ZOL.L Regulatory News (ZOL)

18 Mar 2005 07:00

Crosby Capital Partners Inc18 March 2005 Crosby Capital Partners Inc. (the "Company" and, together with its subsidiaries, the "Group" or "Crosby") Preliminary Results - Year ended 31 December 2004 Crosby is an Asian-Focused Merchant Banking and Asset Management Business 18th March 2005 HIGHLIGHTS • Total revenue significantly increased to US$55 million (2003:US$3 million)• Profit attributable to shareholders significantly increased to US$34 million (2003:US$4 million loss)• London listing achieved for Crosby Capital Partners Inc by way of a reverse into Skiddaw Capital.• Secured various real assets and economic interests in the oil and gas properties of Novus Petroleum Limited• Achieved sale of US interests in Novus Petroleum to newly AIM quoted company, Lodore Resources Inc.• Portfolio of merchant banking deals has grown significantly• Completed first closing of the Crosby ChinaChips Investment Fund• Completed a 50:50 joint venture with E2 Capital and Softbank Hong Kong to further develop our China focused Corporate Finance business. Simon Fry, CEO said: "Crosby's strategy is now firmly established. We have a clear focus on Asia-orientated Merchant Banking and Asset Management.We continue to explore strategic acquisition and joint venture opportunities todevelop and expand our business in both Asia and in Europe; and we remain fullycommitted to delivering substantial returns for our shareholders. Encouragingly, the number of merchant banking transactions that we are workingon continues to increase and we believe that we are now ready and capable tocapitalize on our recent successes and to take full advantage of the currentpositive market environment to drive Crosby forward. I welcome our shareholders along for the ride and am very hopeful of being ableto report further successes during 2005." For further information on Crosby please contact: Simon Fry, Chief Executive Officer in London on +44 (0)207 590 2800 Andy Berry, Fishburn Hedges +44 (0) 20 7839 4321 Chief Executive Officer's Statement "In presenting Crosby's first annual report following our admission to AIM inMay 2004, I am pleased to be able to report to our new shareholders with bothsolid achievements and tangible evidence of the future opportunities that existfor a focused, independent, investment banking business such as ours that has adistinct Asian orientation. We have made substantial progress during 2004 and,more importantly, we have established the right business model to ensure oursuccessful development over the long term. I have been extremely pleased by the substantial progress that we have madeduring the past two years, and delighted in particular that the results in thisannual report show the impact of this success in financial terms. Over the past 18 months we have worked hard to develop a business, whichconcentrates on two key areas - Merchant Banking and Asset Management, bothfocused particularly on Asia. In the Merchant Banking business, we are actively pursuing deals where we workalongside our clients as partners, and where, by securing appropriate newsources of capital, and by financial restructuring, we secure a direct equityinterest for Crosby in the transactions themselves. Simultaneously, we are continuing to develop a complementary and morepredictable income stream via the growth in our asset management businesses. Joining AIM was a significant milestone for Crosby, and one that has allowed usto increase our exposure and credibility in the UK and European markets. Thisnew platform and the broadening of our client base has considerably enhanced ourability to introduce deal opportunities from Europe to our traditional Asianclients and also to assist our new European clients in navigating local marketsand investing successfully in Asia. The London quotation also affords us the ability to be strategically acquisitiveat the Crosby level. Unlike the deals which we pursue in our Merchant Bankingbusiness, any others acquisitions by Crosby are likely to remain firmly focusedon businesses, where we believe there is a synergistic fit with our currentactivities. Operational Review Merchant Banking Whilst it is almost impossible to describe a business strategy or model as "unique" in this day and age, I believe that Crosby's merchant banking businessmay well be worthy of that description. Our merchant banking strategy, which hasconstantly been refined over the past three years, is to pursue companies whosemarket value stands at a significant discount to the value of their underlyingassets, and where the value of those assets is often hidden by a complexcorporate or capital structure. Working with our existing clients, rather thanthrough a fund or other intermediate structure, we endeavour to unlock the truevalue in these companies and deliver the benefits directly to both ourshareholders and our clients. Naturally, our shareholders often seek to understand both how we source theseopportunities and how we are able to profit from them with only a minimal directuse of our own balance sheet. In part, the answer lies in the local knowledgeand the relationships that our management team have developed over many years ofoperating in Asia. In part, it is also the inherent complexity of the solutionsthat creates an opportunity for Crosby. The degree of complexity required, not only in the initial analysis but also inthe structuring and execution of such deals, causes many of our competitors toignore or miss these opportunities, either because they lack the technical andfinancial expertise or, in the case of larger firms, because they have competingbusiness priorities and potential conflicts of interest. This gives us adistinct advantage. Unlike many other firms, we are organized for and preparedto spend our own time and resources in exploring deals at their initial stages,rather than just earning fees from executing deals that are already largelyagreed. This capability undoubtedly creates a sizeable niche where Crosby can bea very profitable player. Our approach is well illustrated by a transaction last year whereby we securedvarious economic interests in the onshore and offshore oil and gas assets ofNovus Petroleum Limited. Our engagement with Novus, which led to us leading afully-funded public bid for the entire company in January 2004, was initiatedseveral months before the bid, and almost exactly a year prior to Crosbyactually acquiring these economic interests. In this transaction, the mostsignificant value for our Group lies in the oil and gas assets located in theGulf of Mexico. It was only in January 2005, a year after making the public bidfor Novus and over 18 months after initially identifying the opportunity, thatwe eventually sold these interests in an all-share transaction to the newlyquoted AIM company, Lodore Resources Inc. ('Lodore'). At the year end, the saleand purchase agreement in respect of the sale of Novus interests to Lodore hadbeen entered in to but the transaction had not at that time completed. As aresult, the Directors took a prudent view and valued Crosby's interest in Lodoreat a discount to the expected value on completion of the transaction. This transaction valued Crosby's interests in the US assets alone at US$82.4million (of which only US$38.4 has been recognised in these financialstatements). I am particularly pleased that, in addition to creating a mechanismfor Crosby to demonstrate the value of our holding in Lodore, Crosby'sshareholders and the market in general are now able to see clearly thesubstantial value that has been created in just one deal by our Merchant Bankingdivision. We remain very enthusiastic about the prospects for Lodore, under theleadership of executive chairman Bob Williams, the former CEO of Novus, whobrings with him the expertise and contacts that he has gained over more than 30years in the upstream oil and gas business. In addition to the progress we have made towards realising the value of ourUS-based assets, we have also taken a number of steps towards monetising thePakistan and the Middle Eastern oil and gas assets that we acquired via theNovus transaction. I hope to report on our progress in relation to these assetsin the near future. The Novus transaction represented by any measure an important deal for Crosby.Even more important for the long term is the fact that our Merchant Bankingdivision now has a very healthy pipeline of substantial deals. These new dealsare at different stages of development and very diversified both geographicallyand by sector, and I am hopeful that I will be able to convey the successfulconclusion of a few of these transactions to our shareholders during the comingyear. Asset Management Funds Management Our current asset management activities continue to focus strongly on Asia,where we see the greatest potential for rapid growth. During the year we havemade excellent progress, not only in accumulating new funds to manage, but alsoin developing new products in our fund management portfolio that we anticipatebringing on line in the coming year. We now manage over US$400 million in a variety of private equity andGovernment-sponsored funds. Strategically, the asset management business is very important for the long termgrowth and development of the Group. We have significant in-house expertise andhave made a concerted effort over the year to identify suitable joint venturepartners to help us expand this business. In pursuit of this aim, in October2004, we agreed with the Japan Asia Investment Company Ltd ('JAIC'), anestablished fund management group listed in Japan, to enter into a joint ventureto manage a new fund focused specifically on mid-cap pre-IPO opportunities inChina. This fund will be launched in the first half of 2005 and will add to thegrowing stable of Crosby's China-focused funds. Wealth Management In April 2004 we entered into another joint venture to develop Crosby WealthManagement with Mr. Paul Giles, a proven and experienced private banker. CrosbyWealth Management will be an investment advisor to high net worth clients inAsian markets. We received the relevant licenses from the Securities and FuturesCommission of Hong Kong in July 2004 and have already raised initial workingcapital of US$3 million to fund the recruitment of a high quality team of wealthmanagement advisors, in order to build up assets under management in a concertedmanner. Credit Suisse Financial Services has been retained to provideinfrastructure and custodian services to our clients, and we expect the businessto become fully operational by the second quarter of 2005. Corporate Finance During the year we made the strategic decision to focus primarily on ourMerchant Banking and Asset Management activities. Crosby's Greater China focusedcorporate finance business has strategic importance to the Crosby group and actsas one of our gateways to the vast array of opportunities that are currentlyavailable in the PRC. The corporate finance business is essentially one whereCrosby acts as an intermediary and is paid a fee for raising capital and, onoccasion, providing financial advice. Growing this type of business requires asubstantial infrastructure of research, distribution and trading. In order for us to exploit fully the potential of the team that we created inlate 2002 and early 2003, and to help take advantage of the opportunities thatthe team had originated, Crosby negotiated a 50:50 joint venture with asubsidiary of Softbank Investment International (Strategic) Limited ("Softbank")and E2 Capital (Holdings) Limited ("E2 Capital"), both of which are investmentfirms listed on the Main Board of the Stock Exchange of Hong Kong. The partnership with E2 Capital and Softbank gives Crosby's 17-person corporatefinance team significant extra leverage through distribution and researchcapabilities, whilst continuing to allow Crosby to benefit from asset gatheringand introduction of merchant banking opportunities. Our People I firmly believe that both our Merchant Banking and our Asset Managementbusinesses are eminently scaleable and during the second half of 2004 we haveactively recruited in both the UK and Asia, adding several experiencedindividuals to our team. With many more transactions now in our pipeline, wewill continue to invest in high quality people who have a proven track recordand who will thrive in our entrepreneurial environment I am grateful to all our staff for their continued effort and commitment to bothour clients and our Group. It is their high level of skill and their expertisethat continue to drive the Group forward and I look forward to many moresuccessful years working together. Outlook As always, the financial markets are hard to predict. This uncertainty, whilstit creates challenges, is welcome, as it presents opportunities for us touncover hidden value and to prosper. Nowhere is this more true than in Asia,and our decision to focus primarily on the opportunities available to us in thisregion reflects our belief that we have a distinct competitive advantage here.Many of our senior management team have spent a significant part of theirbanking careers in Asia and are now well positioned to identify and develop theopportunities that are constantly created in this difficult-to-navigate andvolatile environment. Crosby's strategy is now firmly established. We have a clear focus on Asia-orientated Merchant Banking and Asset Management.We continue to explore strategic acquisition and joint venture opportunities todevelop and expand our business in both Asia and in Europe; and we remain fullycommitted to delivering a meaningful return for our shareholders. Encouragingly,the number of merchant banking transactions that we are working on continues toincrease and we believe that we are now ready and capable to capitalize on ourrecent successes, and to take full advantage of the current positive marketenvironment and to drive Crosby forward. I welcome our shareholders along for this ride and am very hopeful of being ableto report further successes during 2005. CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2004 Note 2004 2003 US$'000 US$'000 Turnover 11,149 2,674Other revenue 44,048 511Total revenue 55,197 3,185 Administrative expenses (7,737) (5,744)Distribution expenses (24) (18)Other operating expenses (3,153) (1,142)Profit/(loss) from operations 44,283 (3,719) Amortisation of goodwill (149) (165)Write off of goodwill (5,468) -Negative goodwill released 64 -Share of associates profits/(losses) 9 (21)Profit/(loss) before taxation 38,739 (3,905) Taxation 2 - (14)Profit/(loss) after taxation 38,739 (3,919) Minority interests (4,720) 30Profit/(loss) attributable to shareholders 34,019 (3,889) Profit/(loss) per share- basic 3 15.33 cents (1.94 cents) CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2004 2004 2003 US$'000 US$'000 Non-current assetsProperty, plant and equipment 501 327Interests in associates 284 109Available for sale investments 225 -Intangible assets 560 155 1,570 591Current assetsAmounts due from parent and related companies 268 23Debtors, deposits and prepayments 1,279 883Other receivables 59 70Financial assets held for trading 49,227 -Cash and bank balances 5,367 7,018 56,200 7,994Current liabilitiesAmounts due to parent and related companies (11) (535)Creditors and accrued charges (1,831) (1,093)Deferred income (82) (25)Provision for taxation (59) (57)Current portion of obligation under finance - (10)leases (1,983) (1,720) Net current assets 54,217 6,274 Total assets less current liabilities 55,787 6,865 Capital and reservesCalled up share capital 2,356 1Share premium 3,810 16,000Other reserves 23,138 4,480Profit and loss account 20,387 (13,632)Equity shareholders' funds 49,691 6,849 Minority interests 6,096 16 55,787 6,865 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2004 Share Share Capital Foreign Profit & Loss Total capital premium reserve exchange Account reserve US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 At 1 January 2003 1 - 4,589 (109) (9,743) (5,262) Capitalisation of amount due from parent - 16,000 - - - 16,000 company Loss attributable to shareholders - - - - (3,889) (3,889) At 31 December 2003 1 16,000 4,589 (109) (13,632) 6,849 Capitalisation of amount due from parent - 700 - - - 700 company Adjustment on reverse acquisition 1,999 (16,700) 18,851 - - 4,150 Issue of new shares 356 4,279 - - - 4,635 Issue costs - (469) - - - (469) Exchange difference on consolidation - - - (193) - (193) Profit attributable to shareholders - - - 34,019 34,019 At 31 December 2004 2,356 3,810 23,440 (302) 20,387 49,691 The capital reserve movement of US$18.85 million in the year arose on theacquisition of Crosby Capital Partners (Holdings) Limited which has beenaccounted for as a reverse acquisition. The capital reserve brought forwardarose on a group reorganisation during the year ended 31 December 2000. CONSOLIDATED CASHFLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2004 2004 2003 US$'000 US$'000 Operating activitiesProfit / (loss) before taxation and minority interests 38,739 (3,905)Adjustments for:Share of profits / (losses) of associates (9) 21Interest income (47) (57)Interest expenses - 1Corporate finance advisory fee received in kind (7,000) -Fair values adjustment on financial assets held for trading (41,774) -Provision for fair values adjustment on financial assets heldfor trading 32 -Depreciation of property, plant and equipment 213 166(Gain)/loss on disposal of property, plant and equipment (22) 3Gain on disposal of subsidiaries, net (1,740) (1)Amortisation of goodwill 149 165Write off of goodwill 5,468 -Negative goodwill released (64) -Bad debts recovery (48) (140)Provision for doubtful debts 86 42Exchange loss/(gain), net (184) 18 Operating loss before working capital changes (6,201) (3,687) Increase in debtors, deposits and prepayments (434) (598)Decrease in tax recoverable 2 5Increase in creditors and accrued charges 738 779Increase in deferred income 57 25(Increase)/decrease in amount due from parent company andrelated company (49) 4,456Decrease in amount due to an associate (10) (4) Cash (used)/generated from operations (5,897) 976Tax paid - - Net cash (outflow)/inflow used in operating activities (5,897) 976 Investing activitiesInterest received 46 58Interest paid - (1)Purchases of property, plant and equipment (441) (306)Reverse acquisition expenses (476) -Cash acquired on reverse acquisition 1,832 -Acquisition of financial assets held for trading (486) -Acquisition of available for sale investments (225) -Acquisition of an associate - (114)Acquisition of intellectual properties (206) -Proceeds from sale of property, plant and equipment 38 4Net proceeds from disposal of subsidiaries 10 -Net (advance to)/repayment from investee companies (29) 21Net repayment from other debtors - 124Net repayment from staff 11 195 Net cash inflow /(outflow) from investing activities 74 (19) Financing activitiesRepayment of finance lease obligations (9) (22)Issue of shares 4,415 -Expenses in connection with shares issue (225) - Net cash inflow / (outflow) used in financing activities 4,181 (22) Net (decrease)/increase in cash and cash equivalents (1,642) 935Cash and cash equivalents as at 1 January 7,018 6,093Effect of exchange rate fluctuations (9) (10) Cash and cash equivalents as at 31 December 5,367 7,018 NOTES TO THE FINANCIAL STATEMENTS 1. BASIS OF PREPARATION The Company was incorporated in the Cayman Islands, which does not prescribe theadoption of any particular accounting framework. The Board has thereforeadopted International Financial Reporting Standards (IFRS). The financialstatements have been prepared in accordance with IFRS adopted by theInternational Accounting Standards Board and with the applicable disclosureprovisions of the Rules Governing the Listing of Securities on the AlternativeInvestment Market of The London Stock Exchange. The financial statements areprepared on the historical cost basis except for certain financial instruments. The acquisition of Crosby Capital Partners (Holdings) Limited by the Company hasbeen accounted for as a reverse acquisition in accordance with InternationalFinancial Reporting Standard 3 on business combinations (IFRS3). Therefore, theincome and cashflow statements for the year ended 31 December 2004 comprisesCrosby Capital Partners (Holdings) Limited and its subsidiary undertakings from1 January 2004 to 31 December 2004 and for the Company from 17 May 2004 to 31December 2004. The income and cashflow statements for the year ended 31December 2003 comprise Crosby Capital Partners (Holdings) Limited and itssubsidiary undertakings only. The consolidated balance sheet at 31 December2004 comprises of the Company and Crosby Capital Partners (Holdings) Limited andits subsidiary undertakings. The consolidated balance sheet at 31 December 2003comprises of Crosby Capital Partners (Holdings) Limited and its subsidiaryundertakings only. The principal accounting policies of the Group are set out in the Group's 2004annual report. 2. TAXATION There is no tax charge for the year. The taxation for the year can be reconciled to the profit/(loss) on ordinaryactivities before tax per consolidated income statement as follows: 2004 2003 US$'000 US$'000 Profit/(Loss) on ordinary activities before tax 38,739 (3,905) Tax at the domestic income tax rate of 17.5% 6,779 (683)Effect of different tax rates of subsidiaries operating (8,247) 190in other regionsTax effect of share of results of associates (1) 4Tax effect of prior year's tax losses utilised this year (15) -Income not subject to tax (485) (325)Expenses not deductible for tax 915 168Tax effect of unrecognised temporary difference 18 6Tax effect of unrecognised tax losses 1,036 654Current tax charge for the year - 14 3. EARNINGS/(LOSS) PER SHARE The calculation of the basic earnings/(loss) per share is based on the profitattributable to shareholders of US$34,018,712 (2003: loss attributable toshareholders of US$3,889,142) divided by the weighted average number of ordinaryshares in issue during the period of 221,957,377 (2003: 200,000,000). The diluted earnings / (loss) per share is not materially different from basicearnings / (loss) per share. 4. PUBLICATION OF NON-STATUTORY ACCOUNTS The financial information set out in this preliminary announcement does notconstitute statutory accounts as defined in section 240 of the Companies Act1985. The consolidated balance sheet at 31 December 2004 and the consolidated incomestatement, consolidated cash flow statement and associated notes for the yearthen ended have been extracted from the Group's 2004 statutory financialstatements upon which the auditors opinion is unqualified. 5. COPIES OF THIS ANNOUCEMENT Copies of this announcement are available for collection from the Company'soffices at 243 Knightsbridge, London SW7 1DN. This information is provided by RNS The company news service from the London Stock Exchange