Legal costs weigh down Keybridge Capital

Legal costs weigh down Keybridge Capital

Investment firm Keybridge Capital's (ASX: KBC) lawyers have had a busy year with litigation costs relating to takeover attempts creating a heavy burden for the company in FY20.

The company, currently embroiled in an ongoing takeover attempt from Wilson Asset Management Capital (ASX: WAM), saw its profits and revenues struggle in the face of legal battles on many fronts.

Costs piled up as a result, spending around $1.7 million - almost 50 per cent more than the previous year's entire revenue - on corporate and administration expenses during the period.

Accounting for personal expenses and "other" expenses, total costs for FY20 hit $2.8 million.

"Keybridge's legal costs represented an extraordinary period," says the investment firm.

Ultimately revenues fell, down from $1.2 million last year to around $426,000 at the end of June 2020, with interest revenue contributing to the bulk of total income.

However, Nicholas Bolton-led Keybridge's net loss improved by 9.3 per cent during the year to $3.2 million.

The release of its preliminary final report caps off a wild FY20 for Keybridge, during which the company was involved in nine Takeovers Panel proceedings.

The latest of these proceedings saw the Takeovers Panel find in favour of WAM Active, giving the firm founded by veteran investment manager Geoff Wilson the green light to continue with its takeover attempt of Keybridge.

WAM's latest bid is its fourth attempt to gain control over Keybridge during FY20.

The company also had to respond to litigation brought by William Johnson and Bentley Capital where those parties attempted to validate steps to asset the former as chairman of Keybridge.

During that time, Johnson authorised the release of a number of ASX announcements that had not been approved by the board. As a consequence Keybridge was suspended from trading on the ASX.

Since then, the Federal Court of Western Australia ruled that Johnson was not, and was never, the chairman of Keybridge.

In addition, Keybridge has been making its own moves on other entities, including one initiated on the penultimate day of the financial year.

This was the proposed takeover of RNY Property Trust which, if successful, will be done via the issuance of Keybridge shares at a ratio of 0.16 KBC shares to 1 RNY unit.

"If successful, the bid will be accretive to Keybridge's Net Tangible Assets," says Keybridge.

Further, the Bolton-led firm has been making some other moves, notably on Webcentral Group, involving the acquisition of a 5.47 per cent interest in the IT company.

Retail has also been firmly in the company's sights since the end of FY20, with Keybridge increasing its shareholding in Adairs (ASX: ADH) by just over a percentage point to 7.21 per cent.

The company also recently became a substantial shareholder in The Reject Shop (ASX: TRS) after acquiring 2 million shares in the retailer.

Ultimately, Keybridge finished the financial year with just $456,000 in cash on hand, down from $1.5 million at the end of FY19.

No dividend has been declared to shareholders.

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