TIDMBKWD
RNS Number : 4687M
Brookwell Limited
18 September 2012
BROOKWELL LIMITED
Announcement of final results for the year ended 30 June
2012
HIGHLIGHTS
Amount raised in D Share placing GBP16.4m
--------------------------------------------- ---------
Amount returned to shareholders in the GBP3.6m
year to 30 June 2012
--------------------------------------------- ---------
Amount returned to shareholders in the GBP6.1m
period from admission of D shares to
trading on AIM ("Admission")(1) to 30
June 2012
--------------------------------------------- ---------
Number of securities acquired in the
D Share placing(1) 76
--------------------------------------------- ---------
Number of securities at 30 June 2012 14
--------------------------------------------- ---------
Net asset value per D Share at Admission(2) 96.80p
--------------------------------------------- ---------
Net asset value per D Share at 30 June
2012 66.99p
--------------------------------------------- ---------
Weighted average net asset value(3)
at 30 June 2012 72.81p
--------------------------------------------- ---------
(1) The D Shares were admitted to trading on AIM on 24 February
2011.
(2) after share issue expenses
(3) net assets and cash returned to shareholders
shares issued in placing
CHAIRMAN'S STATEMENT
The D Class Fund was successfully launched in February/March
2011 with the acquisition of a portfolio of 76 stocks and an
initial aggregate valuation of GBP16.4m. As at the end of June
2012, significant progress has been made with the number of
holdings reduced to 14 and over GBP6.1m has been returned to
shareholders.
The net asset value ('NAV') per D share, as at 30 June 2012, was
66.99p and during the year the number of holdings was reduced from
39 to 14. Subsequently, the NAV per D share, at 7 September 2012,
was 65.93p.
In my last statement in the Annual Report to 30 June 2011, I
described the processes by which your Investment Manager obtains
the maximum value from the holdings in the portfolio. In addition,
in my statement for the half-yearly report published in March, I
referred to examples where the activities of the Investment Manager
have provided value for both Brookwell and for all other
shareholders in the underlying companies. It is pleasing that the
engagement undertaken by your Investment Manager continues to reap
benefits at Northern Investors, whilst at the same time engagement
with Universe Group has resulted in significant change, which the
Board believes enhances the prospects of realising this investment
in a timely manner and at a level probably unattainable at the time
the investment was acquired.
Northern Investors, an investment trust mainly invested in
unquoted investments, has shown a strong share price performance
since Brookwell requisitioned a general meeting in April 2011 to
change the company's strategy. Northern Investors accepted the
realisation strategy proposed by Brookwell and by the end of
December 2011 Northern Investors had returned GBP12.8m (22% of its
assets) to shareholders. Since I updated shareholders at the time
of the interims, Northern Investors has announced that further
realisations will enable it to return a minimum of GBP6m to its
shareholders via a tender offer. This tender offer is expected to
be completed by the end of October 2012. Provided the tender offer
is approved, our entitlement will further boost cash proceeds in
time for the next Brookwell pro-rata redemption scheduled for the
end of December 2012.
Universe Group, a provider of loyalty payment and forecourt
technology solutions to international oil companies and petrol
forecourt operators, was well known to the Investment Manager
before the launch of the D Class Fund. The Investment Manager
previously engaged with Universe Group, which was held in Brookwell
A Class Fund, and was particularly keen to see the board of the
company strengthened. In May 2011 Robert Goddard, who was
introduced by Brookwell, was appointed a non-executive director. In
June 2011 he was appointed chairman of Universe Group and Stephen
McLeod was appointed Chief Executive. In April 2012 Universe Group
appointed finnCap as its nominated advisor and broker and recently
raised GBP1.7m via a share placing at 2.3p. We believe that,
without the changes highlighted above, it would have been much more
difficult for the company to raise fresh funding. The fund raising
leaves the company much better placed to exploit the full value of
its technology, which in time should greatly enhance Brookwell's
ability to extract value and liquidity from its holding.
Elsewhere, we note the recent suspension of trading in Cosalt, a
holding previously sold by Brookwell. Cosalt was heavily leveraged
and received a recommended cash offer from David Ross, the chairman
and a major shareholder of Cosalt. Brookwell believed this initial
offer under-valued Cosalt and, after engaging with Mr Ross and
Cosalt's advisors, Brookwell helped to secure an increased cash
offer at a 100% premium to the initial offer. Whilst some
shareholders hoped/speculated on a further increased offer,
Brookwell decided to sell its holding in the market. This pragmatic
approach was a result of our view that the finances of Cosalt were
precarious and therefore, if Mr Ross failed to complete the
acquisition, any deterioration in trading and/or a failure to reach
an accommodation with the company pension fund would result in a
significant risk of suspension of trading in Cosalt's shares and/or
the company no longer being a going concern. On 1 May 2012 trading
in Cosalt's shares was suspended as a result of uncertainty over
the company's finances. Trading remains suspended at the time of
drafting this statement. Since the year end one of the Company's
holdings, Dawson International Plc, has entered into administration
and been written down to nil. As at 30 June 2012 Dawson
International Plc was valued at GBP128,000.
Since I last updated shareholders in March 2012, the economic
and market backdrop has continued to be unhelpful. In particular,
liquidity in UK smaller companies remains poor. This further
highlights the on-going need for pro-active institutional
investors, like Progressive AIM Realisation Limited, your
Investment Manager. As ever, we remain confident that your
Investment Manager will continue to work hard and seek innovative
and creative opportunities to realise the remaining D share
portfolio in an orderly and timely fashion.
The AGM will be held at 11 New Street, St Peter Port, Guernsey
at 11.00 a.m. on 11 December 2012.
Christopher Clark
17 September 2012
INVESTMENT MANAGER'S REPORT
During the period under review in both the UK, and the eurozone,
the economic backdrop has remained mixed, whilst the banking system
continues to show signs of strain. The temporary market
improvements following various announcements from the European
Central Bank have tended to be followed by gradual reversal as
investors remain sceptical about the implementation of any
substantive measures. As well as this, the UK smaller companies
sector continues to be adversely affected by the lack of banking
support.
This unhelpful economic environment has, not surprisingly,
continued to weigh heavily on the minds of investors with an
adverse impact on both the absolute level of UK smaller cap shares
and the level of trading activity. As has been the case since the
launch of the D Class Fund, we have continued not to rely on a
rising market, but to focus on seeking value and liquidity.
Since June 2011, the total number of investments has been
reduced from 39 to just 14 as a result of our continued programme
of pro-active engagement. Following the latest redemption of
GBP0.6m at the end of June, a total of GBP6.1m has been returned to
D shareholders since the fund's launch.
As is common at this stage of the fund's realisation, the
portfolio has inevitably seen a further increase in stock
concentration. At 30 June 2012 the top 5 holdings accounted for
over 87% of the remaining portfolio.
Five largest investments
Northern Investors: an investment trust mainly invested in
unquoted companies;
Ilika: a fast-throughput materials testing company spun out of
the University of Southampton;
Squarestone Brasil: a Brazilian retail development company,
which delisted from AIM, while at the same time strengthening its
balance sheet with a GBP2.6m rights issue and has just completed a
further GBP4.5m rights issue;
Metalrax Group: a supplier of specialist engineering and
consumer durable products for both commercial and retail markets,
including the majority of bakeware sold in the UK;
Universe Group: one of Europe's largest providers of loyalty,
payment, and forecourt technology solutions to international oil
companies and petrol forecourt operators.
The top 5 holdings at 7 September 2012 represented approximately
91.9% of the remaining portfolio.
Outlook
We continue our programme of engagement with both the investee
companies and other shareholders in those companies. This both
maximises our opportunity to encourage change at the remaining
investments and leaves us well placed to supply potential buyers
when opportunities arise. The announcement just after the year end
of a further return of capital by Northern Investors is further
evidence of our engagement with that company. In addition, for the
second year running, we attended the AGM of Orchid Developments in
Switzerland, where the board turnout continued to disappoint. The
bid price of Orchid's shares has fallen significantly following the
announcement in August 2012 that the company's cash flow is under
strain and it may need to raise additional capital.
Progressive AIM Realisation Limited
17 September 2012
STATEMENT OF COMPREHENSIVE INCOME
For the For the For the For the For the For the
year year year year ended year ended year ended
ended ended ended 30 June 30 June 30 June
30 June 30 June 30 June 2011 2011 2011
2012 2012 2012
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(Losses)/gains on investments
designated
at fair value through
profit or loss - (3,469) (3,469) - 4 4
Investment income 135 - 135 148 - 148
Investment management
fees (100) (100) (200) (108) (101) (209)
Other expenses (295) - (295) (315) - (315)
------------------------------- --------- --------- --------- ------------ ------------ ------------
(Loss) on ordinary activities
before taxation (260) (3,569) (3,829) (275) (97) (372)
Taxation (13) - (13) (11) - (11)
------------------------------- --------- --------- --------- ------------ ------------ ------------
Total comprehensive (loss)
attributable to shareholders (273) (3,569) (3,842) (286) (97) (383)
------------------------------- --------- --------- --------- ------------ ------------ ------------
(Loss) per A Share - - - (1.35)p (8.02)p (9.37)p
------------------------------- --------- --------- --------- ------------ ------------ ------------
(Loss)/earnings per B
Share - - - (8.90)p 6.26p (2.64)p
------------------------------- --------- --------- --------- ------------ ------------ ------------
(Loss) per D Share (2.32)p (30.46)p (32.78)p (0.27)p (0.33)p (0.60)p
------------------------------- --------- --------- --------- ------------ ------------ ------------
The total column of this statement represents the Company's
Statement of Comprehensive Income, prepared under IFRS. The revenue
and capital columns, including the revenue and capital
(loss)/earnings per share data, are supplementary information
prepared under guidance published by the Association of Investment
Companies.
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
during the year.
The Company was incorporated on 28 May 2008 and its A Shares
were admitted to trading on AIM on 26 June 2008. The B Shares were
admitted to trading on AIM on 19 February 2009. The D Shares were
admitted to trading on AIM on 24 February 2011.
The final redemptions of the A and B Shares took place during
the year ended 30 June 2011. All items during the year ended 30
June 2012 are attributable to the D Shares.
STATEMENT OF FINANCIAL POSITION
30 June 30 June
2012 2011
GBP'000 GBP'000
Non-current assets
------------------------------- --------- ---------
Investments designated
at fair value through
profit or loss 5,416 12,877
------------------------------- --------- ---------
Current assets
Sales for future settlement - 123
Other receivables 81 90
Cash and cash equivalents 419 297
------------------------------- --------- ---------
500 510
Total assets 5,916 13,387
Current liabilities:
Other payables 58 87
------------------------------- --------- ---------
58 87
------------------------------- --------- ---------
Total assets less current
liabilities 5,858 13,300
------------------------------- --------- ---------
Capital and reserves
attributable to shareholders
Share capital and share
premium 9,799 13,399
Capital reserve (3,623) (54)
Revenue reserve (318) (45)
------------------------------- ---------
Total shareholders'
funds 5,858 13,300
------------------------------- --------- ---------
Net assets per Share 66.99p 96.17p
The Company's net assets were solely attributable to the D
Shares.
STATEMENT OF CHANGES IN SHAREHOLDERS' FUNDS
Share premium Capital Revenue Total
account Reserve reserve
GBP,000 GBP,000 GBP,000 GBP,000
For the year ended 30 June
2011
Opening shareholders' funds
as at 1 July 2010 15,880 (10,443) (696) 4,741
Issue of shares 16,424 - - 16,424
Share issue expenses (525) - - (525)
Purchases and redemptions of
shares (5,183) (1,774) - (6,957)
Loss for the year - (97) (286) (383)
Balance on reserves released
on final redemption of A Shares
and B Shares (13,197) 12,260 937 -
---------------------------------- -------------- --------- --------- --------
Closing shareholders' funds
as at 30 June 2011 13,399 (54) (45) 13,300
---------------------------------- -------------- --------- --------- --------
For the year ended 30 June
2012
Purchases and redemptions of
shares (3,600) - - (3,600)
Loss for the year - (3,569) (273) (3,842)
---------------------------------- -------------- --------- --------- --------
Closing shareholders' funds
as at 30 June 2012 9,799 (3,623) (318) 5,858
---------------------------------- -------------- --------- --------- --------
The final redemptions of the A and B Shares took place during
the year ended 30 June 2011. All items during the year ended 30
June 2012 are attributable to the D Shares.
STATEMENT OF CASH FLOW
For the For the
year ended year ended
30 June 30 June
2012 2011
GBP'000 GBP'000
Operating activities
Cash inflow from investment
income and interest 130 69
Cash outflow from management
and other expenses (522) (630)
Cash inflow from disposal
of investments 4,114 7,561
Net cash inflow from operating
activities 3,722 7,000
--------------------------------- ------------ ------------
Financing
Expenses of issue of share
capital - (523)
Payments to purchase own shares (3,600) (6,957)
--------------------------------- ------------ ------------
Net cash outflow from financing
activities (3,600) (7,480)
--------------------------------- ------------ ------------
Increase/(decrease) in cash
and cash equivalents 122 (480)
--------------------------------- ------------ ------------
Opening balance 297 777
Cash flow 122 (480)
Closing balance 419 297
NOTES
1. Status
The Company is a closed-ended investment company incorporated
and resident in Guernsey.
2. Basis of preparation
The financial statements of the Company have been prepared in
accordance with International Financial Reporting Standards (IFRS),
as adopted by the European Union, which comprise standards and
interpretations approved by the IASB and International Accounting
Standards and Standing Interpretations Committee interpretations
approved by the IASC that remain in effect at the date of this
document. The financial statements are presented in accordance with
IAS 1 Presentation of Financial Statements (Revised 2007). The
Company has elected to present the 'Statements of Comprehensive
Income' as one statement.
Under IFRS, the Statement of Recommended Practice (SORP) issued
by the Association of Investment Companies in January 2009 has no
formal status, but the Company has taken the guidance of the SORP
and information contained in the Company's Admission Document into
account to the extent that is appropriate and compatible with IFRS
as adopted by the European Union.
3. Going concern
The directors have adopted the going concern basis in preparing
the accounts. The following is a summary of the directors'
assessment of the going concern status of the Company:
The directors have considered the Company's working capital
position including its cash levels and the liquidity of its
investments and following that consideration have a reasonable
expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future.
4. Investments
As the Company's business is investing in financial assets with
a view to profiting from their total return in the form of
increases in fair value, financial assets are designated as fair
value through profit or loss on initial recognition in accordance
with IAS 39. At this time, fair value is the consideration given,
excluding material transaction or other dealing costs associated
with the investment.
After initial recognition such investments are valued at fair
value. For quoted investments this is established by reference to
market bid price. For quoted investments that are not actively
traded, an alternative valuation technique is used that makes use
of market inputs which the directors believe better reflect the
fair value of the investment. The valuation of suspended or
delisted securities requires significant judgment. Suspended or
delisted securities are valued at directors' best estimate of fair
value after taking into account conditions that led to that
investment's delisting or suspension and in particular the
financial health and business outlook for the investee company
concerned. Investments are derecognised when realised. Gains or
losses are recognised in the capital column of the Statements of
Comprehensive Income. All purchases and sales of investments are
accounted for on a trade date basis.
5. Investment management fees
One half of the basic investment management fees and capital
return fees is allocated to the capital column of the Statement of
Comprehensive Income. The entirety of the equity appreciation fee
is allocated to the capital column of the Statement of
Comprehensive Income.
6. (Loss)/earnings per Share
Loss per D Share is based on the loss of GBP3,842,000 (2011:
loss GBP99,000) attributable to the weighted average of 11,718,160
(2011: 16,370,089) D Shares of no par value in issue during the
year.
Supplementary information is provided as follows: revenue loss
per D Share is based on the revenue loss of GBP273,000 (2011: loss
GBP45,000) and capital loss per D Share is based on the net capital
loss of GBP3,569,000 (2011: loss GBP54,000) attributable to
11,718,160 (2011: 16,370,089) D Shares of no par value.
7. Investments designated at fair value through profit or
loss
2012 2011
GBP'000 GBP'000
Investments at cost
Movement during the period:
Opening balance 14,321 7,031
Additions, at cost - 16,424
Disposals, at cost (6,452) (9,134)
------------------------------------------ --------- --------
Cost of investments at 30 June 7,869 14,321
------------------------------------------ --------- --------
Revaluation of investments to fair value
Opening balance (1,444) (2,919)
Transfer to disposal of investments 1,444 2,919
Revaluation of investments (2,453) (1,444)
------------------------------------------ --------- --------
Balance at 30 June (2,453) (1,444)
------------------------------------------ --------- --------
Fair value of investments at 30 June 5,416 12,877
------------------------------------------ --------- --------
AIM quoted shares 2,408 8,268
PLUS quoted shares 4 27
UK listed shares 2,350 4,582
Unquoted shares 654 -
------------------------------------------ --------- --------
Total fixed asset investments at fair
value* 5,416 12,877
------------------------------------------ --------- --------
* The total value of suspended and delisted securities included
in investments at 30 June 2012 was GBP654,000 (2011: nil). Trans
Balkan Investments Limited was delisted from AIM on 23 March 2011
and valued at nil at the year end. On 7 December 2011 Squarestone
Brasil Limited announced that it was seeking approval to delist its
ordinary shares and warrants from AIM. Following such approval the
ordinary shares and warrants were delisted from AIM on 16 January
2012. Subsequent to that delisting and a rights issue the ordinary
shares of Squarestone Brasil Limited have been valued at the
directors' estimate of fair value and its warrants have been valued
at nil at the year end. Following the Company's year end,
Squarestone Brasil Limited has just completed a further rights
issue which may have an impact on the value of the holding. Since
the year end one of the Company's holdings, Dawson International
Plc, has been suspended, subsequently entered into administration
and as a result has been written down to nil. Dawson International
Plc was valued at GBP128,000 at the year end.
8. Redemptions
Pro-rata redemptions of shares
Date Number of Price per
shares redeemed share
-------------- ----------------- ----------
29 June 2012 890,062 67.41p
29 December
2011 4,195,789 71.5p
30 June 2011 2,594,422 96.36p
Other redemptions of Shares
There were no other redemptions of D Shares during the year.
9. Net assets per Share
The figure for net assets per D Share is based on GBP5,858,000
divided by 8,744,099 D Shares in issue at the year end.
10. Annual report
The annual report was approved by the Board of directors on 17
September 2012. The information in this announcement has been
extracted from the annual report on which the Company's auditors
have given an unqualified report. The annual report will be
available on the Company's website www.brookwelllimited.com and
will be sent to shareholders. It will also be available from the
registered office of Company and the UK administration agent.
REGISTERED OFFICE
11 New Street
St Peter Port
Guernsey
GY1 2PF
UK ADMINISTRATION AGENT
Cavendish Administration Limited
145-157 St John Street
London
EC1V 4RU
For further information please contact:
Brookwell Limited
Tom Lancaster-King Tel: 01481 726 034
Progressive AIM Realisation Limited (Investment manager)
Robert Legget Tel: 020 7566 5550
Deloitte Corporate Finance (Nominated adviser)
Jonathan Hinton / James Lewis Tel: 020 7936 3000
Marshall Securities Limited (Broker)
John Webb Tel: 020 7490 3788
Website: www.brookwelllimited.com
17 September 2012
END
This information is provided by RNS
The company news service from the London Stock Exchange
END
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