TIDMBKWD
RNS Number : 7582Y
Brookwell Limited
06 March 2012
BROOKWELL LIMITED
Announcement of half-yearly results for the six months to 31
December 2011
Investment objective
To realise value from a portfolio of AIM Securities and Listed
Securities and, in the case of the D Share class fund, from PLUS
Securities and progressively return cash to shareholders.
Financial highlights
D Shares
------------------------------------------- ---------
Amount raised in placing GBP16.4m
------------------------------------------- ---------
Amount returned to shareholders GBP3.0m
in the six months ended 31 December
2011
------------------------------------------- ---------
Amount returned to shareholders GBP5.5m
in the period from admission of
shares to trading on AIM ("Admission")*
to 31 December 2011
------------------------------------------- ---------
Number of securities acquired in
the placing(1) 76
------------------------------------------- ---------
Number of securities at 31 December
2011 25
------------------------------------------- ---------
Net asset value per Share at Admission(2) 96.8p
------------------------------------------- ---------
Net asset value per Share at 31
December 2011 71.2p
------------------------------------------- ---------
Weighted average net asset value/cash
returned per Share(3) at/up to 31
December 2011 75.2p
------------------------------------------- ---------
(1) The D Shares were admitted to trading on 24 February
2011.
(2) after share issue expenses
(3) net assets and cash returned to shareholders
shares issued in placing
CHAIRMAN'S STATEMENT
Brookwell had another successful six months to 31 December 2011,
with the D Class Fund(1) returning a total of GBP3.0 million to
shareholders. This means that with the cash paid on 30 June 2011, a
total of GBP5.5 million has now been returned.
On 31 December 2011, the net asset value ('NAV') per D Share was
71.18p and the number of holdings had been reduced to 25.
Subsequently, the NAV per D Share at 2 March 2012 was 77.18p, and
the number of shareholdings had reduced further to 16. The D Class
Fund held cash of GBP1.0 million on 2 March 2012.
In my last statement in the Annual Report to 30 June 2011, I
described the processes by which your Investment Manager obtained a
maximum value from the holdings. On this occasion I can highlight
two engagements where the efforts and activities of the Investment
Manager have provided value for both Brookwell and for all other
shareholders in the underlying companies.
Northern Investors, an investment trust mainly invested in
unquoted investments, has shown strong share price performance
since Brookwell requisitioned a general meeting in April 2011 to
change the company's strategy. The share price has increased by 28%
in the period from the requisition to 2 March 2012. Northern
Investors remains our largest holding, despite returning 22% of its
assets at NAV at the end of December 2011. Brookwell's realisation
strategy has been accepted by the board of Northern Investors, but
the current management incentive arrangements and the board
structure still need some tidying up. We trust that Northern
Investors' board and its advisers will take note of the voting at
the recent general meeting and address these final issues for the
benefit of all shareholders.
Orchid Developments, a company investing in Bulgarian property,
had suffered a collapse in its share price due to doubts about its
investment strategy and bonus arrangements. In order to move the
situation forward and address the very significant difference
between share price and NAV, the Investment Manager negotiated a
new executive incentive scheme which rewards a controlled disposal
of the company's assets.
Since I wrote to you on 21 September 2011, there has been little
improvement in the global economic situation. Liquidity in the
stock market remains poor, as it does with many other asset
classes. We remain cautious about the outlook for the UK economy
and for the environment facing many of our investee companies.
We are, however, confident that your Investment Manager will
continue to work hard and imaginatively, with its usual
professionalism, on the realisation of the remaining D Share
portfolio with commensurate success.
Christopher Clark
6 March 2012
(1) The D Class Fund was the only Class Fund in existence during
the six months ended 31 December 2011.
INVESTMENT MANAGER'S REPORT
Against a backdrop of increasing concerns in the Euro region,
most notably, but not restricted to, Greece, it is not surprising
that investors have remained nervous. With historically very high
levels of Government borrowing across the developed economies,
coupled with concerns of a slow-down in the rate of economic
recovery, risk aversion remained the focus for many investors and,
as a result, the AIM market drifted lower over the period.
Despite this unhelpful backdrop our strategy has, as always,
been not to rely on a rising market, but to focus on seeking value
and liquidity.
At the end of June 2011, the number of holdings in the D
portfolio had been reduced from an initial 76 to 39. By the end of
December 2011, further progress had been made in realising value
and liquidity and an additional 14 stocks had been sold, reducing
the number of investments to 25.
As with our previous Brookwell portfolios, this has inevitably
led to greater concentration in the portfolio. At 31 December 2011,
the top five holdings represented approximately 74% of the
remaining portfolio. They are:
Northern Investors Company: 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 recently delisted from AIM, while at the same time
strengthening its balance sheet with a GBP2.4 million 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; and
Private & Commercial Finance Group: an independent finance
house providing vehicle finance for consumers and both vehicle and
plant and equipment finance for businesses.
The top five holdings at 2 March 2012 represented approximately
84% of the remaining portfolio.
We continue to carry out our role as a positive catalyst for
change and can take some credit for persuading the restructuring of
four boards, two changes of strategy to realise value and an
increased bid. We remain strong advocates of good corporate
governance.
The next pro rata redemption of D Shares is scheduled for the
end of June 2012. We will provide an update on progress in June
with the redemption announcement.
Progressive AIM Realisation Limited
6 March 2012
TEN LARGEST INVESTMENTS
D Share portfolio
As at 31 December 2011 Percentage Current Percentage
of relevant Value of portfolio
capital GBP'000 (%)
Company owned
------------------------------ ------------- --------- --------------
Northern Investors Company 6.8% 2,535 38.7%
------------------------------ ------------- --------- --------------
Ilika 5.0% 842 12.9%
------------------------------ ------------- --------- --------------
Squarestone Brasil 1.7% 654 10.0%
------------------------------ ------------- --------- --------------
Metalrax Group 5.7% 513 7.8%
------------------------------ ------------- --------- --------------
Private & Commercial Finance
Group 8.9% 317 4.8%
------------------------------ ------------- --------- --------------
Evocutis 6.8% 294 4.5%
------------------------------ ------------- --------- --------------
Driver Group 3.6% 263 4.0%
------------------------------ ------------- --------- --------------
Orchid Developments 7.4% 213 3.3%
------------------------------ ------------- --------- --------------
Publishing Technology 5.3% 200 3.1%
------------------------------ ------------- --------- --------------
Universe Group 10.6% 153 2.3%
------------------------------ ------------- --------- --------------
Ten largest investments 5,984 91.4%
------------------------------ ------------- --------- --------------
Other investments 559 8.6%
------------------------------ ------------- --------- --------------
Total investments 6,543 100.0%
------------------------------ ------------- --------- --------------
UNAUDITED STATEMENT OF COMPREHENSIVE INCOME
6 months to 31 December 6 months to 31 December
2011 2010
-------------------------------- ------------------------------ -----------------------------
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 - (3,234) (3,234) - 22 22
-------------------------------- -------- --------- --------- --------- -------- --------
Investment income 57 - 57 31 - 31
-------------------------------- -------- --------- --------- --------- -------- --------
Investment management fees (56) (56) (112) (49) (49) (98)
-------------------------------- -------- --------- --------- --------- -------- --------
Other expenses (147) - (147) (162) - (162)
-------------------------------- -------- --------- --------- --------- -------- --------
Loss on ordinary activities
before taxation (146) (3,290) (3,436) (180) (27) (207)
-------------------------------- -------- --------- --------- --------- -------- --------
Taxation (6) - (6) - - -
-------------------------------- -------- --------- --------- --------- -------- --------
Loss and total comprehensive
income attributable to
shareholders (152) (3,290) (3,442) (180) (27) (207)
-------------------------------- -------- --------- --------- --------- -------- --------
Loss per A Share n/a n/a n/a (1.35)p (8.02)p (9.37)p
-------------------------------- -------- --------- --------- --------- -------- --------
(Loss)/earnings per B Share n/a n/a n/a (4.50)p 4.95p 0.45p
-------------------------------- -------- --------- --------- --------- -------- --------
Loss per D Share (1.10)p (23.87)p (24.97)p n/a n/a n/a
-------------------------------- -------- --------- --------- --------- -------- --------
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 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 period.
The Company was incorporated on 28 May 2008 and its D Shares
commenced trading on AIM on 24 February 2011.
As at 31 December 2011, the Company's net assets were solely
attributable to the D Shares. As at 31 December 2010 the Company's
net assets were solely attributable to the B Shares. The final
redemption of the A Shares was completed on 30 December 2010 when
all attributable assets were returned to A Shareholders and all the
outstanding A Shares were redeemed. The final redemption of the B
Shares was completed on 31 March 2011 when all attributable assets
were returned to B Shareholders and the outstanding B Shares were
redeemed.
STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
-------------------------------------- --------------- --------------- -----------
At 31 December At 31 December At 30 June
2011 2010 2011
GBP'000 GBP'000 GBP'000
-------------------------------------- --------------- --------------- -----------
Non-current assets
-------------------------------------- --------------- --------------- -----------
Investments designated at fair value
through profit and loss 6,543 108 12,877
-------------------------------------- --------------- --------------- -----------
Current assets
-------------------------------------- --------------- --------------- -----------
Sales for future settlement - 95 123
-------------------------------------- --------------- --------------- -----------
Other receivables 27 9 90
-------------------------------------- --------------- --------------- -----------
Cash and cash equivalents 359 367 297
-------------------------------------- --------------- --------------- -----------
386 471 510
-------------------------------------- --------------- --------------- -----------
Total assets 6,929 579 13,387
-------------------------------------- --------------- --------------- -----------
Current liabilities
-------------------------------------- --------------- --------------- -----------
Other payables 71 108 87
-------------------------------------- --------------- --------------- -----------
71 108 87
-------------------------------------- --------------- --------------- -----------
Total 6,858 471 13,300
-------------------------------------- --------------- --------------- -----------
Capital and reserves attributable
to shareholders
-------------------------------------- --------------- --------------- -----------
Share capital and share premium 10,399 - 13,399
-------------------------------------- --------------- --------------- -----------
Capital reserve (3,344) 891 (54)
-------------------------------------- --------------- --------------- -----------
Revenue reserve (197) (420) (45)
-------------------------------------- --------------- --------------- -----------
Total shareholders' funds 6,858 471 13,300
-------------------------------------- --------------- --------------- -----------
Net assets per A Share* n/a n/a n/a
-------------------------------------- --------------- --------------- -----------
Net assets per B Share* n/a 112.37p n/a
-------------------------------------- --------------- --------------- -----------
Net assets per D Share* 71.18p n/a 96.17p
-------------------------------------- --------------- --------------- -----------
*As at 31 December 2011, the Company's net assets were solely
attributable to the D Shares. As at 31 December 2010 the Company's
net assets were solely attributable to the B Shares. The final
redemption of the A Shares was completed on 30 December 2010 when
all attributable assets were returned to A Shareholders and all the
outstanding A Shares were redeemed. The final redemption of the B
Shares was completed on 31 March 2011 when all attributable assets
were returned to B Shareholders and the outstanding B Shares were
redeemed.
The Statement of Financial Position at 31 December 2010 is
rounded to the nearest GBP'000s. At that date the shares capital
and share premium comprised only B Shares and was made up as to
GBP2 share capital (Founders Shares) and GBPnil as to share
premium. The B shares were of no par value so there was no
accounting value for the paid up share capital in respect of the B
Shares. The total amount raised on issue of the B shares was
GBP12,961,000 all of which was credited to share premium. Share
issue expenses of GBP441,000 were charged against the share
premium, leaving a net GBP12,520,000. The total amount returned to
B Shareholders by 31 December 2010 was GBP13,900,000 of which
GBP12,520,000 was charged to share premium and the balance to
capital reserves.
UNAUDITED STATEMENT OF CHANGES IN SHAREHOLDERS' FUNDS
6 months to 31 December 2011
Share premium Capital Revenue
account Reserves Reserves Total
---------------------------- ------------- --------- --------- -------
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ------------- --------- --------- -------
Opening shareholders' funds 13,399 (54) (45) 13,300
---------------------------- ------------- --------- --------- -------
Purchases and redemption
of shares (3,000) - - (3,000)
---------------------------- ------------- --------- --------- -------
Loss for the period - (3,290) (152) (3,442)
---------------------------- ------------- --------- --------- -------
Closing shareholders' funds 10,399 (3,344) (197) (6,858)
---------------------------- ------------- --------- --------- -------
6 months to 31 December 2010
Share premium Capital Revenue
account Reserves Reserves Total
----------------------------- ------------- --------- --------- -------
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------------- --------- --------- -------
Opening shareholders' funds 15,880 (10,443) (696) 4,741
----------------------------- ------------- --------- --------- -------
Purchases and redemption
of shares (2,683) (1,380) (4,063)
----------------------------- ------------- --------- --------- -------
Loss for the period - (27) (180) (207)
----------------------------- ------------- --------- --------- -------
Balance on reserves released
on final redemption of A
Shares (13,197) 12,741 456 -
----------------------------- ------------- --------- --------- -------
Closing shareholders' funds - 891 (420) 471
----------------------------- ------------- --------- --------- -------
As at 31 December 2011, the Company's net assets were solely
attributable to the D Shares. As at 31 December 2010 the Company's
net assets were solely attributable to the B Shares. The final
redemption of the A Shares was completed on 30 December 2010 when
all attributable assets were returned to A Shareholders and all the
outstanding A Shares were redeemed. The final redemption of the B
Shares was completed on 31 March 2011 when all attributable assets
were returned to B Shareholders and the outstanding B Shares were
redeemed.
UNAUDITED STATEMENT OF CASH FLOW
6 months to 6 months to
31 December 31 December
2011 2010
-------------------------------------------- ------------- -------------
Company Company
-------------------------------------------- ------------- -------------
GBP'000 GBP'000
-------------------------------------------- ------------- -------------
Operating activities
-------------------------------------------- ------------- -------------
Cash inflow from investment income and
interest 107 31
-------------------------------------------- ------------- -------------
Cash outflow from management and other
expenses (265) (330)
-------------------------------------------- ------------- -------------
Cash inflow from disposal of investments 3,222 3,952
-------------------------------------------- ------------- -------------
Net cash inflow from operating activities 3,064 3,653
-------------------------------------------- ------------- -------------
Financing
-------------------------------------------- ------------- -------------
Expenses of issue of share capital (2) -
-------------------------------------------- ------------- -------------
Payments to purchase own shares (3,000) (4,063)
-------------------------------------------- ------------- -------------
Net cash outflow from financing activities (3,002) (4,063)
-------------------------------------------- ------------- -------------
Increase/ (decrease) in cash and cash
equivalents 62 (410)
-------------------------------------------- ------------- -------------
Opening balance 297 777
-------------------------------------------- ------------- -------------
Cash flow 62 (410)
-------------------------------------------- ------------- -------------
Closing balance 359 367
-------------------------------------------- ------------- -------------
As at 31 December 2011, the Company's net assets were solely
attributable to the D Shares. As at 31 December 2010 the Company's
net assets were solely attributable to the B Shares. The final
redemption of the A Shares was completed on 30 December 2010 when
all attributable assets were returned to A Shareholders and all the
outstanding A Shares were redeemed. The final redemption of the B
Shares was completed on 31 March 2011 when all attributable assets
were returned to B Shareholders and the outstanding B Shares were
redeemed.
NOTES
1 Status
The Company is a closed-ended investment company incorporated
and resident in Guernsey.
2 Accounting policies
The half-yearly financial statements have been prepared in
accordance with IAS 34 (Interim Financial Reporting). The
accounting policies used by the Company are the same as those
stated in the Annual Report for the year ended 30 June 2011, which
was prepared in accordance with International Financial Reporting
Standards ("IFRS"). The Company has also taken the guidance of the
Statement of Recommended Practice issued by the Association of
Investment Companies into account to the extent that it is
appropriate and compatible with IFRS.
The half-yearly financial statements have been prepared on the
going concern basis.
3 Investments
All investments have been classified at "fair value through
profit and loss". At the period end all quoted investments have
been valued at market bid prices apart from the following
investments. Trans Balkan Investments Limited was delisted from AIM
on 23 March 2011 and valued at nil at the period end. On 7 December
2011 Squarestone Brasil announced that it was seeking 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. The ordinary shares of Squarestone Brasil and its warrants
have been valued at the directors' estimate of fair value, which in
the case of the warrants was nil.
Classification and valuation of investments
The Company applied IFRS 7 in the Annual Report for the year
ended 30 June 2011. All investments held by the Company at that
date and at 31 December 2011 were considered to fall within Level 1
and Level 2. The investments classified as Level 2 at 31 December
2011 comprised: Trans Balkan Investments Limited which was unquoted
following its de-listing and has been valued at nil; Squarestone
Brasil Limited, for which a valuation technique based on net asset
value has been used; and the remainder were quoted investments
which have been valued using quoted prices but have been classified
as Level 2 investments due to their underlying trading volumes.
Squarestone Brasil Limited delisted from AIM in January 2012.
The classification of the Company's investments held at fair
value as at 31 December 2011 is detailed in the table below:
Level Level Level Total
1 2 3
------------------------------- -------- -------- -------- --------
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------- -------- -------- --------
Investments designated
as fair value through profit
and loss 5,888 655 - 6,543
------------------------------- -------- -------- -------- --------
No comparatives for the six months ended 31 December 2010 have
been provided, as there was no D Share Class Fund at that date.
Only one investment, Sanderson Group, remained in the B Share
portfolio and it was classified at Level 1.
4 Investment management fees
31 December 2011 31 December 2010
--------------------- ---------------------------- ----------------------------
Revenue Capital Total Revenue Capital Total
--------------------- -------- -------- -------- -------- -------- --------
Investment GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
management
fees
--------------------- -------- -------- -------- -------- -------- --------
Basic fee 41 41 82 35 35 70
--------------------- -------- -------- -------- -------- -------- --------
Capital return
fee 15 15 30 14 14 28
--------------------- -------- -------- -------- -------- -------- --------
Equity appreciation
fee - - - - - -
--------------------- -------- -------- -------- -------- -------- --------
Total 56 56 112 49 49 98
--------------------- -------- -------- -------- -------- -------- --------
One half of basic and capital return fees are charged to capital
and the entirety of the equity appreciation fee is charged to
capital.
5 Share capital and Share premium
At the period end the Company's issued share capital consisted
entirely of 9,643,161 D Shares and two Founders Shares of GBP1
nominal value each. The Founders Shares have negligible rights. The
D Shares are participating redeemable preference shares of no par
value and are admitted to trading on AIM. At 31 December 2010 the
Company's issued share capital comprised 418,858 B Shares and two
Founders Shares.
Further details of the share issue and redemption of the D Share
class are set out below:
D Share
Issue of D Shares
Pursuant to the AIM Admission Document dated 21 January 2011 the
Company:
a) On 24 February 2011, allotted 16,096,091 D Shares, all of
which were issued for consideration in the form of investments
received. The total consideration was GBP16,096,091.
b) On 17 March 2011 allotted a further 328,281 D Shares, all of
which were issued for consideration in the form of investments
received. The total consideration was GBP328,281.
Redemptions of D Shares
Pro-rata redemptions of D Shares
On 30 June 2011 2,594,422 D Shares were redeemed at a price of
96.36p per share.
On 29 December 2011 4,195,789 D Shares were redeemed at a price
of 71.50p per share.
These redemptions were effected pro-rata to the number of D
Shares held by each holder at the time of redemption.
6 Net assets per Share
Net asset per D Share, as at 31 December 2011 is based on the
number of D Shares in issue at the end of the period. No D Shares
were in issue during the six months ended 31 December 2010.
7 Loss per Share
D Share
Loss per D Share for the six months ended 31 December 2011 is
based on the loss of GBP3,442,000 attributable to the weighted
average of 13,784,344 D Shares of no par value in issue during the
period. No D Shares were in issue during the six months ended 31
December 2010.
8 Taxation
The Company is resident for tax purposes in Guernsey.
The Company applies for exempt status under the Income Tax
(Exempt Bodies) (Guernsey) Ordinances 1989 and 1992 and is charged
an annual exemption fee of GBP600.
The tax charge shown in the Statements of Comprehensive Income
relates to overseas withholding tax on dividend income.
The Directors manage the affairs of the Company so that the
upfront and annual requirements relating to "reporting fund" status
under the United Kingdom Offshore Reporting Rules are, and continue
to be, met in relation to the D Shares.
9. 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 Annual Report for the period ended 30
June 2011 received an unqualified audit report and was sent to
shareholders during September 2011 and has been filed with the
Guernsey Financial Services Commission.
The half-yearly report was approved by the Board of directors on
6 March 2012.
For further information please contact:
Brookwell Limited
Tom Lancaster-King (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)
John Webb Tel: 020 7490 3788
Website: www.brookwelllimited.com
6 March 2012
This information is provided by RNS
The company news service from the London Stock Exchange
END
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