25th Jul 2007 07:00
NewMedia SPARK PLC25 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 toannounce 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 forSPARK. In the first instance, the sale of our investment in Mergermarketgenerated £25.9m of cash resources. Throughout the year we have continued toinvest in first class early stage businesses as well as start-up companies, whenthese are being launched by proven, serial entrepreneurs such as Brent Hobermanand Martha Lane-Fox with their new start-up Mydeco.com. "Following the year end we announced the acquisition of Quester which hasestablished 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 muchchange for SPARK. In the first instance, the sale of our investment inMergermarket 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 furtherfunds for the development of our portfolio. Then, after the year end, theacquisition of Quester established SPARK as the largest quoted early-stageinvestor in Europe, providing both a seasoned investment team and giving us theregulatory, administrative and reporting platform for the management of thirdparty funds. Finally, the substantial holdings we have in two of ourinvestments, Aspex Semiconductors and DX3, have been consolidated within ourresults 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, theparent 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 severalUniversity Technology Transfer funds, £175m of which are on long-term or rollingcontracts. It has links with leading UK Universities, including the OxfordUniversity Colleges. Across the funds there are 49 investments made between 1996and 2007, of which approximately one third are in Life Sciences and two thirdsin Technology. In the year ended 31 March 2007, Quester had an unauditedconsolidated 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 £1mover two years depending on revenue targets being met. This acquisition strengthens SPARK's position as one of the leading early-stageEuropean venture investors, significantly expanding its funds under managementand securing a team and platform that is capable of managing additional fundsfrom a number of different sources in the future. The increase in the scale ofoperations will generate substantial efficiency improvements, create a widerspread of investments for co-investing SPARK shareholder funds, and providegreater access to the UK's best early-stage entrepreneurs, investment managersand University intellectual property - benefits which will also be shared by theinvestors in Quester funds. Together, the combined group will manage over £275mof funds, of which over 63% are evergreen (open ended funds). We plan to usethis combined platform to build further funds under management focussed onhigh-growth sectors using emerging technologies to deliver long-term andconsistent growth in shareholder value. New Investments SPARK's investment team has been working together in the sector for over 10years. This exceptional experience combined with a series of good exits hasresulted in an extremely high quality of deal flow available to us. Inparticular, we are delighted to be able to welcome back Brent Hoberman andMartha Lane-Fox with their new start-up Mydeco.com., The SPARK team backed Brentand Martha when launching their first venture, Lastminute.com, in 1998. SPARKhas invested £1.8m into Mydeco.com, leading a round of £5.5m that includes agroup of very high profile investors. The business is due to launch a homedecoration community later in the year that seeks to combine design tools witheasy access to the highly fragmented array of suppliers to the home improvementmarket. We see the return of successful entrepreneurs as a strong endorsement ofSPARK's established position and capacity to add value. In making new investments we look for early stage businesses that haveoutstanding management, but are also achieving a rapid revenue growth byaddressing large markets. The bulk of the invested capital will be in thiscategory, however, investments will also be made into a second category ofcomplete start-up companies, when these are being launched by proven, serialentrepreneurs. 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 andMydeco.com. 'Rapid revenue growth' investments We purchased a 2% stake in Complinet for £0.7m, which is the leading provider ofsolutions for the delivery of compliance intelligence to the global financialservices community. As in the case of Mergermarket, the business has builtsubstantial recurring revenues from a wide range of blue chip financial clientswith 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 alreadydemonstrated rapid revenue growth, and we would expect to see the value of thisbusiness accelerate and provide an exit opportunity over the medium term. More substantial investments in this category have been made since the year endwith Unanimis (£2.1m for 11%) and DEM (£1.7m for 24%). In both cases revenuesare climbing rapidly and the scale of the market opportunity is large. Londonbased Unanimis, is the UK's leading digital advertising sales business. Thecompany offers advertisers the opportunity to maximise their return frominternet advertising and offers web publishers an outsourced solution todelivering advertising revenue. The Unanimis client list includes eBay, TheLondon Stock Exchange, Gumtree and The AA. Unanimis has been one of the UK'sfastest growing media and technology companies, and with the UK onlineadvertising market growing 40% over the last year and expected to continue togrow strongly, Unanimis is ideally positioned to exploit this growth. DEM develops computer aided engineering simulation tools which are used in awide range of industries such as pharmaceutical, chemical, mining, oil & gas,energy, agriculture and food processing. DEM Solutions' software reduces theneed for expensive prototyping, and helps improve process efficiency and saveenergy. The first version of DEM's software was launched in October 2005, sincewhich time the company has sold to many of the worlds leading companies across abroad range of industrial sectors including space, (NASA), manufacturing &agriculture (John Deere) and asphalt/minerals handling (Astec Industries). Thecompany's revenue has tripled over the last year and DEM is well positioned tocapture a substantial portion of this rapidly developing market. Start-up investments Based on a similar concept to Complinet, but at a much earlier stage, GamblingCompliance was launched by a serial entrepreneur and previous employee ofComplinet to address the same mission critical compliance issues for the Gamingcommunity. SPARK seeded this company with an investment of £0.1m for a stake of14%, and despite being pre-revenues at the point of investment, this business isnow demonstrating strong revenue growth. MarketClusters provides customized market intelligence solutions by trackingthousands of analyst-ranked Blog and News sources for opinions and deal flowstories (M&A, VC and Partnership) and indexes these against a database ofhighly-defined public and private companies and industry categories. iSporty isa platform for community sites offering user generated content, blogs, videosand resources to sports enthusiasts. Notonthehighstreet is an ecommerce siteproviding access to a huge range of specialist products not sold through majorbrand retailers. As these represent the start-up category described above, SPARKhas invested under £1m in these three businesses, for holdings of between 7% and33%. Like MyDeco mentioned above, in each case, these start-up companies havebeen created by highly talented individuals each of whom have the capacity tobuild valuable businesses over time. Mature portfolio investments IMI Following the $10m investment by Pequot Ventures last year, IMI has been able toinvest 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 lastthree years. IMI has 275 employees worldwide with operations in 51 countriessupporting 200 operator services and over 250 content partners. The company'sposition in the fast growing Indian market has been consolidated through theimplementation of a Caller Ring Back Tone platform for BSNL, India's secondlargest mobile operator. It also manages mobile campaigns for leading mediacompanies like Reuters and Google. The company has also deployed a number ofregional language services and voice services in India and this should helpmaintain the strong revenue growth. Internationally the company continues tomake progress in the Caribbean and Latin America and has signed up Cable andWireless and Terra as clients during the year. IMI can now reach over 500million mobile subscribers through its deployments. The fund raising has enabledthe company to develop a 25,000 sq ft world class Network Operations Centre inHyderabad, India from where it can deliver a managed service to global carriersand media owners. The company expects the facility to provide assurances to bluechips that the company can deliver a scalable managed service solution withrigorous service levels. Progress has also been made in the engineering divisionas it has developed project management revenues alongside its traditionalsoftware licences and engineering services for tower design. Aspex As many of our shareholders are aware, alongside IMI mobile, AspexSemiconductors represents one of our largest assets. The business designs andsells high-performance semiconductors for video processing applications. Theirinitial target markets were for the professional segment of the video processingmarkets such as film processing, medical imaging, machine vision and printing.Aspex have achieved many design wins in these markets but have found the volumeof chip orders arising from them disappointingly low. In response to this theydeveloped the software skills that allowed them to launch products in April 2006that did not require customers to commit to any design work and were tailoredfor a specific application - the high speed encoding market. In their year toMarch 2007, they made sales of $0.7m from these new products and as at the endof the first quarter of this financial year (June 07), Aspex had several moreorders. They are also in discussions with customers for a high-volume consumerdevice 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 LSILogic, Mobilygen and Ambarella that both endorse the existence of this newmarket and the strength of the Aspex technology. In addition, there is stillstrong evidence of venture funding flowing into similar technologies with QPixelraising a $25m funding round in 2006 and Picochip raising a fourth round of $27min 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 thedevelopment of Aspex's business. Kobalt Kobalt has become one of Europe's top independent music publishers after beingformed as a start-up by a former SPARK executive less than 7 years ago. In theyear to June 2007 Kobalt has grown its revenues by 30% and is profitable in theUK. It has also invested heavily into addressing the US market, establishing apresence in New York, Los Angeles and Nashville. In a short time it hasestablished a strong position by winning royalty collection contracts from majorwriters for stars such as Eminem, Gwen Stefani, James Brown, Barry Manilow,Madonna and other first class acts. In the process it has been recognised byBillboard (the leading trade publication) and other major industry players as anew force in the US music industry based on its technology, efficiency andindependence. 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 FinancialReporting Standards (IFRS) for the presentation of the current years' financialresults and the comparative figures from the year ending March 2006. This has anumber of important implications. Firstly, the Profit and Loss account and theStatement of Total Recognised Gains and Losses have been combined into a singlenew statement - The Group Income Statement. Secondly, we now consolidatemajority holdings in portfolio companies. This means that the income statementsand balance sheets of Aspex Semiconductors and DX3 have to be consolidated intogroup results, rather than appearing as a single component of the value of ourinvestments on the balance sheet. The effect of this latter change is to introduce a new methodology for thevaluation of portfolio companies where stakes in excess of 50% are held. Suchinvestments can no longer be held at BVCA valuations but are instead valued atthe amount of the SPARK group share of their separate net assets together withany goodwill attributable at the time when SPARK gained control. Theseinvestments are now valued as subsidiary companies and the value of thesecompanies to SPARK shareholders will be demonstrated in the inclusion of thesesubsidiary companies' results in the income statement. All other things beingequal, the effect on NAV per share, (the best indicator of SPARK's performanceover time) is to reduce it as early stage technology companies typically havefew assets that can be shown on the balance sheet and because such companies aretypically loss-making so the inclusion of their income statements in SPARK'sgroup income statement will reduce the value of the SPARK balance sheet.Additionally, whereas in prior years, all further investment into Aspex and DX3was largely held at cost, under IFRS such new investment is expensed over timeas the subsidiary spends the cash invested. As in prior years BVCA guidelinesare used to value holdings of less than 50%. The new Group Income Statement now includes both the realised and unrealisedgains and losses for the period along with all the other components of thetraditional profit and loss account. In the case of SPARK, this is a helpfulchange because our key metrics for performance during the year were previouslyspread across two separate statements, but are now integrated into a singlestatement. This means that movements in the valuation of the portfolio (holdingsof less than 50%) are reflected on the face of the same statement as our incomeand costs. The net gains of £26.5m in the year to March 2006, after accruing forpotential incentive scheme costs of £6.4m, in large part arise from therevaluation of IMI (£9.6m) and Mergermarket (£19.8m), even though the lattertransaction did not complete until August of the current financial year. The revenues are principally attributable to SPARK, with the exception of thosefor the sales of goods and related services, which arise from the consolidationof Aspex and DX3. Other income is the rent that SPARK receives for thesubletting of its office space in Piccadilly which has increased during the yearand should be offset against the costs of those offices of £1.7m in theAdministrative expenses section for each of 2006 and 2007. The administrative expenses category is substantially affected by two featuresof the current year. Firstly, the consolidation of Aspex and DX3 which togetherrepresent £5.5m of the costs in 2007 and £5.4m in 2006, and secondly, thepayment of a 'carried interest' incentive of £4.8m in the current year comparedto £1.4m in the previous year. This is the main incentive scheme that wasinitiated in 2003 to incentivise the managers to deliver value to shareholdersfrom the portfolio. The scheme offsets any losses (whether realised orunrealised) 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 whenthey have been realised by the company in cash. The accumulation of profits fromthe sales of companies such as Pricerunner, Footfall, Elata and others wereoffset against the losses of underperformance from other investments, but weresufficient to generate a bonus of £1.4m last year, three years after the schemewas started. However, the sale of Mergermarket for a profit of £26.6m, evenafter deduction of other write downs and hurdle interest, was sufficient togenerate a substantial bonus amounting to £4.8m (including employers NationalInsurance). Excluding all incentive-related payments total SPARK overheads andsalaries were very similar to the previous year. Net results for the financial year, which was a loss of £0.2m in 2007 and aprofit of £18.2m in 2006, would have been a profit of £4.1m in 2007 and a largerprofit of £23.2m in 2006 were it not for the consolidation of the major holdingsin Aspex and DX3. Outlook SPARK has a built a strong position within the venture market, not only in termsof knowledge and sector expertise but also in terms of successful exits. We areseeing an improving flow of exciting investment opportunities in our sectors.The addition of Quester will add to these strengths, providing us with aplatform to build further funds under management and delivering long-term,consistent growth in shareholder value. We look forward on updating ourshareholders on our progress as the year progresses. Unaudited Group income statementYear ended 31 March 2007 Year ended Year ended 31 March 2007 31 March 2006 £'000 £'000 Gains on investments at fair value through profitand loss- Realised gains and losses 2,045 3,224- Unrealised gains and losses 7,339 23,273 ----------- ----------- 9,384 26,497 RevenueBank interest receivable 1,331 871Portfolio dividends and interest 292 121Sales of goods and related services 881 673Other income 1,426 1,280 ----------- ----------- 3,930 2,945 Administrative expensesSalaries 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) 18,231Share based payments 428 479 ----------- -----------Total recognised income and expenses 213 18,710 ----------- ----------- Unaudited Group balance sheetYear ended 31 March 2007 Year ended Year ended 31 March 2007 31 March 2006 £'000 £'000Non-current assets Property, plant and equipment 649 783Investments at fair value through profit andloss 25,453 45,716Deferred consideration 1,498 250Goodwill 13,178 13,178 ----------- ----------- 40,778 59,927Current AssetsDeferred consideration 2,147 -Inventory 89 63Trade and other receivables 1,356 1,374Taxation 422 -Restricted cash 2,869 2,869Cash and cash equivalents 31,846 15,010 ----------- ----------- 38,729 19,316 Total assets 79,507 79,243 Current liabilitiesTrade 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 ----------- ----------- EquityShare capital 11,818 11,818Share premium 39,693 39,693Retained earnings 21,101 24,377Own shares (175) (208) ----------- -----------Total equity 72,437 75,680 ----------- ----------- Number Number '000 '000 Ordinary shares in issue 472,736 472,736Shares 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 sharecalculation 407,322 428,381 ----------- ----------- NAV per share 17.78 17.67 ----------- ----------- Unaudited Group cash flow statementYear 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 activitiesPurchase of property, plant and equipment (61) (57)Sale of property, plant and equipment - 20Purchase 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 activitiesPurchase 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 otherreceivables (276) 37Increase in trade and other payables 3,522 1,100Increase in inventory (26) (30)Depreciation 196 214Non-cash expenditure 33 31Share 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 statedin the statutory accounts for the year ended 31 March 2006, except as notedbelow. The most significant change has been the adoption of InternationalFinancial Reporting Standards and the resulting requirement to consolidate twosubsidiaries, Aspex and Dx3, which were previously treated as fixed assetinvestments. Note 1 - Accounting Policies Basis of preparation The consolidated financial information for the year ended 31 March 2007 has beenprepared in accordance with International Financial Reporting Standards("IFRS"). These comprise standards and interpretations approved by theInternational Accounting Standards Board ("IASB"), together with interpretationsof 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 EuropeanUnion and have been prepared in accordance with those parts of the Companies Act1985 applicable to companies reporting under IFRS. The financial statements have been prepared in accordance with the historicalcost 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 IFRSaccounting policies set out herein have been applied retrospectively to theopening balance sheet as at 1 April 2005 and all subsequent periods. The Grouphas taken advantage of the exemption in IFRS1 to only apply IFRS3 to businesscombinations after 1 April 2005.The disclosures concerning the transition fromUK GAAP to IFRS are given in notes 5 - 6. Basis of consolidation Subsidiaries Subsidiaries are entities controlled by the company. Control exists where theCompany has the power, directly or indirectly, to govern the financial andoperating policies of an entity so as to obtain benefits from its activities. Inassessing control, potential voting rights that presently are exercisable orconvertible are taken into account. The financial statements of subsidiaries areincluded in the consolidated financial statements from the date that controlcommences until the date that control ceases. Minority interests All the subsidiaries consolidated in these accounts are 100% owned with theexception of Aspex and DX3 which are 77% and 75% owned respectively. However, atthe Balance Sheet date, the net equity of each of these companies is negativewhen the debt owed to SPARK is included. As there are no agreements in place forthe minority shareholders to contribute their share of the losses for the year,the accounts presented do not give the minority interests their proportionateshare of the losses made in the year but instead show 100% of the losses asbeing due to SPARK's shareholders. Transactions eliminated on consolidation Intragroup balances and any unrealised gains and losses or income and expensesarising from intragroup transactions, are eliminated in preparing theconsolidated financial statements. Intangible assets Goodwill All business combinations are accounted for by applying the purchase method.Goodwill represents amounts arising on acquisition of subsidiaries. Goodwillrepresents the difference between the cost of the acquisition and the fair valueof the net identifiable assets acquired. Goodwill is stated at cost less anyaccumulated impairment losses. Goodwill is tested annually for impairment. Current Taxation Current tax is provided at amounts expected to be paid or recovered using thetax rates and laws that have been enacted or substantively enacted at theBalance Sheet date. Deferred tax Deferred taxation is provided in full on timing differences that result in anobligation at the balance sheet date to pay more tax, or the right to pay lesstax, at a future date, at rates expected to apply when they crystallise based oncurrent tax rates and law. Timing differences arise from the inclusion of itemsof income and expenditure in taxation computations in periods different fromthose in which they are included in financial statements. Deferred taxliabilities which will be covered by available tax losses are not provided.Deferred tax assets are recognised to the extent that it is regarded as morelikely 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 theGroup is assessed through the capital gains and losses arising from theinvestment activity of the Group. Consequently, for measurement purposes, financial investments, including equity,loan and similar instruments, are designated at fair value through profit andloss, and are valued in compliance with IAS 39 'Financial Instruments:Recognition and Measurement' and the International Private Equity and VentureCapital Valuation Guidelines as recommended by the British Venture CapitalAssociation. Gains and losses on the realisation of financial investments are dealt withthrough the income statement, and taken to retained earnings. The differencebetween the market value of financial investments and book value to the Group isshown 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 hasintroduced a new accounting policy to account for the 2005 Executive ShareOption Scheme. Under this scheme, full-time executives of SPARK were awardedshare options over shares with a value equal to five times the executive'ssalary at the time. The options have an exercise price of 11p, which was themarket price of SPARK's shares at the date of award (30 September 2005). Onefifth of the options vest each year from 31 March 2006 onwards followingconfirmation that the Net Asset Value per share target has been achieved for theyear. At the time the scheme was implemented the published, audited NAV of SPARKwas 12.8p. If growth over the five year period is in excess of 10% per year thenall of an executive's options will vest, if growth averages 5% per year over thefive year period then half of the awarded options will vest with performance inbetween rewarded proportionately. Average performance of less than 5% a yearwill result in no share options vesting, save for the fact that options whichvest following strong performance in the early years of the scheme, cannot becancelled. 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 £395,000 and £448,000 for theyears to March 2007 and 2006 respectively. The corresponding credit entry tothese amounts has been taken to retained earnings. Consequently this policy hasno effect on the Balance Sheet or Cash Flow Statement. Note 2 - The above financial information does not constitute statutory accountswithin the meaning of Section 240 Companies Act 1985. The statutory accounts forthe year ending 31 March 2006 on which the auditors issued an unqualified auditreport have been delivered to the registrar of Companies. Whilst the financialinformation included in this preliminary announcement has been completed inaccordance with IFRS, this announcement does not itself contain sufficientinformation to comply with IFRS's. The group will publish full financialstatements in due course. Note 3 - Carried interest scheme Like most companies in the venture capital / private equity sector, NewMediaSPARK plc operates a carried interest scheme for its employees. The SPARKcarried interest scheme was established in 2003 and is structured to pay to itsemployees 20% of all realised uplifts over the book value of investments as at31 March 2003 together with additions after this date, less an annual 5% hurdlerate. At the start of the period the carried interest provision offset againstinvestments 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) 18,231Share based payments 428 479Share 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 £'000Non currentassetsProperty,plant andequipment 579 70 649Investmentsat fair valuethrough profitand loss 38,632 (948) (11,231) (1,000) 25,453Deferredconsideration 1,498 1,498Goodwill 12,178 1,000 13,178 ------- -------- -------- -------- -------- -------- 40,709 (878) 947 40,778 Current assetsDeferredconsideration 2,147 2,147Inventory 89 89Trade and otherreceivables 1,035 162 159 1,356Taxation 422 422Restricted cash 2,869 2,869Cash at bankand in hand 31,396 450 31,846 ------- -------- -------- -------- -------- -------- 37,447 1,123 159 38,729 Current liabilitiesTrade and otherpayables (1,643) (494) (2,137)Carried interestpayable (4,800) (4,800)Provisions (133) (133) ------- -------- -------- -------- -------- -------- (6,576) (494) (7,070) Net currentassets 30,871 629 159 31,659 ------- -------- -------- -------- -------- --------Net assets 71,580 (249) 947 159 72,437 ------- -------- -------- -------- -------- -------- EquityShare capital 11,818 945 (945) 11,818Share premiumaccount 39,693 39,693Own sharesheld by EBT (413) 238 (175)RevaluationReserve (21,712) (1,294) 159 22,847Retainedearnings 42,194 100 1,892 (23,085) 21,101 ------- -------- -------- -------- -------- --------Equityshareholders'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 £'000Non currentassetsProperty,plant andequipment 690 93 783Investmentsat fair valuethrough profitand loss 59,522 (295) (11,231) (2,280) 45,716Deferredconsideration 250 250Goodwill 12,178 1,000 13,178 ------- -------- -------- -------- -------- -------- 60,462 (202) 947 (1,280) 59,927 Current assetsDeferredconsiderationInventory 63 63Trade andotherreceivables 873 191 310 1,374Restricted cash 2,869 2,869Cash at bankand in hand 14,903 107 15,010 ------- -------- -------- -------- -------- -------- 18,645 361 310 19,316 Current liabilitiesTrade and other payables (2,330) (423) (2,753)Carried interestpayable (677) (677)Provisions (133) (133) ------- -------- -------- -------- -------- -------- (3,140) (423) (3,563) Net currentassets 15,505 (62) 310 15,753 ------- -------- -------- -------- -------- --------Net assets 75,967 (264) 947 (970) 75,680 ------- -------- -------- -------- -------- -------- EquityShare capital 11,818 945 (945) 11,818Share premiumaccount 39,693 39,693Own sharesheld by EBT (413) 205 (208)RevaluationReserve (3,510) 2,000 23,403 (21,893)Retainedearnings 28,379 (3,209) 1,892 (24,373) 21,688 24,377 ------- -------- -------- -------- -------- --------Equityshareholders'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 £'000Non currentassetsProperty,plant andequipment 848 112 960Investmentsat fair valuethrough profitand loss 35,013 (11,231) (810) 22,972DeferredconsiderationGoodwill 12,178 1,000 13,178 ------- -------- -------- -------- -------- -------- 35,861 112 947 190 37,110 Current assetsDeferredconsiderationInventory 33 33Trade and otherreceivables 2,351 111 59 2,521Restricted cash 2,869 2,869Cash at bankand in hand 18,815 1,234 20,049 ------- -------- -------- -------- -------- -------- 24,035 1,378 59 25,472 Current liabilitiesTrade and other payables (1,711) (545) (2,256)Carried interestpayableProvisions (189) (189) ------- -------- -------- -------- -------- -------- (1,900) (545) (2,445) Net currentassets 22,135 833 59 23,027 ------- -------- -------- -------- -------- --------Net assets 57,996 945 947 249 60,137 ------- -------- -------- -------- -------- -------- EquityShare capital 11,818 945 (945) 11,818Share premiumaccount 39,693 39,693Own sharesheld by EBT (413) 174 (239)RevaluationReserve (24,103) 1,593 22,510Retainedearnings 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 £'000Gains oninvestments atfair valuethrough profitand lossRealised gainsand losses 2,045 2,045Unrealisedgains andlosses 4,980 2,359 7,339 ------- -------- -------- -------- -------- -------- 2,045 4,980 2,359 9,384 RevenueBank interestreceivable 1,301 30 1,331Portfoliodividends andinterest 292 292Sales of goodsand relatedservices 403 478 881Other income 1,426 1,426 ------- -------- -------- -------- -------- -------- 3,019 433 478 3,930 AdministrativeexpensesSalaries andother staffcosts (939) (2,033) (623) (395) (3,990)Carriedinterestexpense (4,800) (4,800)Depreciation (129) (67) (196)Other costs (2,482) (2,128) (706) 59 (5,257) ------- -------- -------- -------- -------- --------Totaladministrativeexpenses (8,350) (4,228) (1,329) (336) (14,243) ------- -------- -------- -------- -------- --------Loss beforetaxation (3,286) (3,795) (851) 4,980 2,023 (929) Taxation 714 714 ------- -------- -------- -------- -------- --------Loss for thefinancial 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 £'000Gains oninvestments atfair valuethrough profitand lossRealised gainsand losses 3,224 3,224Unrealisedgains andlosses 2,000 21,273 23,273 ------- -------- -------- -------- -------- -------- 3,224 2,000 21,273 26,497 RevenueBank interestreceivable 858 13 871Portfoliodividends andinterest 216 (95) 121Sales of goodsand relatedservices 431 242 673Other income 1,280 1,280 ------- -------- -------- -------- -------- -------- 2,354 349 242 2,945 AdministrativeexpensesSalaries andother staffcosts (1,698) (2,192) (687) (448) (5,025)Carriedinterestexpense (1,354) (1,354)Depreciation (143) (71) (214)Other costs (2,502) (1,680) (774) (43) (4,999) ------- -------- -------- -------- -------- --------Totaladministrativeexpenses (5,697) (3,943) (1,461) (491) (11,592) ------- -------- -------- -------- -------- --------(Loss) /profit beforetaxation (119) (3,594) (1,219) 2,000 20,782 17,850 Taxation 381 381 ------- -------- -------- -------- -------- --------(Loss) /profit for thefinancial year (119) (3,213) (1,219) 2,000 20,782 18,231 ------- -------- -------- -------- -------- -------- This information is provided by RNS The company news service from the London Stock 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