19 Mar 2009 09:09
19 March 2009
Crosby Asset Management Inc.
(the 'Company' and together with its subsidiaries the 'Group' or 'CAM')
Preliminary Results - Year Ended 31 December 2008
Highlights 2008
Turnover - US$22.9 million (2007: US$39.3 million) for continuing operations
Loss attributable to shareholders - US$56.5 million (2007: US$33.9 million)
Shareholder equity - US$8.2 million (2007: US$64.2 million)
Loss per share (basic) 2008: US$0.23 (2007: US$0.14)
Assets under management - US$0.5 billion down from US$2.5 billion
Chairman's Report
The loss attributable to shareholders in the year ended 31 December 2008 was US$56.5 million. This reflects the extraordinarily difficult market conditions under which our asset management businesses have been operating and the consequences of our ill-timed acquisition of the Forsyth business in 2007, as well as adjustments to the fair value of the Group's investment portfolio. The Group's assets under management ("AUM") fell 80 per cent. from US$2.5 billion, at 31 December 2007, to US$0.5 billion at 31 December 2008. Falls in AUM were recorded in our Crosby Forsyth, Crosby Wealth Management and Crosby Active Opportunity operations, confirming that all parts of the Group have been affected by the collapse in global financial market.
In response to this combination of adverse circumstances, the Group has implemented a strategy that has involved the closure of many of its funds and significant reductions in operating costs. The Company's involvement in the development of the SW1 Capital LP ("SW1") fund platform business has also been terminated, further details of which are outlined in the Chief Executive Officer's report.
The Company has also decided, as part of the Group's cost reduction programme, to reduce the size of the board of CAM (the "Board"). As a consequence, both Johnny Chan and Stuart Westwater will be stepping down from the Board with effect from the Company's forthcoming Annual General Meeting scheduled for 30 April 2009. I would like to take this opportunity, on behalf of the Company, to thank them both for their commitment and contribution to the work of the Group.
Whilst it is extremely disappointing to report further losses and a sharp contraction in the Group's operations, I hope that the strategy that the Board has adopted will allow the Company to re-emerge with a revitalised business model which will rebuild shareholder value over the short to medium term.
I would like to thank the CAM executive team in both Europe and Asia for their continuing efforts through what has been an exceptionally difficult and challenging year both for the industry and for the Company.
Robert OwenChairman
Chief Executive Officer's Report
2008 was clearly a challenging year for the majority of industry participants and not least for CAM. We started the year still working to contain and develop the Forsyth Partners business ("Forsyth") which the Company had acquired in September 2007. Our timing for the acquisition was far from ideal and as the global financial markets continued to deteriorate in the first quarter of 2008, the Company's focus shifted from trying to revive Forsyth to limiting the operating losses and closing those funds which were uneconomical or had little chance of being revived. In the second half of 2008, CAM closed the Forsyth Plc range of UCITS funds and the Forsyth hybrid funds. It also sold, for a nominal initial consideration, with a capped three year earn out mechanism, the Forsyth international funds research and ratings business to Old Broad Street Research.
As set out in the Company's Trading Update released on 13 November 2008, AUM at CAM continued to decline in the fourth quarter resulting in a total AUM as of 31 December 2008 of approximately US$0.5 billion.
Redemption requests within our fund of hedge fund products increased further during the fourth quarter of 2008 due both to the deteriorating economic climate and to increased illiquidity in the underlying hedge fund investments. As a result, the Company has decided it is prudent to abandon CAM's previous plans for the consolidation and remarketing of the remaining Crosby Forsyth fund of hedge fund offerings and, instead, to close them. When this is completed virtually the entire range of Crosby Forsyth funds will have been closed.
In August 2008 CAM discontinued its sponsorship of the development of the fund platform, SW1, and resigned from the partnership. Both Johnny Chan and I also resigned from the partnership at the same time. SW1 has never generated any revenue or profits and no consideration was received by CAM upon its exit from SW1. As a result, CAM no longer has any financial exposure to SW1.
Our asset management business now comprises an interest in Apollo Multi-Asset Management LLP (AUM of approximately US$22.3 million as at 31 December 2008), which launched successfully in November 2008, but as yet has not reached critical mass; our Active Opportunities Fund (AUM or approximately US$38 million as at 31 December 2008), which has been severely hurt during the small cap retrenchment in Asia; and our Wealth Management business in Hong Kong, which, as last reported, suffered losses and withdrawals during the last quarter of 2008, but has now stabilised at the levels last reported in November 2008 of approximately US$200 million. Crosby Wealth Management is proceeding with its defence against legal proceedings brought by a client in Hong Kong concerning a trade execution error. We have paid US$2 million of cash into the Hong Kong court system in respect of the claim and have also made prudent provisions for any costs and interest payments that may arise from the claim.
In summary, the Company's ambitions in asset management have been dramatically curtailed by the exogenous global market events of 2008 and of the first quarter of 2009, the impacts of which have shown little sign of abating in the short to medium term.
At Orchard Petroleum Inc ("Orchard"), the five per cent. owned (subject to the level of repayment of principal to preference shareholders, this will rise to an effective economic interest of between nine per cent. and ten per cent.) upstream oil and gas company focused primarily in California's San Joaquin Basin, drilling continues positively and the company continues to add to its portfolio of productive wells. The Company is pleased to announce that as at the end of December 2008, Orchard was producing from approximately 41 wells. It should be noted, however, that if the substantial decline in both oil and gas prices are maintained or continue, this will clearly affect the forecast earnings ability of Orchard and may reduce the future value of CAM's stake.
Going forward, the Company intends to continue to reduce its cost base by contracting back from Crosby Capital Limited (our parent in Hong Kong) the key operational functions required by the Company and by reducing our fixed overheads as far as possible. As set out in the Chairman's statement, the Company is reducing the Board membership to reduce costs at CAM, and as a consequence, both Johnny Chan and Stuart Westwater will be stepping down from their board seats with effect from our forthcoming Annual General Meeting on 30 April 2009. I would like to take this opportunity to thank them both sincerely for their contribution over the last four years.
We will continue to realise cash and reduce liabilities wherever possible. In doing so we hope to be able eventually to rebuild CAM with a revitalised business model, and ultimately, to regenerate shareholder value.
It is clearly very disappointing to have to report such negative progress over the past year and I would like to thank all our shareholders for both their stamina and patience during these difficult times for the financial services sector as a whole.
Simon Fry
Chief Executive Officer
Consolidated Income Statement
For the year ended 31 December 2008
| Restated | ||||
| 2008 | 2007 | |||
| Notes | US$'000 | US$'000 | ||
| Continuing Operations | ||||
| Revenue | 22,853 | 39,295 | ||
| Cost of sales | (6,502) | (2,608) | ||
| Gross profit | 16,351 | 36,687 | ||
| Loss on financial assets at fair value through profit or loss | (2,219) | - | ||
| Other income | 1,299 | 865 | ||
| Administrative expenses | ||||
| Restructuring expenses | 3 | (6,968) | - | |
| Amortisation of intangible assets | (314) | (123) | ||
| Impairment of intangible assets | (8,930) | - | ||
| Write off of intangible assets | (468) | - | ||
| Other administrative expenses | (24,403) | (27,875) | ||
| (41,083) | (27,998) | |||
| Distribution expenses | (46) | (219) | ||
| Other operating expenses | (6,508) | (847) | ||
| (Loss)/Profit from operations | (32,206) | 8,488 | ||
| Finance costs | (201) | (37) | ||
| Excess of fair value over cost of acquired subsidiary | - | 409 | ||
| Share of profits/(losses) of associates | 24 | (119) | ||
| Share of losses of jointly controlled entities | (10) | - | ||
| (Loss)/Profit before taxation | (32,393) | 8,741 | ||
| Taxation | 4 | 127 | (2,439) | |
| (Loss)/Profit for the year from continuing operations | (32,266) | 6,302 | ||
| Discontinued Operations | ||||
| Loss for the year from discontinued operations | 5 | (25,207) | (26,917) | |
| Loss for the year | (57,473) | (20,615) | ||
| Attributable to: | ||||
| Equity holders of the Company | ||||
| Loss for the year from continuing operations | (31,278) | (6,994) | ||
| Loss for the year from discontinued operations | (25,207) | (26,917) | ||
| (56,485) | (33,911) | |||
| Minority interests | ||||
| (Loss)/Profit for the year from continuing operations | (988) | 13,296 | ||
| (Loss)/Profit for the year from discontinued operations | - | - | ||
| (988) | 13,296 | |||
| Loss for the year | (57,473) | (20,615) | ||
| Dividend | - | - | ||
| Loss per share for loss attributable to equity holders of the Company during the year | 6 | US cents | US cents | |
| Basic | ||||
| Continuing operations | (12.85) | (2.88) | ||
| Discontinued operations | (10.35) | (11.06) | ||
|
| (23.20) | (13.94) | ||
| Diluted | ||||
| Continuing operations | (12.85) | (2.88) | ||
| Discontinued operations | (10.35) | (11.06) | ||
|
| (23.20) | (13.94) |
The 2007 comparatives have been restated to split out the discontinued operations.
Consolidated Balance Sheet
As at 31 December 2008
| 2008 | 2007 | ||
| US$'000 | US$'000 | ||
| ASSETS | |||
| Non-current assets | |||
| Property, plant and equipment | 387 | 1,009 | |
| Interests in associates | 153 | 314 | |
| Interests in jointly controlled entities | 307 | 81 | |
| Available-for-sale investments | 1,625 | 5,523 | |
| Loan receivable | 485 | 463 | |
| Intangible assets | 21 | 8,718 | |
| 2,978 | 16,108 | ||
| Current assets | |||
| Amounts due from parent and related companies | 214 | 169 | |
| Trade and other receivables | 3,424 | 8,120 | |
| Tax recoverable | 82 | 75 | |
| Financial assets at fair value through profit or loss | 2,696 | 43,638 | |
| Cash and cash equivalents | 15,526 | 20,766 | |
| 21,942 | 72,768 | ||
|
| |||
| Total assets | 24,920 | 88,876 | |
| LIABILITIES | |||
| Current liabilities | |||
| Trade and other payables | (11,930) | (13,977) | |
| Deferred income | (34) | - | |
| Provision for taxation | (2,261) | (2,425) | |
| Obligations under finance leases | (298) | - | |
| (14,523) | (16,402) | ||
| Non-current liabilities | |||
| Loan payable | (52) | - | |
| Obligations under finance leases | (513) | - | |
| (565) | - | ||
| Total liabilities | (15,088) | (16,402) | |
| EQUITY | |||
| Share capital | 2,435 | 2,433 | |
| Reserves | 5,749 | 61,772 | |
| Equity attributable to equity holders of the Company | 8,184 | 64,205 | |
| Minority interests | 1,648 | 8,269 | |
| Total equity | 9,832 | 72,474 | |
| Total equity and liabilities | 24,920 | 88,876 |
Consolidated Statement of Changes in Equity
For the year ended 31 December 2008
| Equity attributable to equity holders of the Company | Minority interests | Total equity | ||||||||
| Share capital | Share premium | Capital reserve | Employee share-based compensation reserve | Foreign exchange reserve | Investment revaluation reserve | Profit and loss account | Total | |||
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | |
| At 1 January 2007 | 2,427 | 5,915 | 23,455 | 1,976 | 72 | (2) | 62,745 | 96,588 | 28,152 | 124,740 |
| Exchange differences on consolidation | - | - | - | - | 93 | - | - | 93 | - | 93 |
| Surplus on revaluation | - | - | - | - | - | 157 | - | 157 | - | 157 |
| Net income recognised directly in equity | - | - | - | - | 93 | 157 | - | 250 | - | 250 |
| (Loss)/Profit for the year | - | - | - | - | - | - | (33,911) | (33,911) | 13,296 | (20,615) |
| Total recognised income and expenses for the year | - | - | - | - | 93 | 157 | (33,911) | (33,661) | 13,296 | (20,365) |
| Issue of new shares upon exercise of share options | 6 | 321 | - | (77) | - | - | - | 250 | - | 250 |
| Employee share-based compensation | - | - | - | 1,028 | - | - | - | 1,028 | 13 | 1,041 |
| Deemed disposal of a subsidiary | - | - | - | - | - | - | - | - | (12,586) | (12,586) |
| Dividend paid to minority shareholders | - | - | - | - | - | - | - | - | (19,356) | (19,356) |
| Additional investment in a subsidiary | - | - | - | - | - | - | - | (1,250) | (1,250) | |
| At 31 December 2007 and 1 January 2008 | 2,433 | 6,236 | 23,455 | 2,927 | 165 | 155 | 28,834 | 64,205 | 8,269 | 72,474 |
| Exchange differences on consolidation | - | - | - | - | (145) | - | - | (145) | - | (145) |
| Surplus on revaluation | - | - | - | - | - | (1,243) | - | (1,243) | - | (1,243) |
| Net expense recognised directly in equity | - | - | - | - | (145) | (1,243) | - | (1,388) | - | (1,388) |
| Loss for the year | - | - | - | - | - | - | (56,485) | (56,485) | (988) | (57,473) |
| Total recognized income and expenses for the year | - | - | - | - | (145) | (1,243) | (56,485) | (57,873) | (988) | (58,861) |
| Issue of new shares upon exercise of share options | 2 | 108 | - | (26) | - | - | - | 84 | - | 84 |
| Employee share-based compensation | - | - | - | 1,768 | - | - | - | 1,768 | 25 | 1,793 |
| Dividend paid to minority shareholders | - | - | - | - | - | - | - | - | (5,658) | (5,658) |
| Lapse of share options | - | - | - | (1,072) | - | - | 1,072 | - | - | - |
| At 31 December 2008 | 2,435 | 6,344 | 23,455 | 3,597 | 20 | (1,088) | (26,579) | 8,184 | 1,648 | 9,832 |
Consolidated Cash Flow Statement
For the year ended 31 December 2008
| Restated | |||
| 2008 | 2007 | ||
| US$'000 | US$'000 | ||
| Operating activities | |||
| Continuing operations | |||
| Loss before taxation | (32,393) | 8,741 | |
| Adjustments for: | |||
| Share of losses of jointly controlled entities | 10 | - | |
| Share of (profits)/losses of associates | (24) | 119 | |
| Interest income | (402) | (508) | |
| Finance costs | 201 | 37 | |
| Loss on financial assets at fair value through profit or loss | 2,219 | - | |
| Employee share-based compensation | 1,701 | 619 | |
| Restructuring expenses | 3,153 | - | |
| Depreciation of property, plant and equipment | 809 | 366 | |
| Write off of property, plant and equipment | 83 | - | |
| Profit on disposal of property, plant and equipment | (9) | - | |
| Amortisation of intangible assets | 314 | 123 | |
| Impairment of intangible assets | 8,930 | - | |
| Write off of intangible assets | 468 | - | |
| Excess of fair value over cost of acquired subsidiary | - | (409) | |
| Loss on disposal of available-for-sale investments | 155 | - | |
| Bad debts recovery | (2) | (2) | |
| Impairment of receivables | 769 | - | |
| Provision for claims | 3,246 | - | |
| Foreign exchange losses, net | 17 | (91) | |
| Operating cash flow before working capital changes | (10,755) | 8,995 | |
| Acquisition of financial assets at fair value through profit or loss | (238) | - | |
| Proceeds from disposal of financial assets at fair value through profit or loss | 2,093 | - | |
| Decrease/(Increase) in trade and other receivables | 4,730 | (4,073) | |
| (Increase)/Decrease in trade and other payables | (5,008) | 17,905 | |
| Decrease in amounts due from parent company and related company | 11,635 | 731 | |
| (Increase)/Decrease in amounts due from jointly controlled entities | (237) | 54 | |
| Decrease/(Increase) in amounts due from associates | 48 | (396) | |
| Decrease in amounts due to associates | - | (2) | |
| Cash generated from operations | 2,268 | 23,214 | |
| Tax paid | (46) | (264) | |
| Tax refund | 3 | 76 | |
| Interest paid | (132) | (37) | |
| Net cash inflow from operating activities from continuing operations | 2,093 | 22,989 | |
| Discontinued operations | |||
| Net cash (outflow) used in/inflow from operating activities from discontinued operations | (500) | 26,360 | |
| Net cash inflow from operating activities | 1,593 | 49,349 |
Consolidated Cash Flow Statement (Continued)
For the year ended 31 December 2008
| Restated | |||
| 2008 | 2007 | ||
| US$'000 | US$'000 | ||
| Investing activities | |||
| Continuing operations | |||
| Interest received | 755 | 603 | |
| Purchases of property, plant and equipment | (5,146) | (776) | |
| Investment in a jointly controlled entity | (4) | - | |
| Acquisition of additional interests in subsidiaries | (741) | (421) | |
| Acquisition of subsidiaries, net of cash acquired | 111 | - | |
| Acquisition of the Forsyth Business | (355) | (7,320) | |
| Proceeds from sale of property, plant and equipment | 1,755 | 2 | |
| Proceeds from sale of available-for-sale investments | 2,500 | - | |
| Disposal of subsidiaries, net of cash disposals | (35) | - | |
| Net advance to investees | (598) | - | |
| Net (advance to)/repayment from staff | (253) | 91 | |
| Net cash outflow used in investing activities from continuing operations | (2,011) | (7,821) | |
| Discontinued operations | |||
| Net cash outflow used in investing activities from discontinued operations | (7) | (17,183) | |
| Net cash outflow used in investing activities | (2,018) | (25,004) | |
| Financing activities | |||
| Continuing operations | |||
| Dividend paid to minority shareholders | (5,658) | - | |
| Issue of shares | 84 | 250 | |
| Drawdown of other loan | 11,410 | - | |
| Repayment of other loan | (11,410) | - | |
| Repayment of finance lease obligations | (569) | - | |
| Inception of finance lease obligations | 1,313 | - | |
| Net cash (outflow) used in/inflow from financing activities from continuing operations | (4,830) | 250 | |
| Discontinued operations | |||
| Net cash outflow used in financing activities from discontinued operations | - | (13,832) | |
| Net cash outflow used in financing activities | (4,830) | (13,582) | |
| Net (decrease)/increase in cash and cash equivalents | (5,255) | 10,763 | |
| Cash and cash equivalents as at 1 January | 20,766 | 9,987 | |
| Effect of exchange rate fluctuations | 15 | 16 | |
| Cash and cash equivalents as at 31 December | 15,526 | 20,766 | |
| Analysed into: | |||
| - Continuing operations | 15,526 | 20,259 | |
| - Discontinued operations | - | 507 | |
| Total | 15,526 | 20,766 |
Notes to the Consolidated Financial Information
1. Basis of preparation
The Company was incorporated in the Cayman Islands, which does not prescribe the adoption of any particular accounting framework. The Board has therefore adopted International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board. The Company's shares are listed on the AIM of the London Stock Exchange
The financial statements are prepared under historical cost convention except for certain financial instruments which are measured at fair value. The measurement bases are fully described in the accounting policies detailed in the Group's annual report and financial statements.
It should be noted that accounting estimates and assumptions are used in preparation of the financial statements. Although these estimates are based on management's best knowledge and judgement of current events and actions, actual results may ultimately differ from those estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are set out in the Group's annual report and financial statements.
The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries (together referred to as "the Group") made up to 31 December each year. Material intra-group balances and transactions, and any unrealised gains arising from intra-group transactions, are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
The principal accounting policies are detailed in the Group's annual report and financial statements.
The prior year income statement and cashflow statement have been restated to separate the results and cashflows of the discontinued Merchant Banking business operation from those of the continuing operations as required under IFRS 5 Non Current Assets Held for Sale and Discontinued Operations.
2. Segmental Information
a) Primary reporting format - business segment:
| Merchant banking | Asset management | Unallocated | Consolidated | |||||
| Restated | Restated | Restated | Restated | |||||
| 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | |
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | |
| Continuing Operations | ||||||||
| Revenue | - | - | 20,280 | 39,295 | 2,573 | - | 22,853 | 39,295 |
| Segment results | - | - | (6,855) | 14,568 | (7,902) | (5,957) | (14,757) | 8,611 |
| Restructuring expenses | - | - | (5,449) | - | (1,519) | - | (6,968) | - |
| Impairment of receivables | - | - | (2) | - | (767) | - | (769) | - |
| Amortisation of intangible assets | - | - | (314) | (123) | - | (314) | (123) | |
| Impairment of intangible assets | - | - | (8,378) | - | (552) | - | (8,930) | - |
| Write off of intangible assets | - | - | - | - | (468) | - | (468) | - |
| (Loss)/profit from operations | - | - | (20,998) | 14,445 | (11,208) | (5,957) | (32,206) | 8,488 |
| Finance costs | (201) | (37) | ||||||
| Excess of fair value over cost of acquired subsidiary | - | 409 | ||||||
| Share of profits/(losses) of associates | 24 | (119) | ||||||
| Share of losses of jointly controlled entities | (10) | - | ||||||
| (Loss)/Profit before taxation | (32,393) | 8,741 | ||||||
| Taxation | 127 | (2,439) | ||||||
| (Loss)/Profit for the year from continuing operations | (32,266) | 6,302 | ||||||
| Discontinued Operations | ||||||||
| Loss for the year from discontinued operations (Note 5) | (25,207) | (26,917) | - | - | - | - | (25,207) | (26,917) |
| Loss for the year | (57,473) | (20,615) | ||||||
| Merchant banking | Asset management | Unallocated | Consolidated | |||||
| 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | |
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | |
|
| ||||||||
| Segment assets | - | 50,574 | 17,331 | 29,698 | - | - | 17,331 | 80,272 |
| Unallocated assets | - | - | - | - | 7,589 | 8,604 | 7,589 | 8,604 |
| Total assets | - | 50,574 | 17,331 | 29,698 | 7,589 | 8,604 | 24,920 | 88,876 |
|
| ||||||||
| Segment liabilities | - | 4,589 | 10,888 | 8,102 | - | - | 10,888 | 12,691 |
| Unallocated liabilities | - | - | - | - | 4,200 | 3,711 | 4,200 | 3,711 |
| Total liabilities | - | 4,589 | 10,888 | 8,102 | 4,200 | 3,711 | 15,088 | 16,402 |
| Other information | ||||||||
| Capital expenditure | ||||||||
| Continuing operations | - | - | 3,322 | 124 | 1,824 | 652 | 5,146 | 776 |
| Discontinued operations | 7 | 39 | - | - | - | - | 7 | 39 |
| Depreciation | ||||||||
| Continuing operations | - | - | 278 | 69 | 531 | 297 | 809 | 366 |
| Discontinued operations | 7 | 73 | - | - | - | - | 7 | 73 |
| Share-based compensation | ||||||||
| Continuing operations | - | - | 565 | 305 | 1,136 | 314 | 1,701 | 619 |
| Discontinued operations | 92 | 422 | - | - | - | - | 92 | 422 |
Notes
i) Merchant Banking - provision of corporate finance and other advisory services and the changes in fair value of financial assets and liabilities through profit or loss arising from the Group's Merchant Banking activities. This business was discontinued during the year ended 31 December 2008 and therefore has been shown as a discontinued operation.
ii) Asset Management - provision of fund management, asset management and wealth management services
iii) Unallocated - primarily items related to corporate offices and the remaining investments held which arose from the Merchant Banking business and are now managed on a passive basis.
b) Secondary reporting format -geographical segment:
The asset management business during the years ended 31 December 2008 and 2007 was mainly operated through the Group's subsidiary in the United Kingdom but the Group defines geographical segment with reference to those revenue producing assets and transactions that arise from customers domiciled worldwide. Due to the nature of the business, precise segregation of geographical activities would be arbitrary and therefore considered not appropriate.
3. Restructuring expenses - continuing operations
| 2008 | 2007 | |
| US$'000 | US$'000 | |
| Write off of property, plant and equipment | 3,153 | - |
| Provision for onerous contract in respect of operating lease | 973 | - |
| Others | 2,842 | - |
| Total | 6,968 | - |
The Group has reduced staff numbers as part of the restructuring of its Forsyth fund-of-funds business and relocated the remaining staff to its head office, leaving office premises rented under operating leases vacant and available to sub-let. At 31 December 2008, the Group has provided in full against the net carrying value of the property, plant and equipment in those office premises amounting to US$3.2 million. The Group has also made provision for the discounted net present value of the future property operating lease rental payments under the operating lease, in so far as they are expected to exceed future anticipated rentals if the premises is sub-let, in the amount of US$1.0 million as this represents an onerous contract.
4. Taxation - continuing operations
| 2008 | 2007 | |
| US$'000 | US$'000 | |
| Current tax | ||
| - United Kingdom | 35 | - |
| - Overseas | (162) | 2,439 |
| Total | (127) | 2,439 |
United Kingdom and overseas income tax for the year have been calculated at the rates prevailing in the relevant jurisdictions.
A reconciliation of the tax expense applicable to the loss before taxation using the statutory rates for the countries in which the Company and its subsidiaries are domiciled to the tax credit or expenses at the effective tax rates, and a reconciliation of the statutory tax rates to the effective tax rates, are as follows :
| 2008 | 2007 | |||
| US$'000 | % | US$'000 | % | |
| Loss before taxation | ||||
| Continuing operations | (32,393) | 8,741 | ||
| Discontinued operations | (25,207) | (26,917) | ||
| (57,600) | (18,176) | |||
| Less: Adjustments | ||||
| Share of losses of jointly controlled entities | 10 | - | ||
| Share of (profits)/losses of associates | (24) | 119 | ||
| (57,614) | (18,057) | |||
| Tax at the domestic income tax rates | (9,506) | 16.50 | (3,160) | 17.50 |
| Effect of different tax rates of subsidiaries operating in other regions | - | - | (129) | 0.71 |
| Tax effect of prior year's tax losses utilised this year | (202) | 0.35 | (481) | 2.66 |
| Income not subject to tax | (1,137) | 1.97 | (133) | 0.74 |
| Expenses not deductible for tax | 6,182 | (10.73) | 6,263 | (34.69) |
| Tax effect of temporary differences | 1,237 | (2.15) | 11 | (0.06) |
| Tax effect of unrecognised tax losses | 3,426 | (5.94) | 68 | (0.37) |
| Over provision in prior years | (127) | 0.22 | - | - |
| Tax (credit)/charge for the year | (127) | 0.22 | 2,439 | (13.51) |
The Group has significant unrelieved tax losses, the utilisation of which is uncertain and consequently no deferred tax asset has been recognised.
5. Discontinued operations
| 2008 | 2007 | |
| US$'000 | US$'000 | |
| Revenue | 2,612 | 2,046 |
| Cost of sales | (1,527) | - |
| Gross profit | 1,085 | 2,046 |
| Loss on financial assets at fair value through profit or loss | (20,613) | (13,727) |
| Other income | 384 | - |
| Administrative expenses | (5,432) | (10,620) |
| Other operating expenses | (631) | (4,616) |
| Loss before and after taxation for the period | (25,207) | (26,917) |
During the year ended 31 December 2008, the Group undertook a restructuring to create a more efficient corporate structure by separating its Asset Management and Merchant Banking operations. The staff employed in the Group's Merchant Banking subsidiaries have transferred their employment on a continuous basis to a subsidiary of the Group's parent company, Crosby Capital Limited, with effect from 30 June 2008. The financial assets of the Group that were derived from its Merchant Banking operations were transferred into a 100% subsidiary, Crosby Special Situations Fund Limited ("CSSF") during the year ended 31 December 2008. CSSF has entered into a standard performance-linked advisory agreement with Crosby Capital Limited to manage the optimal realization of these investments but will not enter into any new merchant banking transactions through the Group. The Group has retained a number of assets which form part of the Merchant Banking operation and are managed by CSSF with a view to realisation. These assets are held by the Group on a passive basis and are included within continuing operations from 1 July 2008.
6. Loss per Share
(a) Basic
Basic loss per share is calculated by dividing consolidated loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.
| 2008 | 2007 | |
| US$'000 | US$'000 | |
| Loss attributable to equity holders of the Company | ||
| - Continuing operations | (31,278) | (6,994) |
| - Discontinued operations | (25,207) | (26,917) |
| (56,485) | (33,911) |
| 2008 | 2007 | |
| Weighted average number of shares for calculating basic loss per share | 243,432,377 | 243,235,548 |
| 2008 | 2007 | |
| US cents | US cents | |
| Basic loss per share | ||
| - Continuing operations | (12.85) | (2.88) |
| - Discontinued operations | (10.35) | (11.06) |
| (23.20) | (13.94) |
(b) Diluted
No diluted loss per share is shown for 2008 and 2007, as the outstanding share options were anti-dilutive.
7. Publication
The financial information set out in this preliminary announcement does not constitute statutory accounts.
The consolidated balance sheet at 31 December 2008 and the consolidated income statement, consolidated statement of changes in equity, consolidated cash flow statement and enclosed notes for the year then ended have been extracted from the Group's 2008 statutory financial statements upon which the auditors opinion is unqualified.
8. Copies of This Announcement
Copies of this announcement are available for collection from the Company's offices at 4 Old Park Lane, London W1K 1QW.