IB Daiwa Reforecast
08 April 2008 - 5:48PM
UK Regulatory
RNS Number:8400R
Crosby Capital Partners Inc
08 April 2008
CROSBY CAPITAL PARTNERS INC.
REVISED FINANCIAL FORECAST AT IB DAIWA
London, 8 April 2008 - Crosby Capital Partners Inc. ("Crosby") notes today's
announcement made by IB Daiwa Corporation ("IB Daiwa" - JASDAQ 3587) that
relates to write-downs and provisions against assets within IB Daiwa's Lodore
subsidiary. These are non-cash items within the profit and loss account that
result in extraordinary charges that impact the net profit for the year ended
March 2008 - the sales revenue and ordinary profit forecasts are unchanged.
Crosby owns, through two wholly owned subsidiaries, 85,450,000 shares in IB
Daiwa, representing 20.04% of its issued share capital. The holdings are
classified as 'financial assets at fair value through profit and loss' and are,
therefore, marked to market with gains and losses being recognised in the income
statement.
A copy of IB Daiwa's JASDAQ announcement can be found below. The full text is
available on IB Daiwa's website: www.ibdaiwa.co.jp.
About Crosby Capital Partners
Crosby Capital Partners Inc. is a leading independent deal-focused Asia-oriented
merchant banking and asset management group. Crosby is quoted on the AIM
market of the London Stock Exchange. Further details can be found on the
Company's website www.crosby.com.
For further information on Crosby please contact:
Steve Fletcher, Chief Operating Officer on +44 20 7590 2800
IB DAIWA
Recognition of Extraordinary Losses and Revisions to Forecasts for Consolidated
and Unconsolidated Financials for Current Fiscal Year
IB Daiwa Corporation (the "Company") announces the following revisions to its
consolidated and unconsolidated financial forecasts for the fiscal year ending
March 2008, which were restated in its "FY2007 H1 Financial Results" dated 15
November 2007 ("Previous Forecast").
1. Recognition of Extraordinary Losses
(1) Outline
Consolidated
(Unit: JPY in millions)
Breakdown Extraordinary Losses Provided Additional Extraordinary Total
for in the Previous Low-Case Losses
Forecast
Provision for Exploration 1,954 1,279 3,233
Assets
Write-off of 690 1,958 2,648
Lodore-related Goodwill
Total Extraordinary Losses 2,644 3,237 5,881
(Consolidated)
Unconsolidated
(Unit: JPY in millions)
Breakdown Extraordinary Losses Provided Additional Extraordinary Total
for in the Previous Low-Case Losses
Forecast
Loss on revaluation of 2,644 127 2,771
Lodore shares
Total Extraordinary Losses 2,644 127 2,771
(Unconsolidated)
(2) Reasons for Recognition of Extraordinary Losses
Consolidated
The Previous Forecast for the net profit for FY2007 was given in a range of
positive JPY 2,102 million (the base case net profit) to negative JPY 542
million (the low case net loss) depending on whether or not to recognise the JPY
2,644 million of estimated provision in case of the failure of the Endeavor AMI
Prospect. The Company has decided to recognise JPY 5,881 million of
extraordinary losses, which are the total of JPY 2,644 million yen already
provided for in the Previous Forecast as an estimated loss on write-off and
provision for the Endeavor AMI Prospect-related assets and goodwill, JPY 1,279
million of provision for additional capitalised exploration costs at Lodore
(including the exploration assets related to the Big Mouth Bayou Prospect and
the Northwest Kaplan Prospect), and write-off of JPY 1,958 million of additional
Lodore-related goodwill at the group level (including Lodore-related goodwill
allocated to the Manzano Prospect and the Northwest Kaplan Prospect).
After the recognition of the above extraordinary losses, it is expected that no
balance related to Lodore exploration assets or goodwill remains on the
consolidated balance sheet as at 31 March 2008.
Lodore, a consolidated subsidiary of the Company, engages in oil and gas
exploration, development and production in the US with a special focus on
exploration.
In exploration business, the main activities involve the drilling of exploration
wells to seek for new sources of natural resources such as oil and gas.
Exploration costs for a well vary depending very much on the target depth and
the location (i.e. onshore or offshore) among others, but in general exploration
business is capital intensive and a high-risk and high impact business.
Tremendous return could be achieved if a discovery of resources could be made,
while in the event of failures the Company has to write off capitalised
exploration costs.
In December 2005, the Company acquired Lodore, which was at the time listed on
the AIM market of the London Stock Exchange, for a consideration of approx. JPY
23.9 billion (similar to the market price of the shares of Lodore as quoted on
the AIM market) in kind of 106,400,000 of the Company's shares, valued at 225
yen per share (similar to the market price of the Company's shares as quoted on
the JASDAQ market). The difference between the acquisition cost and the net
assets of Lodore was booked as Lodore related goodwill on the Company's
consolidated balance sheet, and after straight-line amortisation and approx. JPY
19.0 billion of partial written-off in the previous fiscal year, the goodwill as
of the end of the FY2007 Q3 was approximately JPY 2.7 billion.
As announced in "Announcement of the Suspension of Drilling at the Endeavor
Prospect" dated 26 November 2007, Pel Tex SL2038 #1 well, which is drilling the
Endeavor AMI Prospect onshore Louisiana, USA ("the Well"), in which Lodore
participates as a non-operating joint venture partner, was suspended due to an
insurance related issue. On 24 January 2008, the JV filed for proceedings
against the insurers for damages that have resulted from the well being
suspended, caused by the insurers' refusal to provide coverage for the planned
deeper drilling operations under the policy that was in place at the time of
drilling. The JV has also attempted to obtain an alternative insurance in order
to deepen the well, however, the JV has been unable to secure insurance coverage
needed for the planned deeper drilling operations and it remains impossible to
determine whether it will resume drilling and, if so, when. Under these
circumstances, in consultation with each of the Company's and Lodore's external
auditors, it has been decided to take a prudent approach in providing against
the exploration costs for the Well and writing off Lodore-related goodwill
allocated to the Endeavor AMI Prospect, in spite of the remaining possibilities
of deepening the Well and/or the likelihood of recovering the damages as a
consequence of the litigation against the insurers.
The Company also carefully reviewed Lodore's operational and financial plans,
and mainly based on the inevitable risks associated with exploration business
and on the uncertainties of availability of funds for future exploration
projects, after careful discussions with the external auditors, it has also been
decided to provide against the exploration costs for all of Lodore's exploration
projects (JPY 3,233 million, which includes the exploration costs related to the
Endeavor AMI Prospect) and to write off all the Lodore related goodwill except
for JPY 61 million allocated to the Kami producing well (JPY 2,648 million,
which includes the goodwill allocated to the Endeavor AMI Prospect) in this
fiscal year, so that the Company can start the next fiscal year with less
uncertainties on its balance sheet. As such, the Company has included in its
forecast JPY 3,237 million of extraordinary losses in addition to JPY 2,644
million of extraordinary losses already included in its low case projected net
loss, which total JPY 5,881 million.
While taking a prudent approach in accounting treatments, the Company advises
the market that Lodore intends to remain in the industry and will participate in
exploration projects whose potential risks it believes are worth taking and if
funds are available. Lodore would consider opportunities to participate in
comparatively low-risk exploration projects and to acquire development and/or
producing assets, should such opportunities exist.
Unconsolidated
The Company has decided to write-down the investment in subsidiaries account,
triggered by the write-off of Lodore-related goodwill on the consolidated
balance sheet, and to recognise JPY 2,771 million of extraordinary loss.
2. Revisions to Forecasts
(1) Outline
Consolidated
(Unit: JPY in millions)
Sales Revenue Operating Profit Ordinary Profit Net Profit
Previous Forecast (A) 1,439 -1,244 -1,447 Base case: 2,102
Low case: -542
Revised Forecast (B) 1,439 -1,244 -1,447 -3,604
Variance (B-A) 0 0 0 Base case: - 5,706
Low case: -3,062
Variance (%) 0 0 0 -
Reference: Actual Results for 2,947 -2,046 -2,557 -23,455
Previous Period
(1 Apr 06 - 31 Mar 07)
Unconsolidated
(Unit: JPY in millions)
Sales Revenue Operating Profit Ordinary Profit Net Profit
Previous Forecast (A) 576 -632 -557 Base case: -561
Low case: -3,205
Revised Forecast (B) 576 -632 -557 -3,205
Variance (B-A) 0 0 0 Base case: -2,644
Low case: 0
Variance (%) 0 0 0 -
Reference: Actual Results for 1,138 -769 -698 -21,514
Previous Period
(1 Apr 06 - 31 Mar 07)
(2) Reasons for Revisions to Forecast
Consolidated
The Company has revised its projected consolidated net profit for FY2007 due to
the reasons as described in 1. (2) Reasons for Recognition of Extraordinary
Losses Consolidated. No revision is made to the projection
for the consolidated sales revenue, operating profit or ordinary profit for
FY2007.
Unconsolidated
The Company has revised its projected unconsolidated net profit for FY2007 due
to the reasons as described in 1. (2) Reasons for Recognition of Extraordinary
Losses Unconsolidated. No revision is made to the projection
for the unconsolidated sales revenue, operating profit or ordinary profit for
FY2007.
Notes:
The above forecast is estimated based on currently available information and may
be subject to further changes during the course of the audit process which is
still in progress. The extraordinary losses in the above consolidated forecast
include write-off or provision for all substantial, currently estimable
Lodore-related assets except for approximately JPY 460 million of Kami-related
assets. The Company will announce further changes, if any, to its forecast as
soon as they become known.
The Company plans to make FY2007 financial results available to the market on 15
May 2008.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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