RNS Number:5689C
Addworth PLC
08 May 2006
Addworth PLC
8 May 2006
Addworth plc
('Addworth' or the 'Company')
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005 (Unaudited)
AT A GLANCE
* Admitted to trading on AIM and commenced business on 3rd February 2005
* At the end of the first period, Addworth's investments were stated at #933,039
and had seen their value increase to #1,697,070
* Unrealised portfolio gain of #764,031
* Portfolio value up 81.88%
* Addworth created and floated three new issues in the first and subsequent
period
Executive Chairman, Mark Watson-Mitchell commented:
"I am delighted to report an excellent set of results in our first year of
operation. The Addworth strategy is working well with the Company holding a
portfolio of strategic investments in growth companies.
We have a solid pipeline of opportunities under review for possible investment,
and are well positioned to build upon this success in the coming year.
The current year has started strongly and based on these factors, the outlook
for the remainder of the year is very encouraging."
COMPANY STRATEGY
The Addworth strategy is to establish newly quoted companies which focus on
making acquisitions in specific business sectors. Addworth aims to play a key
role in the formation and funding of these new companies by providing early
stage investment capital at the 'founder', 'pre-IPO' and subsequent phases of a
newly quoted company's development.
To enhance the abilities of companies to increase capital value and corporate
profitability, Addworth provides management and financial assistance. As the
companies develop, Addworth will derive management fees and, in due course, part
or all of the invested equity may become subject to disposal with the aim of
establishing added capital value for Addworth and therefore its shareholders.
Three key elements to the Addworth strategy
* invest in and promote companies on to the AIM and Ofex markets
* invest in undervalued smaller quoted companies
* acquire 'non-core' trading operations from quoted companies
Since Addworth's admission to AIM on 3rd February 2005, the Directors have
conducted detailed analysis of a number of potential transactions and
acquisition targets.
It is the Directors' opinion that opportunities also exist to acquire non-core
subsidiary interests from various quoted companies, or from companies in the
private sector where, in each case, the target company may benefit from Addworth
introducing experienced and proven management and investment capital. The
Directors will be involved in the development of these businesses by organic or
acquired growth with a view to achieving an exit by trade sale or flotation.
The Company also seeks to take advantage of opportunities to acquire, or invest
mainly in, established companies whose shares are traded on a recognised
exchange in the United Kingdom or the Republic of Ireland, where the current
market capitalisation does not reflect the underlying value and where the
Company believes it can be pro-active in facilitating change and unlocking a
higher value.
CHAIRMAN'S STATEMENT AND INVESTMENT REVIEW
We have learned so much and in such a short time frame. It has been an exciting
year and, furthermore, as our team has built up its own experience, we now
realise that we do have a massive potential in our particular niche. We have
also been aided by an excellent band of professional advisers.
The Company is continually searching out and identifying smaller company
situations for funding and helping to bring them rapidly to a market quotation.
We have also been seeking undervalued stocks in which we can take both a
meaningful stake and help to improve those company profiles, thereby adding to
investor awareness.
We have entered into negotiations with some non-quoted companies,but to no
avail. The quest to acquire interesting 'non-core operations' of other quoted
companies continues - with prospects under consideration.
At the end of our first period our investments were stated in the balance sheet
at #933,039 but had a portfolio value of #1,697,070. That represented an
unrealised gain of #764,031, a near 82% increase - not yet recognised in the
accounts under our accounting policies. We attempted to stay fully invested
throughout the trading period, however we still ended the year with cash and
debtors of #130,640.
During the period to 31 December 2005, we made adjustments to our short-term
portfolio resulting in sales of #257,731 but these disposals created a gross
loss of #45,065. Additional sales of #17,837 were also generated from consulting
fees. Overheads of #288,938 and interest income of #14,731 resulted in a pretax
loss of #319,272 for the period.
In February 2006 our cash balance was boosted by the subscription of #180,000 by
Starvest Plc, the AIM quoted investment company, which now holds 12.31% of the
Addworth equity.
Our flotations
Early last summer we took e-retail, an internet development consultancy, to AIM.
In the process we created a company with strong cash reserves that was ready to
do a deal in its sector. The eventual target acquisition was spotted early in
its own creation and, following it breaking even last December, the EBTM company
was 'reversed' into e-retail in February this year.
Our investment of #95,000 by the end of the year was valued at #326,500, and at
the beginning of this month that stake is worth #450,000. The EBTM operation is
impressive and trading in the period to end April 2006, its year end, was above
expectations.
Also in the summer of 2005 we created, funded and floated on Ofex, a quite
unique investment company called Yellowcake. The intention was to research and
then invest in quoted uranium stocks across the globe. By late September the
Yellowcake portfolio started to take shape and by the year end was gently ahead
of cost, despite some big disappointments in Australian stocks.
In the last few months Yellowcake has benefited from a surge in the price of
uranium which is beginning to be reflected in the stock prices of its portfolio
constituents, especially in Canada and Australia. Elsewhere a large investment
made in the third stage funding of a private uranium business, with interests in
Africa, showed an increase in value. That company floated on the AIM market a
couple of weeks ago - pushing its value up over 60% from cost.
At the beginning of this month, Yellowcake was up an average of 60% in portfolio
value. We are delighted with this investment to date. It cost #90,000 and is
currently worth around #300,000. That value could increase significantly if
Yellowcake achieves the second part of its strategy, which is to invest directly
in uranium prospects.
Towards the end of 2005 we invested an initial #75,000 in The Core Business
(TCB), a company that creates, develops, launches and distributes personal care
products and colour cosmetics. With the company's AIM flotation in early March
this year, our investment had increased to #182,580 and the value has since
advanced to #440,000.
This company has the potential to negotiate a string of joint venture and
licence agreements with a number of well-known brands. It is still very early
days in TCB's existence but its corporate development since it has floated is
impressive and the prospects are considerable.
New flotations
Elsewhere on our float list we are currently working on the AIM listing of a
very profitable specialist niche business, operating in the construction
engineering sector. The company concerned has a high quality client base
together with impressive order intakes and is well positioned to continue its
record of profitable growth. We look forward to making an investment in that
company's equity within the next month or so and hope to bring it to the market
this summer.
Another potential AIM float is in discussion. This particular company is a niche
player in the supply of highly qualified health and safety executives to the
global oil and gas sector. It has a long record of growth and is profitable but,
with a round of funding, its potential could be opened up considerably.
On the Ofex front we see real room for a major uplift in investor interest.
Unfortunately the market itself is doing next to no direct promotion of its
facilities to either companies or investors. However that could change.
Taking such a view, we have decided to establish a new company called Early
Equity and it will focus purely upon the Ofex market. It is our intention to
trade down the majority of our Ofex investments into the portfolio of this new
company, in which we will hold between 35% -40% of the equity, leaving in our
Addworth portfolio only those investments that we understand will shortly seek
an AIM quotation.
Early Equity will mirror on Ofex the operations of Addworth on the AIM market.
We will expect to see that company funding a number of companies at a very early
stage, as well as creating new specialist acquisition vehicles. It will be the
intention that each of those investee companies will be floated upon Ofex, with
Early Equity helping to introduce investors and guide their corporate strategy.
Currently under consideration are projects to fund companies in the following
sectors: internet fraud prevention; surveillance equipment; television and film
production; estate agency; house-building; coal resources; gaming; oil and gas
operations; and even game fishing.
None of the likely issues will be large, but they will enable investors to
participate, at an early stage, in the equity of some very interesting
companies, any of which could prove to be future winners in their field.
Our 'Undervalued' Portfolio
Another part of the Addworth core strategy is to seek out and invest in
undervalued smaller quoted companies, whether they are fully listed or quoted on
AIM.
Early into Addworth's existence we invested #99,208 in the shares of Myhome
International, the Ofex quoted cleaning franchise business. This company proved
to be in the initial stages of its expansion, with the number of its franchisees
increasing swiftly. By the end of 2005 our investment had improved in value to
just over #307,000.
In the last couple of months we have 'top sliced' our holding - returning the
bulk of our original cash investment and leaving us in with around 1.2m shares,
currently trading around the 35p level.
The hotel company, AJ Leisure, was another Ofex investment that we made early in
2005. The #102,000 cost remained at break even for the better part of 2005,
before rising to #127,000 in value by the end of 2005. The countryside inns
operator has recently joined AIM and has now re-branded itself as the Maypole
Group. We have subsequently added to our holding in this company in anticipation
of an acquisition programme that should really boost its estate and its profits.
By the end of 2005 we had built up a 7.4m share stake in Cheerful Scout, the AIM
quoted media company that is now providing specific equipment and services for
events for major professional firms. This company's balance sheet was
reorganised earlier this year and it now looks as though Cheerful Scout is
trading back into profits. This year we have added to our stake, which is now
10m shares. The cost of #83,149 compares with a current value of over #105,000,
a level at which we consider the shares to be undervalued.
In December 2005 we made a #50,000 investment in a new AIM quoted company called
Venue Solutions. At the same time we also secured three sets of call options
over further equity in this specialist provider of venue management
technologies, all three at advantageous price levels. We have since sold, at a
profit, our original investment and we are looking to action dealings in the
option stock.
In the main we have seen useful advances in the majority of our portfolio
constituents. However, we do have two disappointments - the first is Intandem
Films, in which we have invested #111,000 and which by the year end had fallen
to #82,000 in value and is now worth only #64,000. This is very unsatisfactory,
however, for the time being we have elected to maintain our stance in the stock,
hopeful that its management will be able to heighten the company's profile
sufficiently and thereby increase its value.
The second investment is the #60,000 stake we have in Branded Entertainment,
formerly Three Strikes, a developer of sport and lifestyle DVD projects. Its
major involvement is with the creation of an animated feature film centred
around the Manchester United Football Club. It has taken a very long time in
obtaining funding. Hopefully that situation will be remedied in the near future,
but in the meantime we are locked into a private investment that could
eventually reward us for our patience.
The Portfolio Balance
The balance of our portfolio is made up of much smaller, less meaningful stakes.
Such constituents included at the year end were Cap Energy, an Ofex oil and gas
play, which we have since sold at a profit; Wogen, an AIM quoted metals and
minerals trader, which we also sold at a profit, well before the recent profit
warning; and Elephant Loans, an AIM finance company, which again we have sold at
a profit since the year end.
Other year end portfolio constituents, that are still in our list, include
Franchise Investment Strategies, an Ofex franchise investor, showing around a
30% advance on cost; Creative Entertainment, an Ofex quoted concert business,
was up 19% at the year end; NBCC, an Ofex shell which is looking to do a deal,
which we will hold for the time being; Twenty, has been a really poor performer;
initially it was quoted on Ofex but is now on AIM. Our entry price was high but
we will hold for some recovery; Sexual Health Group which is a healthy yielder
on Ofex; and finally Petsome and Ricmore, which are two other dismal performers
in our portfolio - two AIM listed investment vehicles where the failure of the
incumbent management to find and complete acceptable investments has culminated
in the value of the investment in both stocks falling well below book cost.
Finally, on a positive portfolio note, we have enjoyed some really good profits
already this year after taking a 1m share stake in Concorde Oil & Gas, for just
#24,000. Having already sold off a sufficient proportion of our stake to get our
money back and then double that, we are still holding a sizeable number of
shares, albeit undeclarable. This Ofex-quoted company is expected to shortly
seek an AIM listing which could help to further increase its value from around
the 11p level.
Going Forward
We ended the period with a portfolio value of #1,697,070. That was an unrealised
gain of #764,031, which was a near 82% increase.
We have a number of potential investments to make in companies that we will soon
be looking to take on to either the AIM or Ofex markets. Taking an early stage
investment view and rapidly gaining a quotation for those investee companies
really does help to increase our shareholder value. The management of the
Company is encouraged that if we keep on doing more of the same over the coming
year we should see an increase in our overall balance sheet value.
Furthermore we are enjoying the benefits of identifying undervalued market plays
in what many would consider to be the unfashionable end of the market, that of
the even smaller quoted companies. Hopefully this will continue in 2006, a year
which holds a great deal of promise for Addworth as a whole.
Mark Watson-Mitchell
Executive Chairman
UNAUDITED PROFIT AND LOSS ACCOUNT for the period from 29 October 2004 to 31
DECEMBER 2005
Notes Period
ended 31 December
2005
#
Turnover 1 275,568
Cost of sales (320,633)
---------
Gross loss (45,065)
Administrative expenses (288,938)
---------
Operating loss (334,003)
Interest receivable 14,731
---------
Loss on ordinary activities before taxation (319,272)
Tax on loss on ordinary activities -
---------
Retained loss for the financial period (319,272)
=========
Loss per share
Basic and diluted loss per share 2 (0.7 p)
All of the Company's operations are classed as continuing. There were no gains
or losses in the period other than those included in the above profit and loss
account.
UNAUDITED BALANCE SHEET as at 31 DECEMBER 2005
2005
#
Current assets
Debtors 70,501
Current asset investments 933,039
Cash at bank 60,139
---------
1,063,679
Creditors: amounts falling due within one year (112,067)
---------
Net assets 951,612
=========
Capital and reserves
Called up share capital 285,000
Share premium account 985,884
Profit and loss account (319,272)
---------
Shareholders' funds 951,612
=========
UNAUDITED CASHFLOW STATEMENT for the period ended 31 DECEMBER 2005
Notes Period
ended 31 December
2005
#
Net cash outflow from operating activities 3 (1,229,097)
Returns on investments
Interest received 14,731
---------
Cash outflow before financing (1,214,366)
Financing
Issue of ordinary share capital 1,270,884
---------
Increase in cash in the period 56,518
=========
NOTES
1 Accounting policies
The accounts have been prepared in accordance with applicable accounting
standards.
Basis of accounting
The accounts have been prepared under the historical cost convention.
Current asset investments
Current asset investments are stated at the lower of cost and net realisable
value. Net realisable value is determined from published price quotations for
listed investments. For non listed investments net realisable value is
determined via a review of the related Company's financial position and future
prospects.
Deferred taxation
Deferred tax is provided for on a full provision basis on all timing
differences, which have arisen but not reversed at the balance sheet date.
Deferred tax assets are recognised to the extent that they are recoverable, that
is, on the basis of all available evidence, it is more likely than not that
there will be suitable taxable profits from which the future reversal of the
underlying timing differences can be deducted. Any assets and liabilities
recognised have not been discounted.
Turnover
Turnover represents amounts receivable on disposal of current asset investments
and management fees earned during the period in respect of providing management
services to certain companies in which the Company has made a short term
investment. Turnover excludes VAT.
2 Loss per share
The basic loss per share is based upon a loss of #319,272 and the weighted
average number of shares of 46,344,989 in issue during the period.
3 Reconciliation of operating loss to net cash outflow from #
operating activities
Operating loss (334,003)
Increase in current asset investments (933,039)
Increase in debtors (70,501)
Increase in creditors 108,446
---------
Net cash outflow from operating activities (1,229,097)
=========
4 Reconciliation of net cash flow to movement in net funds #
Increase in cash in the year 56,518
Net funds at 29 October 2004 -
---------
Net funds at 31 December 2005 56,518
=========
5 Analysis of net funds At 29 October Cash Flow At 31 December
2004 2005
# # #
Cash at bank - 60,139 60,139
Bank overdraft - (3,621) (3,621)
--------- -------- ---------
- (56,518) (56,518)
========= ======== =========
6 Investments
At 31 December 2005 the aggregate market value of the investments was
#1,697,070, resulting in an unrecognised gain of #764,031 as at 31 December
2005. If this gain were to be realised this would result in a potential tax
liability of #229,209, based on a corporation tax rate of 30%. Market value
is based on published price quotations where applicable. Where no such
price is available, the market value of the investment is determined
through a review of the related Company's financial position and future
prospects.
Name of Company Number of Lower of cost Market value
shares held or net
realisable
value
#
Cap Energy plc 100,125 26,700 35,544
Cheerful Scout plc 7,400,000 54,506 96,200
EBTM plc (formerly 9,000,000 95,000 326,250
e-retail plc)
Elephant Loans plc 500,000 15,000 22,500
Franchise Investment 625,000 25,000 32,813
Strategies plc
Intandem Films plc 2,848,000 81,880 81,880
JGP Investments plc 1,250,000 25,000 29,750
Maypole Group plc 6,000,000 102,000 127,200
(formerly AJ Leisure
plc)
MyHome International 1,500,000 99,208 307,500
plc
NBCC plc 250,000 24,375 24,375
Petsome plc 1,200,000 24,000 25,500
Ricmore plc 1,200,000 21,000 21,000
Sexual Health Group 25,000 25,000 25,000
plc
10% loan notes
The Core Business plc 6,000,000 75,000 75,000
Branded Entertainment 12,500 60,000 60,000
Limited (formerlyThree
Strikes Limited)
Twenty plc 43,650 21,825 22,916
Venue Solutions plc 225,000 50,715 61,312
Wogen plc 11,000 16,830 16,830
Yellowcake plc 16,250,000 90,000 305,500
--------- -----------
933,039 1,697,070
========= ===========
7 The Directors do not recommend the payment of a dividend for the period.
8 The financial information set out in this document is unaudited and does not
constitute statutory accounts.
The Report and Accounts will be posted to shareholders and copies will be
available to the public, free of charge, from the office of Nabarro Wells & Co.
Ltd, Saddlers House, Gutter Lane, Cheapside, London, EC2V 6HS.
Enquiries:
Addworth plc
Mark Watson-Mitchell, Executive Chairman +44 (0) 207 638 8750
www.addworth.co.uk
Nabarro Wells & Co. Ltd
Hugh Oram +44 (0) 207 710 7404
Aquila Financial Ltd
Yvonne Fraser +44 (0) 207 202 2609
Peter Reilly +44 (0) 207 202 2601
www.aquila-financial.com
This information is provided by RNS
The company news service from the London Stock Exchange
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