Alexander David Securities Group is selling the eponymous broking operations to its management and turning itself into a shell.
There was a slump in the share price immediately after the announcement. At 0.07p a share, down 0.02p, the company is valued at £520,000.
New investors are planning to invest £200,000 in the company, which will give them a 36% stake. There are also plans to convert preference shares, warrants and outstanding directorsí salaries, valued at around £3.8m, into shares. More details will be available in a circular.
The company reported a loss of £650,000 in 2012, up from £493,000 the previous year. Revenues had slumped from £2.36m to £1.41m and this was partly offset by cost cutting. Money raised in placings by the broker more than halved to £6m even though more placings were completed. Alexander David has focused on resources businesses so it is not surprising that it has been difficult to raise cash, particularly for mining companies.
Net debt was £195,000 at the end of 2012. There were also preference shares valued in the balance sheet at £2.07m.
First quarter trading has been near to breakeven. However, the board does not believe that the quoted market is a good place for a broker. This follows the cancellation of the quotations of Westhouse and VSA Capital.
The private client business has been sold to Highstone Investment Management, which is owned by the holding company director Trevor Coote, for £100,000 and the assumption of liabilities and contingent liabilities totalling £330,000. This sale does not include the Alexander David name. Highstone is loaning £100,000 to Alexander David Securities, which will continue to provide the regulatory umbrella for Highstone, and this will be turned into the cash consideration when the deal is completed.
The corporate finance and institutional broking business is being sold to two other Alexander David Securities directors, David Scott and Angus Rose. There was recently an approach by a third party for this business and the agreed disposal is on similar terms. The buyers will pay £1 and up to £300,000 in earn-outs over three years.
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