TIDMADAM
RNS Number : 5513J
Adamas Finance Asia Limited
12 September 2016
Adamas Finance Asia Limited
(AIM: ADAM)
("Adamas Finance Asia", "ADAM", the "Company" or the
!--Group!..)
Interim Consolidated Results for the six months ended 30 June
2016
Highlights
-- 20% increase in dividend and loan income to US$336,000 (H1 2015: US$280,000)
-- Unrealised fair value gain on asset portfolio of US$280,000 (H1 2015: unrealised loss US$ 450,000)
-- Narrowed loss of US$454,000 (H1 2015: US$1.34 million)
-- Cash receipt of US$755,000 as part payment from divested asset interest
-- Consolidated loss per share of US$0.24 (H1 2015: US$0.70)
-- Consolidated NAV at 30 June 2016 of US$114.5 million (31 December 2015: US$117.5 million)
Adamas Finance Asia Chairman, John Croft commented: !--Overall,
while ADAM has been held back by delays in the disposal of its
legacy asset portfolio, the Company continued through the first
half to receive good returns from the small amounts of capital it
has been able to invest in income generating assets to date.
Furthermore, I am hopeful that during the second half of 2016 the
Company will be in a position to announce further progress on the
reshaping of its asset portfolio, which in turn will enable it to
move forward more positively with its investing policy. It gives
grounds for confidence in the strong potential of the Company!|s
long-term investment strategy, underpinned by the expertise of its
advisory team in Hong Kong.!..
Enquiries:
Adamas Finance Asia Limited
John Croft +44 (0) 1825 830587
Nominated Adviser
W H Ireland Limited
Tim Feather
Liam Gribben +44 (0) 113 394 6600
Broker
finnCap Limited +44 (0) 20 7220 0500
William Marle
Grant Bergman
Public Relations Advisers
First City Public Relations
(Hong Kong)
Allan Piper +852 2854 2666
Chairman!|s Statement
Following the steady progress made by ADAM towards achieving its
long-term strategic objectives during the course of 2015, I am
pleased to report once more that the Company continued moving in
the same positive direction over the first six months of the
current year. Losses narrowed sharply and cash realisations
provided further evidence of the potential for strong and
sustainable returns from income-generating investments as the
Company!|s legacy asset portfolio is divested.
Income from existing investments rose during the half year,
thanks to increases in both loan interest and dividends, which
totalled US$336,000. In addition, there was an unrealised fair
value gain of US$280,000 on the asset portfolio, which under
investment accounting rules is reflected in the Company!|s income
statement. This resulted in narrowed losses of US$454,000 (H1 2015:
US$1.34 million).
ADAM first announced two years ago that it intended to shift its
investment strategy by disposing of a legacy portfolio injected
during the reverse takeover in February 2014, so that it could use
the funds realised to invest in income-generating financing
opportunities. The objective is to generate cash that will
eventually yield regular dividends for shareholders. Accordingly,
shareholders initially approved an amendment to the Company's
Investing Policy in April 2015, allowing investment to be made into
funds such as the Greater China Credit Fund LP (!--GCCF!..) and the
BRJ China Credit Fund (!--BRJ!..). Both of these funds have a track
record of regular cash distributions, and both are overseen by the
Company!|s investment adviser in Hong Kong, Adamas Asset Management
(HK) Limited ("Adamas"). Adamas manages the funds to provide loan
and structured-finance capital to high-growth Chinese SMEs, and has
an enviable track record of achieving average internal rates of
return of well above 20% thanks to its stringent approach to due
diligence, legal safeguards, hands-on involvement, and an
insistence on robust and realisable collateral. ADAM has previously
invested in both funds, but because it is still working to realise
the asset disposals that will allow it to substantially implement
its revised Investing Policy, the returns to date have been
relatively modest. A small but important development was announced
shortly after the end of the half year, namely consent was gained
from shareholders for an extension to the current Investing Policy
at the Company!|s Annual General Meeting in July.
I acknowledged in my report for the financial year 2015,
published in June, that while investing in China is not easy, the
track record of the Adamas team in Hong Kong should not be
overlooked. A further example of this followed less than a week
later, on 28 June, when the Company reported it had received full
repayment, plus interest of 10% per annum, at the end of a two-year
term on a loan of US$2.4 million to Changtai Jinhongbang Real
Estate Development Co., Ltd, a company in which ADAM holds an
indirect 15% interest. Funds enabling ADAM to make the loan had
been provided by Elypsis Solutions Limited, the Company's major
shareholder, by means of a loan with a coupon of 9% per annum,
payable six monthly. That was also repaid by the Company during the
half.
That positive development was followed a week later by the
further news that the GCCF, an investment vehicle established by
Adamas into which ADAM has now invested US$4.0 million, had
achieved a successful exit from Project Media, with a gross
internal rate of return of 22.2%. Project Media was a
bridging-finance investment project. ADAM initially invested US$1
million in GCCF in August 2013, and followed that with a US$800,000
in BRJ the following year. The two funds produced cash returns
equating to a 9% annual yield in 2015 and have a track record of
regular cash distributions.
During the first half, ADAM also received a cash payment of
US$755,000 following the sale of a key investment vehicle out of
BRJ and into GCCF, with a further US$84,000 expected to complete
the settlement during the fourth quarter. This supplemented the
Company!|s December 2015 year-end cash balance of US$3.6 million,
enabling it to invest a further US$3 million into GCCF during
March.
The strong returns from both of these fund investments provide
clear evidence of the potential for further growth once the
Company!|s legacy asset portfolio can be crystallised into funding
for similar cash-generating investments in the future.
Unfortunately, the first half opened for ADAM with a disappointing
setback to its disposal plans, on the news that one of its
holdings, Hong Kong Mining Holdings Ltd ("HKMH"), the owner of a
large dolomite magnesium limestone mine in Shanxi Province, China,
would not be proceeding with a planned IPO on the Hong Kong Stock
Exchange. I provide more detail on HKMH below, along with the
Company!|s other legacy assets, but advised by the Adamas team in
Hong Kong the Board continues to explore options for an alternative
exit from HKMH.
Negotiations continued throughout the first half for an
agreement on a revised schedule for payments from Global Pharm
Holdings Group Inc. ("Global Pharm"), another holding in the
Company!|s legacy asset portfolio. The Company announced in
December 2014 the redemption of a convertible bond for an agreed
payment of US$25 million. So far, only US$5.9 million has been
received, leaving an outstanding balance of US$19.1 million, plus
interest.
ADAM announced in April that while a resumption of the
outstanding redemption payments would depend on Global Pharm!|s
working capital requirements, Adamas in Hong Kong !V which holds a
seat on the Global Pharm Board - has remained in close discussions
about a revised schedule.
It is worth noting on this point that the Adamas team has
developed an impressive record of managing difficult situations in
the Chinese investment market. As I have reported before, the
Adamas team has to date provided finance to 69 SMEs within China,
with 64 successful exits, while it has needed to resolve only five
delays in repayments of principal or interest. The delays incurred
on payments from Global Pharm to the Company are subject to agreed
penalties, in addition to outstanding interest, accrued on a daily
basis.
HKMH and Global Pharm are only two of the legacy assets for
which the Board is pursuing divestment plans. The current principal
assets are detailed below:
Current portfolio
The principal assets held by the Company are:
Principal Assets Effective Instrument type Valuation
Interest as at
30 June
2016
US$ million
Changtai Jinhongbang
Real Estate Development
Co. Ltd 15.00% Structured equity 48.4
Global Pharm Holdings Redeemable convertible
Group Inc - bond 19.1
Fortel Technology
Holdings Limited 33.60% Structured equity 11.3
Hong Kong Mining
Holdings Limited 10.95% Structured equity 8.8
Meize Energy Industrial Redeemable convertible
Holdings Ltd 7.9% preference shares 8.3
95.9
Changtai Jinhongbang Real Estate Development Co. Ltd
(!--CJRE!..) is the owner of a luxury resort and residential
development project in Xiamen, Eastern China. Sales of villas and
serviced apartments have continued, albeit at a slow pace, and the
company booked non-operating income of RMB8.8 million (approx.
US$1.32 million) in the first half of 2016 which was rental paid by
China United Travel for the lease of the hotel premises in sector
A-01. As a result, cash on hand rose to RMB9.5 million (approx.
US$1.42 million) in June 2016 from RMB0.9 million (approx.
US$135,000) in December 2015. As mentioned above, CJRE repaid in
full a loan of US$2.4 million and accrued interest to ADAM in June
2016. The investment team continues to seek buyers for the
Company!|s stake in the project.
Global Pharm Holdings Group Inc. (!--Global Pharm!..) is a
pharmaceutical company involved in the cultivation of herbs for
Traditional Chinese Medicine (!--TCM!..) and TCM processing and
distribution. As announced previously, Global Pharm did not meet
the original redemption payment plan agreed in December 2014.
Global Pharm has been investing in the planned launch of an online
Ginseng Exchange in Jilin Province. This resulted in its cash flow
being adversely impacted as it invested in building a stockpile of
ginseng in readiness for the launch of the exchange. The launch was
held back by the delayed receipt of the necessary operating licence
from the Jilin Municipal Financial Services Office. This has now
been issued, and Adamas is in negotiations with Global Pharm to
agree a revised repayment schedule. I anticipate the Company will
be in a position to announce further details in the near
future.
Fortel Technology Holdings Limited (!--Fortel!..) has developed
an integrated distribution platform for both content providers and
consumers to sell and purchase premium digital content. As
mentioned in the 2015 Annual Report Fortel is planning an IPO for
its Chinese subsidiary on the NEEQ exchange in Beijing. Fortel!|s
application has been accepted by the exchange subject to certain
conditions. In order to facilitate the listing process ADAM is
currently restructuring its stake in Fortel from an equity holding
to an interest bearing loan. I hope to be able to announce further
details of this in the near future.
Hong Kong Mining Holdings Limited (!--HKMH!..) is a resources
company whose primary asset is a large dolomite magnesium limestone
mine in the province of Shanxi, China. HKMH!|s application to list
on the Hong Kong Exchange was rejected by the exchange as
previously advised. ADAM!|s investment management team is seeking
buyers for its stake.
Meize Energy Industries Holdings Limited (!--Meize!..) is a
privately-owned company that designs and manufactures blades for
wind turbines. It has a strong order book and its financial
performance has been in line with expectations. ADAM is in
discussions with two new strategic investors from China!|s State
Owned Enterprise sector. As part of those discussions Adamas is
negotiating alternatives to enable ADAM to dispose of its stake
either in whole or in part.
Overall, while ADAM has been held back by delays in the disposal
of its legacy asset portfolio, the Company continued through the
first half to receive good returns from the small amounts of
capital it has been able to invest in income generating assets to
date. Furthermore, I am hopeful that during the second half of
2016, the Company will be in a position to announce further
progress on the reshaping of its asset portfolio, which in turn
will enable it to move forward more positively with its investing
policy. It gives grounds for confidence in the strong potential of
the Company!|s long-term investment strategy, underpinned by the
expertise of its advisory team in Hong Kong.
John Croft
Chairman
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended Year ended
30 June 30 June 31 December
2016 2015 2015
Unaudited Unaudited Audited
Note US$!|000 US$!|000 US$!|000
-------------------------- ------- ----------- ----------- ------------
Realised gain on
disposal of investments 5 - -
Fair value changes
on financial assets
at fair value through
profit or loss 280 (450) (2,265)
Administrative
expenses (1,075) (1,171) (2,306)
----------- ----------- ------------
Operating loss (790) (1,621) (4,571)
Net finance income 136 126 251
Dividend income 200 154 404
Loss before taxation (454) (1,341) (3,916)
Taxation 5 - - -
----------- ----------- ------------
Loss for the period (454) (1,341) (3,916)
Total comprehensive
loss for the period (454) (1,341) (3,916)
=========== =========== ============
Loss per share 7
0.70
Basic 0.24 cents cents 2.02 cents
=========== =========== ============
0.70
Diluted 0.24 cents cents 2.02 cents
=========== =========== ============
The results above relate to continuing operations.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 June 30 June 31 December
2016 2015 2015
Unaudited Unaudited Audited
Note US$!|000 US$!|000 US$!|000
--------------------------- ----- ----------- ------------ --------------
Assets
Unquoted financial
assets at fair
value through profit
or loss 8 110,091 113,839 110,593
Loans and other
receivables 3,749 3,587 3,496
Cash and cash equivalents 869 2,740 3,644
----------- ------------ --------------
Total assets 114,709 120,166 117,733
----------- ------------ --------------
Liabilities
Loan payables and
interest payables - 2,411 2,518
Other payables
and accruals 211 228 263
--------------
Total liabilities 211 2,639 2,781
----------- ------------ --------------
Net assets 114,498 117,527 114,952
=========== ============ ==============
Equity and reserves
Share capital 9 129,543 129,543 129,543
Share based payment
reserve 1 42 1
Accumulated losses (15,046) (12,058) (14,592)
----------- ------------ --------------
Total equity and
reserves attributable
to owners of the
parent 114,498 117,527 114,952
=========== ============ ==============
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share
based Foreign
Share payment translation Accumulated
capital reserve reserve losses Total
US$!|000 US$!|000 US$!|000 US$!|000 US$!|000
Group balance
at 1 January
2015 129,528 42 - (10,717) 118,853
Loss for the
period - - - (1,341) (1,341)
Other comprehensive
expense
Total comprehensive
expense for
the period - - - (1,341) (1,341)
---------- ---------- ------------- ------------ ----------
Issue of shares 15 - - - 15
Group balance
at 30 June 2015 129,543 42 - (12,058) 117,527
---------- ---------- ------------- ------------ ----------
Loss for the
period - - - (2,575) (2,575)
Other comprehensive
expense
Total comprehensive
expense for
the period - - - (2,575) (2,575)
---------- ---------- ------------- ------------ ----------
Share-based
payments - (41) - 41 -
Group balance
at 31 December
2015 129,543 1 - (14,592) 114,952
---------- ---------- ------------- ------------ ----------
Loss for the
period - - - (454) (454)
Other comprehensive
expense
Total comprehensive
expense for
the period - - - (454) (454)
---------- ---------- ------------- ------------ ----------
Group balance
at 30 June 2016 129,543 1 - (15,046) 114,498
========== ========== ============= ============ ==========
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended Year ended
30 June 30 June 31 December
2016 2015 2015
Unaudited Unaudited Audited
US$!|000 US$!|000 US$!|000
------------------------------- ----------- ----------- ------------
Cash flow from operating
activities
Loss before taxation (454) (1,341) (3,916)
Adjustments for:
Dividend Income (200) (154) (404)
Net finance income (136) (126) (251)
Fair value changes on
unquoted financial assets
at fair value through
profit or loss (280) 450 2,265
Realised gain on disposal
of investment (5) - -
Decrease in other receivables 65 61 431
(Decrease)/ increase
in other payables and
accruals (52) 44 79
----------- ----------- ------------
Net cash used in operating
activities (1,062) (1,066) (1,796)
----------- ----------- ------------
Cash flow from investing
activities
Dividend income received 200 120 324
Proceed received from
unquoted financial assets
at fair value through
profit or loss 2,508 - -
Purchase of unquoted
financial assets at
fair value through profit
and loss (2,560) - (440)
Loans granted - (653) (655)
Disposal of investment
in BRJ Credit Fund 755 - -
Proceeds from repayment
of loan granted - 3,940 5,813
----------- ----------- ------------
Net cash generated from
investing activities 903 3,407 5,042
----------- ----------- ------------
Cash flows from financing
activities
Net finance income received (216) (108) (109)
Loans repaid (2,400) - -
Net proceeds from issue
of shares - 15 15
----------- ----------- ------------
Net cash used in financing
activity (2,616) (93) (94)
----------- ----------- ------------
Net (decrease)/ increase
in cash & cash equivalents
during the period (2,775) 2,248 3,152
Cash & cash equivalents
at the beginning of
the period 3,644 492 492
Cash & cash equivalents
at the end of the period 869 2,740 3,644
=========== =========== ============
Notes to the financial information
1. CORPORATE INFORMATION
The Company is a limited company incorporated in the British
Virgin Islands (!--BVI!..) under the BVI Business Companies Act
2004 on 18 January 2008. The address of the registered office is
Commerce House, Wickhams Cay 1, P.O. Box 3140, Road Town, Tortola,
British Virgin Islands VG 1110 and its principal place of business
is 811-817, 8/F, Bank of America Tower, 12 Harcourt Road, Central,
Hong Kong.
The Company is quoted on the AIM Market of the London Stock
Exchange (code: ADAM) and the Quotation Board of the Open Market of
the Frankfurt Stock Exchange (code: 1CP1).
The principal activity of the Company is investment holding. The
Group is principally engaged in investing primarily in unlisted
assets in the areas of luxury resorts real estate, pharmaceutical,
mining, power generation, telecommunications, media and technology
(!--TMT!..), and financial services or listed assets driven by
corporate events such as mergers and acquisitions, pre-IPO, or
re-structuring of state-owned assets.
The condensed consolidated interim financial information was
approved for issue on 9 September 2016.
2. BASIS OF PREPARATION
The condensed consolidated interim financial information has
been prepared in accordance with International Accounting Standard
(!--IAS!..) 34 !--Interim Financial Reporting!...
3. PRINCIPAL ACCOUNTING POLICIES
The condensed consolidated interim financial information has
been prepared on the historical cost convention, as modified by
revaluation of certain financial assets and financial liabilities
at fair value through the income statement.
The accounting policies and methods of computation used in the
condensed consolidated financial information for the six months
ended 30 June 2016 are the same as those followed in the
preparation of the Group!|s annual financial statements for the
year ended 31 December 2015 and are those the Group expects to
apply into financial statements for the year ending 31 December
2016.
The seasonality or cyclicality of operations does not impact on
the interim financial information.
4. SEGMENT INFORMATION
The operating segment has been determined and reviewed by the
Board to be used to make strategic decisions. The Board considers
there to be a single business segment, being that of investing
activity, which is reportable in two cash generating units.
The reportable operating segment derives its revenue primarily
from debt investment in several companies and unquoted
investments.
The Board assesses the performance of the operating segments
based on a measure of adjusted Earnings Before Interest, Taxes,
Depreciation and Amortisation (!--EBITDA!..). This measurement
basis excludes the effects of non-recurring expenditure from the
operating segments such as restructuring costs. The measure also
excludes the effects of equity-settled share-based payments and
unrealised gains/losses on financial instruments.
The segment information provided to the Board for the reportable
segments for the periods are as follows:
BVI Hong Kong
Six months Year Six months Year
ended ended ended ended
30 30 31 30 30 31
June June December June June December
2016 2015 2015 2016 2015 2015
US$000 US$000 US$000 US$000 US$000 US$000
------- ------- ---------- ------- ------- ----------
Realised gain
on disposal
of investments 5 - - - - -
Fair value changes
on financial
assets at fair
value through
profit or loss 280 (450) (2,265) - - -
Net financial
income 136 126 467 - - -
Dividend income 200 154 404 - - -
5. TAXATION
No charge to taxation arises for the six months ended 30 June
2016 and 2015 as there were no taxable profits in either
period.
Tax reconciliation:
Six months
ended Year ended
30 June 30 June 31 December
2016 2015 2015
US!|000 US!|000 US!|000
Loss before taxation (454) (1,341) (3,916)
--------- --------- ------------
Effective tax charge
at 16.5% (2015:16.5%) (75) (221) (646)
Effect of:
Differences in overseas
taxation rates 75 221 646
--------- --------- ------------
Effective tax rate - - -
========= ========= ============
The effective tax charge is calculated based on the rate of
corporate tax in Hong Kong. As at 30 June 2016, the Group has no
unused tax losses (30 June 2015: Nil) available for offset against
future profits.
6. DIVID
The Board does not recommend the payment of an interim dividend
in respect of the six months ended 30 June 2016 (30 June 2015:
Nil).
7. LOSS PER SHARE
The calculation of the basic and diluted loss per share
attributable to owners of the Group is based on the following:
Six months ended Year ended
30 June 30 June 31 December
2016 2015 2015
US!|000 US!|000 US!|000
Numerator
Basic /
Diluted: Net loss (454) (1,341) (3,916)
--------- --------- ------------
Number of shares
!|000 !|000 !|000
Denominator
Weighted average
Basic: shares 191,967 191,959 191,963
Effect of diluted
securities:
Share options 150 225 150
Adjusted weighted
Diluted: average shares 192,117 192,184 192,113
--------- --------- ------------
For the six months ended 30 June 2016 and 2015, the share
options are anti-dilutive and therefore the weighted average shares
in issue are 191,967,084 and 191,959,181 respectively.
8. UNQUOTED FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
30 June 30 June 31 December
2016 2015 2015
US$!|000 US$!|000 US$!|000
At the beginning of
the period 110,593 117,576 117,576
Fair value changes
through profit and
loss 280 (450) (2,265)
Addition 2,560 653 1,097
Disposals (3,342) (3,940) (5,815)
At the end of the period 110,091 113,839 110,593
========== ========== ============
9. SHARE CAPITAL
Number
of Amount
Shares US$!|000
Authorised, called-up and fully
paid ordinary shares of no
par value each at 31 December
2015 and 30 June 2016 191,967,084 129,543
============ ==========
Under the BVI corporate laws and regulations, there is no
concept of !--share premium!.., and all proceeds from the sale of
no par value equity shares is deemed to be share capital of the
Company.
10. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
The following table provides an analysis of financial
instruments that are measured subsequent to initial recognition at
fair value, grouped into Level 1, 2 or 3 based on the degree to
which the fair value is observable:
l Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities;
l Level 2 fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the assets or liability, either directly or
indirectly; and
l Level 3 fair value measurements are those derived from inputs
that are not based on observable market data.
As at As at As at
30 June 30 June 31 December
2016 2015 2015
US!|000 US!|000 US!|000
Level 3
Unquoted financial assets
at fair value through
profit or loss (note
8) 110,091 113,839 110,593
--------- --------- -------------
110,091 113,839 110,593
========= ========= =============
There is no transfer between levels in the current period.
Carrying values of all financial assets and liabilities are
approximate to fair values. The value of level 3 investments has
been determined using the yield capitalisation (discounted cash
flow) method.
11. RELATED PARTY TRANSACTIONS
During the period under review, the Group entered into the
following transactions with related parties and connected
parties:
30 June 30 June 31 December
2016 2015 2015
Note US$!|000 US$!|000 US$!|000
Amount due to Directors (i)
* Conor MacNamara 3 4 4
* Ernest Wong Yiu Kit 2 2 2
* John Croft 7 9 7
Amount due from
Adamas Global Alternative
Investment Management
Inc. 49 4 27
Period-end balance arising
from sales/ purchases
of services
Management fee to Investment
Manager (ii) 609 787 1,449
(i) The amounts due thereto are unsecured, interest free and
have no fixed term of repayment. There are no other contracts of
significance in which any director has or had a material interest
during the current period.
(ii) Adamas Global Alternative Investment Management Inc. is the
Investment Manager of the Group. The management fee which is
calculated and paid bi-annually in advance calculated at an annual
rate of 1% of the higher of the net asset value of the Company!|s
portfolio of assets or market capitalisation.
12. COPIES OF THE INTERIM REPORT
The interim report is available for download from
www.adamasfinance.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR KMGMLNZMGVZG
(END) Dow Jones Newswires
September 12, 2016 03:54 ET (07:54 GMT)
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