Half-yearly report
19 Marzo 2009 - 6:51AM
UK Regulatory
TIDMBKW
BROOKWELL LIMITED
Announcement of results for the period from 28 May 2008 to 31
December 2008
* GBP25.5 million raised in the placing of the Company's A Shares.
* GBP3.6 million returned to shareholders in the period from the
Company's launch to 31 December 2008.
* The number of securities held on the portfolio reduced from 84 to
43 during the period.
* Following shareholder approval of the issue of a new separate
class of B Shares in January 2009, a placing of B Shares raised a
total of GBP12.96 million in February/March 2009.
CHAIRMAN'S STATEMENT
Brookwell Limited ("Brookwell" or "the Company") was incorporated on
28 May 2008 to provide a service for institutions wishing to
rationalise their portfolios of AIM quoted and smaller UK listed
company shares.
Brookwell is managed by Progressive AIM Realisation Limited ("PARL")
a subsidiary of Progressive Value Management Limited ("PVML"), which
has expertise in achieving value and liquidity from such stocks.
PVML was formerly the manager of Advance Value Realisation Company
("ADVARC") Second Advance Value Realisation Company ("SAVR") and
Third Advance Value Realisation Company ("TAVR"). PARL is the Manager
of Advance AIM Value Realisation Company ("AIMVARC").
Brookwell, like AIMVARC, continues to develop the concept established
by ADVARC, SAVR and TAVR, but with a different structure to reflect
the focus on AIM shares. The objective of these companies is to
realise value from the portfolio and progressively return cash to
shareholders. Brookwell was launched by means of a "stock swap"
whereby the Company issued Shares of no par value as consideration
for the acquisition of holdings in 84 companies. The Company's
shares were admitted to AIM on 26 June 2008, with further shares
issued pursuant to a supplemental placing being admitted on 17 July
2008. At launch, the portfolio of qualifying securities established
in this way was valued at GBP25.5m.
I am pleased to report that during our first reporting period to 31
December 2008, the Manager has been active, reducing the number of
holdings to 43 and realising GBP5.1m. On 31 December 2008 the Company
returned GBP3.6m to shareholders through the pro rata redemption of
8,356,533 Shares at a price of 43.08p per Share.
The net revenue loss per Share for the period to 31 December 2008 was
0.23p. As stated in the AIM admission document, the Company seeks
to achieve capital growth rather than to provide dividend income and
it is unlikely that the Company will pay any significant dividends.
The NAV at the period end was 43.0 pence per Share, down from the
opening NAV, net of expenses of the flotation, of 97.0 pence per
Share. The first six months of the Company's existence saw a period
of considerable financial uncertainty. This extremely difficult
economic background has caused distress in a number of major
international banks and developed economies. AIM, with its mixture
of relatively immature businesses, has been particularly vulnerable
and during this period the AIM All Share index is down approximately
60%. Against this backdrop, the fall in the NAV, whilst
disappointing, is understandable.
Many companies in the portfolio have suffered setbacks during the
deteriorating economic backdrop which has exposed weaknesses in a
number of market and product segments. However, your Company was
established in order to help deal with such investment situations and
the Manager is using the experiences gained from the previous workout
funds actively to engage with a number of the remaining investee
companies to help improve the underlying performance of these
businesses.
Towards the end of 2008 the Board concluded that the Company would
benefit, particularly in terms of its expenses ratios, if the
Company's portfolio of investments were to be enlarged in a way which
would protect and not prejudice the original Shareholders.
Accordingly, the Board sought shareholder approval for a placing of a
new and separate class of shares to be known as B Shares and the
designation of the original Shares as A Shares. At an Extraordinary
General Meeting on the 29 January 2009 Shareholders overwhelmingly
supported the proposals. On 19 February 2009 12,372,932 B shares were
issued in an initial placing and a further 587,912 B shares in a
supplemental placing on 12 March 2009, providing a separate asset
pool valued at approximately GBP13 million and 62 extra holdings - (see
note 9 to the accounts). All investors will benefit from the
spreading of fixed overheads over a larger asset base.
The NAV per A Share at 13 March 2009 was 38.45p and the number of
holdings in the A Class Fund had been reduced further to 33. The
Company currently holds GBP0.9m in cash and the Board anticipates that,
after allowing for working capital requirements, a further
distribution in the next pro rata redemption of A Shares will take
place at the end of June 2009. This redemption is almost certain to
be significantly lower than the first redemption in December 2008.
The NAV per B Share at 13 March 2009 was 92.11p and the number of
holdings in the B Class Fund was 55. The Manager has recently begun
the realisation of the investments in the B Class Fund. As stated in
the admission document dated 15 January 2009, the first pro rata
redemption of B Shares is scheduled to take place at the end of June
2009. The amount to be returned, if any, will depend on the level of
available funds after making provision for costs incurred and for
working capital requirements
CHRISTOPHER CLARK
19 March 2009
MANAGER'S REPORT
The Company's portfolio was established by way of a "stock swap" in a
placing and supplemental placing in June and July 2008. In aggregate
the Company acquired at that time holdings in 84 companies from 19
investment institutions. We are pleased that a number of these
investors had participated in earlier funds managed by us whilst
others participated for the first time. The launch of our work-out
fund provides institutions with an opportunity to rationalise their
portfolios and enhance investment efficiency. Prior to acceptance in
the placing, each holding was screened to ensure that securities
offered met the criteria for inclusion in the portfolio set out in
the AIM admission document.
We spend considerable time in the initial period evaluating each
holding to decide the most appropriate exit strategy and to assess
target timing and price levels. This includes meeting the management
of many of the larger holdings and talking to relevant third parties
about the industry context in which investee companies operate.
Brookwell's portfolio on launch provided a spread of holdings. The
fund's largest sector weightings were in Support Services, Real
Estate, Travel & Leisure, Electronic & Electrical Equipment and
Media. There were 23 holdings which represented more than 3% of the
underlying company's equity and 25 which were between 1.0% and 2.99%.
The Company benefited from the takeover of SPI Lasers and the bid
approach for 1st Dental Laboratories. In both cases the holdings
were sold in the market during the bid process, which proved to be
particularly helpful in the case of 1st Dental Laboratories as the
Offer Talks were subsequently terminated.
Poorer performers in the portfolio have included SDI Group, Inland,
Shieldtech, Frontier Mining and Block Shield. In addition, the fund
was badly hit by a profits warning from Claimar Care soon after we
acquired the holding. This warning was particularly disappointing
given the previous update from the company, in May 2008, which
indicated it expected full year results to be broadly in line with
market expectations and the group viewed "its prospects with every
confidence". Sadly, it now appears that confidence was misplaced.
In common with the AIM market in general, the portfolio has
experienced first hand the increased difficulties UK smaller
companies are experiencing in refinancing debt facilities. Five
companies - Greatfleet, International Medical Devices, Vividas,
Microemissive and Landround - were suspended and full provision was
made against their book values.
The Company's NAV has suffered from the above setbacks, reflecting
the difficulties being experienced across both the AIM and fully
listed smaller company markets, rather than issues specific to
Brookwell. In spite of the AIM liquidity problems, the total number
of holdings in the A Class Fund was reduced from 84 to 43 at 31
December 2008 and 33 at 13 March 2009.
Progressive AIM Realisation Limited
19 March 2009
TOP TEN HOLDINGS IN COMPANIES*
At 31 December 2008
By valuation Percentage of
GBP'000 Portfolio (%)
Hotel Corporation 1,400 20.6
Fortune Oil 639 9.4
Inland 554 8.1
Claimar Care Group 411 6.0
The Mission Marketing 392 5.8
Shieldtech 327 4.8
DCD Media 309 4.6
A & J Mucklow Group 265 3.9
SDI Group 213 3.1
Dawson International 200 2.9
4,710 69.2
Other holdings 2,094 30.8
6,804 100.0
* In the A Class Fund as redesignated
INCOME STATEMENT
28 May 2008 28 May 2008 28 May 2008
to 31 to to
December 2008 31 December 31 December
Revenue 2008 2008
Capital Total
GBP'000 GBP'000 GBP'000
Gains/(losses) on
investments
Realised - (1,792) (1,792)
Unrealised - (11,835) (11,835)
- (13,627) (13,627)
Income
148 - 148
Investments 37 - 37
Bank
interest
185 - 185
Investment management (86) (86) (172)
fees
Other expenses (158) - (158)
Loss on ordinary (59) (13,713) (13,772)
activities
Earnings per Share (0.23)p (53.80)p (54.03)p
The Company was incorporated on 28 May 2008. The above figures relate
to the period from commencement of operations on 26 June 2008, when
the Company's Shares were admitted to trading on AIM, to 31 December
2008 There are no comparatives as this is the Company's first period
of operations.
The total column is the income statement of the Company.
All capital and revenue items in the above statement derive from
continuing operations. No operations were acquired or discontinued
during the period.
Earnings per Share is based on the weighted average number of
25,491,644 Shares in issue from the admission of the Company's Shares
to trading on AIM on 26 June 2008 to 31 December 2008.
BALANCE SHEET
At 31 December 2008
GBP'000
NON CURRENT ASSETS
Investments at fair value 6,804
CURRENT ASSETS
Other receivables 25
Cash and cash equivalents 652
677
CURRENT LIABILITIES
Other payables 94
94
NET CURRENT ASSETS 583
TOTAL NET ASSETS 7,387
CAPITAL AND RESERVES
Share capital and share premium 21,925
Share issue expenses (766)
Realised capital reserve (1,878)
Revaluation reserve (11,835)
Revenue reserve (59)
TOTAL EQUITY 7,387
Net asset value per Share 43.03p
No. of Shares in issue 17,168,210
STATEMENT OF CHANGES IN EQUITY
28 May 2008 to
31 December 2008
GBP'000
Placing of Company's shares* 24,759
Purchase and redemption of Company's
shares (3,600)
Loss for financial period (13,772)
Closing equity 7,387
* net of share issue expenses
CASH FLOW STATEMENT
28 May 2008 to
31 December 2008
GBP'000
OPERATING ACTIVITIES
Cash inflow from investment income and bank 165
interest
Cash outflow from management expenses (241)
Cash inflow from disposal of investments 5,094
NET CASH INFLOW FROM OPERATING ACTIVITIES 5,018
FINANCING
Expenses of issue of share capital (766)
Payments to purchase own shares (3,600)
NET CASH OUTFLOW FROM FINANCING (4,366)
INCREASE IN CASH AND CASH EQUIVALENTS 652
NOTES
1 Status
The Company is a closed-ended investment company incorporated and
resident in Guernsey.
2 Accounting policies
The Company presents its accounts in accordance with applicable
International Financial Reporting Standards ("IFRS"). The Company
has also taken the guidance of Statement of Recommended Practice
issued by the Association of Investment Companies into account to the
extent that it is appropriate and compatible with IFRS.
3 Comparatives
There are no comparatives as this is the Company's first reporting
period. The Company was incorporated on 28 May 2008 and was admitted
to trading on AIM on 26 June 2008.
4 Investments
Investments are listed on the London Stock Exchange or quoted on
AIM. All investments have been classified at "fair value through
profit and loss". At the period end all listed and quoted
investments have been valued at market bid prices at that time.
Securities, whose listings have been suspended, have been valued at
fair value as determined by the directors.
5 Investment management fees
In accordance with the policy stated in the Company's admission
document of June 2008 one half of basic and capital return fees have
been charged to capital.
6 Share capital and share premium
Upon incorporation, the Company issued 2 founders' shares of GBP1
nominal value each.
Pursuant to the Placing, the Company issued 25,524,743 participating
redeemable preference shares ("Shares") of no par value in the
Company. The Shares were issued at GBP1 each.
7 Redemption of Shares
Pro-rata redemptions
On 31 December 2008 the first redemption of Shares took place and
8,356,533 Shares were redeemed at an aggregate cost of GBP3,599,994,
reducing the number of Shares to 17,168,210.
8 Net assets per Share
Net assets per Share is based on the number of Shares in issue at the
end of the period.
9 Post balance sheet events
As fully detailed in the Chairman's statement in January 2009
shareholders approved the designation of the Shares as A Shares and
the issue of a separate class of shares - B Shares. A placing of B
Shares at GBP1 per share raised a total GBP12,960,844 in two tranches,
the first on 19 February 2009 and the second on 12 March 2009.
10 Taxation
The Company is resident for tax purposes in Guernsey. The Company is
exempt from Guernsey income tax under the Income Tax (Exempt Bodies)
(Guernsey) Ordinances 1989 and 1992 and is charged an annual
exemption fee of GBP600.
11. Status of this report
These unaudited financial statements are not the Company's statutory
accounts. The half-yearly report will be sent to shareholders and
copies will be made available to the public at the registered office
of the Company and at the address of the UK Administration Agent and
at the Company's website: www.brookwelllimited.com. The first
statutory accounts for the period to 30 June 2009 will be filed with
the GFSC in the autumn of 2009.
The half-yearly report was approved by the Board of directors on 19
March 2009.
DIRECTORS, MANAGER AND ADVISERS
DIRECTORS INVESTMENT MANAGER
CJ Clark (Chairman) Progressive AIM Realisation Limited
PA Clarke 145-157 St John Street
CD Ferbrache OBE London EC1V 4RU
AR McLaren
PD Soulsby
NOMINATED ADVISER
BROKER Deloitte Corporate Finance
Marshall Securities Limited Deloitte LLP
145-157 St. John Street 2 New Street Square
London EC1V 4RE London EC4A 3BZ
AUDITOR SECRETARY & ADMINISTRATOR
Grant Thornton Limited Legis Corporate Services Limited
PO Box 313, Anson Court 1 Le Marchant Street, St Peter Port
La Route des Camps, St Martin Guernsey GY1 4HP
Guernsey GY1 3TF
UK ADMINISTRATION AGENT
CUSTODIAN Cavendish Administration Limited
The Northern Trust Company 145-157 St. John Street
50 Bank Street London EC1V 4RU
Canary Wharf
London E14 5NT
REGISTRAR
ADVISERS AS TO GUERNSEY LAW Capita Registrars (Guernsey) Limited
Ozannes Longue Hougue House
1 Le Marchant Street St Sampson
St Peter Port Guernsey GY2 4JN
Guernsey GY1 4HP
SOLICITORS REGISTERED OFFICE*
Debevoise & Plimpton LLP 1 Le Marchant Street
Tower 42, Old Broad Street St Peter Port
London EC2N 1HQ Guernsey GY1 4HP
* Registered in Guernsey No. 48958
For further information please contact:
Brookwell Limited
Lisa Dodd (Legis Corporate Services Limited - Company Secretary)
Tel: 01481 726 034
Progressive AIM Realisation Limited (Investment manager)
Robert Legget / Ross Courtier Tel: 020 7566 5550
Deloitte LLP (Nominated adviser)
Jonathan Hinton / James Lewis Tel: 020 7936 3000
Marshall Securities Limited (Broker)
Robert Luetchford / John Webb Tel: 020 7490 3788
Website: www.brookwelllimited.com
19 March 2009
END
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