ZOL.L Regulatory News (ZOL)

13 Nov 2008 09:59



Crosby ASSET MANAGEMENT Inc. ("CAM" or the "Group")

Trading Update - Nine Months to 30 September 2008

 13 November 2008

CAM announces its trading figures for the nine months ended 30 September 2008.

Summary Financials 

Turnover for the year to date of US$21.70 million (YTD Q3 2007: US$21.63 million), of which US$18.85 million (YTD Q3 2007: US$21.21 million) was from continuing operations

Loss Attributable to Shareholders for the year to date of US$58.27 million (YTD Q3 2007: US$41.41 million), of which US$32.84 million (YTD Q3 2007: US$10.17 million) was from continuing operations 

Loss Per Share (basic) for the year to date: US$0.24 (YTD Q3 2007: US$0.17)

Assets Under Management Q3 2008: US$1.0 billion (Q3 2007:US$2.5 billion)

CAM has no material debt and has adequate capital to continue to support its operations and meet its obligations as they fall due

TRADING UPDATE

CWM

As announced by the Company on 22 October 2008, at 30 September 2008 the unaudited provisional and estimated assets under management ("AUM") of Crosby Wealth Management ("CWM") was approximately US$500 million, a decline of approximately 64% from US$1.4 billion as of 30 June 2008. In view of the continued and heightened volatility of the financial markets and the related changes in investors' sentiment, shareholders should be aware that the board of CAM anticipates that there will be further declines in the assets under management and margins at CWM over the fourth quarter. At 31 October 2008, assets under management stood at US$222 million, a decline of 56% from the figure as of 30 September 2008. The decline has largely been caused by certain clients restructuring the custody of their portfolios to minimise the counterparty risk they had with other institutions and the diminution in value of certain structured investment products in today's extreme market conditions. The decrease in assets under management at CWM and contraction in margins (largely due to a decline in trading volume) will have an adverse impact on the ongoing revenue and profitability (or losses) of the Group going forward. During the third quarter, CWM's flexible cost base has partially mitigated the financial impact to date; however, going forward, the profitability of this business will depend on the investment appetite of its existing client base and the ability to gain new clients in challenging market conditions that are likely to continue for the medium term. 

CROSBY FORSYTH

During the third quarter, driven mainly by a single large redemption order that led the Group to decide to close the long and hybrid fund ranges, AUM declined by US$323 million to US$280 million. The CAM Board anticipates that the next quarter will see a further fall in AUM - the completion of the fund closure programme will result in a further US$123 million of redemptions and there is a backlog of approximately US$45 million of redemption orders for the Alternative Income Hedge Fund of Funds due to redemptions being suspended whilst the fund was restructured.

In September 2008, as part of the restructuring and refocusing of the product range and cost base, the fund research and ratings service was sold to Old Broad Street Research ("OBSR") and Crosby Forsyth exited the fund advisory business. In both cases, the businesses were operating at close to break-even and there were no exit costs. Consequently, the moves did not have a material impact on the financial position of CAM. 

The fund research and ratings business was sold for a nominal initial consideration with a three year earn-out mechanism. Any cash received under the earn-out will be applied to general working capital for the development of CAM. As part of the deal, CAM will receive privileged access to OBSR's research database for three years.

The restructuring and refocusing of the Crosby Forsyth business around a multi-asset class fund of funds and a multi-strategy fund of hedge funds is scheduled for completion during the fourth quarter of 2008.

APOLLO LLP

During the quarter CAM entered into a joint-venture with a team of award-winning investment managers and sales professionals to launch a pure multi-asset management company - Apollo LLP. The joint-venture is scheduled to launch two products - a cautious growth fund and a balanced growth fund - both in late November 2008.

CROSBY ACTIVE OPPORTUNITIES FUND

The Crosby Active Opportunities Fund ("CAOF") saw a net return to the end of the third quarter of approximately -11.5%, a net return of +8% since inception. Assets under Management have declined to approx $55 million due to both small redemptions and the reduction in NAV. The Active Opportunities Fund remains focussed on unlocking embedded intrinsic value in predominantly mid to small cap companies in Asia. 

ORCHARD PETROLEUM

Despite some mechanical problems and a delay in securing suitable drilling rigs, progress at Orchard Petroleum continues to be positive.

As of the end of October 2008, Orchard Petroleum was producing from approximately 40 wells. A further ten wells have been drilled and are due on stream within a few weeks time. We believe that it is therefore likely that there will be 50 wells in production by the end of the year and that between 60 to 75 wells will be on production on the South Belridge Field by 30 June 2009.

A full reserve audit will be commissioned once the current drilling programme has been completed. Since all the wells that have been drilled this year have been successful and have come on stream, we continue to expect a substantial upgrade in reserves from the previously announced figures as at November 2007 (proven and probable reserves of 16 million barrels of oil equivalent and possible reserves of 68 million barrels of oil equivalent). 

On a consolidated, fully diluted basis, CAM's direct shareholding in ESK (the corporate entity that made the original acquisition of Orchard Petroleum) is 5%. However, after the repayment of principal to preference shareholders, this will rise to an effective economic interest of between 9% and 10%. Separately, the Crosby Active Opportunities Fund, managed by Crosby Asset Management, has a shareholding of approximately 9%. 

ABOUT CAM

CAM is an asset management group with offices in London, Hong Kong and Singapore. CAM has a diversified portfolio of multi-asset, hedge fund and wealth management businesses. Growth at CAM will be derived from joint-ventures and acquisitions and the organic expansion of our existing business lines. CAM is quoted on the AIM market of the London Stock Exchange.

For further information on Crosby please contact:

Simon Fry, Chief Executive Officer on +44 20 7590 2800

Stephen Fletcher, Chief Operating Officer on +44 20 7590 2800

Trading Summary