TIDMIMAC
RNS Number : 3130L
Ingenious Media Active Capital Ltd
29 July 2011
29 July 2011
INGENIOUS media active capital limited
Final results for the year 1 April 2010 to 31 March 2011
Ingenious Media Active Capital Limited today announces its final
results for the year from 1 April 2010 to 31 March 2011.
CHAIRMAN'S STATEMENT
I am pleased to present the fifth Annual Report and Accounts in
respect of Ingenious Media Active Capital Limited (the Company) for
the year ended 31 March 2011.
At the Extraordinary General Meeting of the Company held on 12
May 2010, it was decided to return GBP50.1 million of capital to
Shareholders and to cease new investment activity (other than
follow-on investments to existing investee companies). The Manager
has therefore concentrated on active management of the Company's
investment portfolio.
Investments
The Manager is not considering new investments, only limited
follow-on investments into existing portfolio companies.
The Company provided a further GBP0.5 million of funding to
QobliQ Limited for the acquisition of Fulford PR in May 2010.
The Company's net asset value per share as at 31 March 2011 was
25.88 pence, compared to 62.64 pence at 31 March 2010. The return
of capital in May 2010 of GBP50.1 million accounts for 35.00 pence
of this difference.
A description of the market and the Company's investment
activities to date can be found in the Manager's Review which
follows this statement.
Realisation of Investments
The assets of Stage Three Music Limited were sold to BMG Rights
Management GmbH in July 2010 and in November 2010 the Company
disposed of its shareholding in NetPlay TV plc. In addition,
Outside Line Limited was sold to its management in April 2011.
Mike Luckwell
Chairman
29 July 2011
MANAGER'S REVIEW
Market Review and Prospects
The media sector continues to recover gradually in line with the
UK economy. Trading conditions remain challenging for investee
companies but have been improving throughout 2010 and 2011 in
comparison with the decline in the economy seen in 2008 and 2009.
There remains, however, considerable uncertainty as to the
sustainability of the UK recovery and clearly, any setback to this
would have a corresponding impact on both trading performance and
underlying company valuations.
Investment Activity
As mentioned in the Chairman's Statement, the Manager is no
longer making investments in new investee companies, but will
continue to manage the existing investee companies including making
additional investments in these companies where appropriate.
For further information, please visit: www.imaclimited.com or
contact: Ingenious Ventures, a trading division of the Manager to
IMAC Patrick McKenna / Patrick Bradley 020 7319 4000 Canaccord
Genuity Limited (Nomad to IMAC) Mark Williams / Bhavesh Patel 020
7050 6500
Investments and Committed Funds
It should be noted that all outstanding funding commitments are
at the discretion of the Company and the Manager.
Portfolio Management
This Manager's Review contains only subsidiaries in which IMAC
has a controlling interest. There are no further undrawn
commitments to other investments held by IMAC.
Investments and Committed Funds
Whizz Kid Entertainment Limited
June 2006, GBP2.25 million
February 2008, GBP2.00 million
Whizz Kid Entertainment Limited is an independent TV production
company formed by Malcolm Gerrie, former Chief Executive and
co-founder of Initial, which was sold in 1992 to what became
Endemol. Whizz Kid Entertainment Limited creates and produces
audio-visual content across a range of genres including music,
events and entertainment. The company is able to exploit
opportunities in digital content through its digital arm, Tough
Cookie, and in advertiser-funded content through its investment in
Precious Media with Peter Christiansen.
While the market conditions for independent TV production
companies, especially smaller companies, remain challenging, Whizz
Kid Entertainment Limited has been enjoying some success. In
particular, its Let's Dance show for BBC1 has enjoyed three series
with excellent ratings. Being N-Dubz, a reality show featuring the
pop group N-Dubz, is also now in its second series.
Whizz Kid Entertainment Limited continues to maintain a strong
development pipeline of projects across music, events and
entertainment.
Digital Rights Group Limited
December 2006, GBP3.00 million
June 2007, GBP3.00 million
November 2007, GBP5.27 million
Digital Rights Group Limited (DRG) is a TV sales and rights
distribution group which provides TV producers with international
distribution for their rights and programmes, independently of the
major broadcasters or other TV producer-owned distributors. DRG is
now the largest independent TV distributor in the UK, having
acquired Portman Film & Television Group, Zeal Entertainment,
i-Rights, iD Distribution and Channel 4 International Limited
(C4i).
Market conditions have been steadily improving, with
broadcasters' increasing budgets feeding through into higher
programming sales. DRG has been successful in acquiring the rights
to leading programming including Doc Martin, Collision, Underbelly
and Sea Patrol.
The management team is continuing to work on operational
synergies within the business and is also examining new investment
opportunities in both TV and digital rights.
Outside Line Limited
March 2007, GBP1.50 million
Founded by Ant Cauchi and Lloyd Salmons in 2000, Outside Line
Limited is a digital marketing and creative agency. The company has
grown since IMAC's investment, expanding its service offering from
the design and development of websites and mobile applications into
other disciplines including online PR, social-media marketing, and
blogger outreach. A content division has also been established to
provide filming, editing, audio and copywriting services.
Since 2007, Outside Line Limited has also successfully broadened
its client base from mainly entertainment clients (including The
Beatles, Robbie Williams and Sega Games) to other sectors,
including leading consumer brands such as Playstation, Adidas, Lynx
and LG.
IMAC's holding in Outside Line Limited was successfully sold
back to Outside Line's management team on 6 April 2011.
Two Way Media Holdings Limited (including NetPlay TV plc shares
up to disposal)
May 2007, GBP5.34 million
January 2009, GBP0.60 million
Two Way Media Limited, the trading company, is a UK-based
interactive television company which has transitioned itself from
being a supplier of red button technology and professional services
to UK cable operators and channels to being a multiplatform
interactive TV production and distribution company.
Subsequent to IMAC's investment, Two Way Media Limited
established a cross-platform gambling production company with the
delivery of the Challenge Jackpot gambling channel on TV/online in
partnership with Virgin Media. This joint venture was sold to
NetPlay TV plc in April 2009.
Two Way Media Limited is already the largest supplier of this
type of red button gaming and content to the UK cable platform. It
has a strong pipeline of opportunities both to supply similar red
button content to IPTV operators across Europe as well as to
develop branded casual games content both online and for TV. ITV
red button voting has recommenced and is surpassing expectations.
Two Way Media Limited has also created games for mobile phones,
social networks and won several commissions to create applications
for connected televisions. Two Way Media Limited is also beginning
to push its intellectual property across Facebook, and other online
gaming portals.
Brand Events Holdings Limited
June 2007, GBP7.02 million
March 2010, GBP2.06 million
A leader in the consumer exhibitions market, Brand Events
Limited, the trading company, has established a strong reputation
within the UK for successfully launching new consumer shows. The
company's established operating model borrows skills and techniques
from the entertainment, media and leisure sectors and combines them
with traditional exhibition skills. The company has now established
two key shows: the Taste Festivals, food festivals celebrating
different foods; and Top Gear Live, the Top Gear branded live
motoring theatre format. An international network has been built
allowing Brand Events Limited to license or run the shows with
joint venture partners in Australia, South Africa, The Netherlands,
New Zealand, Ireland and Dubai. New Taste events have included
Milan and Amsterdam this year, as well as a new Christmas format in
Dublin. During the year ended 31 March 2011, Brand Events Holdings
Limited acquired controlling interests in three of its existing
joint venture partners comprising of Brand Events Australia
Limited, Taste of Dublin Limited and JCRM Brand Events South Africa
(Pty) Limited.
A further working capital injection of GBP2.06 million was
agreed with management in order to expand the Top Gear Live shows
into new territories such as Scandinavia and other major cities in
Australasia, as well as creating a car festival format. A new Golf
Live show was launched in May 2010, adding to the portfolio of
shows that can then be licensed internationally through Brand
Events Limited's network. Brand Events also launched Masterchef
Live in Australia, a new food exhibition format during the
year.
QobliQ Limited
December 2007, GBP7.30 million
May 2008, GBP2.30 million
November 2008, GBP2.77 million
May 2010, GBP0.50 million
QobliQ Limited was formed with the aim of creating the leading
international innovative marketing services group, combining
sponsorship, digital and experiential marketing to provide brands
with an integrated innovative marketing solution. The company is
exploiting a structural shift in spend away from traditional
above-the-line advertising into innovative below-the-line marketing
activities which enable brands to engage with their target audience
on a more personal level, whilst typically delivering higher return
on investment for the advertisers.
In December 2007, QobliQ Limited completed its first acquisition
of brandRapport Limited, an independent sponsorship agency in the
UK. In May 2008, IMAC invested a further GBP2.3 million in QobliQ
Limited allowing the company to acquire Paris based experiential
marketing agency, Nouveau Jour SAS, and SponsorClick France SAS, an
independent sponsorship marketing consultancy based in Paris. IMAC
invested an additional GBP2.8 million in November 2008 in order for
the company to acquire Arena International Limited and Arena Sports
Marketing Limited together, (Arena), a UK sponsorship consultancy
specialising in football. The acquisition of Arena, re-branded
brandRapport Arena, extended brandRapport's already impressive
track record into football partnerships through its work with the
Barclaycard Premiership and FA Cup (E.ON). A further investment of
GBP0.5 million was made in May 2010 to fund the acquisition of
Fulford PR giving QobliQ a presence in the UK, France, Hong Kong
and Singapore. In July 2011, Nouveau Jour SAS and SponsorClick
France SAS, French subsidiaries of QobliQ Limited, were placed into
voluntary liquidation.
Review Centre Limited
June 2008, GBP7.03 million
Review Centre Limited (www.reviewcentre.com), a leading
consumer-generated review site, was acquired in June 2008 by IMAC
in a management buy-in (MBI) deal.
The MBI team was led by Nick Hynes as non-executive chairman and
Glen Collins as Chief Executive Officer. Nick Hynes was previously
Chief Executive Officer of The Search Works, the search engine
marketing provider sold to Tradedoubler in July 2007 for GBP56
million, and prior to that headed Overture Europe, Yahoo's search
advertising business. Glen Collins is a career online marketer who
founded and ran pioneering online marketing and web development
agency Digital Outlook, until exiting the business in 2006.
Review Centre was established in 1999 to allow internet users to
post their product reviews on online bulletin boards. It now
provides reviews across a very broad base of different products and
services, encompassing automotive, electrical, entertainment,
finance, lifestyle, sport and travel. In 2002 it switched its
business model to pay-per-click advertising, significantly
enhancing revenues. The business had grown steadily, primarily due
to an expanding database of consumer reviews, a booming e-commerce
market and increased consumer interest in researching purchases
online.
Since investment, the MBI team has pressed ahead with
redesigning the website and enhancing the user experience for both
writing and reading reviews. The new site build has allowed Review
Centre to generate several new revenue streams. These include price
comparison, voucher codes and cash back revenues, display
advertising as well as the ability to deliver more targeted
commercial deals.
Ingenious Ventures L.P.
IMAC's investment in Cream and Stage Three Music is via its
Limited Partnership interest in the Ingenious Ventures L.P. (IVLP)
fund. In July 2010 the assets of Stage Three Music Limited were
sold to BMG Rights Management GmbH. Ingenious Media Limited remains
the other (minority) partner in the limited partnership. No
monitoring fees are charged by the Manager to IMAC for management
of its interest in IVLP.
Cream Holdings Limited
August 2008, GBP1.03 million
Cream Holdings Limited is a live events company based around the
Cream dance brand and is run by James Barton. Its main activities
are festivals in the UK and licensed shows overseas. The company
also operates club nights in both Liverpool and Ibiza and a
compilation record label.
Its best known event, Creamfields, is held in August every year.
The 2010 festival repeated the success of the previous year,
selling out in advance. Management are confident that this success
can again be replicated in 2011 as many of the factors driving the
performance of previous events, including a change of venue and a
move to a two-day format, will be continued.
The club nights business in Ibiza also saw stronger than
expected performance in 2010, and this is expected to continue in
2011.
Stage Three Music Limited
August 2008, GBP5.03 million
Ingenious Ventures L.P. sold the assets of Stage Three Music
Limited to BMG Rights Management GmbH in July 2010. A proportion of
the sale proceeds were retained in the remaining company pending
tax clearance. This clearance has now been received and these final
proceeds will be distributed to IMAC accordingly.
Ingenious Ventures
29 July 2011
Company Statement of Comprehensive Income
for the year ended 31 March 2011
Year ended
31 March Year ended 31 March
2011 2010
Note GBP '000 GBP '000
Revenue 1f 292 277
Other operating expenses 1g (689) (1,361)
Investment revenue 1f 113 341
Fair value loss on investments in
subsidiaries 1d (343) -
Fair value loss on investments at
fair value through profit or loss 1d (853) (6,476)
Fair value (loss)/gain on disposal
of investments (438) 43
Investment management fees 28 (405) (1,793)
Loss before taxation 2 (2,323) (8,969)
Income tax expense 4 - -
Loss for the year (2,323) (8,969)
------------------------------------ ----- ----------- --------------------
Loss per share (basic and diluted
pence per share) 5 (1.62) (6.26)
------------------------------------ ----- ----------- --------------------
All income is attributable to the Ordinary Shareholders of the
Company unless otherwise stated.
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2011
Year ended Year ended
31 March 31 March
2011 2010
Note GBP '000 GBP '000
Continuing operations
Revenue 1f 51,190 44,274
Cost of sales 1g (35,838) (26,992)
Other operating expenses 1g (18,443) (20,433)
Investment revenue 1f 141 369
Income or share of results from associates 1,392 1,275
Fair value (loss)/gain on investments at
fair value through profit or loss 15 (853) 599
Fair value (loss)/gain on disposal of
investments (432) 43
Impairment of goodwill 6 - (3,203)
Impairment of intangible assets 7 (75) (1,904)
Investment management fees 28 (405) (1,793)
Finance costs (637) (640)
--------------------------------------------- ----- ----------- -----------
Loss before taxation (3,960) (8,405)
============================================= ===== =========== ===========
Income tax expense 4 (1,242) (709)
Loss for the year from continuing operations (5,202) (9,114)
Discontinued operations
Profit for the year from discontinued
operations 12 289 81
Non-controlling interests 26 1,065 (296)
============================================= ===== =========== ===========
Loss for the year (3,848) (9,329)
Loss per share on continuing operations
(basic and diluted pence per share) 5 (2.69) (6.58)
Earnings per share on discontinued
operations (basic and diluted pence per
share) 5 - 0.06
Loss per share
(basic and diluted pence per share) 5 (2.69) (6.52)
============================================= ===== =========== ===========
.
All revenue and expenses are derived from continuing operations
unless otherwise stated.
Company Statement of Financial Position
as at 31 March 2011
Year ended Year ended
31 March 31 March
2011 2010
Note GBP '000 GBP '000
--------------------------------------- ----- ----------- -----------
Non current assets
Investment in subsidiaries 9 31,438 32,898
Financial assets at fair value through
profit or loss 15 - 1,109
31,438 34,007
Current assets
Trade and other receivables 16 141 231
Cash and cash equivalents 17 5,718 55,768
5,859 55,999
Current liabilities
Trade and other payables 18 (246) (325)
Net current assets 5,613 55,674
--------------------------------------- ----- ----------- -----------
Net assets 37,051 89,681
--------------------------------------- ----- ----------- -----------
Equity
Share premium account 23 20,860 71,275
Distributable reserve 24 70,663 70,663
Shares held in treasury 22 (515) (515)
Retained earnings (53,957) (51,742)
--------------------------------------- ----- ----------- -----------
Total equity 37,051 89,681
--------------------------------------- ----- ----------- -----------
Net asset value (basic and diluted
pence per share) 25 25.88 62.64
--------------------------------------- ----- ----------- -----------
The financial statements were approved by the Board and
authorised for issue on 29 July 2011.
Signed on behalf of the Board:
David Jeffreys Serena Tremlett
Director Director
Consolidated Statement of Financial Position
as at 31 March 2011
31 March 2011 31 March 2010
Note GBP '000 GBP '000
--------------------------------------- ----- -------------- --------------
Non current assets
Goodwill 6 15,090 13,930
Other intangible assets 7 7,382 8,662
Fixtures, fittings and equipment 8 393 466
Financial assets at fair value through
profit or loss 15 3,806 7,251
Investments in associates (147) 32
26,524 30,341
Current assets
Inventories 1l 1,239 681
Trade and other receivables 16 21,676 23,882
Cash and cash equivalents 17 17,497 68,888
Assets classified as held for sale 13 2,103 -
42,515 93,451
Current liabilities
Trade and other payables 18 (31,971) (33,752)
Current tax liabilities (287) (58)
Liabilities associated with assets
classified as held for sale 13 (641) -
(32,899) (33,810)
--------------------------------------- ----- -------------- --------------
Net current assets 9,616 59,641
Non current liabilities
Long term third party loans 19 (2,895) (2,701)
Deferred tax - (4)
Deferred consideration 20 (4,366) (2,959)
Net assets 28,879 84,318
--------------------------------------- ----- -------------- --------------
Equity
Share premium account 23 20,860 71,275
Distributable reserve 24 70,663 70,663
Shares held in treasury 22 (515) (515)
Retained earnings (65,148) (60,812)
Foreign currency translation reserve 58 39
--------------------------------------- ----- -------------- --------------
Equity attributable to equity holders
of the parent 25,918 80,650
Amounts recognised in equity relating
to assets held for sale 13 462 -
Non-controlling interests 26 2,499 3,668
--------------------------------------- ----- -------------- --------------
Total equity 28,879 84,318
--------------------------------------- ----- -------------- --------------
Net asset value (basic and diluted
pence per share) 25 18.10 56.33
--------------------------------------- ----- -------------- --------------
The financial statements were approved by the Board and
authorised for issue on 29 July 2011.
Signed on behalf of the Board:
David Jeffreys Serena Tremlett
Director Director
Company Statement of Changes in Equity
for the year ended 31 March 2011
Share Shares
premium held in Retained Total
account Distribut-able treasury earnings equity
GBP reserves GBP GBP GBP
Note '000 GBP '000 '000 '000 '000
-------------- ----- --------- --------------- --------- --------- ---------
Balance at 1
April 2010 71,275 70,663 (515) (51,742) 89,681
Capital
distribution 23 (50,109) - - - (50,109)
Capital
distribution
costs 23 (306) - - - (306)
Recognition
in respect
of
share-based
payments 1s - - - 108 108
Retained
losses for
the year - - - (2,323) (2,323)
Balance at 31
March 2011 20,860 70,663 (515) (53,957) 37,051
-------------- ----- --------- --------------- --------- --------- ---------
for the year ended 31 March 2010
Share Shares
premium held in Retained Total
account Distribut-able treasury earnings equity
GBP reserves GBP GBP GBP
Note '000 GBP '000 '000 '000 '000
------------- ------ -------- --------------- --------- --------- --------
Balance at 1 April
2009 71,275 70,663 (515) (42,881) 98,542
Recognition
in respect
of
share-based
payments 1s - - - 108 108
Retained losses for
the year - - - (8,969) (8,969)
Balance at 31 March
2010 71,275 70,663 (515) (51,742) 89,681
--------------------- -------- --------------- --------- --------- --------
Consolidated Statement of Changes in Equity
for the year ended 31 March 2011
Non-
Share Shares Assets Con-
premium Distribu-table Transla-tion held in Retained classified trolling Total
account reserves reserve treasury earnings as held interest equity
GBP GBP GBP GBP GBP for sale GBP GBP
Note '000 '000 '000 '000 '000 GBP '000 '000 '000
-------------- ----- --------- --------------- ------------- --------- --------- ----------- --------- ---------
Balance at 1
April 2010 71,275 70,663 39 (515) (60,812) - 3,668 84,318
Capital
distribution 23 (50,109) - - - - - - (50,109)
Capital
distribution
costs 23 (306) - - - - - - (306)
Recognition
in respect
of
share-based
payments 1s - - - - 108 - - 108
Other reserve
movements - - 19 - (134) - 33 (82)
Dividends - - - - - - (137) (137)
Retained
losses for
the year - - - - (3,848) - (1,065) (4,913)
Amounts in
equity
relating to
assets
classified
as held for
sale 13 - - - - (462) 462 - -
Balance at 31 March
2011 20,860 70,663 58 (515) (65,148) 462 2,499 28,879
--------------------- --------- --------------- ------------- --------- --------- ----------- --------- ---------
for the year ended 31 March 2010
Share Shares
premium Transla-tion held in Retained Total
account Distribu-table reserve treasury earnings Non-controlling equity
GBP reserves GBP GBP GBP interest GBP
Note '000 GBP '000 '000 '000 '000 GBP '000 '000
------------------ ------ -------- --------------- ------------- --------- --------- ---------------- --------
Balance at 1 April
2009 71,275 70,663 110 (515) (51,414) 3,372 93,491
Recognition in
respect of
share--based
payments 1s - - - - 108 - 108
Other reserve
movements - - (71) - (177) - (248)
Retained (losses)/profits
for the year - - - - (9,329) 296 (9,033)
Balance at 31
March 2010 71,275 70,663 39 (515) (60,812) 3,668 84,318
-------------------------- -------- --------------- ------------- --------- --------- ---------------- --------
Company Statement of Cashflows
for the year ended 31 March 2011
Year ended Year ended
31 March 31 March
2011 2010
Note GBP '000 GBP '000
-------------------------------------------- ----- ----------- -----------
Net cash flow from operating activities (570) (2,625)
-------------------------------------------- ----- ----------- -----------
Investing activities
Purchase of investments (net of arrangement
fees) - (408)
Acquisition of subsidiary undertakings 9 (997) (2,146)
Sale of investment/investment repaid 9 1,761 487
Sale of investment at fair value through
profit and loss 15 171 -
Net cash flow used in investing activities 935 (2,067)
-------------------------------------------- ----- ----------- -----------
Financing activities
Capital distribution 23 (50,109) -
Capital distribution costs 23 (306) -
Net cash flow used in financing activities (50,415) -
-------------------------------------------- ----- ----------- -----------
Net decrease in cash and cash equivalents (50,050) (4,692)
-------------------------------------------- ----- ----------- -----------
Cash and cash equivalents at beginning
of year 55,768 60,460
-------------------------------------------- ----- ----------- -----------
Cash and cash equivalents at end of
year 5,718 55,768
-------------------------------------------- ----- ----------- -----------
Cash flow from operating activities
Loss before taxation (2,323) (8,969)
Fair value loss on financial assets 1,196 6,476
Loss on disposal of investment 438 -
Recognition of share based payment 108 108
Decrease in amounts receivable 90 564
Decrease in amounts payable (79) (804)
Net cash flow from operating activities (570) (2,625)
-------------------------------------------- ----- ----------- -----------
Consolidated Statement of Cashflows
for the year ended 31 March 2011
Year ended Year ended
31 March 31 March
2011 2010
Note GBP '000 GBP '000
-------------------------------------------- ----- ----------- -----------
Net cash flow from operating activities (2,834) (4,640)
-------------------------------------------- ----- ----------- -----------
Investing activities
Purchase of investments (net of arrangement
fees) - (408)
Acquisition of subsidiary undertakings 10 1,203 (114)
Sale of investments 2,127 487
Acquisition of intangibles 7 (755) (377)
Purchases of fixtures, fittings and
equipment 8 (383) (161)
Cash deconsolidated on disposal of
discontinued operations 14 - (57)
Net cash flow used in investing activities 2,192 (630)
-------------------------------------------- ----- ----------- -----------
Financing activities
Capital distribution 23 (50,109) -
Capital distribution costs 23 (306) -
Third party borrowings (30) -
Amounts paid to non-controlling interests (332) -
Net cash flow used in financing activities (50,777) -
-------------------------------------------- ----- ----------- -----------
Net decrease in cash and cash equivalents (51,419) (5,270)
-------------------------------------------- ----- ----------- -----------
Cash and cash equivalents at beginning
of year 68,888 74,217
-------------------------------------------- ----- ----------- -----------
Effect of foreign exchange rate changes 28 (59)
-------------------------------------------- ----- ----------- -----------
Cash and cash equivalents at end of
year 17,497 68,888
-------------------------------------------- ----- ----------- -----------
Cash flow from operating activities
-------------------------------------------- ----- ----------- -----------
Loss before taxation (3,960) (8,405)
Fair value loss/(gain) on financial
assets 15 853 (599)
Recognition of share based payment 108 108
Loss on disposal of investment 432 -
Impairment of goodwill 6 - 3,203
Impairment of intangible assets 7 75 1,904
Amortisation of intangible assets 7 1,884 304
(Increase)/decrease in amounts receivable (110) 2,235
Decrease in amounts payable (1,897) (3,478)
Increase in inventories (558) (43)
Depreciation of fixtures, fittings
and equipment 8 256 288
Other 83 (157)
Net cash flow from operating activities (2,834) (4,640)
-------------------------------------------- ----- ----------- -----------
Notes to the Financial Statements
for the year to 31 March 2011
1. Summary of significant accounting policies
Reporting entity
Ingenious Media Active Capital Limited (the Company) is a
closed-end investment company with limited liability formed under
The Companies (Guernsey) Law 2008, and its shares are admitted to
trading on AIM. The Company was incorporated on 17 February 2006
and dealings on AIM commenced on 11 April 2006. The Company's
registered office is Isabelle Chambers, Route Isabelle, St Peter
Port, Guernsey. The Group is defined as the Company and its
subsidiaries.
Basis of preparation
The financial statements of the Company have been prepared in
accordance with IFRSs, which comprise standards and interpretations
approved by the International Accounting Standards Board (the
IASB), and International Accounting Standards and Standing
Interpretations Committee interpretations approved by the
International Accounting Standards Committee (IASC) that remain in
effect, together with applicable legal and regulatory requirements
of Guernsey Law and the Listing Rules of the UK Listing
Authority.
The financial statements have been prepared on the historical
cost basis, as modified by the measurement at fair value of
investments and financial instruments.
There have been no material changes in accounting policies
during the year.
Going concern
The financial statements have been prepared on the going concern
basis. IMAC currently holds adequate cash balances to meet the
payment of funds committed to its investee companies as they fall
due. Following the capital distribution of GBP50.1 million to
Shareholders in May 2010, the Manager anticipated that the Company
would have sufficient cash reserves to fund future operating costs
of the Company over the next two to three years. These costs are
expected to be funded from a combination of the Company's
post-distribution cash balance, as well as cash retained from
ongoing realisations, if required. In the unlikely scenario that
insufficient realisations are made over this period, the Company
will have sufficient cash to meet its operating costs. The
Directors are satisfied under The Companies (Guernsey) Law, 2008 as
to the future solvency of the Company for the purposes of
distributing the capital.
Any current funding commitments that the Company has to the
investee companies, which have yet to be drawn down, are at the
discretion of the Company and the Manager. If the Company and
Manager were to approve draw down of any outstanding commitments,
the commitments to the investee companies would be funded from a
combination of the post--distribution cash balance of the Company,
as well as from additional cash retained from ongoing realisations,
if required.
Shareholders should note that the implementation of the return
of GBP50.1 million of capital also attracts inherent risks to the
Company, such as the Company not being able to realise, or
realising less than expected, for the investee companies. However,
in such a case, with respect to its current funding commitments,
the Company retains the flexibility of choosing in which investee
companies it will continue to invest, with a view to maximising
Shareholder value. Furthermore, in such a case where the Company is
unable to pay fees owing to the Manager due to having insufficient
cash, the Manager has agreed to defer such payments until such time
as the Company has sufficient cash following the realisation of
investee companies. The Board is therefore of the opinion that the
going concern basis should be adopted in the preparation of the
financial statements.
Use of estimates
The preparation of the Group's financial statements requires
management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, and contingencies at the
date of the Group's financial statements, and revenue and expenses
during the reporting period. Actual results could differ from those
estimated. Significant estimates in the Group's financial
statements include the amounts recorded for the fair value of the
investments and recoverable value of goodwill and other intangible
assets. By their nature, these estimates and assumptions are
subject to measurement uncertainty and the effect on the Group's
financial statements of changes in estimates in future periods
could be significant. In the current economic conditions the number
of transactions and market prices are depressed. In these
circumstances the fair value of the Company's investments and
recoverable value of goodwill and other intangible assets cannot be
estimated as easily as when there are greater levels of market
activity.
The current market conditions are such that some of the Group's
investments remain loss making and may require further cash
injection in the future. In each case, the Manager has implemented
measures to reduce operating costs and stimulate revenue growth for
these investments in order to limit future funding requirements and
increase investment value with a view to realisation in an orderly
fashion over an extended period. As explained in note 1d, the
valuations undertaken by the Company are based upon a mixture of
bases using revenue, contribution and earnings multiples in light
of the measures noted above.
As noted in the Chairman's Statement, the decision was taken by
the Board during the period to make a capital distribution to
Shareholders of GBP50.1 million and to change the Company's
investment policy to cease investment in new companies and focus on
developing existing investee companies. Post-distribution of this
capital, the Company has much reduced available cash resources
which could limit its ability to fund its investments going
forward.
Financial instruments
Financial assets
Financial assets are divided into the following categories:
-- loans and receivables, including cash and cash
equivalents;
-- fair value through profit or loss.
Financial assets are assigned to the different categories on
initial recognition depending on the characteristics of the
instrument and its purpose. A financial instrument's category is
relevant for the way it is measured and whether resulting income
and expenses are recognised in the (Consolidated) Statement of
Comprehensive Income or charged directly against equity. All income
and expenses in respect of financial assets held by the Group and
Company in the year under review are recognised in the
(Consolidated) Statement of Comprehensive Income. Generally the
Group and Company recognise all financial assets using trade date
accounting. An assessment of whether the value of a financial asset
is impaired is made at least at each reporting date. All income
relating to financial assets is recognised in the (Consolidated)
Statement of Comprehensive Income under the heading "revenue" and
interest payable is recognised under the heading "finance
costs".
The Group and Company's loans and receivables comprise trade and
other receivables and cash and cash equivalents in the
(Consolidated) Statement of Financial Position.
Cash and cash equivalents include cash in hand and deposits held
on call with banks.
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market.
The Group and Company's trade and other receivables are
initially recognised at fair value and subsequently measured at
amortised cost, using the effective interest method. Discounting is
omitted where its effect is immaterial. Individual receivables are
considered for impairment when they are overdue or when there is
objective evidence that the debtor will default.
Financial assets at fair value through profit or loss include
financial assets that are classified as held for trading. The Group
and Company's remaining assets fall into this category and include
its investment in investee companies. Fair values of securities
listed in active markets are determined by the current bid prices.
Where independent prices are not available, fair values have been
determined with reference to financial information available at the
time of the original investment updated to reflect all relevant
changes to that information at the reporting date. This may
include, among other factors, changes in the business outlook
affecting a particular investment, performance of the underlying
business against original projections and valuations of similar
quoted companies.
Financial liabilities
Financial liabilities are divided into the following
categories:
-- other financial liabilities;
-- fair value through profit or loss.
Other financial liabilities include the Group and Company's
trade and other payables and are initially recognised at fair value
and subsequently measured at amortised cost, using the effective
interest method.
Financial liabilities at fair value through profit or loss are
carried on the (Consolidated) Statement of Financial Position at
fair value determined by current market prices.
Fair value measurement hierarchy
IFRS 7, "Financial Instruments: Disclosures", requires certain
disclosures which require a classification of financial assets and
liabilities measured at fair value using a fair value hierarchy
that reflects the significance of the inputs used in making the
fair value measurement. The fair value hierarchy has the following
levels:
-- level 1 - quoted prices (unadjusted) in active markets for
identical assets or liabilities;
-- level 2 - inputs other than quoted prices included within
level 1 that are observable for the asset or liability either
directly (i.e. as prices) or indirectly (i.e. derived from
prices);
-- level 3 - inputs for the asset or liability that are not
based on observable market data (unobservable inputs).
The level in the fair value hierarchy of the financial asset or
liability is determined on the basis of the lowest level input that
is significant to the fair value measured. Financial assets and
liabilities are classified in their entirety into only one of the
three levels.
Company Consolidated
-------------------- --------------------
2011 2010 2011 2010
GBP '000 GBP '000 GBP '000 GBP '000
--------- --------- --------- --------- ---------
Level 1 - 1,109 - 1,109
Level 2 - - - -
Level 3 31,438 32,898 3,806 6,142
--------- --------- --------- --------- ---------
31,438 34,007 3,806 7,251
--------- --------- --------- --------- ---------
Adoption of new and revised standards
At the date of authorisation of the financial statements, the
following Standards and Interpretations, which have not been
applied in the financial statements, were in issue but not yet
effective:
-- IFRS 10 "Consolidated Financial Statements", effective for
periods beginning on or after 1 January 2013;
-- IFRS 11 "Joint Arrangements", effective for periods beginning
on or after 1 January 2013;
-- IFRS 12 "Disclosure of Interests in Other Entities",
effective for periods beginning on or after 1 January 2013;
-- IFRS 13 "Fair Value Measurement", effective for periods
beginning on or after 1 January 2013.
The Directors anticipate that the adoption of these Standards
and Interpretations in future periods could have a significant
impact on the financial statements of the Group or Company.
Principal accounting policies
a. Basis of consolidation
The Consolidated Financial Statements incorporate the financial
statements of the Company and the Group made up to 31 March each
year. Control is achieved where the Company has the power to govern
the financial and operating policies of an investee entity so as to
obtain benefits from its activities.
Non-controlling interests in the net assets of consolidated
subsidiaries are identified separately from the Group's equity
therein. Non-controlling interests consist of the amount of those
interests at the date of the original business combination and the
minority's share of changes in equity since the date of the
combination.
The results of subsidiaries acquired during the year are
included in the Consolidated Statement of Comprehensive Income from
the effective date of acquisition.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used
into line with those used by the Group.
All intra-group transactions, balances, revenue and expenses are
eliminated on consolidation.
b. Business combinations
The acquisition of subsidiaries is accounted for using the
purchase method. The cost of the acquisition is measured at the
aggregate of the fair values, at the date of exchange, of assets
given, liabilities incurred or assumed, and equity instruments
issued by the Group in exchange for control of the acquiree, plus
any costs directly attributable to the business combination. The
acquiree's identifiable assets, liabilities and contingent
liabilities that meet the conditions for recognition under IFRS 3,
"Business Combinations (Amended)", are recognised at their fair
value at the acquisition date.
Goodwill arising on acquisition is recognised as an asset and
initially measured at cost, being the excess of the cost of the
business combination over the Group's interest in the net fair
value of the identifiable assets, liabilities and contingent
liabilities recognised. If, after reassessment, the Group's
interest in the net fair value of the acquiree's identifiable
assets, liabilities and contingent liabilities exceeds the cost of
the business combination, the excess is recognised immediately in
profit or loss. Goodwill is reviewed for impairments annually.
The non-controlling interests in the acquiree are initially
measured at the minority's proportion of the net fair value of the
assets, liabilities and contingent liabilities at the time of
acquisition.
c. Functional currency
Items included in the financial statements of the Group and the
Company are measured using the currency of the primary economic
environment in which the entity operates ('the functional
currency'). The consolidated financial statements are presented in
GBP (GBP), which is the Company's functional and presentational
currency.
Transactions in currencies other than sterling are translated at
the foreign exchange rate ruling on the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies
at the balance sheet date are translated into sterling at the
exchange rate ruling at that date. Foreign exchange differences
arising on translation are recognised in the Statement of
Comprehensive Income. Non-monetary assets and liabilities that are
measured in terms of historical cost in a foreign currency are
translated using the exchange rate at the date of the transaction.
Non-monetary assets and liabilities denominated in foreign
currencies that are stated at fair value are translated into
sterling at foreign exchange rates ruling at the dates the fair
value was determined.
On consolidation, the assets and liabilities of the Group's
overseas operations are translated at exchange rates prevailing at
the balance sheet date. Income and expenses are translated at the
average exchange rates for the period unless exchange rates
fluctuate significantly. Where the average exchange rates fluctuate
significantly, material income and expenses must be translated at
the exchange rate prevailing on the date of the transaction.
Exchange differences arising, if any, are classified as equity and
transferred to the Group's translation reserve. Such translation
differences are recognised as income or expenses in the period in
which the operation is disposed of.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the rate prevailing at the balance
sheet date.
d. Financial assets at fair value through profit or loss
Investments, including equity and loan investments, including
subsidiaries are designated as fair value through profit or loss in
accordance with International Accounting Standard 39 (IAS 39)
"Financial Instruments: Recognition and Measurement", as the
Company is an investment company whose business is investing in
financial assets with a view to profiting from their total return
in the form of interest and changes in fair value. Investments are
initially recognised at cost. The investments are subsequently
re-measured at fair value, as determined by the Directors.
Unrealised gains or losses arising from the revaluation of
investments are taken directly to the Statement of Comprehensive
Income.
Fair value is determined as follows:
Unquoted securities are valued based on the realisation value
which is estimated by the Directors with prudence and good faith.
The Directors will take into account the guidelines and principles
for valuation of investee companies set out by the International
Private Equity and Venture Capital (IPEV) association, with
particular consideration of the following factors:
-- Fair value is the amount for which an asset could be
exchanged between knowledgeable, willing parties in an arm's length
transaction.
-- In estimating fair value for an investment, the Company will
apply a methodology that is appropriate in light of the nature,
facts and circumstances of the investment and its materiality in
the context of the total investment portfolio and will use
reasonable assumptions and estimations.
-- An appropriate methodology incorporates available information
about all factors that are likely to materially affect the fair
value of the investment. The valuation methodologies are applied
consistently from period to period, except where a change would
result in a better estimate of fair value. Any changes in valuation
methodologies will be clearly disclosed in the financial
statements.
The most widely used methodologies are listed below. In
assessing which methodology is appropriate, the Directors are
predisposed towards those methodologies that draw upon market-based
measures of risk and return.
-- Cost of recent investment
-- Earnings multiple
-- Net assets
-- Available market prices
Gains or losses arising from changes in the fair value of the
'financial assets at fair value through profit or loss' category
are presented in the Statement of Comprehensive Income in the
period in which they arise.
The Group has determined that the valuations are most sensitive
to changes in the following key assumptions:
-- Annual budgets and cash flow projections for each individual
investment. These are based on actual budgets and cash flows and
projections discussed with and approved by management for a period
of one year to five years depending on the investment;
-- Comparable earnings multiples. A number of investments are
valued using comparable listed and other industry multiples which
range from 4.7 to 8 times earnings depending on the investment.
As a result of the above basis of valuation, there is
significant judgement associated with the valuation of
investments.
e. Arrangement fees
Under the terms of the investment agreements between the Company
and its investee companies, the investee companies are required to
pay to the Company an arrangement fee in consideration for its
services in arranging financing for the investee company. In
accordance with IAS 39, this arrangement fee is deducted from the
cost of the investment. A corresponding increase in the fair value
of the investment is then recorded so that the investment is valued
at the gross amount paid.
f. Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable and represents amounts receivable for goods
and services provided in the normal course of business, net of
discounts, VAT and other sales-related taxes. Where appropriate,
revenue is recorded in the Statement of Comprehensive Income on the
basis that there is a legally binding contract in place and there
is virtual certainty of fulfilment of any conditionality attached
to the contract.
Interest income is included on an accruals basis using the
effective interest method.
Dividend income from investments is recognised when the Group's
right to receive payment has been established.
g. Expenses
All expenses are accounted for on an accruals basis. Expenses
are charged through the Statement of Comprehensive Income except
where they relate to capital expenditure or the raising and
maintenance of capital.
h. Other intangible assets
Acquired trademarks, licenses and customer relationships are
initially recognised at fair value. Trademarks, licenses and
customer relationships have a finite useful life and are carried at
cost less accumulated amortisation. Amortisation is calculated
using the straight-line method to allocate the cost of trademarks,
licenses and customer relationships over their estimated useful
lives (being a period of up to 10 years).
i. Fixtures, fittings and equipment
Fixtures and equipment are stated at cost less accumulated
depreciation and any recognised impairment loss.
Depreciation is charged so as to write off the cost or valuation
of assets, over their estimated useful lives (being between two and
five years) using the straight-line method.
j. Investee company interests in joint ventures
Investee company interests in jointly controlled entities,
whereby the venturers have a contractual arrangement that
establishes joint control over the economic activities of the
entity, are recognised using the equity method of accounting. The
investment is initially recognised at cost under 'investments in
associates', and adjusted thereafter for the post-acquisition
change in the investee company's share of net assets of the joint
venture. The investee company's share of the profit or loss of the
joint venture is included under 'other operating revenue and
expenses'.
This accounting policy differs from that applied by the Company
in accounting for its interests in associates, which are designated
as financial assets at fair value through profit or loss.
k. Investee company interests in associates
Investee company interests in associates are accounted for using
the equity method of accounting. Under the equity method,
investments in the associates are carried in the Consolidated
Statement of Financial Position at cost plus post acquisition
changes in the consolidated entity's share of net assets of the
associates.
When the consolidated entity's share of losses in an associate
equals or exceeds its interest in the associate, including any
unsecured long-term receivables and loans, the consolidated entity
does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the associate.
The reporting dates of the associates and the consolidated
entity are identical and the associates' accounting policies
conform to those used by the consolidated entity for like
transactions and events in similar circumstances.
l. Inventories
Inventories comprise of work-in-progress which is the cost
incurred in relation to a show or customer campaign which has not
taken place at the balance sheet date and is stated at the lower of
cost and net realisable value. Cost includes materials, direct
labour and any other direct costs.
m. Trade and other receivables
Trade and other receivables are initially recognised at fair
value. A provision for impairment of trade receivables is
established when there is objective evidence the Group will not be
able to collect all amounts due according to the original terms of
the receivables.
n. Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, on-demand
deposits and other short-term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of change in value.
o. Trade and other payables
Trade and other payables are initially recognised at fair value
and subsequently, where necessary, re-measured at amortised cost
using the effective interest method.
p. Deferred consideration
A number of investee company acquisitions have been made on
deferred payment terms. These deferred payments are generally
contingent on the future revenue and/or profits achieved by the
investee company. Amounts of deferred consideration payable after
one year, are discounted using discount rates that reflect the
current market assessment of the time value of money and, where
appropriate, the risks specific to the investee company. This
contingent deferred consideration is reassessed annually, and the
difference between the present value and the total amount payable
at a future date gives rise to a finance charge which is charged to
the Statement of Comprehensive Income and credited to the liability
over the period in which the consideration is deferred.
q. Financial instruments
Financial assets and financial liabilities are recognised in the
Group's Statement of Financial Position when the Group becomes a
party to the contractual provisions of the instrument.
r. Equity instruments
Equity instruments issued by the Company are recorded at the
proceeds received, net of direct issue costs.
s. Share options
The Company accounts for the fair value of share options at the
grant date over the vesting period in the Statement of
Comprehensive Income, with a corresponding increase to equity. The
fair value has been calculated based on the Black Scholes Model
using the following inputs:
-- Share price 97.50 pence
-- Exercise price 100.00 pence
-- Expected volatility 11.55%
-- Expected life 10 years
-- Risk free rate 4.413%
-- Expected dividends NIL
2. Loss before taxation
The loss before taxation has been arrived at after charging:
Company Consolidated
------------------------------ ------------------------------
Year ended Year ended Year ended Year ended
2011 2010 2011 2010
GBP '000 GBP '000 GBP '000 GBP '000
-------------- -------------- -------------- -------------- --------------
Staff costs - - 11,448 12,590
Directors'
fees 130 129 130 129
Amortisation
of
intangibles - - 1,884 304
Recognition
of
share-based
payment 108 108 108 108
Depreciation
- fixtures,
fittings and
equipment - - 256 288
Rental and
lease
expenses - - 1,068 1,169
Bad debts -
written off - - 24 1
Auditors'
remuneration 123 165 271 316
Auditors -
non audit
remuneration 9 - 48 2
-------------- -------------- -------------- -------------- --------------
3. Operating segments
The information in this note has been prepared using the
definition of an operating segment in IFRS 8: "Operating Segments".
The Group determines and presents the information that is provided
internally to the Directors to enable them to assess performance
and allocate resources.
The chief operating decision-maker has been identified as the
Board, which reviews the Company's internal reporting in order to
assess performance and allocate resources. The Board has determined
the operating segments based on these reports.
As an investment company, the Group's primary focus is on the
performance of its investment portfolio. Whilst there are a number
of individual investments included in this portfolio, performance
is reviewed for the portfolio as a whole on the basis of its fair
value.
The Directors believe that the Company and the Group are engaged
in a single segment of business of holding investments in media and
entertainment companies, operating solely from Guernsey and
therefore the Directors only recognise a single class of asset. The
information reviewed by the Board includes summarised financial
information for each investment in the portfolio, however, this is
not sufficiently detailed to provide any segmental analysis and
hence only a single segment has been identified.
Segment revenue Segment profit/(loss)
------------------------ ------------------------
Segment revenues and Year ended Year ended Year ended Year ended
results 2011 2010 2011 2010
GBP '000 GBP '000 GBP '000 GBP '000
-------------------------- ----------- ----------- ----------- -----------
Investments portfolio 51,190 44,274 10,275 8,192
=========== =========== =========== ===========
Total for continuing
operations 51,190 44,274 10,275 8,192
Share of profit of
associates 1,392 1,275
Other operating expenses
including Directors'
salaries (18,443) (20,433)
Finance costs (637) (640)
Consolidation adjustments 3,453 3,201
----------- -----------
Loss before tax
(continuing operations) (3,960) (8,405)
-------------------------- ----------- ----------- ----------- -----------
To reconcile Group profit and loss and total assets,
'Consolidation adjustments' comprise the difference between the
aggregate fair value and the total assets and liabilities of
subsidiaries and joint ventures.
Year ended Year ended
Segment assets 2011 2010
GBP '000 GBP '000
--------------------------------------------- ----------- -----------
Investments portfolio 66,936 123,792
Assets classified as held for sale 2,103 -
----------- -----------
Total segment and consolidated assets 69,039 123,792
----------- -----------
Segment liabilities
Investments portfolio 39,519 39,474
Liabilities directly associated with assets
classified as held for sale 641 -
----------- -----------
Total segment and consolidated liabilities 40,160 39,474
--------------------------------------------- ----------- -----------
Revenue from external
customers Non current assets
---------------------------- ------------------------------
Geographical Year ended Year ended Year ended Year ended
information 2011 2010 2011 2010
GBP '000 GBP '000 GBP '000 GBP '000
---------------- ------------- ------------- -------------- --------------
United Kingdom 18,279 21,685 26,484 29,592
Europe
(excluding
UK) 11,858 13,168 29 58
Other 21,053 9,421 11 691
------------- ------------- -------------- --------------
51,190 44,274 26,524 30,341
---------------- ------------- ------------- -------------- --------------
Major clients: The Group is not reliant on one major customer as
no one customer accounts for more than 10 per cent. of the Group's
revenue.
4. Income tax expense
The Company has been granted exemption from income tax in
Guernsey under the Income Tax (Exempt Bodies) (Bailiwick of
Guernsey) Ordinance 1989, and is liable to pay an annual fee
(currently GBP600) under the provisions of the Ordinance. As such
it will not be liable to income tax in Guernsey other than on
Guernsey source income (excluding deposit interest on funds
deposited with a Guernsey bank). No withholding tax is applicable
to distributions to Shareholders by the Company.
The subsidiary companies are resident in the UK and liable to UK
Corporation Tax. Group relief on operating losses may be available
between those United Kingdom resident investee companies in which
the Company holds not less than 75 per cent. of the ordinary share
capital.
Consolidated
------------------------
Year ended Year ended
2011 2010
GBP '000 GBP '000
---------------------------------------------- ----------- -----------
Loss before taxation (3,960) (8,405)
Tax rate in Guernsey 0% - -
Adjustments:
For foreign tax rates (1,361) 572
Non deductible expenses 1,220 194
Expenses from prior year allowed in
current year - (48)
Deferred tax not recognised (86) (1,147)
Depreciation in excess of capital allowances (6) 8
Prior year adjustment (12) (444)
Withholding tax charge (1,305) (397)
Utilisation of prior year losses 84 280
Small companies relief - (4)
Consortium relief 224 277
Tax expense for the year (1,242) (709)
----------- -----------
Analysis of tax expense for the year
Current year tax charge - continuing
operations (1,054) 882
Current year tax charge - discontinued
operations (90) -
Prior year adjustment (12) (444)
Deferred tax (86) (1,147)
(1,242) (709)
----------- -----------
Losses carried forward (20,417) (23,510)
---------------------------------------------- ----------- -----------
5. Loss per share
The calculation of basic and diluted return per share is based
on the return on ordinary activities and on 143,168,463 Ordinary
Shares (year ended 31 March 2010: 143,168,463), being the weighted
average number of shares for the purpose of the earnings per share
calculation.
6. Goodwill
Consolidated
------------------
2011 2010
GBP '000 GBP '000
------------------------------------------ -------- --------
Cost
Balance at the beginning of the year 36,441 37,505
Recognised on acquisition of a subsidiary 1,268 149
Purchased goodwill - 144
IFRS adjustment in respect of acquisition
of subsidiaries (108) (32)
Reallocation to intangibles - (1,325)
------------------------------------------ -------- --------
Balance at the end of the year 37,601 36,441
Accumulated impairment losses
Balance at the beginning of the year (22,511) (19,308)
Impairment losses for the year
Continuing operations - (3,203)
Discontinued operations - -
------------------------------------------ -------- --------
Balance at the end of the year (22,511) (22,511)
Carrying amount at the end of the year 15,090 13,930
------------------------------------------ -------- --------
Included within goodwill are other intangible assets which were
not separately identified at acquisition. The Company will review
the treatment of these assets over the next 12 months and make any
appropriate adjustments to the categorisation of these assets. The
Group tests goodwill annually for impairment, or more frequently if
there are indications that goodwill might be impaired.
The Group has invested in a broad range of high growth companies
within the media sector. The Directors view each investment as an
individual cash generating unit as this represents the lowest level
within the Group at which the goodwill is monitored for internal
management purposes. Goodwill has been allocated for impairment
testing purposes to seven individual cash-generating units.
The carrying amount of goodwill is as follows:
2011 2010
GBP '000 GBP '000
------------ -------- --------
Investments 15,090 13,930
------------ -------- --------
During the year ended 31 March 2011, the Group has determined
that there has been no impairment on its cash--generating units
containing goodwill (year ended 31 March 2010: GBP3,203k). The
impairment of goodwill in previous periods resulted from the
difficult market and trading conditions experienced by the investee
companies.
The recoverable amounts (i.e. the higher of value in use and
fair value less costs to sell) of those units and group of units
are determined using either the value in use or the fair value less
cost to sell methodologies as the Directors determine as
appropriate.
2011 2010
GBP '000 GBP '000
------------------------------- -------- --------
Fair value less assets to sell 15,090 13,930
------------------------------- -------- --------
The Group has determined that the recoverable amount
calculations are most sensitive to changes in the following key
assumptions:
a. Annual budgets and cash flow projections for each individual
investment. These are based on actual budgets and cash flows and
projections discussed with and approved by the Manager for a period
of one year to five years depending on the investment;
b. Comparable earnings multiples. A number of investments are
valued using comparable listed and other industry multiples which
range from 4.7 to 8 times earnings depending on the investment.
The Directors have applied the accounting policy outlined in
note 1d to determine the recoverable amount of cash-generating
units where the fair value less cost to sell methodology
applies.
7. Other intangible assets
Consolidated
------------------
2011 2010
GBP '000 GBP '000
------------------------------------------ -------- --------
Cost or valuation
Balance at the beginning of the year 12,932 11,161
Additions in year 513 377
Reclassification - 1,325
Recognised on acquisition of a subsidiary 242 69
------------------------------------------ -------- --------
Balance at the end of the year 13,687 12,932
Amortisation
Balance at the beginning of the year (673) (369)
Reclassification (76) -
Charge for the year (1,884) (304)
------------------------------------------ -------- --------
Balance at the end of the year (2,633) (673)
Impairment
Balance at the beginning of the year (3,597) (1,693)
Charge for the year (75) (1,904)
------------------------------------------ -------- --------
Balance at the end of the year (3,672) (3,597)
Carrying amount at the end of the year 7,382 8,662
------------------------------------------ -------- --------
Acquired trademarks, licenses and customer relationships are
initially recognised at fair value. Trademarks and customer
relationships have a finite useful life and are carried at cost
less accumulated amortisation. Show formats and some licenses have
indefinite lives. Amortisation is calculated using the straight
line method to allocate the cost of trademarks, licenses and
customer relationships over their estimated useful lives (being a
period of up to 10 years).
The carrying amount of intangible assets with indefinite useful
lives is as follows:
2011 2010
GBP '000 GBP '000
------------ -------- --------
Investments 5,686 6,395
------------ -------- --------
The recoverable amounts (i.e. the higher of value in use and
fair value less costs to sell) of those units and group of units
are determined using either the value in use or the fair value less
cost to sell methodologies as the Directors determine as
appropriate.
2011 2010
GBP '000 GBP '000
------------------------------ -------- --------
Fair value less costs to sell 5,686 6,395
------------------------------ -------- --------
8. Fixtures, fittings and equipment
Consolidated
------------------
2011 2010
GBP '000 GBP '000
------------------------------------------ -------- --------
Cost or valuation
Balance at the beginning of the year 1,594 1,786
Additions in year 383 161
Recognised on acquisition of a subsidiary 62 -
Cost value of disposals in year (414) (353)
Reclassified as held for sale (129) -
------------------------------------------ -------- --------
Balance at the end of the year 1,496 1,594
Accumulated depreciation
Balance at the beginning of the year (1,128) (1,002)
Accumulated depreciation on disposals
during the year 281 162
Charge for the year (256) (288)
------------------------------------------ -------- --------
Balance at the end of the year (1,103) (1,128)
Carrying amount at the end of the year 393 466
------------------------------------------ -------- --------
9. Investment in subsidiaries
Company
----------------------
2011 2010
GBP '000 GBP '000
--------------------------------------- ---------- ----------
Opening fair value at the beginning
of the year 32,898 38,416
Reclassifications - (1,000)
Purchases at cost 997 2,281
Disposal proceeds (1,761) -
Investment repaid - (487)
Loss on sale of investment (353) -
Fair value adjustment (343) (6,312)
--------------------------------------- ---------- ----------
Closing fair value at the end of the
year 31,438 32,898
--------------------------------------- ---------- ----------
Reclassification in the year ended 31 March 2010 includes the
4,266,667 shares received in NetPlay TV plc from Two Way Media
Holdings Limited as repayment of loan notes. NetPlay TV plc shares
were disposed in November 2010.
Disposal proceeds in the year ended 31 March 2011 relate to the
disposal of IMAC's indirect share in Stage Three Music to BMG in
July 2010.
Paid as Paid as
at 31 at 31
Name of % of Full March March
subsidiary Class class Country of Principal commitment 2011 2010
undertaking of share held incorpo-ration activity GBP'000 GBP'000 GBP'000
--------------- ------------ ------ --------------- ------------- ----------- -------- --------
Whizz Kid
Entertainment Television
Limited Ordinary 47.1% UK production 4,250 2,750 2,750
--------------- ------------ ------ --------------- ------------- ----------- -------- --------
Digital Rights Television
Group Limited Ordinary 78.4% UK distribution 11,270 8,274 8,274
--------------- ------------ ------ --------------- ------------- ----------- -------- --------
Digital
marketing &
Outside Line creative
Limited Ordinary 0.0% UK agency 1,500 1,000 1,000
--------------- ------------ ------ --------------- ------------- ----------- -------- --------
Two Way Media Interactive
Holdings television
Limited Ordinary 84.3% UK company 4,935 4,655 4,655
--------------- ------------ ------ --------------- ------------- ----------- -------- --------
Enigmas2
Limited
(formerly
In2Games Video games
Limited) Ordinary 43.8% UK business 4,560 4,560 4,560
--------------- ------------ ------ --------------- ------------- ----------- -------- --------
Brand Events Consumer
Holdings events
Limited Ordinary 69.5% UK business 9,080 9,080 8,583
--------------- ------------ ------ --------------- ------------- ----------- -------- --------
Marketing
QobliQ Limited Preference 79.1% UK services 12,867 12,867 12,367
--------------- ------------ ------ --------------- ------------- ----------- -------- --------
Review Centre Internet/new
Limited Ordinary 71.5% UK media 7,034 7,034 7,034
--------------- ------------ ------ --------------- ------------- ----------- -------- --------
Ingenious
Ventures Investment
L.P. N/A 90.0% UK vehicle 1,035 685 685
--------------- ------------ ------ --------------- ------------- ----------- -------- --------
Total 56,531 50,905 49,908
---------------------------- ------ --------------- ------------- ----------- -------- --------
An investee company is classified as a subsidiary where the
Company can achieve control either:
-- by obtaining more than 51 per cent. of the equity of the
investee company; or
-- where there is sufficient power to govern the financial and
operating policies of the investee company so as to obtain the
economic benefits from its activities.
Ingenious Ventures L.P. holds the investment in Stage Three
Music Limited, until the completion of the liquidation of Stage
Three Limited's assets, and continues to hold its investment in
Cream Holdings Limited.
In April 2011, the Company disposed of its holding in Outside
Line Limited. This has been classified as a discontinued
operation.
In June 2011, Enigmas2 Limited applied to be struck off from the
register of companies at Companies House in the UK.
Undrawn commitments
All outstanding funding commitments are at the discretion of the
Company and the Manager.
10. Acquisition of subsidiaries
During the year the Group acquired a controlling interest in
Brand Events Australia Limited, Taste of Dublin Limited, JCRM Brand
Events South Africa (Pty) Limited and Fulford Public Relations
Consultancy PTE Limited which resulted in goodwill arising. The
fair value of assets acquired and liabilities assumed were as
follows:
2011 2010
GBP '000 GBP '000
--------------------------------------------------- --------- ---------
Purchased goodwill - 144
Intangibles 242 69
Fixtures and fittings 62 -
Cash and cash equivalents 2,005 -
Accounts receivable 987 42
Trade payables (3,131) (191)
Non-controlling interest 161 -
Inventory 144 -
--------------------------------------------------- --------- ---------
Net assets acquired 470 64
Goodwill on consolidation 1,268 149
--------------------------------------------------- --------- ---------
Total consideration 1,738 213
Total consideration satisfied by:
Cash 802 114
Cash paid in prior years 300 -
Consideration shares 110 -
Deferred consideration 526 50
Other - 49
--------------------------------------------------- --------- ---------
1,738 213
--------------------------------------------------- --------- ---------
Net cash inflow/(outflow) arising on acquisition:
Cash consideration (802) (114)
Cash and cash equivalents acquired 2,005 -
--------------------------------------------------- --------- ---------
1,203 (114)
--------------------------------------------------- --------- ---------
The goodwill arising on the acquisition and the acquisition
adjustment is attributable to the anticipated profitability of the
Group's products and services.
Included within the consolidated retained loss for the year is a
profit before tax of GBP0.6 million relating to acquired
subsidiaries (year ended 31 March 2010: loss of GBP0.1 million).
Due to the nature of the businesses acquired, financial performance
is not comparable pre to post investment. Therefore, for all
business combinations that were effected during the year, it is
inappropriate to disclose the revenue and profit and loss of the
combined entities for the year as though the acquisition date was
the start of the financial year.
11. Investment in associates
Year ended
31 March Year ended 31 March
2011 2010
GBP '000 GBP '000
------------------------------------------ ----------- --------------------
Aggregate amounts relating to associates
Total assets 12,614 13,504
Total liabilities (11,898) (10,795)
Revenues 15,999 27,458
Loss (1,557) (1,073)
------------------------------------------ ----------- --------------------
A list of the significant investments in associates, including
the name, country of incorporation, proportion of ownership
interest is given below.
Name of associate Class of share % of class Country of
held incorporation
------------------------------- --------------- ----------- ---------------
Taste Festivals Limited Ordinary 50.0% UK
Sub Zero Limited Ordinary 50.0% UK
Brand Events Management Ordinary 50.0% Ireland
Ireland Limited
Brand Events Festivals Limited Ordinary 50.0% Ireland
Brand Events Italy Ordinary 50.0% Italy
Brand Events Benelux Ordinary 50.0% Holland
Brand Events Live Limited Ordinary 49.9% UK
Golfmania Limited Ordinary 49.9% UK
Dance Floor Limited Ordinary 49.9% UK
DRG Media Assets Limited Ordinary 49.9% UK
Taste Xmas Live Limited Ordinary 49.9% UK
------------------------------- --------------- ----------- ---------------
Brand Events Holdings Limited is required to fund its share of
losses in its associates listed above. Two Way Media Limited is
also required to fund its share of losses in Two Way Gaming Limited
and hence these have been accrued for in the financial statements.
Two Way Gaming Limited was voluntarily liquidated, the final
Shareholders' meeting was held on 26 May 2010 and Two Way Gaming
Limited was removed from the Alderney Register of Companies on 30
August 2010. There are no other outstanding commitments. DRG
Limited is not required to fund the losses of its associate, DRG
Media Assets Limited and Whizz Kid is not required to fund the
losses in Dance Floor Limited.
12. Discontinued operations
Discontinued operations in the current year and results relate
to The Outside Line Limited.
Year ended Year ended
31 March 31 March
2011 2010
GBP '000 GBP '000
-------------------------------------------------- ----------- -----------
Revenue 3,666 -
Expenses (3,287) -
Gain on derecognition of subsidiary - 81
----------- -----------
Profit before tax 379 81
Attributable tax expense (90) -
----------- -----------
Profit for the year from discontinued operations 289 81
-------------------------------------------------- ----------- -----------
13. Assets classified as held for sale
Year ended Year ended
31 March 31 March
2011 2010
GBP '000 GBP '000
---------------------------------------- ----------- -----------
Assets held for sale 2,103 -
Liabilities associated with assets held 641 -
for sale
---------------------------------------- ----------- -----------
As described in note 29, the Company disposed of its interest in
The Outside Line Limited in April 2011. The major classes of assets
and liabilities of the business reported in the Consolidated
Statement of Financial Position at the end of the reporting period
are as follows:
Year ended Year ended
31 March 31 March
2011 2010
GBP '000 GBP '000
------------------------------------------ ----------- -----------
Fixed assets 129 -
Accounts receivable 1,442 -
Cash and cash equivalents 532 -
=========== ===========
Assets held for sale 2,103 -
=========== ===========
Trade and other payables 281 -
Provisions 11 -
Current tax liabilities 336 -
Deferred consideration 10 -
Deferred tax 3 -
----------- -----------
Liabilities associated with assets held 641 -
for sale
------------------------------------------ ----------- -----------
Net assets of business classified as held 1,462 -
for sale
------------------------------------------ ----------- -----------
Less elimination of intercompany balances (1,000) -
on consolidation
------------------------------------------ ----------- -----------
Amounts recognised in equity relating to 462 -
assets classified as held for sale
------------------------------------------ ----------- -----------
14. Derecognition of subsidiaries
The Group no longer has a controlling interest in Crystal
Entertainment Limited (Crystal) as IMAC sold the majority of its
shareholding in the year ended 31 March 2010 and now holds 10 per
cent. of the equity of Crystal. The fair value of assets and
liabilities no longer controlled by the Group are as follows:
Year ended Year ended
31 March 31 March
2011 2010
GBP '000 GBP '000
-------------------------------- ------------ -----------
Fixtures and fittings - 29
Cash and cash equivalents - 57
Accounts receivable - 63
Inventories - -
Trade payables - (230)
-------------------------------- ------------ -----------
Net liabilities deconsolidated - (81)
-------------------------------- ------------ -----------
The Company did not receive any sales proceeds from the disposal
of its investment in Crystal and the gain results from the
deconsolidation of the net liabilities.
15. Financial assets at fair value through profit or loss
Company Consolidated
------------------ ------------------
2011 2010 2011 2010
GBP '000 GBP '000 GBP '000 GBP '000
------------------------------- -------- -------- -------- --------
Opening fair value 1,109 - 7,251 5,233
Reclassification - 1,000 - 1,000
Purchases at cost - 310 - 419
Disposal proceeds (171) - (2,160) -
Fair value adjustment (853) (201) (853) 599
Loss on disposal of investment (85) - (432) -
------------------------------- -------- -------- -------- --------
Closing fair value - 1,109 3,806 7,251
------------------------------- -------- -------- -------- --------
Reclassification in the year ended 31 March 2010 includes the
4,266,667 shares received in NetPlay TV plc from Two Way Media
Holdings Limited as repayment of loan notes. The Company disposed
of its holding in NetPlay TV plc in November 2010 resulting in
proceeds of GBP171,000.
The disposal proceeds of GBP1,989,000 relates to the sale of
Stage Three Music Limited to BMG Rights Management GmbH in July
2010. These proceeds, combined with the NetPlay TV plc proceeds,
results in total disposal proceeds on consolidation of
GBP2,160,000.
Paid as Paid as
at 31 at 31
% of Full March March
Name of Class class Country of Principal commit-ment 2011 2010
investment of share held incorporation activity GBP'000 GBP'000 GBP'000
--------------- ------------ ------ -------------- -------------- ------------ -------- --------
Incisive Media Business
Limited Ordinary 0.1% UK publishing 17,903 17,903 17,903
--------------- ------------ ------ -------------- -------------- ------------ -------- --------
Trinity
Universal Interactive
Holdings media
Limited Ordinary 0% UK marketing 5,710 5,710 5,710
--------------- ------------ ------ -------------- -------------- ------------ -------- --------
British
Sportbuzz Virgin Internet/new
Limited Preference 36% Islands media 1,604 1,604 1,604
--------------- ------------ ------ -------------- -------------- ------------ -------- --------
Crystal
Entertainment Talent
Limited Ordinary 10% UK relationships 1,311 1,311 1,311
--------------- ------------ ------ -------------- -------------- ------------ -------- --------
NetPlay TV Gaming and
plc Ordinary 2.1% UK gambling - - -
--------------- ------------ ------ -------------- -------------- ------------ -------- --------
Total 26,528 26,528 26,528
---------------------------- ------ -------------- -------------- ------------ -------- --------
In April 2009 Trinity Universal Holdings Limited was placed in
Voluntary Creditors Liquidation which is still ongoing.
The Company disposed of its holding in NetPlay TV plc in
November 2010.
16. Trade and other receivables
Company Consolidated
-------------------- --------------------
2011 2010 2011 2010
GBP '000 GBP '000 GBP '000 GBP '000
------------------------- --------- --------- --------- ---------
Trade receivables 136 107 5,372 7,488
Prepayments and accrued
income 5 124 6,887 7,087
Income receivable - - 7,857 7,517
Other receivables - - 1,560 1,790
------------------------- --------- --------- --------- ---------
141 231 21,676 23,882
------------------------- --------- --------- --------- ---------
17. Cash and cash equivalents
Cash and cash equivalents held by the Company and Group amount
to GBP5,718k (year ended 31 March 2010: GBP55,768k) and GBP17,497k
(year ended 31 March 2010: GBP68,888k) respectively. Cash and cash
equivalents comprise cash and short-term bank deposits with an
original maturity of three months or less. The cash equivalents are
currently invested in quoted cash funds. The carrying amount of
these assets approximates to their fair value. Included within the
Group's cash and cash equivalents is a restricted cash amount of
GBP2,080k (year ended 31 March 2010: GBP4,096k) in relation to
amounts that Whizz Kid Entertainment Limited is holding in
programme production trust accounts to fund specific programme
production costs and which are owed to Live VCT 1, Live VCT 2,
Entertainment VCT 1 and Entertainment VCT 2 and for DRG Media
Assets Limited to fund co-distribution costs and owed to
Entertainment VCT 1 and Entertainment VCT 2.
18. Trade and other payables
Company Consolidated
-------------------- --------------------
2011 2010 2011 2010
GBP '000 GBP '000 GBP '000 GBP '000
------------------------------ --------- --------- --------- ---------
Trade payables 246 43 7,396 8,358
Third party loans - - 1,810 1,815
Other creditors - - 3,717 3,432
Accruals and deferred income - 282 19,048 20,147
------------------------------ --------- --------- --------- ---------
246 325 31,971 33,752
------------------------------ --------- --------- --------- ---------
19. Long term third party loans
Redemption
date Consolidated
--------------- --------------------
2011 2010
GBP '000 GBP '000
------------------------------- --------------- --------- ---------
Brand Events Holdings Limited 26 April 2012 2,296 2,157
Review Centre Limited 6 June 2018 599 544
------------------------------- --------------- --------- ---------
2,895 2,701
----------------------------------------------- --------- ---------
Long term third party loans represent loan stock instruments
held by other investors in the Group's subsidiaries. Brand Events
Holdings Limited has an ongoing lending facility which is ranked
subordinate with IMAC loan notes. This lending facility will be
reviewed in April 2012 and is expected to be renewed on similar
terms. Review Centre Limited's long term third party loan comprise
of a loan provided by one of the existing directors and ranks parri
passu with IMAC loan notes.
20. Deferred consideration
Deferred consideration represents future amounts payable by DRG
mainly for its acquisition of Channel 4 International Limited (C4i)
(GBP1,597k), QobliQ in respect of its acquisition of Fulford PR
(GBP110k) and by Review Centre (GBP2,659k) for its acquisition of
Resource Team Limited. As described in note 29, DRG ended its trade
mark license agreement with C4i in May 2011 waiving future payments
associated with this agreement of GBP1,261k. Review Centre Limited
will make payments in respect of its deferred consideration, as set
out in the sale and purchase agreement, on various dates before 12
June 2018.
21. Share capital
Company & Consolidated Company & Consolidated
31 March 2011 31 March 2010
Authorised share capital No. No.
Ordinary shares of no par
value Unlimited Unlimited
------------------------------ ---------------------- ----------------------
Issued and fully paid No. No.
------------------------------ ---------------------- ----------------------
Ordinary shares of no par
value 144,402,402 144,402,402
------------------------------ ---------------------- ----------------------
Share options
On 4 April 2006, 750,000 share options were issued in respect of
ongoing services, granting rights to Neil Blackley to subscribe for
750,000 Ordinary Shares. On 24 January 2008, Mike Luckwell was
awarded 750,000 share options.
The share options have an exercise price equal to the placing
price (GBP1) and vest over five years, (with one fifth of the
options vesting each year) or immediately on the signing of a
contract for the sale of the entire (or substantially entire)
issued share capital or business undertaking of the Company or on
their appointment as a director of the Company being terminated
without cause by the Company. The share options will expire ten
years from each date of grant unless there is an early expiration
in accordance with the terms of each grant.
22. Shares held in treasury
The Company held 1,233,939 ordinary shares purchased at an
average price of 41.72 pence in 2009.
Company & Consolidated Company & Consolidated
31 March 2011 31 March 2010
Shares held in treasury No. No.
Ordinary shares of no par
value 1,233,939 1,233,939
------------------------------ ---------------------- ----------------------
23. Share premium account
Company & Consolidated Company & Consolidated
31 March 2011 31 March 2010
GBP '000 GBP '000
Balance at the beginning of
the year 71,275 71,275
Capital distribution (50,109) -
Capital distribution costs (306) -
------------------------------ ---------------------- ----------------------
Balance at the end of the year 20,860 71,275
------------------------------ ---------------------- ----------------------
Following a strategic review of the Company, the Board proposed
changes to the Company's investing policy, the Investment
Management Agreement, its Articles, and a reduction of capital. The
proposed changes were approved by the Shareholders at an
extraordinary general meeting on 12 May 2010.
The new Articles of Incorporation of the Company were adopted in
order to extend the duration of the life of the Company to at least
the eighth anniversary following Admission; and to allow greater
freedom for the Company to distribute both income and capital to
Shareholders. The term of the Investment Management Agreement was
extended for a further three years so that it expires no earlier
than 11 April 2014 (rather than 11 April 2011). The Investment
Management Agreement was also changed to permit the Manager (and
its subsidiaries and associated companies) to make investments for
itself, or on behalf of its clients or other funds it may manage
that would otherwise be caught within the current investing
policy.
The investing policy was amended to halt any new investments,
other than investments relating to the investee companies and to
remove the investment restriction which prevents more than 15 per
cent. of the Company's net assets being invested in any one
investee company at the time of that investment. Subject to
Guernsey company law and the Company's ongoing working capital
requirements, the revised investing policy permits the Company to
make distributions to Shareholders as and when the appropriate
situations arise following the realisation of its investee
companies.
It was agreed to return cash to Shareholders in an amount of
GBP50.1 million, by way of a reduction of the Company's Share
Capital (the Returned Capital). The Returned Capital was
distributed to Shareholders on 28 May 2010.
24. Distributable reserve
Company & Company &
Consolidated Consolidated
2011 2010
GBP '000 GBP '000
--------------------------------------------- ------------- -------------
Balance at the beginning and end of the year 70,663 70,663
--------------------------------------------- ------------- -------------
25. Net asset value per share
Company Consolidated
No. of Shares pence pence
------------------ ------------- ------- ------------
31 March 2011
Ordinary shares
Basic and diluted 143,168,463 25.88 18.10
------------------ ------------- ------- ------------
31 March 2010
Ordinary shares
Basic and diluted 143,168,463 62.64 56.33
------------------ ------------- ------- ------------
26. Non-controlling interests
Consolidated
------------------
31 March 31 March
2011 2010
GBP '000 GBP '000
------------------------------------- -------- --------
Balance at the beginning of the year 3,668 3,372
Post acquisition capital loss (101) -
Prior year adjustment 134 -
Dividends (137) -
(Loss)/profit for the year (1,065) 296
------------------------------------- -------- --------
Balance at the end of the year 2,499 3,668
------------------------------------- -------- --------
27. Financial risk factors
The investment strategy of the Company and Group is to make
equity, debt or convertible investments in a broad range of high
growth companies within the media sector, with a view to achieving
a balanced portfolio covering a number of subsectors and which is
varied in terms of size and risk profile. Consistent with that
objective, the Company's financial instruments mainly comprise of
investments in unlisted companies. The Company will continue to
make investments only in existing investee companies. In addition
the Company holds cash and cash equivalents as well as having trade
and other receivables and trade and other creditors that arise
directly from its operations.
The main risks arising from the Company's financial instruments
are liquidity risk, credit risk, market risk, interest rate risk
and concentration risk.
Liquidity risk
The Company had yet to invest a proportion of the funds raised
from its listing, and as a result made a capital distribution to
its Shareholders on 28 May 2010. The cash and cash equivalents, at
the balance sheet date and following the capital distribution are
placed with financial institutions on a range of terms, from call
to three months' notice.
The following table details the liquidity analysis for financial
liabilities at the balance sheet date:
Less than 1-3 3 months to 1 Greater than
1 month months year 1 year Total
GBP '000 GBP '000 GBP '000 GBP '000 GBP '000
------------- ---------- --------- -------------- ------------- ---------
2011
Company
Trade
payables 90 58 98 - 246
---------- --------- -------------- ------------- ---------
90 58 98 - 246
---------- --------- -------------- ------------- ---------
Group
Trade
payables 3,730 2,871 795 - 7,396
Third party
loans - - 1,810 2,895 4,705
Other
creditors 504 1,816 1,397 - 3,717
Accruals and
deferred
income 4,164 7,156 8,656 4,366 24,342
---------- --------- -------------- ------------- ---------
8,398 11,843 12,658 7,261 40,160
---------- --------- -------------- ------------- ---------
2010
Company
Trade
payables 43 - - - 43
Accruals and
deferred
income - 148 134 - 282
---------- --------- -------------- ------------- ---------
43 148 134 - 325
---------- --------- -------------- ------------- ---------
Group
Trade
payables 2,170 3,826 2,362 - 8,358
Accruals and
deferred
income 3,124 7,126 9,897 - 20,147
Other
creditors 767 948 1,775 2,963 6,453
Third party
loans - - 1,815 2,701 4,516
---------- --------- -------------- ------------- ---------
6,061 11,900 15,849 5,664 39,474
---------- --------- -------------- ------------- ---------
Credit risk
The Company is exposed to credit risk in respect of its cash and
cash equivalents, arising from possible default of the relevant
counterparty, with a maximum exposure equal to the carrying value
of those assets. The credit risk on liquid funds is limited because
the counterparties are banks with high credit-ratings assigned by
international credit-rating agencies. The Company monitors the
placement of cash balances on an ongoing basis.
The Company is also exposed to credit risk in respect of the
loans granted to its investments, with a maximum exposure equal to
the value of the loans advanced.
The Group is exposed to credit risk in respect of its trade
receivables, accrued income and other receivables balances, with a
maximum exposure equal to the carrying value of those assets. Trade
and other receivables are carried at estimated recoverable value
after providing against debtors where collection is considered to
be doubtful. In the current year the Group has provided for any
amounts payable which have exceeded normal payment terms and where
there is an expectation that the amounts may not be recoverable.
The Group also recognises that the quality of debt varies
considerably across the investee companies and that management
regularly review the receivable balances.
Market risk
Market price risk arises principally from uncertainty concerning
future values of financial instruments used in the Company's and
Group's operations. It represents the potential loss the Group
might suffer through holding interests in unquoted private
companies whose value may fluctuate and which may be difficult to
value and/or to realise. The Company seeks to mitigate such risk by
assessing such risks as part of the due diligence process related
to all potential investments, and by establishing a clear exit
strategy for all potential investments.
At the reporting date, if the inputs to the investment valuation
model had been 10 per cent. higher/lower while all other variables
were held constant, the net profit/loss would increase/decrease by
GBP3,144k (2010: decrease/increase by GBP3,401) for the Company and
increase/decrease by GBPnil (2010: increase/decrease GBP111k) for
the Group. The most significant variables in the investment
valuation are the forecast income of the investee companies and the
comparable multiples.
Interest rate risk
The Group is subject to risks associated with changes in
interest rates in respect of interest earned on its cash and cash
equivalents balances. The Group seeks to mitigate this risk by
monitoring the placement of cash balances on an ongoing basis in
order to maximise the interest rates obtained.
Greater
Less than 1-3 3 months than 1
1 month months to 1 year year Total
GBP '000 GBP '000 GBP '000 GBP '000 GBP '000
-------------------- ---------- --------- ----------- --------- ---------
2011
Assets
Company
Non-interest
bearing 55 86 - 31,438 31,579
Floating rate
instruments 5,718 - - - 5,718
---------- --------- ----------- --------- ---------
Total assets 5,773 86 - 31,438 37,297
---------- --------- ----------- --------- ---------
Group
Non-interest
bearing 4,980 9,229 10,809 26,524 51,542
Floating rate
instruments 17,497 - - - 17,497
========== ========= =========== ========= =========
Total assets 22,477 9,229 10,809 26,524 69,039
========== ========= =========== ========= =========
Liabilities
Company
Non-interest
bearing 90 58 98 - 246
---------- --------- ----------- --------- ---------
Total liabilities 90 58 98 - 246
---------- --------- ----------- --------- ---------
Group
Non-interest
bearing 8,398 11,844 10,847 4,366 35,455
Fixed rate
instruments - - 1,810 2,895 4,705
---------- --------- ----------- --------- ---------
Total liabilities 8,398 11,844 12,657 7,261 40,160
---------- --------- ----------- --------- ---------
The following table details interest rate risk exposure at the
balance sheet date:
Greater
Less than 1-3 3 months than 1
1 month months to 1 year year Total
GBP '000 GBP '000 GBP '000 GBP '000 GBP '000
-------------------- ---------- --------- ----------- --------- ---------
2010
Assets
Company
Non-interest
bearing 114 117 - 34,007 34,238
Floating rate
instruments 15,477 40,291 - - 55,768
---------- --------- ----------- --------- ---------
Total assets 15,591 40,408 - 34,007 90,006
---------- --------- ----------- --------- ---------
Group
Non-interest
bearing 5,229 9,063 10,271 30,341 54,904
Floating rate
instruments 28,597 40,291 - - 68,888
---------- --------- ----------- --------- ---------
Total assets 33,826 49,354 10,271 30,341 123,792
---------- --------- ----------- --------- ---------
Liabilities
Company
Non-interest
bearing 43 148 134 - 325
---------- --------- ----------- --------- ---------
Total liabilities 43 148 134 - 325
---------- --------- ----------- --------- ---------
Group
Non-interest
bearing 6,061 11,900 14,034 2,963 34,958
Fixed rate
instruments - - 1,815 2,701 4,516
---------- --------- ----------- --------- ---------
Total liabilities 6,061 11,900 15,849 5,664 39,474
---------- --------- ----------- --------- ---------
The following table illustrates the sensitivity of the loss on
ordinary activities for the year before taxation and total equity
to a change in interest rates of 50 basis points, with effect from
the beginning of the year. These changes are considered to be
reasonably possible based on observation of current market
conditions. The calculations are based on the Company's cash and
cash equivalent balances held at each balance date. All other
variables are held constant. The Group's third party loans are at
fixed interest rates, thus any change in interest rates will not
affect profit.
Company Consolidated
-------------------- --------------------
2011 2010 2011 2010
GBP '000 GBP '000 GBP '000 GBP '000
----------------------------- --------- --------- --------- ---------
+/- 50 basis points
Loss on ordinary activities
before taxation 29 194 87 239
Total equity 29 194 87 239
----------------------------- --------- --------- --------- ---------
Concentration risk
The Company is exposed to concentration risk in respect of its
investments in subsidiaries and financial assets at fair value
through profit or loss, as these investments are all in the media
sector. The maximum exposure is equal to the carrying value of
those assets. The Company seeks to mitigate this risk by investing
in a range of subsectors within the media sector. To date the
Company has invested in the publishing, content, distribution,
internet/new media, live events and marketing services sub
sectors.
Capital risk management
The capital structure of the Company consists of the proceeds
raised from the issue of ordinary shares.
The Manager manages the capital of the Company in accordance
with the discount management and borrowing policy provisions of the
Admissions document. The discount management provisions give the
Company the ability to buy back ordinary shares in the market, if
they are trading at a discount to the prevailing net asset value,
and they believe it to be in the Shareholders' interests. Under the
borrowing policy provisions, the Company has the ability to borrow
up to 25 per cent. of its Net Asset Value. The Company is yet to
make any borrowings.
28. Related party transactions
a. The Company has appointed Ingenious Ventures (a trading
division of Ingenious Asset Management Limited) to provide
investment management services. Patrick McKenna is a director of
Ingenious Asset Management Limited which is a subsidiary within the
Ingenious Group, which is controlled by Patrick McKenna. William
Simpson is also a non-executive director of Ingenious Asset
Management International Limited and FP Holdings Limited which are
Guernsey registered companies, within the Ingenious Group. Ogier,
of which William Simpson is a partner, has provided legal advice in
connection with these entities.
The Company has incurred a management fee of GBP405,000, of
which GBP116,000 was already paid on account to Ingenious Ventures
for the year ended 31 March 2011 and GBP33,000 was still
outstanding at year end.
At the EGM on 12 May 2010, the terms of the Manager's investment
management agreement with the Company were varied, reducing the
Manager's fee to 1.25 per cent. of the Company's net asset value
minus the cash held by the Company payable monthly in arrears. If
the Company were to be unable to pay fees owing to the Manager due
to having insufficient cash, the Manager has agreed to defer such
payments until such time as the Company has sufficient cash
following the realisation of investee companies.
b. Ingenious Ventures provides administrative support to the
Company which is outside the scope of the Investment Management
Agreement. The recharge is made at cost and has been approved by
the Board at a value of GBP171,000 for the current financial year.
Ingenious Ventures invoices for this quarterly in arrears.
Ingenious Asset Management Limited is a subsidiary within the
Ingenious Group which is controlled by Patrick McKenna.
c. Serena Tremlett is the Managing Director of Morgan Sharpe
Administration Limited which receives fees for providing
secretarial and administrative services to the Company. Morgan
Sharpe has received GBP79,000 for the current financial year in
fees for company secretarial and administration services.
d. William Simpson is a partner of Ogier, which may receive fees
for providing legal advice and other services from time to time to
the Company. In the current financial year, fees of GBP19,000 have
been incurred with Ogier for legal advice and other services.
e. The Company has delegated discretionary treasury management
responsibilities to Ingenious Asset Management International
Limited (IAMI), a company of which William Simpson is a
non-executive director, to manage the uninvested funds of the
Company. As at 31 March 2011 IAMI held GBP5,591,000 (31 March 2010:
GBP55,058,000) on behalf of the Company. IAMI is a subsidiary
within the Ingenious Group, which is controlled by Patrick McKenna.
The fees for the services provided by IAMI to the Company are met
by Ingenious Ventures.
f. Ingenious Asset Management International Limited has further
delegated its treasury management responsibilities to Ingenious
Asset Management Limited which is a subsidiary within the Ingenious
Group, which is controlled by Patrick McKenna.
g. Entities within the Group appointed Ingenious Corporate
Finance Limited (ICF), a company of which Patrick McKenna is a
director, to provide corporate finance services. ICF is a
wholly-owned subsidiary within the Ingenious Group, which is
controlled by Patrick McKenna.
Stage Three Music Limited engaged ICF to provide corporate
finance advice on the sale of the assets of Stage Three Music
Limited to BMG Rights Management GmbH in July 2010. A fee of
GBP328,000 was paid to ICF upon completion of the transaction in
August 2010.
Cream Holdings Limited engaged ICF corporate finance advice
during the year incurring fees of GBP25,000.
IMAC directly engaged ICF to provide various corporate finance
advice during the year incurring fees of GBP50,000.
h. Patrick McKenna is a director and a shareholder of both
Ingenious Entertainment VCT 1 plc (Entertainment VCT 1) and
Ingenious Entertainment VCT 2 plc (Entertainment VCT 2). The
Ingenious Group holds shares in both Entertainment VCT 1 and
Entertainment VCT 2. In August 2010, Entertainment VCT 1 and
Entertainment VCT 2 invested GBP1,000,000 through a combination of
equity and loan notes into CLS Concerts Limited (CLS) in return for
a 33 per cent. share of the equity. Cream Holdings Limited also
owns 33 per cent. of the equity of CLS. Patrick McKenna is a
director of Cream Holdings Limited.
i. Ingenious Ventures received Non-Executive Directors fees of
GBP3,876 and monitoring fees of GBP7,689 from Stage Three Music
Limited during the financial year. In July 2010 the assets of Stage
Three Music Limited were sold to BMG Rights Management GmbH. In
August 2010 Stage Three Music Limited was renamed Propeller
Realisations Limited.
j. In February 2011, Two Way Media Holdings Limited and
Ingenious Games LLP entered into an agreement to co-develop new
computer games. Patrick McKenna is a member of the Executive
Committee of Ingenious Games LLP and was a non-controlling member
of Ingenious Games LLP until he retired on 6 April 2011.
During the year, the Group carried out a number of transactions
with the above mentioned related parties in the normal course of
business and on an arm's length basis as listed in the table
below.
Expenditure paid Amounts due/(receivable)
------------------ --------------------------
2011 2010 2011 2010
GBP '000 GBP '000 GBP '000 GBP '000
-------------------------- -------- -------- ------------ ------------
Ingenious Ventures
- Investment management
fee a 256 1,385 33 (116)
- Administrative support b 171 171 43 43
Morgan Sharpe
Administration Limited
- Company secretarial,
administration,
accounting & directorship
services c 79 83 - -
Ogier Fund Administration
(Guernsey) Limited
- Company secretarial,
administration,
accounting & directorship
services d 6 62 - -
Ogier Group Limited
Partnership
- Legal advice d 13 9 - -
Ingenious Corporate
Finance Limited
- Corporate Finance advice e 379 79 50 26
Transactions between related parties
The arrangements detailed at notes a to c below between related
parties of the Company were agreed in the period from 2001 to 2004
prior to IMAC acquiring its 90 per cent. shareholding in Ingenious
Ventures L.P. (IVLP) in 2008. IVLP holds the Company's interest in
Cream Holdings Limited and Stage Three Music Limited which was
disposed in July 2010. At the time that these arrangements were
entered into the entities were not related to the Company. There
has been no variation of the terms of the arrangements since they
were originally entered into. Following the sale of the assets of
Stage Three Music Limited to BMG Rights Management GmbH, Stage
Three Music Limited will remain owned by IVLP until its liquidation
is completed. This means the board of Stage Three Music Limited
will remain in place, but under the control of the liquidator.
a. Patrick McKenna is a director of Cream Holdings Limited and
receives a salary of GBP11,627 per annum and a consultancy fee of
GBP110,000 per annum.
b. Patrick McKenna was a director of Stage Three Music Limited
and during the year received a pro rata salary of GBP3,876, a pro
rata consultancy fee of GBP36,667 and received a final termination
fee of GBP110,000 on the completion of the sale of the assets of
Stage Three Music Limited to BMG Rights Management GmbH in July
2010. In August 2010 Stage Three Music Limited was renamed
Propeller Realisations Limited.
c. Neil Blackley was a director of Stage Three Music Limited and
during the year received a pro rata salary of GBP3,876 up to
completion of the sale of the assets of Stage Three Music Limited
to BMG Rights Management GmbH in July 2010. In August 2010 Stage
Three Music Limited was renamed Propeller Realisations Limited.
d. During the year, Patrick McKenna received a consultancy fee
of GBP26,000 from iD Distribution Limited, a subsidiary of Digital
Rights Group Limited. This arrangement was made prior to Digital
Rights Group Limited acquiring iD Distribution Limited in June
2007.
e. Ingenious Ventures, a trading division of Ingenious Asset
Management Limited, a subsidiary within the Ingenious Group, which
is controlled by Patrick McKenna, receives a fee of GBP120,000 per
annum for the provision of finance director and financial
controller support to Cream Holdings Limited.
29. Events after the balance sheet date
a. On 8 April 2011, the Company successfully sold its holding in
The Outside Line Limited resulting in proceeds of GBP1.3
million.
b. On 9 May 2011, DRG ended its existing trade mark license
agreement with Channel 4 International Limited (C4i), to continue
using the C4i name, waiving future payments associated with this
agreement of GBP1.3 million. The trade mark license agreement to
use the C4i name originated when DRG acquired the international TV
distribution business of Channel 4 in November 2007.
c. In July 2011, Nouveau Jour SAS and SponsorClick France SAS,
French subsidiaries of QobliQ Limited, were placed into voluntary
liquidation. At the date of signing this report, an estimate of the
financial effect is still to be determined.
d. The quarterly review of the NAV took place in the period to
30 June 2011, and as a result of events identified in this period,
a reduction of the Company's investment balance of GBP3.0m was
made.
SHAREHOLDER INFORMATION
1. Share price
All of the issued shares have been admitted to trading on AIM.
Share price information can be obtained from many financial
websites including www.londonstockexchange.com
2. Share trading
Shares can be bought and sold in the same way as any other AIM
admitted company via a stockbroker. The primary market maker for
the shares is Canaccord Genuity Limited.
Selling your shares may have tax consequences. You should
contact your financial adviser if you are in any doubt as to such
potential consequences.
3. Change of Shareholder address
Communications with Shareholders are sent to the registered
address held on the register of members. In the event of a change
of address or any other relevant amendments, please notify the
Company's registrar, Capita Registrars, under the signature of the
registered holder of the shares in question.
4. Investor relations
The Company and the Manager are committed to maintaining
excellent investor relations. If you have any questions about the
Company's progress please contact:
Patrick McKenna/Patrick Bradley Ingenious 020 7319 4000
This information is provided by RNS
The company news service from the London Stock Exchange
END
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