RNS Number:5459H
NewMedia SPARK PLC
17 February 2003
17 February 2003
NewMedia SPARK plc ("SPARK")
Interim Results for the six months to 30 September 2002
Overview
Shareholders will recall that SPARK was unable to release its complete interim
statement, including financial information, before the end of December as a
result of the uncertainty surrounding the valuation of Spuetz's stake in Tullett
plc ("Tullett"). Following the announcement of the offer by Collins Stewart
Holdings plc ("Collins Stewart") to acquire the entire issued capital of
Tullett, this uncertainty has been removed.
SPARK's net asset value per share has risen slightly from 13.0p to 13.4p in the
six month period ended 30 September 2002. Equity markets worldwide remained weak
over this period, but the negative impact of this on SPARK's investment
portfolio was more than offset by an increase in the value of SPARK's 11%
shareholding in Tullett which is held through SPARK's 70% owned subsidiary
Spuetz AG. Following the agreed takeover offer for Tullett from Collins Stewart,
this has been re-valued in SPARK's balance sheet at #23.3 million, up from #7.3
million.
Spuetz has retained the right to choose either Collins Stewart shares or a
mixture of Collins Stewart shares and cash in consideration for its Tullett
shares. We are monitoring the situation closely with a view to maximising the
disposal proceeds. At the time of writing, the "all share" option under the
offer values Spuetz's Tullett stake at approximately #24.5 million, rather than
the #23.3 million mentioned above.
Excluding Tullett, the balance of SPARK's investment portfolio now comprises
investments in over 50 companies with an aggregate book value of #28.0 million.
The book value of these investments has fallen somewhat over the period. However
the fall has been far less dramatic than in previous periods and largely
reflects further falls in the quoted element of the portfolio, which now has an
aggregate book value of #1.4 million. On balance, SPARK's unquoted investments
have performed resiliently over the period, and it is notable that several have
now reached or are approaching cash flow break-even and profitability.
We regard the recent performance of our unquoted investment portfolio as broadly
in accordance with the pattern that might be expected from an unquoted
technology investment portfolio at this stage of development. The portfolio is
now some three years old, and initially predominantly comprised high-risk
investments in early stage technology companies. The expected high early failure
rate has been exacerbated by extremely weak markets and in recent years we have
had to take very substantial write downs within the portfolio. However the more
successful investments are now beginning to emerge, and we believe that their
potential for capital appreciation in the coming years is significant. We have
taken the opportunity of weak markets to invest further limited amounts in
several of our most successful portfolio companies on advantageous terms, and
now hold majority or very substantial minority stakes in those portfolio
companies with the greatest potential.
It should be noted that the short term effect of these follow on investments has
often been to cause a further write down in the book value of those investments,
as we value the entire holding down to the lowest price at which we have
invested.
In addition to the investment portfolio, SPARK's consolidated cash balances as
at 30 September 2002 were #31.4 million. Cash balances reduced during the period
due to further market purchases of shares in Spuetz AG at a cost of #3.0 million
(taking our stake to 70%), further investments in the portfolio of #5.3 million
and expenditure in rationalising or closing our own operating activities
(particularly within Spuetz AG) of #2.5 million. We continue to take a cautious
approach to new investments, and consequently cash balances as at the end of
December were approximately unchanged on the 30 September figure.
On the face of the profit and loss account, administrative expenses during the
period appear extremely high at #10.5 million for the period. However this is
not a meaningful indicator of the ongoing overhead position as it includes the
following:
i) all operating costs incurred during the period for Spuetz's substantial
brokerage business;
ii) substantial costs incurred in rationalising or disposing of Spuetz's
operating activities;
iii) the costs of rationalising SPARK's own operating activities; and
iv) the write off of goodwill arising on acquisitions.
The closure and disposal of Spuetz's operating activities is now nearing
completion, with the sale of Spuetz's remaining brokerage having closed last
week. Following this disposal, Spuetz employs just two members of staff. In
aggregate, SPARK paid approximately Euro35.6 million for its controlling 70% Spuetz
stake. Following the uplift in the value of Spuetz's shareholding in Tullett,
the SPARK attributable share of Spuetz's net asset value is approximately
Euro45.0m. We therefore regard the original decision by SPARK to invest in Spuetz
as having been justified, notwithstanding the considerable management time it
has absorbed during the last eighteen months and the complexity which it has
introduced into the presentation of our consolidated financial figures over that
period.
Following the completion of the rationalisation of Spuetz, and the further
reductions in SPARK's own administrative expenses implemented last year, SPARK's
administrative expenses are now running at approximately #2 million per annum,
before any benefits recouped through the offset of property costs.
We stated at the time of our last full year announcement that in the light of
weak market conditions and extremely poor investor sentiment towards technology
investment, SPARK would examine the possibility of returning surplus cash to
shareholders, and would also give consideration to any corporate action which it
believes to be in the interests of its shareholders. This remains the position
of the SPARK Board. In particular, given the present low level of SPARK's share
price in relation to its stated net asset value, our preferred method of
utilising surplus cash would be via share buy-backs, possibly on a very
substantial scale. However, shareholders should be aware that before we can
implement such a policy there are several technical obstacles that will have to
be overcome, most notably:
(i) It will be necessary to seek Court approval to eradicate the deficit on
SPARK's profit and loss account. At present, in order to obtain this it will be
necessary first to maintain sufficient UK cash balances to provide in full for a
number of liabilities both contingent and definite including the remaining
eleven years of our lease at 33 Glasshouse Street. As the lease cost is over #1m
p.a., this requirement would at present leave SPARK with no surplus UK cash
which it could utilise in share buy-backs.
(ii) The majority of the SPARK Group's cash balances are now held within its 70%
owned German subsidiary Spuetz AG. Unless distributed, these cannot be used by
SPARK for purchases of its own shares.
We are presently examining ways in which these obstacles could most effectively
be overcome, and in particular we have been making strenuous efforts to dispose
of our lease interest in our Head Office in Glasshouse Street. Our rental
payments are broadly in line with present market rates, but we have not as yet
been able to dispose of the lease on terms that we are prepared to accept.
In the face of the above obstacles to implementing a share buy-back policy
(which we continue to work to overcome), we have looked at other possible ways
of releasing shareholder value in the short term. In particular we have entered
into takeover discussions with Collins Stewart as publicly announced. Following
initial due diligence, Collins Stewart has stated that it intends to examine in
detail the possibility of making an offer for SPARK once its takeover of Tullett
is completed. Our position is that we will carefully consider any potential
takeover offer for SPARK in relation both to the value that could be released by
alternative methods and also taking account of the wishes of our shareholders.
Whilst pursuing the above initiatives, we are of course also cognisant of the
need to preserve and enhance the value of our core investment portfolio. The
stock market continues to place little implicit value on this, but we remain of
the view that, having taken very substantial write downs, the core portfolio has
significant potential for capital appreciation in due course, particularly if
markets should recover. We are however aware that all shareholders do not
necessarily share this view.
Finally, the SPARK Group has during the past two years been the subject of
several unwelcome lawsuits. It is our view that in all cases these have been
without merit and have essentially represented attempts to extract cash from a
cash rich company. As a matter of policy we have strenuously resisted all such
lawsuits and have provided in full for the substantial costs of doing so. It
remains our view that no material liability will arise to SPARK as a result of
any law suit to which SPARK is presently a party, and indeed recent events under
which several cases have either been dismissed or settled in our favour
corroborate this view.
Michael Whitaker
17 February 2003
Consolidated Profit and Loss Account Six months to Six months to Year to
Interim Report to 30 September 2002 30-Sep 30-Sep 31-Mar
2002 2001 2002
#'000 #'000 #'000
Unaudited Unaudited Audited
Turnover 1,392 - 3,008
Administrative expenses
Salaries and other staff costs (3,768) (2,706) (8,537)
Administrative and operating costs (3,671) (1,348) (6,995)
Amortisation of positive goodwill (1,340) (1,925) (15,661)
Amortisation of negative goodwill 1,072 78 10,007
Depreciation (462) (173) (967)
Other costs (2,350) (875) (3,551)
Total administrative expenses (10,519) (6,949) (25,704)
Other operating income 478 665 1,143
Operating loss (8,649) (6,284) (21,553)
Amounts written off investments (9,932) (2,594) (85,859)
Interest receivable and similar income 692 1,574 2,408
Loss on ordinary activities before taxation (17,889) (7,304) (105,004)
Tax credit/ (charge) on loss on ordinary activities 928 (115) (1,090)
Loss on ordinary activities after taxation (16,961) (7,419) (106,094)
Equity minority interests 1,647 169 1,846
Retained loss for the period (15,314) (7,250) (104,248)
Losses per ordinary share (3.24p) (1.52p) (22.32p)
Diluted losses per ordinary share (3.24p) (1.52p) (22.32p)
Consolidated Statement of Total Recognised Six months to Six months to Year to
Gains and Losses 30-Sep 30-Sep 31-Mar
Interim Report to 30 September 2002 2002 2001 2002
#'000 #'000 #'000
Unaudited Unaudited Audited
Loss for the financial period (15,314) (7,250) (104,248)
Unrealised gain /(loss) on investments 14,690 (35,110) (48,570)
Previously unrealised losses now deemed permanent 6,455 10,036
Deemed remuneration on transfer of founder warrants - 119
Minority interest share of unrealised gain on (4,722)
investments
Unrealised exchange differences 611 (4,321) (457)
Total recognised gains/(losses) in the period 1,720 (46,681) (143,120)
Consolidated Balance Sheet 30-Sep 30-Sep 31-Mar
Interim Report to 30 September 2002 2002 2001 2002
#'000 #'000 #'000
Unaudited Unaudited Audited
Fixed assets
Goodwill - 15,076 1,338
Negative goodwill (4,136) (12,926) (4,044)
Intangible assets (4,136) 2,150 (2,706)
Tangible assets 2,015 3,224 2,442
Investments 53,297 145,761 38,816
51,176 151,135 38,552
Current assets
Debtors 4,312 14,450 8,696
Other investments - 2,987 988
Cash at bank and in hand 31,374 35,045 41,782
35,686 52,482 51,466
Creditors: amounts falling due within one year (5,147) (24,486) (10,160)
Net current assets 30,539 27,996 41,306
Total assets less current liabilities 81,715 179,131 79,858
Provision for liabilities and charges (3,870) (3,684)
Equity minority interest (14,544) (18,127) (14,593)
Net assets 63,301 161,004 61,581
Capital and reserves
Called up share capital 11,799 12,459 11,799
Capital reserve 8,391 8,391 8,391
Share premium account 183,365 247,116 183,365
Revaluation reserve (30,913) (43,323) (47,336)
Profit and loss account (109,341) (63,639) (94,638)
Equity shareholders funds 63,301 161,004 61,581
Net Asset Value per share 13.4p 32.3p 13.0p
Number '000 Number '000 Number '000
Ordinary shares in issue 471,978 498,373 471,978
Consolidated Cash Flow Statement Six months to Six months to Year to
Interim Report to 30 September 2002 30-Sep 30-Sep 31-Mar
2002 2001 2002
#'000 #'000 #'000
Unaudited Unaudited Audited
Net cash outflow from operating activities (6,690) (6,320) (9,369)
Return on investments and servicing of finance
Interest received 692 1,574 2,407
Net cash inflow from returns on investments and 692 1,574 2,407
servicing of finance
Taxation
UK Corporation tax paid - - (93)
Net cash outflow from taxation - - (93)
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (54) (489) (904)
Payments to acquire investments (6,077) (22,304) (27,688)
Receipts from sales of investments 4,138 75 27,723
Net cash outflow from investing activities (1,993) (22,718) (869)
Acquisitions and disposals
Purchase of subsidiary undertakings - (15,603) (28,412)
Purchase of minority interest (2,417) - -
Net cash acquired with subsidiaries - 1,544 1,550
Net cash outflow from acquisitions and disposals (2,417) (14,059) (26,862)
Net cash outflow before financing (10,408) (41,523) (34,786)
Financing
Issue of ordinary share capital - - -
Expenses paid in connection with share issues - - -
Net cash inflow from financing - - -
Decrease in cash in the period (10,408) (41,523) (34,786)
Notes to the Interim Report to 30 September 2002
1) The information relating to the six month periods ended 30 September
2002 and 30 September 2001 is unaudited. The information relating to the period
ended 31 March 2002 is extracted from the audited accounts of the Company which
have been filed at Companies House and on which the auditors issued an
unqualified opinion.
2) The above financial information does not constitute statutory accounts
within the meaning of Section 240 Companies Act 1985.
3) Loss per share is based on the weighted average number of shares in
issue during the six months ended 30 September 2002 of 471,977,815 (31 March
2002: 467,109,000).
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR SFEFWLSDSELE
