Final Results
LONDON FINANCE & INVESTMENT GROUP P.L.C.
Preliminary announcement of unaudited results for the year ended 30th June 2006
London Finance is an investment company whose assets primarily consist of three
Strategic Investments and a General Portfolio. Strategic Investments are
significant investments in smaller UK quoted companies and these are balanced
by a General Portfolio, which consists mainly of investments in major British
and European equities.
At 30th June 2006, we held three Strategic Investments in which we have board
representation: our associated company Western Selection P.L.C., Marylebone
Warwick Balfour Group Plc and Finsbury Food Group plc. Detailed comments on our
Strategic Investments are given below.
Our objective is to achieve capital growth in real terms over the medium term,
while maintaining a progressive dividend policy.
Results
The Group made a profit before tax for the year of £309,000 (2005 - £202,000).
Our operating profits have increased from £228,000 to £263,000 as a result of
higher profits realised on sales of investments and increased fee income
achieved by City Group. Our profit after tax and minority interest was £303,000
(2005 - £212,000) giving earnings per share of 1.06p (2005 - 0.81p).
To reflect the improvement in the earnings and our progressive dividend policy,
the Board has decided to increase the dividend for the year to 1.05p per share
(2005 - 1.0p).
Our net assets per share have increased 17% to 52p at 30th June 2006 from 44p
last year after provision for deferred taxation. Our Strategic Investments have
increased in value by 43% and our General Portfolio by 22% after taking into
account additions and disposals of investments. This compares with the increase
in the FTSE 100 index of 14% and the FTSE Eurotop 300 index of 15% over the
year.
International Financial Reporting Standards
This is the first year when the consolidated financial statements have been
prepared under the International Financial Reporting Standards (IFRS) adopted
by the EU. The comparatives for 2005 have accordingly been restated from UK
Generally Accepted Accounting Practice (UK GAAP). Figures on an IFRS basis were
included as memoranda columns in the 2005 financial statements.
Strategic Investments
Western Selection P.L.C. ("Western")
The Company owns 5,212,000 shares, being 44.6% of the issued share capital of
Western. On 24th August 2006, Western announced a profit after tax of £315,000
for its year to 30th June 2006, earnings per share of 2.75p (2005 - 1.40p), and
a 5.6% increase in dividend to 2.45p (2005 - 2.32p). Western's net assets at
market value were £10,495,000, equivalent to 89.8p per share, a 1% increase
from 88.8p last year. This increase in value was reduced by the exercise of
warrants at 64p, which increased Western's capital in issue by 7.5%.
The market value of the Company's investment in Western at 30th June 2006 was £
2,997,000 and the book value was £4,643,000. At market value this represents
19% of the net assets of Lonfin. The underlying value of the Company's
investment in Western, valuing Western's investments at market value, was £4.68
million (2005 - £3.9 million).
Mr. Marshall is the Chairman of Western and Mr. Robotham is a non-executive
director. Western has strategic investments in Creston plc, Swallowfield plc,
Northbridge Industrial Services plc and Industrial & Commercial Holdings PLC.
An extract from Western's announcement of its strategic investments is set out
below:
Creston plc
Creston is a marketing services group whose strategy is to grow within its
sector both by organic growth and through selective acquisition to become
a substantial, diversified international marketing services group. The
results for the year to 31st March 2006, show a profit after tax of £
2,927,000 (2005 - £2,640,000), equivalent to earnings of 8.04p per share
(2005 - 7.04p).
At 1st July 2005, Western owned 2,873,998 shares in Creston. During the
year a further 126,002 shares were acquired at a cost of £207,903 by way
of exercise of warrants and participation in Creston's fundraising. At the
year end, the total holding of 3,000,000 shares represented 8.6% of
Creston's issued share capital. The market value of the Company's holding
in Creston on 30th June 2006 was £4,845,000 (2005 - £4,455,000), being 40%
of Western's net assets.
Swallowfield plc
Swallowfield has a long history of developing and producing aerosol,
cosmetic and toiletry products stretching back to 1950. As one of Europe's
premier contract manufacturers of toiletries and cosmetics it offers an
unrivalled breadth of product capabilities. Its skill in design,
developing and producing gift packs and themed product ranges compliments
its production capability.
Swallowfield's latest published results were for the 28 weeks to 7th
January 2006 and showed a loss of £695,000, after reorganisation costs of
£677,000 (28 weeks to 8th January 2005 - profit of £353,000).
Western owns 1,000,000 shares in Swallowfield being 8.9% of the issued
share capital. The market value of the Company's holding in Swallowfield
on 30th June 2006 was £455,000 (2005 - £775,000), being 4% of Westerns'
net assets.
Northbridge Industrial Services PLC
Western announced in March that it was making an investment of £1.5
million in Northbridge Industrial Services PLC. That company placed
6,437,500 shares at £1 and at the same time it shares were admitted to
AIM. Western Selection was allotted 1.5 million shares representing 20.3%
of Northbridge's share capital. The value of the investment at 30th June
2006 was £1,598,000.
Northbridge was formed for the purpose of acquiring companies that hire
and sell specialist industrial equipment such as generators, load banks,
pumps, air compressors, heaters and chillers .Northbridge is seeking to
acquire specialist niche businesses that have the potential for expansion
into outsourcing providers, capable of supplying a non-cyclical customer
base. Northbridge's first acquisition is Crestchic Limited, one of the
largest specialist load bank equipment manufacturers in the world; selling
and hiring to a national and international customer base.
Industrial & Commercial Holdings PLC
ICH is a small unlisted PLC in which Western holds 29.9%.It holds land
with potential to receive planning permission for housing at Milngavie,
adjacent to Dougalston golf course, just north east of Glasgow. As it may
take many years for the permission to be received, we are in discussion
with the board of ICH to consider an acquisition of an active business.
Marylebone Warwick Balfour Group Plc ("MWB")
The Company owns 3 million shares, representing 3.16% of MWB's issued share
capital. The market value at 30th June 2006 was £5.9 million, compared with the
book value of £2.5 million, and represents 38% of the net assets of Lonfin.
MWB is in the process of maturing and realising its assets for the benefit of
all stakeholders through an orderly disposal programme, having disposed of the
Park Lane Marriot hotel for £105 million in May and the recently announced
disposal of its West India Quay subsidiary for £110 million. Mr. Marshall is a
non-executive director of MWB and the board constantly reviews the programme of
disposal.
Finsbury Food Group plc ("Finsbury")
During the year we acquired a further 200,000 shares in Finsbury at a cost of £
146,000 to bring our holding to 5,000,000 shares and 3,000,000 warrants
representing 21.66% of their share capital and 54.06% of their warrants. The
market value of our holding was £4.3 million on 30th June 2006 (2005 - £3.2
million) with a cost of £993,000 and represents 28% of the net assets of
Lonfin.
Finsbury Food's main subsidiary, Memory Lane Cakes, is a supplier of boxed
ambient cakes to most of the UK's major supermarket chains, which include Asda,
Morrisons, Sainsbury, Somerfield, Tesco and Waitrose. Ambient cakes are baked
cakes that have not been frozen and are generally retailed at room temperature.
Finsbury Food acquired three new bakeries in November 2005 and is involved in
capital projects for the automation of existing, and the installation of new,
production lines, together with the segregation of a gluten free area to give a
market leading facility. Mr. Marshall is a non-executive director of Finsbury.
General Portfolio
The General Portfolio has material interests in oil, natural resources and
utilities, pharmaceuticals and healthcare, banking and insurance and food and
beverages. These sectors accounted for 69% of the portfolio by value at 30th
June 2006 (73% at 30th June 2005). We believe that the companies in these
sectors in which we have invested have the potential to outperform the market
in the medium to long term.
The number of holdings in the General Portfolio has increased to 43 from 39. We
have invested £238,000 (2005: £457,000) in the General Portfolio over the year
and the average value of each holding has increased from £110,000 to £114,000.
We have a £2 million bank facility and at 30th June 2006 had drawn down £1.65
million. This leaves £350,000 available for further investment.
Dividend
The recommended dividend is 1.05p per share (2005 - 1.00p). Subject to
shareholder approval, the dividend will be paid on 6th October 2006 to those
members registered at the close of business on 8th September 2006. Shareholders
on the South African register will receive their dividend in South African Rand
converted from sterling at the closing rate of exchange on 23rd August 2006.
D.C. MARSHALL
Chairman
25th August 2006
Consolidated Profit and Loss Account
For the year ended 30th June 2006 2005
£000 £000
Operating Income
Investment operations 610 572
Management services 587 501
Administrative expenses
Investment operations (350) (294)
Management services (584) (551)
-------- --------
Operating profit 263 228
Share of result of associated undertaking 169 90
Interest payable (123) (116)
-------- --------
Profit on ordinary activities before taxation 309 202
Tax on result of ordinary activities (4) (12)
-------- --------
Profit on ordinary activities after taxation 305 190
Equity minority interest (2) 22
-------- --------
Profit for the financial year attributable to members of the 303 212
holding company
===== =====
Basic earnings per share 1.06p 0.81p
Headline earnings per share 1.06p 0.81p
Diluted earnings per share 1.06p 0.80p
Consolidated Statement of Recognised Gains and Losses
Profit attributable to members 303 212
Unrealised gains on investments held as :-
Fixed assets 3,768 2,131
Current assets 427 130
Deferred taxation on unrealised gains (1,188) (176)
-------- --------
Total recognised gains and losses for the year 3,310 2,297
===== =====
Changes in Shareholders' Equity
Total recognised gains and losses for the year 3,310 2,297
Proceeds of new shares issued 949 77
Dividend paid in respect of the previous year (262) (233)
-------- --------
3,997 2,141
Shareholders' funds at start of year 11,634 9,493
-------- --------
Shareholders' funds at end of year 15,631 11,634
===== =====
All profits and losses are on continuing activities.
Consolidated Balance Sheet
at 30th June 2006 2005
£000 £000
Non-current Assets
Tangible assets 430 431
Investments 13,247 8,776
-------- --------
13,677 9,207
-------- --------
Current Assets
Listed investments 4,907 4,265
Accounts receivable 196 178
Bank balance and deposits 171 48
-------- --------
5,274 4,491
Current Liabilities
Accounts payable: falling due within one year (1,893) (1,827)
-------- --------
Net Current Assets 3,381 2,664
-------- --------
Total Assets less Current Liabilities 17,058 11,871
Deferred taxation (1,363) (176)
-------- --------
Total Assets less Current Liabilities 15,695 11,695
===== =====
Capital and Reserves
Called up share capital 1,500 1,310
Share premium account 1,854 1,095
Reserves 5,244 2,237
Profit and loss account 7,033 6,992
-------- --------
Equity shareholders' funds 15,631 11,634
Minority equity interests 64 61
-------- --------
15,695 11,695
===== =====
Consolidated Cash Flow Statement
For the year ended 30th June 2006 2005
£000 £000
Cash outflow on operating activities (120) (244)
-------- --------
Returns on investments and servicing of finance
Dividends received 281 277
Interest paid (95) (89)
-------- --------
Net cash inflow from returns on investments and servicing of 186 188
finance
Taxation (4) (15)
-------- --------
Investing activities
Purchase of tangible fixed assets (12) (4)
Fixed asset investments - purchased (664) (101)
-------- --------
Net cash outflow from investment activities (676) (105)
-------- --------
Equity dividend paid (262) (233)
Financing
Share capital issued 949 77
Net (repayment)/draw down of loan facility (50) 350
-------- --------
Net cash inflow from financing 999 427
-------- --------
Increase in cash 123 18
===== =====
Notes
1. The dividend for the year of 1.05p per share (2005 - 1.00p) will be paid
on 6th October 2006 to shareholders on the register on 8th September 2006.
2. Earnings per share are based on the profit on ordinary activities after
taxation and minority interests and on 28,672,672 shares (2005 -
26,113,943) being the weighted average of the number of shares in issue
during the year.
3. The net assets attributable to shareholders, taking investments at market
value, are before providing for any tax that may arise on realisation.
4. The financial information in this preliminary announcement of unaudited
group results, which has been reviewed and agreed by the auditors, does
not constitute statutory accounts within the meaning of section 240(5) of
the Companies Act 1985. The accounts have been prepared in accordance with
the Accounting Standards of the Auditing Practices Board of the United
Kingdom and are consistent with those applied in the previous financial
year. The audited accounts of the group for the year ended 30th June 2005
have been reported on with an unqualified audit report in accordance with
section 235 of the Companies Act 1985 and have been delivered to the
Registrar of Companies.
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