources in the future. The increase in the scale of
operations will generate substantial efficiency improvements, create a wider
spread of investments for co-investing SPARK shareholder funds, and provide
greater access to the UK's best early-stage entrepreneurs, investment managers
and University intellectual property - benefits which will also be shared by the
investors in Quester funds. Together, the combined group will manage over £275m
of funds, of which over 63% are evergreen (open ended funds). We plan to use
this combined platform to build further funds under management focussed on
high-growth sectors using emerging technologies to deliver long-term and
consistent growth in shareholder value.
New Investments
SPARK's investment team has been working together in the sector for over 10
years. This exceptional experience combined with a series of good exits has
resulted in an extremely high quality of deal flow available to us. In
particular, we are delighted to be able to welcome back Brent Hoberman and
Martha Lane-Fox with their new start-up Mydeco.com., The SPARK team backed Brent
and Martha when launching their first venture, Lastminute.com, in 1998. SPARK
has invested £1.8m into Mydeco.com, leading a round of £5.5m that includes a
group of very high profile investors. The business is due to launch a home
decoration community later in the year that seeks to combine design tools with
easy access to the highly fragmented array of suppliers to the home improvement
market. We see the return of successful entrepreneurs as a strong endorsement of
SPARK's established position and capacity to add value.
In making new investments we look for early stage businesses that have
outstanding management, but are also achieving a rapid revenue growth by
addressing large markets. The bulk of the invested capital will be in this
category, however, investments will also be made into a second category of
complete start-up companies, when these are being launched by proven, serial
entrepreneurs. During the period, new investments were made into Complinet,
Market Clusters, Gambling Compliance, iSporty and Notonthehighstreet.com.
Following the year end, new investments have been made into Unanimis, DEM and
Mydeco.com.
'Rapid revenue growth' investments
We purchased a 2% stake in Complinet for £0.7m, which is the leading provider of
solutions for the delivery of compliance intelligence to the global financial
services community. As in the case of Mergermarket, the business has built
substantial recurring revenues from a wide range of blue chip financial clients
with data that is mission critical. Historically growing at a rate of over 30%
per annum, this business falls into the category of investment that has already
demonstrated rapid revenue growth, and we would expect to see the value of this
business accelerate and provide an exit opportunity over the medium term.
More substantial investments in this category have been made since the year end
with Unanimis (£2.1m for 11%) and DEM (£1.7m for 24%). In both cases revenues
are climbing rapidly and the scale of the market opportunity is large. London
based Unanimis, is the UK's leading digital advertising sales business. The
company offers advertisers the opportunity to maximise their return from
internet advertising and offers web publishers an outsourced solution to
delivering advertising revenue. The Unanimis client list includes eBay, The
London Stock Exchange, Gumtree and The AA. Unanimis has been one of the UK's
fastest growing media and technology companies, and with the UK online
advertising market growing 40% over the last year and expected to continue to
grow strongly, Unanimis is ideally positioned to exploit this growth.
DEM develops computer aided engineering simulation tools which are used in a
wide range of industries such as pharmaceutical, chemical, mining, oil & gas,
energy, agriculture and food processing. DEM Solutions' software reduces the
need for expensive prototyping, and helps improve process efficiency and save
energy. The first version of DEM's software was launched in October 2005, since
which time the company has sold to many of the worlds leading companies across a
broad range of industrial sectors including space, (NASA), manufacturing &
agriculture (John Deere) and asphalt/minerals handling (Astec Industries). The
company's revenue has tripled over the last year and DEM is well positioned to
capture a substantial portion of this rapidly developing market.
Start-up investments
Based on a similar concept to Complinet, but at a much earlier stage, Gambling
Compliance was launched by a serial entrepreneur and previous employee of
Complinet to address the same mission critical compliance issues for the Gaming
community. SPARK seeded this company with an investment of £0.1m for a stake of
14%, and despite being pre-revenues at the point of investment, this business is
now demonstrating strong revenue growth.
MarketClusters provides customized market intelligence solutions by tracking
thousands of analyst-ranked Blog and News sources for opinions and deal flow
stories (M&A, VC and Partnership) and indexes these against a database of
highly-defined public and private companies and industry categories. iSporty is
a platform for community sites offering user generated content, blogs, videos
and resources to sports enthusiasts. Notonthehighstreet is an ecommerce site
providing access to a huge range of specialist products not sold through major
brand retailers. As these represent the start-up category described above, SPARK
has invested under £1m in these three businesses, for holdings of between 7% and
33%. Like MyDeco mentioned above, in each case, these start-up companies have
been created by highly talented individuals each of whom have the capacity to
build valuable businesses over time.
Mature portfolio investments
IMI
Following the $10m investment by Pequot Ventures last year, IMI has been able to
invest substantially in growth this year. The company has doubled revenues to
$10m and has been recording 100% growth in revenues year on year for the last
three years. IMI has 275 employees worldwide with operations in 51 countries
supporting 200 operator services and over 250 content partners. The company's
position in the fast growing Indian market has been consolidated through the
implementation of a Caller Ring Back Tone platform for BSNL, India's second
largest mobile operator. It also manages mobile campaigns for leading media
companies like Reuters and Google. The company has also deployed a number of
regional language services and voice services in India and this should help
maintain the strong revenue growth. Internationally the company continues to
make progress in the Caribbean and Latin America and has signed up Cable and
Wireless and Terra as clients during the year. IMI can now reach over 500
million mobile subscribers through its deployments. The fund raising has enabled
the company to develop a 25,000 sq ft world class Network Operations Centre in
Hyderabad, India from where it can deliver a managed service to global carriers
and media owners. The company expects the facility to provide assurances to blue
chips that the company can deliver a scalable managed service solution with
rigorous service levels. Progress has also been made in the engineering division
as it has developed project management revenues alongside its traditional
software licences and engineering services for tower design.
Aspex
As many of our shareholders are aware, alongside IMI mobile, Aspex
Semiconductors represents one of our largest assets. The business designs and
sells high-performance semiconductors for video processing applications. Their
initial target markets were for the professional segment of the video processing
markets such as film processing, medical imaging, machine vision and printing.
Aspex have achieved many design wins in these markets but have found the volume
of chip orders arising from them disappointingly low. In response to this they
developed the software skills that allowed them to launch products in April 2006
that did not require customers to commit to any design work and were tailored
for a specific application - the high speed encoding market. In their year to
March 2007, they made sales of $0.7m from these new products and as at the end
of the first quarter of this financial year (June 07), Aspex had several more
orders. They are also in discussions with customers for a high-volume consumer
device which will be shipping in 2008.
Whilst these developments do not guarantee a successful future for the company,
we have seen the launch of similar technologies from companies such as LSI
Logic, Mobilygen and Ambarella that both endorse the existence of this new
market and the strength of the Aspex technology. In addition, there is still
strong evidence of venture funding flowing into similar technologies with QPixel
raising a $25m funding round in 2006 and Picochip raising a fourth round of $27m
in June 2007 (taking the total investment funding raised in that company to
$70.5m). In the light of these developments, and after considerable research,
the board of SPARK has resolved that we should continue to support the
development of Aspex's business.
Kobalt
Kobalt has become one of Europe's top independent music publishers after being
formed as a start-up by a former SPARK executive less than 7 years ago. In the
year to June 2007 Kobalt has grown its revenues by 30% and is profitable in the
UK. It has also invested heavily into addressing the US market, establishing a
presence in New York, Los Angeles and Nashville. In a short time it has
established a strong position by winning royalty collection contracts from major
writers for stars such as Eminem, Gwen Stefani, James Brown, Barry Manilow,
Madonna and other first class acts. In the process it has been recognised by
Billboard (the leading trade publication) and other major industry players as a
new force in the US music industry based on its technology, efficiency and
independence. Whilst it will take time for these contracts to get established,
we believe the prospects for this business are strong.
Adoption of International Financial Reporting Standards
In line with the rest of our industry, SPARK has adopted International Financial
Reporting Standards (IFRS) for the presentation of the current years' financial
results and the comparative figures from the year ending March 2006. This has a
number of important implications. Firstly, the Profit and Loss account and the
Statement of Total Recognised Gains and Losses have been combined into a single
new statement - The Group Income Statement. Secondly, we now consolidate
majority holdings in portfolio companies. This means that the income statements
and balance sheets of Aspex Semiconductors and DX3 have to be consolidated into
group results, rather than appearing as a single component of the value of our
investments on the balance sheet.
The effect of this latter change is to introduce a new methodology for the
valuation of portfolio companies where stakes in excess of 50% are held. Such
investments can no longer be held at BVCA valuations but are instead valued at
the amount of the SPARK group share of their separate net assets together with
any goodwill attributable at the time when SPARK gained control. These
investments are now valued as subsidiary companies and the value of these
companies to SPARK shareholders will be demonstrated in the inclusion of these
subsidiary companies' results in the income statement. All other things being
equal, the effect on NAV per share, (the best indicator of SPARK's performance
over time) is to reduce it as early stage technology companies typically have
few assets that can be shown on the balance sheet and because such companies are
typically loss-making so the inclusion of their income statements in SPARK's
group income statement will reduce the value of the SPARK balance sheet.
Additionally, whereas in prior years, all further investment into Aspex and DX3
was largely held at cost, under IFRS such new investment is expensed over time
as the subsidiary spends the cash invested. As in prior years BVCA guidelines
are used to value holdings of less than 50%.
The new Group Income Statement now includes both the realised and unrealised
gains and losses for the period along with all the other components of the
traditional profit and loss account. In the case of SPARK, this is a helpful
change because our key metrics for performance during the year were previously
spread across two separate statements, but are now integrated into a single
statement. This means that movements in the valuation of the portfolio (holdings
of less than 50%) are reflected on the face of the same statement as our income
and costs. The net gains of £26.5m in the year to March 2006, after accruing for
potential incentive scheme costs of £6.4m, in large part arise from the
revaluation of IMI (£9.6m) and Mergermarket (£19.8m), even though the latter
transaction did not complete until August of the current financial year.
The revenues are principally attributable to SPARK, with the exception of those
for the sales of goods and related services, which arise from the consolidation
of Aspex and DX3. Other income is the rent that SPARK receives for the
subletting of its office space in Piccadilly which has increased during the year
and should be offset against the costs of those offices of £1.7m in the
Administrative expenses section for each of 2006 and 2007.
The administrative expenses category is substantially affected by two features
of the current year. Firstly, the consolidation of Aspex and DX3 which together
represent £5.5m of the costs in 2007 and £5.4m in 2006, and secondly, the
payment of a 'carried interest' incentive of £4.8m in the current year compared
to £1.4m in the previous year. This is the main incentive scheme that was
initiated in 2003 to incentivise the managers to deliver value to shareholders
from the portfolio. The scheme offsets any losses (whether realised or
unrealised) from the profits generated by selling investments and pays out 20%
of those profits above a 5% hurdle rate of interest to the managers, only when
they have been realised by the company in cash. The accumulation of profits from
the sales of companies such as Pricerunner, Footfall, Elata and others were
offset against the losses of underperformance from other investments, but were
sufficient to generate a bonus of £1.4m last year, three years after the scheme
was started. However, the sale of Mergermarket for a profit of £26.6m, even
after deduction of other write downs and hurdle interest, was sufficient to
generate a substantial bonus amounting to £4.8m (including employers National
Insurance). Excluding all incentive-related payments total SPARK overheads and
salaries were very similar to the previous year.
Net results for the financial year, which was a loss of £0.2m in 2007 and a
profit of £18.2m in 2006, would have been a profit of £4.1m in 2007 and a larger
profit of £23.2m in 2006 were it not for the consolidation of the major holdings
in Aspex and DX3.
Outlook
SPARK has a built a strong position within the venture market, not only in terms
of knowledge and sector expertise but also in terms of successful exits. We are
seeing an improving flow of exciting investment opportunities in our sectors.
The addition of Quester will add to these strengths, providing us with a
platform to build further funds under management and delivering long-term,
consistent growth in shareholder value. We look forward on updating our
shareholders on our progress as the year progresses.
Unaudited Group income statement
Year ended 31 March 2007
Year ended Year ended
31 March 2007 31 March 2006
£'000 £'000
Gains on investments at fair value through profit
and loss
- Realised gains and losses 2,045 3,224
- Unrealised gains and losses 7,339 23,273
----------- -----------
9,384 26,497
Revenue
Bank interest receivable 1,331 871
Portfolio dividends and interest 292 121
Sales of goods and related services 881 673
Other income 1,426 1,280
----------- -----------
3,930 2,945
Administrative expenses
Salaries and other staff costs (3,990) (5,025)
Carried interest expense (4,800) (1,354)
Depreciation (196) (214)
Other costs (5,257) (4,999)
----------- -----------
(14,243) (11,592)
----------- -----------
(Loss) / profit before taxation (929) 17,850
Taxation 714 381
----------- -----------
(Loss) / profit for the financial year (215) 18,231
----------- -----------
Attributable to:
- Equity shareholders (215) 18,231
Unaudited group statement of recognised income and expenses
Year ended Year ended
31 March 2007 31 March 2006
£'000 £'000
(Loss) / profit for the financial year (215) 18,231
Share based payments 428 479
----------- -----------
Total recognised income and expenses 213 18,710
----------- -----------
Unaudited Group balance sheet
Year ended 31 March 2007
Year ended Year ended
31 March 2007 31 March 2006
£'000 £'000
Non-current assets
Property, plant and equipment 649 783
Investments at fair value through profit and
loss 25,453 45,716
Deferred consideration 1,498 250
Goodwill 13,178 13,178
----------- -----------
40,778 59,927
Current Assets
Deferred consideration 2,147 -
Inventory 89 63
Trade and other receivables 1,356 1,374
Taxation 422 -
Restricted cash 2,869 2,869
Cash and cash equivalents 31,846 15,010
----------- -----------
38,729 19,316
Total assets 79,507 79,243
Current liabilities
Trade and other payables (2,137) (2,753)
Carried interest payable (4,800) (677)
Provisions (133) (133)
----------- -----------
Total liabilities (7,070) (3,563)
----------- -----------
Net current assets 31,659 15,753
----------- -----------
Net assets 72,437 75,680
----------- -----------
Equity
Share capital 11,818 11,818
Share premium 39,693 39,693
Retained earnings 21,101 24,377
Own shares (175) (208)
----------- -----------
Total equity 72,437 75,680
----------- -----------
Number Number
'000 '000
Ordinary shares in issue 472,736 472,736
Shares held in Treasury (58,391) (36,016)
Shares held by Employee Benefit Trust (7,023) (8,339)
----------- -----------
Shares in issue for net asset value per share
calculation 407,322 428,381
----------- -----------
NAV per share 17.78 17.67
----------- -----------
Unaudited Group cash flow statement
Year ended 31 March 2007
Year ended Year ended
31 March 2007 31 March 2006
£'000 £'000
Cash flows from operating activities
Cash flow from operations (6,469) (6,847)
Tax received 570 381
----------- -----------
Net cash from operating activities (5,899) (6,466)
Cash flows from investing activities
Purchase of property, plant and equipment (61) (57)
Sale of property, plant and equipment - 20
Purchase of financial investments (4,143) (3,524)
Sale of financial investments 30,395 8,155
----------- -----------
Net cash inflow from investing activities 26,191 4,594
Cash flows from financing activities
Purchase of own shares (3,456) (3,167)
----------- -----------
(3,456) (3,167)
----------- -----------
Change in cash and cash equivalents 16,836 (5,039)
Opening cash and cash equivalents 15,010 20,049
----------- -----------
Closing cash and cash equivalents 31,846 15,010
----------- -----------
Reconciliation of operating income to net cash inflow from operating activities
Year ended Year ended
31 March 2007 31 March 2006
£'000 £'000
Revenue 3,930 2,945
Administrative expenses (14,243) (11,592)
----------- -----------
Operating loss (10,313) (8,647)
(Increase) / decrease in trade and other
receivables (276) 37
Increase in trade and other payables 3,522 1,100
Increase in inventory (26) (30)
Depreciation 196 214
Non-cash expenditure 33 31
Share based payment 395 448
----------- -----------
Net cash flow from operations (6,469) (6,847)
----------- -----------
This announcement is prepared on the basis of the accounting policies as stated
in the statutory accounts for the year ended 31 March 2006, except as noted
below. The most significant change has been the adoption of International
Financial Reporting Standards and the resulting requirement to consolidate two
subsidiaries, Aspex and Dx3, which were previously treated as fixed asset
investments.
Note 1 - Accounting Policies
Basis of preparation
The consolidated financial information for the year ended 31 March 2007 has been
prepared in accordance with International Financial Reporting Standards
('IFRS'). These comprise standards and interpretations approved by the
International Accounting Standards Board ('IASB'), together with interpretations
of the International Accounting Standards and Standing Interpretations Committee
('IRFIC') approved by the International Accounting Standards Committee ('IASC')
that remain in effect, to the extent that IFRS have been adopted by the European
Union and have been prepared in accordance with those parts of the Companies Act
1985 applicable to companies reporting under IFRS.
The financial statements have been prepared in accordance with the historical
cost convention modified to include certain investments at valuation.
First time adoption of IFRS
The date of transition to IFRS for the group is 1 April 2005. The IFRS
accounting policies set out herein have been applied retrospectively to the
opening balance sheet as at 1 April 2005 and all subsequent periods. The Group
has taken advantage of the exemption in IFRS1 to only apply IFRS3 to business
combinations after 1 April 2005.The disclosures concerning the transition from
UK GAAP to IFRS are given in notes 5 - 6.
Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the company. Control exists where the
Company has the power, directly or indirectly, to govern the financial and
operating policies of an entity so as to obtain benefits from its activities. In
assessing control, potential voting rights that presently are exercisable or
convertible are taken into account. The financial statements of subsidiaries are
included in the consolidated financial statements from the date that control
commences until the date that control ceases.
Minority interests
All the subsidiaries consolidated in these accounts are 100% owned with the
exception of Aspex and DX3 which are 77% and 75% owned respectively. However, at
the Balance Sheet date, the net equity of each of these companies is negative
when the debt owed to SPARK is included. As there are no agreements in place for
the minority shareholders to contribute their share of the losses for the year,
the accounts presented do not give the minority interests their proportionate
share of the losses made in the year but instead show 100% of the losses as
being due to SPARK's shareholders.
Transactions eliminated on consolidation
Intragroup balances and any unrealised gains and losses or income and expenses
arising from intragroup transactions, are eliminated in preparing the
consolidated financial statements.
Intangible assets
Goodwill
All business combinations are accounted for by applying the purchase method.
Goodwill represents amounts arising on acquisition of subsidiaries. Goodwill
represents the difference between the cost of the acquisition and the fair value
of the net identifiable assets acquired. Goodwill is stated at cost less any
accumulated impairment losses. Goodwill is tested annually for impairment.
Current Taxation
Current tax is provided at amounts expected to be paid or recovered using the
tax rates and laws that have been enacted or substantively enacted at the
Balance Sheet date.
Deferred tax
Deferred taxation is provided in full on timing differences that result in an
obligation at the balance sheet date to pay more tax, or the right to pay less
tax, at a future date, at rates expected to apply when they crystallise based on
current tax rates and law. Timing differences arise from the inclusion of items
of income and expenditure in taxation computations in periods different from
those in which they are included in financial statements. Deferred tax
liabilities which will be covered by available tax losses are not provided.
Deferred tax assets are recognised to the extent that it is regarded as more
likely than not that they will be recovered. .
Investments
Investments are included at valuation on the following bases:
(a) Listed investments are valued at the closing mid-market price on the
31 March.
(b) Unquoted investments where a significant third party funding event has taken
place during the year ended 31 March which establishes a new value for that
investment are carried at that value.
(c) Investments considered to be mature are valued according to the Directors
best estimate of the Group's share of that investments value. This value is
calculated in accordance with British Venture Capital Association (BVCA)
guidelines and industry norms and includes calculations based on appropriate
earnings or sales multiples.
(d) All other unquoted investments are valued at the Directors' best estimate of
the Group's share of that investment's value, taking into account any
temporary loss in value. For new investments, the cost of investment is
generally considered to be its fair value for at least a period of a year
after which time it is carried at the directors' best estimate of the Group's
share of that investment's value.
The Directors consider that a substantial measure of the performance of the
Group is assessed through the capital gains and losses arising from the
investment activity of the Group.
Consequently, for measurement purposes, financial investments, including equity,
loan and similar instruments, are designated at fair value through profit and
loss, and are valued in compliance with IAS 39 'Financial Instruments:
Recognition and Measurement' and the International Private Equity and Venture
Capital Valuation Guidelines as recommended by the British Venture Capital
Association.
Gains and losses on the realisation of financial investments are dealt with
through the income statement, and taken to retained earnings. The difference
between the market value of financial investments and book value to the Group is
shown as a gain or loss in the income statement, and taken to retained earnings.
Consequently, we no longer have a revaluation reserve.
Share options
Executive Share Option Scheme
In accordance with IFRS 2, Accounting for Share Based Payments, the company has
introduced a new accounting policy to account for the 2005 Executive Share
Option Scheme. Under this scheme, full-time executives of SPARK were awarded
share options over shares with a value equal to five times the executive's
salary at the time. The options have an exercise price of 11p, which was the
market price of SPARK's shares at the date of award (30 September 2005). One
fifth of the options vest each year from 31 March 2006 onwards following
confirmation that the Net Asset Value per share target has been achieved for the
year. At the time the scheme was implemented the published, audited NAV of SPARK
was 12.8p. If growth over the five year period is in excess of 10% per year then
all of an executive's options will vest, if growth averages 5% per year over the
five year period then half of the awarded options will vest with performance in
between rewarded proportionately. Average performance of less than 5% a year
will result in no share options vesting, save for the fact that options which
vest following strong performance in the early years of the scheme, cannot be
cancelled.
The fair value of the options awarded (20,227,273 in total) has been estimated
at 6.2p per share using the Black-Scholes valuation methodology and it has been
assumed that all options will vest. The effect on the Profit and Loss Account
has been to increase the remuneration charge by £395,000 and £448,000 for the
years to March 2007 and 2006 respectively. The corresponding credit entry to
these amounts has been taken to retained earnings. Consequently this policy has
no effect on the Balance Sheet or Cash Flow Statement.
Note 2 - The above financial information does not constitute statutory accounts
within the meaning of Section 240 Companies Act 1985. The statutory accounts for
the year ending 31 March 2006 on which the auditors issued an unqualified audit
report have been delivered to the registrar of Companies. Whilst the financial
information included in this preliminary announcement has been completed in
accordance with IFRS, this announcement does not itself contain sufficient
information to comply with IFRS's. The group will publish full financial
statements in due course.
Note 3 - Carried interest scheme
Like most companies in the venture capital / private equity sector, NewMedia
SPARK plc operates a carried interest scheme for its employees. The SPARK
carried interest scheme was established in 2003 and is structured to pay to its
employees 20% of all realised uplifts over the book value of investments as at
31 March 2003 together with additions after this date, less an annual 5% hurdle
rate. At the start of the period the carried interest provision offset against
investments was £6.4m.
Note 4 - Reconciliation of movements in equity (unaudited)
Year ended Year ended
31 March 2007 31 March 2006
£'000 £'000
Opening total equity 75,680 60,137
Profit for the financial year (215) 18,231
Share based payments 428 479
Share buy-backs (3,456) (3,167)
----------- -----------
Closing total equity 72,437 75,680
----------- -----------
Note 5: Effect of IFRS on the balance sheets
As at 31.03.2007
Previous GAAP Consolidate Calculate Aspex Consolidate DX3 Other IFRS
Aspex Goodwill adjustments
£'000 £'000 £'000 £'000 £'000 £'000
Non current
assets
Property,
plant and
equipment 579 70 649
Investments
at fair value
through profit
and loss 38,632 (948) (11,231) (1,000) 25,453
Deferred
consideration 1,498 1,498
Goodwill 12,178 1,000 13,178
------- -------- -------- -------- -------- --------
40,709 (878) 947 40,778
Current assets
Deferred
consideration 2,147 2,147
Inventory 89 89
Trade and other
receivables 1,035 162 159 1,356
Taxation 422 422
Restricted cash 2,869 2,869
Cash at bank
and in hand 31,396 450 31,846
------- -------- -------- -------- -------- --------
37,447 1,123 159 38,729
Current liabilities
Trade and other
payables (1,643) (494) (2,137)
Carried interest
payable (4,800) (4,800)
Provisions (133) (133)
------- -------- -------- -------- -------- --------
(6,576) (494) (7,070)
Net current
assets 30,871 629 159 31,659
------- -------- -------- -------- -------- --------
Net assets 71,580 (249) 947 159 72,437
------- -------- -------- -------- -------- --------
Equity
Share capital 11,818 945 (945) 11,818
Share premium
account 39,693 39,693
Own shares
held by EBT (413) 238 (175)
Revaluation
Reserve (21,712) (1,294) 159 22,847
Retained
earnings 42,194 100 1,892 (23,085) 21,101
------- -------- -------- -------- -------- --------
Equity
shareholders'
funds 71,580 (249) 947 159 72,437
------- -------- -------- -------- -------- --------
Minority interest
------- -------- -------- -------- -------- --------
Total equity 71,580 (249) 947 159 72,437
------- -------- -------- -------- -------- --------
Note 5(continued): Effect of IFRS on the balance sheet
As at 31.03.2006
Previous GAAP Consolidate Calculate Aspex Consolidate DX3 Other IFRS
Aspex Goodwill adjustments
£'000 £'000 £'000 £'000 £'000 £'000
Non current
assets
Property,
plant and
equipment 690 93 783
Investments
at fair value
through
profit
and loss 59,522 (295) (11,231) (2,280) 45,716
Deferred
consideration 250 250
Goodwill 12,178 1,000 13,178
------- -------- -------- -------- -------- --------
60,462 (202) 947 (1,280) 59,927
Current assets
Deferred
consideration
Inventory 63 63
Trade and
other
receivables 873 191 310 1,374
Restricted cash 2,869 2,869
Cash at bank
and in hand 14,903 107 15,010
------- -------- -------- -------- -------- --------
18,645 361 310 19,316
Current liabilities
Trade and other
payables (2,330) (423) (2,753)
Carried interest
payable (677) (677)
Provisions (133) (133)
------- -------- -------- -------- -------- --------
(3,140) (423) (3,563)
Net current
assets 15,505 (62) 310 15,753
------- -------- -------- -------- -------- --------
Net assets 75,967 (264) 947 (970) 75,680
------- -------- -------- -------- -------- --------
Equity
Share capital 11,818 945 (945) 11,818
Share premium
account 39,693 39,693
Own shares
held by EBT (413) 205 (208)
Revaluation
Reserve (3,510) 2,000 23,403 (21,893)
Retained
earnings 28,379 (3,209) 1,892 (24,373) 21,688 24,377
------- -------- -------- -------- -------- --------
Equity
shareholders'
funds 75,967 (264) 947 (970) 75,680
------- -------- -------- -------- -------- --------
Minority interest
------- -------- -------- -------- -------- --------
Total equity 75,967 (264) 947 (970) 75,680
------- -------- -------- -------- -------- --------
Note 5(continued): Effect of IFRS on the balance sheet
As at 01.04.2005
(date of transition)
Previous GAAP Consolidate Calculate Aspex Consolidate DX3 Other IFRS (opening
Aspex Goodwill adjustments IFRS Balance
Sheet)
£'000 £'000 £'000 £'000 £'000 £'000
Non current
assets
Property,
plant and
equipment 848 112 960
Investments
at fair value
through profit
and loss 35,013 (11,231) (810) 22,972
Deferred
consideration
Goodwill 12,178 1,000 13,178
------- -------- -------- -------- -------- --------
35,861 112 947 190 37,110
Current assets
Deferred
consideration
Inventory 33 33
Trade and other
receivables 2,351 111 59 2,521
Restricted cash 2,869 2,869
Cash at bank
and in hand 18,815 1,234 20,049
------- -------- -------- -------- -------- --------
24,035 1,378 59 25,472
Current liabilities
Trade and other
payables (1,711) (545) (2,256)
Carried interest
payable
Provisions (189) (189)
------- -------- -------- -------- -------- --------
(1,900) (545) (2,445)
Net current
assets 22,135 833 59 23,027
------- -------- -------- -------- -------- --------
Net assets 57,996 945 947 249 60,137
------- -------- -------- -------- -------- --------
Equity
Share capital 11,818 945 (945) 11,818
Share premium
account 39,693 39,693
Own shares
held by EBT (413) 174 (239)
Revaluation
Reserve (24,103) 1,593 22,510
Retained
earnings 31,001 249 (22,684) 8,566
------- -------- -------- -------- -------- --------
Equity
shareholders'
funds 57,996 945 648 249 59,838
------- -------- -------- -------- -------- --------
Minority interest 299 299
------- -------- -------- -------- -------- --------
Total equity 57,996 945 947 249 60,137
------- -------- -------- -------- -------- --------
Note 6: Effect of IFRS adoption on the income statement
Year ended 31.03.2007
Previous GAAP Consolidate Consolidate DX3 Reverse Other IFRS
Aspex subsidiary adjustments
revaluations
£'000 £'000 £'000 £'000 £'000 £'000
Gains on
investments at
fair value
through profit
and loss
Realised gains
and losses 2,045 2,045
Unrealised
gains and
losses 4,980 2,359 7,339
------- -------- -------- -------- -------- --------
2,045 4,980 2,359 9,384
Revenue
Bank interest
receivable 1,301 30 1,331
Portfolio
dividends and
interest 292 292
Sales of goods
and related
services 403 478 881
Other income 1,426 1,426
------- -------- -------- -------- -------- --------
3,019 433 478 3,930
Administrative
expenses
Salaries and
other staff
costs (939) (2,033) (623) (395) (3,990)
Carried
interest
expense (4,800) (4,800)
Depreciation (129) (67) (196)
Other costs (2,482) (2,128) (706) 59 (5,257)
------- -------- -------- -------- -------- --------
Total
administrative
expenses (8,350) (4,228) (1,329) (336) (14,243)
------- -------- -------- -------- -------- --------
Loss before
taxation (3,286) (3,795) (851) 4,980 2,023 (929)
Taxation 714 714
------- -------- -------- -------- -------- --------
Loss for the
financial year (3,286) (3,081) (851) 4,980 2,023 (215)
------- -------- -------- -------- -------- --------
Note 6 (continued): Effect of IFRS adoption on the income statement
Year ended 31.03.2006
Previous GAAP Consolidate Consolidate DX3 Reverse Other IFRS
Aspex subsidiary adjustments
revaluations
£'000 £'000 £'000 £'000 £'000 £'000
Gains on
investments at
fair value
through profit
and loss
Realised gains
and losses 3,224 3,224
Unrealised
gains and
losses 2,000 21,273 23,273
------- -------- -------- -------- -------- --------
3,224 2,000 21,273 26,497
Revenue
Bank interest
receivable 858 13 871
Portfolio
dividends and
interest 216 (95) 121
Sales of goods
and related
services 431 242 673
Other income 1,280 1,280
------- -------- -------- -------- -------- --------
2,354 349 242 2,945
Administrative
expenses
Salaries and
other staff
costs (1,698) (2,192) (687) (448) (5,025)
Carried
interest
expense (1,354) (1,354)
Depreciation (143) (71) (214)
Other costs (2,502) (1,680) (774) (43) (4,999)
------- -------- -------- -------- -------- --------
Total
administrative
expenses (5,697) (3,943) (1,461) (491) (11,592)
------- -------- -------- -------- -------- --------
(Loss) /
profit before
taxation (119) (3,594) (1,219) 2,000 20,782 17,850
Taxation 381 381
------- -------- -------- -------- -------- --------
(Loss) /
profit for the
financial year (119) (3,213) (1,219) 2,000 20,782 18,231
------- -------- -------- -------- -------- --------
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