Interim Results

RNS Number:3867J
London Asia Capital PLC
25 September 2006


25 September 2006

                            London Asia Capital plc

                         ("London Asia" or "the Group")

                              Interim Results 2006


London Asia Capital plc (AIM: LDC.L) the Greater China focused investment and
merchant banking group, today announces Interim Results for the six months ended
30 June 2006.


Financial Highlights

   * Net assets increased to #28.1 million (2005: #25.8 million);
   * Profits for the six months up six-fold to #0.7 million (2005: #0.13
     million);
   * Market value of listed investments #8.7 million at 30 June 2006, #4.8
     million above cost;
   * Turnover more than doubled to #1.42 million (2005: #0.54 million)


Operational Highlights

   * Raised #50 million for the AIM listed London Asia Chinese Private Equity
     Fund, and first management fees received;
   * Two investee companies listed since start of year;
   * Corporate adviser to 5 floats of Chinese businesses in the UK since
     January 2006, currently corporate adviser to 8 companies listed on PLUS;
   * Number of offices in China increased to 32;
   * Significant relationship established with Shanghai United Asset and
     Equity Exchange.



Commenting on outlook Jack Wigglesworth, Chairman said, "Despite the 
considerable progress we have made in the last 12 months we are dissappointed 
by the performance of the Company's share price. We believe there is 
considerable unrecognised value in the Company, and we will be embarking on a 
restructuring of the business over the coming months to simplify and bring 
greater clarity to the value of the business."



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

Simon Littlewood/Stephen Lucas              John West/Matt Ridsdale
London Asia Capital plc                     Tavistock Communications
Tel: [phone]                   Tel: [phone]






                            London Asia Capital plc

                 ("London Asia", "the Group", or "the Company")

                              Chairman's Statement


I am pleased to announce a very strong set of interim results for the six months
ended 30 June 2006, with substantial progress across all the Group's business
activities.


Highlights for the period include:

   * Profits for the six months up six-fold to #0.7 million (2005: #0.13
     million);
   * Net assets increased to #28.1 million (2005: #25.8 million);
   * Raised #50 million for the AIM listed London Asia Chinese Private Equity
     Fund, and first management fees received;
   * Two investee companies listed since start of year;
   * Market value of listed investments #8.7 million at 30 June 2006, #4.8
     million above cost;
   * Corporate adviser to 5 floats of Chinese businesses in the UK since
     January 2006, currently corporate adviser to 8 companies listed on PLUS;
   * Number of offices in China increased to 32;
   * Significant relationship established with Shanghai United Asset and
     Equity Exchange.



Financial Results

Turnover is nearly three times that for the same period last year, with
overheads up only 63%, resulting in a six-fold increase in net profits. As we
indicated at the time of our 2005 accounts, our overheads (before the FRS 20
charge) have increased as a result of the opening of new offices and the
expansion in staff and infrastructure to support the significant increase in our
fund management and corporate finance activities. Basic and diluted earnings per
share was 0.63 pence and 0.53 pence respectively, up from 0.09 pence and 0.08
pence on the prior period.


We received income from corporate finance fees, dividends, and profits on sale
of investments, as well as the first fund management fees. Together with our
growing corporate finance activities and fund management income, we expect to
further increase our recurring revenue base, with less dependence on exiting our
investment portfolio to fund further expansion.


As a result of the convergence of UK accounting standards with International
Financial Reporting Standards ("IFRS"), the Group has adopted FRS 20: Share
based payments, which requires a notional charge to be recognised in the profit
and loss account and comparative figures adjusted accordingly. The adoption of
FRS 20 has no impact on the Group's cash flow.


Our investment portfolio continues to perform well, with profit on sale of
investments in the period over #0.6 million. Although we continue to show our
investments at cost, the market value of our listed investments at 30 June 2006
was #4.8 million above the cost of #3.9 million shown in the accounts. With the
introduction of IFRS for all AIM listed companies in 2007, we will be required
to account for all our investments at fair value instead of historical cost.
This will unlock the inherent value in our investment portfolio.



Investment in China

The Chinese Government has over the last 18 months introduced various measures
to slow down those sectors of the economy which are growing too rapidly, such as
property and construction, and reduce the growth of those industries which are
big or inefficient consumers of commodities or energy. Our investment strategy
is in line with the Chinese Government's emphasis on creating future growth
through developing the consumer market in China, and stimulating the services
and SME sectors in China, particularly in second tier cities. China's service
sector is estimated to account for only 40% of the economy, against 70% in
developed economies, so there is considerable growth potential. The businesses
we invest in continue to see stronger growth than the economy as a whole.


The latest Five Year Plan for China's economy emphasises China's need to protect
its environment, reduce pollution, switch from fossil fuel to other energy
sources and address the problems with its water supply and quality. We are
investing heavily in this area through the London Asia Chinese Private Equity
Fund, through China Finance and Trust, and directly.


There have been significant changes over the last few months in the investment
environment in China, both in terms of the ability to invest and exit routes.


A great deal of money has been raised recently for investment in China, both
through funds focused on investing in China, and floats of Chinese businesses
outside China. In many cases those managing the new funds and those floating the
businesses outside China do not have a developed infrastructure within China to
be able to properly source deals and do due diligence. This has resulted in
fierce competition for deals in some sectors and locations.


China is a developing market, and therefore relatively high risk, without a
fully developed legal system, little track record of protection of minority
shareholders, and levels of corporate governance which in general do not meet
standards expected by UK investors. Those investing without the benefit of a
strong local adviser, who is able to select the transactions which not only
achieve sustainable profit growth, but also have a management team genuinely
committed to shareholder value and proper levels of corporate governance, are
taking a significant risk.


The Chinese Government has brought in Ordinance 10 to check some of the recent
excesses. Effective from 8 September, it essentially re-establishes procedures
that were in place up till three years ago, Ordinance 10 places restrictions on
non Chinese investing in Chinese businesses, and on the ability of Chinese
businesses to restructure and list outside China.


At this stage it is unclear how strictly the new rules will be interpreted and
to what extent it will restrict foreign investment into China, but the Ordinance
is part of a broader trend to bring in tighter regulation of investment into
China, following a perception within China that assets have been sold too
cheaply, with the best companies taken overseas where Chinese cannot invest in
them, and that there has been too much abuse of the system, particularly in
relation to the tax breaks available to foreign invested Chinese businesses.


The Chinese Government is keen to develop the financial services sector within
China. This shift is evident from recent large Chinese floats, such as Bank of
China and China Merchants Bank doing their listing and fund raising in Shanghai
and Hong Kong, rather than a dual listing in New York or London.


We anticipate that the effect of Ordinance 10 will be to slow down the investment
process, as additional permissions will be required, and reduce the number of
businesses that will be able to list outside China. Given the significant time
we allocate for due diligence before investing, the additional time required for
obtaining permissions is not anticipated to have a significant impact on our
business activities. A decrease in the number of poor quality or speculative
deals currently flowing out of China would also be beneficial to our business,
as it reduces the risk of investors being put off the sector over quality
concerns.


Much of the fall-out is likely to be for the larger, more high profile
transactions, which larger funds are forced to do to justify the size of their
funds and invest their money quicker - in the SME sector where London Asia
operates, investments are more likely to be approved given the continued
difficulty listing locally caused by the backlog of applications for listing.


The Chinese Stock Markets were closed much of last year and early this year to
new issues. With the reform of the stock markets now largely complete, they have
recently re-opened and are attracting an increasing number of new listings. Many
businesses which have previously been forced to list outside China are now
looking at the possibility of listing within China, though the backlog of
applicants for listing on the main exchanges means that in practice it could be
some time before SMEs are able to list in China. The re-opening of markets in
China presents a good opportunity for us, as it is another potential exit point
for our investments, and valuations are typically high given the substantial
funds available both within China and from overseas funds seeking to invest in
listed Chinese stock.


We are expanding our presence in Shanghai, with a new office opening in October,
to focus on listed transactions and listing our investments in China. Earlier
this month we announced that we had dual listed eight of our investee companies
in Shanghai, the first foreign listings in China, in partnership with Shanghai
United Assets and Equity Exchange, following agreements signed with them earlier
this year.


We see the new rules and investment environment as being beneficial to our
business. Many foreign investors may struggle with the new regulations,
particularly more recent entrants who have not built up local relationships and
contacts, and do not have experience of working under the more restrictive rules
that were present until three years ago and have effectively been re-introduced.
Brokers who have been taking transactions straight to IPO outside China without
proper restructuring and without pre IPO finance will be hardest hit. This will
reduce competition for deals, bring down prices and the longer time period for
listings will mean more companies will require pre IPO finance.


Going forward, investors will have to work harder for their deals, both in terms
of looking into industry sectors and geographical areas where the Chinese
Government actively encourages foreign investment, and in terms of taking the
time to do restructuring correctly and get all the necessary approvals. Those
firms that commit the resources to building a genuine long term presence in
China are likely to reap the rewards, as short term opportunists are driven from
the market.


London Asia has expanded its office network to 32 offices in China, with over 80
staff, giving us one of the widest footprints in China of any Western investment
group, covering 20 of China's provinces. We will continue to develop this
presence and expand the range of services offered to Chinese businesses.


One side-effect of the new regulations is that those businesses already listed
outside China or restructured under the old regulations are likely to have
increased values, as there will be less opportunities for foreign investors to
invest in new Chinese deals outside China. The new regulations also introduce
the ability to do share swaps to acquire Chinese assets, which was previously
heavily restricted, enabling our existing investments to acquire Chinese
businesses using shares rather than cash.



Fund Management

In March we successfully raised the #50 million we were seeking for the London
Asia Chinese Private Equity Fund, and listed it on the UK's AIM Stock Market. As
of now, the Fund has committed #23 million to 7 investments, with provisional
Board approval for further investments, which were they to be finalized would
mean the fund would be fully invested. London Asia receives a fee of 2% of the
net asset value of the fund, plus a profit share equal to 20% of the increase in
assets of the fund.


We are currently working on several new funds, focused on the Asian market, for
launch later this year and next year, including ones for Mongolia and Vietnam,
for the Energy and Environment sector, and the Chinese property sector.


Corporate Finance Activities

Our corporate finance activities include managing the exits of portfolio
companies, and generating both one-off and recurring fee income from clients.


During the period and since the period end we were corporate advisor for the
listings on the UK's PLUS Stock Market, and associated fund raisings, for the
following businesses:

   * China Biofoods;
   * China Mobilenet;
   * China New Energy;
   * Dalian Business Institute;
   * China Biotech.


We continue to act as Corporate Adviser to three other businesses listed on
PLUS, making us the number one adviser for Chinese businesses on PLUS. London
Asia is one of the few UK corporate finance advisers with offices and staff
based in China able to complete due diligence on, and monitor the performance
of, these businesses.


Going forward we anticipate doing increasing amounts of corporate finance work
within China, as the opening up of the Chinese stock markets create new
opportunities, and as we list more businesses within the Greater China markets.
We are seeing increasing levels of merger and acquisition activity, and
financing through private equity funds rather than capital markets, which we
anticipate being an increasing trend, with valuations in the private market
often better than that available in public markets.



Private Equity

We have made only one new investment in the period, #0.65 million in China
Biotech. Additional funds have been invested in AIM listed Europasia Education
plc, a platform for investing in Chinese education deals.


Whilst we continue to build our investment portfolio, it is at a slower pace
than in the past, using money raised from selling existing investments to fund
new investment opportunities. The Group will continue to benefit from the
capital uplift on its carry in the funds and existing holdings, as well as
warrants and options acquired as part of our corporate finance work.


China Financial Services Ltd ("CFS"), the financial software business in which
we have a 48% stake, continues to go from strength to strength. As a Chinese
financial services business, CFS is seeing increasing opportunities with the
shift in favour of local businesses over foreign. Its core business has also
benefited substantially from the re-opening of the Chinese stock markets and
associated increased trading volume and activity. We will seek to continue to
grow this business by acquisition and through expanding the sectors in which it
operates.



Structured Finance

China Finance & Trust ("China Finance"), our largest investment to date,
continues to expand. It has built up a portfolio of investments in the energy
and environment sector, as well as financial services. As a Chinese incorporated
business, with significant capital, it is in a strong position to benefit from
the recent changes in the investment environment in China and reforms to the
financial services sector.


Board and Management Changes

We were very pleased that Robert Spriddell agreed to join the Board last month
as a non-executive director. Robert works for Consensus Business Group, a
shareholder in London Asia. In July Cesidio Di Ciacca decided to step down from
the Board to pursue other interests. On behalf of the Board I would like to
express our gratitude for all the hard work he put in.



Outlook

Despite the considerable progress we have made in the last 12 months we are 
dissappointed by the performance of the Company's share price. We believe there 
is considerable unrecognised value in the Company, and we will be embarking on 
a restructuring of the business over the coming months to simplify and bring 
greater clarity to the value of the business.


Jack Wigglesworth
Chairman
25 September 2006



London Asia Capital plc
Consolidated Profit and Loss Account
For the six months ended 30 June 2006


                                         Six months       Six months       Year ended
                                              ended            ended      31 December
                                       30 June 2006     30 June 2005            2005*
                                        (Unaudited)      (Unaudited)        (Audited)
                                             #'000            #'000            #'000

Revenue                                      1,428              535            1,661

Administrative expenses                       (750)            (408)          (1,037)

FRS 20 share based payment charge               (7)               -             (462)
                                      -----------------------------------------------

Operating profit                               671              127              162

Interest receivable                             62               20              257

Interest payable                                (7)               -              (13)
                                      -----------------------------------------------

Profit on ordinary activities before
taxation                                       726              147              406

Taxation                                       (13)               -              (26)
                                      -----------------------------------------------

Profit on ordinary activities after
taxation                                       713              147              380

Minority interest                              (12)             (22)             (22)
                                      -----------------------------------------------

Retained profit for the year                   701              125              358
                                      ===============================================

Earnings per share                           Pence            Pence            Pence
Basic                                         0.63             0.09             0.20
Diluted                                       0.53             0.08             0.16

Adjusted earnings per share before FRS 20 share based payment charge

Basic                                         0.64             0.09             0.46
Diluted                                       0.53             0.08             0.03


All amounts are derived from continuing operations.

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

* Restated as set out in note 3.



London Asia Capital plc
Consolidated Balance Sheet
As at 30 June 2006

                                           30 June          30 June      31 December
                                              2006             2005             2005*
                                        (Unaudited)      (Unaudited)        (Audited)
                                             #'000            #'000            #'000

Fixed assets
Tangible assets                                 26                8               15
Investments                                 20,086            9,756           16,274
Goodwill                                       299                -              315
                                      -----------------------------------------------
                                            20,411            9,764           16,604
                                      -----------------------------------------------

Current assets
Debtors                                      1,680            1,038            1,282
Current asset investments                    7,376            2,551            6,894
Cash at bank and in hand                     4,171           13,068            2,600
                                      -----------------------------------------------
                                            13,227           16,657           10,776

Creditors: amounts falling due
within one year                             (5,292)            (337)            (450)
                                      -----------------------------------------------

Net current assets                           7,935           16,320           10,326
                                      -----------------------------------------------

Total assets less current liabilities       28,346           26,084           26,930


Creditors: amounts falling due after
more than one year                            (223)            (260)            (169)
                                      -----------------------------------------------

Total assets less liabilities               28,123           25,824           26,761
                                      ===============================================

Capital and reserves
Called up share capital                     11,280           10,671           11,066
Share premium account                       21,332           21,048           20,903
Profit and loss account                     (4,551)          (5,917)          (5,249)
Minority interest                               62               22               49
Other reserves                                   -                -               (8)
                                      -----------------------------------------------

Shareholders' funds                         28,123           25,824           26,761
                                      ===============================================

* Restated as set out in note 3.





London Asia Capital plc
Cash Flow Statement
For the six months ended 30 June 2006

                                                Six months     Six months     Year ended
                                                     ended          ended             31
                                                   30 June        30 June       December
                                                      2006           2005           2005
                                                (Unaudited)    (Unaudited)      (Audited)
                                                     #'000          #'000          #'000

Net cash flow from operating activities              1,495           (277)          (708)

Returns on investments and servicing of 
finance                                         -----------------------------------------
Interest received                                       62             20            260
Interest paid                                           (7)             -            (13)
                                                -----------------------------------------


Net cash flow from returns on investments
and servicing of finance                                55             20            247


Financial investment and capital
expenditure                                      -----------------------------------------
Payments to acquire tangible fixed assets              (10)            (3)           (13)
Payments to acquire fixed asset investments           (933)          (544)       (10,984)
                                                 -----------------------------------------


Net cash flow from financial investment
and capital expenditure                               (943)          (547)       (10,997)


Purchase of subsidiaries net of cash acquired            -              -            (50)


Net cash inflow/(outflow) before
management of liquid resources and
financing                                              607           (804)       (11,508)


Management of liquid resources                   -----------------------------------------
Payments to acquire current asset investments         (224)             -          1,699
Proceeds on disposal of current asset investments    1,155         (2,085)        (1,658)
                                                 -----------------------------------------


Cash flow from management of liquid
resources                                              931         (2,085)            41


Financing                                        -----------------------------------------
Net proceeds from issue of ordinary share capital       51         13,073         11,185
Decrease in bank loans                                 (19)             -             (2)
                                                 -----------------------------------------


Net cash inflow from financing                          33         13,073         11,183
                                                 -----------------------------------------

Increase/(decrease) in cash in the year              1,571         10,184           (284)
                                                 =========================================



Reconciliation of movements in shareholders' funds

                                                   30 June        30 June    31 December
                                                      2006           2005           2005*
                                                (Unaudited)    (Unaudited)      (Audited)
                                                     #'000          #'000          #'000

Profit for the period                                  701            125            358
FRS 20 share option charge                               7              -            462
Minority interest charge                                12             22             22
Other reserves                                          (1)             -             (8)
Issue of ordinary share capital                        643         13,073         13,323
                                                -----------------------------------------
Net addition to shareholders' funds                  1,362         13,220         14,157
Opening shareholders' funds                         26,761         12,604         12,604
                                                -----------------------------------------
Closing shareholders' funds                         28,123         25,824         26,761
                                                =========================================


* Restated as set out in note 3.




London Asia Capital plc
Notes to the interim results


1. Basis of preparation

The results for the six months ended 30 June 2006 are unaudited and have not
been reviewed by the Auditors. They have been prepared on accounting bases and
policies that are consistent with those used in the preparation of the financial
statements of the Group for the year ended 31 December 2005 with the exception
of the adoption of FRS 20: Share based payments. The impact of FRS 20 has been
reflected as a prior year adjustment as disclosed in note 3.


The financial statements contained in the report do not constitute statutory
accounts within the meaning of Section 240 of the Companies Act 1985. The
results for the year ended 31 December 2005 were reported on by the auditors and
received an unqualified audit report. Full accounts for the year ended 31
December 2005 have been delivered to the Registrar of Companies.



2. Significant accounting policies

Fixed asset investments
Fixed asset investments are stated at cost less provision for diminution in
value. The directors consider that the principal activity of the Group is that
of an investment holding company and therefore to account for its share of the
net assets and liabilities of associates would not be meaningful. As an
investment holding company, the Group accounts for its investments in associates
at cost less provision for diminution in value in accordance with Financial
Reporting Standard No.9: Associates and Joint Ventures.


Current asset investments
Current asset investments comprise marketable and quoted investments held for
resale and are stated at lower of cost and net realisable value.



3. Share based payments

The Group is required to adopt FRS 20: Share based payments which is applicable
for all periods commencing on or after 1 January 2006. FRS 20 requires an
expense to be recognised in respect of share options granted to directors and
employees. The expense is calculated by reference to the fair value at the date
of grant of the share options which is charged to the profit and loss account
over the vesting period of the options.

There is no impact on the Group's cash flow or net assets.



The fair value of options on the date of grant has been estimated using the
Black Scholes valuation model. The significant inputs to the model were:


a) Share price on the date of the grant

b) Exercise price

c) Expected volatility (50% based on historic volatility)

d) Risk free rate on date of grant

e) Expected dividend yield


Comparative figures for the six months ended 30 June 2005 and year ended 31
December 2005 have been restated to apply the provision of FRS 20.



4. Earnings per share

                                                   30 June       30 June  31 December*
                                                      2006          2005          2005
                                                (Unaudited)   (Unaudited)     (Audited)
                                                      #000          #000          #000

Profit for the period                                  701           126           358

FRS 20 share option charge                               7             -           462
                                                  ------------------------------------
Profit for the period before FRS 20 share
option charge                                          708           126           820
                                                  ------------------------------------

Weighted average number of shares in issue     110,606,436   136,320,617   176,619,585

Diluted weighted average number of 
shares in issue                                133,297,118   158,620,617   219,190,030


                                                 Pence         Pence         Pence
Basic earnings per share                          0.63          0.09          0.20
Diluted earnings per share                        0.53          0.08          0.16
Adjusted basic earnings per share before 
FRS 20 share option charge                        0.64          0.09          0.46
Adjusted diluted earnings per share before 
FRS 20 share option charge                        0.53          0.08          0.37


* As restated by note 3



5. Dividend

The directors do not recommend the payment of an interim dividend.



6. Taxation

The tax charge relates to a subsidiary of the Group which is not permitted to
claim relief from group tax losses brought forward.



7. Interim Results

Copies of the Interim Results are available on the Company's web site,
www.londonasia.com, or from the Company's registered office, 140B High Street,
Ongar, Essex, CM5 9JH. 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
IR ILFFTADIFFIR