Half-yearly Report
Date: 20th February 2008
On behalf of: London Finance & Investment Group P.L.C. ("Lonfin", "the
Company" or "the Group")
Embargoed until: 1230hrs
London Finance & Investment Group P.L.C.
Interim Results
London Finance & Investment Group P.L.C. (LSE: LFI, JSE: LNF), the investment
company, today announces its unaudited interim results for the six months ended
31st December 2007.
Highlights from last six month period include:
- Three significant strategic investments: Western Selection P.L.C.,
Marylebone Warwick Balfour Group Plc and Finsbury Food Group plc
- Increased stake in Western Selection, representing 43.8% of share capital
- Two dividends per annum proposed
David Marshall, Chairman of Lonfin commented:
"Last six months have been challenging for the Company and our strategic
investments due to the volatile financial market conditions which have had an
impact on our net assets. However, we remain confident that our balanced
investments and combined portfolios are an effective way of achieving growth
over medium and longer term."
- Ends -
Enquiries to:
London Finance & Investment Group Via Redleaf Communications
P.L.C.
David Marshall
Redleaf Communications 020 7822 0200
Emma Kane/Sanna Lehtinen
Notes to Editors:
* 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 U.K. and European equities.
* Its strategic investments comprise: Western Selection P.L.C., Marylebone
Warwick Balfour Group Plc and Finsbury Food Group plc. Western Selection
P.L.C. has strategic investments in Creston plc, Swallowfield plc,
Northbridge Industrial Services plc and Industrial & Commercial Holdings
P.L.C. The General Portfolio has material interests in Oil, Natural
Resources, Pharmaceuticals and Healthcare, Food and Beverages and Banking.
TO THE MEMBERS
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 performance
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 mainly consists of investments in major U.K. and European equities.
At 31st December 2007, 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.
Results
Our net assets per share decreased 15% to 56p at 31st December 2007 from 66p at
30th June 2007. Our Strategic Investments decreased in value by 19% and our
General Portfolio increased by 9%. This compares with the decline in the FTSE
100 index of 2% over the half year. At the close of business on 15th February
2008, our net asset value was 48p.
The Group made a profit before tax for the half year of £228,000 compared with
a profit of £1,048,000 for the same period last year due to a substantial
reduction in profits realised from the General Portfolio. Our profit after tax
and minority interest was £220,000 (2006 -£750,000) giving earnings per share
of 0.7p (2006 - 2.50p).
Strategic Investments
Western Selection P.L.C. ("Western")
The Group has increased its investment by £1,297,000 in the period through the
subscription for Warrant Units and the subsequent exercise of 2007 Warrants. We
now own 7,864,412 Western shares and 3,785,820 Western 2010 Warrants
representing 43.8% of Western's issued share capital and 49.2% of outstanding
Warrants. The 2010 Warrants are exercisable 28 days after posting of Western's
interim and annual accounts in each of the years 2008 to 2010. We have approval
from Western's shareholders and the Takeover Panel to increase our holding in
Western up to 48% through the exercise of warrants.
Following its fund raising, Western has cash and bank facilities available to
take advantage of any buying opportunities in the stock markets and to acquire
new strategic investments.
On 14th February 2008, Western announced a profit after tax and exceptional
items of £38,000 for its half year to 31st December 2008 and a profit per share
of 0.3p (2006 - loss after exceptional items 1.9p). Western's net assets at
market value were £11,333,000 equivalent to 63p per share, a decrease of 10.9%
from 89.8p at 30th June 2007 (adjusted for the exercise of warrants).
The market value of the Company's investment in Western at 31st December 2007
was £2,961,000 against a book value of £5,886,000, this represent 17% of the
net assets of Lonfin. The underlying value of the Company's investment in
Western, valuing Western's own investments at market value, was £4,964,000
(30th June 2007 - £5,300,000).
I am the Chairman of Western and Mr. Robotham is a non-executive director.
Western has strategic investments in Creston plc, Northbridge Industrial
Services PLC and Swallowfield plc. Extracts from Western's announcement on its
strategic investments are set out below:
Creston plc
Creston is a marketing services group whose strategy is to grow within its
sector to become a substantial diversified international marketing services
group. Creston's results for the half-year to 30th September 2007 show a
profit after tax of £2,280,000 (2006 restated: £790,000), equivalent to
earnings of 4.1p per share (2006 restated: 1.6p).
Western owns 3,000,000 shares in Creston (5.4%) with a market value at 31st
December 2007 of £2,288,000 (30th June 2006: £4,890,000), being 20.2% of
Western's assets.
Northbridge Industrial Services PLC
Northbridge was formed for the purpose of acquiring companies that hire and
sell specialist industrial equipment such as electrical load banks and
generators. Northbridge's first acquisition was Crestchic Limited, one of
the largest specialist load bank equipment manufacturers in the world,
located in Burton-on-Trent, selling and hiring to a national and
international customer base.
Northbridge has recently acquired RDS (Technical) Limited ("RDS") which
conducts the majority of its activities through a branch office in Baku,
Azerbaijan. Its principal business is to provide generators and associated
equipment by way of hire, sale and service to the oil and gas industry in
the Caspian region. RDS is held by Northbridge (Middle East) FZE, a recently
incorporated wholly owned subsidiary of Northbridge, which has been
established in the Jebel Ali Free Zone in Dubai, UAE. This will enable its
newly formed subsidiary in Dubai to establish an oil and gas business in the
Middle East and Caspian region with a broader range of equipment available
for hire and sale.
Western owns 1,500,000 shares, representing 20.3% of Northbridge's share
capital. The value of this investment at 31st December 2007 was £2,220,000
(30th June 2006: £2,768,000), representing 19.6% of Western's assets.
Swallowfield plc
Swallowfield is a full service provider for global and household brands
operating in the cosmetics and personal care and household goods
marketplace. It offers a flexible and tailored service including: contract
filling market analysis, design, formulation and testing of products,
packaging design and sourcing and distribution of stock.
Swallowfield's latest results, for the year to 30th June 2007, showed
profit, before exceptional items, of £683,000 (2006: loss of £295,000).
At 31st December 2007, Western owned 1,000,000 shares in Swallowfield (8.9%
of their issued share capital). The market value of the Company's holding in
Swallowfield on 31st December 2007 was £740,000 (30th June 2006: £795,000)
representing 6.5% of the Company's assets. Since 31st December Western has
acquired a small number of Swallowfield shares and now own in excess of 9%
of the company.
Western has unsuccessfully requested the Swallowfield Board's assistance in
appointing two new directors: Peter Gyllenhammar (a fellow Swallowfield
shareholder owning 29%) and David Marshall Western does not believe that the
Swallowfield Board contains a broad enough mix of experience and will
continue to work with other Swallowfield shareholders to rectify this.
Marylebone Warwick Balfour Group Plc ("MWB")
The Group owns 2,000,000 shares, representing 2.48% of MWB's issued share
capital. The market value of the holding at 31st December, 2007 was £4,860,000,
compared with a book value of £1,681,000, which represents 28% of the net
assets of Lonfin.
MWB is in the process of a realisation program through the controlled sale of
assets with the objective of returning cash or cash equivalents to shareholders
by the end of December 2008. We expect the repayment to be above the current
market price of MWB's shares.
I am a non-executive director of MWB.
Finsbury Food Group plc ("Finsbury Food")
The Group owns 8,000,000 shares in Finsbury Food, representing 15.6% of their
share capital. The market value of our holding was £6,880,000 on 31st December
2007 compared to a cost of £1,893,000; this represents 39% of the net assets of
Lonfin.
Finsbury Food is a supplier of ambient cakes to most of the UK's major
supermarket chains and speciality breads to Waitrose including gluten-free and
low fat products.
I am a deputy chairman of Finsbury Food.
General Portfolio
The General Portfolio consists of large capitalisation companies with
significant exposure to the United Kingdom and Europe's leading international
groups. The list of these investments appears below.
Outlook
Over the medium to long term we expect superior returns from our Strategic
Investments in smaller quoted companies. However we accept that the share
prices of these investments could be volatile in the short term.
Funding for new strategic investments will not be available until we have had
the opportunity to release funds from our existing strategic investment in MWB
and this will act as a constraint on corporate activity in the short term.
Our practice has been to only declare one dividend a year, which was paid in
October 2007 for the year ended 30th June 2007. In future we will declare two
dividends a year, with an interim dividend of approximately half of the
distribution of the previous year.
We view the future with some uncertainty due to the World economic problems in
the banking and mortgaging industries, however we expect the broad spread of
our investments to perform satisfactorily. It is our intention, subject to
unforeseen circumstances, to maintain our policy of a progressive dividend
distribution
David C. Marshall
Chairman
Interim dividend
The recommended interim dividend is 0.55p per share (2006 - nil) and will be
paid on 28th March 2008 to those members registered at the close of business on
29th February 2008. Shareholders on the South African register will receive
their dividend in South African Rand converted from sterling at the closing
rate of exchange on Tuesday, 19th February 2008.
Salient dates for dividend
Shares trade ex dividend (UK) Wednesday, 5th March 2008
Record date (UK & SA) Friday, 7th March 2008
Pay date Friday 28th March 2008
No dematerialisation or rematerialisation of share certificates, nor transfer
of shares between the registers in London and South Africa will take place
between Monday, 3rd March 2008 and Friday, 7th March 2008, both dates
inclusive.
Unaudited Consolidated Income Statement
Half year ended Year ended
31st December 30th June
2007 2006 2007
£000 £000 £000
Operating Income
Dividends received 205 155 252
Interest and sundry income 17 18 83
Profit on sales of investments 234 1,337 1,426
---------- ---------- ----------
456 1,510 1,761
Management services income 241 251 614
---------- ---------- ----------
697 1,761 2,375
---------- ---------- ----------
Administrative expenses
Investment operations (193) (170) (344)
Management services (235) (274) (594)
---------- ---------- ----------
Total administrative expenses (428) (444) (938)
---------- ---------- ----------
Operating profit 269 1,317 1,437
Share of result of associated undertaking
Operating profit 38 9 75
Exceptional expenses - (202) (597)
Interest payable (79) (76) (150)
---------- ---------- ----------
Profit on ordinary activities before 228 1,048 765
taxation
Tax on result of ordinary activities (3) (309) (245)
---------- ---------- ----------
Profit on ordinary activities after 225 739 520
taxation
Minority interest (5) 11 (31)
---------- ---------- ----------
Profit attributable to members of the 220 750 489
holding company
====== ====== ======
Reconciliation of headline earnings
Earnings per share 0.7p 2.5p 1.6p
Adjustment for exceptional items, net of - 0.5p 2.4p
tax
---------- ---------- ----------
Headline earnings per share 0.7p 3.0p 4.0p
---------- ---------- ----------
Dividend per share 0.55p Nil 1.10p
Consolidated Statement of Changes in Shareholders' Equity
Unrealised gains/(losses) on investments, (2,922) 1,943 4,181
net of taxation
Profit attributable to members 220 750 489
---------- ---------- ----------
Total income and expense (2,702) 2,693 4,670
Share capital issued - 60 534
Dividend paid in respect of the previous (343) (315) (315)
year
Total transactions with shareholders (343) (255) 219
---------- ---------- ----------
Shareholders' funds at start of period 20,520 15,631 15,631
---------- ---------- ----------
Shareholders' funds at end of period 17,475 18,069 20,520
====== ====== ======
Unaudited Consolidated Balance Sheet
31st December 30th June
2007 2006 2007
£000 £000 £000
Non-current assets
Tangible assets 410 423 416
Principle investments:-
Marylebone Warwick Balfour Group Plc 4,860 4,820 5,495
Finsbury Food Group plc 6,880 7,020 9,320
Western Selection P.L.C. 2,961 3,542 3,490
---------- ---------- ----------
15,111 15,805 18,721
Current assets ---------- ---------- ----------
Listed investments 6,885 5,382 6,564
Debtors 284 177 184
Cash, bank balances and deposits 31 878 87
---------- ---------- ----------
7,200 6,437 6,835
---------- ---------- ----------
Total Assets 22,311 22,242 25,556
====== ====== ======
Capital and Reserves
Called up share capital 1,560 1,560 1,560
Share premium account 2,328 1,855 2,328
Reserves 6,503 7,186 9,425
Profit and loss account 7,084 7,468 7,207
---------- ---------- ----------
Shareholders funds 17,475 18,069 20,520
Creditors falling due within one year 3,268 2,023 1,777
Deferred taxation 1,468 2,097 3,164
Minority equity interest 100 53 95
---------- ---------- ----------
22,311 22,242 25,556
====== ====== ======
Consolidated Cash Flow Statement
Half year ended Year ended
31st December 30th June
2007 2006 2007
£000 £000 £000
Cash outflow on operating activities (354) (305) (1,311)
---------- ---------- ----------
Returns on investments and servicing of
finance
Dividends received 340 282 380
Net interest paid (58) (54) (88)
---------- ---------- ----------
Net cash inflow from returns on investments 282 228 292
and servicing of finance
---------- ---------- ----------
Taxation paid (2) (3) (13)
---------- ---------- ----------
Investing activities
Non-current asset investments purchases (1,297) (888) (948)
Non-current asset investments disposals - 2,080 2,080
---------- ---------- ----------
Net cash (outflow)/inflow from investment (1,297) 1,192 1,132
activities
---------- ---------- ----------
Equity dividend paid - Company (343) (315) (315)
---------- ---------- ----------
Financing
Share capital issued - 60 534
Net drawdown/(repayment) of loan facility 1,658 (150) (403)
---------- ---------- ----------
Net cash inflow/(outflow) from financing 1,658 (90) 131
---------- ---------- ----------
Increase in cash (56) 707 (84)
====== ====== ======
(a) Reconciliation of operating profit to net cash flow from operating
activities
31st 30th
December June
2007 2007
£000 £000
Profit before taxation 228 765
Dividends receivable (205) (253)
Share of associate (38) (75)
Depreciation charges 7 14
Net interest paid 80 138
Profit on sale of non-current asset investment - (1,239)
(Increase)/Decrease in debtors (99) 12
(Decrease)/Increase in creditors (168) 56
Increase in current asset investments (158) (729)
---------- ----------
(353) (1,311)
====== ======
(b) Reconciliation of net cash flow to movement in net debt
At start Cash At end of
of period flow Period
£000 £000 £000
2007
Cash at bank 87 (56) 31
Bank loan (1,247) (1,658) (2,905)
---------- ---------- ----------
(1,160) (1,714) (2,874)
2006/2007
Cash at bank 171 (84) 87
Bank loan (1,650) 403 (1,247)
(1,479) 319 (1,160)
Market Value of General Portfolio
31st December 2007
£000 %
L'Oreal 248 3.6
Nestlé 231 3.4
British American Tobacco 224 3.2
Heineken 211 3.1
Royal Dutch Shell 210 3.0
ABB 203 2.9
BASF 202 2.9
Lafarge 202 2.9
Beiersdorf 199 2.9
Unilever 192 2.8
Reckitt Benckiser 189 2.7
BHP Billiton 187 2.7
Land Securities Group 186 2.7
BP 186 2.7
Standard Chartered 185 2.7
Diageo 184 2.7
Anglo American 183 2.7
Investor 179 2.6
Imperial Tobacco Group 178 2.6
Holcim 178 2.6
ING Groep 172 2.5
Pernod-Ricard 168 2.4
Koninklijke 167 2.4
Henkel 166 2.4
Credit Suisse Group 163 2.4
Schindler-Holdings 162 2.4
Johnson Matthey 160 2.3
Total 159 2.3
Associated British Foods 157 2.3
Richemont 155 2.3
Carlsberg 153 2.2
Rio Tinto 150 2.2
LVMH Moët Hennessy-Louis Vuitton 147 2.1
Novartis 144 2.1
UBS 140 2.0
Roche Holdings 130 1.9
Deutche Post 121 1.8
Swire Pacific 109 1.6
Heidelbergcement 106 1.5
TNT 101 1.5
---------- ----------
6,885 100.0
---------- ----------
Notes:-
1. The results for the half-year are unaudited and have been prepared in
accordance with International Financial Reporting Standards which was the
basis on which the accounts for the year ended 30th June 2007 were
prepared. The financial information in this interim report does not
constitute statutory accounts within the meaning of Section 240(5) of the
Companies Act 1985. The audited accounts of the Group for the year ended
30th June 2007 have been reported on by the Group's auditors and have been
delivered to the Registrar of Companies. The report of the auditors was
unqualified and did not contain a statement under Section 237(2) or 272(3)
of the Companies Act 1985.
2. Earnings per share are based on the profit after taxation and minorities
and on the weighted average number of shares in issue during the period -
31,200,000 (December 2006 - 30,065,217 and June 2007 - 30,631,233).
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