FTO.L Regulatory News (FTO)

26 Apr 2007 07:01

Fortune Oil PLC26 April 2007 26 APRIL 2007 FORTUNE OIL PLC ("Fortune Oil" or "the Company") Announcement of Preliminary Results for Year Ended 31 December 2006 Fortune Oil invests in and manages oil and gas infrastructure projects in China.Fortune Oil is quoted on the full list of the London Stock Exchange and hasits headquarters in Hong Kong. KEY POINTS • Revenues including Group's share of jointly controlled entities increased by 23 per cent to £176 million (2005: £143 million). • Profit attributable to shareholders increased 54% to £4.3 million (2005: £2.8 million), due to both exceptional gains and improvements in underlying profits. • Earnings per share increased to 0.24 pence (2005: 0.16 pence). • Margin restored at Bluesky aviation refuelling business by the government compensation mechanism. • Throughput at Maoming SPM the highest on record, with net profit increasing by 60% including exceptional gains. • Total natural gas sales volume increased by 260 per cent to 122 million cubic metres (2005: 34 million cubic metres). Fortune Gas profit from operations was £1.2 million and now operates 511 km of gas distribution pipelines with 81,479 contracted customers. • Significant progress in developing Coal Bed Methane project in Shanxi Province. • Expansion of cross-border trading on a low-risk basis. • Signing of US$50 million term loan, to allow accelerated development of existing projects and provide funding to exploit new opportunities. Mr. Qian Benyuan, Chairman of Fortune Oil, commented: "Over the past year it has been clear that China's energy markets are openingmore rapidly, driven by increasing demand, particularly for clean energy.Fortune Oil is uniquely positioned as an international company operating bothoil and gas ventures onshore China and we now have some significant projects indevelopment. Fortune Oil is making major steps forward in helping China developits energy industry and in providing profit growth for our shareholders." ENQUIRIES: Fortune Oil PLCJohn Pexton - Deputy Chief Executive Tel: 00 852 2583 3113 (Hong Kong) Pelham Public RelationsArchie Berens Tel: 020 7743 6679 or 07802 442 486 Alex Walters Tel: 020 3170 7435 FORTUNE OIL PLC ("Fortune Oil" or "the Company") Announcement of Preliminary Results for Year Ended 31 December 2006 CHAIRMAN'S STATEMENT Introduction In 2006 China achieved the highest growth rate for over a decade and China's GDPexceeded that of the United Kingdom. Fortune Oil's sales and profit continue togrow as we expand our operations in China and in 2006 achieved the largestoperating profit to date: earnings attributable to shareholders increased by 54per cent to £4.3 million. Fortune Oil also made a key strategic move upstreaminto coal bed methane development, becoming the first independent energydistributor in China to explore for gas. Over the past year it has been clear that China's energy markets are openingmore rapidly, driven by increasing demand, particularly for clean energy.Fortune Oil is uniquely positioned as an international company operating bothoil and gas ventures onshore China and we now have projects in development thatwill move the company to a different level. We have also today securedsignificant debt finance of US$50 million in order to exploit theseopportunities and fund more rapid development of the Company. Results In 2006 the natural gas business tripled its volume gas sales and achieved aprofit from operations of £1.2 million after breaking even in 2005. Throughputof crude oil at the SPM was at a record high and exceptional gains fromstatutory funds augmented the profit increase. Jet fuel sales at Blueskycontinued to grow and a government compensation mechanism for high jet fuelprices enabled profits to recover for the second half of the year. High dieselprices continued to affect operations at the West Zhuhai terminal but ourtrading business began to flourish in late 2006 as we commenced imports andexports of non-regulated products on a low risk but higher margin basis. The Group's revenues (including share of jointly controlled entities) increasedby 23 per cent to £176 million. Earnings per share increased by 50 per cent to0.24 pence from 0.16 pence in 2005. The Board does not recommend payment of adividend in respect of 2006 but will continue to review dividend policy. Over the last four years the Company has significantly exceeded its performancetargets, as measured by our Key Performance Indicators. The underlying netprofit attributable to equity shareholders before exceptionals was £3.5 millionin 2006, an increase of 16 per cent over 2005. Since 2003 this has increased onaverage by 52 per cent per year, compared to our target of 15 per cent.Earnings per share have increased annually on average by 43 per cent in the sameperiod, Group revenues (including share of jointly controlled entities) haveincreased by 21 per cent per year. The Company's volume gas sales haveincreased annually by 180 per cent compared to our target of 30 per cent. Governance In 2006 the size of the Board was reduced and the proportion of IndependentDirectors increased. Mr. Li De, Mr. Feng Xuechang and Mr. Yang Chunshu had beenNon-Executive Directors representing shareholders in the Company and theyretired without replacement in 2006, as did our Executive Vice-Chairman Mr.Bruce McGowan. We would like to thank them all for their invaluablecontributions over the years. Ms. Louisa Ho stepped down as Finance Director but remains on the Board asNon-Executive Director with responsibility for corporate governance issues. Westrengthened the management team by promoting Mr. Sammy Ng to Group FinancialController and appointing Mr. Tian Jun as Chief Operating Officer and we alsoappointed a CBM Operations Manager and Group HSE Manager during the year. Therehas been a particular focus on HSE in 2006 and our Annual Report will containmore details on safety and environmental issues. Future Developments Today we are pleased to announce with our 2006 preliminary results that theCompany has raised significant debt financing. A syndicate of internationalbanks has committed US$50 million of term finance, the largest fund raising todate by the Company. For many years Fortune Oil relied upon its majorshareholders for financing and the gearing ratio was very low. We have takenadvantage of the current strong liquidity in the debt markets to finance theopportunities now emerging in the China energy market, particularly in energyinfrastructure, methane recovery and oil products supply. We have already been exploiting opportunities developing around our terminalsand supply activities, such as the recent growth in cross-border trading. Wehave also declared our intent to create one of the first independent integratedgas companies in China, combining our gas distribution expertise and assets withour new coal bed methane opportunities. There are substantial growthopportunities in all sectors of the gas chain in China, particularly given theinsatiable demand in China for clean energy and the steadily increasing gasprices. Fortune Oil is now making major steps forward in helping China developits energy industry and in providing profit growth for our shareholders. FORTUNE OIL PLC ("Fortune Oil" or "the Company") Announcement of Preliminary Results for Year Ended 31 December 2006 CHIEF EXECUTIVE'S REVIEW Overview In 2006 revenues including the Group's share of jointly controlled entities were£176 million compared with £143 million in 2005 and profit from operationsincreased 68 per cent to £9.6 million. The profit attributable to equityshareholders increased by over 50 per cent to £4.3 million from £2.8 million in2005. Earnings per share were 0.24 pence in 2006, compared to 0.16 pence in2005. The natural gas business was a major contributor to profit growth. Gas salesincreased substantially in every gas operation and the Tongzhou CNG station hadits first full year of operation, resulting in a tripling in total sales. Thenet profit achieved at both Bluesky and West Zhuhai was similar to 2005 whileexceptional items over the past two years contributed to a 60 per cent profitincrease at the Maoming SPM for 2006. Net assets at the end of 2006 were £50.0 million, little changed from theprevious year because of a 10 per cent appreciation in sterling against China'scurrency (RMB), the principle currency for the Group's revenues and expenses.Under the terms of a Court approved capital reduction scheme during 2006, theCompany cancelled the balance on its share premium account against a negativeretained earnings balance, so as to create reserves for possible dividenddistribution in future. Over the past year Fortune Oil has made a strategic step of entering theupstream gas business by acquiring control of the exploration rights for coalbed methane (CBM) in the Liulin block, Shanxi Province. Within a few months ofacquiring this interest we had assembled a professional CBM team and begundrilling two production wells. Development of China's CBM resources is agovernment priority for preventing coal mine accidents, reducing emissions ofgreenhouse gases and recovering valuable methane gas. We are also very excitedabout the prospects for Fortune Oil in being able to integrate our gasdistribution business with this and other CBM recovery opportunities. China Energy Industry Last year China's energy industry resumed its surging growth after a briefslow-down in 2005. GDP has increased over 10 per cent per year since 2003 andgrowth over the past year is at a record high. The combination of higher energyprices, surging demand and pressures to liberalise markets create a dynamicenvironment. The Chinese authorities are increasingly emphasising the need forhigher standards of safety, efficiency and environmental protection.Participation by companies such as Fortune Oil to implement these measures isthus particularly welcome. Operations In 2006 volume sales at the Bluesky aviation refuelling joint venture (SouthChina Bluesky Aviation Oil Company) grew 12 per cent to 1.5 million tonnes. Inthe first half of 2006 Bluesky's profit was adversely affected by high pricesfor international jet fuel that could not be passed onto customers but agovernment compensation mechanism restored the margin from mid-2006. As aresult Bluesky's net profit in 2006 was £9.4 million (US$17.4 million), similarto 2005 (£9.6 million, US$17.4 million). This ongoing compensation mechanismwill ensure that the airlines, rather than Bluesky, pay for any pricedifferential between domestic and international jet fuel. Bluesky continues toinvest in new infrastructure, particularly at Guangzhou Baiyun InternationalAirport where the new FedEx Asia hub will open in 2008. The aviation sectorcontinues to boom and Fortune Oil is one of the few private sector participantsin China's aviation refuelling business. Throughput at the Maoming SPM (MKM subsidiary) was the highest on record. Thevolume of crude oil delivered increased 11 per cent to 10.8 million tonnes as aresult of higher utilisation at the Maoming refinery and upgrades now allowingthe single point mooring buoy to handle 300,000 dwt tankers. A change in PRCcompany law allowed MKM to write-back surplus amounts in the statutory staffwelfare fund accrual, thereby providing an exceptional credit of £1.9 million.The net profit increased 60 per cent in 2006 to £6.7 million compared to £4.2million in 2005 largely as a result of these exceptional write-backs in 2006 anda write-off for the old buoy in 2005. The Maoming SPM continues to be a uniqueasset. It is the only foreign-controlled crude oil facility and the onlyoffshore oil import system in China and it has safely and reliably supplied thelargest refinery in southern China for over a dozen years. Net profit at the West Zhuhai Oil Products Terminal joint venture was similar to2005, at £2.0 million (US$3.7 million), of which the Group's share was £0.5million. Supply disruptions continued in the region due to high diesel pricesand a sunken barge in the port channel also affected operations for a month. Asa result total throughput and trans-shipment volumes were 1.9 million tonnes,lower than in previous years. PetroChina, a 45 per cent shareholder in theterminal, remained the only customer in 2006 because of the import licensingregime. However we expect additional parties to use the facility in futurefollowing the granting of a long-awaited licence to store bonded-status productsin December. This vindicated the Company's decision in 2006 to acquire Vitol'sinterest in the terminal, thereby increasing our shareholding to 37 per cent.As part of this acquisition we also agreed to purchase the Vitol Group's 22.5per cent interests in the Fu Duo LPG subsidiary, which remains a break-evenbusiness. Our independent Trading business expanded in late 2006 as our extensive networkof commercial relationships in China enabled us to take advantage of new tradingopportunities. We commenced the import and export of non-regulated productssuch as bitumen, base oil and petrochemicals on a low-risk agency orback-to-back basis, with a higher margin than our previous pure domesticactivities. The trading business, including our gasoline retail stations, madean earnings contribution of £0.3 million, compared to break-even in 2005, and weexpect further growth in 2007. Sales of Natural Gas surged to 122 milion cubic metres (m3), a 260 per centincrease over the previous year (34 million m3). The Fortune Gas subsidiarycontributed £1.2 million in profit from operations in 2006 after a break-evenyear in 2005. A significant fraction of the sales (43 million m3) were asCompressed Natural Gas (CNG) from the Tongzhou station, which is now one of thelargest suppliers of CNG in Beijing. In addition every gas operation achievedsubstantial growth in sales and profit in 2006, particularly the spur pipelines. The Company's city gas operations had 81,479 customers by the end of the yearand we operate 511 km of pipelines and a fleet of CNG trucks. There were 10,100new contracted connections in 2006, mostly to new residential apartments. TheChina gas business is still at an early stage of development with lowpenetration rates, so our existing infrastructure has substantial growthopportunities. The Company continues to benefit from its partnership with thePetroChina affiliate which operates the supply pipelines to Beijing. However,the Company needs to ensure independent reliable sources of supply for itsfuture gas businesses, which we intend to source from coal bed methane. In 2006 we made a strategic step into the development of Coal Bed Methane (CBM)through acquiring a controlling interest in the Liulin CBM block in ShanxiProvince. Liulin is regarded as one of the top-ranked areas for CBM developmentin China. There is considerable geological data available and the gas in placewas estimated at 40.5 bcm (1.4 trillion cubic feet) by a recent studycommissioned by the Company. The foreign contractor rights in the block'sProduction Sharing Contract are now owned by Fortune Liulin Gas, a joint ventureheld 60 per cent by Fortune Oil and 40 per cent by Molopo Australia Limited, anexperienced CBM developer. The block is still in the exploration phase andFortune Oil's 60 per cent controlling interest is in return for funding thefirst US$2.5 million of an initial appraisal programme. Two vertical pilot wellsare now in production testing and further appraisal work including data wellsare planned. Most of the initial funding commitment has now been provided butonly US$0.7 million of this was incurred in 2006. Fortune Oil has rapidly acquired an important presence in China's CBM industryand an understanding of the key opportunities and risks. Development of thecountry's vast CBM resources is a government priority under the 11th Five YearPlan. Our focus is in Shanxi Province, the largest coal-mining and CBM region,and where the Company already has a natural gas distribution business. FortuneOil is now one of the largest foreign companies in China's CBM industry and thefirst gas distributor to be exploring for gas. Post Balance Sheet Term Loan The Company has announced today the signing of a US$50 million loan facility forFortune Oil PRC Holdings Limited, the Company's principal holding company inHong Kong. The facility is a dual currency (US dollars and Hong Kong dollars)term loan with a term of 3 years and a margin of 1.1% above LIBOR or HIBOR. Thecovenants are standard for this type of syndicated loan and the facility isguaranteed by Fortune Oil PLC. The Mandated Lead Arrangers are Industrial and Commercial International CapitalLtd (ICIC) and Oversea-Chinese Banking Corporation Limited (OCBC). A total of18 international and regional banks participated in the transaction. Thefacility size was over-subscribed to US$50 million. The proceeds will be used to finance Fortune Oil's investment requirements inthe China energy sector. This will include further development of the LiulinCBM block, new opportunities in relation to the recovery and utilisation ofmethane gas in Shanxi Province, new downstream gas projects and acquisitions andnew investments in the supply of refined products. We expect to makeannouncements concerning these new opportunities over the coming months. Outlook It is remarkable how rapidly China has changed from emerging giant to globalleader, from closed energy market to the world's number two consumer. Chinaunderstands the importance of making best use of its energy resources both froman economic and environmental perspective. Foreign companies are increasinglybeing encouraged to take a lead in this. Fortune Oil is one of the very fewinternational companies to have made inroads into the onshore oil & gas marketsand we intend to make a major contribution to the development of China'sdomestic energy supplies. We intend to be at the leading edge of methane gasrecovery and distribution, creating potentially the first independent integratedgas company in China; and we intend to exploit supply and terminalsopportunities as the oil markets gradually open. We remain confident ofsustained growth in shareholder value. FORTUNE OIL PLC ("Fortune Oil" or "the Company") Announcement of Preliminary Results for Year Ended 31 December 2006 FINANCIAL REVIEW Revenue and Expenditure Revenues including the Group's share of jointly controlled entities increased by23 per cent to £175.8 million (US$324.5 million) in 2006 from £143.1 million(US$260.2 million) in 2005. Group revenue excluding jointly controlledentities decreased marginally in 2006 to £43.3 million from £45.0 million in2005 despite higher sales of natural gas. This was because Fu Duo's operationswere contracted out, resulting in a £11.2 million reduction in sales at Fu Duo. The profit attributable to equity shareholders was £4.3 million (US$7.9million), an increase of 54 per cent over 2005 (£2.8 million, US$5.1 million).The major differences were higher earnings from the natural gas business andexceptional items for Maoming SPM. Earnings per share were 0.24 pence comparedwith 0.16 pence in 2005. Capital expenditure and acquisitions totalled £8.1 million (US$15.0 million)(2005: £10.9 million). This comprised principally £4.7 million in purchase offixed assets and £3.2 million in acquisition of an 18.5% shareholding inSouthern China Petroleum (in respect of West Zhuhai Terminal) and a capitalcontribution to Tianjin Tianhui Natural Gas Limited. Debt secured on theBeijing hotel of £1.1million at the end of 2005 was fully repaid in 2006 and thehotel security is in the process of being released. The Group had a netborrowing position of £0.8 million (US$1.5 million) as at 31 December 2006,compared to a net cash position of £2.6 million (US$4.5 million) in the previousyear. The change was mainly due to acquisitions in 2006. Net assets of the Group decreased marginally in 2006 to £50.0 million (US$ 98.1million) from £50.7 million (US$87 million) in 2005 as a result of the increasein retained earnings being offset by foreign currency translation differences onconsolidation. Financial Costs and Tax Finance expenses for the Group were £471,000 (US$869,000) in 2006, similar tothe 2005 expense of £454,000 (US$826,000). Loans to the Group at end 2006totalled £9.0 million (US$17.7 million), similar to outstanding loans at end2005 (£9.1 million, US$15.6 million). At end 2006 there was a £3.2 million(US$6.3 million) loan outstanding to First Level Holdings Limited, the largestshareholder in the Company, compared to £4.2 million (US$7.3 million) in theprevious year. The Group's tax charge in 2006 was £617,000 (2005: £544,000) representing aneffective tax rate of 7 per cent (2005: 10 per cent). The decrease in effectivetax rate resulted from the impact of exceptional gains and a higher contributionfrom natural gas. The PRC government intends to unify the corporate tax rate at 25 per cent fordomestic and foreign companies from January 2008. The current tax rate for mostcompanies in China is 33 per cent but foreign enterprises have generally beeneligible for a 15 per cent tax rate. The overall impact should be neutral forFortune Oil in the medium term as most of the existing tax privileges will begrand-fathered for 5 years. Companies engaged in certain industries will enjoypreferential rates and tax concessions have already been announced for coal bedmethane development and energy conservation measures. Foreign exchange The revenues and expenses of the Group are primarily denominated in China'srenminbi (RMB). Some expenses are denominated in pound sterling (£) and in HongKong dollars (HK$), which is pegged to the US dollar (US$). Since the RMB/US$peg was loosened in mid-2005 the RMB has appreciated 6 percent against the US$. However in 2006 sterling appreciated 14 per cent against the US dollar andthere was a net 10 per cent appreciation against the RMB. This currency movement has had the effect of understating our performanceimprovements as measured in pound sterling. The Company has not hedged currencyrisk and any further revaluation of the RMB or change in US$/£ exchange rate in2007 is likely to affect the Group's results as denominated in sterling. The Group requires both RMB for operating expenses in China and foreign exchangefor equity investments in new joint ventures. A major element of the Group'sforeign exchange needs currently comes from the dividend payments by the MaomingSPM and Bluesky joint ventures. Historically the Maoming SPM and Bluesky jointventures have usually paid out the full net profit as dividend aftercontributions to statutory employee welfare funds. Capital Structure Most of the Group's investments and expenses take place in the PRC and are heldthrough Fortune Oil PRC Holdings Limited, a 100 per cent-owned subsidiary of theCompany in Hong Kong. To facilitate inter-company restructuring most of theinvestments in China are held through subsidiary Hong Kong registered companies. The Company's UK operations consist only of local representation as a directexpense to the Company. Dividend Policy In prior years a deficit in retained earnings had restricted Fortune Oil fromdeclaring dividends. In 2006 a capital reduction exercise eliminated thisrestriction and the Group now has distributable reserves. However the Group'spolicy remains that we should currently reinvest profits rather than declaredividends. FORTUNE OIL PLC Announcement of Preliminary Results for Year Ended 31 December 2006 Group Income Statement for the Year Ended 31 December 2006 Amount in £'000 Note 2006 2005 Revenue including share of jointly controlled entities 2 175,771 143,057 Share of revenue of jointly controlled entities (132,500) (98,068) Group revenue 43,271 44,989 Cost of sales (33,912) (36,851) Gross profit 9,359 8,138 Exceptional gains 3 2,551 - Exceptional charges 3 (834) (629) Administrative expenses (4,444) (4,617) Share of results of jointly controlled entities 2,942 2,810 Profit from operations 2 9,574 5,702 Finance costs (471) (454) Investment Income 168 156 Profit before taxation 9,271 5,404 Taxation 4 (617) (544) Profit for the year 8,654 4,860 Attributable to Equity shareholders 4,307 2,792 Minority interests 4,347 2,068 8,654 4,860 Earnings per share Basic 6 0.24p 0.16p Diluted 6 0.24p 0.16p FORTUNE OIL PLC Announcement of Preliminary Results for Year Ended 31 December 2006 Group Balance Sheet as at 31 December 2006 Amount in £'000 2006 2005 AssetsNon-current assetsProperty, plant and equipment 24,539 26,747Investment properties 1,577 1,800Goodwill 943 1,074Other intangible assets 992 914Investments in jointly controlled entities 21,083 19,410Other investment 101 117 49,235 50,062Current assetsInventories 1,070 2,151Trade and other receivables 6,249 6,272Cash and cash equivalents 8,202 11,713 15,521 20,136 Total assets 64,756 70,198 LiabilitiesCurrent liabilitiesBorrowings 3,427 1,944Trade and other payables 5,362 9,813Current tax liabilities 170 241 8,959 11,998Non-current liabilitiesBorrowings 5,567 7,126Deferred tax liabilities 264 336 5,831 7,462 Total liabilities 14,790 19,460 Net assets 49,966 50,738Shareholders' equityOrdinary shares 18,363 18,351Treasury shares (795) (760)Share premium account 22 37,344Translation reserves (2,717) 2,062Retained earnings 23,805 (17,985)Total shareholders' equity 38,678 39,012Minority interests 11,288 11,726Total equity 49,966 50,738 FORTUNE OIL PLC Announcement of Preliminary Results for Year Ended 31 December 2006 Group Cash Flow Statement for the Year Ended 31 December 2006 Amount in £'000 2006 2005Cash flows from operating activitiesProfit for the year 8,654 4,860 Adjustments for: Share of post-tax results of jointly controlled entities (2,942) (2,810) Taxation 617 544 Amortisation and depreciation 2,508 2,419 Impairment 834 158 Loss on disposal of property, plant and equipment 35 803 Profit on disposal of subsidiary undertakings (188) - Share based payment 139 63 Investment income (168) (156) Finance costs 471 454 Decrease/ (Increase) in inventory 842 (413)(Increase)/ decrease in trade and other receivables (706) 2,076Decrease in trade and other payables (3,428) (1,859) Cash generated from operations 6,668 6,139 Finance costs (471) (454)Taxation paid (665) (545) Net cash generated from operating activities 5,532 5,140 FORTUNE OIL PLC Announcement of Preliminary Results for Year Ended 31 December 2006 Group Cash Flow Statement for the Year Ended 31 December 2006 (cont.) Amount in £'000 2006 2005 Cash flow from investing activitiesInvestment income 168 156Dividend received from a jointly controlled entities 2,463 1,496Payments for property, plant and equipment (4,708) (7,383)Payments for other intangible assets (223) (14)Payments for investment properties - (187)Receipt from disposal of subsidiary undertakings 305 -Receipt from disposal of property, plant and equipment 66 99Acquisition of business/ subsidiaries - (3,273)Investment in jointly controlled entities (3,072) -Repayment from jointly controlled entities - 794Loan to jointly controlled entities (335) - Total cash flows used in investing activities (5,336) (8,312) Cash flows from financing activitiesProceeds from issue of share capital 34 41Loan from minority shareholders 429 478Repayment of loans to minority shareholders (441) -Dividend paid to minority shareholders (3,265) (2,346)Repayment of loans (689) (1,194)Increase in loans 1,663 - Total cash flows used in financing activities (2,269) (3,021) Net decrease in cash and cash equivalents (2,073) (6,193)Cash and cash equivalents at beginning of the year 11,713 16,086Effect of foreign exchange rate changes (1,438) 1,820 Cash and cash equivalents at end of the year 8,202 11,713 FORTUNE OIL PLC Notes to financial statements in respect of year ended 31 December 2006 1. Basis of accounting This preliminary announcement, which has been agreed with the auditors, wasapproved by the Board on 24 April 2007. The financial information set out inthe announcement does not constitute the company's statutory financialstatements, as defined by Section 240 of the Companies Act 1985, for the yearsended 31 December 2006 or 2005. The financial information for the year ended 31December 2005 is derived from the statutory financial statements for that yearwhich have been delivered to the Registrar of Companies. The auditors reportedon those financial statements; their report was unqualified and did not containa statement under s.237 (2) or (3) Companies Act 1985. The statutory financialstatements for the year ended 31 December 2006 will be finalised on the basis ofthe financial information presented by the Directors in this preliminaryannouncement and will be delivered to the Registrar of Companies in due course.The statutory accounts for the year ended 31 December 2006 have not yet beenapproved, audited or filed. Whilst the financial reporting included in this preliminary announcement hasbeen computed in accordance with International Financial Reporting Standards(IFRSs), this announcement does not itself contain sufficient information tocomply with IFRSs. The company expects to publish full financial statements thatcomply with IFRSs in due course. 2. Segmental analysis a) Business segments Single point Aviation Natural gas Oil trading & mooring facility storage * Amount in £'000 2006 2005 2006 2005 2006 2005 2006 2005 Revenue including share of 12,136 11,810 126,049 92,899 13,194 5,685 19,631 28,258Jointly controlled entitiesShare of revenue of jointly controlled entities - - (126,049) (92,899) (724) - (966) (814) Group revenue 12,136 11,810 - - 12,470 5,685 18,665 27,444 Exceptional gains 1,943 - - - - - 608 -Exceptional charges (424) (629) - - - - (410) - Profit from operations 7,077 4,456 2,243 2,336 1,235 137 (331) (749)(including share of results ofjointly controlled entities)Finance costsInvestment income Profit before taxationTaxation Profit for the year Attributable toEquity shareholdersMinority interests Capital additions 2,488 3,223 - - 2,108 7,298 564 335Depreciation and amortisation 1,443 1,547 - - 777 565 286 306Impairment 424 - - - - - 410 158 Net assets: by class of businessAssets 15,318 17,841 14,273 16,318 20,235 20,240 14,038 15,588Liabilities (1,291) (3,239) (13) (14) (4,826) (5,421) (8,538) (10,657) 14,027 14,602 14,260 16,304 15,409 14,819 5,500 4,931 Others* * Central Group Administration Amount in £'000 2006 2005 2006 2005 2006 2005 Revenue including share of jointly controlled entities 4,761 4,405 - - 175,771 143,057Share of revenue of jointly controlled entities (4,761) (4,355) - - (132,500) (98,068) Group revenue - 50 - - 43,271 44,989 Exceptional gains - - - - 2,551 -Exceptional charges - - - - (834) (629) Profit from operations 93 143 (743) (621) 9,574 5,702(including share of results of jointly controlledentities)Finance costs (471) (454)Investment income 168 156 Profit before taxation 9,271 5,404Taxation (617) (544) Profit for the year 8,654 4,860 Attributable toEquity shareholders 4,307 2,792Minority interests 4,347 2,068 Capital additions 305 - - 2 5.465 10,858Depreciation and amortisation 1 - 1 1 2,508 2,419Impairment loss - - - - 834 158 Net assets: by class of businessAssets 753 129 139 82 64,756 70,198Liabilities (5) (2) (117) (127) (14,790) (19,460) 748 127 22 (45) 49,966 50,738 b) Geographical operations With the exception of operating loss of £561,000 (2005: £545,000) in respect ofcentral administration in the United Kingdom, all of the Group's activities arecarried out in the PRC and Hong Kong. The Directors are of the opinion that thePRC and Hong Kong form one geographic segment. * Includes overheads in Hong Kong/PRC offices.** Others include distribution and CBM unit. 3. Exceptional gains and charges Exceptional gains Amount in £'000 2006 2005 Write back of accrual for staff welfare 1,943 -Waiver of borrowings 410 -Gain on disposal of subsidiaries 198 -Total exceptional gains 2,551 - Exceptional charges Amount in £'000 2006 2005 Impairment of fixed assets 834 -Loss on disposal of a single point mooring buoy - 629Total exceptional charges 834 629 The staff welfare fund accrual has been written back to profit following changesin Company Law in the People's Republic of China effective from 1 January 2006.The Directors have obtained legal opinion that the changes are such that therelevant companies within the Group are no longer obliged to set aside profitsin respect of staff welfare funds. 4. Taxation The taxation charge for the year is analysed below: Amount in £'000 2006 2005 Current taxGroup current taxUK tax - -Foreign tax 651 598Total current tax 651 598 Deferred taxNet reversal of timing differences - Group (34) (54)Total deferred tax (34) (54)Tax on profit on ordinary activities 617 544 The tax charge for the year differs from the standard rate ofcorporation tax and is explained below. Amount in £'000 2006 2005 Profit on ordinary activities before taxation 9,271 5,404Theoretical tax at PRC corporation tax rate 33% 3,059 1,783Effects of:- Share of results of joint controlled entities (970) (927)- nil or lower tax in PRC (1,768) (832)- tax losses carried forward 536 575- utilization of tax losses credit not previously recognized (204) -- other expenditure that is not tax deductible 198 173- other timing differences (200) (174)Total current tax 651 598 The above reconciliation uses a 33% standard rate of tax, being the standardrate of tax payable in the PRC, where the majority of the Group's activitiestake place. The Group tax charge above does not include any amounts for jointly controlledentities, whose results are disclosed in the income statement net of tax. 5. Dividends were not paid in any of the periods reported upon and no dividend is proposed. 6. Earnings per share Earnings per share have been calculated on the earnings activities aftertaxation and minority interest of £ 4,307,000. (2005:£ 2,792,000) 2006 2006 2005 2005 No. No. '000 pence '000 penceBasic 1,775,985 0.24 1,774,293 0.16 Share option adjustment 6,281 - 8,618 - Diluted 1,782,266 0.24 1,782,911 0.16 7. Copies of this report are available from the Group's Registered Office at 6/F, Belgrave House, 76 Buckingham Palace Road, London SW1W 9TQ. This information is provided by RNS The company news service from the London Stock Exchange