Interim Results
London Finance & Investment Group P.L.C.
10th March
2003
UNAUDITED RESULTS FOR THE SIX MONTHS TO 31STDECEMBER 2002
The directors are pleased to present the unaudited interim results of the
company for the six months ended 31st December 2002.
Results
Our profit on ordinary activities attributable to shareholders for the six
months was £71,000 compared to a loss of £5,000 for the same period in 2001 and
earnings per share were 0.28p (2001 - loss per share of 0.02p).
The operating profit is mainly due to profits realised on sales of investments
in the period. Dividends received during the period decreased as a result of
Marylebone Warwick Balfour Group Plc ('MWB') ceasing payment of dividends due
to a major change in the direction of its business (see MWB below). Management
services income has increased due to timing of one off tasks undertaken on
behalf of clients.
During both 2000 and 2001 our associated company, Western Selection P.L.C.,
realised exceptional profits on the sale of part of its investment in The
Sanctuary Group PLC. This has not been repeated this year and is the main
reason for the decrease in contribution to profit from Western.
As is our practice, we are not paying an interim dividend; the dividend paid in
October 2002 was for the 12 months ended on 30th June 2002. At 31st December
2002 our net asset value per share was 30.1p, a decrease of 23% from 30th June
2002 and 19% from 31st December 2001. Net asset value has declined mainly due
to a significant decrease in the market value of our strategic investment in
MWB, which is held as a long term fixed asset. Excluding MWB, our net asset
value per share has declined by 8% over the last six months. This compares with
falls in the FTSE 100 and the FTSE All Share during the same period, which were
down 15% and 17% respectively.
If we value our investment in Western at net asset value, rather than market
value, our net assets per share at 31st December 2002 were 35p compared to 43p
at 30th June 2002.
Investment policy and management
Our investment policy is to have strategic stakes in a few special situations,
and hold a diversified general portfolio of U.K. and European listed equities.
Strategic investments are minority positions where we seek to exercise
influence over the management of the investment. We are represented on the
boards of two of our strategic investments (MWB and Finsbury Food Group plc)
and, in turn, Western is also represented on the boards of three of its
strategic investments, Creston plc, The Sanctuary Group PLC and Doctors Direct
plc.
I manage our general portfolio, together with one of our non-executive
directors, Michael Robotham. Decisions in relation to both our strategic and
unlisted investments are taken by the board as a whole.
Strategic Investments
Marylebone Warwick Balfour Group Plc ('MWB')
In view of the worsening economic environment and its impact upon business
activities, MWB took the decision in early 2002, to mature and realise its
assets for the benefit of all stakeholders. An orderly disposal program is
presently under way and the Group has already realised certain assets,
including its interest in the Cannon Street property, the residential
development site at Royal Victoria Docks and the Teesside Leisure Park at
Stockton-on-Tees. The Board of MWB are committed to return 200p a share to
shareholders by December 2005. If this target is achieved we will realise
approximately £4.5 million more than the current value of our investment.
During the year ended 30th June 2002, MWB produced a loss on ordinary
activities before exceptional items and after taxation of £31.6m and incurred
exceptional items of a further £75.6m. This compared to a profit of £9.2m in
the previous year. The principally non-cash exceptional write-downs reflect the
diminution in the property and enterprise value of MWB's serviced office
subsidiary, together with the value of certain investments and the Liberty
brand. The share price at 31st December 2002 was 50.75p, compared to 88p at
31st December 2001, and was 49.5p on 28th February 2003.
Finsbury Food Group plc (formerly Megalomedia plc)
During August 2002 Megalomedia plc, a clean cash shell, changed direction and
moved into the food industry by successfully completing the acquisition of
Memory Lane Cakes Ltd ('Memory Lane'), a supplier of ambient temperature cakes
to leading U.K. supermarkets. At the same time, the name of the company was
changed from Megalomedia plc to Finsbury Food Group plc ('FFG') and David
Brooks, the then Managing Director of Memory Lane, was appointed Group Chief
Executive. Memory Lane bakes own-label cakes for major supermarkets and
produces a number of brands of its own under licence, including Mrs Beeton,
Bubblegum and a number of Nestlé confectionery brands.
During February 2003 FFG acquired the trade and assets of Nicholas & Harris, a
supplier of specialty bread and cake products mainly to major supermarket
chains. The acquisition is expected to be earnings enhancing in the year ending
June 2004. The Board of FFG believe that significant opportunities exist within
the fragmented UK food sector to develop profitable niche businesses and,
through organic growth and acquisition, to create a substantial cash generative
Group.
Following the announcement of the change of direction of the business to a food
group, we acquired 200,000 new shares and a further 1,566,667 warrants. We now
hold 4,500,000 shares in FFG, representing 21.47% of the issued share capital,
and 3,000,000 warrants, representing 45.79% of the warrants. The share price at
31st December 2002 was 29p, compared to 26p at 31st December 2001, and was 31p
on 28th February 2003.
Western Selection P.L.C., our associate strategic investment company, announced
profits after tax for the six months to 31st December 2002 of £166,000 (2001-
loss of £125,000, excluding exceptional items). Western's intention, subject to
unforeseen circumstances, is to maintain the dividend for the current year,
which it anticipates paying in October 2003. Western's net asset value per
share at 31st December 2002, taking listed investments at market value, was
19.2p. This is a reduction of 13% from 30th June 2002 and 30% from 31st
December 2001. This compares with falls in both the FTSE 100, which was down
15% over the last six months and 24% over the year, and the FTSE All Share,
which fell 16% in the last six months and 25% over the year. The market value
of General Portfolio investments listed on the London Stock Exchange was £
3,960,000 (£5,287,000 at 30th June 2002), on other exchanges £440,000 (£469,000
at 30th June 2002) and on Ofex and AIM £158,000 (£234,000 at 30th June 2002).
Western's share price at 31st December 2002 was 11.25p, compared to 14p at 31st
December 2001, and was 11p on 28th February 2003.
Western has strategic investments in The Sanctuary Group PLC, Creston plc,
Swallowfield plc and Doctors Direct plc and has recently reported on them as
follows:
The Sanctuary Group plcis one of the world's leading developers of
intellectual property rights in the fields of music, television and
entertainment. It has issued accounts for the twelve months to
30thSeptember 2002, reporting an increase in turnover of 44% and operating
profits before interest and tax of £12,321,000 (2001 - £10,032,000).
Earnings per share increased 2.6% to 2.01p from 1.96p last year, and the
full year dividend is increased from 0.30p to 0.35p. The Sanctuary share
price has decreased from 48.25p at 30thJune 2002 to 40.0p at 31stDecember
2002 and was 35p on 21st February 2003.
Creston plcis the holding company of a Marketing Services Group with a'Buy
and Build' strategy. The main components of the group are Marketing
Sciences Ltd (MSL), Mobile Sensory Testing Services Ltd, both acquired in
January 2001, The Real Adventure Marketing Communications Ltd (RAMC),
which was acquired in November 2001, and EMO Group Ltd (EMO) which was
acquired in December 2002. MSL is a broad based market research agency,
MSTS provides expertise in sensory analysis and profiling of products and
RAMC provides a comprehensive range of creative and marketing disciplines
for clients including brand development, direct mail campaigns,
eMarketing, customer relationship and database management, incentive
schemes, advertising and design. EMO is a channel marketing and marketing
communications company covering all the paths a customer takes to the
product and ultimately their purchasing decision. Interim results for the
six months to 30thSeptember 2002 show earnings of £136,000 (2001 - loss of
£194,000), including the first full 6 months contribution from RAMC. The
Creston share price was 56p at 30thJune, improved to 56.5p at 31stDecember
2002 and was 62.5p on 21st February 2003.
We have increased our investment in Swallowfield plcto 8% from 7% at a
cost of £55,000. Swallowfield are a high value added and innovative
supplier of quality personal care and other products to branded and own
label customers. They specialise in formulation and manufacture of aerosol
and non-aerosol products for retail distributors, the contract filling of
aerosols and the manufacture of cosmetic pencils and other cosmetic
products. Results for the year ended 30thJune 2002 showed turnover up 7%,
and operating profit up 21% to £2,628,000. Earnings per share at 15p
increased 21% on last year. In November, Swallowfield announced that, 'a
combination of severe pressure on margins and some erosion due to
increases in our natural cost base, coupled with the delayed `ramp up' of
production output due to labour unavailability, have combined to hold back
the levels of profit' in the key pre-Christmas profit generating period.
The Swallowfield share price was 89.5p at 30thJune, 87.5p at 31stDecember
2002 and 78.5p on 21st February 2003.
We have invested £451,000 to acquire 16% of Doctors Direct plc, a company
that provides a visiting GP service direct to individuals at their home,
hotel or workplace 24 hours a day, 365 days a year. Visits are made at the
patient's request and convenience. Doctors Direct listed on OFEX at the
end of August 2002. Results for the year ended 30thJune 2002 showed a
profit from operations. However, after head office, flotation costs and
goodwill amortisation, a loss of £153,000 was incurred for the year
(equivalent to 2.2p per share post listing). Interim results for the six
months to 31stDecember 2002, the period in which the company was listed,
are expected shortly. Doctors Direct's share price was 44.5p at
30thDecember 2002 and 41.5p on 21st February 2003.
Conclusion
Our long standing strategy is to achieve increasing value for shareholders from
our Strategic Investments whose quoted value may well be volatile, and a
General Portfolio of leading shares in companies which operate on a global
basis.
The outlook for equity markets in both the short and medium term is uncertain -
with our low gearing - we are relatively well positioned to take advantage of
any investment opportunities that may arise.
We declared a dividend for the year to 30th June 2002 of 0.8p per share, which
was paid in October. As mentioned above, it is not our intention to pay interim
dividends; and, subject to unforeseen circumstances, we expect to at least
maintain our dividend for the year to 30th June 2003, which we anticipate
paying in October 2003.
David C. Marshall
Chairman
Unaudited Consolidated Profit & Loss Account
Half year Year
31st December 30th June
2002 2001 2002
£000 £000 £000
Operating Income
Dividends received 51 93 162
Interest and sundry income 14 20 28
Profit/loss on sales of investments 77 (109) 86
_____ _____ _____
142 4 276
Management services income 292 242 495
_____ _____ _____
434 246 771
_____ _____ _____
Administrative expenses
Investment operations (138) (141) (263)
Management services (250) (232) (481)
_____ _____ _____
Total administrative expenses (388) (373) (744)
_____ _____ _____
Operating profit/(loss) 46 (127) 27
Share of result of associated undertaking - normal 68 (50) (98)
- exceptional - 219 219
Interest payable (26) (43) (88)
_____ _____ _____
Profit/(loss) on ordinary activities before 88 (1) 60
taxation
Tax on result of ordinary activities (1) (1) (9)
_____ _____ _____
Profit/(loss) on ordinary activities after 87 (2) 51
taxation
Minority interest (16) (3) (7)
_____ _____ _____
Profit/(loss) attributable to members of the 71 (5) 44
holding company
Proposed dividend - - (205)
_____ _____ _____
Retained profit/(loss) for the period 71 (5) (161)
_____ _____ _____
Earnings/(loss) per share 0.28p (0.02)p 0.17p
Earnings/(loss) per share excluding exceptional 0.28p (0.88)p (0.68)p
Fully diluted earnings/(loss) per share 0.28p (0.02)p 0.17p
Dividend per share Nil Nil 0.80
Unaudited Consolidated Balance Sheet
31st December 30th June
2002 2001 2002
£000 £000 £000
Fixed assets
Tangible assets 461 485 471
Investments 7,320 7,800 7,741
______ ______ ______
7,781 8,285 8,212
Current assets
Listed investments 2,374 2,577 2,743
Unlisted investments 43 43 43
Debtors 114 133 187
Cash, bank balances and deposits 36 46 26
______ ______ ______
2,567 2,799 2,999
Creditors falling due within one year (633) (1,320) (1,583)
______ ______ ______
Net Current Assets 1,934 1,479 1,416
______ ______ ______
Total Assets less Current Liabilities 9,715 9,764 9,628
===== ===== =====
Capital and Reserves
Called up share capital 1,281 1.278 1,281
Share premium account 975 963 975
Reserves 361 362 361
Profit and loss account 7,019 7,103 6,948
______ ______ ______
Shareholders funds 9,636 9,706 9,565
Minority equity interests 79 58 63
______ ______ ______
9,715 9,764 9,628
===== ===== =====
Notes:-
1. The results for the half-year are unaudited and have been prepared on the
basis of the accounting policies adopted in the accounts for the year
ended 30th June 2002. 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 2002 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 average number of shares 25,616,862 (December 2001 - 25,551,873
and June 2002 - 25,592,026), in issue during the period.
Balance Sheet Analysis taking investments at market value
31st December 30th June
2002 2001 2002
£000 £000 £000
Principal investments at market value:
Marylebone Warwick Balfour Group Plc 1,522 2,640 2,820
Finsbury Food Group plc 1,552 1,118 1,032
Western Selection P.L.C. 2,095 2,644 2,380
Merrydown plc - sold 30 July 2002 - 567 -
______ ______ ______
5,169 6,969 6,232
General equity portfolio (see analysis below) 2,610 3,732 4,210
Tangible fixed assets 461 485 471
Cash, bank balances and deposits 36 46 26
Bank Overdraft (500) (1,050) (1,200)
Other net liabilities 25 (94) (153)
Minority interests (79) (58) (63)
______ ______ ______
Net assets 7,722 10,030 9,523
______ ______ ______
Net Assets per share 30.1p 39.3p 37.2p
Consolidated Cash Flow Statement
Half year ended Year
ended
31st December 30th June
2002 2001 2002
£000 £000 £000
Cash inflow/(outflow) on operating activities 277 141 (71)
_____ _____ _____
Returns on investments and servicing of finance
Dividend received 139 182 243
Interest paid (26) (43) (78)
_____ _____ _____
Net cash inflow from returns on investments and 113 139 165
servicing of finance
_____ _____ _____
Taxation paid (1) (1) (5)
_____ _____ _____
Investing activities
Tangible fixed assets - purchased - (5) -
Fixed assets investments - purchased (138) (105) (107)
- proceeds on disposal 663 - 3
_____ _____ _____
Net cash outflow from investment activities 525 (110) (104)
_____ _____ _____
Equity dividend paid - Company (205) (307) (307)
_____ _____ _____
Financing
Share capital issued - 2 16
Net (repayment)/drawdown of loan facility (700) 150 300
_____ _____ _____
Net cash (outflow)/inflow from financing (700) 152 316
_____ _____ _____
Increase/(Decrease) in cash 9 14 (6)
_____ _____ _____
Market Value of General Portfolio at 31st December 2002
£000 %
Unilever 201 7.70
Nestlé (Registered) 197 7.57
UBS (Registered) 156 5.98
HSBC Holding 124 4.73
Barclays Bank 123 4.72
Shell Transport & Trading Co 123 4.72
Lavendon Group 122 4.67
Diageo 115 4.40
AstraZeneca 111 4.25
Cadbury Schweppes 108 4.15
BOC Group 107 4.08
Anglo American 103 3.96
Lloyds TSB Group 98 3.76
GlaxoSmithKline 95 3.65
Novartis (Registered) 91 3.47
ING Groep 87 3.34
Roche Holdings Genusscheine 87 3.34
J. Sainsbury 84 3.20
Land Securities Group 71 2.71
Boots Company 70 2.69
Aviva 66 2.52
Prudential Corporation 66 2.52
Fortis NL 65 2.50
Smiths Group 59 2.27
Credit Suisse Group (Registered) 54 2.07
Zurich Financial Services 27 1.03
_____ _____
2,610 100.00
_____ _____
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