TIDMBKWD
RNS Number : 2420Z
Brookwell Limited
05 March 2013
BROOKWELL LIMITED
Announcement of half-yearly results for the six months to 31
December 2012
Investment objective
The objective of the Company is to realise value from its
portfolios of AIM Securities and Listed Securities and, in the case
of the D Share class fund, ISDX Securities (formerly PLUS
Securities) and progressively return cash to shareholders.
Financial highlights
D Shares
Amount raised in placing GBP16.4m
Amount returned to shareholders in the six months ended GBP1.1m
31 December 2012
Amount returned to shareholders in the period from admission GBP7.2m
of shares to trading on AIM ("Admission")(1) to 31 December
2012
Number of securities acquired in the placing(1) 76
Number of securities at 31 December 2012 12
Net asset value per Share at Admission(2) 96.8p
Net asset value per Share at 31 December 2012 57.4p
Weighted average net asset value/cash returned per Share(3)
at/up to 31 December 2012 67.7p
(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 D returned GBP1.1 million to shareholders in the six
months to 31 December 2012 and has now given back a total of GBP7.2
million to D Shareholders.
On 31 December 2012 the net asset value ("NAV") per D share was
57.35p and the number of holdings had been reduced to 12.
Subsequently the NAV per D share at 1 March 2013 was 56.63p and the
number of shareholdings had reduced further to eight. The D Class
Fund held cash of GBP1.0 million on 1 March 2013.
The portfolio has continued to become more concentrated as the
number of investee companies falls. The NAV per share fell from
66.99p at the end of June 2012 to 57.35p at 31 December 2012. The
main features of the portfolio over the period were:
-- Northern Investors, which remains by far the largest
investment, had an excellent share price performance rising 26% and
returned a further GBP10 million to shareholders on 17 December, of
which Brookwell's share was GBP773,000. The increase in share price
meant that the carrying value at 31 December 2012 was only
GBP32,000 less than that at 30 June despite the cash return.
-- The share price of Ilika fell substantially during the period
following a trading update and news that a partner was not renewing
an agreement. As a consequence Brookwell sold its holding.
-- We reduced substantially the valuation of our investment in
Squarestone Brasil, which had delisted in January 2012. The
reduction reflected details of an arrangement it had made with a
replacement joint venture partner and the terms of refinancing
which reduced the net asset value and a fall in the value of the
Brazilian Real during the period.
-- In December 2012 we and other shareholders concluded that the
terms of a proposed fund-raising by Orchid Developments were not in
shareholders' interests. The directors of Orchid Developments would
not compromise on the board structure to improve governance and in
consequence the resolution was defeated and the company was placed
into liquidation. The investment was written down to nil at that
time.
-- As described in my report in September 2012 Dawson
International was placed into administration as a result of being
unable to resolve its complex pension issues.
-- The share price of Metalrax fell as a weak trading update was
followed by the results announcement confirming that and describing
a challenging outlook in its markets.
-- In September 2012 I spoke of the positive action taken by the
Investment Manager regarding Universe Group. In the period up to 31
December 2012 Brookwell sold a part of its holding and at that date
the bid price was significantly ahead of that at 30 June 2012.
Since the end of the half-year, Brookwell has disposed of the
remainder of the holding. The majority of the holding was sold at a
price which was almost double that of the fund raising in July
2012.
A full list of the holdings at 31 December 2012 is set out after
the Investment Manager's report.
Global stock market indices have increased over the past three
months, reflecting a more sanguine economic outlook. Large
companies have substantial cash balances and there appears to be a
rotation with investors switching from bonds to equities. This
euphoria has generally bypassed the UK small cap market, where
liquidity and institutional appetite remain poor. Nevertheless, the
improvement in tone provides a slightly better environment for the
Investment Manager to continue to seek a favourable result for the
remainder of the investments as Brookwell moves towards the
continuation vote in the third quarter of 2014.
As the D Share portfolio has reduced in size, the Directors and
advisers have reviewed the ongoing costs of the Company. The
Investment Manager's contract provides for its fees to reduce from
1 July 2013 to 1% of net asset value at 30 June 2013. The Directors
and certain advisers have agreed to reduce their own fees with
effect from 1 July 2013 by approximately GBP48,000 per annum in
total. If the net assets of the Company were to remain unchanged at
30 June 2013 the combined effect of the reduced management fee and
the revised costs would be a reduction of approximately 40% in the
Company's annual running costs.
Christopher Clark
5 March 2013
INVESTMENT MANAGER'S REPORT
The weakness of the economies in some European countries,
notably Greece and Spain, cast a cloud over investors' attitude to
risk. In the UK Government borrowing continues to rise, the economy
remains in the doldrums with interest rates being kept at
historically rock bottom levels.
At 30 June 2012 the total number of holdings was 14 and at 31
December 2012 only 12 stocks remained; the current holdings at 1
March 2013 were eight. A total of GBP1.1 million was returned to
shareholders at the end of December 2012 which means that GBP7.2
million has been returned to D shareholders since the fund's
launch.
At 31 December 2012 the top five holdings represented 97.7% of
the portfolio.
Northern Investors remains the largest investment. It is an
investment trust mainly invested in unquoted companies which is
liquidating its investments and distributing the proceeds to
shareholders.
Universe Group is a provider of payment and on-line loyalty
systems. On 18 December 2012 it announced that it expected to
report a profit for the full year ahead of market expectations.
This has assisted us in successfully disposing of Brookwell's
entire holding after the period end.
Private and Commercial Finance Group is an independent finance
house providing vehicle finance for consumers and both vehicle and
plant and equipment finance for business. It raised GBP6m in
November 2012 from an issue of convertible unsecured loan stock
listed on the main market. The company's interim profits were 40%
above the same period for the previous year.
Squarestone Brasil is a Brazilian retail development company,
which delisted from AIM in January 2012. As noted in the chairman's
statement the valuation was reduced in the six months reflecting
both a fall in the underlying value and currency effects.
Metalrax Group is a supplier of specialist engineering and
consumer durable products for both commercial and retail markets,
including the majority of bakeware sold in the UK.
In January 2013 Evocutis updated the market on a strategic
review and confirmed that it was in discussion with a number of
parties in Europe and North America and was confident of a positive
outcome. We have taken advantage of market liquidity to sell down
the entire position, for proceeds in excess of the carrying value
at 31 December 2012.
As at the date of this report there are eight holdings in the
portfolio, of which three are fully written down. We continue to
have discussions regarding the portfolio companies with the
objective of obtaining value and liquidity for Brookwell
shareholders.
Progressive AIM Realisation Limited
5 March 2013
INVESTMENTS
D Share portfolio
As at 31 December 2012 Percentage Current Percentage
of relevant value of portfolio
Company capital GBP'000 (%)
owned
-------------- --------- ---------------
Northern Investors Company 6.5% 2,319 67.3%
Universe Group 4.9% 320 9.3%
Metalrax Group 5.7% 291 8.4%
Private & Commercial Finance
Group 8.9% 270 7.8%
Squarestone Brasil(1) 1.7% 167 4.8%
Evocutis 5.6% 68 2.0%
Hotel Corp 1.5% 9 0.3%
Union Medtech 0.5% 2 0.1%
Esv Group 0.3% - -
Orchid Developments(1) 7.0% - -
Squarestone Brasil Warrants(1) 1.7% - -
Trans Balkan Investments(1) 2.2% - -
-------------- --------- ---------------
Total investments 3,446 100.0%
-------------- --------- ---------------
(1) Delisted
UNAUDITED STATEMENT OF COMPREHENSIVE INCOME
6 months 6 months 6 months 6 months 6 months 6 months
to to to to to to
31 December 31 December 31 December 31 December 31 December 31 December
2012 2012 2012 2011 2011 2011
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- --------------- ------------- ------------- --------------- -------------
(Losses) on investments
designated
at fair value through
profit or loss - (625) (625) - (3,234) (3,234)
Investment income 20 - 20 57 - 57
Investment
management
fees (47) (47) (94) (56) (56) (112)
Other expenses (141) - (141) (147) - (147)
----------------- --------------- ------------- ------------- --------------- -------------
(Loss) on
ordinary
activities
before
taxation (168) (672) (840) (146) (3,290) (3,436)
Taxation (2) - (2) (6) - (6)
----------------- --------------- ------------- ------------- --------------- -------------
Total
comprehensive
(loss)
attributable
to shareholders (170) (672) (842) (152) (3,290) (3,442)
----------------- --------------- ------------- ------------- --------------- -------------
(Loss) per D
Share (1.95)p (7.72)p (9.67)p (1.10)p (23.87)p (24.97)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 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.
UNAUDITED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
At 31 At 31 At 30
December December June
2012 2011 2012
GBP'000 GBP'000 GBP'000
---------- ---------- --------
Non-current assets
Investments designated at fair value through
profit and loss 3,446 6,543 5,416
---------- ---------- --------
Current assets
Other receivables 15 27 81
Cash and cash equivalents 508 359 419
---------- ---------- --------
523 386 500
---------- ---------- --------
Total assets 3,969 6,929 5,916
---------- ---------- --------
Current liabilities
Other payables 53 71 58
---------- ---------- --------
53 71 58
---------- ---------- --------
Total assets less current liabilities 3,916 6,858 5,858
---------- ---------- --------
Capital and reserves attributable to shareholders
Share capital and share premium 8,699 10,399 9,799
Capital reserve (4,295) (3,344) (3,623)
Revenue reserve (488) (197) (318)
---------- ---------- --------
Total shareholders' funds 3,916 6,858 5,858
---------- ---------- --------
Net assets per D Share 57.35p 71.18p 66.99p
UNAUDITED STATEMENT OF CHANGES IN SHAREHOLDERS' FUNDS
6 months to 31 December 2012
Share
premium Capital Revenue
account Reserves Reserves Total
GBP'000 GBP'000 GBP'000 GBP'000
--------- ---------- ---------- --------
Opening shareholders' funds as
at 1 July 2012 9,799 (3,623) (318) 5,858
Purchases and redemption of shares (1,100) - - (1,100)
Loss for the period - (672) (170) (842)
--------- ---------- ---------- --------
Closing shareholders' funds as
at 31 December 2012 8,699 (4,295) (488) 3,916
--------- ---------- ---------- --------
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 as
at 1 July 2011 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 as
at 31 December 2011 10,399 (3,344) (197) 6,858
--------- ---------- ---------- --------
All items during both periods are attributable to the D
Shares.
UNAUDITED STATEMENT OF CASH FLOW
6 months 6 months
to 31 December to 31 December
2012 2011
GBP'000 GBP'000
---------------- ----------------
Operating activities
Cash inflow from investment income
and interest 81 107
Cash outflow from management and
other expenses (236) (265)
Cash inflow from disposal of investments 1,344 3,222
---------------- ----------------
Net cash inflow from operating activities 1,189 3,064
---------------- ----------------
Financing
Expenses of issue of share capital - (2)
Payments to purchase own shares (1,100) (3,000)
---------------- ----------------
Net cash outflow from financing activities (1,100) (3,002)
---------------- ----------------
Increase in cash and cash equivalents 89 62
---------------- ----------------
Opening balance 419 297
Cash flow 89 62
---------------- ----------------
Closing balance 508 359
---------------- ----------------
All items during both periods are attributable to the D
Shares.
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 2012, 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. Delisted investments have been
valued as follows:
Trans Balkan Investments Limited was delisted from AIM on 23
March 2011 and valued at nil at the period end.
Squarestone Brasil Limited delisted its ordinary shares and
warrants from AIM on 16 January 2012. The ordinary shares of
Squarestone Brasil Limited have been valued at the Directors'
estimate of fair value based on net asset value with a liquidity
discount applied and its warrants have been valued at nil.
Orchid Developments Limited was suspended from trading on AIM on
24 September 2012. In December 2012 it was placed into liquidation
and the shares were cancelled from trading on AIM on 15 January
2013. The holding was valued at nil at the period end.
.
Classification and valuation of investments
The Company applied IFRS 7 in the Annual Report for the year
ended 30 June 2012. Categorisation within the hierarchy has been
determined on the basis of the lowest level input that is
significant to the fair value measurement of the relevant asset.
Investments classified within Level 3 have significant unobservable
inputs. The Level 3 figure consists of the investments in Trans
Balkan Investments Limited, Squarestone Brasil Limited and Orchid
Developments Limited.
The classification of the Company's investments held at fair
value as at 31 December 2012 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 3,279 - 167 3,446
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
4 Investment management fees
31 December 2012 31 December 2011
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- -------- -------- --------
Basic fee 41 41 82 41 41 82
Capital return
fee 6 6 12 15 15 30
Equity appreciation
fee - - - - - -
-------- -------- -------- -------- -------- --------
Total 47 47 94 56 56 112
-------- -------- -------- -------- -------- --------
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 6,828,071 D Shares (31 December 2011: 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.
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.
On 29 June 2012 890,062 D Shares were redeemed at a price of
67.41p per share.
On 28 December 2012 1,916,028 D Shares were redeemed at a price
of 57.41p 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 assets per D Share, as at 31 December 2012 is based on the
number of D Shares in issue at the end of the period.
7 Loss per Share
D Share
Loss per D Share for the six months ended 31 December 2012 is
based on the loss of GBP842,000 (31 December 2011: GBP3,442,000)
attributable to the weighted average of 8,712,859 (31 December
2011: 13,784,344) D Shares of no par value in issue during the
period.
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 year ended 30
June 2012 received an unqualified audit report and was sent to
shareholders during September 2012 and has been filed with the
Guernsey Financial Services Commission.
The half-yearly report was approved by the Board of Directors on
5 March 2013.
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)
James Lewis / Paul Zimmerman Tel: 020 7936 3000
Marshall Securities Limited (Broker)
John Webb Tel: 020 7490 3788
5 March 2013
Website: www.brookwelllimited.com
END
This information is provided by RNS
The company news service from the London Stock Exchange
END
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