| Thu 7 Mar 2002, 0:00 | | London Finance & Investment Group P.l.c.- Interim |
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LONDON FINANCE & INVESTMENT GROUP PLC -
ISIN Code : GB0005264105
Share Code : LNFO
Directors Registered office
D.C. Marshall, Chairman 25 City Road
R.A. Good London, EC1Y 1BQ
Dr. F.W.A.A. Lucas
J.M. Robotham, OBE, FCA, MSI 7th March 2002
TO THE MEMBERS
The directors are pleased to present the unaudited interim results of the
company for the six months ended 31st December 2001.
Results
Our loss on ordinary activities attributable to shareholders for the six
months was GBP5,000 compared to a profit of GBP883,000 for the same period
in 2000 and losses per share were 0.02p (2000 - profit per share of 3.46p).
The operating loss is mainly due to lower profits realised on sales of
investments in the period and provisions made to value General Portfolio
investments at market value, where this is below cost. Last year, dividends
received included a special dividend of GBP64,000 from our investment in
Creston plc, which has not been repeated this year. Management services
income has also declined due to timing of one off tasks undertaken on behalf
of overseas clients.
The contribution to profits by our associated company, Western Selection
P.L.C., for its half year to 31st December 2001, includes exceptional
profits realised on the sale of part of Western's strategic investment in
The Sanctuary Group PLC (in both 2000 and 2001), and the receipt in 2000 of
an exceptional dividend from its strategic investment in Creston plc.
As is our practice, we are not paying an interim dividend; the dividend paid
in October 2001 was for the 12 months ended on 30th June 2001. At 31st
December 2001 our net asset value per share was 39.25p, a decrease of 28%
from 30th June 2001 and 36% from 31st December 2000. The decrease in net
asset value is mainly due to a significant decrease in the market value of
our strategic investment in Marylebone Warwick Balfour Group Plc, which is
held as a long term fixed asset. Excluding MWB, our net asset value per
share has declined by 14% over the last year. This compares with falls in
both the FTSE 100, which was down 7.53% over the last six months and 16.15%
over the year, and the FTSE All Share, which fell 7.17% in the last six
months and 15.13% over the year.
If we value our investment in Western at net asset value, rather than market
value, our net assets per share at 31st December 2001 were 48p compared to
62p at 30th June 2001.
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 (Marylebone
Warwick Balfour Group Plc and Megalomedia plc) and, in turn, Western is also
represented on the boards of two of its strategic investments, Creston plc
and The Sanctuary Group PLC.
Our general portfolio is managed by two of our non-executive directors,
Richard Good and 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") consists of a series of highly
cash generative businesses, each of which has property at its core.
Operations are split into 6 areas:
MWB Business Exchange, which provides 712,081 workstations in 38 serviced
office centres;
Hotels, most of which have 20-year management agreements with recognised
operators;
Retail Stores, which owns the Liberty brand, retail operations and
properties;
Fund Management, which has invested GBP539m out of GBP650m committed by
three leisure funds;
Asset Management, which owns and manages commercial property; and
Project Management, which covers activities that create one-off profits or
fees, over a defined time-scale, with clearly contained risk.
MWB announced profits before tax of GBP7,660,000 for its year ended 30th
June 2001 (2000 - GBP11,418,000) and dividends for the year of 2.8p (2000 -
2.8p) per share. Earnings per share fell by 25% to 7.3p. At 30th June 2001
the group had net assets with a book value in excess of GBP354 million (2000
- 210m), and net assets per share of 235p (up from 202p at 30th June 2000).
The market has marked down significantly the share price of MWB because of
similarities between its mainly UK based Business Exchange operations and
Regus plc's poor performing international network of serviced offices with
heavy exposure in the US. The share price at 31st December 2001 was 88.0p,
compared to 233.5p at 31st December 2000, and was 88.0p on 28th February
2002.
Megalomedia plc has metamorphosed into a clean cash shell with net assets of
GBP5,141,000 at 30th September 2001 (29.5p per share on a fully diluted
basis). It is looking to invest in a sound, cash generative business with
good management and strong growth prospects. The share price at 31st
December 2001 was 26p, compared to 22p at 31st December 2000, and was 25p at
28th February 2002.
We have taken a 5.1% shareholding in Merrydown plc, producers of Merrydown
cider and Schloer soft drinks. Merrydown has reported increased turnover
for the half year ended 30th September 2001 of GBP8,054,000 (2000 -
GBP7,331,000) and increased operating losses of GBP271,000 (2000 -
GBP170,000) due to higher marketing spend for the Schloer brand.
Advertising and promotional spend in the 6 months was over GBP1,000,000 more
than in the same period last year. Merrydown's management is confident that
growth in Schloer sales, which have a seasonal peak over Christmas, will
continue to offset declines in cider sales. Our average cost of investment
of 40p compares with net assets per share at 30th September of 49p and a
share price of 42p at 31st December 2001 and 41p at 28th February 2002.
Western Selection P.L.C., our associate strategic investment company,
announced profits after tax for the six months to 31st December 2001 of
GBP417,000 compared with GBP1,754,000 for the same period in the previous
year. Western expects to at least maintain its dividend of 0.46p for its
current year. The net asset value of Western, at market values, has fallen
to GBP11,945,500 from GBP14,720,000 at 31st December 2000. This equates to
27.4p per share at 31st December 2001, a decrease of 9% since 30th June
2001. The share price at 31st December 2001 was 14.0p, compared to 14.75p
at 31st December 2000, and was 14.0p at 28th February 2002.
Western has strategic investments in The Sanctuary Group PLC, Creston plc
and Swallowfield plc and has recently reported on them as follows:
The Sanctuary Group plc is 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 30th
September 2001, reporting an increase in turnover of 87% and operating
profits before interest and tax of GBP10,146,000 (2000 - GBP5,533,000).
Earnings per share increased 36% to 2.56p from 1.88p last year, and the full
year dividend is increased from 0.25p to 0.30p. The Sanctuary share price
has decreased from 74.0p at 30th June 2001 to 67.5p at 31st December 2001
and was 60.0p on 28th February 2002.
Creston plc is the recently transformed holding company of a Marketing
Services Group with a strategy incorporating acquisitions as well as organic
growth. The main components of the group are Marketing Sciences Ltd (MSL),
Mobile Sensory Testing Services Ltd, both acquired in January 2001, and The
Real Adventure Marketing Communications Ltd (RAMC) which was acquired in
November 2001. 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. Interim results for the six months to 30th September 2001 show a
loss for the six months of GBP194,000, reflecting the bedding-in of the
first acquisitions made under the new strategy. The Creston share price was
82.5p at 30th June 2001, improved to 88.5p at 31st December 2001 and was
81.5p on 28th February 2001.
We have acquired 7.1% of Swallowfield plc, 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 31st December 2001 show turnover up 8%
and operating profit up 6% to GBP2,875,000. Earnings per share, excluding
restructuring, increased 9% on last year. Our average acquisition cost of
108p per share compares with Swallowfield's share price of 105.5p at 30th
June 2001, 92.5p at 31st December 2001 and 105.0p on 28th February 2001.
Conclusion
The MWB share price currently stands at a significant discount to MWB's net
asset value and we are supporting management's efforts to eliminate this
discount. We are engaged in the identification of a new business for
Megalomedia and are encouraging the management of our new strategic
investment, Merrydown to investigate ways of increasing shareholder value.
General Portfolio investments are held for the medium to long term, and we
expect that they will provide a reasonable return over time, by way of both
income and capital growth.
We declared a dividend for the year to 30th June 2001 of 1.2p 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 2002, which we
anticipate paying in October 2002.
David C. Marshall
Chairman
Unaudited Consolidated Profit & Loss Account
Half year ended Year ended
31st December 30th June
2001 2000 2001
GBP000 GBP000 GBP000
Operating Income
Dividends received 93 174 304
Interest and sundry income 20 16 34
(Loss)/profit on sales of
investments (109) 136 282
4 326 620
Management services income 242 238 425
246 564 1,045
Administrative expenses
Investment operations (141) (137) (273)
Management services (232) (186) (416)
Total administrative expenses (373) (323) (689)
Operating (loss)/profit (127) 241 356
Share of result of associated
undertaking - normal (50) (90) 4
- exceptional 219 805 805
Interest payable (43) (58) (105)
(Loss)/profit on ordinary
activities before taxation (1) 898 1,060
Tax on result of
ordinary activities (1) - (12)
(Loss)/profit on
ordinary activities
after taxation (2) 898 1,048
Minority interest (3) (15) (3)
(Loss)/profit attributable
to members of the
holding company (5) 883 1,045
Proposed dividend - - (307)
Retained (loss)/profit
for the period (5) 883 738
Earnings per share (0.02)p 3.46p 4.09 p
Earnings per share
excluding exceptional (0.88)p 0.31p 0.94p
Fully diluted earnings per share Nil Nil 3.93p
Dividend per share Nil Nil 1.10p
Unaudited Consolidated Balance Sheet
31st December 30th June
2001 2000 2001
GBP000 GBP000 GBP000
Fixed assets
Tangible assets 485 509 493
Investments 7,800 7,199 7,607
8,285 7,708 8,100
Current assets
Listed investments 2,577 3,537 3,443
Unlisted investments 43 43 43
Debtors 133 225 157
Cash, bank balances
and deposits 46 238 32
2,799 4,043 3,675
Creditors falling due
within one year (1,320) (1,828) (2,010)
Net Current Assets 1,479 2,215 1,665
Total Assets less
Current Liabilities 9,764 9,923 9,765
Capital and Reserves
Called up share
capital 1,278 1,277 1,277
Share premium
account 963 961 962
Reserves 362 363 361
Profit and
loss account 7,103 7,254 7,109
Shareholders
funds 9,706 9,855 9,709
Minority equity
interests 58 68 56
9,764 9,923 9,765
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 2001. 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 2001 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 25,551,873 (December 2000 -
25,530,338 and June 2001 - 25,540,767), in issue during the period.
Balance Sheet Analysis taking investments at market value
31st December 30 June
2001 2000 2001
GBP000 GBP000 GBP000
Principal investments at market value:
Marylebone
Warwick Balfour Group Plc 2,640 7,005 5,160
Megalomedia plc 1,118 902 1,161
Merrydown plc - acquired 27 June 2001 567 - 429
Western Selection P.L.C. 2,644 2,841 3,418
Creston plc - sold 30 January 2001 - 186 -
6,969 10,934 10,168
General equity portfolio (see
analysis below) 3,732 5,557 5,040
Tangible fixed assets 485 509 493
Cash, bank balances and deposits 46 238 32
Bank Overdraft (1,050) (1,500) (900)
Other net liabilities (94) (61) (910)
Minority interests (58) (68) (55)
Net assets 10,030 15,609 13,868
Net Assets per share 39.25p 61.11p 54.28p
Consolidated Cash Flow Statement
Half year ended Year ended
31st December 30 June
2001 2000 2001
GBP000 GBP000 GBP000
Cash inflow on operating activities 141 304 888
Returns on investments and servicing
of finance
Dividend received 182 270 374
Interest paid (43) (58) (105)
Net cash inflow from returns on investments and servicing
of finance 139 212 269
Taxation (paid)/recovered (1) 5 (6)
Investing activities
Tangible fixed assets - purchased (5) (5) (3)
Fixed assets investments - purchased (105) (56) (532)
- proceeds on disposal - - 238
Net cash outflow from investment
activities (110) (61) (297)
Equity dividend paid - Company (307) (281) (281)
Financing
Share capital issued 2 6 6
Net drawdown/(repayment) of loan
facility 150 - (600)
Net cash inflow from financing 152 6 (594)
Increase/(Decrease) in cash 14 185 (21)
Market Value of General Portfolio at 31st December 2001
GBP000 %
Uti Worldwide Inc 317 8.5
Unilever 282 7.6
Nestle 218 5.9
Diageo 203 5.5
Barclays Bank 182 4.9
UBS 179 4.8
Lloyds TSB 164 4.4
AstraZeneca 155 4.2
ING Groep 145 3.9
HSBC Holding 145 3.9
The Shell Transport & Trading Company 142 3.8
GlaxoSmithKline 138 3.7
BOC Group 127 3.4
Cadbury Schweppes 123 3.3
Prudential Corporation 119 3.2
Credit Suisse Group 117 3.1
Anglo American 117 3.1
J. Sainsbury 110 2.9
Fortis NL 106 2.8
CGNU 101 2.7
Novartis 99 2.7
Roche Holdings 98 2.6
Zurich Financial 75 2.0
Reuters Group 75 2.0
Land Securities 71 1.9
Boots Company 70 1.9
Cable & Wireless 40 1.0
Others (less than 1%) 14 0.3
3,732 100.0
