RNS Number:9295R
London Asia Capital PLC
29 September 2005
29 September 2005
London Asia Capital PLC
("London Asia" or "the Group")
Interim Results 2005
London Asia Capital PLC (AIM: LDC.L) the Greater China focused investment and
merchant banking group, today announces Interim Results for the six months ended
30 June 2005.
Commenting on the results, Jack Wigglesworth, Chairman London Asia Capital said:
"The period saw us receive income from dividends, management and corporate
finance fees, as well as profits on disposal of investments. This is in line
with our strategy of building multiple revenue streams to fund costs and further
investment."
Financial Highlights:
* Completed #11.4 million placing
* Net assets more than trebbled to #25.8 million (2004: #8.2 million)
* Total investments #12.3 million (2004: #5.2 million)
* Cash at bank #13.1 million (2004: #2.8 million)
Operational Highlights:
* Investee company Betex successfully listed on OFEX
* Eastsea Group: completion of secondary fundraising and appointed as
adviser for listing on OFEX
* Appointed adviser for fund raising and OFEX listing of China Education
Group Ltd
* Listing of two portfolio companies in Singapore
* Advised portfolio company on acquisition of Chinese mobile services
business
* Strategic alliance signed with China Chengxin Financial Consultancy
* David Brewer appointed non executive director
* New Joint Venture established with Consensus
Commenting on outlook he added, "The Chinese economy continues to power on.
Recent reforms in the Stock Market, which have led to a closing to new issues,
coupled with reform of the banking sector and a government orchestrated credit
crunch designed to cool the economy, have reduced the capital available to
Chinese businesses, many of whom are struggling to fund their growth. This has
encouraged them to seek overseas listings to gain access to capital to fund
growth, and there is an increasing flow coming to the UK, where UK investors are
particularly keen to gain access to a share of the fastest growing major economy
on the planet. As one of the few corporate finance advisers from the UK with
offices and staff based in China able to complete due diligence on, and monitor
the performance of, these businesses, London Asia is well placed to benefit from
this trend."
For further information please visit www.londonasia.com or contact:
Simon Littlewood, Chief Executive John West / Matt Ridsdale
London Asia Capital plc Tavistock Communications
Tel: + 44 (0) 20 7248 7578 Tel: + 44 (0) 207 920 3150
London Asia Capital plc
("London Asia", "the Group", or "the Company")
Chairman's Statement
I am pleased to announce a strong set of interim results for the six months
ended 30 June 2005. This was a very busy period for the Group, which made
substantial progress in all its core activities, and saw us successfully
complete a major fund raising.
Highlights include:
* Raised #11 million (net of expenses) via a private placing
* Net assets #25.8 million
* Investee company Betex successfully listed on OFEX
* Listing of two portfolio companies in Singapore
* Eastsea Group completion of secondary fundraising and appointed as
adviser for listing on OFEX
* Appointed adviser for fund raising and OFEX listing of China Education
Group Ltd
* Advised portfolio company on acquisition of Chinese mobile services
business
* Strategic alliance signed with China Chengxin Financial Consultancy
* David Brewer appointed non executive director
* New Joint Venture established with Consensus
Financial Results
The period saw us receive income from dividends, management and corporate
finance fees, as well as profits on disposal of investments. This is in line
with our strategy of building multiple revenue streams to fund costs and further
investment.
With several new mandates taken on both during and post period end, we
anticipate corporate finance activities to become an increasingly important
element of our revenue.
In the accounts we show our investments at original cost rather than actual or
market value. We do not revalue investments and no account is taken of their
uplift in value until they are sold. The total value of our investments, at
cost, as at 30 June 2005 was #12.3 million (30 June 2004: #5.2 million),
including #2.6 million of listed securities (30 June 2004: #0.5 million).
During the period there was a realisation of part of our investment in Betex
Group plc, which we successfully floated on OFEX in May. This is in line with
our strategy of realising investments once they have listed to re-use the money
for new investment.
Financing and investment activities
In June we successfully raised #11 million (net of expenses) via a placing of 76
million shares to institutional and other investors at a placing price of 15
pence per share. The number of shares placed was equal to 55% of the shares in
issue prior to the placing, and we are grateful for the support shown by our
existing and new shareholders in helping complete such a major refinancing at
only a small discount to market price.
Since the period end we have made no significant new cash investments. Whilst we
will continue to build our investment portfolio, it will be at a slower pace
than in the past. It is the Board's intention to realise the value from existing
investments to fund new investment opportunities,rather than raise funds from
the placing of shares as we have done in the past. We shall continue to use our
own shares to make investments via share swaps, where this can be done at a
premium to market price. We anticipate much of the larger investment activity
going forward to be through private equity funds that we are launching, both in
the UK and overseas, and through co-investment with our joint venture partners,
such as LAC Consensus.
This strategy will reduce the cash requirements of the business, and therefore
the dilution to existing shareholders which, we feel, has adversely affected the
share price in the past. The Group will continue to benefit from the capital
uplift on investments identified through its carry in the funds and share of the
joint ventures.
The bulk of the funds raised in the June placing were allocated to increase our
stake in China Finance & Trust ("China Finance") from 6% to 20%, with our
commitment so far of #14 million, making it our largest investment to date. The
core focus of this business is to acquire other financial services businesses as
part of the reforms taking place in the Chinese financial services sector, and
there are a number of potential acquisitions which the team are currently
performing due diligence on. Alongside this, China Finance has won a number of
corporate finance project mandates in conjunction with London Asia, including:
* Xiangfan Kaidi Renewable Energy Company, which is owned by the
Kaidi Group and has been established to carry out infrastructure, energy and
environmental protection projects that utilise waste to generate clean energy in
Xiangfan, which is located in the Hubei Province of China; and
* Zhengzhou Coal Mine, which is seeking to raise RMB1 billion (#63
million) to expand its current coal mining operations, from 10 million to 15
million tons per annum.
Large projects such as these take a considerable time to complete, but have the
potential to generate significant revenue, which if we are successful will
impact in 2006 onwards.
China Financial Services Ltd ("CFS"), the financial software business in which
we have invested #2.4 million for a 48% stake, continues to go from strength to
strength. Its profits for the six months ended 30 June 2005 were #845,000, up
25% on the same period in the previous year. We have once again taken a dividend
and management fees from CFS during the period, such that cash taken out to date
is now greater than the cash originally invested. Despite considerable delay,
there is now some momentum behind the US listing of CFS, with BDO Stoy Hayward's
China office having now completed their audit of the historical accounts to
December 2004, and their review of the first quarter in 2005, and we are now
only awaiting final sign off from BDO's US office to enable the filings for the
US listing to proceed.
We continued to invest during the period, focusing primarily on pre IPO
opportunities.
* In February we invested #160,000 in JSM, a New York based broker dealer.
JSM is currently working on a number of fund raising mandates for us in the
US market.
* In March we invested #1.7 million in Singapore listed Asia Power Corp.
Ltd. We have already received a dividend from this investment, which
provided a dividend yield of over 4.5%, though our key interest in this
investment is to use it as a platform for us to sell other Chinese power
projects into, thereby receiving corporate finance fees and a capital uplift
on our stake in Asia Power.
* Investee company Betex Group plc ("Betex") was successfully admitted to
trading on OFEX in May. As well as our initial investment, we exercised our
warrants to increase our stake and took our corporate finance fees in
shares. Betex has subsequently announced that it has completed a #3 million
placing and that it is seeking to move to AIM. We have to date recouped a
large part of our original investment at a substantial profit.
* In May we invested #340,000 for an 8% stake in Eastsea, a leading IT
outsourcing service provider for the petrochemical industry in China. It has
just raised a further US$1 million of funding from leading Taiwanese venture
capitalist Hotung Group. We have increased our initial stake through
conversion of corporate finance fees and via a share swap so that our
holding is now 13%.
Corporate Finance Activities
Our corporate finance activities complement our investing activities by managing
the exits of portfolio companies, generating fee income, strengthening our brand
and attracting investment opportunities.
We are working with a number of businesses seeking stock market listings in
Singapore, London and New York through our various offices.
In May we assisted Betex with its fundraising and listing on Ofex. We are
currently working on two further Ofex mandates, for China Education Group Ltd
("China Education") and China Eastsea Group Ltd, in which as noted above we
already hold a stake.
China Education, whose business is located in Shandong Province, China, is a
nationally accredited comprehensive three-year college, and is one of the few
privately-run colleges in China with all diplomas officially accredited by the
Education Ministry of China. London Asia investee company Europasia Education
plc took a 12% stake in February 2005, and London Asia is currently preparing
the paperwork for a listing of China Education on OFEX in November.
Partnerships
In February we announced a tie up with the Qingdao Economic Zone and the
formation of a US$20 million fund. We have established an office in Qingdao and
the new team there are looking at a number of opportunities for the fund.
At the start of June we signed a strategic alliance with China Chengxin
Financial Consultancy Co. Ltd ("CCXC"), for co-operation in providing off-shore
financing to, and undertaking listings for, Chinese corporations. The alliance
with CCXC provides us with a nationwide business network, additional expertise
and experience in China, as well as the ability to share the extensive client
resources and expertise of CCXC. The agreement significantly enlarges London
Asia's potential customer base, facilitating more rapid growth and further
promotes London Asia's brand and business within China.
In late August we agreed the creation of a new joint venture company, LAC
Consensus ("LACC"), with Consensus Business Group Ltd. This new company is 40%
owned by London Asia and will focus on two principal investment opportunities in
China: investment in pre-IPO and secondary listings; and the commercial and
residential property market. Investments can be in China related companies going
to any financial market, or in already listed Chinese businesses, which have
either been overlooked by the market or are trading at attractive valuations for
incoming investors. London Asia is responsible for identifying suitable
opportunities for the new venture. Consensus is responsible for arranging the
underlying financing for the deals taken on by LACC.
Board and Management Changes
We were very pleased that, in May, David Brewer agreed to join the Board of
London Asia as a non-executive director. David is one of the leading experts in
the UK on the financial services sector in China. His experience in China dates
back to 1981, when he set up the Chinese office for the Sedgwick Group, making
it the first Western insurance broker to open an office, and in 1993 he was
responsible for obtaining the first authorisation of an insurance broker in
China. David is currently an Alderman of the City of London, was Sheriff in
2002-2003, and in November it is anticipated that he will become the next Lord
Mayor of London.
We also announced in July that Barry Gold, London Asia non-executive director,
decided to step down from the Board to pursue other interests. Barry has been
with the Company since its formation and on behalf of the Board I would like to
express our gratitude for all the hard work he has put in.
Energy and Environment
An increasingly important area for the Group is the Energy and Environment ("E&
E") sector. As a result of the Country's rapid industrialisation, with
associated pollution, large and increasingly prosperous population, and heavy
reliance on fossil fuels, especially coal, China represents the fastest growing
environmental market in the world. The Chinese Government has committed to a
range of measures to encourage the use of non fossil fuel based energy sources
and reduce dependence on imported oil (China is already the second largest
consumer of oil after the US) and to reduce the damage, both economic and
social, caused by rising levels of pollution.
London Asia is already heavily exposed to the E&E sector through its partnership
with Kaidi Group, China's leading environmental group, and investment in China
Finance, which is working on a number of mandates in the sector. We also have a
significant investment in Asia Power, a Chinese power station operator which is
expanding into the wind power market in China.
Given the specialist knowledge required in this area, we have created a new
subsidiary, Clean Technology plc, which will focus on the opportunities in the E
&E sector, and a new team recruited in and run from Germany, where much of the
technology in the sector can be sourced. The team is already working on a number
of projects in China, including wind power, desulphurisation, carbon credits and
land restoration/replanting.
Investment in China
The Chinese economy continues to power on. Recent reforms in the Stock Market,
which have led to a closing to new issues, coupled with reform of the banking
sector and a government orchestrated credit crunch designed to cool the economy,
have reduced the capital available to Chinese businesses, many of whom are
struggling to fund their growth. This has encouraged them to seek overseas
listings to gain access to capital to fund growth, and there is an increasing
flow coming to the UK, where UK investors are particularly keen to gain access
to a share of the fastest growing major economy on the planet. As one of the few
corporate finance advisers from the UK with offices and staff based in China
able to complete due diligence on, and monitor the performance of, these
businesses, London Asia is well placed to benefit from this trend.
Outlook
We have now successfully organised the business into four core divisions:
private equity; corporate finance; fund management; and banking and structured
finance.
Through the generation of fee income, realisation of existing investments and
the recently formed fund management division, we are reducing our dependence on
raising money for new investments via the issue of shares, which has in the past
been a hindrance on the share price performance. Our new joint venture partners
also provide us with access to non-dilutive funding for deals.
London Asia continues to have access to considerably more investment
opportunities than it has financial resources. We have an already established
comprehensive infrastructure, which enables us to expand the number of
transactions undertaken and leverage on our recognised reputation both in the UK
and Greater China at little additional cost.
The next stage of our development is focused on growing our fund management and
corporate finance divisions to fund the large number of transactions, which
cannot be funded from our own internally generated resources. This will bring
increased value for our shareholders and enable us to exploit more fully the
leading position London Asia has developed.
Jack Wigglesworth
Chairman
29 September 2005
London Asia Capital plc
Consolidated Unaudited Profit and Loss Account
For the six months ended 30 June 2005
Six months Six months Year
ended ended ended
30 June 2005 30 June 2004 31 Dec. 2004
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Turnover 496 579 751
Profit on sale of investments 40 13 19
Administrative expenses (408) (198) (498)
Operating profit/(loss) 128 394 272
Net interest receivable 20 24 53
Profit 148 418 325
Minority interest (22) - -
Retained profit for the period 126 418 325
Basic earnings per ordinary share 0.09p 0.59p 0.40p
Diluted earnings per ordinary
share 0.08p 0.44p 0.35p
All amounts are derived from continuing operations.
There were no recognised gains or losses not dealt through the profit and loss
account.
London Asia Capital plc
Consolidated Unaudited Balance Sheet
As at 30 June 2005
30 June 2005 30 June 2004 31 December
2004
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000 #'000 #'000 #'000
Fixed assets
Tangible assets 8 6 5
Investments 9,756 4,924 9,212
------- ------- --- -------
9,763 4,930 9,217
Current assets
Debtors 1,038 733 425
Investments 2,551 246 466
Cash at bank and in hand 13,068 2,786 2,884
------- ------- -------
16,657 3,765 3,775
Creditors: amounts falling
due (337) (43) (88)
within one year ------- ------- -------
Net current assets 16,320 3,722 3,687
------- ------- -------
Total assets less current
liabilities 26,083 8,652 12,904
Creditors: amounts falling
due (260) (474) (300)
after more than one year ------- ------- -------
Total assets less 25,823 8,178 12,604
liabilities ======= ======= =======
Capital and reserves
Called up share capital 10,671 4,057 6,435
Share premium account 21,048 10,070 12,211
Profit and loss account (5,918) (5,949) (6,042)
Minority interest 22 - -
------- ------- -------
Equity shareholders' funds 25,823 8,178 12,604
======= ======= =======
London Asia Capital plc
Consolidated Unaudited Cash Flow statement
For the six months ended 30 June 2005
Six months Six months Year ended
ended ended 31 December
30 June 2005 30 June 2004 2004
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000 #'000 #'000 #'000
Net cash outflow from
operating activities (277) (992) (739)
Returns on investment
Net interest received 20 24 63
----- ----- ------
Net cash outflow from
returns on investments 20 24 63
Capital expenditure
Payment to acquire tangible
assets (3) (3) (3)
Net purchase of investments (544) (466) (5,081)
----- ------- ------
Net cash (outflow)/inflow
from capital expenditure (547) (469) (5,084)
Acquisitions and
disposals
Payment to acquire
subsidiary undertakings and
investment in associates - (314) -
------- ------ -------
Net cash outflow before
management of liquid
resources and financing (807) (1,751) (5,760)
Management of liquid
resources
Current asset investments (2,085) (108) (328)
Bank deposits - - -
------- ------- ------
Net cash (outflow)/inflow
from management of liquid
resources (2,085) (108) (328)
Financing
Proceeds from issue of
shares 13,073 2,406 6,452
Net proceeds from
convertible loan stock 5 -
Repayment of bank loan - - 286
------- ------- ------
Net cash inflow from
financing 13,073 2,411 6,738
------- ------ -------
Increase/(decrease) in cash 10,184 552 650
======= ====== =======
Reconciliation of movements in shareholders' funds
30 June 30 June 31 December
2005 2004 2004
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Profit for the period 126 418 325
Issue of ordinary share capital 13,073 3,576 8,095
---------- ----------- -----------
Net addition to shareholders' funds 13,198 3,994 8,420
Opening shareholders' funds 12,604 4,184 4,184
---------- ----------- -----------
Closing shareholders' funds 25,802 8,178 12,604
========== =========== ===========
London Asia Capital plc
Notes to the interim results
1. Basis of preparation
The results for the six months ended 30 June 2005 are unaudited and have not
been reviewed by the Auditors. They have been prepared on accounting bases and
policies that are consistent with those used in the preparation of the financial
statements of the Group for the year ended 31 December 2004.
The financial statements contained in this report do not constitute statutory
accounts within the meaning of Section 240 of the Companies Act 1985. The
results for the year ended 31 December 2004 were reported on by the auditors and
received an unqualified audit report. Full accounts for the year ended 31
December 2004 have been delivered to the Registrar of Companies.
2. Significant accounting policies
Fixed asset investments
Fixed asset investments are stated at cost less provision for diminution in
value.
Current asset investments
Current asset investments comprise marketable and quoted investments held for
resale and are stated at lower of cost and net realisable value.
Associated undertakings and participating interests
The Company has not treated certain investments in which it holds more than 20%
of the shares as associated undertakings as the directors consider that the
Company does not have the required significant influence over the operations of
these undertakings.
3. Earnings per share
The calculation of basic earnings per share is based on the profit after tax of
#125,624 (2004: #418,000) and on 136,320,617 (2004: 70,901,779) ordinary shares
being the weighted average number of ordinary shares being in issue in the
period. The calculation of diluted earnings per share is based on basic earnings
per share adjusted to allow for the issue of ordinary shares on the assumed
conversion of all options and warrants resulting in 158,620,617 (2004:
101,773,426) ordinary shares.
4. Dividend
The directors do not recommend the payment of an interim dividend.
5. Taxation
No taxation is expected to arise due to tax losses brought forward.
6. Interim Results
Copies of the Interim Results are available on the Company's web site,
www.londonasia.com, or from the Company's registered office, 11 Central House,
High Street, Ongar, Essex, CM5 9AA. Send an email to
accounts@londonasiacapital.com if you would like a copy of the accounts posted
to you.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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