Ambrian Capital plc (“Ambrian Capital”), the natural resources investment bank, today announces its unaudited results for the first half ended 30 June 2009.
Highlights
• Total income was £10.13 million in the first half of 2009 compared to £3.74 million for the first half ended 30 June 2008.
• Profit before tax was £2.28 million compared with a loss of £(2.79) million for the first half of 2008.
• Commodities generated record first half revenue of £6.52 million, reflecting strength in physical metals merchanting.
• Corporate Finance & Equities traded profitably in the first half of 2009 with revenue of £3.39 million, approximately unchanged compared to the first half of 2008.
• Ambrian was ranked (a) 1st in small cap metals & mining research (Thomson Reuters Extel Survey 2009); (b) 1st by aggregate market capitalisation and number of retained corporate clients in the AIM Basic Materials Sector (Hemscott), and (c) 7th worldwide by number of announced mergers and acquisitions in the metals & mining sector for the first half of 2009 (Merger Market).
• Own cash resources increased by £1.21 million during the half year to £23.77 million.
• Net asset value per share increased 4.4% during the half year to 33.0p.
• Basic earnings per share were 1.61p compared with a loss of (1.94)p for the first half of 2008.
• Interim dividend maintained at 0.75p per share.
“Ambrian delivered a robust first half performance,” said Tom Gaffney, Chief Executive. “Our results reflect a particularly strong performance by our physical metals merchanting business and the recovery in commodities prices since the start of the year. Chinese demand for raw materials is unlikely to be maintained and, therefore, we do not expect our income in the second half of 2009 to reach the level achieved in the first half of the year. Nevertheless, any acceleration in global economic recovery should see export led demand for raw materials from China and rapid re-stocking in North America, Europe and Japan.
We are committed to maintaining a strong financial position and to our distinct business model. Further global growth in demand for natural resources will propel Ambrian’s growth across each of our activities – equities, futures and physicals.”
CHIEF EXECUTIVE’S STATEMENT
Ambrian Capital delivered a robust performance in the first half of 2009 with total income of £10.13 million compared to £3.74 million in the first half of 2008. Revenue from operations of £9.91 million was up 83.9% compared to the first half of 2008 and exceeded the total for 2008.
Profit before tax of £2.28 million in the first half of 2009 represented a 22.5% pre-tax profit margin.
The growth in revenue and profitability primarily has been driven by the Commodities businesses, and in particular, physical metals merchanting which we started in June 2008. Ambrian Metals Limited (“Ambrian Metals”) benefited from record inflows to China of raw materials in the first six months of the year.
Ambrian Partners Limited (“Ambrian Partners”), the Corporate Finance & Equities business, further strengthened its leading position in the London natural resources sector and made a good return to profitability based on its uniquely specialised focus and low cost base.
The legacy Investment Portfolio represented less than five per cent of Ambrian Capital’s net asset value at 30 June 2009. Movements in the market value of holdings in the Investment Portfolio had a limited but positive impact on results for the first half of 2009.
We are committed to building a business that has intrinsic value substantially in excess of net asset value based on a differentiated business model and an enduring franchise.
Income and Pre-Tax Profits
Total income was £10.13 million for the first half of 2009, compared to £3.74 million for the first half of 2008.
Ambrian Capital’s operating businesses comprise its Corporate Finance & Equities and Commodities businesses. Revenue from operations was £9.91 million for the first half of 2009, compared to £5.39 million for the first half of 2008.
Total income for the first half of 2009 also includes gains on the Investment Portfolio of £0.22 million, compared to a loss of £(1.65) million for the first half of 2008.
Profit before tax was £2.28 million for the first half of 2009 compared to a loss of £(2.79) million in the first half of 2008.
Corporate Finance & Equities
Corporate Finance & Equities’ revenue was £3.39 million for the first half of 2009, compared to £3.38 million for the first half of 2008 and £3.25 million for the whole of 2008.
During the first half of 2009, Ambrian Partners was recognised as the leading investment bank to the mid and small cap metals & mining sector:
• Ambrian Partners ranked 1st in the UK small cap metals & mining sector in the 2009 Thomson Reuters Extel Survey.
• Ambrian Partners ranked 1st in the AIM Basic Materials Sector both in terms of number and in terms of aggregate market capitalisation of retained corporate clients in the Hemscott 2nd Quarter 2009 Advisers Rankings Guide.
• Ambrian Partners ranked 7th by number of worldwide announced mergers and acquisitions in the metals & mining sector for the first half of 2009 according to Merger Market.
Among the transactions announced during the first half of 2009 in which Ambrian Partners was involved were the following:
• Avocet Mining plc’s US$145 million acquisition of Wega Mining ASA
• Centamin Egypt plc’s C$69 million equity placing
• Kalahari Minerals plc’s £17.9 million equity placing
Ambrian Partners made progress in further building its Cleantech franchise and completed equity placings for Dyesol Limited (solar technology) and Ramco Energy plc (marine renewables). Ambrian Partners was also appointed Nomad and Broker to Energetix Group plc (alternative energy technologies) and to VPhase plc (domestic energy effectiveness).
Ambrian Partners’ strategy is to focus its resources on a selected group of retained Nomad and Corporate Broking clients which are of high quality, have high growth potential and offer Ambrian Partners the potential to generate significant fees on a recurring basis. At 1 September 2009, Ambrian Partners had 35 retained corporate clients compared to 42 at 31 December 2008. Ambrian Partners’ retained listed clients had an average market capitalisation of £79 million at 1 September 2009 compared to the then average market capitalisation of an AIM listed company of £39 million.
Ambrian Partners’ stockbroking and market making activities performed well as a result of the rebound in the share prices of natural resources companies during the first half of 2009. Ambrian Partners has begun research coverage of the major London listed mining companies and this has already begun to have a positive impact on secondary commissions generated. Market making was profitable in each of the first six months of 2009 and generated revenue of £0.76 million in the first half of 2009 compared to a loss of £(2.04) million in the year ended 2008. This is a particularly strong performance given that only £1 million of capital was allocated to Ambrian Partners’ market making activities.
Ambrian Partners has taken advantage of the turmoil in the London stockbroking sector and made a number of key senior hires during the first half of 2009 in each of corporate finance, research and equity sales. We will continue to selectively recruit talented individuals both in our existing sectors of expertise and new sectors as the opportunity arises.
Our policy is to recruit only those individuals with proven skills who are able to make a tangible contribution in excess of their attributable costs in their first 12 months of employment.
Commodities
Commodities revenue was £6.52 million for the first half of 2009, compared to £2.01 million for the first half of 2008 and £6.39 million for the whole of 2008. Ambrian Capital’s commodities business includes Ambrian Commodities, an LME broker-dealer, and Ambrian Metals, a physical metals merchant, which commenced operations in June 2008 and therefore made only a small contribution to revenue in the first half of 2008.
Ambrian Commodities Limited
Ambrian Commodities’ performance in the first half of 2009 was slightly weaker than its performance in the first half of 2008.
Total LME trading volume was almost unchanged with 53.9 million lots traded in the first half of 2009 compared to 53.3 million lots in the 2008 first half. Despite the slowdown in the global economy, LME volumes were maintained by the activity of financial investors.
Ambrian Commodities’ client base primarily consists of industrial metals fabricators, of which approximately two-thirds are located in Continental Europe.
These industrial customers have a regular need for the metals price hedging services provided by Ambrian Commodities regardless of the actual level of metals prices; however, their volume of LME activity is directly related to their manufacturing production. Given the weak global economy, output in the first half of 2009 was reduced and this put some pressure on Ambrian Commodities’ volume of activity.
The amount of capital required by Ambrian Commodities is linked to the total amount of margin credit lines granted to its customers. At 30 June 2009, Ambrian Commodities had a regulatory capital requirement of £8.3 million and had granted margin credit lines totalling US$69.7 million (£42.3 million).
The strategic alliance with Mizuho Financial Group, one of Japan’s largest financial institutions, has been slow to become operational nevertheless, we expect that in due course it will enable Ambrian Commodities to expand its business without the requirement for further capital.
Ambrian Commodities is well positioned with its low cost base, close client relationships and alliance with Mizuho Financial Group to benefit from the eventual recovery in global manufacturing output.
Ambrian Metals Limited
Ambrian Metals benefited during the first half of 2009 from record flows of refined copper into China. The total volume of refined copper imported by China in the first half of 2009 was 1.78 million tonnes, compared to 1.76 million tonnes for the whole of 2008.
Chinese demand for copper in the first half of 2009 was fuelled in large part by the RMB 4 trillion (US$585 billion) stimulus package announced by China in November 2008 which included fiscal expenditure and rapid credit expansion. Approximately US$450 billion was targeted for investment in infrastructure, rural development and other fixed asset investment. These policies have also promoted domestic consumption, for example, passenger car sales in China rose 90% in August 2009 compared with a year earlier.
Ambrian Metals is focussed on merchanting refined copper in the form of LME-grade copper cathode and copper wire-rod. Refined copper is converted into a range of products, with the building, construction and electrical sectors representing the largest end consumers. Approximately two-thirds of Ambrian Metals’ sales volume in the first half of 2009 was to Chinese customers through Ambrian Metals’ office in Shanghai. The balance was primarily taken up by customers in the Middle East and with some being sold to European and US customers.
During the first half of 2009, Ambrian Metals sourced refined copper from producers located around the world, including Russia, Kazakhstan, Japan, Zambia, Brazil, India and Chile.
In the first half of 2009, Ambrian Metals traded metal with a total market value of approximately US$969 million compared to US$524 million in the second half of 2008.
Investment Portfolio
The Investment Portfolio generated income of £0.22 million in the first half of 2009, compared to a loss of £(1.65) million in the first half of 2008 and a loss of £(10.71) million for the year ended 31 December 2008.
The total value of the Investment Portfolio at 30 June 2009 was £1.40 million compared with £1.50 million at 31 December 2008.
At 30 June 2009 the largest remaining publicly listed holdings in the Investment Portfolio were Rivington Street Holdings plc (valued at £0.47 million) and Anglesey Mining plc (valued at £0.20 million).
The unlisted investments were valued at £0.27 million at 30 June 2009, unchanged from 31 December 2008.
The value of Ambrian Capital’s investment in Minerva Resources plc (“Minerva”) was marked down to £nil in the Group’s accounts for the year ended 31 December 2008 and continued to be carried at £nil at 30 June 2009 as a result of the suspension of Minerva from AIM in January 2009.
On 23 June 2009, Dwyka Resources Limited (“Dwyka”), an Australian incorporated and registered minerals explorer and developer listed on AIM and the ASX, made a recommended all share offer for Minerva. Ambrian Capital exchanged its holding in Minerva for 11,575,840 Dwyka ordinary shares which were admitted to trading on AIM on 21 July 2009. The market value of the holding at 1 September 2009 was £0.62 million.
Expenses
Administrative expenses were £7.85 million in the first half of 2009, compared to £6.53 million in the first half of 2008.
Remuneration expenses were £5.46 million in the first half of 2009 of which (i) £3.56 million was represented by salaries, employers’ national insurance and benefits and (ii) £1.90 million represented a provision for year-end profit-related bonuses. The ratio of total remuneration expenses to total income was 53.9% for the first half of 2009. Total headcount at 30 June 2009 was 68, up one during the first half of 2009.
Non-personnel costs were £2.39 million, 7.4% lower than the first half of 2008. The decrease compared with the first half of 2008 was principally attributable to rigorous focus on cost control in the first half of 2009 and one-off costs incurred in the first half of 2008 associated with the acquisition of Nabarro Wells & Co Limited, start-up costs associated with Ambrian Metals and costs associated with the move to new offices in April 2008.
Balance Sheet
As at 30 June 2009, shareholders’ equity was £31.72 million. Net asset value per share was 33.0p and tangible net asset value per share was 30.5p, an increase of 4.4% and 4.8% respectively, during the first half. Net asset value per share and tangible net asset value per share are based on 96.24 million ordinary shares outstanding at 30 June 2009 (excluding Treasury shares and shares held by the Ambrian Capital EBT).
Own cash resources, net of amounts due to clients, totalled £23.77 million at 30 June 2009, compared to £22.56 million at 31 December 2008. The £1.21 million increase is after the payment of the 2008 final dividend, corporation tax payments and the payment of 2008 employee bonuses.
As at 30 June 2009, Ambrian Capital’s capital resources substantially exceeded its then aggregate regulatory capital requirement of £10.00 million for the regulated subsidiaries (Ambrian Partners and Ambrian Commodities).
Dividend
The Board has declared a maintained interim dividend of 0.75p per share. The dividend will be paid on 23 October 2009 to all shareholders on the register as at 2 October 2009.
Outlook
Chinese demand for raw materials is unlikely to be maintained at the same high level in the second half of 2009 and, therefore, we do not expect our income in the second half to reach the level achieved in the first half of the year. Nevertheless, any acceleration in global economic recovery should see export led demand for raw materials from China and rapid re-stocking in North America, Europe and Japan.
We are committed to maintaining a strong financial position and to our distinct business model. Further global growth in demand for natural resources will propel Ambrian’s growth across each of our activities – equities, futures and physicals.
Tom Gaffney
Chief Executive
16 September 2009
Notes to Editors:
Ambrian Capital plc
Ambrian Capital plc (AIM: AMBR) is the holding company of Ambrian Partners Limited, Ambrian Commodities Limited and Ambrian Metals Limited.
Ambrian Partners Limited is a specialist investment bank focussed on the metals & mining, oil & gas, and cleantech sectors. It provides corporate finance advice, equity research, sales and trading and market making services. Ambrian Partners is a member of the London Stock Exchange and is authorised and regulated by the Financial Services Authority.
Ambrian Commodities Limited is a trader and broker specialising in London Metals Exchange cleared base metals futures and options. Its customers include metals producers, consumers, merchants, traders and financial investors. Ambrian Commodities is an Associate Broker Member of the London Metal Exchange and is authorised and regulated by the Financial Services Authority.
Ambrian Metals Limited is an independent physical metals merchant with particular strengths in copper, aluminium and lead. Through Ambrian Metals’ offices in London and Shanghai and agents in Calcutta, New York, Santiago, São Paulo, Seoul and Tokyo, it sources non-ferrous metals from producers for distribution to an international client base of metals consumers and merchants.
Enquiries:
Tom Gaffney
Chief Executive
Ambrian Capital plc
Tel: +44 (0)20 7634 4700
Simon Law/Marc Milmo
Fox-Pitt, Kelton
+ 44 (0)20 7663 6000
Charlotte Kirkham/Ben Simons
M: Communications
+ 44 (0)20 7920 2331/2430
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