Half-year Report for 6 months ended 31 December...

London Finance & Investment Group P.L.C.

(the ‘Company’)

Unaudited Interim Results for the six months ended 31^st December 2017 and dividend declaration

The Company today announces its unaudited interim results and dividend declaration for the six months ended 31^st December 2017 (the ‘Interim Statement’).

Chairman’s Statement

Introduction

As an investment company our target is to achieve growth in shareholder value in real terms over the medium to long term.  In the short term our results can be influenced by overall stock market performance, particularly the valuation of our Strategic Investments.  We continue to believe that a combination of Strategic Investments and a General Portfolio is the most effective way of achieving our aims.  Strategic Investments are significant investments in smaller UK quoted companies where we have expectations of above average growth over the medium to longer term and these are balanced by a General Portfolio which consists of investments in major U.S., U.K. and European equities.

At 31^st December 2017, we held two Strategic Investments: Western Selection P.L.C., and Finsbury Food Group plc. Detailed comments on our Strategic Investments are given below.

Change in accounting policies

The Board has adopted IFRS 9, and the comparatives in the income statement have been restated to reflect the resulting change in accounting policy.  Strategic investments are a fundamental part of the Company’s investment strategy to secure long term capital appreciation and by their very nature the investments are largely illiquid. Consequently, the directors have elected to present the unrealised changes in value of these specific investments as part of other comprehensive income as it better reflects the underlying performance of the Company within its primary statements.  This does not change the basis of valuation or the amounts reported in the statement of financial position.  The effect of the change in accounting policy is further described in Note 1 below.

Results

Our net assets per share increased 1.8% to 66.8p at 31^st December 2017 from 65.6p at 30^th June 2017.  Our Strategic Investments decreased in value by 0.8% during the period.  Our General Portfolio increased by 4.9%, compared with increases of 5.1% and 2.5% in the FTSE 100 index and the FTSEurofirst 300 Index respectively, over the half year.  At the close of business on 31^st January 2018, our net asset value was 67.1p per share.

The Group profit before tax for the half year was £615,000 compared to a restated profit of £426,000 for the same period last year. Our total comprehensive income after tax and minority interest was £524,000 (2016: £1,247,000 restated) giving earnings per share of 1.8p (2016: 0.2p restated).

On 4^th October 2017, the Company entered into an interest rate swap agreement with Coutts & Co, expiring on 30^th September 2022, in the sum of £1,500,000 at a fixed rate of 1.06% per annum over base rate and margin, with a view to providing insurance against rising interest rates.

Strategic Investments

Western Selection P.L.C. (“Western”)

The Group owns 7,860,515 Western shares, representing 43.8% of Western’s issued share capital. Western is a strategic investment which is technically a subsidiary of the Company that has not been consolidated due to the application of the investment entity exemption under IFRS 10.

On 5^th February 2018, Western announced a profit before tax of £170,000 for its half year to 31^st December 2017 and earnings per share of 0.91p (2016: earnings per share of 2.5p).  Western’s net assets at market value were £17,115,000 equivalent to 95p per share. Western also announced an interim dividend of 1.1p per share (2016: 1.1p per share).

The market value of the Company’s investment in Western at 31^st December 2017 was £4,166,000 representing 20% of the net assets of Lonfin.  The underlying value of the investment in Western, valuing Western’s own investments at market value, was £5,266,000 (30^th June 2017: £5,348,000). 

I am the Chairman of Western and Edward Beale is a non-executive director.  Michael Robotham was a non-executive director of Western until his resignation on 5^th December 2017.

Western’s main Core Holdings are Northbridge Industrial Services Plc, Swallowfield Plc, Bilby Plc and Tudor Rose International Limited.

An extract from Western’s interim results announcement relating to its main Core Holdings is set out below:

Core Holdings

Northbridge Industrial Service plc (“Northbridge”)

Northbridge hires and sells specialist industrial equipment to a non-cyclical customer base.  With offices or agents in the UK, USA, Dubai, Germany, Belgium, France, Australia, New Zealand, Singapore, Brazil, Korea and Azerbaijan, Northbridge has a global customer base. This includes utility companies, the oil and gas sector, shipping, construction and the public sector. The product range includes loadbanks, transformers and oil tools.  Further information about Northbridge is available on its website: www.northbridgegroup.co.uk

Northbridge’s latest results, for the half year to 30^th June 2017, showed a loss after tax of £2,308,000 for the period (2016: loss after tax of £2,338,000).  No interim dividend was declared (2016: none).

Western owns 3,223,632 Northbridge shares, representing 12.45% of Northbridge’s issued share capital.  The market value of this investment at 31^st December 2017 was £2,966,000 (30^th June 2017: £3,320,000), representing 17% (2016: 24%) of Western’s net assets.

I am a non-executive director of Northbridge.

Swallowfield plc (“Swallowfield”)

Swallowfield is a market leader in the development, formulation, manufacture and supply of cosmetics, toiletries and related household products for global brands and retailers operating in the cosmetics, personal care and household goods market.  Further information about Swallowfield is available on its website: www.swallowfield.com

Swallowfield announced its annual results for the 52 weeks ended 24^th June 2017 in September 2017 showing a profit after tax of £2,572,000 compared to a profit of £2,001,000 for the comparable period last year.  Swallowfield paid a final dividend of 3.5p per share in December 2017 which provided us with income of £52,500.  

The market value of the Company’s holding of shares in Swallowfield on 31^st December 2017 was £4,950,000 (30^th June 2017: £5,700,000), representing 29% of the Company’s net assets.

Western owns 1,500,000 Swallowfield shares (representing 8.90% of Swallowfield’s issued share capital).

Edward Beale is a non-executive director of Swallowfield.

Bilby Plc (“Bilby”)

Bilby is an established, and award winning, provider of gas installation, maintenance and general building services to local authority and housing associations across London and South East England.  It has a strategy of growing organically and by acquisition.  Further information about Bilby is available on its website: www.bilbyplc.com.

Bilby announced its interim results for the six month period to 30^th September 2017 on 21^st

November 2017 showing a loss after tax of £1,966,000 (2016: loss after tax of £833,000).  Bilby will pay an interim dividend of 0.5p per share in January 2018 which will provide us with income of £13,500.

Western owns 2,699,280 Bilby shares, which represent 6.8% of Bilby’s issued share capital.  The market value of the Company’s holding in Bilby on 31^st December 2017 was £3,051,000 representing 18% of the Company’s net assets.

Tudor Rose International Limited (previously Hartim Limited) (“Tudor Rose International”)

Tudor Rose International works closely with a number of leading UK branded fast-moving consumer goods companies, offering a complete sales, marketing and logistical service.  Based in Stroud, Gloucestershire, Tudor Rose International sells into 78 countries worldwide including USA, Spain, Portugal, Italy, Czech Republic, Russia, Turkey, South Africa, Saudi Arabia, UAE, Malaysia, Australia and China.

Our share of Tudor Rose International’s estimated results for the period ended 31^st December 2017 is a profit after tax of £81,000 (2016: profit after tax of £57,000).

At 31^st December 2017, Western owned 49.5% of Tudor Rose International.  The carrying value of the Company’s equity investment in Tudor Rose International on 31^st December 2017 was £1,674,000 (2016: £654,000) representing 9.8% of the Company’s net assets.  In addition, loans of £191,756 (equivalent to a further 1% of the Company’s net assets) were outstanding at 31^st December 2017 from Tudor Rose International’s executive directors. 

Western has two nominees on the board of Tudor Rose International: Edward Beale and I are the directors.

Finsbury Food Group plc (“Finsbury”)

Finsbury is one of the largest producers and suppliers of premium cakes, bread and morning goods in the UK and currently supplies most of the UK's major supermarket chains.  Further information about Finsbury, which is admitted to trading on AIM, is available on its website: www.finsburyfoods.co.uk

At 31^st December 2017, Lonfin held 6,000,000 Finsbury shares, representing approximately 4.6% of Finsbury’s issued share capital.  The market value of the holding was £6,420,000 as at 31^st December 2017 (cost - £1,724,000) and represents approximately 31% (2016: 34%) of Lonfin’s net assets.

On 18^th September 2017, Finsbury announced audited profits on continuing operations after tax and minority interests of £12,958,000 for the 52 weeks ended 1^st July 2017 (2016: £12,754,000).

Finsbury paid a final dividend of 2.0 per share, making 3.0p for the year (2016: 2.8p). This provided the Company with further income of £120,000.

General Portfolio

The portfolio is diverse with material interests in Food and Beverages, Natural Resources, Chemicals and Tobacco.  We believe that the portfolio of quality companies we hold has the potential to outperform the market in the medium to long term.

At 31^st December 2017, the number of holdings in the General Portfolio was 30 (2016: 26).

Board Change

On 31^st January 2018, the Company announced the appointment of Warwick Marshall to the Board.  His substantial business experience in the development of the Monteagle Group in South Africa and particularly its trading division will assist the Board in the assessment of the performance of investments and will complement the skills and experience of existing board members.  He has extensive investment experience in his private capacity and he now resides in Zug, Switzerland.

Outlook

Although markets have shown resilience and strength over the course of the last year, they are close to an all-time high. The Board remains cautious about the potential impact of major geo-political risks. Accordingly, the Board expects to see continued volatility in the equity and currency markets. These may have a material impact on the value of our investments.

The Board has declared an interim dividend of 0.55p per share (2016: 0.55p).

6^th February 2018

D.C. MARSHALL

Chairman

Interim Dividend

The Board recommends an interim gross dividend of 0.55p per share (9.36442 SA cents) (2016: 0.55p) which will be paid on Friday 6^th April 2018 to those members registered at the close of business on Friday 16^th March 2018 (SA and UK). Shareholders on the South African register will receive their dividend in SA Rand converted from sterling at the closing rate of exchange on Thursday 1^st February 2018 being GBP 1 = SA Rand 17.02622.

In respect of the normal gross cash dividend, and in terms of the South African Tax Act, the following dividend tax ruling only applies to those shareholders who are registered on the South African register on Friday 16^th March 2018.  All other shareholders are exempt.

Shareholders registered on the South African register are advised that the dividend withholding tax will be withheld from the gross final dividend amount of 9.36442 SA cents per share at a rate of 20% unless a shareholder qualifies for an exemption; shareholders registered on the South African register who do not qualify for an exemption will therefore receive a net dividend of 7.49154 SA cents per share. The dividend withholding tax and the information contained in this paragraph is only of direct application to shareholders registered on the South African register, who should direct any questions about the application of the dividend withholding tax to Computershare Investor Services (Pty) Limited, Tel: [phone]

• The number of shares in issue now and as at the dividend declaration date is 31,207,479;

• The interim gross dividend in SA cents is 9.36442 cents.

• The dividend has been declared from income reserves, which funds are sourced from the Company’s main bank account in London and is regarded as a foreign dividend by South African shareholders; and

• The Company’s UK Income Tax reference number is 948/L32120.

  Dividend dates:

Last day to trade (SA)	Tuesday 13th March 2018
Shares trade ex-dividend (SA)	Wednesday 14h March 2018
Shares trade ex-dividend (UK)	Thursday 15th March 2018
Record date (SA and UK)	Friday 16th March 2018
Pay date	Friday 6th April 2018

Share certificates may not be de-materialised or re-materialised between Wednesday 14^th March 2018 and Friday 16^th March 2018, both dates inclusive. Shares may not be transferred between registers in London and South Africa between Wednesday 14^th March 2018 and Friday 16^th March 2018, both dates inclusive.

Statement of Directors’ responsibility

The Directors confirm that, to the best of their knowledge:

- the unaudited interim results for the six months ended 31^st December 2017, have been prepared in accordance with IAS 34 as adopted by the EU; and

- the Interim Statement includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R of the Disclosure and Transparency Rules.

Neither this Interim Statement nor any future interim statements of the Company will be posted to shareholders.  The Interim Statement is available as follows:

• on the Company’s website at  www.city-group.com/london-finance-investment-group-plc/; and
• by writing to City Group P.L.C., the Company Secretary, at 6 Middle Street, London EC1A 7JA

This Interim Statement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

The Directors accept responsibility for the contents of this Interim Statement.

For further information, please contact:

London Finance & Investment Group P.L.C Sponsor: Sasfin Capital (a member of the Sasfin group).

[phone]

Consolidated Statement of Total Comprehensive Income (Unaudited)

	Half year ended				Year Ended
	31st December				30th June
			Restated		Restated
	2017		2016		2017
	£000		£000		£000
Operating Income
Dividends received	311		265		608
Rental and other income	50		50		109
Profit on sales of investments, including provisions	26		3		3
	387		318		720
Management service fees	118		130		296
	505		448		1,016
Administrative expenses
Investment operations	(229)		(190)		(352)
Management services	(162)		(168)		(389)
Total administrative expenses	(391)		(358)		(741)
Operating profit	114		90		275
Unrealised changes in the carrying value of General Portfolio investments	501		335		989
Interest payable	(1)		-		(33)
Profit before taxation	615		425		1,231
Tax expense	(49)		(350)		(121)
Profit after taxation	566		75		1,110
Non-controlling interest	(3)		(6)		(7)
Profit attributable to shareholders	563		69		1,103
Other comprehensive income/(expense) – Items that may subsequently be reclassified to profit or loss
Unrealised changes in the carrying value of Strategic Investments	(87)		819		477
Profit on sale of strategic investments	-		217		217
Deferred tax	48		142		99
Corporation tax	-		-		(238)
Total other comprehensive income	(39)		1,178		555
Total comprehensive income attributable to shareholders	524		1,247		1,658
Basic and Diluted earnings per share	1.8p		0.2p		3.5p
Adjustment for the unrealised changes in the carrying value of investments, net of tax	(1.5)p		(1.1)p		(2.5)p
Headline earnings per share	0.3p		(0.9)p		1.0p
Interim dividend	0.55p		0.55p		0.50p
Final dividend	-		-		0.55p
Total in respect of the period	0.55p		0.55p		1.05p

Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)

	Half year ended				Year ended
	31st December				30th June
	2017		2016		2017
	£000		£000		£000
Total comprehensive income attributable to shareholders	531		1,247		1,658
Dividends paid to equity shareholders	(172)		(171)		(343)
	359		1,076		1,315
Equity shareholders’ funds at start of period	20,483		19,168		19,168
Equity shareholders’ funds at end of period	20,842		20,244		20,483

Consolidated Statement of Financial Position (Unaudited)

	31st December				30th June
	2017		2016		2017
	£000		£000		£000
Non-current assets
Property, plant and equipment	15		18		14
Strategic investments: -
Finsbury Food Group Plc	6,420		7,320		6,900
Western Selection P.L.C.	4,166		3,694		3,773
	10,601		11,032		10,687
Current assets
Listed investments	11,295		8,836		10,766
Trade and other receivables	63		178		220
Cash, at bank	277		1,588		222
	11,635		10,602		11,208
Total Assets	22,236		21,634		21,895
Capital and Reserves
Called up share capital	1,560		1,560		1,560
Share premium account	2,320		2,320		2,320
Unrealised profits and losses on investments	8,514		7,967		8,265
Share of retained profits and losses of subsidiaries	4,007		3,647		3,794
Company’s retained realised profits and losses	4,441		4,750		4,544
Total Capital and Reserves attributable to owners	20,842		20,244		20,483
Trade and other payables falling due within one year	483		479		486
Deferred taxation	818		815		829
Non-controlling equity interest	93		96		97
	22,236		21,634		21,895
Net assets per share	66.8p		64.9p		65.9p
Number of shares in issue	31,207,479		31,207,479		31,207,479

Consolidated Statement of Cash Flows (Unaudited)

	Half year ended				Year ended
	31st December				30th June
			Restated		Restated
	2017		2016		2017
	£000		£000		£000
Cash flows from operating activities
Profit before tax	615		425		1,231
Adjustments for non-cash -
Finance expense	1		-		33
Depreciation charges	4		4		8
Unrealised changes in the fair value of investments	(501)		(335)		(989)
Decrease/(Increase)in trade and other receivables	157		97		52
(Decrease)/Increase in trade and other payables	(3)		(74)		(66)
Overseas Taxes paid	(11)		(7)		(45)
Net cash inflow from operating activities	262		110		224
Cash flows from investment activity
(Increase)/Decrease in current asset investments	(727)		(1,376)		(2,652)
Disposal of investment	698		2,438		2,438
Purchase of IT software	(5)		-		-
Net cash inflow/(outflow) from investment activity	(34)		1,062		(214)
Cash flows from financing
Interest paid	(1)		-		(33)
Equity dividends paid	(172)		(172)		(343)
Net cash outflow from financing	(173)		(172)		(376)
(Decrease)/Increase in cash and cash equivalents	55		1,000		(366)
Cash and cash equivalents at the beginning of the year	222		588		588
Cash and cash equivalents at end of the year	277		1,588		222

Reconciliation of net cash flow to movement in net debt

	At start		Cash		At end of
	of Period		Flow		Period
Half year ended	£000		£000		£000
31st December 2017
Cash and cash equivalents	222		205		427
Bank overdraft	0		(150)		(150)
Net cash and cash equivalents	222		55		277
31st December 2016
Cash and cash equivalents	588		1,000		1,588
Year ended 30th June 2017
Cash and cash equivalents	588		(366)		222

Notes: -

1.	Basis of preparation: The results for the half-year are unaudited.  The information contained in this report does not constitute statutory accounts within the meaning of the Companies Act 2006.  The statutory accounts of the Group for the year ended 30th June 2017 have been reported on by the Company's auditors and have been delivered to the Registrar of Companies.  The report of the auditors was unqualified.
	The Company has adopted IFRS 9. Under IFRS 9, the Company has elected to classify its long term Strategic Investments as financial instruments which are held at fair value with unrealised changes in value taken directly to Other Comprehensive Income.  General Portfolio investments are held at fair value with unrealised changes in fair value recognised in Profit or Loss.  Strategic and General Portfolio investments are quoted investments, and their fair value continues to be calculated using quoted prices. This report has been prepared in accordance with the accounting policies contained in the Group’s 2017 Annual Report and Accounts and International Financial Reporting Standards, and complies with IAS 34.
2.	Earnings per share: Earnings per share are based on the profit on ordinary activities after taxation and non-controlling interests of £563,000 (2016: £70,000) and on 31,207,479 (2016: 31,207,479) shares being the weighted average of number of shares in issue during the year. There are options outstanding over 80,000 shares. Reconciliation of headline earnings Headline earnings are required to be disclosed by the JSE.  Headline earnings per share are based on the profit attributable to the shareholders after tax and non-controlling interests, before unrealised changes in the fair value of investments net of tax, of £11,000 (2016: £279,000 loss) and on 31,207,479 (2016: 31,207,479) shares being the weighted average of number of shares in issue during the year.
3.	Going Concern: After making enquiries, the Board is satisfied that the Group will be able to operate within the level of its facilities for the foreseeable future. For this reason, the Board considers it appropriate for the Group to adopt the going concern basis in preparing its financial statements.
4.	Principal risks and uncertainties: The principal risks and uncertainties which could impact the Group’s long-term performance are disclosed on pages 9-10 of the Group’s 2017 Annual Report and Accounts, The key risks and mitigating activities have not changed from these: -           Stock market vulnerability and economic uncertainty including Brexit; -           Possible volatility of share prices of investments; -           Dividend income; -           Ability to make strategic investments; and -           Liquidity of equity investments in strategic investments.

Composition of General Portfolio

		Value
		£000		%
Investor		624		5.5
British American Tobacco		492		4.4
Schindler Holding		484		4.3
Diageo		463		4.1
LVMH Moet Hennessy		436		3.9
HSBC Holdings		422		3.7
Brown Forman		417		3.7
Heineken Holding		417		3.7
Unilever		416		3.7
Pernod Ricard		405		3.6
Henkel		405		3.6
Antofagasta		402		3.6
Phillip Morris		398		3.5
Nestle		384		3.4
3M		383		3.4
Danone		373		3.3
Chevron		361		3.2
Givaudan		358		3.2
Royal Dutch Shell		357		3.2
L'Oreal		346		3.1
BASF		342		3.0
Reckitt Benckiser		339		3.0
United Technologies		321		2.8
Exxon Mobil		309		2.7
Anheuser Busch		308		2.7
Procter & Gamble		306		2.7
Kimberley Clark		303		2.7
Imperial Brands		281		2.3
Compagnie Financiere Richemont		222		2.0
Becton Dickinson		221		2.0
		11,295		100