TIDMAURR
RNS Number : 8790I
Aurora Russia Limited
11 December 2015
11 December 2015
Aurora Russia Limited ("Aurora Russia" or the "Company")
Results for the six months ended 30 September 2015
The financial information set out in this announcement is the
full unedited unaudited interim report and unaudited condensed half
year financial statements (the "Interim Report") of the Company for
the period ended 30 September 2015, as approved by the Board of
Directors today. The Interim Report will be uploaded onto the
Company's website at www.aurorarussia.com and sent to shareholders
shortly. Its publication on the website will announced
separately.
Enquiries:
Aurora Russia Limited
Gilbert Chalk +44 (0)7768 527973
JTC Fund Solutions (Guernsey) Limited +44 (0)1481 702400
Secretary
Chairman's Statement
Introduction
The results of Aurora Russia Limited (the "Company" or "Aurora
Russia") for the 6 months ended 30 September 2015 are presented
below.
The last 6 months in Russia have seen a further contraction in
the Russian economy. The key drivers of the valuation of Russian
assets being the Ukraine crisis, sanctions, and the oil price
continue to play a pivotal role. These three variables have
stabilised in the third quarter with oil hovering at the $45 range
at that time, the Ukraine crisis an unresolved stalemate and
sanctions making doing business in Russia more difficult. The
future in Russia is as ever unpredictable, but it would seem the
beginning of the end of the crisis is in sight, with the IMF
forecasting economic growth of 0.2% in 2016. This should serve to
further ease pressure on the economy.
The Annual General Meeting ('AGM')
The AGM will be held on 23 December 2015. Notice of the AGM has
been sent to all shareholders by post and, as announced on 24
November 2015, the AGM notice can also be downloaded from the
Company's website. As required by the Company's articles of
incorporation, a continuation vote is to be proposed at the AGM,
which the Board has recommended be approved, and all shareholders
should read the covering circular explaining the rationale for this
recommendation prior to making their decision as to how they wish
to cast their votes.
Review
A share buy back was undertaken in April 2015 following the
earlier successful sale in February of the Company's investment in
Superstroy. The buy back resulted in a net amount of GBP668,720
being returned to shareholders.
The Company's sole remaining asset now is its 26% shareholding
in OJSC Unistream Bank ("Unistream"), a Russian bank and money
transfer company, that has performed well in the nine months ended
30 September 2015. As further set out in the Investment Advisor's
report, Unistream's trade volumes, revenue, and EBITDA continue to
grow year on year in Rouble terms. Unistream's share of the money
remittance market also grew strongly to 17.2% in June 2015 from
13.4% in December 2014, according to Central Bank of Russia
figures. The Board remains confident in Unistream's future and is
determined to achieve a sale for a price that reflects its fair
value in current market conditions. Aurora Russia is currently in
discussions with various strategic investors to sell its 26% stake
in Unistream. The Board and the Investment Advisor have continued
their extensive negotiations over the last six months with
prospective acquirers of the Company's investment in Unistream.
These negotiations have not been made easier by the Company's
position as a minority holder in Unistream and the limited appetite
for Russian assets during the period. Notwithstanding these
obstacles, the Board believe that the prospect of a sale is
realistic given Unistream remains an attractive company due to its
consistent growth, strong market positioning and cash
generation.
Results
For the 6 months to 30 September 2015, Aurora Russia recorded a
loss of GBP2.35 million or 6.11 pence per share, calculated based
on the unaudited condensed half year's statement of comprehensive
income. The net asset value ('NAV') of the Company as at 30
September 2015 was GBP4.79 million or 12.6 pence per share. This
decline in value is derived from the reasons set out above and in
the Investment Advisor's report.
Direct administration and operating expenses of the Company for
the 6 months amounted to GBP430,000 which includes one off payments
of GBP11,438 to JTC Fund Solutions (Guernsey) Limited, GBP18,000 to
Numis Securities Limited for additional work undertaken, incentive
fees of GBP75,000 to the Directors and GBP6,000 to Mr Nicholas
Henderson-Stewart and performance fees of GBP34,816 to AIAL and
GBP68,000 to Mr Nicholas Henderson-Stewart. This overall cost
compares to GBP371,000 in the same period last year. Cash balances
as at 30 September 2015 stood at GBP1.67 million.
Investments
The Company has one remaining investment, 26.0% of Unistream, a
Russian bank including a leading money transfer business.
Portfolio Valuation
A re-valuation of the investment portfolio was performed as at
30 September 2015, resulting in a decrease in the value of
Unistream from GBP5.3 million to GBP3.4 million (36% since 31
March, 2015). This value is based largely on an indicative offer
from a third party, supported by a market approach. This valuation
was prepared for accounting purposes only and is in accordance with
the International Private Equity and Venture Capital Board's
('IPEV') valuation guidelines.
Outlook
The Board with the assistance of the Investment Advisor is
seeking to achieve a sale of the Company's holding in Unistream in
the near term at a price which reflects Unistream's market
position, trading results and balance sheet. Based on recent
discussions, the Board believes that a sale at the valuation
included in this interim report should be feasible.
Gilbert Chalk
Chairman of the Board
Aurora Russia Limited
11 December 2015
Investment Advisor's Report
Overview
The Russian economy has continued to decline since the March
2015 annual report and audited financial statements. Although
experiencing some relief between April-June when the oil price
rallied strongly, the economy has since again been under strain as
the oil price fell once more to under $50 per barrel. The Ukraine
crisis has been out of the headlines for some time, as a fragile
ceasefire appears to be holding. However, the fundamental
differences in views between Russia and the US/EU countries remain
and neither side shows much willingness to compromise. So it seems
the sanctions imposed on Russia will not be lifted any time soon
and the market will continue to heavily discount Russian assets
until the situation in Ukraine resolves itself.
Russia's sizeable foreign currency reserves have remained stable
over the last six months at $360 billion. The reserves coupled with
low debt to GDP levels and a positive trade balance will continue
to limit the blow caused to the Russian economy by low commodity
prices and Western sanctions.
Trading Updates
Unistream
Unistream has performed relatively well in the first nine months
of 2015. Results were buoyed by a strong first half period, when
currency turmoil in Russia led Unistream's clients to actively
trade currency and send money to Russia to take some advantage of a
cheap Rouble environment. There was a marked slowdown in the third
quarter as customers' falling disposable income reduced their cash
transfer activities. Unistream's management accounts show that
volume transfers in the first nine months of 2015 were RUR159.8
billion (GBP1.71 billion using average exchange rate for the year),
up 12.4% year on year. Net revenues grew 11.1% to RUR2.3 billion
(GBP25 million) for the same period.
The Central Bank of Russia's statistics indicate Unistream's
share of the Russian money remittance market grew from 13.4% in
December 2014 to 17.2% in June 2015. The growth in transfer volumes
and market share growth were driven by an increase in partner
networks, such as with Tinkoff Bank and Megafon. This drove revenue
growth, but slightly reduced the share of profit attributed to
Unistream (the remainder being the partner's commission).
The valuation of Aurora's stake in Unistream as at 30 September
2015 was marked down to GBP3.4 million, based largely on an
indicative third party offer. The valuation was supported by a
market-based approach using a weighted combination of revenue and
EBITDA multiples as detailed in notes 4 and 7 of the financial
statements. The main factors in the decrease in the valuation were
adverse currency movements and an increase in the liquidity
discount from 40% to 45%, reflecting more stringent working capital
requirements, which is expected to reduce significantly the cash
available for distribution to Unistream's shareholders.
Conclusion
I will continue to work closely with Aurora Russia's Board of
Directors to achieve its stated objective of realising Unistream at
a price that properly reflects its value. As the Chairman states in
his report, we believe that such a sale is feasible.
Nicholas Henderson-Stewart
11 December 2015
Independent Review Report to Aurora Russia Limited
We have been engaged by the Company to review the unaudited
condensed half year financial statements for the six months ended
30 September 2015 which comprise the unaudited condensed half year
statement of comprehensive income, the unaudited condensed half
year statement of financial position, the unaudited condensed half
year statement of changes in equity, the unaudited condensed half
year statement of cash flows and related explanatory notes. We have
read the other information contained in the interim report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the unaudited
condensed half year financial statements. As described in note 2.1,
the half year financial statements have been prepared on a
non-going concern basis.
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This report is made solely to the Company, in accordance with
the terms of our engagement letter dated 22 October 2015. Our work
has been undertaken so that we might state to the Company those
matters we are required to state to them in an independent review
report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than
the Company, for our review work, for this report, or for the
conclusions we have reached.
Directors' responsibilities
The interim report and unaudited condensed half year financial
statements is the responsibility of, and has been approved by, the
Directors. The Directors are responsible for preparing the half
year financial report in accordance with the AIM Rules of the
London Stock Exchange.
As disclosed in note 2, the annual financial statements of the
Company are prepared in accordance with International Financial
Reporting Standards ('IFRS') as issued by the International
Accounting Standards Board ('IASB'). The unaudited condensed half
year financial statements included in this half year financial
report have been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting'.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the unaudited condensed half year financial statements in the
interim report based on our review.
Scope of review
We conducted our review in accordance with International
Standards on Review Engagements (UK and Ireland) ISRE 2410, 'Review
of Interim Financial Information Performed by the Independent
Auditor of the Entity' issued by the Auditing Practices Board for
use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the unaudited condensed half year
financial statements for the six months ended 30 September 2015 are
not prepared, in all material respects, in accordance with
International Accounting Standard 34 and the AIM rules of the
London Stock Exchange.
KPMG Channel Islands Limited
Glategny Court
Glategny Esplanade
St Peter Port
Guernsey
GY1 1WR
Date: 11 December 2015
Unaudited Condensed Half Year Company Statement of Comprehensive
Income
For the 6 month period 1 April 2015 to 30 September 2015
1 April 2015 1 April 2014
to 30 September to 30 September
2015 2014
Notes GBP'000 GBP'000
Loss on sale of investments - (20,675)
Revenue - 6
---------------- -----------------------
- Interest - 6
---------------- -----------------------
Administration and operating expenses 3 (430) (371)
Fair value movements on revaluation
of investments 4 (1,900) (1,506)
Exchange losses (15) (1)
Operating loss before tax (2,345) (1,535)
---------------- -----------------------
Income tax expense - -
Total comprehensive loss for the
period (2,345) (1,535)
================ =======================
Basic and diluted loss per share (6.11p) (2.82p)
================ =======================
All items in the above statement derive from continuing
operations.
The accompanying notes on pages 9 to 19 form an integral part of
these financial statements.
Unaudited Condensed Half Year Company Statement of Financial
Position
As at 30 September 2015
30 September 31 March
2015 2015
Notes GBP'000 GBP'000
Non-current assets
Investments at fair value through
profit and loss 4 - 5,300
- 5,300
------------------- ---------
Current assets
Investments 4 3,400 -
Other receivables 8 13
Cash and cash equivalents 1,672 2,638
------------------- ---------
5,080 2,651
------------------- ---------
Total assets 5,080 7,951
------------------- ---------
Current liabilities
Other payables 293 150
Total liabilities 293 150
------------------- ---------
Total net assets 4,787 7,801
=================== =========
Equity
Share capital 6 379 446
Special reserve 6 55,7474 56,349
Accumulated loss (51,339) (48,994
------------------- ---------
Total equity 4,787 7,801
=================== =========
Total equity and liabilities 4,787 7,801
------------------- ---------
Net asset value per share - basic
and diluted 12.6p 17.5p
=================== =========
The accounts on pages 5 to 19 were approved by the Board of
Directors on 11 December 2015 and signed on its behalf by:
Gilbert Chalk Jonathan Bridel
Director: Director:
Date: 11 December 2015
The accompanying notes on pages 9 to 19 form an integral part of
these financial statements.
Unaudited Condensed Half Year Statement of Changes in Equity
For the 6 month period 1 April 2015 to 30 September 2015
Share Special Accumulated
Capital Reserve loss Total
GBP'000 GBP'000 GBP'000 GBP'000
Balance as at 1 April 2014 743 64,331 (44,386) 20,688
Total comprehensive loss for the
period
Loss for the period - - (1,535) (1,535)
Share buy back (44) (8,235) - (8,279)
At 30 September 2014 699 56,096 (45,921) 10,874
========= ========= ============ ========
Balance as at 1 April 2015 446 56,349 (48,994) 7,801
Total comprehensive loss for the
period
Loss for the period - - (2,345) (2,345)
Share buy back (67) (602) - (669)
At 30 September 2015 379 55,747 (51,339) 4,787
========= ========= ============ ========
The accompanying notes on pages 9 to 19 form an integral part of
these financial statements.
Unaudited Condensed Half Year Statement of Cash Flows
For the 6 month period 1 April 2015 to 30 September 2015
1 April 2015 1 April 2014
to 30 September to 30 September
Notes 2015 2014
Cash flows from operating activities GBP'000 GBP'000
Total comprehensive loss (2,345) (1,535)
Adjustments for movements in working
capital:
Decrease/(increase) in operating
trade and other
Receivables 5 (5)
Increase / (decrease) in operating
trade and other
payables 143 (117)
Adjust for:
Revaluation of investments 4 1,900 (19,506)
Exchange losses 15 1
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Loss on disposal of Kreditmart
Finance Limited - 20,675
Interest received - (6)
Net cash outflow from operating
activities (282) (493)
---------------- ----------------
Cash flows from investing activities
Proceeds on disposal of Kreditmart
Finance Limited - 1,919
Bank interest received - 6
Net cash inflow from investing activities - 1,925
---------------- ----------------
Cash flows from financing activities
Share buy back (669) (8,279)
Net cash outflow from financing
activities (669) (8,279)
---------------- ----------------
Net decrease in cash and cash equivalents (951) (6,847)
---------------- ----------------
Opening cash and cash equivalents 2,638 9,136
Effect of exchange rate changes (15) (1)
Closing cash and cash equivalents 1,672 2,288
================ ================
The accompanying notes on pages 9 to 19 form an integral part of
these financial statements.
Notes to the Unaudited Condensed Half Year Financial
Statements
For the 6 month period 1 April 2015 to 30 September 2015
1. Reporting entity
Aurora Russia Limited (the 'Company') is a closed-ended
investment fund that was incorporated in Guernsey on 22 February
2006, and was admitted to the Alternative Investment Market of the
London Stock Exchange ('AIM') on 20 March 2006. The Company was
established to acquire interests in small and mid-sized private
companies in Russia, focusing on the financial, business and
consumer services sectors.
2. Accounting Policies
2.1 Basis of preparation
These unaudited condensed half year financial statements have
been prepared in accordance with International Accounting Standard
(IAS) 34 'Interim Financial Reporting' ('IAS 34') and the AIM Rules
for Companies.
The unaudited condensed half year financial statements do not
include all the information and disclosures required for a complete
set of International Financial Reporting Standards ('IFRS')
financial statements, and should be read in conjunction with the
Company's audited annual report and financial statements for the
year ended 31 March 2015. Selected explanatory notes are included
to explain events and transactions that are significant to an
understanding of the changes in financial position and performance
since the last audited annual report and financial statements as at
and for the year ended 31 March 2015.
The Directors resolved to begin the gradual winding up of the
Company over the following 12 months. As such the Directors believe
it is appropriate to adopt a non-going concern basis in preparing
the financial statements. The Directors believe that the Company
will be able to realise its investment in an orderly manner and
therefore do not consider there to be a material difference in the
value of the Company's assets, and liabilities, compared to if the
financial statements had been prepared on a going concern basis.
Accruals of GBP15,000 for circular and de-listing, GBP20,000 for
liquidation and GBP15,000 for retention have been accrued in the
financial statements for the year ended 31 March 2015 and carried
forward to the current period.
2.2 Accounting period
The comparative numbers used for the unaudited condensed half
year statement of comprehensive income, unaudited condensed half
year statement of changes in equity and unaudited condensed half
year statement of cash flows are that of the half year period ended
30 September 2014, which is considered a comparable period as
defined per IAS 34. The comparatives used in the unaudited
condensed half year statement of financial position are that of the
previous financial year ended 31 March 2015.
2.3 Significant accounting policies
There were no new standards adopted in the current period and
the accounting policies applied are consistent with that of 31
March 2015 year end.
New standards and interpretations not yet adopted:
There are a number of new standards, amendments to standards and
interpretations that are not yet effective for the year ended 31
March 2015, and have not been applied in preparing these financial
statements.
-- IFRS 9 Financial Instruments (effective on or after 1 January
2018)
IFRS 9 deals with classification and measurement of financial
assets and its requirements represent a significant change from the
existing requirements in IAS 39 in respect of financial assets:
amortised cost and fair value. Financial assets are measured at
amortised cost when the business model is to hold assets in order
to collect contractual cash flows. All other financial assets are
measured at fair value with changes recognised in profit or loss.
For an investment in an equity instrument that is not held for
trading, an entity may on initial recognition elect to present all
fair value changes from the investment in other comprehensive
income. The company is currently in the process of evaluating the
potential effect of this standard. The standard is not expected to
have a significant impact on the financial statements since all of
the Company's financial assets are designated at fair value through
profit and loss and the Company is in the process of winding up and
realising its remaining investment.
2.4 Revenue
Interest income is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial
asset to that asset's net carrying amount.
Dividend income from investments is recognised when the
Company's right to receive payment has been established, which is
the last date of registration of shareholders.
2.5 Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the Chief Operating Decision Maker.
The Chief Operating Decision Maker, who is responsible for
allocating resources, assessing performance of the operating
segments and making strategic decisions, has been identified as the
Board of Directors of the Company. There have been no changes to
operating segments since year end.
2.6 Investments
Recognition and Measurement
Unquoted investments are designated as fair value through profit
or loss. Investments are initially recognised at cost on a trade
date basis. The investments are subsequently re-measured at fair
value, which is determined by the Directors on the recommendation
of the Valuation Committee; all the Directors are currently on the
Valuation Comittee. Unrealised gains and losses arising from the
revaluation of investments are taken directly to profit or loss.
Investments deemed to be denominated in a foreign currency are
revalued in Sterling even if there is no revaluation of the
investment in its currency of denomination. Acquisition of
investments is recorded on the trade date or when substantially all
the risks and rewards of ownership transfer to the Company.
Investments are denominated in Russian Roubles, which the
Directors believe best reflect the underlying nature of the
currency exposure of the investee companies. The investments are
translated into Sterling at period end, which is the functional and
presentational currency of the Company. Unrealised gains and losses
arising from the revaluation of investments are taken directly to
the statement of comprehensive income.
The fair value of the investments is arrived at on the basis of
the recommendation of the Company's Valuation Committee, based on
valuations that were performed by Mr Nicholas Henderson-Stewart
("NHS"). Fair value is determined as follows:
Unquoted securities are valued based on the fair value which is
estimated by the Valuation Committee. The Valuation Committee will
take into account the guidelines and principles for valuation of
Portfolio Companies set out by the International Private Equity and
Venture Capital Board (IPEV), with particular consideration of the
following factors:
-- Fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
-- The valuation methodology applied uses reasonable assumptions
and estimations and takes account of the nature, facts and
circumstances of the investment and its materiality in the context
of the total portfolio.
-- An appropriate methodology incorporates available information
about all factors that are likely material to 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 (discussed
further in note 7). In assessing which methodology is appropriate,
the Valuation Committee is predisposed towards those methodologies
that draw upon market-based measures of risk and return.
-- Market Approach
-- Income Approach
-- Net Assets Approach
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Investments made by the Company are generally considered to be
long term investments and are not intended to be disposed of on a
short term basis. Accordingly valuations do not necessarily
represent the amounts which may eventually be realised from sales
or other disposals of investments. Values of unlisted investments
may differ significantly from the values that would have been used
had a ready market for these assets existed.
Derecognition
The Company derecognises a financial asset when the contractual
rights to the cash flows from the financial asset expire or it
transfers the rights to receive the contractual cash flows in a
transaction in which substantially all the risks and rewards of
ownership of the financial asset are transferred or in which the
Company neither transfers nor retains substantially all the risks
and rewards of ownership and does not retain control of the
financial asset. Any interest in such transferred financial assets
that is created or retained by the Company is recognised as a
separate asset or liability.
On de-recognition of a financial asset, the difference between
the carrying amount of the asset (or the carrying amount allocated
to the portion of the asset de-recognised), and consideration
received (including any new asset obtained less any new liability
assumed) is recognised in profit or loss. In determining the
consideration received the proceeds received are decreased by any
payables that are directly linked to the sale.
The Company enters into transactions whereby it transfers assets
recognised on its statement of financial position, but retains
either all or substantially all the risks and rewards of the
transferred asset or a portion of them. If all or substantially all
risk and rewards are retained, then the transferred assets are not
derecognised. Transfers of assets with retention of substantially
all risks and rewards include securities lending and repurchase
transactions.
The Company derecognises a financial liability when its
contractual obligations are discharged, cancelled or expire.
2.7 Critical accounting judgements and key sources of estimation uncertainty
In preparing these unaudited condensed half year financial
statements management has made judgements, estimates and
assumptions that affect the application of policies and the
reported amounts of assets and liabilities, income and expenses.
The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the
basis of making judgements about the carrying values of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates. The estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period or in
the periods of the revision and future periods if the revision
affects both current and future periods.
The following areas are a key source of estimation uncertainty
for the Company and are included within the relevant accounting
policy note:
-- Valuation of Investments
Significant estimates in the Company's unaudited condensed half
year financial statements include the amounts recorded for the fair
value of the investments. By their nature, these estimates and
assumptions are subject to measurement uncertainty and the effect
on the Company's unaudited condensed half year financial statements
of changes in estimates in future periods could be significant
(note 7).
1 April 2015
to
30 September 1 April 2014 to
2015 30 September 2014
GBP'000 GBP'000
3. Administration and operating expenses
Investment management fee 35 49
Auditors' remuneration 38 61
Directors' remuneration 53 110
Other operating and administrative
expenses
- Administration fees 25 71
- Performance fee 103 25
- Marketing costs 4 19
- Incentive fee 81 -
- Other 91 36
430 371
-------------- -------------------
4. Investments
Investments in Subsidiaries
30 September 31 March
2015 2015
GBP'000 GBP'000
Kreditmart
At beginning of period - 1,968
Proceeds on sale - (1,919)
Loss on sale - (20,675)
Reversal of unrealised losses - 20,626
At end of period - -
--------------- ----------
Other Investments
30 September
2015 31 March 2015
GBP'000 GBP'000
Unistream Bank ('Unistream') 3,400 5,300
Total investments at fair
value through profit and
loss 3,400 5,300
============== ===============
The investment in Unistream is classified as a current asset as
at 30 September 2015 as the Company expects to realise its
remaining investment in the following 12 months.
Change in fair value of investments at fair value through profit
and loss
1 April 2015 1 April 2014
to 30 September to 30 September
2015 2014
GBP'000 GBP'000
Unistream Bank (1,900) 400
Grindelia Holdings* - (1,520)
Reversal of Kreditmart
unrealised losses - 20,626
Total unrealised losses (1,900) 19,506
================= =================
*Holding company for Superstroy, sold on 28 January 2015.
The valuation of the Company's investment at 30 September 2015
and 31 March 2015 were performed by the Investment Advisor, who is
considered by the Board of Directors to have the necessary
experience in valuing investments of this nature, and were approved
by the Board on the recommendation of the Valuation Committee.
In the view of the Board, the fair value of the investment in
Unistream Bank as at 30 September 2015 was GBP3.4 million (31 March
2015: GBP5.3 million) representing a decrease in the total value of
the Company's investment from the prior year end.
Methodologies and assumptions used in valuing the Company's
investment:
The Company based the value of its investment in Unistream
largely on an indicative third party offer, supported by a
market-based approach using a combination of revenue and EBITDA
multiples.
The market approach uses industry specific benchmarks as its
basis and indicates the market value of the shares of the
investment based on a comparison of the subject company to other
comparable companies in similar lines of business that are publicly
traded or which have been part of a recent public or private
transaction.
The market comparable method indicates the market value of the
shares of a business by comparing it to publicly traded companies
in similar lines of business. The conditions and prospects of
companies in similar lines of business depend on common factors,
such as overall demand for their products and services. An analysis
of the market multiples of companies engaged in similar businesses
yields insight into investors' perceptions and, therefore, the
value of the subject company.
In the market approach, recent sales, listings of comparable
assets and such other factors as the Board deems relevant are
gathered and analysed. After identifying and selecting the
comparable publicly traded companies, their business and financial
profiles are analysed for relative similarity. Price or EV
multiples of the publicly traded companies are calculated and then
adjusted for factors such as relative size, growth, profitability,
risk, and return on investment. The adjusted multiples are then
applied to the relevant element of the subject company's
business.
The Company's investment in Unistream was valued using a
weighted combination of revenue and/or EBITDA multiples with a
discount applied for liquidity (see note 7 for details). This
valuation was supported by an independent valuation performed by a
third party expert in September 2015.
5. Sale of Kreditmart Finance Limited
30 September 31 March
2015 2015
GBP'000 GBP'000
Proceeds on sale - 1,919
Less: Cost of Investment - (20,594)
Loss of sale - (20,675)
============= =========
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December 11, 2015 13:00 ET (18:00 GMT)
The Company sold 100% of its shares in Kreditmart Finance
Limited to Amikson Business Limited on 24 April 2014. The proceeds
of the sale was RUB 100,000,000 and USD 450,000, the total amount
of which was paid in USD.
6. Share buyback
30 September 31 March
Number of shares 2015 2015
Authorised share capital:
Ordinary Shares of 1p each 200,000,000 200,000,000
============== =============
Issued share capital:
Opening balance as at 1 April 44,611,131 74,262,617
Shares redeemed in share buy back
- 4 June 2014 - (29,651,486)
Shares redeemed in share buy back
- 14 April 2015 (6,687,203) -
-------------- -------------
37,923,928 44,611,131
============== =============
30 September 31 March
2015 2015
GBP'000 GBP'000
Share Capital
Opening balance as at 1 April 446 743
29,651,486 Ordinary Shares of 0.01p
bought back - (297)
6,687,203 Ordinary Shares of 0.01p bought
back (67) -
379 446
------------- -------------
Number of shares
Treasury Shares
Opening balance as at 1 April - -
29,651,486 Ordinary Shares bought - 29,651,486
4,343,081 Shares cancelled - (4,343,081)
25,308,405 Share cancelled - (25,308,405)
6,687,203 Ordinary Shares bought 6,687,203 -
6,687,203 Shares cancelled (6,687,203) -
------------- -------------
- -
============= =============
Special Reserve
Opening balance as at 1 April 56,349 64,331
29,651,486 Ordinary Shares bought back
by NUMIS - (7,871)
Professional and legal fees incremental
to Share buyback - (111)
6,687,203 Ordinary Shares bought back
by NUMIS (602) -
55,747 56,349
======= ========
On 1 May 2014 the Company entered into a repurchase agreement to
purchase ordinary shares of the Company from Numis Securities
Limited ("Numis"). On 4 June 2014, the Company purchased 29,651,486
ordinary shares at 27.5454 p per share for an aggregate gross
consideration of GBP8,167,620.
On 7 April 2015, the Company entered into a professional client
agreement and side letter to the Nominated Adviser and Broker
Agreement with Numis, in order to purchase pursuant to a tender
offer and via Numis ordinary shares in the Company from its
shareholders. On 10 April 2015, the Company purchased 6,687,203
ordinary shares at 10p per share for an aggregate gross
consideration of GBP668,720.
7. Financial risk factors
Other than as set out below, the risks faced by the Company and
its management of those risks are consistent with the prior year
end.
Market price risk
Market price risk arises principally from uncertainty concerning
future values of financial instruments used in the Company's
operations.
It represents the potential loss the Company 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. There is a rigorous due diligence process
before an investment can be approved which will cover financial,
legal and market risks. Following investment the Company/Manager
will always have Board representation, the investee company is
required to submit regular management information to an agreed
standard and timeliness and the Manager undertakes regular
monitoring. The Board receives and considers the most recent
monitoring report prepared by the Manager at every Board
meeting.
Pricing Risk Table
All security investments present a risk of loss of capital, the
maximum risk resulting from instruments is determined by the fair
value of the financial instrument. The following represents the
Company's market pricing exposure at period end:
At 30 September 2015:
Fair value % of Net
Notes GBP'000 Assets
Investments
- Unlisted Equities 4 3,400 71.03
At 31 March 2015:
Notes
Investments
- Unlisted Equities 4 5,300 67.94
Valuation of financial instruments
The Company measures fair values using the following fair value
hierarchy that reflects the significance of the inputs used in
making the measurements:
> Level 1: Quoted market price (unadjusted) in an active
market for an identical instrument.
> Level 2: Valuation techniques based on observable inputs,
either directly (i.e. as prices) or indirectly (i.e. derived from
prices). This category includes instruments valued using: quoted
market prices in active markets for similar instruments; quoted
prices for identical or similar instruments in markets that are
considered less than active; or other valuation techniques where
all significant inputs are directly or indirectly observable from
market data.
> Level 3: Valuation techniques using significant
unobservable inputs. This category includes all instruments where
the valuation technique includes inputs not based on observable
data and the unobservable inputs have a significant effect on the
instrument's valuation. This category includes instruments that are
valued based on quoted prices for similar instruments where
significant unobservable adjustments or assumptions are required to
reflect differences between the instruments.
The table below analyses financial instruments, measured at fair
value at the end of the reporting period, by the level in the fair
value hierarchy into which the fair value measurement is
categorised:
At 30 September 2015:
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Investments
- Unlisted Equities - - 3,400 3,400
---------- ---------- --------- ---------
- - 3,400 3,400
========== ================================ ========= =========
At 31 March 2015:
Investments
- Unlisted Equities - - 5,300 5,300
---------- ---------- --------- ---------
- - 5,300 5,300
========== ================================ ========= =========
The following table shows a reconciliation from the beginning
balances to the ending balances for fair value measurements in
Level 3 of the fair value hierarchy of the Company:
Level 3 Level 3
GBP'000 GBP'000
2015 2014
Opening balance 5,300 9,800
Disposal of investments - (1,000)
Total fair value gains
or losses in profit or
loss (1,900) (3,500)
3,400 5,300
========= =========
Although the Company believes that its estimates of fair values
are appropriate, the use of different methodologies or assumptions
could lead to different measurements of fair value. Investments
classified within level 3 have significant unobservable inputs, as
they are not traded. As observable prices are not available for
these securities, the Company has used valuation techniques to
derive the fair value. Transfers between levels are deemed to take
place at the end of the period.
Level 3 investments have been valued in accordance with the
methodologies in Note 4. The value of the investment and the fair
value movement is disclosed in note 4.
Unrealised loss on fair value movements from revaluation of
level 3 investments still held at period end and recognised in the
Unaudited Condensed Half Year Statement of Comprehensive Income
amounted to GBP1.90 million (31 March 2015: unrealised loss of
GBP3.5 million).
Unistream was valued using 75% EBITDA multiple and 25% Revenue
multiple and 45% liquidity discount (March 2015: 40% liquidity).
For Unistream the Revenue multiple observed was 1.6x (31 March
2015: 1.6x) and for EBITDA was 6.1x (31 March 2015: 6.2x).
Price Sensitivity
The sensitivity analysis below has been determined based on the
exposure to equity price risks as at the reporting date.
At the reporting date, if the valuations had been 20% higher
while all other variables were held constant net loss would
decrease by GBP680,000 (31 March 2015: GBP1,060,000) for the
Company. This sensitivity rate was determined by the Directors as
reasonable taking market conditions into account.
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