TIDMSOV
RNS Number : 5256S
SovGEM Limited
20 May 2009
SovGEM Limited
SovGEM Limited ("the Company"), the emerging market equity finance house, is
pleased to announce its annual results for the year ended 31 December 2008.
HIGHLIGHTS:
* Net Asset Value (NAV) 14.9p (2007: 34.4p)
* Most portfolio companies continue to report strong earnings and operating
profits
* Acquisition of Hanson Westhouse intended
For further information:
+--------------------------------------------+----------------------------+
| SovGEM Limited | |
| Hugh de Lusignan, Chief Executive Officer | Tel: +44 (0) 20 7389 0655 |
| hdelusignan@sovereigngroup.com | www.sovgem.com |
| | |
+--------------------------------------------+----------------------------+
| Nominated Adviser | |
| Smith & Williamson Corporate Finance | |
| Limited | Tel: +44 (0) 20 7131 4000 |
| Azhic Basirov/Joanne Royden-Turner | www.smith.williamson.co.uk |
| corpfinance@smith.williamson.co.uk | |
| | |
+--------------------------------------------+----------------------------+
| Broker | |
| Hanson Westhouse Limited | |
| Tim Metcalfe / Martin Davison | Tel: +44 (0) 20 7601 6100 |
| tim.metcalfe@hansonwesthouse.com | www.hansonwesthouse.com |
| | |
+--------------------------------------------+----------------------------+
| Media enquries: | |
| Abchurch Communications Limited | |
| Charlie Jack / Jack Ballantyne | Tel: +44 (0) 20 7398 7714 |
| jack.ballantyne@abchurch-group.com | www.abchurch-group.com |
| | |
+--------------------------------------------+----------------------------+
CHAIRMAN AND Chief Executive Officer's Report
Review of 2008
2008 was an unprecedented year in the financial markets globally. Despite the
underlying strength of most of our investee companies their stock market
valuations were dramatically hit as asset classes collapsed as a consequence of
the collapse of the credit markets. The deleveraging that has resulted from the
credit crunch has seen stock valuations fall to levels that we had not
envisaged.
As a result of a significant fall in stock valuation, an impairment of
available-for-sale assets of GBP1,524,717 has been recognised in the income
statement (2007: Nil).
Chinese market in 2008
Chinese stock markets have been particularly hard hit in the global turmoil.
From its peak in October 2007 (at 5,877) the CSI300 Index (the main index of
leading Chinese shares in Shanghai) fell 73.1% to its trough of 1,627 in
November 2008. During the calendar year 2008 the CSI300 fell 65.8%. The Halter
Index of Chinese companies listed in America has fallen 56.6% during 2008.
SovGEM's NAV over the same period has fallen 56.7%.
Chinese Economic Outlook
We remain convinced that China is suffering a severe cyclical slowdown in its
growth rates but we do not believe that there has been a fundamental change in
the long term structural growth outlook for China. In particular we believe that
our policy of investing in those companies exposed to domestic demand growth
within China and eschewing export orientated companies is the correct policy.
Reasons for Optimism
* The Chinese government's fiscal position is superior to many globally and its
debt burden is low. Total government debt is only 23% of GDP. Moreover China
continues to have a huge current account surplus and foreign debt is negligible.
This underpins the government's ability to deliver its announced massive capital
investment programme which will add an additional 14% to GDP over the next two
years.
* The banking system is conservative and strong with little exposure to
international markets.
* The corporate sector has deleveraged over the past two years.
* Household bank deposits are 73% of GDP and total consumer loans are only 13% of
GDP. In the long run there is plenty of pent up consumer demand.
SovGEM
Whilst the Board of SovGEM is unhappy that our investments have fallen so much
over the year, we are solvent, we have announced a small operating profit and we
are taking steps to ensure that our exposure to successful Chinese companies
remain so that we may experience the recovery when it comes. We can take some
comfort that since its low point of 1,627 in November 2008 the CSI300 has risen
over 71% as at 15 May 2009. This rise has not to date been fully reflected in
the valuation of UK and American quoted Chinese companies.
Acquisition of Hanson Westhouse Holdings Limited
On 6 May 2009 the Board announced the intention to acquire the entire issued
share capital of Hanson Westhouse Holdings Limited and the simultaneous
suspension of the Company's shares from trading pending the publication of an
admission document in relation to the acquisition, which will constitute a
reverse takeover under the AIM Rules. It is intended that an admission document
is published on or around 20 May 2009 when the shares are expected to be
re-admitted to trading.
Garth Milne - Chairman
Hugh de Lusignan - CEO
19 May 2009
REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF SovGEM LIMITED
The report of the independent auditor to the members of SovGEM Limited included
in the financial statements of the Company for the year ended 31 December 2008
included wording to the following effect:
"Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgments made by the directors in the preparation of
the financial statements, and of whether the accounting policies are appropriate
to the company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. However, the evidence available to us to confirm the
valuation of one of the company's investments was limited because the
information upon which the directors based their valuation upon could not be
verified for audit purposes. As a result, and in the absence of any alternative
evidence available to us, in particular the 2008 audited financial statements,
we have been unable to form a view as to the accuracy of the valuation of the
investment which is included in the balance sheet at a value of GBP466,667. We
are unable to quantify the effect on the financial statements as the valuation
of the investment could be over or understated.
In forming our opinion we also evaluated the overall adequacy of the
presentation of information in the financial statements.
Qualified opinion arising from limitation in audit scope
Except for the financial effects of such adjustments, if any, as might have been
determined to be necessary had we been able to satisfy ourselves as to valuation
of one of the company's investments, in our opinion the financial statements:
* give a true and fair view, in accordance with United Kingdom Generally Accepted
Accounting Practice, of the state of the company's affairs as at 31 December
2008 and of its loss for the year then ended; and
* have been properly prepared in accordance with the Companies Act 1985.
In respect solely of the limitation on our work relating to the valuation of one
of the investments:
* we have not obtained all the information and explanations that we considered
necessary for the purpose of our audit; and
* we are unable to determine whether the investment valuation is accurate.
In our opinion the information given in the Directors' Report is consistent with
the financial statements and the financial statements have been properly
prepared in accordance with the Companies (Jersey) Law 1991."
INCOME STATEMENT
Year ended 31 December 2008
+--------------------------------------------------+------+--------------+--------------+
| |Note | Year ended | Year ended |
| | | 31 | 31 Dec 2007 |
| | | Dec 2008 | GBP |
| | | GBP | |
+--------------------------------------------------+------+--------------+--------------+
| Revenue | | - | - |
+--------------------------------------------------+------+--------------+--------------+
| Gain on sale of non current assets | | 426,029 | 807,073 |
+--------------------------------------------------+------+--------------+--------------+
| Loss on sale of non current assets | | (60,213) | - |
+--------------------------------------------------+------+--------------+--------------+
| | | | |
+--------------------------------------------------+------+--------------+--------------+
| Gains in fair value of assets held at fair value | 5 | 124,547 | - |
| through profit or loss | | | |
+--------------------------------------------------+------+--------------+--------------+
| Losses in fair value of assets held at fair | 5 | (50,092) | (110,819) |
| value through profit or loss | | | |
+--------------------------------------------------+------+--------------+--------------+
| Administrative expenses | | (416,349) | (623,649) |
+--------------------------------------------------+------+--------------+--------------+
| | | ____________ | ____________ |
+--------------------------------------------------+------+--------------+--------------+
| Operating profit before impairment of available | | 23,922 | 72,605 |
| - for - sale financial assets | | | |
+--------------------------------------------------+------+--------------+--------------+
| Impairment of available-for-sale financial | 5 | (1,524,717) | - |
| assets | | | |
+--------------------------------------------------+------+--------------+--------------+
| | | ____________ | ____________ |
+--------------------------------------------------+------+--------------+--------------+
| Operating (loss)/profit before interest and | | (1,500,795) | 72,605 |
| taxation | | | |
+--------------------------------------------------+------+--------------+--------------+
| | | | |
+--------------------------------------------------+------+--------------+--------------+
| Finance income | | 4,133 | 13,079 |
+--------------------------------------------------+------+--------------+--------------+
| Investment income | | 25,648 | 7,005 |
+--------------------------------------------------+------+--------------+--------------+
| | | ____________ | ____________ |
+--------------------------------------------------+------+--------------+--------------+
| Results for the year before taxation | | (1,471,014) | 92,689 |
+--------------------------------------------------+------+--------------+--------------+
| Tax expense, net | | - | - |
+--------------------------------------------------+------+--------------+--------------+
| | | ____________ | ____________ |
+--------------------------------------------------+------+--------------+--------------+
| Net results for the year | | (1,471,014) | 92,689 |
+--------------------------------------------------+------+--------------+--------------+
| | | | |
+--------------------------------------------------+------+--------------+--------------+
| | | ____________ | ____________ |
+--------------------------------------------------+------+--------------+--------------+
| Total and continuing | | | |
+--------------------------------------------------+------+--------------+--------------+
| Basic and diluted earnings per share | 6 | (6.5) | 0.41 pence |
| | | pence | |
+--------------------------------------------------+------+--------------+--------------+
BALANCE SHEET
As at 31 December 2008
+--------------------------------------------------+---------+--------------+--------------+
| | Note | 2008 | 2007 |
| | | GBP | GBP |
+--------------------------------------------------+---------+--------------+--------------+
| Assets | | | |
+--------------------------------------------------+---------+--------------+--------------+
| Non current assets | | | |
+--------------------------------------------------+---------+--------------+--------------+
| Long term financial assets- Available-for- sale | 5 | 3,001,364 | 7,425,544 |
+--------------------------------------------------+---------+--------------+--------------+
| Fair value through profit and loss | 5 | 374,885 | 300,430 |
+--------------------------------------------------+---------+--------------+--------------+
| | | | |
+--------------------------------------------------+---------+--------------+--------------+
| Current assets | | | |
+--------------------------------------------------+---------+--------------+--------------+
| Trade and other receivables | | 14,084 | 23,063 |
+--------------------------------------------------+---------+--------------+--------------+
| Cash and cash equivalents | | 57,423 | 320,659 |
+--------------------------------------------------+---------+--------------+--------------+
| | | ____________ | ____________ |
+--------------------------------------------------+---------+--------------+--------------+
| | | 71,507 | 343,722 |
+--------------------------------------------------+---------+--------------+--------------+
| | | ____________ | ____________ |
+--------------------------------------------------+---------+--------------+--------------+
| Total Assets | | 3,447,756 | 8,069,696 |
+--------------------------------------------------+---------+--------------+--------------+
| | | ____________ | ____________ |
+--------------------------------------------------+---------+--------------+--------------+
| Equity | | | |
| Equity attributable to shareholders of SovGEM | | | |
| Limited | | | |
+--------------------------------------------------+---------+--------------+--------------+
| | | | |
+--------------------------------------------------+---------+--------------+--------------+
| Share capital | | 228 | 228 |
+--------------------------------------------------+---------+--------------+--------------+
| Reserve in respect of share options | 8 | 54,435 | 54,435 |
+--------------------------------------------------+---------+--------------+--------------+
| Share premium account | 8 | 2,868,171 | 2,868,171 |
+--------------------------------------------------+---------+--------------+--------------+
| Revaluation reserve | 8 | 562,246 | 3,543,378 |
+--------------------------------------------------+---------+--------------+--------------+
| Retained earnings | 8 | (92,519) | 1,378,495 |
+--------------------------------------------------+---------+--------------+--------------+
| | | ____________ | ____________ |
+--------------------------------------------------+---------+--------------+--------------+
| Total equity | | 3,392,561 | 7,844,707 |
+--------------------------------------------------+---------+--------------+--------------+
| | | ____________ | ____________ |
+--------------------------------------------------+---------+--------------+--------------+
| Liabilities | | | |
+--------------------------------------------------+---------+--------------+--------------+
| Current | | | |
+--------------------------------------------------+---------+--------------+--------------+
| Trade and other payables | | 55,195 | 224,989 |
+--------------------------------------------------+---------+--------------+--------------+
| | | ____________ | ____________ |
+--------------------------------------------------+---------+--------------+--------------+
| Total liabilities | | 55,195 | 224,989 |
+--------------------------------------------------+---------+--------------+--------------+
| | | _______ | _______ |
+--------------------------------------------------+---------+--------------+--------------+
| Total equity and liabilities | | 3,447,756 | 8,069,696 |
+--------------------------------------------------+---------+--------------+--------------+
| | | ____________ | ____________ |
+--------------------------------------------------+---------+--------------+--------------+
STATEMENT OF RECOGNISED INCOME AND EXPENSE
+--------------------------------------------------+---------+--------------+--------------+
| | | 2008 | 2007 |
| | | GBP | GBP |
+--------------------------------------------------+---------+--------------+--------------+
| | | | |
+--------------------------------------------------+---------+--------------+--------------+
| (Loss)/profit for the financial year | | (1,471,014) | 92,689 |
+--------------------------------------------------+---------+--------------+--------------+
| (Losses)/gains on revaluation taken from equity | 8 | (3,746,066) | 1,937,043 |
+--------------------------------------------------+---------+--------------+--------------+
| | | | |
+--------------------------------------------------+---------+--------------+--------------+
| Impairment losses on available -for sale- | 8 | 1,524,717 | - |
| financial assets | | | |
+--------------------------------------------------+---------+--------------+--------------+
| | | | |
+--------------------------------------------------+---------+--------------+--------------+
| Derecognition of unrealised gains on disposals | 8 | (759,783) | (564,484) |
+--------------------------------------------------+---------+--------------+--------------+
| | | ____________ | ____________ |
+--------------------------------------------------+---------+--------------+--------------+
| Total recognised income and expense attributable | | (4,452,146) | 1,465,248 |
| to equity holders | | | |
+--------------------------------------------------+---------+--------------+--------------+
| | | ____________ | ____________ |
+--------------------------------------------------+---------+--------------+--------------+
statement OF CASH FLOWS
Year ended 31 December 2008
+----------------------------------------------+---------+--------------+---------------------------------+
| | | Year ended | Year ended |
| | | 31 Dec | 31 Dec |
| | | 2008 | 2007 |
| | | GBP | GBP |
+----------------------------------------------+---------+--------------+---------------------------------+
| | | | |
+----------------------------------------------+---------+--------------+---------------------------------+
| (Loss)/profit after tax | | (1,471,014) | 92,689 |
+----------------------------------------------+---------+--------------+---------------------------------+
| Adjustments for: | | | |
+----------------------------------------------+---------+--------------+---------------------------------+
| Gain on sale of non current assets | | (426,029) | (807,073) |
+----------------------------------------------+---------+--------------+---------------------------------+
| | | | |
+----------------------------------------------+---------+--------------+---------------------------------+
| Loss on sale of non current assets | | 60,213 | - |
+----------------------------------------------+---------+--------------+---------------------------------+
| | | | |
+----------------------------------------------+---------+--------------+---------------------------------+
| Movements in fair value assets held at fair | | (74,455) | 110,819 |
| value | | | |
+----------------------------------------------+---------+--------------+---------------------------------+
| | | | |
+----------------------------------------------+---------+--------------+---------------------------------+
| Income received from investing activities | | (29,781) | (20,084) |
+----------------------------------------------+---------+--------------+---------------------------------+
| | | | |
+----------------------------------------------+---------+--------------+---------------------------------+
| Decrease/(Increase) in receivables | | 8,979 | (46) |
+----------------------------------------------+---------+--------------+---------------------------------+
| Decrease in payables | | (169,794) | (52,628) |
+----------------------------------------------+---------+--------------+---------------------------------+
| Share based payments | | - | 25,092 |
+----------------------------------------------+---------+--------------+---------------------------------+
| | | | |
+----------------------------------------------+---------+--------------+---------------------------------+
| Impairment of available-for-sale financial | | 1,524,717 | - |
| assets | | | |
+----------------------------------------------+---------+--------------+---------------------------------+
| | | ____________ | ____________ |
+----------------------------------------------+---------+--------------+---------------------------------+
| Net cash decrease from operating activities | | (577,164) | (651,231) |
| | | | |
+----------------------------------------------+---------+--------------+---------------------------------+
| Investing activities | | | |
| | | | |
+----------------------------------------------+---------+--------------+---------------------------------+
| Interest received | | 4,133 | 13,079 |
+----------------------------------------------+---------+--------------+---------------------------------+
| Investment income | | 25,648 | 7,005 |
+----------------------------------------------+---------+--------------+---------------------------------+
| | | | |
+----------------------------------------------+---------+--------------+---------------------------------+
| Purchase of investments | | (418,434) | (2,046,246) |
+----------------------------------------------+---------+--------------+---------------------------------+
| | | | |
+----------------------------------------------+---------+--------------+---------------------------------+
| Proceeds from sale of investments | | 702,581 | 1,812,763 |
+----------------------------------------------+---------+--------------+---------------------------------+
| | | ____________ | ____________ |
+----------------------------------------------+---------+--------------+---------------------------------+
| Net cash used in investing activities | | 313,928 | (213,399) |
+----------------------------------------------+---------+--------------+---------------------------------+
| | | ____________ | ____________ |
+----------------------------------------------+---------+--------------+---------------------------------+
| Net decrease in cash and cash equivalents | | (263,236) | (864,630) |
+----------------------------------------------+---------+--------------+---------------------------------+
| | | ____________ | ____________ |
+----------------------------------------------+---------+--------------+---------------------------------+
| Cash and cash equivalents at beginning of | | 320,659 | 1,185,289 |
| period | | | |
+----------------------------------------------+---------+--------------+---------------------------------+
| | | ____________ | ____________ |
+----------------------------------------------+---------+--------------+---------------------------------+
| Cash and cash equivalents at end of period | | 57,423 | 320,659 |
+----------------------------------------------+---------+--------------+---------------------------------+
| | | ____________ | ____________ |
+----------------------------------------------+---------+--------------+---------------------------------+
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2008
1BASIS OF PREPARATION
The financial statements have been prepared in accordance with applicable
International Financial Reporting Standards (IFRS) as adopted by the EU.
The accounting policies that have been applied in the opening balance sheet have
also been applied throughout all periods presented in these financial
statements. These accounting policies comply with each IFRS that is mandatory
for accounting periods ending on 31 December 2008.
1.1 New standards not applied
New standards and interpretations currently in issue but not effective for
accounting periods commencing on 1 January 2008 are:
* IAS 1 Presentation of Financial Statements (revised 2007) (effective 1 January
2009)
* IAS 23 Borrowing Costs (revised 2007) (effective 1 January 2009)
* Amendment to IAS 32 Financial Instruments: Presentation and IAS 1 Presentation
of Financial Statements - Puttable Financial Instruments and Obligations Arising
on Liquidation (effective 1 January 2009)
* IAS 27 Consolidated and Separate Financial Statements (Revised 2008) (effective
1 July 2009)
* Amendment to IFRS 2 Share-based Payment - Vesting Conditions and Cancellations
(effective 1 January 2009)
* Amendments to IFRS 1 First-time Adoption of International Financial Reporting
Standards and IAS 27 Consolidated and Separate Financial Statements - Costs of
Investment in a Subsidiary, Jointly Controlled Entity or Associate (effective 1
January 2009)
* Amendment to IAS 39 Financial Instruments: Recognition and Measurement -
Eligible Hedged Items (effective 1 July 2009)
* Improvements to IFRSs (effective 1 January 2009 other than certain amendments
effective 1 July 2009)
* IFRS 3 Business Combinations (Revised 2008) (effective 1 July 2009)
* IFRS 8 Operating Segments (effective 1 January 2009)
* IFRIC 15 Agreements for the Construction of Real Estate (effective 1 January
2009)
* IFRIC 16 Hedges of a Net Investment in a Foreign Operation (effective 1 October
2008)
* IFRIC 17 Distributions of Non-cash Assets to Owners (effective 1 July 2009)
* IFRIC 18 Transfers of Assets from Customers (effectively prospectively for
transfers on offers 1 July 2009).
The adoption of IAS 1 will impact disclosure within the financial statements,
the adoption of IFRS 3 will impact the basis of accounting for any future
acquisitions. The adoption of IFRS 8 could have a significant impact on the
disclosure of segments. The full effects of the remaining standards and
interpretations on accounts are not known at this time.
2 SUMMARY OF ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of the financial
information set out in this announcement are set out in the full financial
statements for the year ended 31 December 2008 (the "Financial Statements").
3Gain on sale of non current assets
Net gains from the sale of non current assets are set out below.
+----------------------------------------------------------+-------------+-------------+
| | 2008 | 2007 |
+----------------------------------------------------------+-------------+-------------+
| | GBP | GBP |
+----------------------------------------------------------+-------------+-------------+
| Available-for-sale financial assets | 365,816 | 690,002 |
+----------------------------------------------------------+-------------+-------------+
| Financial assets designated at fair value though profit | - | 117,071 |
| or loss | | |
+----------------------------------------------------------+-------------+-------------+
| | ___________ | ___________ |
+----------------------------------------------------------+-------------+-------------+
| | 365,816 | 807,073 |
+----------------------------------------------------------+-------------+-------------+
| | ___________ | ___________ |
+----------------------------------------------------------+-------------+-------------+
4Segment reporting
The Company's internal organisation and management structure and its system of
financial reporting are based neither on investment type nor business segments,
but rather on an individual investment basis, on the underlying requirement that
the company has exposure to China. The Company is focused on investing in
companies that are involved in servicing the Chinese market. Although the
domicile of the investee companies has been in many jurisdictions across the
world, it is their involvement with China that is important and not their
domicile. Equally, the Company does not seek to specialise in any particular
industry or sector, but seeks to identify high growth companies servicing
Chinese domestic demand. The Directors consider that the Company has only one
business segment, and to identify industry sectors or investment types would be
an artificial analysis and not reflect the actuality of the Company's activity.
The Directors consider that the company has only one secondary reporting
segment.
However, set out below is an analysis of the investments:
+----------------------------------------------------------+--------------+--------------+
| | 2008 | 2007 |
| | GBP | GBP |
+----------------------------------------------------------+--------------+--------------+
| Total assets | | |
+----------------------------------------------------------+--------------+--------------+
| Listed investments | 2,339,311 | 5,326,593 |
+----------------------------------------------------------+--------------+--------------+
| Unlisted investments | 662,053 | 2,098,951 |
+----------------------------------------------------------+--------------+--------------+
| Warrants and Options | - | 50,092 |
+----------------------------------------------------------+--------------+--------------+
| Convertible debt | 374,885 | 250,338 |
+----------------------------------------------------------+--------------+--------------+
| | ____________ | ____________ |
+----------------------------------------------------------+--------------+--------------+
| | 3,376,249 | 7,725,974 |
+----------------------------------------------------------+--------------+--------------+
| | ____________ | ____________ |
+----------------------------------------------------------+--------------+--------------+
+----------------------------------------------------------+--------------+--------------+
| | 2008 | 2007 |
| | GBP | GBP |
+----------------------------------------------------------+--------------+--------------+
| Gain on sale of non current assets | | |
+----------------------------------------------------------+--------------+--------------+
| Listed investments | 365,816 | 690,002 |
+----------------------------------------------------------+--------------+--------------+
| Unlisted investments | - | - |
+----------------------------------------------------------+--------------+--------------+
| Warrants and Options | - | 117,071 |
+----------------------------------------------------------+--------------+--------------+
| Convertible debt | - | - |
+----------------------------------------------------------+--------------+--------------+
| | ____________ | ____________ |
+----------------------------------------------------------+--------------+--------------+
| | 365,816 | 807,073 |
+----------------------------------------------------------+--------------+--------------+
| | ____________ | ____________ |
+----------------------------------------------------------+--------------+--------------+
+----------------------------------------------------------+--------------+--------------+
| | 2008 | 2007 |
| | GBP | GBP |
+----------------------------------------------------------+--------------+--------------+
| | | |
+----------------------------------------------------------+--------------+--------------+
| Impairment of available-for-sale financial assets | (1,524,717) | - |
+----------------------------------------------------------+--------------+--------------+
| | ____________ | ___________ |
+----------------------------------------------------------+--------------+--------------+
5Long term financial assets
The amount recognised in the balance sheet relate to the following investment
types:
+----------------------------------------------------------+-------------+-------------+
| | 2008 | 2007 |
+----------------------------------------------------------+-------------+-------------+
| | GBP | GBP |
+----------------------------------------------------------+-------------+-------------+
| Long term available-for-sale financial assets | 3,001,364 | 7,425,544 |
+----------------------------------------------------------+-------------+-------------+
| Financial assets at fair value through profit or loss | 374,885 | 300,430 |
+----------------------------------------------------------+-------------+-------------+
| | ___________ | ___________ |
+----------------------------------------------------------+-------------+-------------+
| | 3,376,249 | 7,725,974 |
+----------------------------------------------------------+-------------+-------------+
| | ___________ | ___________ |
+----------------------------------------------------------+-------------+-------------+
5.1 Long term available-for-sale financial assets
+----------------------------------------------------------+--------------+--------------+
| | 2008 | 2007 |
| | GBP | GBP |
+----------------------------------------------------------+--------------+--------------+
| Listed equity securities | 2,339,311 | 5,326,593 |
+----------------------------------------------------------+--------------+--------------+
| Unlisted financial assets | 662,053 | 2,098,951 |
+----------------------------------------------------------+--------------+--------------+
| | ____________ | ____________ |
+----------------------------------------------------------+--------------+--------------+
| | 3,001,364 | 7,425,544 |
+----------------------------------------------------------+--------------+--------------+
| | ____________ | ____________ |
+----------------------------------------------------------+--------------+--------------+
The listed financial assets have been stated at fair value. Fair value is
determined by valuing the financial assets at the appropriate closing mid price
on 31 December 2008.
The unlisted financial assets have been stated at fair value. Fair value is
determined by using recent arms' length transactions and valuation models where
a recent arms length transaction does not exist.
+------------------------------------+--------------+--------------+--------------+--------------+
| | 2008 | 2008 | 2008 | 2007 |
| | Listed | Unlisted | Total | Total |
+------------------------------------+--------------+--------------+--------------+--------------+
| | GBP | GBP | GBP | GBP |
+------------------------------------+--------------+--------------+--------------+--------------+
| | | | | |
+------------------------------------+--------------+--------------+--------------+--------------+
| Opening fair value as at 1 January | 5,326,593 | 2,098,951 | 7,425,544 | 4,967,397 |
| 2008 | | | | |
+------------------------------------+--------------+--------------+--------------+--------------+
| | | | | |
+------------------------------------+--------------+--------------+--------------+--------------+
| Purchases at cost | 418,434 | - | 418,434 | 1,919,296 |
+------------------------------------+--------------+--------------+--------------+--------------+
| Disposals in the year | (336,765) | - | (336,765) | (1,005,690) |
+------------------------------------+--------------+--------------+--------------+--------------+
| Transfers | 93,417 | (93,417) | - | - |
+------------------------------------+--------------+--------------+--------------+--------------+
| | | | | |
+------------------------------------+--------------+--------------+--------------+--------------+
| Transfers as a result of | - | - | - | 171,982 |
| exercising of warrants | | | | |
+------------------------------------+--------------+--------------+--------------+--------------+
| | | | | |
+------------------------------------+--------------+--------------+--------------+--------------+
| Movement from changes in fair | | | | |
| value: | | | | |
+------------------------------------+--------------+--------------+--------------+--------------+
| | | | | |
+------------------------------------+--------------+--------------+--------------+--------------+
| Movement from changes in fair | (2,153,368) | (827,764) | (2,981,132) | 1,372,559 |
| value recognised in equity | | | | |
+------------------------------------+--------------+--------------+--------------+--------------+
| | | | | |
+------------------------------------+--------------+--------------+--------------+--------------+
| Impairment of available-for-sale | (1,009,000) | (515,717) | (1,524,717) | - |
| financial assets recognised in the | | | | |
| income statement | | | | |
+------------------------------------+--------------+--------------+--------------+--------------+
| | ____________ | ____________ | ____________ | ____________ |
+------------------------------------+--------------+--------------+--------------+--------------+
| | (3,162,368) | (1,343,481) | (4,505,849) | 1,372,559 |
+------------------------------------+--------------+--------------+--------------+--------------+
| | ____________ | ____________ | ____________ | ____________ |
+------------------------------------+--------------+--------------+--------------+--------------+
| Closing fair value as at 31 | 2,339,311 | 662,053 | 3,001,364 | 7,425,544 |
| December 2008 | | | | |
+------------------------------------+--------------+--------------+--------------+--------------+
| | ____________ | ____________ | ____________ | ____________ |
+------------------------------------+--------------+--------------+--------------+--------------+
| | | | | |
+------------------------------------+--------------+--------------+--------------+--------------+
| Closing cost as at 31 December | 2,989,155 | 936,489 | 3,925,644 | 3,843,975 |
| 2008 | | | | |
+------------------------------------+--------------+--------------+--------------+--------------+
| (Loss)/Gain as at 31 December 2008 | (649,844) | (274,436) | (924,280) | 3,581,569 |
+------------------------------------+--------------+--------------+--------------+--------------+
| | ____________ | ____________ | ____________ | ____________ |
+------------------------------------+--------------+--------------+--------------+--------------+
| | 2,339,311 | 662,053 | 3,001,364 | 7,425,544 |
+------------------------------------+--------------+--------------+--------------+--------------+
| | ____________ | ____________ | ____________ | ____________ |
+------------------------------------+--------------+--------------+--------------+--------------+
Unlisted investments are valued on the most recent transaction value that has
occurred during the period, or failing that Directors' best estimate, based on
the most recent financial information available.
All the listed equity securities have been issued by publicly traded companies
5.2 Impairment of available-for-sale financial assets
Investments have been assessed for impairment in line with IAS 39 Financial
Instruments: Recognition and Measurement. As a result, the difference between
fair value and book cost as at 31 December 2008 of GBP1,524,717 (2007: Nil) has
been taken directly to the income statement
5.3 Financial assets at fair value through profit or loss
+------------------------------------------------------+---------------+---------------+
| | 2008 | 2007 |
| | GBP | GBP |
+------------------------------------------------------+---------------+---------------+
| Financial assets at fair value through profit or | | |
| loss | | |
+------------------------------------------------------+---------------+---------------+
| Designated at fair value through profit or loss - | 374,885 | 250,338 |
| Convertible debt | | |
+------------------------------------------------------+---------------+---------------+
| Held for trade at fair value through profit or loss | - | 50,092 |
| - Stock warrants | | |
+------------------------------------------------------+---------------+---------------+
| | __________ | __________ |
+------------------------------------------------------+---------------+---------------+
| | 374,885 | 300,430 |
+------------------------------------------------------+---------------+---------------+
| | __________ | __________ |
+------------------------------------------------------+---------------+---------------+
Movements in the year
+----------------------------------+------------+--------------+------------+------------+
| | 2008 | 2008 | 2008 | 2007 |
| | Designated | Held for | Total | Total |
| | GBP | trade | GBP | GBP |
| | | GBP | | |
+----------------------------------+------------+--------------+------------+------------+
| | | | | |
+----------------------------------+------------+--------------+------------+------------+
| Opening fair value as at 1 | 250,338 | 50,092 | 300,430 | 456,281 |
| January 2008 | | | | |
+----------------------------------+------------+--------------+------------+------------+
| Purchases at cost | - | - | - | 126,950 |
+----------------------------------+------------+--------------+------------+------------+
| Transfers as a result of | - | - | - | (171,982) |
| exercising of warrants | | | | |
+----------------------------------+------------+--------------+------------+------------+
| Gains/(Losses) in changes in | 124,547 | (50,092) | 74,455 | (110,819) |
| fair value | | | | |
+----------------------------------+------------+--------------+------------+------------+
| | __________ | __________ | __________ | __________ |
+----------------------------------+------------+--------------+------------+------------+
| Closing fair value as at 31 | 374,885 | - | 374,885 | 300,430 |
| December 2008 | | | | |
+----------------------------------+------------+--------------+------------+------------+
| | __________ | __________ | __________ | __________ |
| | | | | |
+----------------------------------+------------+--------------+------------+------------+
| Closing cost as at 31 December | 258,889 | - | 258,889 | 258,889 |
| 2008 | | | | |
+----------------------------------+------------+--------------+------------+------------+
| Gain/(loss) as at 31 December | 115,996 | - | 115,996 | 41,541 |
| 2008 | | | | |
+----------------------------------+------------+--------------+------------+------------+
| | __________ | __________ | __________ | __________ |
+----------------------------------+------------+--------------+------------+------------+
| | 374,885 | - | 374,885 | 300,430 |
+----------------------------------+------------+--------------+------------+------------+
| | __________ | __________ | __________ | __________ |
+----------------------------------+------------+--------------+------------+------------+
Convertible debt has been designated as fair value through profit or loss.
Warrants are held for trade and have been valued using an appropriate option
pricing model at the time of acquisition and as at 31 December 2008.
6Earnings per share
The basic earnings per share is based on the (loss)/profit attributable to
ordinary shareholders divided by the weighted average number of shares in issue
during the year.
+------------------------------------------------------+----------------+---------------+
| | 2008 | 2007 |
| | GBP | GBP |
+------------------------------------------------------+----------------+---------------+
| | | |
+------------------------------------------------------+----------------+---------------+
| | | |
+------------------------------------------------------+----------------+---------------+
| Net results for the year | (1,471,014) | 92,689 |
+------------------------------------------------------+----------------+---------------+
| | _____________ | _____________ |
+------------------------------------------------------+----------------+---------------+
| Weighted average of ordinary shares of 0.001p in | 22,775,000 | 22,775,000 |
| issue | | |
+------------------------------------------------------+----------------+---------------+
| | _____________ | _____________ |
+------------------------------------------------------+----------------+---------------+
| Net asset value per share | 14.9p | 34.4p |
+------------------------------------------------------+----------------+---------------+
| | __________ | __________ |
+------------------------------------------------------+----------------+---------------+
| Earnings per share - basic and diluted | (6.5)p | 0.41p |
+------------------------------------------------------+----------------+---------------+
| | __________ | __________ |
+------------------------------------------------------+----------------+---------------+
The options in issue are "out of the money" and as such do not have a dilutive
effect on the earnings per share.
7Other financial results
+------------------------------------------------------+---------------+---------------+
| | 2008 | 2007 |
| | GBP | GBP |
+------------------------------------------------------+---------------+---------------+
| Gains/(Losses) from fair value through profit and | 74,455 | (110,819) |
| loss financial assets- | | |
| classified as held for trading | | |
+------------------------------------------------------+---------------+---------------+
| Gain/(loss) from exchange differences recognised in | 8,657 | (15,128) |
| administrative expenses | | |
+------------------------------------------------------+---------------+---------------+
| | __________ | __________ |
+------------------------------------------------------+---------------+---------------+
| | 83,112 | (125,947) |
+------------------------------------------------------+---------------+---------------+
| | __________ | __________ |
+------------------------------------------------------+---------------+---------------+
8Statement of movement of reserves
+---------------------------+-----------+--+--------------+--------------+--------------+--------------+--------------+--+
| | Share | Share | Revaluation | Reserve | Retained | Total |
| | Capital | premium | Reserve | in | earnings | Equity |
| | GBP | account | GBP | respect | GBP | GBP |
| | | GBP | | of | | |
| | | | | share | | |
| | | | | options | | |
| | | | | GBP | | |
+---------------------------+--------------+--------------+--------------+--------------+--------------+--------------+
| | | | | | | |
+---------------------------+--------------+--------------+--------------+--------------+--------------+--------------+
| As at 1 January 2007 | 228 | 2,868,171 | 2,170,819 | 29,343 | 1,285,806 | 6,354,367 |
+---------------------------+--------------+--------------+--------------+--------------+--------------+--------------+
| Available for sale | | | | | | |
| securities | | | | | | |
+---------------------------+--------------+--------------+--------------+--------------+--------------+--------------+
| -Unrealised gain on | - | - | 1,937,043 | - | - | 1,937,043 |
| revaluation of available | | | | | | |
| for sale financial assets | | | | | | |
| - taken direct to equity | | | | | | |
+---------------------------+--------------+--------------+--------------+--------------+--------------+--------------+
| | | | | | | |
+---------------------------+--------------+--------------+--------------+--------------+--------------+--------------+
| -Derecognition of | - | - | (564,484) | - | - | (564,484) |
| unrealised gains on | | | | | | |
| disposals | | | | | | |
+---------------------------+--------------+--------------+--------------+--------------+--------------+--------------+
| | __________ | ____________ | ____________ | ____________ | ____________ | ____________ |
+---------------------------+--------------+--------------+--------------+--------------+--------------+--------------+
| Net income recognised | - | - | 1,372,559 | - | - | 1,372,559 |
| directly in equity | | | | | | |
+---------------------------+--------------+--------------+--------------+--------------+--------------+--------------+
| | | | | | | |
+---------------------------+--------------+--------------+--------------+--------------+--------------+--------------+
| Net results for the year | - | - | - | - | 92,689 | 92,689 |
| ended 31 December 2007 | | | | | | |
+---------------------------+--------------+--------------+--------------+--------------+--------------+--------------+
| | __________ | ____________ | ____________ | ____________ | ____________ | ____________ |
+---------------------------+--------------+--------------+--------------+--------------+--------------+--------------+
| Total recognised income | - | - | 1,372,559 | - | 92,689 | 1,465,248 |
| and expense for the | | | | | | |
| period | | | | | | |
+---------------------------+--------------+--------------+--------------+--------------+--------------+--------------+
| | | | | | | |
+---------------------------+--------------+--------------+--------------+--------------+--------------+--------------+
| Employee share based | - | - | | 25,092 | - | 25,092 |
| transactions | | | | | | |
+---------------------------+--------------+--------------+--------------+--------------+--------------+--------------+
| | __________ | ____________ | ____________ | ____________ | ____________ | ____________ |
+---------------------------+--------------+--------------+--------------+--------------+--------------+--------------+
| As at 31 December 2007 | 228 | 2,868,171 | 3,543,378 | 54,435 | 1,378,495 | 7,844,707 |
+---------------------------+--------------+--------------+--------------+--------------+--------------+--------------+
| | | | | | | |
+---------------------------+-----------+-----------------+--------------+--------------+--------------+-----------------+
| As at 1 January 2008 | 228 | 2,868,171 | 3,543,378 | 54,435 | 1,378,495 | 7,844,707 |
+---------------------------+-----------+-----------------+--------------+--------------+--------------+-----------------+
| Available for sale | | | | | | |
| securities | | | | | | |
+---------------------------+-----------+-----------------+--------------+--------------+--------------+-----------------+
| -Unrealised loss on | - | - | (3,746,066) | - | - | (3,746,066) |
| revaluation of available | | | | | | |
| for sale financial assets | | | | | | |
| - taken direct to equity | | | | | | |
+---------------------------+-----------+-----------------+--------------+--------------+--------------+-----------------+
| | | | | | | |
+---------------------------+-----------+-----------------+--------------+--------------+--------------+-----------------+
| Impairment losses on | - | - | 1,524,717 | - | - | 1,524,717 |
| available -for sale- | | | | | | |
| financial assets taken to | | | | | | |
| income statement | | | | | | |
+---------------------------+-----------+-----------------+--------------+--------------+--------------+-----------------+
| | | | | | | |
+---------------------------+-----------+-----------------+--------------+--------------+--------------+-----------------+
| -Derecognition of | - | - | (759,783) | - | - | (759,783) |
| unrealised gains on | | | | | | |
| disposals | | | | | | |
+---------------------------+-----------+-----------------+--------------+--------------+--------------+-----------------+
| | _________ | ____________ | ____________ | ____________ | ____________ | ____________ |
+---------------------------+-----------+-----------------+--------------+--------------+--------------+-----------------+
| Net income recognised | - | - | (2,981,132) | - | - | (2,981,132) |
| directly in equity | | | | | | |
+---------------------------+-----------+-----------------+--------------+--------------+--------------+-----------------+
| | | | | | | |
+---------------------------+-----------+-----------------+--------------+--------------+--------------+-----------------+
| Net results for the year | - | - | - | - | (1,471,014)) | (1,471,014) |
| ended 31 December 2008 | | | | | | |
+---------------------------+-----------+-----------------+--------------+--------------+--------------+-----------------+
| | _________ | ____________ | ____________ | ____________ | ____________ | ____________ |
+---------------------------+-----------+-----------------+--------------+--------------+--------------+-----------------+
| Total recognised income | - | - | (2,981,132) | - | (1,471,014) | (4,452,146) |
| and expense for the | | | | | | |
| period | | | | | | |
+---------------------------+-----------+-----------------+--------------+--------------+--------------+-----------------+
| | | | | | | |
+---------------------------+-----------+-----------------+--------------+--------------+--------------+-----------------+
| Employee share based | - | - | - | - | - | - |
| transactions | | | | | | |
+---------------------------+-----------+-----------------+--------------+--------------+--------------+-----------------+
| | _________ | ____________ | ____________ | ____________ | ____________ | ____________ |
+---------------------------+-----------+-----------------+--------------+--------------+--------------+-----------------+
| As at 31 December 2008 | 228 | 2,868,171 | 562,246 | 54,435 | (92,519) | 3,392,561 |
+---------------------------+-----------+-----------------+--------------+--------------+--------------+-----------------+
| | _________ | ____________ | ____________ | ____________ | ____________ | ____________ |
+---------------------------+-----------+--+--------------+--------------+--------------+--------------+--------------+--+
9ACQUISITION OF HANSON WESTHOUSE HOLDINGS LIMITED
On 6 May 2009 the Board announced the intention to acquire the entire issued
share capital of Hanson Westhouse Holdings Limited and the simultaneous
suspension of the Company's shares from trading pending the publication of an
admission document in relation to the acquisition, which will constitute a
reverse takeover under the AIM Rules. It is intended that an admission document
is published on or around 20 May 2009 when the shares are expected to be
re-admitted to trading.
10FINANCIAL STATEMENTS
The financial information set out in this announcement does not constitute the
Company's statutory financial statements but has been derived from those
financial statements, which will be delivered to the registrar of companies
following the Company's annual general meeting. The Company's annual report and
financial statements will be posted to shareholders today. Further copies will
be available from the Company's registered office, 3rd Floor Windward House, La
Route de la Liberation, St Helier, Jersey JE2 3BQ, Channel Islands and a copy
will be published on the Company's website, www.sovgem.co.uk
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FGGMKKLVGLZM
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