ZOL.L Regulatory News (ZOL)

8 Apr 2008 07:48

Crosby Capital Partners Inc08 April 2008 CROSBY CAPITAL PARTNERS INC. REVISED FINANCIAL FORECAST AT IB DAIWA London, 8 April 2008 - Crosby Capital Partners Inc. ("Crosby") notes today'sannouncement made by IB Daiwa Corporation ("IB Daiwa" - JASDAQ 3587) thatrelates to write-downs and provisions against assets within IB Daiwa's Lodoresubsidiary. These are non-cash items within the profit and loss account thatresult in extraordinary charges that impact the net profit for the year endedMarch 2008 - the sales revenue and ordinary profit forecasts are unchanged. Crosby owns, through two wholly owned subsidiaries, 85,450,000 shares in IBDaiwa, representing 20.04% of its issued share capital. The holdings areclassified as 'financial assets at fair value through profit and loss' and are,therefore, marked to market with gains and losses being recognised in the incomestatement. A copy of IB Daiwa's JASDAQ announcement can be found below. The full text isavailable on IB Daiwa's website: www.ibdaiwa.co.jp. About Crosby Capital Partners Crosby Capital Partners Inc. is a leading independent deal-focused Asia-orientedmerchant banking and asset management group. Crosby is quoted on the AIMmarket of the London Stock Exchange. Further details can be found on theCompany's website www.crosby.com. For further information on Crosby please contact: Steve Fletcher, Chief Operating Officer on +44 20 7590 2800 IB DAIWA Recognition of Extraordinary Losses and Revisions to Forecasts for Consolidated and Unconsolidated Financials for Current Fiscal Year IB Daiwa Corporation (the "Company") announces the following revisions to itsconsolidated and unconsolidated financial forecasts for the fiscal year endingMarch 2008, which were restated in its "FY2007 H1 Financial Results" dated 15November 2007 ("Previous Forecast"). 1. Recognition of Extraordinary Losses (1) Outline Consolidated (Unit: JPY in millions) Breakdown Extraordinary Losses Provided Additional Extraordinary Total for in the Previous Low-Case Losses ForecastProvision for Exploration 1,954 1,279 3,233AssetsWrite-off of 690 1,958 2,648Lodore-related GoodwillTotal Extraordinary Losses 2,644 3,237 5,881(Consolidated) Unconsolidated (Unit: JPY in millions) Breakdown Extraordinary Losses Provided Additional Extraordinary Total for in the Previous Low-Case Losses ForecastLoss on revaluation of 2,644 127 2,771Lodore sharesTotal Extraordinary Losses 2,644 127 2,771(Unconsolidated) (2) Reasons for Recognition of Extraordinary Losses Consolidated The Previous Forecast for the net profit for FY2007 was given in a range ofpositive JPY 2,102 million (the base case net profit) to negative JPY 542million (the low case net loss) depending on whether or not to recognise the JPY2,644 million of estimated provision in case of the failure of the Endeavor AMIProspect. The Company has decided to recognise JPY 5,881 million ofextraordinary losses, which are the total of JPY 2,644 million yen alreadyprovided for in the Previous Forecast as an estimated loss on write-off andprovision for the Endeavor AMI Prospect-related assets and goodwill, JPY 1,279million of provision for additional capitalised exploration costs at Lodore(including the exploration assets related to the Big Mouth Bayou Prospect andthe Northwest Kaplan Prospect), and write-off of JPY 1,958 million of additionalLodore-related goodwill at the group level (including Lodore-related goodwillallocated to the Manzano Prospect and the Northwest Kaplan Prospect). After the recognition of the above extraordinary losses, it is expected that nobalance related to Lodore exploration assets or goodwill remains on theconsolidated balance sheet as at 31 March 2008. Lodore, a consolidated subsidiary of the Company, engages in oil and gasexploration, development and production in the US with a special focus onexploration. In exploration business, the main activities involve the drilling of explorationwells to seek for new sources of natural resources such as oil and gas.Exploration costs for a well vary depending very much on the target depth andthe location (i.e. onshore or offshore) among others, but in general explorationbusiness is capital intensive and a high-risk and high impact business.Tremendous return could be achieved if a discovery of resources could be made,while in the event of failures the Company has to write off capitalisedexploration costs. In December 2005, the Company acquired Lodore, which was at the time listed onthe AIM market of the London Stock Exchange, for a consideration of approx. JPY23.9 billion (similar to the market price of the shares of Lodore as quoted onthe AIM market) in kind of 106,400,000 of the Company's shares, valued at 225yen per share (similar to the market price of the Company's shares as quoted onthe JASDAQ market). The difference between the acquisition cost and the netassets of Lodore was booked as Lodore related goodwill on the Company'sconsolidated balance sheet, and after straight-line amortisation and approx. JPY19.0 billion of partial written-off in the previous fiscal year, the goodwill asof the end of the FY2007 Q3 was approximately JPY 2.7 billion. As announced in "Announcement of the Suspension of Drilling at the EndeavorProspect" dated 26 November 2007, Pel Tex SL2038 #1 well, which is drilling theEndeavor AMI Prospect onshore Louisiana, USA ("the Well"), in which Lodoreparticipates as a non-operating joint venture partner, was suspended due to aninsurance related issue. On 24 January 2008, the JV filed for proceedingsagainst the insurers for damages that have resulted from the well beingsuspended, caused by the insurers' refusal to provide coverage for the planneddeeper drilling operations under the policy that was in place at the time ofdrilling. The JV has also attempted to obtain an alternative insurance in orderto deepen the well, however, the JV has been unable to secure insurance coverageneeded for the planned deeper drilling operations and it remains impossible todetermine whether it will resume drilling and, if so, when. Under thesecircumstances, in consultation with each of the Company's and Lodore's externalauditors, it has been decided to take a prudent approach in providing againstthe exploration costs for the Well and writing off Lodore-related goodwillallocated to the Endeavor AMI Prospect, in spite of the remaining possibilitiesof deepening the Well and/or the likelihood of recovering the damages as aconsequence of the litigation against the insurers. The Company also carefully reviewed Lodore's operational and financial plans,and mainly based on the inevitable risks associated with exploration businessand on the uncertainties of availability of funds for future explorationprojects, after careful discussions with the external auditors, it has also beendecided to provide against the exploration costs for all of Lodore's explorationprojects (JPY 3,233 million, which includes the exploration costs related to theEndeavor AMI Prospect) and to write off all the Lodore related goodwill exceptfor JPY 61 million allocated to the Kami producing well (JPY 2,648 million,which includes the goodwill allocated to the Endeavor AMI Prospect) in thisfiscal year, so that the Company can start the next fiscal year with lessuncertainties on its balance sheet. As such, the Company has included in itsforecast JPY 3,237 million of extraordinary losses in addition to JPY 2,644million of extraordinary losses already included in its low case projected netloss, which total JPY 5,881 million. While taking a prudent approach in accounting treatments, the Company advisesthe market that Lodore intends to remain in the industry and will participate inexploration projects whose potential risks it believes are worth taking and iffunds are available. Lodore would consider opportunities to participate incomparatively low-risk exploration projects and to acquire development and/orproducing assets, should such opportunities exist. Unconsolidated The Company has decided to write-down the investment in subsidiaries account,triggered by the write-off of Lodore-related goodwill on the consolidatedbalance sheet, and to recognise JPY 2,771 million of extraordinary loss. 2. Revisions to Forecasts (1) Outline Consolidated (Unit: JPY in millions) Sales Revenue Operating Profit Ordinary Profit Net ProfitPrevious Forecast (A) 1,439 -1,244 -1,447 Base case: 2,102 Low case: -542Revised Forecast (B) 1,439 -1,244 -1,447 -3,604Variance (B-A) 0 0 0 Base case: - 5,706 Low case: -3,062Variance (%) 0 0 0 -Reference: Actual Results for 2,947 -2,046 -2,557 -23,455Previous Period (1 Apr 06 - 31 Mar 07) Unconsolidated (Unit: JPY in millions) Sales Revenue Operating Profit Ordinary Profit Net ProfitPrevious Forecast (A) 576 -632 -557 Base case: -561 Low case: -3,205Revised Forecast (B) 576 -632 -557 -3,205Variance (B-A) 0 0 0 Base case: -2,644 Low case: 0Variance (%) 0 0 0 -Reference: Actual Results for 1,138 -769 -698 -21,514Previous Period (1 Apr 06 - 31 Mar 07) (2) Reasons for Revisions to Forecast Consolidated The Company has revised its projected consolidated net profit for FY2007 due tothe reasons as described in 1. (2) Reasons for Recognition of ExtraordinaryLosses Consolidated. No revision is made to the projectionfor the consolidated sales revenue, operating profit or ordinary profit forFY2007. Unconsolidated The Company has revised its projected unconsolidated net profit for FY2007 dueto the reasons as described in 1. (2) Reasons for Recognition of ExtraordinaryLosses Unconsolidated. No revision is made to the projectionfor the unconsolidated sales revenue, operating profit or ordinary profit forFY2007. Notes: The above forecast is estimated based on currently available information and maybe subject to further changes during the course of the audit process which isstill in progress. The extraordinary losses in the above consolidated forecastinclude write-off or provision for all substantial, currently estimableLodore-related assets except for approximately JPY 460 million of Kami-relatedassets. The Company will announce further changes, if any, to its forecast assoon as they become known. The Company plans to make FY2007 financial results available to the market on 15May 2008. This information is provided by RNS The company news service from the London Stock Exchange