RNS Number:4247T
NewMedia SPARK PLC
19 December 2003
NewMedia SPARK plc ("SPARK")
Interim Results for the six months to 30 September 2003
Overview
SPARK's net asset value at 30th September 2003 was 11.6p per share (2002:
13.4p). Following limited further investment in certain portfolio companies, and
after funding administrative, legal and reorganisation costs during the period,
consolidated cash balances at 30th September 2003 were #46.4m. In addition to
cash balances, the book value of SPARK's investment portfolio as at 30th
September 2003 was #24.8m (2002: #51.275m) excluding the value of shares held in
the Employee Benefit Trust and Spuetz shares held within Spuetz itself.
A number of the companies in SPARK's investment portfolio have continued to make
strong progress during the period and the Board continues to believe that, taken
as a whole, the portfolio is carried in SPARK's books at conservative valuations
with significant potential for capital appreciation. The fact that the book
value of the investment portfolio has shown relatively little change during the
period reflects SPARK's conservative accounting policies, which do not allow
investments to be written up in SPARK's books unless they are subject to
specific valuation events such as flotation, sale or third party investment.
The investment climate for technology companies has shown some improvement in
recent months, and in particular the IPO market has shown signs of recovery.
SPARK is monitoring these developments closely and will consider flotations of
portfolio companies during 2004 if appropriate and possible. However we would
caution that the timing of any flotations cannot be predicted with certainty.
Whilst a number of our portfolio companies have now reached profitability and
are making strong progress, it is important that we do not float companies
prematurely as that may damage both the companies themselves and investor
sentiment towards further flotations from SPARK.
We have continued the process of rationalisation of SPARK's costs during the
period. In particular, staff numbers are now down to 12 people (of whom three
are part time), including three in Germany. We are also making good progress
with our joint venture with Corpnex to turn our 18,000 square foot Soho offices
into serviced office space. The fit out for this is now complete and tenant
demand has been strong. Approximately two thirds of the space is now tenanted,
and we are optimistic that this venture will in due course very substantially
reduce our central property costs, which had been running at over #1m p.a..
The sale and closure of operations at Spuetz, our 70% owned quoted German
subsidiary, is also now largely complete. Spuetz and SPARK Gmbh now employ only
three executive staff between them, and Spuetz's assets consist largely of over
Euro 60m of cash. Following the period end, Spuetz has launched a tender offer
to buy back 7.3% of its share capital at Euro 9.90 per share, and if SPARK were
to tender into this offer pro-rata then it will receive approximately Euro 2.8 m
cash whilst maintaining its majority stake. Spuetz has also restated its 2002
accounts, which has put it into a position where it will be able to propose the
payment of a dividend in excess of Euro 20m once its 2003 accounts are
finalised. If such a dividend proposal were approved by the shareholders it
could be payable following the company's annual general meeting in Spring 2004.
Overall, whilst we are encouraged by the underlying progress at a number of our
portfolio companies, we share our own shareholders' frustration that this has
not yet been reflected in our book valuations. However, early stage venture
capital is a long-term business. Unlike the more mature buy-out market where
quicker exits are possible, early stage portfolios can typically take five years
or more to mature. Failure rates, as we have experienced during the last few
years, are typically high in the early years of a portfolio and therefore the
long-term performance of such portfolios typically depends on the emergence of a
relatively few "star" investments. This has certainly been our experience, and
although we believe we are now passing the bottom of the "J" curve the eventual
returns we achieve will be crucially dependent on the timing and valuation of
our exits from our investments. We are monitoring exit opportunities carefully,
but it would be foolish to exit prematurely from our most successful investments
simply to establish higher short-term valuations.
We are also aware of shareholder disappointment that the resolving of issues
relating to our UK property lease and the repatriation of cash from our German
investments has taken some time, and that this has to date blocked our stated
aim to institute a share buy-back programme. However, these have been highly
complex issues to resolve and as mentioned above we are now making good progress
in both of these areas. As matters evolve we hope to report further to
shareholders in the coming months.
Andrew Carruthers
17th December 2003
INDEPENDENT REVIEW REPORT TO NEWMEDIA SPARK PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 September 2003 which comprises the profit and loss
account, the balance sheet, the cash flow statement and related notes 1 to 4.
We have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
This report is made solely to the company, in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the company, for our review work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are also responsible for ensuring that the accounting polices and presentation
applied to the interim figures are consistent with those applied in preparing
the preceding annual accounts except where any changes, and the reasons for
them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom auditing standards 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 that
should be made to the financial information as presented for the six months
ended 30 September 2003.
Deloitte & Touche LLP
Chartered Accountants
London
17 December 2003
Consolidated Statement of Total Recognised Six months to Six months Year to
to
Gains and Losses 30-Sep 30-Sep 31-Mar
Interim Report to 30 September 2003 2003 2002 2003
#'000 #'000 #'000
Unaudited Unaudited Audited
Loss for the financial period (4,395) (15,314) (9,030)
Unrealised (loss)/ gain on investments (523) 14,690 (4,560)
Previously unrealised losses now deemed permanent 983 6,455 7,704
Minority interest share of unrealised gain on - (4,722)
investments
Unrealised exchange differences 96 611 2,850
Total recognised (losses) / gains in the period (3,839) 1,720 (3,036)
Consolidated Profit and Loss Account Six months to Six months to Year to
Interim Report to 30 September 2003 30-Sep 30-Sep 31-Mar
2003 2002 2003
#'000 #'000 #'000
Unaudited Unaudited Audited
Turnover - 1,392 1,295
Administrative expenses
Salaries and other staff costs (1,642) (3,768) (8,361)
Other administrative and operating costs (2,280) (3,671) (8,170)
Amortisation of positive goodwill - (1,340) (1,338)
Amortisation of negative goodwill - 1,072 5,221
Depreciation (469) (462) (915)
Other costs (1,321) (2,350) (2,695)
Total administrative expenses (5,712) (10,519) (16,258)
Other operating income 802 478 650
Operating loss (4,910) (8,649) (14,313)
Amounts written off investments (549) (9,932) 3,943
Interest receivable and similar income 533 692 1,284
Loss on ordinary activities before taxation (4,926) (17,889) (9,086)
Tax (charge) / credit on loss on ordinary activities (14) 928 330
Loss on ordinary activities after taxation (4,940) (16,961) (8,756)
Equity minority interests 545 1,647 (274)
Retained loss for the period (4,395) (15,314) (9,030)
Basic Loss per ordinary share (0.95p) (3.24p) (1.96p)
Diluted loss per ordinary share (0.95p) (3.24p) (1.96p)
Consolidated Balance Sheet 30-Sep 30-Sep 31-Mar
Interim Report to 30 September 2003 2003 2002 2003
#'000 #'000 #'000
Unaudited Unaudited Audited
Fixed assets
Goodwill - - -
Negative goodwill - (4,136) -
Intangible assets - (4,136) -
Tangible assets 1,090 2,015 1,372
Investments 26,182 53,297 25,408
27,272 51,176 26,780
Current assets
Debtors 3,516 4,312 3,930
Cash at bank and in hand 46,357 31,374 51,989
49,873 35,686 55,919
Creditors: amounts falling due within one year (6,395) (5,147) (7,260)
Net current assets 43,478 30,539 48,659
Total assets less current liabilities 70,750 81,715 75,439
Provision for liabilities and charges (3,207) (3,870) (3,660)
Equity minority interest (12,832) (14,544) (13,234)
Net assets 54,711 63,301 58,545
Capital and reserves
Called up share capital 11,799 11,799 11,799
Capital reserve 8,391 8,391 8,391
Share premium account 183,371 183,365 183,365
Revaluation reserve (43,732) (30,913) (44,192)
Profit and loss account (105,118) (109,341) (100,818)
Equity shareholders funds 54,711 63,301 58,545
Net Asset Value per share 11.6p 13.4p 12.4p
Number '000 Number Number '000
'000
Ordinary shares in issue 471,986 471,978 471,978
Consolidated Cash Flow Statement Six months to Six months to Year to
Interim Report to 30 September 2003 30-Sep 30-Sep 31-Mar
2003 2002 2003
#'000 #'000 #'000
Unaudited Unaudited Audited
Net cash outflow from operating activities (5,039) (6,690) (12,693)
Return on investments and servicing of finance
Interest received 537 692 1,284
Net cash inflow from returns on investments and 537 692 1,284
servicing of finance
Taxation
UK Corporation tax paid - - 118
Overseas tax paid (273) - -
Net cash (outflow) / inflow from taxation (273) - 118
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (174) (54) (68)
Proceeds from disposal of fixed assets 264
Payments to acquire investments (2,033) (6,077) (8,347)
Receipts from sales of investments 1,159 4,138 28,351
Net cash (outflow) / inflow from investing activities (1,048) (1,993) 20,200
Acquisitions and disposals
Sale of subsidiary undertakings - - 3,517
Purchase of minority interest - (2,417) (2,645)
Net cash sold with subsidiaries - - (2,901)
Net cash outflow from acquisitions and disposals - (2,417) (2,029)
Net cash (outflow) / inflow before financing (5,823) (10,408) 6,880
Financing
Issue of ordinary share capital 6 - -
Net cash inflow from financing 6 - -
Net cash (outflow) / inflow in the period (5,817) (10,408) 6,880
Analysis of changes in net funds
Net cash (outflow) / inflow in the period (5,817) (10,408) 6,880
Foreign exchange differences 185 - 3,327
(Decrease) / increase in cash in the period (5,632) (10,408) 10,207
Notes to the Interim Report to 30 September 2003
1) The information relating to the six month periods ended 30 September
2003 and 30 September 2002 is unaudited. The information relating to the period
ended 31 March 2003 is extracted from the audited accounts of the Company which
have been filed at Companies House and on which the auditors issued an
unqualified opinion.
2) The above financial information does not constitute statutory accounts
within the meaning of Section 240 Companies Act 1985.
3) Loss per share is based on the weighted average number of shares in
issue during the six months ended 30 September 2003 of 460,445,113 (31 March
2003: 460,966,000). These weighted average numbers exclude shares held by the
Employee Benefit Trust.
4) Of the consolidated group cash balances at 30 September 2003 of #46.357m
(2002: #31.374m), #42.076m (2002: #23.524) is held within our 70% owned German
subsidiary, Spuetz AG. After allowing for the minority interest in the cash, the
cash attributable to SPARK shareholders was approximately #33.734m (2002:
#24.317m). Until the cash balances in Spuetz are repatriated to the UK, SPARK is
unable to use these funds to finance share buy-backs.
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