5th Dec 2006 07:02
NewMedia SPARK PLC05 December 2006 For Immediate Release 5 December 2006 NewMedia SPARK plc ("SPARK") Interim Results for the six months to 30 September 2006 Key Highlights: •Net cash £38.1m, including restricted cash of £2.9m (September 2005: £19.9m, including £2.9m of restricted cash). •Net Assets per share increase slightly in the period to 17.9p from 17.7p (up 27.9% over 12 months). •Realisations from the sale of portfolio assets contributed over £20m to cash reserves, after further investments of £3.9m, outflows from operations of £1.7m and share buy-backs of £1.7m. •Investments made in support of SPARK's position in the growing digital video and mobile media markets with further funding for Aspex and DX3. •Sale of Synaptic to Capita post period end for £1.4m represents a 44% uplift against book value since March. Andrew Carruthers, Chief Executive of NewMedia SPARK, commented: "SPARK's investment strategy continues to enable the Company to perform welldelivering an oustanding increase in NAV since September last year of nearly28%. We have continued to strengthen our position in the rapidly growing areasof digital video and mobile media whilst making considerable returns via therealisation of some of our investments. With a strong cash position, the nextperiod will see SPARK making new investments with particular emphasis onenterprise software, publishing and niche broadcasting, consistent with expecteddevelopments in these sectors. This strategy coupled with the development of ourexisting investee companies, we believe, will deliver value for our shareholdersas these exciting areas expand." Enquiries: Andrew Carruthers, Chief Executive Officer 020 7851 7777Isabel Podda, Buchanan Communications 020 7466 5000 About NewMedia SPARK plc NewMedia SPARK is a quoted venture capital organisation based in central Londonfocused on early stage investments in the technology, media and telecomssectors. SPARK's portfolio has a particular emphasis on digital media, softwareapplications, technology and communications. As an investor, SPARK expects toadd significant value to its investments through active support and strategicdirection. SPARK is listed on London's Alternative Investment Market. For further information, see www.newmediaspark.com. Overview Since the announcement of our preliminary results for March 2006 in August,there have been no major changes in the value of net assets. Despite spending£1.7m purchasing our own shares through the buy-back programme, total net assetshave only fallen by £0.9m and the consequent reduction of shares in circulationhas increased the net assets per share. However, the composition has changedsubstantially, as £30.5m of disposals have come out of the investments line intocash and deferred consideration. Of this, £27.8m came from the sale ofMergermarket (of which £3.6m is deferred), and £2.7m from the sale of ourresidual stake in Spuetz AG, from Tradera and other small transactions. Theother substantial movement in the period was the reduction of £2.7m in thecarried interest provision offset against the value of investments. Of this,£2.4m was charged to the Profit and Loss account and £0.3m was written off. Thischarge to the Profit and Loss account (crystallised principally by the cash saleof Mergermarket) is £1.4m greater than that for the same period last year, butotherwise Salaries and other staff costs are lower. Further details of thecarried interest scheme are disclosed in note 5 to this statement. After theperiod end, Synaptic was sold to Capita for consideration of £1.4m, an uplift of£0.4m from the carrying value at 31 March of £1.0m. Portfolio investments Events in the portfolio companies are tracking developments in the wider digitalmedia markets. Summarised below is the impact that the growth of digital video,mobile media, emerging markets and new publishing models is having on specificportfolio companies. The companies not mentioned here continue to develop inline with expectations and will be reviewed after the financial year end. High Speed Video Processing - Aspex Recent months have witnessed dramatic events in the broadcasting industry. InOctober, Google purchased YouTube, the video uploading site, for $1.65bn, andsoon after announced that its advertising revenues in the UK alone were largerthan those of Channel 4. The TV broadcasters, who by virtue of their licensesand their delivery platforms (Cable, Terrestrial and Satellite etc), have beenthe traditional gatekeepers for the UK's consumption of video, now see usergenerated content from YouTube, a company that was only formed 18 months ago,delivering 100 million videos a day. Advertising revenues are already fastmigrating online, and the mass consumption of video online only threatenstraditional broadcasters still further. Suddenly, any individual with a budgetconsumer video camera, a mid-range PC, a broadband connection and a bit ofpatience can become a broadcaster - even if only in poor quality. In this context we have invested a further £2.9m in Aspex Semiconductors duringthe period. In order for the democratisation of video broadcast to continue, thesoftware tools involved in the process now need the power of hardware solutions,such as those offered by Aspex, in order to satisfy the increasing demands forspeed, volume and quality of video. The infrastructure involved in the capture,encoding and delivery of video is beginning to attract substantial investment byTelecoms companies, broadcasters and consumer device manufacturers. The scale ofthe investment required to date by NewMedia SPARK has been greater thananticipated and the market has taken longer to develop, but the market is nowmoving quickly in Aspex's favour. We believe that the company still represents astrong technology developed and supported by a strong team who have been veryearly into a sector which is now experiencing rapid growth. Although the risksremain, the potential rewards in this investment are significant. Mobile Media - DX3 In addition, the delivery of media to mobile phones is fast becoming a featureof the mass market. The arrival of hundreds of new, 'media ready', mobiledevices on the market over recent and coming months will see the domination ofApple's iPod coming under threat from 'connected' devices manufactured bycompanies such as Nokia, Samsung, Motorola and others. Meanwhile, all the majormobile operators are stepping up their own efforts to service the mobile phoneas the principal portable media device. It is expected that Apple will alsolaunch a mobile network and an iPod phone in 2007. Taken together, thesedevelopments enhance the need for platforms capable of ingesting, hosting anddelivering securely, music content to wireless devices as well as the PC. Inview of this trend, we have made a further investment of £0.5m into DX3, ourtechnology platform for the delivery of digital media to wired and wirelessdevices. India - IMImobile The environment for the wireless sector in emerging markets is developingequally fast. IMImobile has benefited from this trend with revenues more thandoubling year on year. Its reach now extends into the entire Indian subcontinentwith either a platform or content presence among all major operators in India,and leading operators in Bangladesh (Grameen Phone) and Sri Lanka (Dialog).In the Middle East, IMImobile's platform now delivers content and services onSTC and Mobily in Saudi Arabia, Etisalat and Du in UAE, and Qtel in Qatar. InAfrica the company has deployments with Starcomm in Nigeria and is deployed inLatin America with Terra, where it will provide a messaging gateway and contentmanagement system with a reach of 250 million subscribers. In addition to its territorial growth, the company has demonstrated itscommitment to leading edge technologies by deploying its first 3G service withMTC Vodafone in Kuwait. The service provides both live video streaming ofleading TV channels and a Video On Demand service. A range of other 3Gapplications and services are expected to launch with a number of operators overthe coming year. Alternative reality gaming - Mind Candy Finally, the recent investment into Mind Candy by Accel Ventures is anindication that SPARK is able to take early advantage of its position in thecutting edge of UK digital media market. Mike Smith, the founder of the onlineretailer for gadgets, Firebox.com, raised seed funding from SPARK and privateinvestors in 2004 for 'Perplex City' - a business addressing the new market inalternative reality gaming (ARG). The business provides players with a blend ofpuzzles, clues and online community focused on discovering the location of asubstantial prize. The revenues are derived from selling cards containingpuzzles and clues through retailers, which can then be solved and traded inorder to get closer to locating the prize. The combination of game play, puzzlesolving, online community and physical product work well with the developingtrends for interactivity. The two fund raising rounds since our initial modestinvestment of £50k has allowed us to write up the value of this investment to£340k, of which £92k was follow-on investment from SPARK. New Investments At present, we are not in a position to disclose the investments that arecurrently in hand. However, we expect to be able to announce a number of newadditions to the portfolio as well as further developments within the portfolioover coming months. In addition to businesses directly associated with thedevelopments in digital media, we are working on a spread of investments in theenterprise software sector, as well as established companies that needinvestment and support to make the transitions required by the changing mediamarket. Andrew Carruthers5 December 2006 INDEPENDENT REVIEW REPORT TO NEWMEDIA SPARK PLC Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 September 2006 which comprises the consolidated profitand loss account, the consolidated statement of total recognised gains andlosses, the consolidated reconciliation of shareholders' funds, the consolidatedbalance sheet, the consolidated cash flow statement and related notes 1 to 8. Wehave read the other information contained in the interim report and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. This report is made solely to the Company, in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the Company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe Company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare also responsible for ensuring that the accounting policies and presentationapplied to the interim figures are consistent with those applied in preparingthe preceding annual accounts except where any changes, and the reasons forthem, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK and Ireland) and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 September 2006. Deloitte & Touche LLPChartered AccountantsLondon5 December 2006 Consolidated Profit and Loss Account Six months to Six months to Year toInterim Report to 30 September 2006 30-Sep 30-Sep 31-Mar 2006 2005 2006 Restated £'000 £'000 £'000 Unaudited Unaudited AuditedAdministrative expensesSalaries and other staff costs (3,015) (1,512) (3,500)Other administrative and operatingcosts (1,109) (1,000) (2,200)Depreciation (65) (75) (143)Other costs (101) (181) (302) --------- -------- --------Total administrative expenses (4,290) (2,768) (6,145) Other operating income 773 725 1,280 --------- -------- --------Operating loss (3,517) (2,043) (4,865) Gains from investments (16) 1,546 3,224Dividends received 145 - -Interest receivable and similarincome 400 604 1,074 --------- -------- --------(Loss) / profit on ordinaryactivities before taxation (2,988) 107 (567) Tax (charge) / credit on loss / profit - - -on ordinary activities --------- -------- --------(Loss) / profit on ordinaryactivities after taxation (2,988) 107 (567)--------------------------- --------- -------- --------Retained (loss) / profit for theperiod (2,988) 107 (567)--------------------------- --------- -------- -------- Basic and diluted (loss) / earningsper ordinary share (note 4) (0.70p) 0.02p (0.13p) --------- -------- -------- Consolidated Statement of Total Six months to Six months to Year toRecognised 30-Sep 30-Sep 31-MarGains and Losses 2006 2005 2006Interim Report to 30 September 2006 Restated £'000 £'000 £'000 Unaudited Unaudited Audited Loss for the financial period aspreviously stated (119)Restatement following change inaccounting policy (note 2) (448) --------(Loss) / profit for the financialperiod (2,988) 107 (567)Unrealised gain on investments 3,631 5,268 21,273Foreign currency translation (4) (16) (16)--------------------------- --------- -------- --------Total recognised gains and losses inthe period 639 5,359 20,690--------------------------- --------- -------- -------- Reconciliation of Movements in Six months to Six months to Year toConsolidatedShareholders' Funds 30-Sep 30-Sep 31-MarInterim Report to 30 September 2006 2006 2005 2006 Restated £'000 £'000 £'000 Unaudited Unaudited Audited (Loss) / profit for the financialperiod (2,988) 107 (567)Other recognised gains and lossesfor the period 3,627 5,252 21,257Share based payment 197 - 448Own shares purchased for Treasury (1,712) (504) (3,167)--------------------------- --------- -------- --------Net (reduction to) / increase inshareholders' funds (876) 4,855 17,971--------------------------- --------- -------- --------Opening shareholders' funds 75,967 57,996 57,996--------------------------- --------- -------- --------Closing shareholders' funds 75,091 62,851 75,967--------------------------- --------- -------- -------- Consolidated Balance Sheet 30-Sep 30-Sep 31-MarInterim Report to 30 September 2006 2006 2005 2006 £'000 £'000 £'000 Unaudited Unaudited AuditedFixed assetsTangible assets 641 755 690Investments 36,623 42,962 59,522 -------- ------- -------- 37,264 43,717 60,212Current assetsDebtors 598 1,750 873Deferred consideration 3,866 250 250Restricted cash 2,869 2,869 2,869Cash at bank and in hand 35,233 17,069 14,903 -------- ------- -------- 42,566 21,938 18,895Creditors: amounts falling duewithin one year (4,606) (2,615) (3,007) -------- ------- --------Net current assets 37,960 19,323 15,888 -------- ------- --------Total assets less currentliabilities 75,224 63,040 76,100 Provision for liabilities andcharges (133) (189) (133)--------------------------- -------- ------- --------Net assets 75,091 62,851 75,967--------------------------- -------- ------- -------- Capital and reserves Called up share capital 11,818 11,818 11,818Own shares held by EBT (413) (413) (413)Share premium account (note 8) 39,693 39,693 39,693Revaluation reserve (note 8) (25,969) (18,835) (3,510)Profit and loss account (note 8) 49,962 30,588 28,379--------------------------- -------- ------- --------Equity shareholders' funds 75,091 62,851 75,967--------------------------- -------- ------- -------- Net Asset Value per share 17.9p 14.0p 17.7p Number '000 Number '000 Number '000 -------- ------- --------Ordinary shares in issue 472,736 472,736 472,736Shares held in treasury (46,741) (14,500) (36,016)Shares held by Employee BenefitTrust (7,023) (9,269) (8,339) -------- ------- --------Shares in issue for net asset pershare calculation 418,972 448,967 428,381 -------- ------- -------- Consolidated Cash Flow Statement Six months to Six months to Year toInterim Report to 30 September 2006 30-Sep 30-Sep 31-Mar 2006 2005 2006 £'000 £'000 £'000 Unaudited Unaudited Audited Net cash outflow from operatingactivities (note 7) (1,661) (1,006) (2,698) Return on investments and servicing offinanceInterest received 400 604 1,073Dividend received 145 - - --------- -------- --------Net cash inflow from returns oninvestments and servicing of finance 545 604 1,073 TaxationUK Corporation tax paid - - -Overseas tax repaid 275 - - --------- -------- --------Net cash inflow from taxation 275 - - Capital expenditure and financialinvestmentPayments to acquire tangible fixedassets (16) (2) (5)Proceeds from disposal of fixedassets - 20 20Payments to acquire investments (3,851) (3,745) (7,289)Receipts from sales of investments 26,749 2,887 8,155 --------- -------- --------Net cash inflow / (outflow) frominvesting activities 22,882 (840) 881 --------- -------- --------Net cash inflow / (outflow) beforefinancing 22,041 (1,242) (744) FinancingPurchase of own shares (1,711) (504) (3,167) --------- -------- --------Net cash outflow from financing (1,711) (504) (3,167)--------------------------- --------- -------- --------Net cash inflow / (outflow) in theperiod 20,330 (1,746) (3,911)--------------------------- --------- -------- -------- Notes to the Interim Report to 30 September 2006 1) NewMedia Spark plc is a company incorporated in the United Kingdom. Theconsolidated interim financial statements as at 30 September 2006 and for thesix months then ended comprise those of the Company and its subsidiaries(together referred to as the "Group").The consolidated interim financialstatements have been prepared in accordance with United Kingdom GenerallyAccepted Accounting Practice (UK GAAP).The accounting policies applied by theGroup in the consolidated interim financial statements are the same as thoseapplied by the Group in its consolidated financial statements for the year ended31 March 2006 except for the introduction of a new accounting policy for sharebased payments in accordance with FRS 20 as described in note 2 below. The preparation of consolidated interim financial statements requires managementto make judgements, estimates and assumptions that affect the application ofaccounting policies and the reported amounts of assets and liabilities, incomeand expense. Actual results may differ from these estimates. In preparing theseconsolidated interim financial statements, the significant judgements made bymanagement in applying the Group's accounting policies and the key sources ofestimation uncertainty were the same as those that applied to the consolidatedfinancial statements as at and for the year ended 31 March 2006. 2) Following the introduction of FRS20, Accounting for Share BasedPayments, into UK GAAP for AIM listed companies, the company has introduced anew accounting policy to account for the 2005 Executive Share Option Scheme.Under this scheme, full-time executives of SPARK were awarded share options overshares with a value equal to five times the executive's salary at the time. Theoptions have an exercise price of 11p, which was the market price of SPARK'sshares at the date of award (30 September 2005). One fifth of the options vesteach year from 31 March 2006 onwards following confirmation that the Net AssetValue per share target has been achieved for the year. At the time the schemewas implemented the published, audited NAV of SPARK was 12.8p. If growth overthe five year period is in excess of 10% per year then all of an executive'soptions will vest, if growth averages 5% per year over the five year period thenhalf of the awarded options will vest with performance in between rewardedproportionately. Average performance of less than 5% a year will result in noshare options vesting, save for the fact that options which vest followingstrong 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 estimatedat 6.2p per share using the Black-Scholes valuation methodology and it has beenassumed that all options will vest. The effect on the Profit and Loss Accounthas been to increase the remuneration charge by £197,000 and £448,000 for thesix months to September 2006 and year to March 2006 respectively but has had noeffect on the results for the six months to 30 September 2005 as the ExecutiveShare Option Scheme was only implemented on 30 September 2005. The correspondingcredit entry to these amounts has been taken to the profit and loss reserveconsequently this policy has no effect on the Balance Sheet or Cash FlowStatement. 3) The above financial information for the year ended 31 March 2006 doesnot constitute statutory accounts as defined in Section 240 of the Companies Act1985. The information relating to the six month periods ended 30 September 2006and 30 September 2005 is unaudited. The information relating to the period ended31 March 2006 is extracted from the audited accounts of the Company which havebeen filed at Companies House. The auditors' report on those accounts was notqualified and did not contain statements under section 237(2) or (3) of theCompanies Act 1985. The information shown for the year ended 31 March 2006 hasbeen restated following the change in accounting policy for share based paymentsas stated in note 2 above. 4) (Loss) / earnings per share is based on the weighted average number ofshares in issue during the six months ended 30 September 2006 of 425,752,000 (31March 2006: 445,461,000). 5) Like most companies in the venture capital / private equity sector,NewMedia SPARK plc operates a carried interest scheme for its employees. TheSPARK carried interest scheme was established in 2003 and is structured to payto its employees 20% of all realised uplifts over the book value of investmentsas 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 offsetagainst investments was £6.4m. This provision was reduced to £6.1m in the periodand then further reduced to £3.7m by the effect of expensing £2.4m in the profitand loss account following the highly profitable sale of Mergermarket. 6) Analysis of changes in net funds Six months to Six months to Year to 30-Sep 30-Sep 31-Mar 2006 2005 2006 £'000 £'000 £'000 Unaudited Unaudited Audited Net cash inflow / (outflow) in theperiod 20,330 (1,746) (3,911)Foreign exchange differences - - (1)--------------------------- -------- -------- --------Increase / (decrease) in cash in theperiod 20,330 (1,746) (3,912)--------------------------- -------- -------- --------Opening net funds 14,903 18,815 18,815--------------------------- -------- -------- --------Closing net funds 35,233 17,069 14,903--------------------------- -------- -------- -------- 7) Reconciliation of operating loss to Six months to Six months to Year tonet cash outflowfrom operating activities 30-Sep 30-Sep 31-Mar 2006 2005 2006 Restated £'000 £'000 £'000 Unaudited Unaudited Audited Operating loss (3,517) (2,043) (4,865)Depreciation 65 75 143Share based payment 197 - 448(Increase) / decrease in debtors (69) 41 365Increase in creditors 1,663 921 1,211--------------------------- --------- -------- --------Net cash outflow from operatingactivities (1,661) (1,006) (2,698)--------------------------- --------- -------- -------- 8) Reserves Share Premium Revaluation Profit and loss account reserve account £'000 £'000 £'000 Reserves at 1 April 2006 39,693 (3,510) 28,379Unrealised gain on investments - 3,631 -Previously unrealisedgains now deemed permanent (26,090) 26,090Own shares purchased fortreasury in the period - - (1,712)Foreign currency translation - - (4)Share based payment - - 197Loss for the period - - (2,988)--------------------------- --------- -------- --------Reserves at 30 September 2006 39,693 (25,969) 49,962--------------------------- --------- -------- -------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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