Amd Commo Exagr Regulatory News (COMG)

29 Jun 2007 13:54

Europasia Education PLC29 June 2007 EUROPASIA EDUCATION PLC: FINAL RESULTS EuropAsia Education plc, the AIM-listed education investment group, announcesits audited results for the year to December 31 2006. Main points: • New Chief Executive appointed • Change of strategy • Planned disposals • Proposed name change to Commodity Growth plc • Net Assets £1.4m (2005: £1.3m) • Net assets at market value £4.5m equal to 7.8p per share • Continued profit growth at Chinese investee companies • Operating loss £150,000 (2005: £250,000) EPE Chairman James Holmes said: "The Board has reached the conclusion that thebest interests of shareholders are served by abandoning the current educationfocused investment strategy and implementing a strategy of investing in rarecommodities, particularly those used in the energy and environment sectors. "As part of the change in strategy we are proposing a resolution at the AGM tochange the Company's name to Commodity Growth plc and in order to finance thenew strategy we intend to dispose of the existing education portfolio. "2006 was a challenging year for the Group despite the growth in our Chineseeducation investments. The combined value of our holdings in Plus-market listedChina Education Group and Dalian Business Institute as at 31 December 2006 was£5.9 million against a cost of £2.8 million. "Under current accounting rules EPE does not recognise the gain in market valueof these investments on the balance sheet or through the profit and loss accountnor a share of their respective profits, resulting in an overall loss for theyear. "With the new management team, the change in investment strategy, and the moveto dispose of our existing assets, we look forward to moving the Company forwardto restore shareholder value". For further information James Holmes, Chairman 020 7231 0282EuropAsia Education Plc Paul Quade 07947 186694CityRoad Communications 020 7248 8010 Nandita SahgalInsinger de Beaufort 020 7190 7000 CHAIRMAN'S STATEMENT 2006 was a challenging year for the Group as, despite the growth in our Chineseeducation investments, the share price continued to languish, a decline whichhas continued since the year end, preventing us from expanding the business. Highlights • Net assets £1.4 million (2005: £1.3 million), equal to 2.4p per share • Net assets at market value as at year end of £4.5 million, equal to 7.8p per share • Interim results of our main investments CEG and DBI show continued profit growth • Raised over £1 million via the issue of Convertible Loan Notes • Appointment of new Chief Executive post year end Financial results Turnover relates primarily to our wholly owned UK business, BournemouthEducational Centre Ltd ("E2000"), which is a language and vocational trainingcollege based in Bournemouth. Turnover was lower than 2005, but as a result ofvarious changes at the business to reduce costs and focus on higher margincourses, E2000 returned to profit in 2006. The operating loss before interest and amortisation of goodwill was £0.14million (2005: £0.22 million). The reduction in losses compared to last year isa result of improved performance at E2000, and our strategy of reducingoverheads across the Group by stopping all new business and business developmentoperations, and laying off all non essential staff. Whilst E2000 has returned to profits, it remains a small business with marginalprofits, and we have decided to provide against the goodwill which arose on themaking of the investment, resulting in a charge of £0.4 million. We raised over £1 million in new funds early in 2006. During the year weincreased our holding in PLUS Markets listed China Education Group ("CEG") by£0.4 million to £1.8 million, giving us a 16.9% holding in the company. CEGachieved profits of £2.3 million for the period ended 30 June 2006 (a nine monthoperating period) and interim profits to 31 December 2006 of £1.7 million, upnearly 50%. We also invested a total of £1.1 million in Dalian Business Institute ("DBI"),which subsequently listed on PLUS Markets in May 2006. DBI, based in LiaoningProvince, consists of six colleges and five independent faculties teaching eightbusiness and business related subjects to 5,000 students. DBI announced interimprofits to 31 January 2007 of £0.9 million. The combined value of our holdings in CEG and DBI as at 31 December 2006 was£5.9 million against a cost of £2.8 million, an increase of £3.1 million. Undercurrent accounting rules EPE does not recognise the gain in market value ofthese investments on the balance sheet or through the profit and loss accountnor a share of their respective profits, resulting in an overall loss for theyear. Strategy We continue to generate losses and our share price continues to decline. TheBoard has previously stated that it believes the business is too small to bothcover the costs, and reap the benefit of an AiM listing. As a result, the Boardhas been looking for some time for either an acquisition to increase the size ofthe business or an acquirer to buy the Company, but has to date beenunsuccessful and we do not hold out much hope of being any more successful goingforward. The Company has no money to make acquisitions and, given the currentsignificant discount to assets, it is not attractive to existing shareholders tocarry out a placing other than via a rights issue. In April we entered intodiscussions for a possible takeover of the Company, but the offeror terminateddiscussions in May. The Board has therefore been considering alternative strategies to preserveshareholder value and take the Company forward. As part of this process werecently announced the appointment to the Board of Benson Day as ChiefExecutive. Benson has over 30 years experience in corporate finance, mergers andacquisitions, and commodities investments across Asia. He has helped launchseveral successful ventures in China and South East Asia and co founded theInternational Association of Energy Economics (Singapore). Benson hassignificant expertise in the commodity and energy sectors, currently managing aprivate commodity fund with its own proprietary benchmark commodity index. Hisspecialities are in rare commodities for which there are currently no futuresmarket and those commodities used in clean technology and the energy sector. The Board has reached the conclusion that the best interests of the shareholdersare served by abandoning the current education focused investment strategy andimplementing a strategy of investing in rare commodities, particularly thoseused in the energy and environment sectors, in line with Benson's expertise anda resolution to that effect is to be proposed at the upcoming Annual GeneralMeeting ("AGM"). The details of the revised investment strategy are outlined inthe Chief Executive's Statement. Benson is bringing in a small team to assist in the implementation of thestrategy. Benson and the new team are being awarded up to 10 million newordinary shares in lieu of cash salaries. This will reduce the cash burn of theCompany and align the interests of the management team with the shareholders.The new staff must complete at least one year's service before they are entitledto sell the shares and the shares are being purchased by the team in lieu ofsalary at the equivalent of 5p per share, a significant premium to the currentEPE share price. As part of the change in strategy, we are proposing a resolution at the AGM tochange the Company's name to Commodity Growth plc. In order to finance the new strategy we intend to dispose of the existingeducation portfolio. The E2000 management team, along with myself and fellowEPE director George Allnutt, has made an offer of £70,000 to acquire the entireUK business consisting of E2000 and Management International ("MI"). Paymentwill be made via the cancellation of EPE's 10% Convertible Loan Notes. Theacquisition price represents approximately three times the combined E2000 and MIprofits for 2006. Additional consideration may become payable based on anyincrease in profit in 2007 over 2006. The independent directors, SimonLittlewood and Victor Ng, have determined that the sales price and acquisitionterms are reasonable. In view of the interests of George Allnutt and myself, theproposed disposal constitutes a substantial property transaction under section320 of the Companies Act 1985, and, accordingly, is conditional on the approvalof shareholders at the AGM. We have received an offer from AiM listed London Asia Capital plc and itsassociates ("LDC") to acquire up to £1.5 million worth of CEG shares and ourentire holding of DBI shares. The valuation of our holdings for the purpose ofthe transaction is based on the average closing mid market price of the previousfive trading days as quoted by PLUS at the time of the transaction, less 30%.Based on current share price and assuming the full acquisition, this wouldequate to sales proceeds of £2.8 million against a book cost for the investmentssold of £2.1 million, generating a profit for EPE on the deal of £0.7 million.LDC will pay for its stake via the cancellation of £452,399 of EPE 10%Convertible Loan Notes and via LDC ordinary shares at a valuation per shareequal to the average closing mid market price of the previous five trading daysas quoted on AiM. The transaction will result in a significant reduction inliabilities for the Group, a saving of £45,240 in interest costs per annum, aprofit in the accounts on the sale of the investments and the holding of moreliquid LDC AiM stock rather than CEG and DBI's relatively illiquid PLUS stockwhich can be sold to generate funds for the new investment strategy. Given therelative illiquidity of PLUS listed stock, we have been unable to realise ourholdings in DBI and CEG to date and do not anticipate that situation changing inthe near future. I therefore as independent director, recommend thistransaction. As Simon Littlewood and George Allnutt are interested in the sharecapital of LDC, the proposed disposals constitute substantial propertytransactions under section 320 of the Companies Act 1985, and, accordingly, areconditional on the approval of shareholders at the AGM. Outlook With the new team, the change in investment strategy and the move to dispose ofour existing assets, we look forward to moving the Company forward to restoreshareholder value. James Holmes Chairman 29 June 2007 CHIEF EXECUTIVE'S STATEMENT We will be proposing a resolution to shareholders at the AGM that the investmentstrategy of the business be amended so that going forward the investmentobjective will be to achieve capital appreciation by investing in listedcompany, pre-IPO and private company investments in the natural resourcessector, targeting businesses that explore for, mine or process rare commoditieswhich are not traded on a recognised exchange or which are used in the energy orclean technology sector. The Company's initial focus will be investing in those companies involved inmolybdenum and also investing in, holding, selling and otherwise transacting inphysical molybdenum. Currently there is no futures market for molybdenum. The Company will provide aplatform for investors to invest in the physical assets to realise potentialfuture gains against rising prices which we anticipate will result fromincreasing demand for molybdenum. Demand For Molybdenum Molybdenum is used principally as an alloying agent in steels, cast irons andhigh strength low alloy steel to enhance hardenability, strength, toughness andresistance to wear and corrosion. It is usually added in combination with otheralloying metals such as chromium, columbium, manganese, nickel, tungsten andniobium to enhance the properties of the alloy. Molybdenum is also used as acatalyst in petroleum refining and plastics as specialty grease, and is one ofthe primary alloying elements in high temperature mechanical components of jetand turbine engines. In most cases, it is difficult to substitute other elementsfor Molybdenum. It is used across a range of industries, including: • aerospace • the steel alloys construction sector • oil and gas exploration • drill stem tubing • nuclear reactors • pipelines • refineries • coal Liquefaction plants. Global forecast of molybdenum consumption by application, 2005 and 2010 2005 2010 Kt % AAGR(%) Kt % Stainless steel 50 28 6.0 67 30Full alloy steel 27 15 3.5 32 14Tool and high speed steel 18 10 3.0 21 9High strength low alloy (HSLA) steel 17 9 4.5 21 10Carbon steel 16 9 2.5 18 8Catalysts 14 8 5.0 18 8Molybdenum metal and alloys 13 7 3.0 15 7High performance alloys (HPA) 9 5 4.0 11 5Cast iron 6 3 2.0 6 3Lubricants 6 3 3.0 6 3Pigments/corrosion inhibitors 4 2 3.5 4 2Other chemical 2 1 3.0 2 1Total 181 100 4.2 223 100 AAGR - annual average growth rate Whilst the demand for molybdenum is global, much of the increasing demand iscoming from the booming Asia markets. We predict a significant increase indemand for molybdenum due to a combination of economic growth in China, thelimited number of current suppliers, producers and roasting capacity, as well asincreased demand for stainless steel, chemicals, catalysts and super-alloysworldwide. Current Molybdenum Supply The primary producers of molybdenum are the United States, Chile, and China.Canada, Peru and Russia are also significant producing countries. Mineproduction of molybdenum increased from about 280 million pounds in 2002 to over400 million pounds in 2005. Molybdenum Pricing Molybdenum is an unhedged metal with no forward markets. The price is primarilydetermined by changes in supply and demand which are in turn affected by globaleconomic conditions. Molybdenum is sold largely on a spot basis by traders anddealers worldwide. Some business is done on the basis of long term supplycontracts between producers and consumers. Since 2002 prices have peaked anddropped several times, reaching a high of US$45 per pound in June 2005.Molybdenum is currently trading around US$30 to US$35 per pound. Investing Strategy The Company will enable investors to gain exposure to molybdenum through amanaged diversified portfolio of global molybdenum assets which the Company willinvest into, selected through rigorous analysis and on-going monitoring by itsexperienced team members. This will allow for risk diversification and providesan alternative to a direct investment in a mining company which could be subjectto a number of operating risks, hazards, unexpected maintenance or technicalproblems, periodic interruptions due to bad weather conditions and naturaldisasters, industrial accidents and various other unexpected variations inmineralisation, geological or mining conditions resulting in major delays andincreased costs. The Company intends to take advantage of the commodities super-cycle, driven bythe strong growth demand identified by its research. The Company aims to use itscash and listed paper to acquire molybdenum physical stocks, companies andbusinesses initially focusing on China, where it has already identifiedpotential investments. Benson Day Chief Executive 29 June 2007 EUROPASIA EDUCATION PLCCONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED 31 DECEMBER 2006 2006 2005 £ £ £ £Turnover 366,424 434,667 Cost of sales (106,594) (171,782) ---- ----Gross profit 259,830 262,885Administrative expenses:Other administrative expenses (791,919) (719,838)Provision for diminution in value of fixedasset investment - (66,040) ---- (791,919) ---- (785,878) ----- -----Operating loss (532,089) (522,993)Interest receivable and similar income 30,597 9,407Interest payable on convertible loan notes (155,296) (4,783)Interest payable - other (6,582) - ----- -----Loss on ordinary activities beforetaxation (663,370) (518,369)Taxation (121) 130 ----- -----Loss on ordinary activities aftertaxation (663,491) (518,239) ----- ----- 2006 2005 Pence PenceLoss per shareBasic and diluted 1.3 1.2 EUROPASIA EDUCATION PLCCONSOLIDATED BALANCE SHEETAS AT 31 DECEMBER 2006 2006 2005 £ £ £ £ Fixed assetsIntangible assets - 382,013Tangible assets 14,398 27,633 ----- ----- 14,398 409,646 Current assetsDebtors 177,858 37,735Investments 2,830,317 1,414,844Cash at bank and in hand 313,068 70,589 ----- ----- 3,321,243 1,523,168Creditors: amounts falling due withinone year (302,231) (141,761) ----- -----Net current assets 3,019,012 1,381,407 ----- -----Total assets less current liabilities 3,033,410 1,791,053 Creditors: amounts falling due afterone year (1,635,898) (452,399) Provisions for liabilities and chargesDeferred taxation (3,694) (3,694) ----- -----Total assets less liabilities 1,393,818 1,334,960 ----- ----- Capital and reservesCalled up share capital 2,850,426 2,239,228Share premium account 3,395,328 3,284,177Profit and loss account (4,851,936) (4,188,445) ----- -----Shareholders' funds 1,393,818 1,334,960 ----- ----- EUROPASIA EDUCATION PLCCOMPANY BALANCE SHEETAS AT 31 DECEMBER 2006 2006 2005 £ £ £ £ Fixed assetsInvestments 70,000 750,267 Current assetsDebtors 447,768 66,156Investments 2,830,317 1,414,844Cash at bank and in hand 9,101 30,718 ----- ----- 3,287,186 1,511,718Creditors: amounts falling due withinone year (270,146) (88,343) ----- -----Net current assets 3,017,040 1,423,375 ----- -----Total assets less current liabilities 3,087,040 2,173,642 Creditors: amounts falling due afterone year (1,635,898) (452,399) ----- -----Total assets less liabilities 1,451,142 1,721,243 ----- ----- Capital and reservesCalled up share capital 2,850,426 2,239,228Share premium account 3,395,328 3,284,177Profit and loss account (4,794,612) (3,802,162) ----- -----Shareholders' funds 1,451,142 1,721,243 ----- ----- EUROPASIA EDUCATION PLCCONSOLIDATED CASH FLOW STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2006 2006 2005 £ £ £ £ Net cash outflow from operating activities (89,442) (376,480) Returns on investments and servicing of financeInterest received 9,134 9,407Interest paid (75,995) (4,783) ----- -----Net cash (outflow)/inflow for returns oninvestmentsand servicing of finance (66,861) 4,624 Capital expenditure and financial investmentPayments to acquire tangible assets (640) (11,173)Payments to acquire investments (978,875) (156,148)Proceeds on disposals of tangible assets 2,399 30,960 ----- -----Net cash outflow for capital expenditureand financial investment (977,116) (136,361) ----- -----Net cash outflow before management ofliquid resources and financing (1,133,419) (508,217) FinancingIssue of share capital 252,399 -Issue of loan notes 1,123,499 - ----- -----Net cash inflow from financing activities 1,375,898 - ----- -----Increase/(decrease) in cash in the year 242,479 (508,217) ----- ----- Reconciliation to net (debt)/cash flowNet (debt)/cash at 1 January (381,810) 578,806Increase/(decrease) in net cash 242,479 (508,217)Issue of convertible loan notes (1,183,499) (452,399) ----- -----Net debt at 31 December (1,322,830) (381,810) ----- ----- NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2006 1. Basis of preparation The financial information set out in this announcement does not constitute theCompany's statutory financial statements within the meaning of section 240 ofthe Companies Act 1985, for the years ended 31 December 2006 or 31 December2005. The statutory financial statements for the year ended 31 December 2006will be delivered to the Registrar of Companies following the Company's AnnualGeneral Meeting. This announcement is prepared on the basis of the accounting policies as statedin the previous year's financial statements. 2. Dividend No dividend has been proposed in respect of the year. 3. Loss per share The calculation of basic and diluted loss per share is based on the loss aftertax of £663,491 (2005: £518,239) and on 49,261,162 (2005: 43,131,334) ordinaryshares being the weighted average number of ordinary shares in issue during theperiod. The calculation of diluted loss per share does not include the effect of anyexercise of outstanding share options, warrants or the effects of theconvertible loan stock outstanding at year end as these are not dilutive inaccordance with FRS 22. This information is provided by RNS The company news service from the London Stock Exchange