Final Results

RNS Number:5392E
London Asia Capital PLC
14 June 2006




Strictly embargoed until 07.00, 14 June 2006


                            LONDON ASIA CAPITAL PLC
                                        
                                        
            PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005


London Asia Capital plc ("London Asia") the Asia focused merchant banking group,
today announces preliminary results for the year ended 31 December 2005.


Jack Wigglesworth Chairman of London Asia commented:
"I am pleased to announce a record set of results for the year ended 31 December
2005, with a 167% increase in profits and a doubling of the size of our balance
sheet. The year saw a transformation in the activities of your company, as we
completed our development into a merchant banking group, providing a range of
financial services to Asian businesses."


Highlights include:

   * Turnover up 116% to #1.7 million (2004: #0.8 million)
   * Profit before tax up 167% to #0.9 million (2004: #0.3 million)
   * Net assets up 112% to #26.8 million (2004: #12.6 million)
   * London Asia Chinese Private Equity Fund raised #50 million and admitted
     to AiM
   * #1.7 million raised from sale of investments in the period, with a
     further #1.1 million raised post year end
   * Six companies listed on Ofex by London Asia during the period and since
     period end
   * Energy and Environment division set up - proposed launch of US$500
     million private equity fund


Mr Wigglesworth added: "London Asia's brand in China is very strong, and our
tie-up with partners such as the Shanghai United Assets and Equity Exchange, as
well as our extensive network, provide us with significantly more opportunities
than we can currently take advantage of. We have partially addressed this
through the launch of the London Asia Private Equity Fund, and will continue to
increase the amount of funds under management to more fully utilise the deal
flow we have access to."



For further information please visit www.londonasia.com or contact:

Simon Littlewood, Chief Executive         John West / Matt Ridsdale
London Asia Capital plc                   Tavistock Communications
                                          Tel: + 44 (0) 207 920 3150




                                        
                            LONDON ASIA CAPITAL PLC
                                        
            PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2004
                                        
                              CHAIRMAN'S STATEMENT


I am pleased to announce a record set of results for the year ended 31 December
2005, with a 167% increase in profits and a doubling of the size of our balance
sheet. The year saw a transformation in the activities of your company, as we
completed our development into a merchant banking group, providing a range of
financial services to Asian businesses.


Highlights include:


 * Turnover up 116% to #1.7 million (2004: #0.8 million)
 * Profit before tax up 167% to #0.9 million (2004: #0.3 million)
 * Net assets up 112% to #26.8 million (2004: #12.6 million)
 * London Asia Chinese Private Equity Fund raised #50 million and admitted
   to AiM
 * #1.7 million raised from sale of investments in the period, with a further 
   #1.1 million raised post year end
 * Six companies listed on Ofex by London Asia during the period and since
   period end
 * Energy and Environment division set up



Financial Overview

In line with our strategy of building multiple revenue streams, the period saw
us receive income from dividends, corporate finance fees, as well as profits on
disposal of investments.


The successful listing of the London Asia Chinese Private Equity Fund, where we
are appointed adviser, creates a new income stream, starting March this year.
The annual management fee of 2% brings in an initial #1 million per annum, with
a success fee on top based on the performance of the fund.


Revenue for the period rose 116% to #1.7 million (2004: #0.8 million), primarily
as a result of a large increase in profit on sale of investments. The overall
profit after tax and minority interests was #0.8 million (2004: #0.3 million),
ahead of market expectations. Basic earnings per share was 0.46 pence (2004:
0.36 pence) and fully diluted earnings per share was 0.38 pence (2004: 0.32
pence).


Our expansion has led to a considerable increase in overheads, which is ongoing
as we continue to expand the business, both geographically, with new offices
opening all the time and new staff being recruited, and in terms of the products
and services we provide, which require specialist, more expensive staff,
particularly in relation to financial reporting and compliance, which saw the
largest increase in costs given the high cost of staff and associated expenses 
in the UK. 2005 also saw us make a significant investment in IT and reporting
systems, required as a result of the expansion of the Group's activities and
personnel. These increased overheads enable us to build the Group and do more
transactions, such as the fund management division and corporate finance
activities, generating increasing profits and recurring revenues, reducing the
risk of the business as we have more stable, and diversified, income flows,
which is important given the instability in capital markets.


Net assets increased to #26.8 million (2004: #12.6 million), giving net assets
per share of 12.1p (2004: 9.8p). We continue to show all investments at
historical cost, rather than current value, and do not show the profits or
uplifts in the value of our investments through the profit and loss account
until they are disposed of. As at the year end and at 1 June 2006, the market
value of our listed investments was #1.8 million and #5.0 million respectively
above the value shown in the accounts.


We successfully raised #11 million (net of expenses) in June 2005, via a placing
of 76 million shares at a placing price of 15 pence per share. The bulk of the
funds raised in the June placing were allocated to increase our stake in China
Finance & Trust ("China Finance"), making it our largest investment to date.


Cash at bank as at 31 December 2005 was #2.6 million. Our increased
profitability, strengthened balance sheet, continued realisation of cash from
our investment portfolio, and new revenue from our fund management operations
put us in a strong position to continue to grow the business from our own
resources.



Operating Review

Following the acquisition of London Asia Corporate Finance Ltd in October we
have restructured the group into four distinct, but complementary, activities:

 * Corporate Finance;
 * Private Equity;  
 * Fund Management;
 * Structured products and banking.


Our corporate finance business completed four transactions. It provides the
Group with both one-off and recurring fee income, strengthening our brand and
attracting investment opportunities, as well as assisting in the exit of our own
and the funds' investments. London Asia is gaining growing prominence as adviser
of choice for Chinese businesses looking to list on UK markets.


I outlined in my interim statement that the intention was to realise the value
from existing investments to fund new investments, rather than raise funds from
the placing of shares as we had done in the past. This has proven to be the case
and we were able to raise significant funds from existing portfolio companies
during the period and since.


Fund management represents an increasingly important activity for London Asia.
We have already successfully raised a #50 million fund for investment in China,
and it is our intention to raise additional funds with a focus on other Asian
regions. These include proposed fund launches in Vietnam, in partnership with
Vietcombank Fund Management, and Mongolia.


We increasingly see the importance of the Energy and Environment sector for the
whole region. The opportunities in this sector span across all the Group's
operations. China's surging economy and industrialisation have created pressures
on the environment, which the Government is looking to address through
encouraging investment in the sector. This creates opportunities for the Group
and in December 2005 we formed an Energy and Environment division, based in
Germany.


Integral to our strategy are the partnerships, alliances and joint ventures that
we have signed with key government bodies, large institutions and major players
in diverse geographical regions. During the year London Asia signed a number of
such agreements, which significantly enlarge London Asia's potential customer
base, facilitate more rapid growth and further promote London Asia's brand and
business within China and the region.


Board and Management

During the period David Brewer joined us as a non-executive director. David is
the current Lord Mayor of London and one of the leading experts in the UK on the
financial services sector in China. In July 2005 Barry Gold resigned as a
non-executive director. Cesidio Di Ciacca will also be stepping down from the
Board following this year's AGM. On behalf of shareholders I would like to
welcome David, and thank both Barry and Cesidio for their contributions to the
company. I would also like to welcome Stephen Lucas, who joined us from KPMG's
Transaction Services practice in November as Group Financial Controller, based
in London.



Outlook

We have considerably extended our geographical coverage, both within China,
where we now have 32 representative offices, and in Asia as a whole, with new
offices and partnerships in Mongolia and Vietnam, providing what we believe is
the most extensive geographical coverage of any Western financial services group
operating in our sector in Greater China. We now have over eighty people working
with the Group and can truly be seen as the leading independent Greater China
focused merchant banking group.


China is a high risk investment environment, where great caution needs to be
exercised to ensure the accuracy of the information that has been provided, that
the investment transaction and subsequent flotation, as well as the businesses
activities, are legal, and most importantly that the senior management are aware
of their responsibilities to outside shareholders. This is particularly true in
relation to corporate governance and treatment of minority shareholders, where
standards in China are improving but have not yet reached global standards, and
the expectations of Western investors are often markedly different from the
Chinese entrepreneurs and management.


Whilst many businesses in China appear at first glance attractive, closer
examination often reveals significant issues which make the vast majority of
businesses in China unsuitable for listing on international stock markets. This
is something recognised by those who are on the ground in Asia, or those who
have followed the history of Chinese businesses raising funds or listing
overseas in the last few years. Several UK advisers seeking to bring Chinese
businesses to the UK markets do not have any significant presence in China, or
any real understanding of the market or business culture, so are unable to
properly assess the risks, or properly advise the business post fund raising and
listing. This could have a significant negative impact on sentiment towards
investing in Chinese businesses, should the risks materialise, as they have done
on other stock markets which have considerably more experience of dealing with
Chinese businesses. London Asia will seek to continue to highlight the need for
those interested in investing in China to only work with those who have a
significant presence in China and are therefore able not only to perform a
proper assessment of the risks and opportunities, but more importantly to
continue to monitor the company once the investment has been made or the company
listed, a key factor in many of the failings of Chinese companies that have
listed to date.


London Asia's brand in China is very strong, and our tie-up with partners such
as the Shanghai United Assets and Equity Exchange, as well as our extensive
network, provide us with significantly more opportunities than we can currently
take advantage of. We have partially addressed this through the launch of the
London Asia Private Equity Fund, and will continue to increase the amount of
funds under management to more fully utilise the deal flow we have access to.


Jack Wigglesworth
Chairman
14 June 2006



                          CHIEF EXECUTIVE'S STATEMENT


We achieved a great deal in 2005 across all areas of the business, and saw a
huge increase in profits and assets. As well as significantly expanding our
office network, increasing the number of employees in the Group, and its areas
of activity, we have also signed strategic alliances and formed partnerships
which now give us access to unrivalled deal flow in the region.


Fund Management

Given our extensive presence in China, we have always had significantly more
deal flow than we have been able to finance from our own resources. We took the
strategic decision last year to move away from using our own balance sheet to
finance transactions, and instead to manage third party funds which are then
used to complete investments. This has significant benefits to London Asia
shareholders compared to direct investment:

 * It reduces the need for London Asia to continually raise new funds to
   make investments, which we have historically done by either selling
   investments earlier than we would have liked, or by issuing new shares,
   which has hampered our share price growth;
 * It gives us access to significantly more cash than we would be able to
   raise off our own balance sheet, enabling us to do a lot more deals, and
   thereby generate significantly more corporate finance income; and
 * It generates ongoing fee income and provides exposure to the capital
   gains through our profit share incentive fee.


Since March 2006 we have been adviser to the #50 million London Asia Chinese
Private Equity Fund. We have announced two further proposed fund launches, for
Vietnam and Mongolia, which will be similar in structure and objective to the
existing China fund, and are being managed in partnership with strong local
partners with significant on the ground presence.


One key area of focus for our business is in the energy and environmental
sector. China derives 70% of its energy from coal and is the largest consumer of
coal and the second largest consumer of oil on the planet. In January of this
year a renewables law became effective, giving financial and other incentives
for the development of renewable energy, with China committed to spend an
estimated US$180bn on renewables over the next 15 years, increasing their
contribution to energy supply from 7% to 15%. China is now regarded as the
biggest potential host country for CDM projects under the Kyoto protocol, and
for many sectors, such as wind power, it is projected to become the largest
market worldwide in the next 15 years


Given the size of the opportunity, the specialist knowledge required to
understand the risks and opportunities in the sector, and the international,
cross-border nature of the industry, with much of the technology in Europe and
North America, we have formed a division specifically to target this sector,
based in Germany. We have spent considerable resources in the last 12 months
building up deal flow and developing industry contacts. This division is
launching a US$500 million private equity fund for the Energy and Environment
sector, which will be focused on opportunities in the sector globally, using the
specialist teams and contacts we have built up in the UK, Germany, China, North
America, Vietnam and Mongolia.


Corporate Finance Activities

London Asia Corporate Finance was appointed as corporate adviser for the fund
raisings and Ofex listings of Betex Group, China Education Group, Peach Blossom
Media and China Eastsea. All four companies were successfully admitted to Ofex
during the period, with China Education Group raising #0.8m and Betex Group,
in which London Asia was an investor, subsequently admitted to AiM
with a market capitalisation of over #80 million. Since the year end we have
raised funds for and listed two more Chinese companies on Ofex, China Biotech
Healthcare and Dalian Business Institute.


I am delighted with the progress we have made in this area and our pipeline of
deal flow remains strong, with a number of our clients and investee businesses
seeking listings on Ofex and AiM. We will be continuing to expand this area of
our business both within China and the UK to take advantage of the strong
position we have established in the market, particularly following our agreement
with Shanghai United Assets & Equity Exchange, which gives us access to a
significant new stream of deal flow from the state owned sector, in addition to
our existing private sector deals.


Investment Portfolio

During the period we invested #15 million in eight transactions, three of which
we have subsequently listed. We have seen full and partial exits from several of
our existing investments at a profit, and a significant increase in market value
of those holdings not yet disposed of, which bodes well for profitability going
forward.


China Finance & Trust ("China Finance") is our largest investment to date, at
approximately #12 million. They have made a number of investments in the energy
and environment sector in businesses in China seeking pre IPO finance, and are
currently examining a number of potential investments in China's financial
services sector, which given the highly regulated nature of the industry take
time to receive the necessary approvals. With the full opening up of China's
financial services sector, expected in January 2007, and the re-opening of
China's Stock Markets in May 2006, the second half of this year will be an
extremely busy period for the business, and we have transferred some of London
Asia's existing staff over to it to assist in the management of its growth, as
well as the active involvement of myself and Victor Ng, who sit on the Board of
China Finance.


China Financial Services Ltd continues to perform well, with profits for the
year ended 31 December 2005 of #1.8 million, up 80%. We have to date received
over #0.9 million in dividends.


In March 2005 we invested #1.7 million in Singapore listed Asia Power Corp. Ltd,
with a further #0.3 million invested later. We have already received over #0.2
million in dividends, and the shares are currently trading at over double the
price at which we invested. In line with our accounting policy, this profit has
not be shown in these accounts and the investment has not been revalued upwards,
as we only book profits on sale of the investments.


Betex was a significant success, and a good example of how our business model
works. We invested #0.6 million in late 2004 and early 2005, listed the company
on Ofex in May 2005, for which we received corporate finance fees, with the
company subsequently stepping up to AiM, and managed to exit our entire
investment by the year end at a near 100% return.


We will seek to continue to realise the value in our existing portfolio as
opportunities arise, and where we have surplus resources, these will be invested
in new opportunities alongside the funds that we manage, or in the exercise of
options that we receive as part of our corporate finance activities.


Strategic Partnerships and Alliances

We continue our policy of signing strategic alliances and partnering with
organisations that give us both access to capital and deal flow and enable us
to expand our business network and geographic reach across China, and a number
of new partnerships were formed during the period and since.


We have previously focused on private companies within China, but our
partnership with the Shanghai United Assets and Equity Exchange, China's largest
private equity exchange, takes us into working with state owned companies and
assets. This represents a vast, largely untapped sector as China accelerates its
privatisation program and we will be working together to assist Chinese
businesses to restructure, raise capital and list both within and outside China.


Outlook and Summary

In line with the changes to the AiM Rules and accounting standards, we are
required to change the way we account for our investments to comply with
International Financial Reporting Standards. Although this is only effective for
our 2007 year end, the effective date of transaction is 2006 as our comparatives
will also need to be reported under IFRS as well. This will potentially have a
significant impact on our results going forward, as it will require us to put a
"fair value" on our investments, and book any increase in value as a profit
through our profit and loss account, and show an increase in the value in our
balance sheet, rather than report them at historical cost, less any reduction in
value, as has been the case to date. The change is designed to give readers of
the accounts a better understanding of the real value of the business, its
investments and assets, rather than a record of their historical cost. Many
investors have had a problem to date valuing London Asia, as the value of our
portfolio has been shown in the accounts at cost, and we have only been able to
show profits by selling an investment, which is not necessarily in our long term
interest if the investment is continuing to grow in value. It is to be hoped
that this change will enable shareholders to get a clearer idea of the real
value of our business.


Historically we have used stock options as a way to incentivise staff, which
have been a significant element of overall remuneration for many of our staff.
The new accounting rules coming into force require that a charge is made to the
profit and loss account reflecting the theoretical cost of those options to the
company, such that the higher our share price goes, the more the theoretical
cost the accounting standards will force us to charge to the profit and loss
account. We are therefore moving away from using stock options, and are
developing additional ways to incentivise staff and tie their overall package to
the performance of the company. This is likely to lead to an increase in
reported overheads going forward, both from the theoretical charge for existing
options until exercised, and for the cost of whatever replacement remuneration
we set up for staff.


I would like to take this opportunity to thank all of our staff, consultants and
the employees of the businesses we have invested in, who have achieved an
incredible amount in a short period of time.


Simon Littlewood
Chief Executive
14 June 2006





Consolidated profit and loss account for the year ended 31 December 2005

                                                        2005            2004
                                                       #'000           #'000
                                                                    Restated

Revenue                                                1,661             770

Administrative expenses
    Operating                                           (781)            (498)
    Other                                               (256)               -
                                                        ---------------------
Operating profit                                         624              272

Interest receivable                                      257              102

Interest payable                                         (13)             (49)
                                                        ---------------------

Profit on ordinary activities before taxation            868              325

Taxation                                                 (26)               -
                                                        ---------------------

Profit on ordinary activities after taxation             842              325

Minority interest                                        (22)             (27)
                                                        ---------------------

Retained profit for the year                             820              298
                                                        =====================


Earnings per share                                     Pence            Pence

Basic                                                   0.46             0.36

Diluted                                                 0.38             0.32
                                                        =====================

All amounts are derived from continuing operations.

There were no recognised gains or losses not dealt with through the profit and
loss account.



Balance sheet at 31 December 2005

                                    Group       Group       Company     Company
                                     2005        2004          2005        2004
                                    #'000       #'000         #'000       #'000
                                             Restated                  Restated

Fixed assets
    Tangible assets                    15           5             4           5
    Investments                    16,274       9,212        12,172       2,354
    Goodwill                          315           -             -           -
                                   --------------------------------------------
                                   16,604       9,217        12,176       2,359
                                   --------------------------------------------

Current assets
    Debtors                         1,282         425        11,747       7,923
    Current asset investments       6,894         466           839         216
    Cash at bank and in hand        2,600       2,884         1,223       2,287
                                   --------------------------------------------
                                   10,776       3,775        13,809      10,426

Creditors: amounts falling due 
within one year                      (450)        (88)         (196)       (108)
                                   --------------------------------------------

Net current assets                 10,326       3,687        13,613      10,318
                                   --------------------------------------------

Total assets less current 
liabilities                        26,930      12,904        25,789      12,677

Creditors: amounts falling due 
after more than one year             (169)       (300)         (169)       (300)
                                   --------------------------------------------

Total assets less liabilities      26,761      12,604        25,620      12,377
                                   ============================================


Capital and reserves
    Called up share capital        11,066       6,435        11,066       6,435
    Share premium account          20,903      12,211        20,903      12,211
    Profit and loss account        (5,249)     (6,069)       (6,349)     (6,269)
    Minority interest                  49          27             -           -
    Other reserves                     (8)          -             -           -
                                   --------------------------------------------
Equity shareholders' funds         26,761      12,604        25,620      12,377
                                   ============================================



Cash flow statement for the year ended 31 December 2005


                                                             2005              2004
                                                        #'000    #'000    #'000    #'000
    
Net cash flow from operating activities                           (708)             (739)

Returns on investments and servicing 
of finance
    Interest received                                     260               102
    Interest paid                                         (13)              (39)
                                                        -------          -------


Net cash flow from returns on investments
and servicing of finance                                           247                63

Taxation paid                                                        -                 -

Financial investment and capital expenditure
    Payments to acquire tangible fixed assets             (13)               (3)
    Payments to acquire fixed asset investments       (10,984)           (5,102)
    Proceeds on disposal of fixed asset investments         -                21
                                                        -------          -------

Net cash flow from financial investment and
capital expenditure                                            (10,997)           (5,084)

Acquisitions and disposals
    Purchase of subsidiaries net of cash acquired                  (50)                -
                                                                -------          -------

Net cash outflow before management of liquid 
resources and financing                                        (11,508)           (5,760)

Management of liquid resources
    Payments to acquire current asset investments      (1,658)             (328)
    Proceeds on disposal of current asset investments   1,699
                                                        -------          -------

Cash flow from management of liquid resources                       41              (328)

Financing
    Net proceeds from issue of ordinary share capital  11,185             6,452
    (Decrease)/increase in bank loans                      (2)              286
                                                        -------          -------
Net cash inflow from financing                                  11,183             6,738
                                                                -------          -------
(Decrease)/increase in cash in the year                           (284)              650




Notes to the financial statements for the year ended 31 December 2005

1. Basis of preparation

The financial information set out above does not constitute the Group's
statutory accounts, within the meaning of Section 240 of the Companies Act 1985,
for the year ended 31 December 2005 or 2004, but is derived from those accounts.
Statutory accounts for the year ended 31 December 2004 have been filed with the
Registrar of Companies. The statutory accounts for 2005 will be delivered to the
Registrar of Companies following the Company's Annual General Meeting. The
auditors have reported on the 2004 accounts; their report was unqualified and
did not contain a statement under Section 237(2) or (3) of the Companies Act
1985. When published, the Company's Annual Report and Accounts for 2005 will be
sent to shareholders and will be made available to the public at the Company's
registered office, 140B High Street, Ongar, Essex CM5 9JH.

The financial information has been prepared on a basis consistent with the
accounting policies disclosed in the Group's 2004 Report and Accounts.

The Company and the Group have restated their results for the year ended 31
December 2004 in respect of an investment and a related dividend that was
incorrectly recorded in the Company in 2004. The net impact on the Group is a
reduction in retained profit of #27,000.


2. Revenue

                                                2005        2004
                                               #'000       #'000

Profit on sale of investments                    895          19
Dividends and Management fees                    501         674
Fee income                                       186           -
Other income                                      76          77
Interest received on convertible loan notes        3           -
                                               -----------------
                                               1,661         770


3. Earnings per share

The calculation of basic earnings per share is based on the profit after tax and
minority interests of #820,000 (2004: restated profit after tax of #298,000) and
on 176,619,585 (2004: 81,664,943) ordinary shares being the weighted average
number of ordinary shares in issue during the period.


The calculation of diluted earnings per share is based on profit after tax of
#820,000 (2004 restated: #344,000 having added back interest paid in 2004 on
convertible loan stock of #46,000) and on 211,525,919 ordinary shares (2004:
106,841,285), being the weighted average number of ordinary shares in issue,
adjusted for the effects of dilutive potential ordinary shares.


The weighted average has been adjusted for the effects of convertible loan
stock, both converted during the year and outstanding at the year end, warrants
both issued during the year and outstanding at the year end and the options that
were dilutive during the year.


4. Dividend

No dividend has been proposed in respect of the year.


5. Annual Report and Accounts

Copies of the Annual Report and Accounts will be sent to London Asia Capital
plc's shareholders in due course. Copies of this announcement and of the Annual
Report and Accounts will be made available to the public at the Company's
registered office, 140b, High Street, Ongar, Essex, CM5 9JH. Please send an
email to [e-mail] if you would like a copy of the
accounts posted to you.




                      This information is provided by RNS
            The company news service from the London Stock Exchange

END
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