6 Oct 2008 07:00
6 October 2008
Albany Capital plc
("Albany Capital" or "the Company")
Trading Update
Albany is delighted with the progress the Company has made since December 2007 with the admission to AIM of China Food Company, (AIM: CFC) on 10 December 2007 and most recently the admission to AIM of Sorbic International plc (AIM: SORB) on 30 September 2008, Albany's second successful project since implementing its new investment strategy, as stated in the Company's annual report for the year ended 30 September 2007.
During 2007 the Board successfully repositioned Albany's investment strategy to focus investments in China-based companies which are profitable, cash generative and have strong growth potential. The two new investments made to date both fulfil these criteria and are also both exposed to forecast growth in demand in the food manufacturing sector, particularly the segment of the market which is exposed to the growing number of Chinese middle class households.
Albany has also invested at a time when the investee businesses are operationally geared to future expansion and the investment capital provided as a result of our investment and our co-investors is already being deployed in the construction of new manufacturing capacity, as in the case of China Food Company, or very near to commencing the build of new capacity at Sorbic International. In both cases, investment into increased production capacity is planned to meet growing demand in their respective markets.
China - Focus on the 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, our two investee companies to date 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. A recent research report by the McKinsey Global Institute highlighted the emergence of the Chinese urban middle class, saying that its spending power will soon redefine the Chinese market and 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, should both benefit.
Albany Financials
The value of Albany's holdings in China Food Company and Sorbic International as of 30 September 2008 was £10.2 million representing a 23 per cent gain on Albany's original investment.
As at 30 September 2008 the Company had no material debt and had cash balances in excess of £2.6 million. Unaudited net asset per share was 48p as at 30 September 2008.
as at 30 September 2008:
| New Portfolio | Cost | Value | Gain / (Loss) | Holding in Co | Share Price |
| £ | £ | £ | p | ||
| China Food Company plc | 4,099,188 | 4,398,900 | 299,712 | 20.1% | 33.00 |
| Sorbic International plc | 4,256,285 | 5,842,056 | 1,585,771 | *38.9% | 65.00 |
| 8,355,473 | 10,240,956 | 1,885,483 |
* Albany Capital's holding in Sorbic International Plc will reduce to 26.9% following the issue of Deferred Shares relating to a 31 December 08 Profit Target being achieved
| Non Core Portfolio | Cost | Value | Gain/(Loss) | Holding in Co | Share Price |
| £ | £ | £ | p | ||
| Blue Oar Group plc | 1,384,626 | 426,250 | (958,376) | 3.3% | 7.75 |
| Densitron Technologies plc | 834,182 | 690,581 | (143,601) | 16.5% | 6.00 |
| Journey Group plc | 1,886,425 | 880,332 | (1,006,093) | 8.7% | 3.50 |
| ZTC Telecommunications plc | 847,345 | 163,440 | (683,905) | 5.0% | 3.00 |
| 4,925,578 | 2,160,603 | (2,791,975) | |||
| Total | Cost | Value | Gain/(Loss) | ||
| 13,281,051 | 12,401,559 | (906,492) |
Commenting, John McLean, Chairman of Albany Capital said:
"We have made significant progress over the last year following the implementation of our strategy to invest in profitable, cash generative companies with management teams that can deliver significant future growth. We have cash resources for further new investments and we will continue to identify further opportunities over the coming year."
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 |
Notes to Editors:
China Food Company plc and Sorbic International 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 recently announced interim results to 30 June 2008 with profit before tax of £3.54 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 and commissioning in late 2008 and will significantly increase production capacity.
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 acquired the Honour Field International for total consideration of up to £20.12 million, which includes a deferred consideration which will be paid if the company makes it target of PBT £4.3m in year ended 31 Dec 2008. It has just over £4m of cash which will be used to double the production capacity (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 strategy:
New facilities - At present, Sorbic International operates from a site in Linyi City. 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. In order for LVST to be better positioned to service future anticipated growth in demand for its products, it 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 RMB 100 million (circa £7.3 million) which will be available from the cash resources of the Enlarged group and existing working capital facilities. 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.
Increase marketing activities - Currently the new board of Sorbic International believe that sales of products is limited by production capacity. Anticipating the increase in production capacity, the Board plans to enhance its effort in the area of distribution. With strong growth in both domestic and international market, it is proposed that the sales team focus on developing new markets while strengthening the relationship with the existing customers.
Acquisition opportunities - whilst the board of Sorbic International believe that there are substantial opportunities for organic growth through increased production, they will also consider suitable acquisition opportunities as they arise.
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