24 Sep 2014 07:00
Adamas Finance Asia Limited
(AIM: ADAM)
("Adamas Finance Asia", "ADAM" or the "Company")
Interim Results for the six months ended 30 June 2014
Highlights
Adamas Finance Asia Chairman, John Croft, commented: "There is no doubt that the six month period to June 2014 was the most eventful and potentially significant since the Company's admission to AIM in 2009. With a strengthened asset base and strong investment management support, the Company is now positioned for a planned programme of asset disposals to realise funding for re-investment in cash-generative projects seeking secured, high-yielding credit finance. I am confident this will enable the Board to meet its long-term objective of re-positioning the Company as a credit finance operation generating strong and predictable returns for shareholders."
Enquiries:
Adamas Finance Asia Limited John Croft |
+44 (0) 1825 830587 |
Nominated Adviser and Joint Broker | |
W H Ireland Limited Tim Feather |
+44 (0) 113 394 6611 |
Joint Broker | |
NSBO | |
Laurie Pinto | +44 (0) 20 7024 4600 |
Public Relations Advisers | |
First City Public Relations (Hong Kong) Allan Piper |
+852 2854 2666 |
Tavistock Communications (London) Simon Hudson |
+44 (0) 20 7920 3170 |
Chairman's Statement
On behalf of the Directors, I am pleased to present the interim results of the Company for the six month period ended 30 June 2014, a period that saw the completion of a key event of long-term significance to its future development. That event was the reverse takeover of the Company completed in February (the "RTO"), involving a US$87 million asset injection, together with a change of name from China Private Equity Investment Holdings Limited to Adamas Finance Asia Limited.
Also at the time of the RTO, the Company appointed an affiliate of Adamas Asset Management (HK) Limited ("Adamas") to provide investment management services. Adamas will play a pivotal role in the Company's planned transition into a credit finance business focused on providing funding for well-managed Chinese growth businesses able to offer secure collateral to support their short-term borrowing requirements. The strategy of investing in credit finance began during the half-year to show early signs of the potential for strong returns, as described further below.
Current portfolio
Through the RTO, the Company'¦s asset portfolio was significantly strengthened, with the addition of interests in four China-focused businesses.
Following the addition of those assets, the most significant assets held by the Company are:
Principal Assets | Effective Interest | Instrument type | Valuation as at 30 June 2014 US$ million |
Changtai Jinhongbang Real Estate Development Co. Ltd | 15.00% | Structured equity | 48.26 |
Global Pharm Holdings Group Inc | 4.29% | Redeemable convertible bond | 22.36 |
Fortel Technology Holdings Limited | 33.60% | Structured equity | 17.13 |
Hong Kong Mining Holdings Limited | 5.68% | Structured equity | 9.61 |
Meize Energy Industrial Holdings Ltd | 7.9% | Redeemable convertible preference shares | 6.73 |
104.09 |
Changtai Jinhongbang Real Estate Development Co. Ltd ("CJRE") is the owner of a luxury resort and residential development project in Fujian Province, Eastern China. CJRE expects to hold a grand opening of a new batch of villas and apartments ready for sale in the second half of the year. The company is also in a discussion with one of the largest insurance companies in China, which may invest pension funds into part of the project.
Global Pharm Holdings Group Inc.("Global Pharm") is a pharmaceutical company involved in pharmaceuticals, the cultivation of herbs for Traditional Chinese Medicine ("TCM") herb cultivation, and TCM processing and distribution. Headquartered in Shenzhen, Southern China, Global Pharm has recently completed two major acquisitions to enhance the TCM operations, and has positioned itself in a strong position within China's high-margin ginseng business.
Fortel Technology Holdings Limited ("Fortel") is a platform provider for the distribution of online content in China which has developed an integrated content distribution platform for both content providers and consumers to sell and purchase premium digital content. Following delays to a long-planned IPO for Fortel, the management team has been focused on the continuing development of innovative software application and e-commerce services, and is still preparing for an eventual listing on the Growth Enterprise Market board of the Hong Kong Stock Exchange.
Hong Kong Mining Holdings Limited ("HKMH") is a resources company whose primary asset is a large dolomite magnesium limestone mines in the province of Shanxi, China. HKMH continues to prepare for an IPO on the Hong Kong Stock Exchange.
Strategy
ADAM's strategy is to achieve an orderly disposal of the principal assets with the objective of providing cash reserves for redeployment into income-generating investment opportunities. The plan is to create a business with the potential to offer strong and predictable returns to shareholders and open access to a wider investor base.
The track record of the Adamas teams in Hong Kong and Shanghai provides confidence that the re-investment of funds raised through the disposal programme can yield attractive and regular returns. With over US$600 million under management, Adamas has established a solid record of investment successes since 2010, achieving high internal rates of return (IRR) by providing funding to Chinese SMEs on a secured basis.
Despite prevailing negative sentiment about the risks carried by investing into China, attractive opportunities exist to provide finance for operationally-sound Chinese SMEs in need of short-term bridging finance not easily available within the PRC. More than 90% of such companies have difficulty in obtaining bank funding, and Adamas has demonstrated it is possible to achieve consistent cash-generative returns by placing strong emphasis on rigorous due diligence, tight management involvement and robust collateral.
In August 2013, prior to the RTO, the Company made a US$1 million investment into the Greater China Credit Fund, which is managed by Adamas. In April 2014, the Company received its first dividend of US$75,300 from the investment, an interim yield of more than 7.5%. The Company has also invested US$0.8 million in two tranches into Chinese assets through the BRJ China Credit Fund Limited ("BRJ"), a fund launched by Adamas in partnership with a Shanghai-based firm. Since the initial investment of US$500,000 with BRJ in April 2014, the fund has achieved three exits, yielding gross IRRs of 27.26%, 31.83% and 57.04% on fully-repaid loans of US$2.1 million, US$2.4 million and US$4.8 million, respectively.
Results
Following the asset injections from the RTO, the Company's unaudited consolidated net asset value as at 30 June 2014 stood at US$116.6 million, an increase of more than 458% over the 31 December 2013 valuation of US$25.5 million. The loss per share narrowed to US¢0.05, down from US¢0.64 for the six months to 30 June 2013, despite a significant increase in administrative expenses arising from the RTO.
Conclusion
In summary, there is no doubt that the six-month period to June 2014 was the most eventful and potentially significant since the Company's admission to AIM in 2009. With a strengthened asset base and strong investment management support, the Company is now positioned for a planned programme of asset disposals to realise funding for re-investment in cash-generative projects seeking secured, high-yielding credit finance. I am confident this will enable the Board to meet its long-term objective of re-positioning Adamas Finance Asia Limited as a credit finance operation generating strong and predictable returns for shareholders.
John Croft
Chairman
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended | Year ended | ||||||||
Note | 30 June 2014 Unaudited US$'000 | 30 June 2013 (Restated) Unaudited US$'000 | 31 December 2013 (Restated) Audited US$'000 | ||||||
Realised gain on disposal of investments | 238 | - | 548 | ||||||
Fair value changes on financial assets at fair value through profit or loss | 821 | 30 | (870) | ||||||
Administrative expenses | (1,978) | (758) | (1,738) | ||||||
Operating loss | (919) | (728) | (2,060) | ||||||
Other income | 106 | 35 | 137 | ||||||
Finance income | 189 | 99 | 223 | ||||||
Finance charges | (8) | - | (21) | ||||||
Loss before taxation | (632) | (594) | (1,721) | ||||||
Taxation | 5 | - | - | - | |||||
Loss for the period | 7 | (632) | (594) | (1,721) | |||||
Other comprehensive expense Currency translation differences | (44) | (17) | (7) | ||||||
Total comprehensive expense for the period | (676) | (611) | (1,728) |
| |||||
Loss per share | 7 | ||||||||
Basic | 0.05 cents | 0.64 cents | 1.57 cents | ||||||
Diluted | 0.04 cents | 0.64 cents | 1.57 cents | ||||||
The results above relate to continuing operations.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note | 30 June 2014 Unaudited US$'000 |
30 June 2013 (Restated) Unaudited US$'000 |
31 December 2013 (Restated) Audited US$'000 | ||||||
Assets | |||||||||
Fixtures, fittings and equipment | - | 106 | 75 | ||||||
Loans and other receivables | 3,074 | 3,467 | 1,864 | ||||||
Quoted financial assets at fair value through profit or loss | 9 | - | 762 | 684 | |||||
Unquoted financial assets at fair value through profit or loss | 8 | 116,217 | 22,808 | 22,637 | |||||
Cash and cash equivalents | 1,095 | 1,064 | 1,024 | ||||||
Total assets | 120,386 | 28,207 | 26,284 | ||||||
Liabilities | |||||||||
Other payables and accruals | 1,389 | 1,635 | 809 | ||||||
Loan payable | 2,400 | - | - | ||||||
Total liabilities | 3,789 | 1,635 | 809 | ||||||
Net assets | 116,597 | 26,572 | 25,475 | ||||||
Equity and reserves | |||||||||
Share capital | 10 | 127,313 | 35,572 | 35,572 | |||||
Share based payment reserve | 88 | 11 | 31 | ||||||
Foreign translation reserve | - | 34 | 44 | ||||||
Accumulated losses | (10,804) | (9,045) | (10,172) | ||||||
Total equity and reserves | 116,597 | 26,572 | 25,475 |
| |||||
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share capital US$'000 | Share based payment reserve US$'000 | Foreign translation reserve US$'000 | Accumulated losses US$'000 | Total US$'000 | |||||
Balance at 1 January 2013 (restated) | 31,572 | 2 | 51 | (8,451) | 23,174 | ||||
Loss for the year | - | - | - | (594) | (594) | ||||
Other comprehensive expense | |||||||||
Currency translation differences | - | - | (17) | - | (17) | ||||
Total comprehensive expense for the period | - | - | (17) | (594) | (611) | ||||
Issue of shares | 4,000 | - | - | - | 4,000 | ||||
Issue of options | - | 9 | - | - | 9 | ||||
Balance at 30 June 2013 (restated) | 35,572 | 11 | 34 | (9,045) | 26,572 | ||||
Loss for the period | - | - | - | (1,127) | (1,127) | ||||
Other comprehensive income | |||||||||
Currency translation differences | - | - | 10 | - | 10 | ||||
Total comprehensive income / (expense) for the period | - | - | 10 | (1,127) | (1,117) | ||||
Issue of options | - | 20 | - | - | 20 | ||||
Balance at 31 December 2013 and 1 January 2014 (restated) | 35,572 | 31 | 44 | (10,172) | 25,475 | ||||
Loss for the period | - | - | - | (632) | (632) | ||||
Other comprehensive expense | |||||||||
Currency translation differences | - | - | (44) | - | (44) | ||||
Total comprehensive expense for the period | - | - | (44) | (632) | (676) | ||||
Issue of shares | 91,741 | - | - | - | 91,741 | ||||
Share-based payments | - | 57 | - | - | 57 | ||||
Balance at 30 June 2014 | 127,313 | 88 | - | (10,804) | 116,597 | ||||
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended | Year ended | ||||||
30 June 2014 Unaudited US$'000 | 30 June 2013 (Restated) Unaudited US$'000 | 31 December 2013 (Restated) Audited US$'000 | |||||
Cash flow from operating activities | |||||||
Loss before taxation | (632) | (594) | (1,721) | ||||
Adjustments for: | |||||||
Dividend income | (80) | - | - | ||||
Depreciation | 19 | 23 | 58 | ||||
Finance income | (189) | (99) | (223) | ||||
Finance charges | 8 | - | - | ||||
Loss on fixed asset disposal | 56 | - | - | ||||
Fair value changes on unquoted financial assets at fair value through profit or loss | (858) | 31 | 946 | ||||
Fair value changes on quoted financial assets at fair value through profit or loss | 37 | (61) | (76) | ||||
Realised on unquoted financial assets at fair value through profit or loss | - | - | (548) | ||||
Realised on quoted financial assets at fair value through profit or loss | (238) | - | - | ||||
Share-based payment expenses | 57 | 9 | 29 | ||||
Decrease in other receivables | 169 | 81 | 82 | ||||
Increase in other payables and accruals | 572 | 1,157 | 331 | ||||
Net cash (used in) / generated from operating activities | (1,079) | 547 | (1,122) | ||||
Cash flow from investing activities | |||||||
Acquisition of fixtures, fittings and equipment | - | (122) | (126) | ||||
Dividend received | 75 | - | - | ||||
Finance income received | - | 99 | 223 | ||||
Purchase of quoted financial assets at fair value through profit or loss | - | (701) | (701) | ||||
Sales proceeds of quoted financial assets at fair value through profit or loss | 885 | - | 92 | ||||
Purchase of unquoted financial assets at fair value through profit or loss | (4,287) | (2,706) | (4,450) | ||||
Sales proceeds of unquoted financial assets at fair value through profit or loss | - | - | 1,548 | ||||
Loans granted | (2,939) | (2,906) | (3,564) | ||||
Loans borrowed | 2,400 | - | - | ||||
Proceeds from repayment of loans granted | - | 2,380 | 4,639 | ||||
Net cash used in investing activities | (3,866) | (3,956) | (2,339) | ||||
Cash flows from financing activity | |||||||
Net proceeds from issue of shares | 5,016 | 4,000 | 4,000 | ||||
Net cash generated from financing activity | 5,016 | 4,000 | 4,000 | ||||
Net increase in cash & cash equivalents during the period | 71 | 591 | 539 | ||||
Cash & cash equivalents at the beginning of the period | 1,024 | 489 | 489 | ||||
Effect of foreign exchange | - | (16) | (4) | ||||
Cash & cash equivalents at the end of the period | 1,095 | 1,064 | 1,024 | ||||
Notes to the financial information
1. CORPORATE INFORMATION
The Company is a limited company incorporated in the British Virgin Islands ("BVI") under the BVI Business Companies Act 2004 on 18 January 2008. The address of the registered office is Commerce House, Wickhams Cay 1, PO Box 3140, Road Town, Tortola, British Virgin Islands VG1110 and its principal place of business is 1810, 18/F, Tai Yau Building, 181 Johnston Road, Wanchai, Hong Kong.
The Company is quoted on AIMof the London Stock Exchange (code: ADAM); and with effect from 6 December 2012, the Company's ordinary shares have been included on the Quotation Board of the Open Market of the Frankfurt Stock Exchange (code: 1CP).
2. BASIS OF PREPARATION
The financial information included in this interim report for the six months ended 30 June 2014 is unaudited.
The condensed consolidated interim financial information has been prepared in accordance with International Accounting Standard ("IAS") 34 "Interim Financial Reporting".
3. PRINCIPAL ACCOUNTING POLICIES
The condensed consolidated interim financial information has been prepared on the historical cost convention, as modified by revaluation of certain financial assets and financial liabilities at fair value through the income statement.
Changes in accounting standards
IFRS 10, 11 and 12 are effective for the year ended 31 December 2014, therefore these standards have been adopted as part of the preparation of the results for the period ended 30 June 2014. The principal changes as a result of these standards arise from IFRS10, as well as "Investment Entities" (Amendments to IFRS 10, IFRS 12 and IAS 27).
Under IFRS 10, companies are able to consider whether they are classed as an investment entity. An investment entity is an entity that:
a. obtains funds from one or more investors for the purpose of providing those investor(s) with investment management services;
b. commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and
c. measures and evaluates the performance of substantially all of its investments on a fair value basis.
In assessing whether a company meets the definition of an investment entity, the following characteristics must be considered:
a. it has more than one investment;
b. it has more than one investor;
c. it has investors that are not related parties of the entity; and
d. it has ownership interests in the form of equity or similar interests.
The directors have considered the definition of an investment entity in IFRS 10 as well as the associated application guidance. The stated activity of the Company is to achieve capital appreciation by gaining securities of private and public companies. The directors considered that the Company met the definition of an investment entity on the following basis:
1. it has more than one investment;
2. it has more than one investor;
3. the investors in the Company are not related parties of the Company; and
4. the ownership interests in the investments are in the form of equity.
Investments held by designated investment entity are measured at fair value through profit or loss in accordance with IAS 39 "Financial Instruments: Recognition and Measurement". This represents a change in accounting policy for the group and requires the previous audited period to be restated.
The impact of this change on the consolidated statement and statement of financial position for the year ended 31 December 2013 and the period ended 30 June 2013 are detailed below:
Year ended | Adjustment | |||||
Consolidated statement of comprehensive income | 31 December 2013 (as per previous accounting policy) US$'000 |
31 December 2013 (as per new accounting policy) US$'000 | US$'000 | |||
Realised gain on disposal of investments | 548 | 548 | - | |||
Fair value changes on financial assets at fair value through profit or loss | (867) | (870) | (3) | |||
Administrative expenses | (1,741) | (1,738) | 3 | |||
Operating loss | (2,060) | (2,060) | - | |||
Other income | 137 | 137 | - | |||
Finance income | 223 | 223 | - | |||
Finance charges | (21) | (21) | - | |||
Loss before taxation | (1,721) | (1,721) | - | |||
Taxation | - | - | - | |||
Loss for the period | (1,721) | (1,721) | - | |||
Other comprehensive expense Currency translation differences | (7) | (7) | - | |||
Total comprehensive expense for the period | (1,728) | (1,728) | - | |||
Loss per share | ||||||
Basic | 1.57 cents | 1.57 cents | - | |||
Diluted | 1.57 cents | 1.57 cents | - | |||
Year ended | Adjustment | ||||||
Consolidated Statement of Financial Position | 31 December 2013 (as per previous accounting policy) US$'000 |
31 December 2013 (as per new accounting policy) US$'000 | US$'000 | ||||
Assets |
| ||||||
Fixtures, fittings and equipment | 75 | 75 | - |
| |||
Loans and other receivables | 1,864 | 1,864 | - |
| |||
Quoted financial assets at fair value through profit or loss | 3,182 | 684 | (2,498) |
| |||
Unquoted financial assets at fair value through profit or loss | 20,168 | 22,637 | 2,469 |
| |||
Cash and cash equivalents | 1,344 | 1,024 | (320) |
| |||
Total assets | 26,633 | 26,284 | (349) |
| |||
| |||||||
Liabilities |
| ||||||
Other payables and accruals | 1,158 | 809 | 349 |
| |||
| |||||||
Total liabilities | 1,158 | 809 | 349 |
| |||
| |||||||
Net assets | 25,475 | 25,475 | - |
| |||
| |||||||
Equity and reserves |
| ||||||
Share capital | 35,572 | 35,572 | - |
| |||
Share based payment reserve | 31 | 31 | - |
| |||
Foreign translation reserve | 44 | 44 | - |
| |||
Accumulated losses | (10,172) | (10,172) | - |
| |||
| |||||||
Total equity and reserves | 25,475 | 25,475 | - |
| |||
Year ended | Adjustment | |||||
Consolidated statement of cashflows | 31 December 2013 (as per previous accounting policy) US$'000 |
31 December 2013 (as per new accounting policy) US$'000 | US$'000 | |||
Cash flow from operating activities | ||||||
Loss before taxation | (1,721) | (1,721) | - | |||
Adjustments for: | ||||||
Depreciation | 58 | 58 | - | |||
Finance income | (223) | (223) | - | |||
Fair value changes on unquoted financial assets at fair value through profit or loss | (587) | 946 | 1,533 | |||
Fair value changes on quoted financial assets at fair value through profit or loss | 906 | (76) | (982) | |||
Realised on unquoted financial assets at fair value through profit or loss | - | (548) | (548) | |||
Share-based payment expenses | 29 | 29 | - | |||
Decrease in other receivables | 82 | 82 | - | |||
Increase in other payables and accruals | 681 | 331 | (350) | |||
Net cash used in operating activities | (775) | (1,122) | (347) | |||
Cash flow from investing activities | ||||||
Acquisition of fixtures, fittings and equipment | (126) | (126) | - | |||
Finance income received | 223 | 223 | - | |||
Purchase of quoted financial assets at fair value through profit or loss | (4,489) | (701) | 3,788 | |||
Sales proceeds of quoted financial assets at fair value through profit or loss | 400 | 92 | (308) | |||
Purchase of unquoted financial assets at fair value through profit or loss | (1,002) | (4,450) | (3,448) | |||
Sales proceeds of unquoted financial assets at fair value through profit or loss | 1,548 | 1,548 | - | |||
Loans granted | (3,564) | (3,564) | - | |||
Proceeds from repayment of loans granted | 4,639 | 4,639 | - | |||
Net cash used in investing activities | (2,371) | (2,339) | 32 | |||
Cash flows from financing activity | ||||||
Net proceeds from issue of shares | 4,000 | 4,000 | - | |||
Net cash generated from financing activity | 4,000 | 4,000 | - | |||
Net increase in cash & cash equivalents during the period | 854 | 539 | (315) | |||
Cash & cash equivalents at the beginning of the period | 489 | 489 | - | |||
Effect of foreign exchange | 1 | (4) | (5) | |||
Cash & cash equivalents at the end of the period | 1,344 | 1,024 | (320) | |||
Six months ended | Adjustment | |||||
Consolidated statement of comprehensive income | 30 June 2013 (as per previous accounting policy) US$'000 |
30 June 2013 (as per new accounting policy) US$'000 |
US$'000 | |||
Fair value changes on financial assets at fair value through profit or loss | 30 | 30 | - | |||
Administrative expenses | (758) | (758) | - | |||
Operating loss | (728) | (728) | - | |||
Other income | 35 | 35 | - | |||
Finance income | 99 | 99 | - | |||
Loss before taxation | (594) | (594) | - | |||
Taxation | - | - | - | |||
Loss for the period | (594) | (594) | - | |||
Other comprehensive expense Currency translation differences | (17) | (17) | - | |||
Total comprehensive expense for the period | (611) | (611) | - | |||
Loss per share | ||||||
Basic | 0.64 cents | 0.64 cents | - | |||
Diluted | 0.64 cents | 0.64 cents | - | |||
Six months ended | Adjustment | ||||||
Consolidated statement of financial position | 30 June 2013 (as per previous accounting policy) US$'000 |
30 June 2013 (as per new accounting policy) US$'000 |
US$'000 | ||||
Assets | |||||||
Fixtures, fittings and equipment | 106 | 106 | - | ||||
Loans and other receivables | 3,467 | 3,467 | - | ||||
Quoted financial assets at fair value through profit or loss | 3,431 | 762 | (2,669) | ||||
Unquoted financial assets at fair value through profit or loss | 20,119 | 22,808 | 2,689 | ||||
Cash and cash equivalents | 1,084 | 1,064 | (20) | ||||
Total assets | 28,207 | 28,207 | - | ||||
Liabilities | |||||||
Other payables and accruals | 1,635 | 1,635 | - | ||||
Total liabilities | 1,635 | 1,635 | - | ||||
Net assets | 26,572 | 26,572 | - | ||||
Equity and reserves | |||||||
Share capital | 35,572 | 35,572 | - | ||||
Share based payment reserve | 11 | 11 | - | ||||
Foreign translation reserve | 34 | 34 | - | ||||
Accumulated losses | (9,045) | (9,045) | - | ||||
Total equity and reserves | 26,572 | 26,572 | - | ||||
Six months ended | Adjustment | |||||
Consolidated statement of cashflows | 30 June 2013 (as per previous accounting policy) US$'000 |
30 June 2013 (as per new accounting policy) US$'000 |
US$'000 | |||
Cash flow from operating activities | ||||||
Loss before taxation | (594) | (594) | - | |||
Adjustments for: | ||||||
Depreciation | 23 | 23 | - | |||
Finance income | (99) | (99) | - | |||
Fair value changes on unquoted financial assets at fair value through profit or loss | - | 31 | 31 | |||
Fair value changes on quoted financial assets at fair value through profit or loss | (30) | (61) | (31) | |||
Share-based payment expenses | 9 | 9 | - | |||
Decrease in other receivables | 81 | 81 | - | |||
Increase in other payables and accruals | 1,157 | 1,157 | - | |||
Net cash generated from operating activities | 547 | 547 | - | |||
Cash flow from investing activities | ||||||
Acquisition of fixtures, fittings and equipment | (122) | (122) | - | |||
Finance income received | 99 | 99 | - | |||
Purchase of quoted financial assets at fair value through profit or loss | (3,401) | (701) | 2,700 | |||
Purchase of unquoted financial assets at fair value through profit or loss | - | (2,706) | (2,706) | |||
Loans granted | (2,906) | (2,906) | ||||
Proceeds from repayment of loans granted | 2,380 | 2,380 | - | |||
Net cash used in investing activities | (3,950) | (3,956) | (6) | |||
Cash flows from financing activity | ||||||
Net proceeds from issue of shares | 4,000 | 4,000 | - | |||
Net cash generated from financing activity | 4,000 | 4,000 | - | |||
Net increase in cash & cash equivalents during the period | 597 | 591 | - | |||
Cash & cash equivalents at the beginning of the period | 489 | 489 | - | |||
Effect of foreign exchange | (2) | (16) | (14) | |||
Cash & cash equivalents at the end of the period | 1,084 | 1,064 | (20) | |||
4. SEGMENT INFORMATION
The operating segment has been determined and reviewed by the senior management and executive Board members to be used to make strategic decisions. The senior management and executive Board members consider there to be a single business segment, being that of investing activity, which is reportable in two cash generating units.
The reportable operating segment derives its revenue primarily from debt investment in several companies and unquoted investments.
The senior management and executive Board members assess the performance of the operating segments based on a measure of adjusted Earnings Before Interest, Taxes, Depreciation and Amortisation (¡§EBITDA¡¨). This measurement basis excludes the effects of non-recurring expenditure from the operating segments such as restructuring costs. The measure also excludes the effects of equity-settled share-based payments and unrealised gains/losses on financial instruments.
The segment information provided to the senior management and executive Board members for the reportable segments for the periods is as follows:
Revenue attributed by reference to each company¡¦s country of domicile:
BVI | Hong Kong | ||||||||||||
Six months ended | Year ended | Six months ended | Year ended | ||||||||||
30 June 2014 | 30 June 2013 (Restate) | 31 December 2013 (Restated) | 30 June 2014 | 30 June 2013 (Restated) | 31 December 2013 (Restated) | ||||||||
US$000 | US$000 | US$000 | US$000 | US$000 | US$000 | ||||||||
Realised gain on disposal of investments | - | - | 548 | 238 | - | - | |||||||
Fair value changes on financial assets at fair value through profit or loss | 858 | (31) | (906) | (37) | 61 | 36 | |||||||
Other income | 83 | - | - | 23 | 35 | 137 | |||||||
Financial income | 189 | 99 | 223 | - | - | - | |||||||
5. TAXATION
No charge to taxation arises for the six months ended 30 June 2014 and 2013 as there were no taxable profits in either period.
Tax reconciliation:
Six months ended | Year ended | |||||
30 June 2014 US$'000 | 30 June 2013 (Restated) US$'000 | 31 December 2013 (Restated) US$'000 | ||||
Loss before taxation | (632) | (594) | (1,721) | |||
Effective tax charge at 16.5% (2013:16.5%) | (104) | (98) | (284) | |||
Effect of: | ||||||
Differences in overseas taxation rates | 104 | (98) | 284 | |||
Effective tax rate | - | - | - | |||
As at 30 June 2014, the Group has no unused tax losses (30 June 2013: Nil) available for offset against future profits.
6. DIVIDEND
The Board of the Company does not recommend the payment of an interim dividend in respect of the six months ended 30 June 2014 (30 June 2013: Nil).
7. LOSS PER SHARE
The calculation of the basic and diluted loss per share attributable to owners of the Group is based on the following:
Six months ended | Year ended | |||
30 June 2014 US$'000 | 30 June 2013 US$'000 | 31 December 2013 US$'000 | ||
Numerator | ||||
Basic / Diluted: | Net loss | (632) | (594) | (1,721) |
Number of shares | ||||
'000 | '000 | '000 | ||
Denominator | ||||
Basic: | Weighted average shares | 1,272,068 | 93,412 | 109,984 |
Effect of diluted securities | ||||
Share options | 2,250 | 750 | 2,250 | |
Warrants | 136,207 | - | - | |
Diluted: | Adjusted weighted average shares | 1,410,525 | 94,162 | 112,234 |
The share options are anti-dilutive and therefore excluded from the adjusted weighted average share calculation.
On 19 February 2014, the Company issued 785,850,641 warrants, all exercisable at US$0.06. For the six months ended 30 June 2014, the warrants are dilutive. The adjusted weighted average warrant is calculated by reference to its dilutive effect.
Therefore, for the six months ended 30 June 2014 and 2013, the weighted average shares in issue are 1,408,275,529 and 93,412,000 respectively.
8. UNQUOTED FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
30 June 2014 US'¦000 | 30 June 2013 (Restated) US$'000 | 31 December 2013 (Restated) US$'000 | ||||
At the beginning of the period | 22,637 | 20,133 | 20,133 | |||
Fair value changes through profit or loss | 858 | (31) | (946) | |||
Additions | 92,722 | 2,706 | 4,450 | |||
Disposals | - | - | (1,000) | |||
At the end of the period | 116,217 | 22,808 | 22,637 | |||
9. QUOTED FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
30 June 2014 US$'000 | 30 June 2013 (Restated) US$'000 | 31 December 2013 (Restated) US$'000 | ||||
Market value at the beginning of the period | 684 | - | - | |||
Currency translation difference | - | - | (1) | |||
Fair value changes through profit or loss | (37) | 61 | 76 | |||
Additions | - | 701 | 701 | |||
Disposals | (647) | - | (92) | |||
Balance at the end of the period | - | 762 | 684 | |||
The quoted financial assets at fair value through profit or loss amounting to US$ NIL (30 June 2013: US$762,000) were pledged under a securities margin account.
10. SHARE CAPITAL
Number of Shares | Amount US$'000 | |||
Authorised, called-up and fully paid ordinary shares of no par value each at 30 June 2013 | 126,284,645 | 35,572 | ||
Bonus Shares issued on 19 February 2014 | 42,094,858 | - | ||
Shares issued for acquisition of special purpose vehicles on 19 February 2014 | 1,445,416,667 | 86,725 | ||
Ordinary shares issued for cash on 19 February 2014 | 83,600,000 | 5,016 | ||
Warrant exercised to ordinary shares on 30 May 2014 | 6,000 | - | ||
Authorised, called-up and fully paid ordinary shares of no par value each at 30 June 2014 | 1,697,402,170 | 127,313 | ||
Under the terms of the re admission of the Company¡¦s shares to trading on AIM on 19 February 2014, existing shareholders were issued with new ordinary shares on the basis of one new ordinary shares for every three ordinary shares held for nil consideration ("Bonus Shares").
The consideration for the acquisition of new unquoted financial assets was the issue to Elypsis Solutions Limited ("Elypsis") by the Company of 1,445,416,667 new ordinary shares at a price of US$0.06 per ordinary share.
On 19 February 2014, the Company placed a total of 83,600,000 ordinary shares at a price of US$0.06 per share and raised gross proceeds of US$5.016 million.
The fair value of the ordinary shares issued was determined with reference to the quoted market price with adjustment made for dilution in respect of bonus shares issued in February 2014.
On 30 May 2014, the Company had received exercise notices in respect of warrants to subscribe for 6,000 new ordinary shares of no par value each at a price of US$0.06 each.
The Company was incorporated in the BVI under the BVI Business Companies Act 2004. Under the BVI laws and regulations, there is no concept of ¡§share premium¡¨, and all proceeds from the sale of no par value equity shares is deemed to be share capital of the Company.
11. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Level 1, 2 or 3 based on the degree to which the fair value is observable:
l Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
l Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly or indirectly; and
l Level 3 fair value measurements are those derived from inputs that are not based on observable market data.
As at 30 June 2014 US$'000 | As at 30 June 2013 (Restated) US$'000 | As at 31 December 2013 (Restated) US$'000 | ||||
Level 1 | ||||||
Quoted financial assets at fair value through profit or loss | - | 762 | 684 | |||
Level 3 | ||||||
Unquoted financial assets at fair value through profit or loss (note 8) | 116,217 | 22,808 | 22,637 | |||
116,217 | 23,570 | 23,321 |
There is no transfer between levels in the current period.
During the year ended 31 December 2013 unquoted financial assets with a carrying value of US$17,120,000 were transferred from level 2 to level 3 due to the lack of available, observable input data.
The values of level 3 investments have been determined using the yield capitalisation (Discounted cash flow) method.
12. RELATED PARTY TRANSACTIONS
During the period under review, the Group entered into the following transactions with related parties and connected parties:
Note | 30 June 2014 US$'000 | 30 June 2013 US$'000 | 31 December 2013 US$'000 | |
Amount due to Directors | (i) | |||
- Hanson Cheah | n/a | 32 | 47 | |
- Conor MacNamara | 25 | n/a | 2 | |
- Ernest Wong Yiu Kit | 13 | 108 | 96 | |
- John Croft | 51 | 15 | 16 | |
(i) The amounts due thereto are unsecured, interest free and have no fixed term of repayment. There are no other contracts of significance in which any director has or had a material interest during the current period.
13. EVENTS AFTER THE REPORTING PERIOD
On 11 July 2014, the Company entered into a number of subscription agreements with new investors. Pursuant to the terms of the subscription agreements, investors agreed to subscribe for an aggregate of 31,648,000 ordinary shares at a subscription price per ordinary share of US$0.07, raising a total of US$2,215,360 for the Company.
The Company offered warrant holders at the offer record date the opportunity to exchange their shareholder warrants on the basis of one existing ordinary share for every 4 shareholder warrants held.
Under the terms of reorganisation of the existing ordinary shares every 10 existing ordinary shares, whether issued or unissued, was consolidated into one new ordinary share ("1-for-10 Ordinary Share Consolidation").
The reorganisation was as following:
Number of Shares | Amount US$'000 | |||
Authorised, called-up and fully paid ordinary shares of no par value each at 30 June 2014 | 1,697,402,170 | 127,313 | ||
Ordinary shares issued in cash on 11 July 2014 | 31,648,000 | 2,215 | ||
Exchange the shareholder warrants on the basis of 1 existing ordinary share for every 4 shareholder warrants held | 190,374,229 | - | ||
Authorised, called-up and fully paid ordinary shares of no par value each at 11 July 2014, before 1-for-10 Ordinary Share Consolidation | 1,919,424,399 | 129,528 | ||
Authorised, called-up and fully paid ordinary shares of no par value each at 11 July 2014, after 1-for-10 Ordinary Share Consolidation | 191,942,420 | 129,528 | ||
14. COPIES OF THE INTERIM REPORT
The Interim report is available for download from www.adamasfinance.com.