Cost Reduction Measures
NewMedia SPARK PLC
13 July 2001
NewMedia SPARK plc
13 July 2001
Cost Reduction Measures
The Board of NewMedia SPARK plc ('SPARK') announces cost reduction measures
intended to reduce SPARK's central organisational costs from over £7m p.a. to
approximately £4m p.a. These measures include: a significant reduction in the
headcount at SPARK's main London office; postponement of SPARK's plans to
establish a presence in India; tight control of costs in SPARK's other
European offices; and the charging of a higher proportion of costs to
portfolio companies utilizing SPARK's facilities.
These steps are being taken in the light of continuing difficult trading
conditions in technology markets worldwide. SPARK has for some months been
asking its portfolio companies to maintain extremely tight control over costs
and, notwithstanding its substantial cash reserves, SPARK now wishes to reduce
its own central operational costs to suite prevailing market conditions.
SPARK's balance sheet remains very healthy, with central cash balances of over
£60m. In addition, a number of its portfolio companies also have significant
cash reserves. SPARK estimates that further investment by SPARK in its present
portfolio and subsidiary companies will not exceed £10m over the next twelve
months. In aggregate, the cash burn of these businesses is now decreasing as
they mature. Many of them continue to make good progress despite weak broader
technology markets - for example, DX3, eTV and EO are developing into
substantial businesses in their specific markets. However, investor sentiment
towards the technology sector shows little sign of imminent improvement. In
these circumstances SPARK has decided to take tough cost reduction action now
rather than wait in the hope of an early upturn.
SPARK remains confident of the quality and potential of its portfolio. The
Board believes that even in present market conditions the value of its
portfolio and cash assets substantially exceeds SPARK's current share price.
SPARK remains fully committed to the goal of building Europe's leading early
stage technology investment business.
In view of the substantial discount at which SPARK shares currently trade in
comparison to its net asset value per share, following the proposed
acquisition of GlobalNet SPARK does not intend to issue further shares whilst
this discount remains.
Enquires: Joel Plasco - 0207 851 7703
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