Kingswood H. Regulatory News (KWG)

25 June 2013

EW Group Limited

Preliminary unaudited results for the year ended 31 December 2012

EW Group Limited (AIM: EWG) ("EW Group" or "the Company"), the strategic investment company, focused on financial services, today announces its preliminary unaudited results for the year ended 31 December 2012.

Period Highlights

·; Unrealised gains on investments of more than £1.4 million (2011: £0.3 million loss);

·; Net profits of almost £1.2 million (2011: £0.6 million loss);

·; Earnings per share of 0.54 pence (2011: 0.6 pence loss);

·; Net assets up more than 8-fold to £3.3 million (2011: £0.4 million);

·; Net asset value per share almost tripled to 1.1 pence (2011: 0.4 pence);

·; Decision taken to focus on investments in financial services sector;

·; 33.3% investment made in fast growing UK wealth manager European Wealth Management Group plc ("European Wealth");

·; Quoted company portfolio delivered gains of almost 30%; and

·; Board strengthened with appointments of Tim Revill, Rod Gentry and Kishore Gopaul.

Post Period Highlights

·; Name changed from Kingswalk Investments to EW Group to align with key investment in European Wealth;

·; Shareholding in European Wealth increased from 33.3% to 48.8%;

·; EW Group's £1.0 million convertible loan note converted into new shares leaving Company debt free at the date of these results;

·; Company raised a further £0.6 million in new equity to support investment portfolio;

·; John Morton appointed to the EW Group Board; and

·; Wholly owned subsidiary, EW Investments, launched to hold quoted investments portfolio.

Paul Everitt of EW Group Limited, said:

"2012 and the early part of 2013 has been an excellent period for the Company. We are delighted with the transformational investment we made in European Wealth which has already delivered a material value uplift on its initial investment cost within the first year. The Board of EW Group continues to monitor closely all of its investments in order to deliver maximum value to EW Group's shareholders. We remain optimistic that the Company's focus on investments in the financial services sector and in particular its holding in European Wealth will deliver significant shareholder value over the short and medium term".

The Company's audited report and accounts for the year ended 31 December 2012, together with the notice convening the Company's annual general meeting for 24 July 2013 at 12 noon, will be posted to shareholders on or before 28 June 2013.

ENDS

EW Group Limited

Paul Everitt: +44 (0)14 8173 2888

John Morton: +44 (0) 7787 438 434

www.ewgrouplimited.com 

Daniel Stewart & Company Plc - Nominated Adviser and Broker

Antony Legge, Director, Corporate Finance: +44 (0)20 7776 6550

James Thomas, Corporate Finance

GTH Communications

Toby Hall: +44 (0)20 7822 7493 / +44 (0)7713 341072

DIRECTORS' REPORT

Introduction

We are pleased to present these preliminary unaudited results of EW Group Limited (formerly Kingswalk Investments Limited) ("EW Group" or the "Company") to shareholders for the year ended 31 December 2012.

Background

EW Group is an AIM quoted Guernsey registered investment company. Incorporated in 2004 and admitted to trading on AIM in 2005, the Company's investment policy permits investments to be made in, amongst other things, private and publicly quoted companies across a wide range of sectors with no limit on the percentage ownership that EW Group can hold in any investee company.

2012 has witnessed a significant turnaround in the Company's fortunes with its net asset base increasing from approximately £0.4 million at the start of the year to approximately £3.3 million at the year end. Profit on ordinary activities for the year was approximately £1.2 million, mainly due to the unrealised gain on investments of £1.4 million, a material upturn from the £0.6 million loss reported in 2011.

In early 2012, the directors took the decision, for the short to medium term at least, to focus its investing activities in the financial services sector which resulted in EW Group making its transformational investment in April 2012 into European Wealth Management Group Plc ("European Wealth"). European Wealth is a fast growing wealth manager that combines traditional values with contemporary delivery embracing the latest available technology.

Until April 2012, EW Group had taken minority stakes in diversified businesses in a wide range of sectors (e.g. resources, technology, financial services) with the intention of delivering capital growth for shareholders. However, following an extensive appraisal of the available opportunities for delivering shareholder value in the early part of 2012, the board of EW Group ("the Board") concluded that the financial services sector is able to deliver strong growth potential and is a sector ripe for consolidation within which there is room for high quality businesses to grow and operate profitably. The perpetual increase in regulation coupled with the fact that individuals are today taking more interest and control over their own financial affairs means that building an integrated financial services business that embraces the latest technology, could attract significant premiums, if well executed.

The Board believes that, in European Wealth, they have identified the perfect platform to exploit this tremendous opportunity and have therefore focussed their short term investment activities on supporting the growth of European Wealth to ensure it delivers significant shareholder value to EW Group's shareholders.

Summary of activities

During the financial year under review, the Company successfully raised more than £2.5 million in new equity and debt funds, invested approximately £2.5 million in equity and debt in supporting the growth of European Wealth, reduced the size of its quoted company portfolio and realised its mezzanine loan portfolio without default. At the end of the year, the Company had equity investments in five companies valued at almost £2.4 million, over 95 per cent. of which relates to the holding in European Wealth, and a loan book, comprised primarily of loans made to European Wealth, of approximately £1.6 million.

By far EW Group's largest equity investment to date completed in April 2012 when the Company acquired a 33.3% stake in European Wealth, consideration for which was the issue of 92.0 million new ordinary shares of 1 pence each to the vendors ("the European Wealth Investment"). At the same time as the European Wealth Investment, the Company raised a further £0.7 million in new funds through the issue of approximately 93.3 million new ordinary shares of 0.1 pence each ("Ordinary Shares") at 0.75 pence per Ordinary Share, following a capital reorganisation. The majority of the equity funds raised were lent on to European Wealth to assist in its growth.

During the year under review, in line with the Board's strategy to focus its short term investment activities in the support of European Wealth's consolidation plans, a further £0.9 million was lent to European Wealth financed in part through the issue at 0.7 pence of approximately 18.0 million new Ordinary Shares, which raised approximately £0.1 million of new money, in part through the Company issuing its own unsecured convertible loan note which raised approximately £0.6 million and in part through £0.2 million of cash realised from the sale of some of its own portfolio of investments.

The strong operational performance of European Wealth since the Company's investment in April 2012, in particular its increase in its contracted assets under management ("AUM") from £0.15 billion to almost £0.5 billion at the year end, led the Board to revalue upwards the carrying value of its 33.3% stake in European Wealth from approximately £0.9 million to approximately £2.3 million. This has resulted in a gain on the value of the European Wealth Investment of approximately £1.4 million.

The board of EW Group was strengthened during the year with the appointments of Mr Tim Revill in January 2012 and Mr Roderick Gentry and Mr Kishore Gopaul in April 2012. Mr Gentry is chief executive officer and Mr Gopaul is a non-executive director of European Wealth. Mr Berting and Mr van den Noort both stepped down from the Board in July 2012. Post year end in March 2013, Mr John Morton joined the Board.

Investments

European Wealth

The Company's investment in European Wealth is a transformational one for EW Group. Having initially acquired 33.3% of European Wealth in April 2012, the Company increased its holding to 48.8% in March 2013.

European Wealth is a fast growing private wealth management business founded in 2010 with headquarters in London and regional offices in Brighton, Cheltenham, Worcester, Wokingham and East Malling. Through its two key operating subsidiaries, European Investment Management ("EIM") and European Financial Planning ("EFP"), both of which are authorised and regulated by the Financial Conduct Authority, European Wealth provides investment management and financial planning services. Since EW Group's investment in April 2012, European Wealth's AUM have grown from approximately £0.15 billion to more than £0.6 billion today, with a further £0.1 billion of AUM expected to be transferred over the next six months. Over the same period, European Wealth has grown its employee base from 24 to 45. European Wealth seeks to provide a highly personal service to its clients while building a technology led scalable and recognisable brand, capitalising on back office synergies and cost savings.

Since inception, European Wealth has completed and fully integrated four acquisitions and has identified a number of further acquisition opportunities. One of European Wealth's important differentiators that appealed to EW Group was that it has purposely been set up to be scaleable in seamlessly adding portfolios both organically and via acquisitions of both investment management and financial planning clients. An example of this is that the two most recent acquisitions completed at the end of 2012 are now fully operational off the same single financial planning platform.

As the consolidation in the wider wealth management market continues and ever increasing regulatory changes force the smaller wealth management firms to seek complementary business with which to merge, European Wealth is able to attract ever higher calibre market professionals who would, in previous market cycles, have been priced out of European Wealth's reach. This is expected to accelerate European Wealth's growth over the next few years.

Audited turnover for European Wealth for the year end 31 December 2012 was approximately £2.5 million (2011: £0.8 million), a more than 3-fold increase, and European Wealth's loss on ordinary activities after taxation for 2012 was £0.3 million, a significant reduction from £1.0 million in 2011. European Wealth's management's conscious decision to develop financial planning and investment management platforms concurrently provides its clients with the widest possible range of expertise at the same time as removing reliance upon lumpy clients or significant stock market swings for its shareholders in the current year. European Wealth's turnover will be split broadly evenly between financial planning and investment management and this even split is expected to be maintained by European Wealth in the long term. Trading for the first half of 2013 has been in line with management's expectations with profitability anticipated for 2013 as a whole.

European Wealth is independently and separately managed by its own board of directors and the directors of EW Group that are independent of European Wealth ("Independent Directors") manage the European Wealth Investment. The Independent Directors are currently considering the potential impact of alternative structures for its investment into European Wealth as part of a strategic review focused on maximising shareholder value.

Quoted Company Portfolio - EW Investments Limited

As at the beginning of the year, the Company had investments in approximately 20 companies with an investment value of approximately £0.16 million. A strong performance in the portfolio during the year resulted in realised gains of approximately £0.05 million (30%), such that at the year end, the Company held investments in 3 quoted companies valued at approximately £0.03 million. Post the year end, the Company created a new wholly owned subsidiary, EW Investments Limited to hold its portfolio of quoted investments as distinct from its investment in unquoted European Wealth. In May 2013, the Company disposed of its investment in unquoted CMS Corporate Consultants to its management for its balance sheet carrying value of £0.04 million.

Mezzanine loans

At the beginning of the year , the Company had outstanding loans due for repayment of £0.14 million, all of which were repaid during the year. During the year, as disclosed above, the Company made loans to European Wealth totalling £1.56 million, £0.82 million of which were converted into new equity in European Wealth in March 2013. The remaining £0.74 million of loans attract interest at 10% per annum and are convertible into new shares in European Wealth.

Financial review

The Company achieved a gain on investments in the year of £1.43 million (2011: £0.27 million) which was almost entirely due to the £1.39 million unrealised gain on the directors' revaluation of the European Wealth Investment. These gains, together with interest and fees receivable on mezzanine loans of £0.09 million (2011: £0.04 million) offset administration costs of £0.35 million (2011: £0.25 million). The additional administration costs were directly attributable to the professional fees incurred in the execution of the European Wealth Investment.

The Company's profit for the year was £1.17 million (2011: £0.55 million loss) resulting in earnings per share of 0.54 pence (2011: 0.6 pence loss).

The carrying value of the Company's equity portfolio was £2.38 million at the year end (2011: £0.2 million), of which £2.31 million was the European Wealth Investment.

The Company's other long term assets were primarily made up of loans made to European Wealth totalling £1.56 million at the year end. Of this amount, £0.82 million was converted into new shares in European Wealth in March 2013 which, together with the additional existing shares in European Wealth acquired by EW Group at the same time, increased EW Group's shareholding in European Wealth to its current holding of 48.8%. The balance of £0.74 million loans made to European Wealth comprise two year unsecured convertible loan notes issued by European Wealth which carry interest at 10 per cent. per annum payable bi-annually and can be converted into new A ordinary shares in European Wealth at increasing share prices at three fixed intervals during the remaining life of the loan up to October 2014.

The Company issued its own unsecured convertible loan note during the year, of which £0.63 million had been issued at the year end and further £0.37 million was issued in February 2013 ("EW Group Loan Note"). The EW Group Loan Note carried interest at 10 per cent. per annum payable bi-annually and was capable of conversion into new Ordinary Shares at fixed intervals during its two year life. All of the holders of the £1.0 million EW Group Loan Note elected to convert their loan notes into new Ordinary Shares at 0.7 pence in April and May 2013, resulting in the Company issuing an aggregate 142,857,143 of new Ordinary Shares in early June 2013. Total interest payable on the EW Group Loan Notes during their short existence was approximately £0.04 million, of which £0.01 million was expensed in 2012.

The value of the Company's net assets at the year end improved more than 8-fold to £3.32 million (2011: £0.4 million) and the net asset value per share more than doubled to 1.1 pence from 0.41 pence in 2011.

Share issues and capital reorganisation

At the beginning of the year under review, the Company had 93,171,673 ordinary shares of 1 pence each in issue. In April 2012, in consideration for the 33.3% European Wealth Investment, EW Group issued and allotted 92,000,000 new ordinary shares of 1 pence each. At the same time as announcing the European Wealth Investment, EW Group undertook a shareholder approved share capital reorganisation whereby each existing ordinary share of 1 pence each was split into one new ordinary share of 0.1 pence each ("Ordinary Share") and one deferred share of 0.9 pence each ("Deferred Share"). The Ordinary Shares carried the same rights as previously attached to the ordinary shares of 1 pence each (save for the reduction in nominal value) ("Share Reorganisation").

The Deferred Shares did not entitle the holder to receive notice of or attend and vote at any general meeting of the Company or to receive a dividend or other distribution or to participate in any return of capital on a winding up other than the nominal amount paid on such shares. The Company had the right to redeem and cancel the Deferred Shares from any Shareholder for a consideration of one penny in aggregate for all that Shareholder's Deferred Shares. As such, the Deferred Shares effectively had no value. As a result, in accordance with the Company's Articles of Incorporation, the Company bought back and cancelled all of the Deferred Shares in December 2012 for an effective nominal nil consideration resulting in a credit to the Company's profit and loss reserve of approximately £1.67 million.

Following the Share Reorganisation being approved by EW Group's shareholders at the extraordinary general meeting held on 14 May 2012, the Company completed a subscription to raise £0.7 million in new money through the issue and allotment of 93,333,333 new Ordinary Shares at a price of 0.75 pence each and the Company issued and allotted a further 3,200,000 new Ordinary Shares in settlement of £24,000 of loans made to the Company.

In May 2012, in accordance with the Company's Articles of Incorporation, the Board made a distribution of approximately £5.38 million from the Company's share premium account to offset losses in the Company's profit and loss account reserve.

In October 2012, the Company raised approximately £0.12 million through the issue of 17,285,716 new Ordinary Shares at 0.7 pence per share and at the same time the Company issued 714,286 new Ordinary Shares to settle an outstanding amount payable by the Company.

Accordingly, as at 31 December 2012, the Company had a total of 299,705,008 Ordinary Shares in issue.

Name change

At the Company's extraordinary general meeting held in January 2013, the Company's shareholders approved a resolution permitting the Company to change its name from Kingswalk Investments Limited to EW Group Limited. This change was to better reflect the Company's investments in financial and wealth services, and particularly its interest in European Wealth, which is by far the largest investment made by the Company to date.

Investment policy

The Company's investment policy is set out below and remains unchanged from that approved by its shareholders at the 2012 AGM.

The investment policy allows the Company to invest in a broad range of listed and unlisted businesses. The Company's investment policy allows the Board to evaluate potential investments from a wide variety of industry sectors and the Company will seek investments in sectors where there is potential for growth. This is likely to include sectors such as financial services, support services, resources and property, amongst others, where the Directors believe significant value resides. The Company will primarily focus on European businesses but will also consider investments in other geographical areas if appropriate.

The Company does not seek to limit the size of the investment or the size of the entities in which it invests and does not limit the percentage ownership that it may hold in any one company at any time. Accordingly, the Company's investment policy permits the Company to make investments of up to, and including, 100% of businesses.

The Company will not seek to have a fixed number of investments or seek to diversify the investments over particular sectors or particular indexes, however it is envisaged that the total number of investments at any given time will not exceed 50 investments. The Company will instead generally focus on diversifying the relative risks of investments. The Company does not intend at this stage to gear its investments but may consider doing so in the future if suitable funding arises.

The Company will generally be a passive investor in the entities in which it invests but if the Board or the Company's consultants are able to add value to the investee entity then the Company may take a more active stance. The Company's investment decisions will be based upon research prepared and presented by individual directors of the Board and by research consultants and advisers.

Annual General Meeting

The Company's Annual General Meeting is be held at its registered office, being Roseneath, The Grange, St Peter Port, Guernsey, GY1 3SJ on 24 July 2013 at 12:00 noon. The notice convening the 2013 AGM, together with a form of proxy for use at the AGM will be sent to shareholders on or before 28 June 2013.

Outlook

The Board is delighted with its transformational investment in European Wealth which has already delivered a significant value uplift on its initial investment cost. The Board of EW Group continues to monitor closely all of its investments in order to deliver maximum value to EW Group's shareholders. The Board remains optimistic of the Company's investment in European Wealth delivering significant shareholder value over the short and medium term.

The Directors would like to thank shareholders for their continued support.

All revenue and capital items in the above statement derive from continuing operations.

No operations were acquired or discontinued during the year.

The Company had no recognised gains or losses other than those shown in the Income Statement.

BALANCE SHEET

As at 31 December 2012

CASH FLOW STATEMENT

For the year ended 31 December 2012

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

For the year ended 31 December 2012

Notes to the Results

31 December 2012

1 INVESTMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS

On 30 April 2012, the Company acquired a 33.3% investment in the issued share capital of European Wealth Management Group plc ("European Wealth") for £0.9 million through the issue of 92,000,000 ordinary shares of 1p each at par. As at 31 December 2012, European Wealth had audited net liabilities of £1.3 million and for the year ended 31 December 2012 recorded audited turnover of £2.5 million and a net loss of £0.3 million. Since the year end, the Company has increased its investment in European Wealth to 48.8% through the issue of 56,847,461 new ordinary shares of 0.1p and through the conversion of certain outstanding loans made to European Wealth of £822,000. As at 31 December 2012, the directors' assessment of the carrying value of the then 33.3% investment in European Wealth was approximately £2.3 million.

On 21 May 2013, the Company disposed of its 100% ownership of CMS Corporate Consultants Limited to its management for a consideration of £40,000.

2 EARNINGS PER SHARE

The calculation of basic earnings per share is based on the net profit on ordinary activities after tax for the year and on 218,419,396 shares (2011: 91,089,481) being the weighted average number of shares in issue during the year.

3 LOANS RECEIVABLE

Of the loans receivable after more than one year, £1,558,000 relates to loans made to European Wealth, the investee company in which EW Group held a 33.3% shareholding at the year end. £736,000 of the loans were unsecured convertible loans in European Wealth which attract interest at 10% per annum, payable bi-annually and are repayable in full in October 2014 ("EWMG Convertible Loan"). The balance of the loans made to European Wealth of £822,000 were unsecured loans attracting interest at 10% per annum payable quarterly and repayable in full as to £640,000 in May 2015 and £182,000 in December 2015 ("Unsecured Loans"). In March 2013, the respective board's of EW Group and European Wealth agreed to convert all of the Unsecured Loans into new shares in European Wealth, which, together with the additional existing shares in European Wealth acquired by EW Group in March 2013, increased EW Group's shareholding in European Wealth to 48.8%.

4 NET ASSET VALUE PER SHARE

The calculation of net asset value per share is based on the net assets of £3,319,816 (2011: £379,123) and on the ordinary shares in issue of 299,705,008 (2011: 93,171,673) at the balance sheet date.

5 OTHER CREDITORS AND ACCRUALS

6 LOANS PAYABLE

The £625,000 outstanding at 31 December 2012 represented part of the Company's own convertible loan note created in October 2012 which carried interest at 10 per cent. per annum payable bi-annually and was capable of conversion into new Ordinary Shares at fixed intervals during its two year life ("EW Group Loan Note"). A further £375,000 of the EW Gorup Loan Notes was issued in February 2013 taking its total to £1.0 million. In April and May 2013, all of the holders of the £1.0 million EW Group Loan Note elected to convert their loan notes into new Ordinary Shares at 0.7 pence, resulting in the Company issuing an aggregate 142,857,143 of new Ordinary Shares in early June 2013.

7 NOTES ON THE CASH FLOW STATEMENT

8 SHARE CAPITAL

On 30 April 2012, the Company announced the issue and allotment of 92,000,000 Ordinary Shares of 1p each in consideration for the acquisition of 33.3% of the issued share capital of European Wealth Management Group plc. On the same day, the Company announced, subject to the approval of its shareholders which was given at the extraordinary general meeting held on 14 May 2012 ("May EGM"), a share capital reorganisation and issue and allot 93,333,333 New Ordinary Shares of 0.1p each fully paid at 0.75p per New Ordinary Share in order to raise new funds for the Company totalling £700,000.

At the May EGM, as part of the approved share capital reorganisation, the Company's shareholders approved the splitting of each of the 185,171,673 ordinary shares of 1p each into the same number of 0.1p ordinary shares ("New Ordinary Shares") and the creation of 185,171,673 deferred shares of 0.9p each ("Deferred Shares"). The Deferred Shares did not entitle the holder to receive notice of or attend and vote at any general meeting of the Company or to receive a dividend or other distribution or to participate in any return on capital on a winding up other than the nominal amount paid on such shares. The Company had the right to redeem and cancel the Deferred Shares from any Shareholder for a consideration of one penny in aggregate for all that Shareholder's Deferred Shares, as such, the

Deferred Shares effectively had no value and share certificates were not been issued in respect of the Deferred Shares. In December 2013, the directors redeemed all of the Deferred Shares for a nominal nil consideration..

On 14 May 2012, the Company issued and allotted 3,200,000 New Ordinary Shares in settlement of an outstanding loan by the Company valued at £24,000.

On 31 October 2012 the Company issued and allotted of 17,285,716 New Ordinary Shares to raise £121,000 of new funds for the Company and on the same day issued and allotted 714,286 New Ordinary Shares in settlement of an amount payable by the Company. Both issues were at an effective price of 0.7p per New Ordinary Share.

9 POST BALANCE SHEET EVENTS

On 6 March 2012, the Company increased its holding in European Wealth from 33.3% to approximately 48.81% through two transactions. Under the first transaction, European Wealth issued 61,991 ordinary shares in European Wealth ("Sale Shares") to the Company in satisfaction of loans owing by European Wealth to the Company of £822,000. Under the second transaction, the Company acquired 58,948 shares in European Wealth. Consideration for the Sale Shares was satisfied by the issue to the sellers of 56,847,461 new Ordinary Shares.

On 10 April 2013, the Company completed a subscription to raise, in aggregate, £626,750 through the issue of 62,675,000 new ordinary shares of 0.1p each in the Company ("Ordinary Shares") to new and existing investors at a subscription price of 1p per Subscription Share ("Subscription"). On the same day, the Company also issued 3,250,000 new Ordinary Shares in satisfaction of professional fees incurred in connection with the Subscription.

On 10 April 2013, the Company provided a new loan to European Wealth of £625,000 ("April 2013 Loan"). The April 2013 Loan is unsecured and carries interest at 10 per cent. per annum payable monthly and is repayable 364 days from the date of draw down. Following the issue of the April 2013 Loan, the Company's aggregate lending to European Wealth, as at the date of this report is £1.67 million.

On 5 June 2013, 142,857,143 of new Ordinary Shares were issued in connection with the conversion of £1.0 million of unsecured convertible loan note issued by the Company variously between October 2012 and February 2013. Accordingly, as at the date of these preliminary unaudited results, the Company has an aggregate of 565,334,614 Ordinary Shares in issue.