| Fri 14 Sep 2007, 9:00 | | LNF - London Finance & Investment Group P.L.C. - P |
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LNF
LOJM
LNF - London Finance & Investment Group P.L.C. - Preliminary Unaudited Results
For The Year Ended 30 June 2007 and dividend declaration
LONDON FINANCE & INVESTMENT GROUP P.L.C.
(Incorporated in England - No. 201151)
Code: LNF & ISIN: GB0002994001
Directors Registered office
D.C. Marshall, Chairman 30 City Road
J.H. Maxwell London, EC1Y 2AG
Dr. F.W.A.A. Lucas
J.M. Robotham, OBE, FCA, MSI
PRELIMINARY ANNOUNCEMENT OF UNAUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2007
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.
At 30 June 2007, the three Strategic Investments, in which we have board
representation, were 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 GBP765,000 (2006 -
GBP309,000). Our operating profits have increased to GBP840,000 from GBP263,000
as a result of higher profits realised on sales of investments, particularly the
disposal of one third of the Group holding in Marylebone Warwick Balfour, and
increased fee income achieved by City Group, reduced by the costs of
establishing an Employee Benefit Trust. Our profit after tax and minority
interest was GBP489,000 (2006 - GBP303,000) giving earnings per share of 1.60p
(2006 - 1.06p).
To reflect the improvement in the earnings and our progressive dividend policy,
the Board has decided to increase the dividend for the year to 1.10p per share
(2006 - 1.05p).
Our net assets per share, after provision for deferred taxation, have increased
26% to 66p at 30th June 2007 from 52p last year. Our Strategic Investments have
increased in value by 41% and our General Portfolio by 19% after taking into
account additions and disposals of investments. This compares with the increase
in the FTSE 100 index of 13% and the FTSE Eurotop 300 index of 22% over the
year.
STRATEGIC INVESTMENTS
Western Selection P.L.C. ("Western")
The Company owns 5,287,221 shares, being 41.23% of the issued share capital of
Western, having purchased 74,721 shares for GBP47,821 during the year. On 10th
September 2007, Western announced a profit before associates and exceptional
items of GBP355,000 for its year to 30th June 2007 (2006 - GBP316,000).
Including associates and after exceptional items and tax, earnings per share
were 0.51p (2006 - 2.79p). The company announced a 4% increase in dividend to
2.55p (2006 - 2.45p). Western`s net assets at market value were GBP12,783,000,
equivalent to 100p per share, an 11% increase from 90p last year. The increase
in value reflected in the performance of both its strategic investments and
General Portfolio.
The market value of the Company`s investment in Western at 30th June 2007 was
GBP3,490,000 and the book value was GBP4,567,000. At market value this
represents 17% of the net assets of Lonfin. The underlying value of the
Company`s investment in Western, valuing Western`s investments at market value,
was GBP5.27 million (2006 - GBP4.68 million).
On 16th July 2007 Western invited its shareholders to subscribe for warrants.
The funds raised from this subscription and from the exercise of the warrants
will be used to increase the assets under management, improving the ratio of
assets invested to operating expenses.
The offer was structured to raise GBP872,000 in September 2007, assuming that
all Warrants are issued. If all Warrants are exercised GBP1,693,000 will be
raised in December 2007 and a further GBP3,848,000 in the period 2008-2010. The
offer was oversubscribed and closed on 17th August 2007. The Group took up all
of its entitlement under the offer and was allocated 204,496 Warrant Units for
its excess application. The GBP429,000 cost to the Group of this investment was
financed under a specific new facility with the Group`s bankers.
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. Creston made a
further three acquisitions during its financial year, ICM in research, TMW in
direct and digital marketing and PAN, in healthcare advertising and
communications, being some of the larger UK groups in their sectors. The
results for the year to 31st March 2007, show a profit after tax of GBP4,931,000
(2006 - GBP2,927,000), equivalent to earnings of 9.43p per share (2006 - 8.04p).
Western maintained its holding of 3,000,000 shares in Creston during the year
which is 5.4% of Creston`s issued share capital. The market value of the
Company`s holding in Creston on 30th June 2007 was GBP4,890,000 (2006 -
GBP4,845,000), being 33% (2006 - 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 complements its production capability.
Swallowfield`s latest published results were for the 28 weeks to 13 January 2007
and showed a profit of GBP255,000 (2006 - loss of 695,000 after reorganisation
costs of GBP677,000)
Western owns 1,000,000 shares in Swallowfield which is 8.9% of the issued share
capital. The market value of the Company`s holding in Swallowfield on 30th June
2007 was GBP795,000 (2006 - GBP455,000), being 5% (2006 - 4%) of Western`s net
assets.
Northbridge Industrial Services PLC
Northbridge announced profits of GBP731,000 for the year ended 31 December 2006
and declared a maiden dividend of 2p per share. Western maintained its holding
of 1,500,000 shares in Northbridge, being 19.7% of the company. The value of
the investment at 30th June 2007 was GBP2,768,000 (2006 - GBP1,598,000) being
19% (2006 - 13%) of Western`s assets.
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 to give it the potential for expansion into outsourcing
providers, capable of supplying a non-cyclical customer base. Northbridge`s
first acquisition was Crestchic Limited, one of the largest electrical load bank
equipment manufacturers in the world; selling and hiring to leading national and
international customers.
Industrial & Commercial Holdings PLC
ICH is a small unlisted PLC in which Western holds 29.9%. It owns land with
potential to receive planning permission for housing at Milngavie, adjacent to
Dougalston golf course, just north east of Glasgow. ICH is currently making
representations for inclusion in the local authority`s next five year plan, but
it may take some time 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 accepted a tender offer for 1 million shares in MWB during the year,
realising a profit of GBP1.2 million, and at 30th June 2007 holds its remaining
2 million shares representing 2.48% of MWB`s issued share capital. The market
value at 30th June 2007 was GBP5.5 million, compared with the book value of
GBP1.7 million, and represents 27% 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, and appointed Bank of
America to find a buyer for its Malmaison and Hotel du Vin property assets on 2
July 2007. 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 exercised the remaining holding of warrants, acquiring a
further 3,000,000 shares in Finsbury at a cost of GBP900,000 to bring our
holding to 8,000,000 shares, representing 15.66% of their share capital. The
market value of our holding was GBP9.3 million on 30th June 2007 (cost -
GBP1,893,000) and represents 45% of the net assets of Lonfin.
Finsbury Food`s main subsidiary, Memory Lane Cakes in Cardiff, 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.
After acquiring three bakeries in Scotland last year Finsbury continued its
expansion programme with the acquisition of the Lightbody Group in Hamilton,
Scotland in February 2007. The results are ahead of expectations and many
synergies are now being pursued within the substantially expanded group. Mr.
Marshall is a non-executive director of Finsbury.
GENERAL PORTFOLIO
The General Portfolio has material interests in Oil, Natural Resources,
Pharmaceuticals and Healthcare, Food and Beverages and Banking. These sectors
accounted for 64% of the portfolio by value at 30 June 2007 (69% at 30th June
2006). 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 decreased from 43 to 39. We
have invested GBP694,000 (2006: GBP238,000) in this portfolio over the year and
the average value of each holding has increased from GBP114,000 to GBP168,000.
We have a GBP2 million bank facility and at 30th June 2007 had drawn down
GBP1,247,000. This leaves GBP753,000 available for further investment when the
Board feels appropriate.
Dividend
The recommended dividend is 1.10p per share (2006 - 1.05p). Subject to member`s
approval, the dividend will be paid on 19 October 2007 to those members
registered at the close of business on 28 September 2007. Shareholders on the
South African register will receive their dividend in South African Rand
converted from sterling at the closing rate of exchange on 12 September 2007.
SALIENT DATES FOR DIVIDEND
Last day to trade (SA) Thursday 20 September 2007
Shares trade ex dividend (SA) Friday 21 September 2007
Shares trade ex dividend (UK) Wednesday 26 September 2007
Record date (UK & SA) Friday 28 September 2007
Pay date Friday 19 October 2007
Currency conversion date 12 September 2007.
Shareholders are hereby advised that the exchange rate to be used will be GBP 1
= ZAR14.5249.
This has been calculated as the average of the bid/ask spread as at 16h00
(United Kingdom time) being closing of business on 12th September 2007.
Consequently the dividend of 1.10p will be equal to 15.97739 South African
cents.
No dematerialisation or rematerialisation of share certificates, nor transfer of
shares between the registers in London and South Africa will take place between
Friday 21 September 2007 and Friday 28 September 2007, both dates inclusive.
Outlook
In spite of the current volatility in the market, we believe that we will again
be able to produce satisfactory results in the current year.
D.C. MARSHALL
Chairman
14 September 2007
CONSOLIDATED INCOME STATEMENT
2007 2006
GBP000 GBP000
Operating Income
Investment operations 1,713 610
Management services 662 587
Administrative expenses
Investment operations - normal (344) (350)
Management services - normal (594) (584)
Exceptional (597) -
Operating profit 840 263
Share of result of associated undertaking - normal 206 169
Share of result of associated undertaking - (131) -
exceptional
Interest payable (150) (123)
Profit on ordinary activities before taxation 765 309
Tax on result of ordinary activities (245) (4)
Profit on ordinary activities after taxation 520 305
Equity minority interest (31) (2)
Profit for the financial year attributable to 489 303
members of the holding company
Basic earnings per share 1.60p 1.06p
Headline earnings per share 3.97p 1.06p
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Ordinary Share Revaluation Fair Retained Total
share premium reserve value earnings GBP000
capital account GBP000 reserve GBP000
GBP000 GBP000 GBP000
Balances at 1 1,310 1,095 330 1,907 6,992 11,634
July 2005
Profit - - 303 303
attributable
to
shareholders - -
Fair value - - - 3,007 - 3,007
adjustment on
listed
undertakings,
net of
profits
realised
during the
year and
reflected in
the income
statement
Total income - - - 3,007 303 3,310
and expense
for the year
New shares 2 10 - - - 12
issued
New shares 188 749 - - - 937
issued in
respect of
warrants
exercised
Dividends - - - - (262) (262)
paid in
respect of
the previous
year
Total 190 759 - - (262) 687
transactions
with
shareholders
for the year
Balances at 1,500 1,854 330 4,914 7,033 15,631
30 June 2006
Year ended 30
June 2007
Balances at 1 1,500 330 7,033 15,631
July 2006 1,854 4,914
Profit - - 489 489
attributable
to
shareholders - -
Fair value - - - 4,181 - 4,181
adjustment on
listed
undertakings
net of
profits
realised
during the
year and
reflected in
the income
statement
Total income - - - 4,181 489 4,670
and expense
for the
period
New shares 60 - - 534
issued 474 -
Dividends - - - - (315) (315)
paid in
respect of
the previous
year
Total 60 474 - - (315) 219
transactions
with
shareholders
for the year
Balances at 1,560 2,328 330 9,095 7,207 20,520
30th June
2007
CONSOLIDATED BALANCE SHEET
2007 2006
GBP000 GBP000
Non-current Assets
Tangible assets 416 430
Investments 18,305 13,247
Current Assets
Listed investments 6,564 4,907
Accounts receivable 184 196
Bank balance and deposits 87 171
Current Liabilities
Accounts payable: falling due within one (1,777) (1,893)
year
Net Current Assets 5,058 3,381
Total Assets less Current Liabilities 23,779 17,058
Deferred taxation (3,164) (1,363)
Total Assets less Current Liabilities 20,615 15,695
Capital and Reserves
Called up share capital 1,560 1,500
Share premium account 2,328 1,854
Reserves 9,425 5,244
Profit and loss account 7,207 7,033
Equity shareholders` funds 20,520 15,631
Minority equity interests 95 64
20,615 15,695
CONSOLIDATED CASH FLOW STATEMENT
2007 2006
GBP000 GBP000
Cash outflow on operating activities
Cash absorbed by operations, including (1,311) (140)
General Portfolio investments
Dividends receivable 380 281
Interest paid (100) (95)
Interest received 12 20
Taxation paid (13) (4)
Net cash (absorbed)/generated by operations (1,032) 62
Investing activities
Purchase of tangible fixed assets - (12)
Proceeds on sale of non-current asset 2,080 -
investments
Non-current asset investments - purchased (948) (664)
Net cash inflow/(outflow) from investment 1,132 (676)
activities
Financing
Share capital issued 534 949
Equity dividend paid (315) (262)
Net repayment of loan facility (403) 50
Net cash (outflow)/inflow from financing (184) 737
(Decrease)/Increase in cash (84) 123
Notes
1.
The dividend for the year of 1.10p per share (2006 - 1.05p) will be paid on 5
October 2007 to shareholders on the register on 14 September 2007.
2.
Earnings per share are based on the profit on ordinary activities after taxation
and minority interests and on 30,631,233 shares (2006 - 28,672,672) 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 30 June 2006 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.
14 September 2007
Sponsor
Imara Corporate Finance South Africa (Pty) Ltd
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