20 Nov 2008 07:00
Embargoed Release: 07:00hrs Thursday 20th November 2008
Albany Capital plc
("Albany Capital" or "the Company")
Preliminary Results
for the year ended 30 September 2008
Albany Capital (ticker: ALB.L) is pleased to announce unaudited preliminary results for the year ended 30 September 2008. The preliminary announcement has been prepared in accordance with the requirements of IFRS 1 "First Time Adoption of International Financial Reporting Standards".
Summary of results
Investment strategy delivers growth from core portfolio:
Well established China-based companies with good profit records
Both China Food Company plc and Sorbic International plc have delivered good profits growth and strong cash flow
Companies are well positioned in their respective markets to deliver further significant growth once they have completed build of new production capacity over next twelve months
China investment portfolio had a market value of £10.2 million at year end against a cost £8.4m resulting in a fair value gain of £1.8m for the year
China investment portfolio represented 65% of the company's Net Assets at year end and 82% of the total investment portfolio value at year end
Non core investment portfolio had a market value of £2.2 million at year end resulting in a fair value loss of £2.6m for the year
Retained loss for the year ended 30 September 2008 of £847,674 (30 September 2007: £114,250)
Net assets per share at 30 September 2008 of 49.4 pence per share (30 September 2007: 51.1 pence per share)
Cash reserves at 30 September 2008 of £2.8 million (30 September 2007: £10.5 million)
Commenting, John McLean, Chairman of Albany Capital said:
"Since moving Albany onto a new investment strategy we now have core holdings in companies with established trading records which are also very cash generative and well placed to benefit from future growth. Albany's core investments are on track to deliver further growth and it also remains well placed with the cash resources to make new investments."
Enquiries: www.albanycapital.co.uk
| Albany Capital , John McLean, Chairman | tel: +44 (0)7768 031454 |
| WH Ireland, James Joyce/ Sarang Shah | tel: +44 (0) 20 7220 1666 |
| Hansard Group, John Bick | tel: +44 (0)7872 061007 |
Chairman's Statement
Overview
I am pleased to report to shareholders on a successful year for Albany in which the Company has benefited from its first full year under the new investment strategy of investing in profitable and cash-generative growth companies which are based in China. They are also positioned to benefit from the forecast growth in China's domestic consumer sectors which is explained in more detail later. It is clear to your board that the investments made since December 2007 are in companies with strong profits records, good cash generation records and significant growth potential in their respective markets.
In the year ended 30 September 2008 Albany Capital made a loss after tax of £847,674 (2007: £114,250). At the year-end, the net asset value per share for the Company was 49.4p.(2007: 51.1p)
The value of Albany's holdings in China Food Company and Sorbic International as of 30 September 2008 was £10.2 million representing a 21.4 per cent gain on Albany's original investment.
As at 30 September 2008 the Company had no debt and had cash balances in excess of £2.8 million.
Investing for Continued Growth
Albany has made significant progress since the Board successfully repositioned Albany's investment strategy just over a year ago to concentrate on reversing China-based companies into AIM listed cash shells, as stated in the Company's annual report for the year ended 30 September 2007.
We are delighted with the progress the Company has made since December 2007 with the admission to AIM of China Food Company plc (AIM: CFC), a leading soya sauce producer, on 10 December 2007 and most recently the admission to AIM of Sorbic International plc (AIM: SORB), the third largest producer of sorbic acid and potassium sorbate - both key natural products used by food producers around the world, on 30 September 2008.
The successful repositioning of our investment strategy has resulted in acquiring significant holdings in two AIM listed companies, both with leading positions in their respective markets.
China Food Company and Sorbic International operate in markets which are forecast to grow and both companies are also benefiting from further additional investment in new production facilities. These are due to come on stream at both companies over the next twelve months, principally in order to meet the anticipated increases in demand in their respective markets. Both companies are therefore well positioned with strong management in place to deliver significant future growth.
Our focus over the last year has been to invest in companies which have a strong record in terms of profits growth and cash generation and both China Food Company and Sorbic International fulfil these criteria and both are also investing in the future.
Growing aspirations of emerging middle classes
Albany's strategy to focus on China-based investments continues to be endorsed by forecast economic trends in China. Whilst we have seen inflationary pressures in that economy, which now look to have subsided from higher levels earlier in 2008, the directors believe our two investee companies are both set to benefit over the long term to a shift in domestic spend, primarily from a burgeoning 'middle-class'.
This segment of the consumer market in China is expected to continue to grow over the next twenty years. In doing so it is expected to bring very significant influence to each of the consumer sectors, including food, particularly as household incomes increase and aspirational buying takes hold across a growing number of families benefiting from a move to urban living and improved income levels.
Research has highlighted the emergence of the Chinese urban middle classes and certainly reinforced our analysis that the spending power of China's emerging middle classes will soon redefine the Chinese market. Although producers of luxury goods may continue to cater only to the wealthiest households, other companies, especially manufacturers of mass consumer goods, can win the bigger prize by broadening their focus to include the emerging middle class. It is exactly this segment of the market that both China Food Company, moving towards the premium brand end of the soya sauce market, and Sorbic International, set to benefit from the increased demand for more natural food preservatives, will benefit from.
In its Annual Chinese Consumer Survey 08, McKinsey & Company said that Chinese consumers earning above 5,000 renminbi per annum are more willing to pay a premium for the best products and adds that by 2015 these high earners will make up one-third of all urban consumers and account for half the value of all consumption.
China Investment Portfolio
| Total investment | £8.4m |
| Opening fair value profit / (loss) | Nil |
| Fair value movement for the year | £1.8m |
| Market value at year end | £10.2m |
| Overall return | 21.4% |
China Food Company plc
On 6 December 2007, Vestpa Plc, an AIM listed cash shell which Albany controlled, acquired Full Fortune Holdings Pte for a consideration of £25.17 million. The enlarged company, of which Albany now own 19.9%, was renamed China Food Company Plc.
China Food Company plc is an established manufacturer of branded consumer condiment products and animal feeds based in the Shandong province of the People's Republic of China (the "PRC"), and announced interim results to 30 June 2008 with profit before tax of £3.54 million. (30 June 2007: £2.62 million).
Construction of the group's new £25 million, state-of-the-art facility in Shou Guang City, Weifang, Shandong province in the PRC, is on track for completion in late 2008 and will significantly increase production capacity.
On 17 September 2008 China Food Company reported strong first half revenue growth of 49.0 per cent year-on-year to £16.2 million (2007: £10.9 million) and gross profit growth of 15.0 per cent in a business climate of rising raw materials and distribution costs. Its condiments business continued to perform strongly producing revenue growth of 18.8% to £6.8 million (2007: £5.7 million) during the first half and its production facilities continued to operate at full capacity. China Food's animal feeds business also performed strongly growing revenues by 82.4% to £9.4 million (2007: £5.2 million).
It was very encouraging to see further progress with China Food's investment in the expansion of its distribution network and the range of brands which has been very successful, particularly in respect of its recently introduced premium brands. As a result, the Group's "Fushi" soya sauce brand has risen in the national rankings from 47th place in 2007 to 9th place in 2008. We believe that the company has substantial growth potential over the next 2 years as it seeks national distribution of its branded products.
Sorbic International plc
On 29 September 2008, Ninety Plc, an AIM listed cash shell which Albany controlled, acquired Honour Field for a consideration of up to £20.12 million. The enlarged company, of which Albany now own 38.7%, was renamed Sorbic International Plc.
Sorbic International plc is the 3rd largest Sorbic Acid and Potassium Sorbate producer in the World and made PBT £2.26 million at the half year to 30 June 2008. Sorbic International has cash resources which will be used to double the production capacity (Sorbic is currently running at full capacity) to meet growing demand in China and international clients (food and drink producers and pharma and cosmetic companies).
Sorbic International has three main elements to its future growth strategy: to increase current production capacity to meet demand, broaden the distribution and sales network and look at possible acquisitions or joint ventures.
The first of these strategic actions is already underway with work having already started on the investment into new facilities at Sorbic International's site in Linyi City in North East China. The existing facility has an area of approximately 33,000 m² and has two production lines which are currently operating at their full design capacities. Sorbic has acquired land immediately adjacent to its present site with total area of approximately 14,700 m². The total cost of expanding production facilities will be approximately £7.3 million which is being financed by the company's existing cash resources. The proposed new production facilities will include two more production lines which would double the existing capacity. A major international food manufacturer has already expressed an interest in purchasing the entire output from one of the proposed new production lines.
The consideration of up to £20.12 million includes a sum payable under deferred consideration which will be paid if the company makes a profit before tax of RMB60 million (£4.9 million at an exchange rate of 12.2071 RMB to £1 at 30 September 2008) for the year ended 31 December 2008.
Non Core Portfolio
| Total Investment | £5.0m | |
| Opening fair value profit / (loss) | £(0.2)m | |
| Fair value movement for the year | £(2.6)m | |
| Market value at year end | £2.2m | |
| Overall return | (56)% |
The non core portfolio consists of holdings in Blue Oar Plc, Densitron Technologies Plc, Journey Group Plc and ZTC Plc. We are actively managing the non core portfolio in an effort to improve the overall market value of the portfolio. It is our intention to eventually dispose of non core holdings and close the portfolio.
Profit and Loss account
Fee Income
Fee income, which represents transaction fees and corporate services provided to China Food Company Plc and Sorbic International Plc, increased to £419,065 for the year ended 30 September 2008 (2007: £20,000)
Operating expenses before share based payments
Operating expenses before share based payments increased to £878,453 for the year ended 30 September 2008 (2007: £367,360). The increase was in part due to the increased investment activity throughout the year.
Post balance sheet event regarding ZTC Plc
On 7 November 2008 shares in ZTC Plc were suspended from trading on AIM due to a management control issue. As at 7 November Albany Capital held 5.0 per cent of the issued ordinary shares in ZTC plc valued at £163,440 which is considered by the Board of Albany to be part of the Company's non-core portfolio. Subject to any notice of change Albany would expect to recognise an impairment on this asset in the following financial year.
Representative China Office - Shandong Province
During the year the Company opened a representative office in Qingdao to focus on further investments in Shandong province, North Eastern China. Shandong province has the second highest gross domestic product in China.
Outlook
Since moving Albany onto a new investment strategy, the Company has established a dedicated investment portfolio with core holdings in companies with established trading records which are also very cash generative and well placed to benefit from future growth. Albany's core investments are on track to deliver further growth and it also remains well placed with the cash resources to make new investments, which the Company is actively seeking.
John McLean
Chairman
20 November 2008
Income statement
for the year ended 30 September
| 2008 |
2007 | |
| £ |
£ | |
| (Losses)/gains on investments at fair value through profit or loss | (746,887) |
164,729 |
| Loss on disposal of loan notes | - | (314,999) |
| Investment income | 33,000 | 18,150 |
| Fee income | 419,065 | 20,000 |
| ----------------------------- | ----------------------------- | |
| Total Revenue | (294,822) | (112,120) |
| ----------------------------- | ----------------------------- | |
| Operating expenses before share based payments | (878,453) | (367,360) |
| Share based payments | (314,423) | (258,349) |
| ----------------------------- | ----------------------------- | |
| Operating expenses | (1,192,876) | (625,709) |
| ----------------------------- | ----------------------------- | |
| Operating loss | (1,487,698) | (737,829) |
| Finance income | 447,073 | 723,264 |
| ----------------------------- | ----------------------------- | |
| Loss before tax | (1,040,625) | (14,565) |
| Taxation | 192,951 | (99,685) |
| ----------------------------- | ----------------------------- | |
| Loss for the year | (847,674) | (114,250) |
| ============== | ============== | |
| Earnings per share: | ||
| Basic and diluted | (2.69) | (0.39) |
| =============== | ============== |
Balance sheet
as at 30 September
| 2008 |
2007 | ||
| £ |
£ | ||
| ASSETS | |||
| Non-current assets | |||
| Property, plant and equipment | 8,831 | 4,592 | |
| Deferred tax | 258,657 | 130,706 | |
| Investments in subsidiaries held at cost | - | 1,739,000 | |
| ----------------------------- | ----------------------- | ||
| 267,488 | 1,874,298 | ||
| ----------------------------- | ----------------------- | ||
| Current assets | |||
| Financial assets at fair value through profit or loss | 12,484,235 | 3,625,826 | |
| Trade and other receivables | 292,663 | 284,858 | |
| Cash and cash equivalents | 2,800,597 | 10,540,122 | |
| ----------------------------- | ----------------------- | ||
| 15,577,495 | 14,450,806 | ||
| ----------------------------- | ----------------------- | ||
| Total assets | 15,844,983 | 16,325,104 | |
| =============== | =========== | ||
| LIABILITIES | |||
| Current liabilities | |||
| Trade and other payables | 238,843 | 120,713 | |
| Current tax liabilities | - | 65,000 | |
| ----------------------------- | ----------------------- | ||
| Total liabilities | 238,843 | 185,713 | |
| ----------------------------- | ----------------------- | ||
| Net assets | 15,606,140 | 16,139,391 | |
| =============== | =========== | ||
| EQUITY | |||
| Equity attributable to equity holders of the parent | |||
| Share capital | 7,890,090 | 7,890,090 | |
| Share premium account | 7,939,812 | 7,939,812 | |
| Shares to be issued | 572,772 | 258,349 | |
| Retained (deficit) / earnings | (796,534) | 51,140 | |
| ----------------------------- | ----------------------- | ||
| Total equity | 15,606,140 | 16,139,391 | |
| ============== | =========== |
The financial statements were approved by the Board of Directors and authorised for issue on 19 November 2008 and signed on their behalf.
Cash flow
for the year ended 30 September
| 2008 |
2007 | ||
| £ |
£ | ||
| Cash flows from operating activities | |||
| Cash used in operations | (562,256) | (329,753) | |
| Purchase of investments held at fair value through profit and loss | (7,723,420) | (4,409,628) | |
| Proceeds on sale of investments held at fair value through profit and loss | - | 1,935,056 | |
| Interest received | 521,502 | 509,253 | |
| Dividends received | 33,000 | 18,150 | |
| Corporation taxes paid | - | (12,234) | |
| ----------------------- | --------------------- | ||
| Net cash used in operating activities | (7,731,174) | (2,289,156) | |
| ----------------------- | -------------------- | ||
| Cash flows from investing activities | |||
| Purchase of shares in subsidiary undertaking held at cost | - |
(1,739,000) | |
| Proceeds on sale of non-current available for sale investments | - |
53,249 | |
| Purchase of property, plant and equipment | (8,351) |
(6,652) | |
| ----------------------- | --------------------- | ||
| Net cash used in investing activities | (8,351) | (1,692,403) | |
| ----------------------- | --------------------- | ||
| Cash flows from financing activities | |||
| Proceeds from issue of share capital | - |
12,271,667 | |
| Expense on share issues | - |
(206,856) | |
| ----------------------- | --------------------- | ||
| Net cash from financing activities | - | 12,064,811 | |
| ----------------------- | --------------------- | ||
| Net (decrease) / increase in cash and cash equivalents | (7,739,525) | 8,083,252 | |
| Cash and cash equivalents at beginning of year | 10,540,122 | 2,456,870 | |
| ----------------------- | --------------------- | ||
| Cash and cash equivalents at end of year | 2,800,597 | 10,540,122 | |
| =========== | ========== |
Notes to the financial statements
1. Basis of preparation and general information
The figures for the year ended 30 September 2008 are un-audited and are not full financial statements. The figures for the years ended 30 September 2008 and 2007 do not constitute statutory accounts within the meaning of Section 240 (5) of the Companies Act 1985. The figures for the year ended 30 September 2007 are non-statutory and have been extracted from the financial statements filed with the Registrar of Companies which contain an unqualified audit report and no statements under Sections 237 (2) or 237 (3) of the Companies Act 1985.
Albany Capital plc ('Albany Capital') is the ultimate parent company. It is incorporated and domiciled in Great Britain. The registered address of Albany Capital is 17 Hanover Square, London, W1S 1HU. Its shares are listed on AIM of the London Stock Exchange.
The company's financial statements are for the twelve months ended 30 September 2008. They have been prepared in accordance with International Financial Reporting Standards and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS as adopted for use in the European Union.
The financial statements have been prepared under the historical cost convention except that they have been modified to include the revaluation of certain financial assets and liabilities. The measurement bases and principal accounting policies of the Company, which have been consistently applied to all periods, are set out below.
Albany Capital Plc was a parent Company at 30 September 2007 and therefore prepared consolidated financial statements for the year then ended in accordance with United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). The date of transition to IFRS was 1 October 2006 and therefore the comparative figures in these financial statements are based on Albany Capital Plc Company Information for the year ended 30 September 2007, prepared under IFRS and stated for the first time. The comparative figures have been restated to reflect changes in accounting policies as a result of adoption of IFRS. The disclosures required by IFRS 1 concerning the transition from UK GAAP to IFRS are given in the reconciliation schedules, presented and explained in note 24. The Company has taken advantage of certain exemptions available under IFRS 1 First-time adoption of International Financial Reporting Standards.
2. Investments
| 2008 | 2007 | |
| £ | £ | |
| Non-current investments | ||
| Investments in subsidiaries held at cost | - | 1,739,000 |
| Current investments | ||
| Investments held at fair value through profit or loss | 12,484,235 | 3,625,826 |
Included in the above is Albany's investment in China Food Company Plc and Sorbic International Plc. Both transactions constituted a reverse takeover under the AIM Rules of a listed cash shell, Vestpa Plc in the instance of China Food Company Plc and Ninety Plc in the instance of Sorbic International Plc. Both Vestpa Plc and Ninety Plc were founded by Albany and listed as AIM shell companies with the intention of undertaking a reverse takeovers.
On 29 March 2007, Albany Capital subscribed for 50m ordinary shares of 0.1p each at par in Vestpa plc for a total cash consideration of £50,000. On 12 June 2007, Albany Capital subscribed for a further 168.9m ordinary shares at 1p each in Vestpa plc for a total cash consideration of £1,689,000. As at 30 September 2007 Albany Capital owned 59.16% of the Ordinary Share Capital of Vestpa plc whose principal activity was holding cash pending investment. When Albany Capital acquired a controlling interest in Vestpa plc no fair value adjustments were required to be made to the acquired balance sheet asset values.
On 6 December 2007 Albany Capital ceased to control Vestpa plc due to a share subscription by Vestpa plc to a third party reducing Albany's interest in the company to 20%. On this date, Vestpa plc was renamed China Food Company plc. As of this date the investment was accounted for as an investment carried at fair value through profit or loss. No consideration on disposal was received by Albany Capital.
As part of the subscription that took place on 6 December 2008, Albany Capital subscribed for 7,807,500 shares at 30p each for a total consideration of £2,342,250. Additional market share purchases of £17,937 take Albany's total investment in China Food Company Plc to £4,099,187. Albany has a total holding of 13,330,000 ordinary shares in China Food Company Plc.
In September 2007 Albany Capital subscribed for 55m ordinary shares of 0.1p each at par in Ninety plc for a total cash consideration of £55,000. On 24 October 2007, Albany Capital subscribed for a further 209.5m ordinary shares at 1p each in Ninety plc for a total cash consideration of £2,095,000. During the year Albany Capital increased its holding to 72% of the Ordinary Share Capital of Ninety plc whose principal activity was holding cash pending investment.
On 29 September 2008 Albany Capital ceased to control Ninety plc due to a share subscription by Ninety plc to a third party reducing Albany's interest in the company to 38.7%. On this date Ninety plc was renamed Sorbic International plc. As of this date the investment was accounted for as an investment carried at fair value through profit or loss. No consideration on disposal was received by Albany Capital. It should be noted that Albany Capital will see its interest in Sorbic International reduce to 26.7% subject to the issue of deferred shares which are conditional on Sorbic International Plc achieving a profit after tax of RMB 60 million (£4.38 million) for the year ending 31 December 2008.
As part of the subscription that took place on 29 September 2008, Albany Capital subscribed for 4,444,444 shares at 45p each for a total consideration of £2,000,000. Additional market share purchases of £106,647 take Albany's total investment in Sorbic International Plc to £4,256,647. Albany has a total holding of 8,987,778 ordinary shares in Sorbic International Plc.
Basic and diluted earnings per share
| 2008 | 2007 | ||
| £ | £ | ||
| Loss after tax | (847,674) |
(114,250) | |
| Weighted average number of shares | 31,560,359 |
29,257,756 | |
| Basic and diluted earnings / (loss) per share (pence) | (2.69) |
(0.39) |
Net asset value per share
The group's undiluted basic net asset value per ordinary share is based on the net assets of the company at year end and on the weighted average number of shares for the year. There were no dilutive instruments in issue for all years. Reconciliations of the net asset value and weighted average number of shares used in the calculations are set out below.
| 2008 | 2007 | ||
| £ | £ | ||
| Net asset value | 15,606,140 |
16,139,391 | |
| Weighted average number of shares | 31,560,359 |
29,257,756 | |
| Basic and diluted net asset value per share | 49.45 |
55.16 |