TIDMIMAC
RNS Number : 5300I
Ingenious Media Active Capital Ltd
26 July 2012
For immediate release
INGENIOUS MEDIA ACIVE CAPITAL
Audited Results for the year ended 31 March 2012
Ingenious Media Active Capital ("IMAC" or "the Company") today
announces the audited results for the year ended 31 March 2012.
CHAIRMAN'S STATEMENT
I am pleased to present the sixth Annual Report and Accounts in
respect of Ingenious Media Active Capital Limited for the 12 months
ended 31 March 2012.
Realisation of Investments
In line with its stated strategy to seek exits for the
portfolio, the Manager successfully sold Cream Holdings Limited
(Cream) to Live Nation in May 2012. The increase in Net Asset Value
(NAV) as a result of this sale is included in the accounts (see
Investments section below).
The Directors are particularly pleased with the sale of Cream,
which generated a 9.1 times return to the Company. Despite the
challenging global economic conditions, certain sectors of media
continue to thrive, including, in this case, the electronic dance
festival business, with significant growth taking place in the
United States of America. We have always believed that our
portfolio of companies represent strategic acquisitions for larger
media combines, who acquire small to medium sized creative
businesses to enhance or expand their own business growth, given
the independents tend to be the initiators of new activities or
content. The acquisition of Cream by Live Nation is an example of
this theory in practice.
Cash Distribution
The Board is recommending that a cash distribution be paid by
the Company to Shareholders in the amount of ten pence per Share.
Such distribution is subject to approval by Shareholders at the
Company's Annual General Meeting (AGM) on 29 August 2012, details
of which are set out in the notice accompanying these Annual Report
and Accounts.
Investments
The Manager is not considering new investments, only limited
follow-on investments into existing portfolio companies when
appropriate.
The Company's NAV per Share as at 31 March 2012 was 23.50 pence
(including 4.45 pence of cash) compared to 25.88 pence (including
3.99 pence of cash) at 31 March 2011. The Cream transaction
following the year end resulted in a fair value gain (and increase
in the Company's NAV) of GBP7,534k (see note 15), equivalent to
5.26 pence per IMAC Ordinary Share. 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.
Finally it should be noted that the loss before tax reported by
the Company for the financial year reflects the fact that fair
value adjustments for investments are taken through the profit and
loss account, which is the normal accounting treatment for
investment companies. The fair value adjustments arise from the
Manager's valuation of the underlying portfolio companies,
comprising both unrealised and realised assets during the year.
Mike Luckwell
Chairman
25 July 2012
MANAGER'S REVIEW
Market Review and Prospects
Although the economic climate remains uncertain, the sale of
Cream underlines the Manager's belief that large media businesses
will continue to acquire independent companies that support or
enhance their strategic ambitions. As such, the Manager will
continue to seek exits for the remaining companies in the portfolio
at the appropriate time. Individual company performance remains
subject to the impact of adverse economic and financial conditions.
The Manager has accordingly reserved some funds to cover any
contingency requirements of the portfolio.
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.
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 all investments in which IMAC has
a significant interest. There are no further undrawn commitments to
other investments held by IMAC.
Investments
Whizz Kid Entertainment Limited
Whizz Kid Entertainment Limited (Whizz Kid) 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 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 Limited with Peter
Christiansen.
Whizz Kid continues to perform well, with successful productions
of the fourth series of Let's Dance for the BBC and coverage of
Bestival and Camp Bestival for Sky completed. Recently won
commissions include a commemoration of the Titanic's sinking
broadcast by the BBC live from Belfast in April 2012.
Digital Rights Group Limited
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 and Television Limited, Zeal Entertainment
Limited, i-Rights Limited, iD Distribution Limited and Channel 4
International Limited.
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. The entry of new
digital broadcast aggregators into the market, such as Hulu and
Netflix, is a new source of buyers for the company's
programming.
Two Way Media Holdings Limited (including NetPlay TV plc shares
up to disposal)
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.
IMAC's holding in Two Way Media Holdings Limited was sold back
to Two Way Media's management team on 18 October 2011.
Brand Events Holdings Limited
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 in
Australia, South Africa, The Netherlands, New Zealand, Ireland and
Dubai.
A further working capital injection of GBP2.06 million was
agreed with management (in the financial years ending 31 March 2010
and 31 March 2011 respectively) 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 with joint venture
partner IMG, adding to the portfolio of shows that can then be
licensed internationally through Brand Events Limited's network.
Brand Events also launched Masterchef in Australia in 2009.
This year, Brand Events continued to run and license its Taste
Food Festivals format in the UK, Ireland, Europe, South Africa and
Australia. Taste also hit the impressive milestone of reaching 1
million paying visitors in its history this year. A new Top Gear
Festival in Durban, South Africa, was deemed a great success with
large crowds, and Golf Live ran for the third time. The management
team also continue to develop new formats - CarFest with Chris
Evans being a notable new proposition that was developed during the
year and will launch in the summer of 2012.
brandRapport Group Limited (formerly QobliQ Limited)
brandRapport Group Limited focuses on sports sponsorship, sports
and consumer PR through its offices in London, Singapore and Hong
Kong. The group represents a number of high profile clients,
including Barclays, Jaguar and Samsung.
In December 2007, brandRapport Group 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 brandRapport Group 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 (which have subsequently gone
into voluntary liquidation in August 2011). 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
in Singapore, which focuses on consumer and sports PR in the
region.
The UK business continues to successfully deliver activation for
brands around sports such as Barclays with the FA Premiership
Football League, and Samsung with its sponsorship of Chelsea
Football Club. The agencies in Asia continue to win a wide range of
new consumer PR clients on a retainer basis and are now winning
sports sponsorship clients leveraging off the expertise in the UK.
These clients include Mission Hills Golf in Hong Kong.
Review Centre Limited
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.
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. However, the company has been impacted by changes
in Google's search engine rating system (Panda) requiring it to
review the way in which it operates under such system. This review
has now concluded satisfactorily and the company has implemented
appropriate changes to mitigate the impact of Panda.
Ingenious Ventures L.P.
IMAC's investment in Cream is via its Limited Partnership
interest in the Ingenious Ventures L.P. (IVLP) fund. This interest
was purchased from UBS (Jersey) Limited in August 2008. Ingenious
Media Limited remains the other (minority) partner in the Limited
Partnership.
Cream Holdings Limited
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 as well as a
compilation record label.
Its best known event, Creamfields, is held in August every
year.
The company was sold to Live Nation in May 2012, producing a 9.1
multiple cash return for IMAC. The increase in NAV as a result of
this sale is included in the financial statements.
Ingenious Ventures
25 July 2012
COMPANY Statement of Comprehensive Income
for the year ended 31 March 2012
Year ended
31 March
2012 Year ended 31 March 2011
Note GBP '000 GBP '000
Revenue 1f 207 292
Other operating expenses 1g (828) (689)
Investment revenue 1f 52 113
Fair value loss on investments in subsidiaries 1d, 9 (2,677) (343)
Fair value loss on investments at fair value through profit or loss 1d, 15 - (853)
Fair value gain/(loss) on disposal of investments 72 (438)
Investment management fees 28 (340) (405)
Loss before taxation 2 (3,514) (2,323)
Income tax expense 4 - -
Loss for the year (3,514) (2,323)
-------------------------------------------------------------------- ------- ----------- -------------------------
Loss per share (basic and diluted pence per share) 5 (2.45) (1.62)
-------------------------------------------------------------------- ------- ----------- -------------------------
All income is attributable to the Ordinary Shareholders of the
Company unless otherwise stated.
All revenue and expenses are derived from continuing operations
unless otherwise stated.
The notes are an integral part of these consolidated financial
statements.
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2012
Year ended Year ended
31 March 31 March
2012 2011
Note GBP '000 GBP '000
Continuing operations
Revenue 1f 52,705 51,190
Cost of sales 1g (38,401) (35,838)
Other operating expenses 1g (13,889) (18,443)
Investment revenue 1f 247 141
Income or share of results from associates 160 1,392
Fair value gain/(loss) on investments 1d,
at fair value through profit or loss 15 7,534 (853)
1d,
Loss on disposal of investments 15 - (432)
Impairment of goodwill 6 (7,916) -
Impairment of other intangible assets 7 (258) (75)
Investment management fees 28 (340) (405)
Profit on disposal of a foreign operation 382 -
Finance costs (665) (637)
Loss before taxation 2 (441) (3,960)
Income tax expense 4 (870) (1,242)
Loss for the year from continuing
operations (1,311) (5,202)
Discontinued operations
Profit for the year from discontinued
operations 12 436 289
Loss for the year (875) (4,913)
Attributable to:
------------------------------------------- ----- ----------- -----------
Owners of the Company (878) (3,848)
Non-controlling interests 26 3 (1,065)
Loss per share on continuing operations
(basic and diluted pence per share) 5 (0.82) (2.69)
Earnings per share on discontinued
operations
(basic and diluted pence per share) 5 0.21 -
Loss per share
(basic and diluted pence per share) 5 (0.61) (2.69)
All income is attributable to the Ordinary Shareholders of the
Company unless otherwise stated.
All revenue and expenses are derived from continuing operations
unless otherwise stated.
The notes are an integral part of these consolidated financial
statements.
COMPANY Statement Of Financial Position
as at 31 March 2012
Year ended Year ended
31 March 31 March
2012 2011
Note GBP '000 GBP '000
----------------------------------- ----- ----------- -----------
Non current assets
Investment in subsidiaries 9 27,110 31,438
27,110 31,438
Current assets
Trade and other receivables 16 334 141
Cash and cash equivalents 17 6,370 5,718
6,704 5,859
Current liabilities
Trade and other payables 18 (169) (246)
Net current assets 6,535 5,613
----------------------------------- ----- ----------- -----------
Net assets 33,645 37,051
----------------------------------- ----- ----------- -----------
Equity
Share premium account 23 20,860 20,860
Distributable reserve 24 70,663 70,663
Shares held in treasury 22 (515) (515)
Retained earnings (57,363) (53,957)
----------------------------------- ----- ----------- -----------
Total equity 33,645 37,051
----------------------------------- ----- ----------- -----------
Net Asset Value (basic and diluted
pence per share) 25 23.50 25.88
----------------------------------- ----- ----------- -----------
The notes are an integral part of these consolidated financial
statements.
The financial statements were approved by the Board and
authorised for issue on 25 July 2012.
Signed on behalf of the Board:
David Jeffreys Serena Tremlett
Director Director
COnsolidated Statement Of Financial Position
as at 31 March 2012
Year ended Year ended
31 March 2012 31 March 2011
Note GBP '000 GBP '000
--------------------------------------- ----- --------------- ---------------
Non current assets
Goodwill 6 6,851 15,090
Other intangible assets 7 6,746 7,382
Property, plant and equipment 8 328 393
Financial assets at fair value through
profit or loss 15 10,963 3,806
Investments in associates 84 (147)
24,972 26,524
Current assets
Inventories 1l 2,641 1,239
Trade and other receivables 16 21,624 21,676
Cash and cash equivalents 17 18,100 17,497
Assets classified as held for sale 13 - 2,103
42,365 42,515
Current liabilities
Trade and other payables 18 (35,958) (31,971)
Current tax liabilities (282) (287)
Liabilities associated with assets
classified as held for sale 13 - (641)
(36,240) (32,899)
--------------------------------------- ----- --------------- ---------------
Net current assets 6,125 9,616
Non current liabilities
Long term third party loans 19 (2,391) (2,895)
Deferred consideration 20 (153) (4,366)
Net assets 28,553 28,879
--------------------------------------- ----- --------------- ---------------
Equity
Share premium account 23 20,860 20,860
Distributable reserve 24 70,663 70,663
Shares held in treasury 22 (515) (515)
Retained earnings (64,606) (65,148)
Foreign currency translation reserve 84 58
--------------------------------------- ----- --------------- ---------------
Equity attributable to equity holders
of the parent 26,486 25,918
Amounts recognised in equity relating
to assets held for sale 13 - 462
Non-controlling interests 26 2,067 2,499
--------------------------------------- ----- --------------- ---------------
Total equity 28,553 28,879
--------------------------------------- ----- --------------- ---------------
Net Asset Value (basic and diluted
pence per share) 25 18.50 18.10
--------------------------------------- ----- --------------- ---------------
The notes are an integral part of these consolidated financial
statements.
The financial statements were approved by the Board and
authorised for issue on 25 July 2012.
Signed on behalf of the Board:
David Jeffreys Serena Tremlett
Director Director
COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2012
Share
premium Distribut-able Shares Total
account reserves held Retained equity
GBP GBP in treasury earnings GBP
Note '000 '000 GBP '000 GBP '000 '000
------------------------------ ----- --------- --------------- ------------- ---------- --------
Balance at 1 April 2011 20,860 70,663 (515) (53,957) 37,051
Recognition in respect of
share-based payments 1s - - - 108 108
Retained losses for the year - - - (3,514) (3,514)
Balance at 31 March 2012 20,860 70,663 (515) (57,363) 33,645
------------------------------ ----- --------- --------------- ------------- ---------- --------
for the year ended 31 March 2011
Share
premium Distribut-able Shares Retained
account reserves held earnings Total
GBP GBP in treasury GBP equity
Note '000 '000 GBP '000 '000 GBP '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
------------------------------ ----- --------- --------------- ------------- ---------- ----------
The notes are an integral part of these consolidated financial
statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2012
Shares Assets Non-
Distribu- held classified con-
Share table Transla-tion in Retained as held trolling
premium reserves reserve treasury earnings for sale interest Total
account GBP GBP GBP GBP GBP '000 GBP equity
Note GBP '000 '000 '000 '000 '000 '000 GBP '000
----------------- ----- --------- --------------- ------------- --------- --------- ----------- --------- ---------
Balance at 1
April
2011 20,860 70,663 58 (515) (65,148) 462 2,499 28,879
Recognition in
respect of
share-based
payments 1s - - - - 108 - - 108
Other reserve
movements - - 26 - 60 - - 86
Retained losses
for the year - - - - (878) - 3 (875)
Shares issued to
non-controlling
interest 26 - - - - - - 215 215
Amounts in
equity
relating to
assets
previously
classified
as held for
sale - - - - 462 (462) - -
Disposal of
subsidiaries 26 - - - - - - (650) (650)
Capital
contribution - - - - 790* - - 790
----------------- ----- --------- --------------- ------------- --------- --------- ----------- --------- ---------
Balance at 31 March
2012 20,860 70,663 84 (515) (64,606) - 2,067 28,553
------------------------ --------- --------------- ------------- --------- --------- ----------- --------- ---------
* The debt structure of Brand Events has been restructured during the
year, leading to a write off of the accumulated Shareholder loan note
interest of the minority Shareholder which has previously been accrued
as a creditor.
for the year ended 31 March 2011
Shares Assets Non-
held classified con-
Share Distribu-table Transla-tion in Retained as held trolling
premium reserves reserve treasury earnings for sale interest Total
account GBP GBP GBP GBP GBP '000 GBP equity
Note GBP '000 '000 '000 '000 '000 '000 GBP '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 - - - - (462) 462 - -
Balance at 31 March
2011 20,860 70,663 58 (515) (65,148) 462 2,499 28,879
------------------------ --------- --------------- ------------- --------- --------- ----------- --------- ---------
The notes are an integral part of these consolidated financial
statements.
COMPANY STATEMENT OF CASH FLOWS
for the year ended 31 March 2012
Year ended Year ended
31 March 31 March
2012 2011
Note GBP '000 GBP '000
----------------------------------------------- ----- ----------- -----------
Net cash flow from operating activities (1,071) (570)
----------------------------------------------- ----- ----------- -----------
Investing activities
Acquisition of subsidiary undertakings 9 - (997)
Sale of investment 9 1,723 1,761
Sale of investment at fair value through
profit or loss 15 - 171
Net cash flow from investing activities 1,723 935
----------------------------------------------- ----- ----------- -----------
Financing activities
Capital distribution 23 - (50,109)
Capital distribution costs 23 - (306)
Net cash flow from financing activities - (50,415)
----------------------------------------------- ----- ----------- -----------
Net increase/(decrease) in cash and
cash equivalents 652 (50,050)
----------------------------------------------- ----- ----------- -----------
Cash and cash equivalents at beginning
of the year 5,718 55,768
----------------------------------------------- ----- ----------- -----------
Cash and cash equivalents at end of
the year 6,370 5,718
----------------------------------------------- ----- ----------- -----------
Cash flow from operating activities
Loss before taxation (3,514) (2,323)
Fair value loss on investments in subsidiaries 2,677 1,196
Fair value (gain)/loss on disposal
of investments (72) 438
Recognition of share based payment 108 108
(Increase)/decrease in amounts receivable (193) 90
Decrease in amounts payable (77) (79)
Net cash flow from operating activities (1,071) (570)
----------------------------------------------- ----- ----------- -----------
The notes are an integral part of these consolidated financial
statements.
CONSOLIDATED Statement Of Cash Flows
for the year ended 31 March 2012
Year ended Year ended
31 March 31 March
2012 2011
Note GBP '000 GBP '000
------------------------------------------------ ----- ----------- -----------
Net cash flow from operating activities (1,187) (3,076)
------------------------------------------------ ----- ----------- -----------
Investing activities
Acquisition of subsidiary undertakings 10 534 1,203
Sale of investments 377 2,127
Acquisition of other intangible assets 7 (593) (513)
Purchases of property, plant and equipment 8 (250) (383)
Disposal of subsidiaries 14 1,010 -
Net cash flow from investing activities 1,078 2,434
------------------------------------------------ ----- ----------- -----------
Financing activities
Capital distribution 23 - (50,109)
Capital distribution costs 23 - (306)
Third party borrowings 686 (30)
Amounts received from/(paid to) non-controlling
interests 59 (332)
Net cash flow from financing activities 745 (50,777)
------------------------------------------------ ----- ----------- -----------
Net increase/(decrease) in cash and
cash equivalents 636 (51,419)
------------------------------------------------ ----- ----------- -----------
Cash and cash equivalents at beginning
of the year 17,497 68,888
------------------------------------------------ ----- ----------- -----------
Effect of foreign exchange rate changes (33) 28
------------------------------------------------ ----- ----------- -----------
Cash and cash equivalents at end of
the year 18,100 17,497
------------------------------------------------ ----- ----------- -----------
Cash flow from operating activities
------------------------------------------------ ----- ----------- -----------
Loss before taxation (441) (3,960)
Fair value (gain)/loss on financial
assets 15 (7,534) 853
Recognition of share based payment 108 108
Loss on disposal of investment 15 - 432
Impairment of goodwill 6 7,916 -
Impairment of other intangible assets 7 258 75
Amortisation of other intangible assets 7 1,079 1,884
Increase in amounts receivable (1,119) (110)
Decrease in amounts payable (1,419) (1,897)
Decrease/(increase) in inventories 328 (558)
Depreciation of property, plant and
equipment 8 248 256
Profit on disposal of a foreign operation (382) -
Other (229) (159)
Net cash flow from operating activities (1,187) (3,076)
------------------------------------------------ ----- ----------- -----------
The notes are an integral part of these consolidated financial
statements.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2012
1. Summary of significant accounting policies
Reporting entity
IMAC is a closed-end investment company with limited liability
formed under the Companies Law 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 Old Bank Chambers, La Grande Rue, St Martin's,
Guernsey, GY4 6RT. The Groupis defined as the Company and its
subsidiaries.
Basis of preparation
This set of financial statements of the Company and Group have
been prepared in accordance with IFRS, 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 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 the proposed
distribution of capital, as noted in the Chairman's Statement.
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 a drawdown 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 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 will retain 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, earnings and contribution multiples, net
assets and cash in light of the measures noted above.
Financial instruments
Financial assets
Financial assets are divided into the following categories:
-- loans and receivables, including cash and cash equivalents; and
-- 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 Company and Consolidated
Statement of Comprehensive Income or charged directly against
equity. All income and expenses in respect of financial assets held
by the Company and Group in the period under review are recognised
in the Company and Consolidated Statement of Comprehensive Income.
Generally the Company and Group 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
Company and Consolidated Statement of Comprehensive Income under
the heading "revenue" and interest payable is recognised under the
heading "finance costs".
The Company and Group's loans and receivables comprise trade and
other receivables in the Company and 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 Company and Group'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
Company and Group's remaining financial 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; and
-- fair value through profit or loss.
Other financial liabilities include the Company and Group'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 Company and 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);
and
-- 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
-------------------- --------------------
2012 2011 2012 2011
GBP '000 GBP '000 GBP '000 GBP '000
--------- --------- --------- --------- ---------
Level 1 - - - -
Level 2 - - - -
Level 3 27,110 31,438 10,963 3,806
--------- --------- --------- --------- ---------
27,110 31,438 10,963 3,806
--------- --------- --------- --------- ---------
Adoption of new and revised standards
At the date of approval 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 9 "Financial Instruments - Classification and
Measurement", effective for periods beginning on or after 1 January
2013;
-- 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 and Company. The
Directors are reviewing this impact on an ongoing basis.
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 2012.
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 period 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 in
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. 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
the Consolidated Statement of Comprehensive Income. 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 Company and
Consolidated 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 Company and Consolidated
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 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 Company and Consolidated 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 5 to 10 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
andservices provided in the normal course of business, net of
discounts, VAT and other sales-related taxes. Where appropriate,
revenue is recorded in the Company and Consolidated 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 Company and Consolidated 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. Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and any recognised impairment losses.
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 similar
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/credit which is
charged/credited to the Consolidated 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
Company and Consolidated 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 Group are recorded as the
proceeds are received, net of direct issue costs.
s. Share options
The Group and the Company accounts for the fair value of Share
options at the grant date over the vesting period in the Company
and Consolidated 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
31 March 31 March
Year ended 31 March 2012 2011 Year ended 31 March 2012 2011
GBP '000 GBP '000 GBP '000 GBP '000
-------------------------------------- ------------------------- ----------- ------------------------- -----------
Staff costs - - 8,583 11,448
Directors' fees 130 130 130 130
Amortisation of other intangible
assets - - 1,079 1,884
Recognition of share-based payment 108 108 108 108
Depreciation of property, plant and
equipment - - 248 256
Rental and lease expenses - - 758 1,068
Bad debts - written off 112 - 80 24
Auditor - remuneration 121 123 280 271
Auditor - non audit remuneration 4 9 87 48
-------------------------------------- ------------------------- ----------- ------------------------- -----------
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)
-------------------------------- -----------------------------------
Year ended Year ended Year ended Year ended
2012 2011 2012 2011
Segment revenues and results GBP '000 GBP '000 GBP '000 GBP '000
--------------------------------- ---------------- -------------- ------------------- --------------
Investments portfolio 52,705 51,190 22,181 10,275
================ ============== =================== ==============
Total for continuing operations 52,705 51,190 22,181 10,275
Share of profit of associates 160 1,392
Group administration costs
and Directors' salaries (13,889) (18,443)
Finance costs (665) (637)
Consolidation adjustments (8,228) 3,453
------------------- --------------
Loss before tax (continuing
operations) (441) (3,960)
--------------------------------- ---------------- -------------- ------------------- --------------
Year ended Year ended
2012 2011
Segment assets GBP '000 GBP '000
------------------------------------------------------------------------- -------------- -------------
Investments portfolio 67,337 66,936
Assets classified as held for sale - 2,103
-------------- -------------
Total segment and consolidated assets 67,337 69,039
-------------- -------------
Segment liabilities
Investments portfolio 38,784 39,519
Liabilities directly associated with assets
classified as held for sale - 641
-------------- -------------
Total segment and consolidated liabilities 38,784 40,160
------------------------------------------------------------------------- -------------- -------------
Revenue from external
customers Non current assets
---------------------------- -----------------------------------
Year ended Year ended Year ended Year ended
2012 2011 2012 2011
Geographical information GBP '000 GBP '000 GBP '000 GBP '000
--------------------------------- ------------ -------------- ------------------- --------------
United Kingdom 21,025 18,279 24,941 26,484
Europe (excluding UK) 8,076 11,858 12 29
Other 23,604 21,053 19 11
------------ -------------- ------------------- --------------
52,705 51,190 24,972 26,524
--------------------------------- ------------ -------------- ------------------- --------------
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
2012 2011
GBP '000 GBP '000
---------------------------------------------- ----------- -----------
Loss before taxation (441) (3,960)
Tax rate in Guernsey - 0% - -
Adjustments:
For foreign tax rates 580 (1,361)
Non deductible expenses (115) 1,220
Expenses from prior year allowed in
current year 2 -
Deferred tax not recognised (641) (86)
Depreciation in excess of capital allowances - (6)
Prior year adjustment (29) (12)
Withholding tax charge (667) (1,305)
Utilisation of prior year losses - 84
Consortium relief - 224
Tax expense for the year (870) (1,242)
----------- -----------
Analysis of tax expense for the year:
Current year tax charge - continuing
operations (841) (1,054)
Current year tax charge - discontinued
operations - (90)
Prior year adjustment (29) (12)
Deferred tax - (86)
(870) (1,242)
----------- -----------
Losses carried forward (22,881) (20,417)
---------------------------------------------- ----------- -----------
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 2011: 143,168,463), being the weighted
average number of Shares for the purpose of the earnings per Share
calculation.
6. Goodwill
Consolidated
------------------
2012 2011
GBP '000 GBP '000
------------------------------------------ -------- --------
Cost
Balance at the beginning of the year 37,601 36,441
Recognised on acquisition of a subsidiary 1,351 1,268
Derecognised on disposal of a subsidiary (323) -
IFRS adjustment in respect of acquisition
of subsidiaries - (108)
Reallocation to other intangible assets (1,351) -
------------------------------------------ -------- --------
Balance at the end of the year 37,278 37,601
Accumulated impairment losses
Balance at the beginning of the year (22,511) (22,511)
Impairment losses for the year
Continuing operations (7,877) -
Discontinued operations (39) -
------------------------------------------ -------- --------
Balance at the end of the year (30,427) (22,511)
Carrying amount at the end of the year 6,851 15,090
------------------------------------------ -------- --------
The Group tests goodwill annually for impairment, or more
frequently if there are indications that goodwill might be
impaired.
The Group has concluded a sensitivity analysis on the impairment
of goodwill which is essentially driven by the valuation of the
individual investments. Refer to note 27 for more detail around the
sensitivity analysis.
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 four individual cash-generating units.
The carrying amount of goodwill is as follows:
2012 2011
GBP '000 GBP '000
------------ -------- --------
Investments 6,851 15,090
------------ -------- --------
During the year ended 31 March 2012, the Group has determined
that there has been an impairment on a number of its
cash--generating units containing goodwill or intangible assets
with indefinite useful lives amounting to GBP7,916k (year ended 31
March 2011: GBPNil).
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.
2012 2011
GBP '000 GBP '000
------------------------------ -------- --------
Fair value less costs to sell 6,851 15,090
------------------------------ -------- --------
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; and
b. Comparable earnings multiples. A number of investments are
valued using comparable listed and other industry multiples which
range from 5 to 10 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
------------------
2012 2011
GBP '000 GBP '000
---------------------------------------------- -------- --------
Cost or valuation
Balance at the beginning of the year 13,687 12,932
Additions in year 593 513
Recognised on acquisition of a subsidiary 18 242
Reclassification from goodwill 1,351 -
Derecognised due to early license termination (2,963) -
---------------------------------------------- -------- --------
Balance at the end of the year 12,686 13,687
Amortisation
Balance at the beginning of the year (2,633) (673)
Reclassification - (76)
Charge for the year (1,079) (1,884)
Derecognised due to early license termination 1,702 -
---------------------------------------------- -------- --------
Balance at the end of the year (2,010) (2,633)
Impairment
Balance at the beginning of the year (3,672) (3,597)
Charge for the year (258) (75)
---------------------------------------------- -------- --------
Balance at the end of the year (3,930) (3,672)
Carrying amount at the end of the year 6,746 7,382
---------------------------------------------- -------- --------
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 other intangible assets with indefinite
useful lives is as follows:
2012 2011
GBP '000 GBP '000
------------ ---------- --------
Investments 3,851 5,686
------------ ---------- --------
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.
2012 2011
GBP '000 GBP '000
------------------------------ -------- ----------
Fair value less costs to sell 3,851 5,686
------------------------------ -------- ----------
8. Property, plant and equipment
Consolidated
------------------
2012 2011
GBP '000 GBP '000
------------------------------------------ -------- --------
Cost or valuation
Balance at the beginning of the year 1,496 1,594
Additions in year 250 383
Recognised on acquisition of a subsidiary 13 62
Derecognised on disposal of a subsidiary (504) -
Cost value of disposals in year - (414)
Reclassified as held for sale - (129)
------------------------------------------ -------- --------
Balance at the end of the year 1,255 1,496
Accumulated depreciation
Balance at the beginning of the year (1,103) (1,128)
Accumulated depreciation on disposals
during the year - 281
Derecognised on disposal of a subsidiary 424 -
Charge for the year (248) (256)
------------------------------------------ -------- --------
Balance at the end of the year (927) (1,103)
Carrying amount at the end of the year 328 393
------------------------------------------ -------- --------
9. Investment in subsidiaries
Company
----------------------
2012 2011
GBP '000 GBP '000
-------------------------------------- ---------- ----------
Opening fair value at the beginning
of the year 31,438 32,898
Purchases at cost - 997
Disposal proceeds (1,723) (1,761)
Profit/(loss) on sale of investment 72 (353)
Fair value adjustment (2,677) (343)
-------------------------------------- ---------- ----------
Closing fair value at the end of the
year 27,110 31,438
-------------------------------------- ---------- ----------
Disposal proceeds in the year ended 31 March 2012 relate to the
liquidation proceeds of Stage Three Music Limited (GBP331k),
Enigmas2 (GBP72k) as well as the disposal of IMAC's share in
Outside Line (GBP1,320k) and Two Way Media (GBP1).
An investee company is classified as a subsidiary where the
Company can achieve control either:
-- by obtaining more than 50 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.
In April 2011, the Company disposed of its holding in Outside
Line.
In June 2011, Enigmas2 Limited applied to be struck off from the
register of companies at Companies House in the UK.
In August 2011, Nouveau Jour SAS and SponsorClick France SAS,
French subsidiaries of brandRapport Group Limited, were placed into
voluntary liquidation.
In October 2011, the Company disposed of its investment in Two
Way Media Holdings Limited.
IVLP sold the majority of its shareholding in Cream Holdings
Limited in May 2012.
Undrawn commitments
All outstanding funding commitments are at the discretion of the
Company and the Manager.
Paid
Paid as as at
Name of % of Country Full at 31 31 March
subsidiary Class class of Principal commitment March 2011
undertaking of share held incorpo-ration activity GBP'000 2012 GBP'000 GBP'000
---------------- ------------ ------- --------------- --------------- --------------- -------------- ----------
Whizz Kid
Entertainment Television
Limited Ordinary 47.7% UK production 4,250 2,750 2,750
---------------- ------------ ------- --------------- --------------- --------------- -------------- ----------
Digital Rights Television
Group Limited Ordinary 78.3% UK distribution 11,270 8,274 8,274
---------------- ------------ ------- --------------- --------------- --------------- -------------- ----------
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 9,080
---------------- ------------ ------- --------------- --------------- --------------- -------------- ----------
brandRapport Marketing
Group Limited Preference 79.1% UK services 12,867 12,867 12,867
---------------- ------------ ------- --------------- --------------- --------------- -------------- ----------
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 55,031 49,905 49,905
----------------------------- ------- --------------- --------------- --------------- -------------- ----------
10. Acquisition of subsidiaries
During the year the Group acquired a controlling interest in
Brand Events Benelux B.V. and Taste Festivals Limited which
resulted in goodwill arising. The final fair value (which is
similar to the net book value) of assets acquired and liabilities
assumed were as follows:
2012 2011
GBP '000 GBP '000
--------------------------------------------------- --------- ---------
Other intangible assets 18 242
Property, plant and equipment 13 62
Cash and cash equivalents 1,902 2,005
Accounts receivable 596 987
Trade payables (4,385) (3,131)
Non-controlling interest 31 161
Inventory 1,842 144
--------------------------------------------------- --------- ---------
Net assets acquired 17 470
Goodwill on consolidation 1,351 1,268
--------------------------------------------------- --------- ---------
Total consideration 1,368 1,738
Total consideration satisfied by:
Cash 1,368 802
Cash paid in prior years - 300
Consideration shares - 110
Deferred consideration - 526
1,368 1,738
--------------------------------------------------- --------- ---------
Net cash inflow/(outflow) arising on acquisition:
Cash consideration (1,368) (802)
Cash and cash equivalents acquired 1,902 2,005
--------------------------------------------------- --------- ---------
534 1,203
--------------------------------------------------- --------- ---------
The goodwill arising on the acquisition 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 GBP0.2 million relating to acquired
subsidiaries (year ended 31 March 2011: profit before tax of GBP0.6
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/or 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
2012 2011
GBP '000 GBP '000
------------------------------------------ ----------- --------------------
Aggregate amounts relating to associates
Total assets 12,751 12,614
Total liabilities (11,447) (11,898)
Revenues 10,816 15,999
Profit/(loss) 178 (1,557)
------------------------------------------ ----------- --------------------
A list of the significant investments in associates, including
the name, country of incorporation and proportion of ownership
interest is given below.
% of class Country of
Name of associate Class of share held incorporation
-------------------------------- --------------- ----------- ---------------
Sub Zero Limited Ordinary 50.0% UK
Brand Events Management Ireland Ordinary 50.0% Ireland
Limited
Brand Events Festivals Limited Ordinary 50.0% Ireland
Brand Events Italy Limited Ordinary 50.0% Italy
Brand Events Live Limited Ordinary 49.9% UK
Golfmania Limited Ordinary 49.9% UK
Taste Xmas Live Limited Ordinary 49.9% UK
Dance Floor Limited Ordinary 49.9% UK
DRG Media Assets Limited Ordinary 49.9% UK
-------------------------------- --------------- ----------- ---------------
Brand Events Holdings Limited is required to fund its share of
losses in its associates listed above, except for Brand Events Live
Limited, Golfmania Limited and Taste Xmas Live Limited, which are
all VCT associates. DRG is not required to fund the losses of its
associate, DRG Media Assets Limited (a VCT associate) and Whizz Kid
is not required to fund the losses in Dance Floor Limited (a VCT
associate).
During the period the Group acquired a controlling interest in
Brand Events Benelux B.V. and Taste Festivals Limited. These
companies are no longer associates in the Group, and are now fully
consolidated.
12. Discontinued operations
Discontinued operations in the current year end results relate
to Outside Line and Two Way Media.
Year ended Year ended
31 March 31 March
2012 2011
GBP '000 GBP '000
-------------------------------------------------- ------------ ------------
Revenue 1,645 3,666
Expenses (797) (3,287)
Loss on derecognition of subsidiary (412) -
------------ ------------
Profit before tax 436 379
Attributable tax expense - (90)
------------ ------------
Profit for the year from discontinued operations 436 289
-------------------------------------------------- ------------ ------------
13. Assets classified as held for sale
Year ended Year ended
31 March 31 March 2011
2012
GBP '000 GBP '000
----------------------------------------- ------------ ---------------
Assets held for sale - 2,103
Liabilities associated with assets held
for sale - 641
----------------------------------------- ------------ ---------------
The Company disposed of its interests in Outside Line in April
2011 and Two Way Media Holdings Limited in October 2011. The assets
held for sale for 2011 reflect the assets and liabilities related
to Outside Line.
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
2012 2011
GBP '000 GBP '000
------------------------------------------- ------------ -----------
Property, plant and equipment - 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
for sale - 641
------------------------------------------- ------------ -----------
Net assets of business classified as held
for sale - 1,462
------------------------------------------- ------------ -----------
Less elimination of intercompany balances
on consolidation - (1,000)
------------------------------------------- ------------ -----------
Amounts recognised in equity relating to
assets classified as held for sale - 462
------------------------------------------- ------------ -----------
14. Derecognition of subsidiaries
The Group no longer has controlling interests in Outside Line or
Two Way Media as it sold its shareholdings on 6 April 2011 and 28
October 2011 respectively. 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
2012
GBP '000 GBP '000
------------------------------ ----------- ---------------
Property, plant and equipment 142 -
Cash and cash equivalents 826 -
Accounts receivable 2,800 -
Trade and other payables (1,414) -
------------------------------ ----------- ---------------
Net assets derecognised 2,354 -
------------------------------ ----------- ---------------
Outside Line was disposed of for GBP1,320,000 and Two Way Media
was disposed of for GBP1. The cash contained as part of the net
assets of Outside Line and Two Way Media on the days of disposal
were GBP516,000 and GBP310,000 respectively. The Outside Line cash
was reflected in assets held for sale in the year ended 31 March
2011, and for that reason the GBP516,000 is not reflected on the 31
March 2012 Cash Flow Statement.
15. Financial assets at fair value through profit or loss
Company Consolidated
------------------ ------------------
2012 2011 2012 2011
GBP '000 GBP '000 GBP '000 GBP '000
------------------------------- -------- -------- -------- --------
Opening fair value - 1,109 3,806 7,251
Disposal proceeds - (171) (377) (2,160)
Fair value adjustment - (853) 7,534 (853)
Loss on disposal of investment - (85) - (432)
------------------------------- -------- -------- -------- --------
Closing fair value - - 10,963 3,806
------------------------------- -------- -------- -------- --------
The disposal proceeds of GBP377,000 relates to the sale of Stage
Three Music Limited to BMG Rights Management GmbH in July 2010. The
fair value adjustment of GBP7,534,000 relates to Cream.
Paid Paid
% as at as at
of Full 31 March 31 March
Name of Class class Country Principal commit-ment 2012 2011
investment of share held of 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 Limited Ordinary 0% UK media marketing 5,710 5,710 5,710
------------------ ------------ ------- ----------------- ----------------- ------------- ---------- ----------
British
Virgin Internet/new
Sportbuzz Limited Preference 45% Islands media 1,604 1,604 1,604
------------------ ------------ ------- ----------------- ----------------- ------------- ---------- ----------
Crystal
Entertainment Talent
Limited Ordinary 10% UK relationships 1,311 1,311 1,311
------------------ ------------ ------- ----------------- ----------------- ------------- ---------- ----------
Total 26,528 26,528 26,528
------------------------------- ------- ----------------- ----------------- ------------- ---------- ----------
In April 2009 Trinity Universal Holdings Limited was placed in
Voluntary Creditors Liquidation which is still ongoing.
16. Trade and other receivables
Company Consolidated
-------------------- --------------------
2012 2011 2012 2011
GBP '000 GBP '000 GBP '000 GBP '000
------------------------- --------- --------- --------- ---------
Trade receivables 95 136 7,374 5,372
Prepayments and accrued
income 16 5 6,221 6,887
Income receivable - - 6,961 7,857
Other receivables 223 - 1,068 1,560
------------------------- --------- --------- --------- ---------
334 141 21,624 21,676
------------------------- --------- --------- --------- ---------
17. Cash and cash equivalents
Cash and cash equivalents held by the Company and Group amount
to GBP6,370k (year ended 31 March 2011: GBP5,718k) and GBP18,100k
(year ended 31 March 2011: GBP17,497k) 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
GBP3,248k (year ended 31 March 2011: GBP2,080k) in relation to
amounts that Whizz Kid 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.
18. Trade and other payables
Company Consolidated
-------------------- --------------------
2012 2011 2012 2011
Note GBP '000 GBP '000 GBP '000 GBP '000
----------------------------------------------------- --------- --------- --------- ---------
Trade payables 74 246 5,644 7,396
Third party loans 19 - - 2,470 1,810
Other creditors - - 6,310 3,717
Accruals and deferred income 95 - 21,534 19,048
----------------------------------------------------- --------- --------- --------- ---------
169 246 35,958 31,971
----------------------------------------------------- --------- --------- --------- ---------
19. Long term and short term third party loans
Long term
Redemption Consolidated
date
--------------- --------------------
2012 2011
GBP '000 GBP '000
------------------------------- --------------- --------- ---------
Brand Events Holdings Limited 26 April 2012 1,730 2,296
Review Centre Limited 6 June 2018 661 599
------------------------------- --------------- --------- ---------
2,391 2,895
----------------------------------------------- --------- ---------
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 to IMAC loan notes. It has been agreed that the 2015
loan notes take priority over the 2012 loan notes. Therefore, there
will be no repayments of any of the loan notes before 2015. Review
Centre Limited's long term third party loan comprises of a loan
provided by one of the existing directors and ranks pari passu with
the IMAC loan notes.
Short term
Short term third party loans comprise a flexible rate loan (the
current interest rate is 8.518%) acquired by Brand Events Holdings
Limited which is denominated in Australian Dollars, a fixed rate
loan payable to Dance Floor Limited by Whizz Kid and a fixed rate
loan payable to Peter Christiansen, a shareholder in Precious Media
Limited, a subsidiary of Whizz Kid.
20. Deferred consideration
Deferred consideration represents future amounts payable by DRG
(GBP153k) mainly for its acquisition of Channel 4 International
Limited. In May 2011, DRG ended its trade mark license agreement
with Channel 4 International, waiving future payments associated
with this agreement amounting to GBP1,261k.
21. Share capital
Company & Consolidated Company & Consolidated
31 March 2012 31 March 2011
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 2012 31 March 2011
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 2012 31 March 2011
GBP '000 GBP '000
Balance at the beginning of the year 20,860 71,275
Capital distribution - (50,109)
Capital distribution costs - (306)
------------------------------------- ---------------------- ----------------------
Balance at the end of the year 20,860 20,860
------------------------------------- ---------------------- ----------------------
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 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
Companies 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. There were no capital
distributions during the year ended 31 March 2012.
24. Distributable reserve
Company & Company &
Consolidated Consolidated
2012 2011
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 2012
Ordinary Shares
Basic and diluted 143,168,463 23.50 18.50
------------------ ------------- ------- ------------
31 March 2011
Ordinary Shares
Basic and diluted 143,168,463 25.88 18.10
------------------ ------------- ------- ------------
26. Non-controlling interests
Consolidated
------------------
31 March 31 March
2012 2011
GBP '000 GBP '000
------------------------------------------ -------- --------
Balance at the beginning of the year 2,499 3,668
Post acquisition capital loss - (101)
Prior year adjustment - 134
Dividends - (137)
Shares issued to non-controlling interest 215 -
Disposal of subsidiaries (650) -
Profit/(loss) for the year 3 (1,065)
------------------------------------------ -------- --------
Balance at the end of the year 2,067 2,499
------------------------------------------ -------- --------
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 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 country and currency risk, liquidity risk, credit risk, market
risk, interest rate risk and concentration risk.
Country and currency risk
In January 2012 the Financial Reporting Council issued an update
to directors of listed companies entitled "Responding to increased
country and currency risk in financial reports". The update aimed
to draw directors' attention to some of the more significant issues
they may need to consider in order to provide a balanced and
understandable assessment of the Company's position and prospects
in the context of increased country and currency risk in financial
reports to Shareholders.
The Directors and the Manager actively manage the Company's
portfolio of investments and assets, exposures, performance and
market data and reposition investments to remain in line with the
investment policy and risk appetite of the Company and its
Shareholders.
Where deemed necessary, the Group covers any currency exposure
with specific currency instruments such as forward contracts. As
far as possible, the Group makes use of hedging of currency by
receiving cash in the foreign currency and making associated
payments in the foreign currency.
The majority of the Group's transactions are in Pound Sterling,
but there are also transactions in other currencies such as the
Euro and Australian Dollars.
No impairment provision has been made against assets or
liabilities of the Company or Group as the Directors believe the
risk of material loss as a result of country and currency exposure
is minimal.
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
1 month months 3 months to 1 year Greater than 1 year Total
GBP '000 GBP '000 GBP '000 GBP '000 GBP '000
------------------------------ ---------- --------- ------------------- -------------------- ---------
2012
Company
Trade and other payables 74 11 84 - 169
---------- --------- ------------------- -------------------- ---------
74 11 84 - 169
---------- --------- ------------------- -------------------- ---------
Group
Trade payables 2,647 353 2,644 - 5,644
Third party loans - - 2,470 2,391 4,861
Other creditors 669 3,149 2,774 - 6,592
Accruals and deferred income 3,878 9,196 8,460 153 21,687
---------- --------- ------------------- -------------------- ---------
7,194 12,698 16,348 2,544 38,784
---------- --------- ------------------- -------------------- ---------
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
---------- --------- ------------------- -------------------- ---------
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 receivable 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 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
GBP2,711k (2011: increase/decrease by GBP3,144k) for the Company
and increase/decrease by GBP1,096k (2011: increase/decrease GBPNil)
for the Group. The most significant variables in the investment
valuation are the forecast income of the investee companies and the
comparable multiples.
The majority of the carrying value of goodwill and other
intangible assets which are linked to the fair value of the
investment portfolio are not sensitive due to significant headroom
available.
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
--------------------------- ---------- --------- ----------- --------- ---------
2012
Assets
Company
Non-interest bearing 81 115 138 27,110 27,444
Floating rate instruments 6,370 - - - 6,370
---------- --------- ----------- --------- ---------
Total assets 6,451 115 138 27,110 33,814
---------- --------- ----------- --------- ---------
Group
Non-interest bearing 3,919 9,888 10,458 24,972 49,237
Floating rate instruments 18,100 - - - 18,100
========== ========= =========== ========= =========
Total assets 22,019 9,888 10,458 24,972 67,337
========== ========= =========== ========= =========
Liabilities
Company
Non-interest bearing 74 11 84 - 169
---------- --------- ----------- --------- ---------
Total liabilities 74 11 84 - 169
---------- --------- ----------- --------- ---------
Group
Non-interest bearing 7,194 12,698 13,878 153 33,923
Fixed rate instruments - - 2,470 2,391 4,861
---------- --------- ----------- --------- ---------
Total liabilities 7,194 12,698 16,348 2,544 38,784
---------- --------- ----------- --------- ---------
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
--------------------------- ---------- --------- ----------- --------- ---------
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 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 sheet 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
-------------------- --------------------
2012 2011 2012 2011
GBP '000 GBP '000 GBP '000 GBP '000
----------------------------- --------- --------- --------- ---------
+/- 50 basis points
Loss on ordinary activities
before taxation 32 29 91 87
Total equity 32 29 91 87
----------------------------- --------- --------- --------- ---------
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 NAV, 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 NAV. The Company is yet to make any
borrowings.
28. Related party transactions
a. The Company has appointed Ingenious Ventures to provide
investment management services. Ingenious Ventures was a trading
division of Ingenious Asset Management Limited up to 5 April 2012
after which it became a trading name of Ingenious Capital
Management Limited. Patrick McKenna is a director of Ingenious
Asset Management Limited and Ingenious Capital Management Limited
which are subsidiaries within the Ingenious Group, which is
controlled by Patrick McKenna. William Simpson is also a
non-executive director of Ingenious Asset Management International
Limited (IAMI) and FP Holdings Limited, both Guernsey registered
companies within the Ingenious Group. Ogier, of which William
Simpson is a partner, has provided legal advice to the Company
during the year.
The Company has incurred a management fee of GBP340,099 of which
GBP26,979 was still outstanding at the year end.
At the Extraordinary General Meeting 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 NAV 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.
The Board has approved a deed of novation which, with effect
from 6 April 2012, has novated the Management Agreement so that
Ingenious Capital Management Limited will replace Ingenious Asset
Management Limited as Manager to the Company. Ingenious Capital
Management Limited, trading as Ingenious Ventures, will undertake
the same duties as Ingenious Asset Management Limited and, save for
the change of name of the Manager, there will be no other change to
the terms of the Management Agreement. The reason for this change
was to effect an administrative reorganisation within the Ingenious
Group.
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 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 invoiced IMAC GBP72,464 for the current year in fees for
company secretarial and administration services. At 31 March 2012,
no fees were unpaid.
d. William Simpson is a partner of Ogier which may receive fees
for providing legal advice and other services to the Company from
time to time. In the current year, fees of GBP3,348 have been
invoiced by Ogier for legal advice. At 31 March 2012, no fees were
unpaid.
e. The Company has delegated discretionary treasury management
responsibilities to IAMI, a company of which William Simpson is a
non-executive director, to manage the uninvested funds of the
Company. As at 31 March 2012, IAMI held GBP6,313,000 (31 March
2011: GBP5,591,000) 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. IAMI 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. All such
appointments were approved by the Board members of the Company who
are independent of the Manager. ICF is a wholly-owned subsidiary
within the Ingenious Group, which is controlled by Patrick
McKenna.
h. 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.
i. CFDT Limited is an associated company of C.I. (Events)
Limited. C.I. (Events) Limited is a wholly-owned subsidiary of
Cream Holdings Limited. Cream Holdings Limited is 47% owned by
Ingenious Ventures L.P. (IVLP). IMAC is a 90% partner in IVLP.
Patrick McKenna is a director of both Ingenious Live VCT 1 plc and
Ingenious Live VCT 2 plc (the Live VCTs), which each had a 33%
interest in CFDT Limited. During the year, the directors of the
Live VCTs agreed to sell their interest in CFDT Limited to C.I.
(Events) Limited for a total consideration of GBP2.78 million,
together with a future contingent payment.
j. Golfmania Limited, Brand Events Live Limited and Taste Xmas
Limited are VCT Associates which are also associated with Brand
Events. Brand Events is a subsidiary of the Company of which
Patrick McKenna is a Director. Patrick McKenna is also a director
of each of Entertainment VCT 1, Entertainment VCT 2, Live VCT 1 and
Live VCT 2. There is ongoing trading between these VCT Associates
and Brand Events based on co-promotion agreements, leading to a
deferred revenue balance of GBP3,595,443 in Brand Events.
k. Dance Floor Limited is a VCT Associate which is also a
company associated with Whizz Kid. Whizz Kid is a subsidiary of the
Company of which Patrick McKenna is a Director. Patrick McKenna is
also a director of each of Entertainment VCT 1, Entertainment VCT
2, Live VCT 1 and Live VCT 2. At 31 March 2012, a short term loan
of GBP1,754,945 was payable to Dance Floor Limited by Whizz Kid, as
disclosed in note 19.
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
------------------ ------------------
2012 2011 2012 2011
GBP '000 GBP '000 GBP '000 GBP '000
--------------------------------------- -------- -------- -------- --------
Ingenious Ventures
- Investment management
fee a 346 256 27 33
- Administrative support b 171 171 43 43
Morgan Sharpe Administration
Limited
- Company secretarial, administration,
accounting and directorship
services c 72 79 - -
Ogier Fund Administration
(Guernsey) Limited
- Company secreterial,
administration, accounting
and directorship services d - 6 - -
Ogier Group Limited Partnership
- Legal advice d 3 13 - -
Ingenious Corporate Finance
Limited
- Corporate finance advice e - 379 - 50
Transactions between related parties
The arrangements detailed at notes a to b 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 IVLP in
2008. IVLP holds the Company's interest in Cream Holdings Limited
of which the majority of its shareholding was disposed of in May
2012. At the time that this arrangement was entered into the
entities were not related to the Company.
a. Patrick McKenna was a director of Cream Holdings Limited
until 9 May 2012 and received a salary of GBP10,000 per annum and a
consultancy fee of GBP110,000 per annum.
b. Ingenious Media Consulting Limited, a subsidiary within the
Ingenious Group, which is controlled by Patrick McKenna, received a
fee of GBP120,000 per annum for the provision of finance director
and financial controller support to Cream Holdings Limited until
August 2012.
29. Events after the balance sheet date
In April 2012, IVLP (in which IMAC has a 90% interest) acquired
additional shares in Cream Holdings Limited, increasing the
shareholding from 47% to 73.5%. On 9 May 2012, the Company
successfully sold the majority of its shareholding in Cream
Holdings Limited for an upfront consideration of GBP13.3 million as
well as some additional deferred consideration amounting to
GBP387,000.
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 Beaumont Cornish 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:
IMAC
Patrick McKenna/ Patrick Bradley 020 7319 4000
Beaumont Cornish Limited
Michael Cornish 020 7628 3396
MHP Communications
Reg Hoare / Barnaby Fry / Simon Hockridge / Giles Robinson 020 3128 8100
ENDS
This information is provided by RNS
The company news service from the London Stock Exchange
END
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