NEWS & MEDIA

Adamas Finance Asia Ltd – Final Results for the Year Ended 31 December 2017

21 June 2018

Adamas Finance Asia Limited , a London quoted pan-Asian diversified investment vehicle, is pleased to announce the publication of its Final Results for the year ended 31 December 2017.

During 2017, the Company underwent a change of its Investment Manager, investment strategy and a revision of its portfolio holdings including new investments as well as disposals.  The net result has been to report a net profit of US$11.7 million and an increase in NAV of US$15.8 million to US$93.6 million.

 

Highlights of the year

Performance update

  • NAV increase of US$15.8mto US$93.6m (2016: US$77.8m)
  • Net profit of US$11.7m(2016: loss of US$37.2m)
  • The gain reflects a net increase in fair value movements in the portfolio of US$19.6m
  • This included a realised loss on investment disposals of US$14.3mand unrealised gains on fair value changes of US$33.9m
  • Year-end cash of US$13.2m(2016: US$1.3m)
  • NAV per Share of US$1.22(2016: US$0.40)

 

Significant events post year end affecting Portfolio valuations

  • In April 2018 the Company announced that its interest in a substantial part of the legacy portfolio is being exchanged for a Convertible Bond in a Hong Kong based food and beverage business
  • A notable new investment was made in March 2018 in DocDoc, a leading online Asian patient empowerment company
  • The Company announced the renegotiation of its agreement to dispose of its interest in Global Pharm resulting in a loss on disposal of US$14.3 million

 

 

Commenting on ADAM’s final results, John Croft, Chairman, said:

“I am very pleased to be able to report that significant progress has been made in reshaping our portfolio in line with our strategy, most significantly with the agreed disposal of a number of our largest assets and thereby bringing cash into the vehicle that will be available for reinvestment in the exciting pipeline of investments on which our Investment Manager is working.

“Overall, I am confident that 2018 will be a year of further progress both with disposals and new investments as we move towards a predominantly income generating portfolio which will allow us to make regular dividend distributions to our shareholders.”

 

Enquiries:
Adamas Finance Asia Limited
John Croft +44 (0) 1825 830587
WH Ireland Limited – Nominated Adviser
Tim Feather +44 (0) 113 394 6600
James Sinclair-Ford
Shard Capital Partners LLP – Broker
Philip Pooley +44 (0) 20 7186 9967
Buchanan – Financial PR
Charles Ryland +44 (0) 20 7466 5000
Henry Wilson

 

The information contained within this announcement is deemed by the Company to constitute inside information under the Market Abuse Regulation (EU) No. 596/2014.

About Adamas Finance Asia

ADAM is a London quoted investment company focusing on delivering long-term income and capital growth to shareholders through a diverse portfolio of pan-Asian investments.  It aims to provide uncorrelated returns through a combination of capital growth and dividend income from a broad spectrum of national geographies and asset classes.

The Company’s Investment Manager, Harmony Capital, which has a dedicated team with real Asian expertise, is focused on the strategy of creating income and capital growth. Harmony Capital is sourcing predominantly private opportunities and has created a strong pipeline of income generating assets which include potential investments in fintech, healthcare, property, mining, pharmaceuticals and telecoms across Asia. 

 

Chairman’s Statement

 

Since the beginning of 2017, I am very pleased to report that significant progress has been made in reshaping our portfolio in line with our new strategy, most significantly with agreeing the disposal of a number of our largest assets and thereby bringing cash into the Company that will be available for reinvestment in the exciting pipeline of investments which our Investment Manager, Harmony Capital Investors Limited (“Harmony Capital”), has already identified.

 

Whilst some of the agreed disposals have resulted in write downs in value directly impacting our income statement, they will nevertheless generate much needed cash for reinvestment, which your Board believes is a better option than retaining interests in assets which may take many years to deliver acceptable returns.

 

In contrast, the increase in our holding in Hong Kong Mining (“HKMH”) announced in December 2017 resulted in a significant increase in the audited carrying value of that investment. The increase in shareholding in HKMH is a result of the completion of the enforcement of a share pledge following the suspension of HKMH’s IPO process as announced in January 2016.

 

A summary of each of the major investments in the asset portfolio is provided in the report which follows.

 

The net effect of the changes described above is that the Company is reporting a net profit for 2017 amounting to US$11.7 million, principally comprising a realised loss on investment disposals of US$14.3 million and unrealised gains on fair value changes of US$33.9 million, resulting in an increase in the NAV of US$15.8 million to US$93.6 million.

 

Since the end of 2017 we have also been able to make further announcements regarding the disposal of other legacy assets which were identified for disposal, as well as our first new investment since the appointment of Harmony Capital as Investment Manager.

 

The most significant disposal was that of the Company’s interests in a significant proportion of its legacy portfolio announced in April 2018, comprising China iEducation Holdings Limited, CPE Finance Limited, CPE Growth Capital Limited, CPE TMT Holdings Limited and the Fortel Loan. In consideration for the disposal, the Company will be issued with an interest bearing US$26.5 million Convertible Bond by the Issuer, which, upon completion of a restructuring, will be the controlling shareholder of a long-established and well-known Hong Kong-based food and beverage business, primarily operating in high-end Chinese restaurants.  A further announcement will be made in due course.

 

The previously announced disposal of our interest in Global Pharm Holdings Group Inc. did not complete as originally planned.  Revised terms for the disposal were announced on 15 June 2018.  The Company will still receive a cash injection of US$15.6 million, through US$3 million in consideration and a subscription for US$12.6 million in new equity.  As a result, the results reflect a balance sheet write down of US$14.3 million in respect of the Global Pharm interest.

 

Now that many of the legacy assets have been either restructured, sold or are in the process of being sold, Harmony Capital is able to focus its energies more fully on new investments. They are working on a strong deal pipeline and I anticipate we will be announcing more new investments in due course.

 

Overall, 2017 saw major progress being achieved particularly with reshaping the portfolio and I am confident that 2018 will be a year of further progress both with disposals and new investments as we move towards a predominantly income generating portfolio. This will enable us ultimately to make regular dividend distributions to our shareholders.

 

The principal assets held by the Company at the year-end were:

 

Portfolio at 31 December 2017

 

Principal Assets

 

Effective Interest

 

Instrument type

 

Valuation as at 31 December 2017

US$ million

 

CPE Legacy Portfolio (Fortel Loan/China iEducation etc.) Interest bearing loan/Equity 26.5
Hong Kong Mining Holdings Limited 79.26% Structured equity 39.4
Meize Energy Industrial Holdings Ltd 7.9% Redeemable convertible preference shares 8.2
Global Pharm Holdings Group Inc. Receivable 3.0
GCCF/Other 3.3
Cash 13.2
 

Total net asset value

 

93.6

 

Global Pharm Holdings Group Inc. (“Global Pharm”) In September 2017 the Company announced the planned disposal of the Group’s interest in Global Pharm for a cash consideration of US$15.6 million to Fortune Insight Limited (“Fortune”), a special purpose vehicle (SPV) set up specifically to acquire the interest in Global Pharm and other unrelated assets. However, settlement of the transaction was not completed on time and the terms of the disposal were renegotiated. Under the new terms announced on 15 June 2018, the Company is entitled to receive US$3.0 million in cash in settlement of the disposal, and in addition Fortune will subscribe to new shares to the value of US$12.6 million. The Company has therefore incurred a balance sheet write-down of approximately US$14.3 million in the results for the year.

 

CPE Legacy Portfolio (Fortel Loan/China iEducation etc.) Post year end, the Company announced the disposal of its interests in a significant portion of its legacy portfolio, comprising China iEducation Holdings Limited, CPE Finance Limited, CPE Growth Capital Limited, CPE TMT Holdings Limited and the Fortel Loan. In consideration for these disposals, the Company will be issued with an interest bearing Convertible Bond by the Issuer, which, upon completion of a restructuring, will be the controlling shareholder of a long-established and well-known Hong Kong-based food and beverage business primarily operating in high-end Chinese restaurants.

 

The Issuer is a newly incorporated special purpose vehicle, set up as part of a wider concurrent restructuring exercise being undertaken by Chinese Food and Beverage Group Limited (“CFBG“), which is a Hong Kong listed restaurant, food and beverage business. Prior to completion of the restructuring, CFBG’s subsidiaries owned a substantial interest in the assets and business comprising the Fook Lam Moon restaurant business, being the Hong Kong restaurants in Wanchai and Kowloon (including the freehold interest in those properties), related intellectual property and management companies and certain other real estate holdings in Hong Kong.

 

Hong Kong Mining Holdings Limited (“HKMH”) HKMH is a natural resources company whose primary asset is a large dolomite magnesium limestone mine in the province of Shanxi, China. HKMH is in the process of restarting operations.

 

The increase in shareholding in HKMH is the result of the completion of the enforcement of a share pledge in favour of Dynamite Win Limited by Superior Profit International Investment Limited (“Superior Profit”), the previous controlling shareholder of HKMH, following the suspension of HKMH’s IPO process as announced in January 2016.

 

Mine operations are scheduled to restart during the second half of 2018 and it is anticipated that HKMH will seek an admission to the Hong Kong Stock Exchange at an appropriate time once full operations and sales have been fully established.

 

Meize Energy Industries Holdings Limited (“Meize”) 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. Negotiations regarding the partial sale and restructuring of this investment are continuing and we hope to be able to update the market on this in due course.

 

Administrative expenses increased from US$1.9 million to US$8.0 million principally as a result of an incentive fee of US$3.5 million payable to the Investment Manager and the award of warrants under the ownership-based compensation scheme for senior management and the equity compensation scheme for the Investment Manager to the directors and the Investment Manager with an aggregate fair value of US$2.3 million.

 

Quarterly NAV Updates

 

Due to the significant increase in ADAM’s percentage holding in HKMH during the year and its potential impact on the NAV, in February 2018 the Board determined not to publish an estimated NAV per share prior to completion of the audit for the year ended 31 December 2017.  In future, the Board plans to resume publishing an estimated NAV per share following each quarter end.

 

John Croft

Chairman of the Board

21 June 2018

 

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2017

 

2017 2016
US$’000 US$’000
Realised (loss)/gain on disposal of investments (14,329) 5
Fair value changes on financial assets at fair value through profit or loss 33,885  

(34,094)

Loan written off (2,238)
Administrative expenses (7,958) (1,948)
Operating gain/(loss) 11,598 (38,275)
Finance income  82  80
Finance expense  –  (98)
Dividend income  –  911
Other income

 

 14

 

 220

 

Profit/(Loss) before taxation

 

11,694

 

(37,162)

 

Taxation
Profit/(Loss) for the year 11,694 (37,162)
 

Other comprehensive income:

 

Items that will or may be reclassified to profit or loss:

 

Exchange differences arising on translation of foreign operations
 

Total comprehensive income/(expense) for the year

 

11,694 (37,162)
 

Profit/(Loss) per share

 

Basic 15.23 cents (48.40) cents
Diluted 14.96 cents (48.40) cents

 

 

The results reflected above relate to continuing operations.

 

Consolidated Statement of Changes in Equity

For the year ended 31 December 2017

 

Share capital

 

Share based payment reserve

 

Accumulated losses

 

Total

 

US$’000 US$’000 US$’000 US$’000
Group balance at 1 January 2016 129,543 1 (14,592) 114,952
Loss for the year (37,162) (37,162)
Other comprehensive income
Exchange differences arising on translation of foreign operations  

 

 

 

 

 

 

 

Total comprehensive expense for the year (37,162) (37,162)
Issue of shares
Share-based payments (1) (1)
Group balance at 31 December 2016 and 1 January 2017 129,543 (51,754) 77,789
Profit for the year  –  – 11,694 11,694
Other comprehensive income
Exchange differences arising on translation of foreign operations
Total comprehensive income for the year  –  – 11,694 11,694
Issue of shares
Share-based payments 4,070 4,070
Group balance at 31 December 2017  129,543  4,070 (40,060) 93,553

 

 

Consolidated Statement of Financial Position

As at 31 December 2017

 

2017 2016
US$’000 US$’000
Assets
Unquoted financial assets at fair value through profit or loss 75,639 75,044
Loans and other receivables  6,579  1,514
Cash and cash equivalents  13,217  1,308
Total assets 95,435 77,866
Liabilities
Loan payables and interest payables
Other payables and accruals 1,882 77
Total liabilities 1,882 77
Net assets 93,553 77,789
Equity and reserves
Share capital 129,543 129,543
Share based payment reserve 4,070            –
Accumulated losses (40,060) (51,754)
Total equity and reserves attributable to owners of the parent 93,553 77,789

 

The financial statements were approved by the Board of Directors and authorised for issue on

21 June 2018 and signed on its behalf by:

 

John Croft

Director

 

 

Consolidated Cash Flow Statement 

For the year ended 31 December 2017

 

2017

 

2016

 

US$’000 US$’000
Cash flows from operating activities
Gain/(Loss) before taxation  

11,694

 

(37,162)

Adjustments for:

 

Dividend income

 

(911)
Finance income

 

(82) (80)
 

Finance expense

 

98
Exchange gain

 

(453)
Loan written off

 

2,238
Fair value changes on unquoted financial assets at fair value through profit or loss

 

(33,885) 34,094
Realised loss/(gain) on disposal of investments

 

14,329 (5)
Share-based expenses

 

  4,070 (1)
Decrease/(Increase) in other receivables

 

(139) (12)
Increase/(Decrease) in other payables and accruals

 

1,805 (186)
Net cash used in operating activities (2,661) (1,927)
Cash flows from investing activities

 

Dividend income received 1,611
Sale proceeds of unquoted financial assets at fair value through profit or loss 15,100 756
Purchase of unquoted financial assets at fair value through profit or loss (2,560)
Loans granted (530)
Proceeds from repayment of loan granted 2,400
Net cash generated in investing activities

 

14,570 2,207
Cash flows from financing activities
Finance expense paid (216)
Loans repayment (2,400)
Net proceeds from issue of shares
Net cash used from financing activities

 

(2,616)
 

Net increase / (decrease) in cash and cash equivalents

 

11,909 (2,336)
 

Cash and cash equivalents and net debt at the beginning of the year

 

1,308 3,644
 

Cash and cash equivalents and net debt at the end of the year

 

13,217 1,308

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

 

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