REG - Aurora Russia Ltd - Half Yearly Report <Origin Href="QuoteRef">AURR.L</Origin> - Part 2

Aurrigo InternationalAnnouncement

09/12/2014 07:10

- Part 2: For the preceding part double click  ID:nRSI1816Za 

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   
                                                         £'000    £'000     
                                                         2014     2013      
                                                                            
 Opening balance                                         9,800    32,800    
 Disposal of investments                                 -        (5,817)   
 Total fair value gains or losses in profit or loss      (1,120)  (15,215)  
 Transfer to level 2                                     -        (1,968)   
                                                         8,680    9,800     
 
 
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 with level 3 have
significant unobservable inputs, as they trade infrequently. 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/year. 
 
Level 3 investments have been valued in accordance with the methodologies in
Note 4. The value of the investments and the fair value movements are
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 £1.12 million (31
March 2014: £12.6 million). 
 
Unistream 
 
Unistream was valued using 75% EBITDA multiple and 25% Revenue multiple and
30% liquidity discount as at 30 September 2014 and 31 March 2014. 
 
For Unistream the Revenue multiple observed was 1.96x and for EBITDA was 7.83x
(31 March 2014 revenue multiple was 2.0x and for EBITDA was 7.4x). 
 
If the Revenue multiple weighting was increased by 10% the value of
Unistream's value would become £9.5 million (31 March 2014: £9.1 million). 
 
Superstroy 
 
Superstroy was valued using 100% EBITDA multiple with 25% liquidity discount
in the prior year and was valued using an adjusted NAV Valuation basis as at
30 September 2014. The change in valuation technique is due to the fact that
this basis is deemed to be more appropriate given the change in fundamentals,
performance and lifecycle stage of Superstroy during the period. 
 
The average of the EBITDA multiple range observed when valuing Superstroy was
7.8x as at 31 March 2014. 
 
8.         Segmental information 
 
The Board of Directors of the Company decides on the strategic resource
allocations of the Company. The operating segments of the Company are the
business activities that earn revenue or incur expenses, whose operating
results are regularly reviewed by the Board of Directors of the Company, and
for which discrete financial information is available. The Board of Directors
considers the Company to be made up of one segment, which is reflective of the
business activities of the Company and the information used for internal
decision-making which includes the monthly reporting to management of
investment holdings on a fair value basis: 
 
- Aurora Russia Limited. 
 
The Investment Manager's Report provides more information on the Company's
business and the operations of each investment. 
 
The Company derives its revenues from its investments primarily through fair
value gains or losses. 
 
The Company regards the holders of its ordinary shares as its customers, as it
relies on their funding for continuing operations and meeting its objectives.
The Company's shareholding structure is not exposed to a significant
shareholder concentration. 
 
The Company is engaged in investment in small and mid-sized companies in
Russia and in one principal geographical area, being Russia. 
 
9.         Related party transactions 
 
Details of the investments in Unistream Bank and Grindelia Holdings are
presented in note 4. 
 
Michael Hough, who was a director of Aurora Investment Advisors Limited
("AIAL"), held Nil (31 March 2014: 100,000) shares in the Company as at 30
September 2014. 
 
AIAL held 286,354 (31 March 2014: 1,224,072) shares in the Company as at 30
September 2014. 
 
The management fees paid to AIAL during the 6 months ended 30 September 2014
were £30,000 (2013: 458,940). At the period end there were no management fees
owing. 
 
The Company's management contract with AIAL to provide investment advisory and
management services which ran for 8 years was terminated effective 30 April
2014. AIAL's services were extended to 30 June 2014. Mr Nicholas
Henderson-Stewart was appointed as Advisor effective 19 June 2014. 
 
Per the Amended and Restated Management Agreement (the "agreement"), certain
provisions of that agreement survived the termination of the agreement,
including the provisions relating to performance fees. The performance fees
are to decline by 20% per annum from 1 January 2012 in respect of the 2.5%
Tranche, and by 20% per annum from 1 January 2013 in respect of each of the
7.5% Tranche and the 20% Tranche. These performance fee provisions remain
applicable up to 31 March 2018. 
 
The performance fees paid by the Company to AIAL during the period was £24,558
(2013: £44,808); at period end £Nil (2013: £45,696) was outstanding. The
performance fees became payable on the sale of KFL, calculated at 1.28% on the
cash consideration of £1.9 million. 
 
If the remaining investments were sold at their fair values as at 30 September
2014, £111,104 would be payable to AIAL by way of performance fees. 
 
10.        Contingencies 
 
The Company had no contingencies outstanding at the reporting date other than
those disclosed in note 9. 
 
11.        Events after the reporting date 
 
No further material post balance sheet events were noted. 
 
This information is provided by RNS
The company news service from the London Stock Exchange