| Mon 10 Mar 2003, 9:55 | | London Finance & Investment Group Plc - Interim St |
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LONDON FINANCE & INVESTMENT GROUP PLC - INTERIM STATEMENT 31ST DECEMBER 2002
London Finance & Investment Group P.L.C.
(Incorporated in England - No. 201151)
Code: LNF ISSN: GB0002994001
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 2003
TO THE MEMBERS
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 GBP71,000 R980,496Ù compared to a loss of GBP5,000 R86,602Ù for the
same period in 2001 and earnings per share were 0.28p 3.87cÙ (2001 - loss per
share of 0.02p 0.35cÙ).
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 30.15p 416cÙ, 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 483cÙ compared
to 43p 676cÙ 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 GBP4.5 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 GBP31.6m R497.1mÙ and incurred
exceptional items of a further GBP75.6m R1,189.3mÙ. This compared to a profit
of GBP9.2m R104.3mÙ in the previous year. The principally non-cash exceptional
write-downs reflect the diminution in the property and enterprise value of the
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 701cÙ,
compared to 88.0p 1,524cÙ at 31st December 2001, and was 49.5p 629cÙ 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 Nestle confectionery brands.
During February 2003 FFG acquired the trade and assets of Nicholas & Harris, a
supplier of speciality 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 400cÙ, compared to 26p 450cÙ at 31st December 2001,
and was 31p 394cÙ 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 GBP166,000
R2,292,427Ù (2001- loss of GBP125,000 R2,165,063Ù, 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 265cÙ. 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 GBP3,960,000 R54,686,808Ù (GBP5,287,000
R83,169,268Ù at 30th June 2002), on other exchanges GBP440,000 R6,076,312Ù
(GBP469,000 R7,377,792Ù at 30th June 2002) and on Ofex and AIM GBP158,000
R2,181,948Ù (GBP234,000 R3,681,031Ù at 30th June 2002). Western"s share price
at 31st December 2002 was 11.25p 155cÙ, compared to 14p 242cÙ 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 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 2002, reporting an
increase in turnover of 44% and operating profits before interest and tax of
GBP12,321,000 R204,268,627Ù (2001 - GBP10,032,000 R132,928,013Ù). 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 30th June 2002 to 40.0p 552cÙ at 31st December 2002
and was 35p 565cÙ on 21st February 2002.
Creston plc is the holding company of 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 30th September 2002 show earnings of GBP136,000 (2001 -
loss of GBP194,000), including the first full 6 months contribution from RAMC.
The Creston share price was 56p at 30th June, improved to 56.5p 979cÙ at 31st
December 2001 and was 62.5p 1010cÙ on 21st February 2002.
We have increased our investment in Swallowfield plc to 8% from 7% at a cost of
GBP55,000 R759,539Ù. 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 30th June 2002 showed turnover up 7%, and operating profit up 21%
to GBP2,628,000 R41,340,805Ù. 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
{1,407.92cÙ at 30th June, 87.5p 1,208.36cÙ at 31st December 2002 and 78.5p
1269cÙ on 21st February 2002.
We have invested GBP451,000 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 30th June 2002 showed a profit from
operations. However, after head office, flotation costs and goodwill
amortisation, a loss of GBP153,000 R2,406,828Ù was incurred for the year
(equivalent to 2.2p per share post listing). Interim results for the six months
to 31st December 2002, the period in which the company was listed, are expected
shortly. Doctors Direct"s share price was 44.5p 614.54cÙ at 30th December 2002
and 41.5p 671cÙ on 21st February 2002.
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 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 11cÙ 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
Year Half year Half year Ye
30th 31st December 31st December 30
June June
2 002 2 001 2 002 2 002 2 001
R000 R000 R000 GBP000 GBP000
Operating Income
2 548 1 611 704 Dividends received 51 93
441 346 193 Interest and sundry income 14 20
1 353 (1 888) 1 063 Profit/loss on sales of 77 (109)
investments
4 342 69 1 960 142 4
7 787 4 192 4 046 Management services income 293 242
12 129 4 261 6 006 434 246
Administrative expenses
(4 137) (2 442) (1 906) Investment operations (138) (141)
(7 567) (4 018) (3 452) Management services (250) (232)
(11 704) (6 460) (5 358) Total administrative expenses (388) (373)
425 (2 200) 635 Operating profit/(loss) 46 (127)
(1 542) (866) 939 Share of result of associated 68 (50)
undertaking - normal
3 445 3 793 - - exceptional - 219
(1 384) (745) (359) Interest payable (26) (43)
944 (18) 1 215 Profit/(loss) on ordinary 88 (1)
activities before taxation
(142) (17) (14) Tax on result of ordinary (1) (1)
activities
802 (35) 1 201 Profit/(loss) on ordinary 87 (2)
activities after taxation
(110) (52) (221) Minority interest (16) (3)
692 (87) 980 Profit/(loss) attributable to 71 (5)
members of the holding company
(3 225) - - Proposed dividend - -
(2 533) (87) 980 Retained profit/(loss) for the 71 (5)
period
1.10 c (0.35) c 3.87 c Earnings per share 0.28 p (0.02)
10.70 c (15.24) c 3.87 c Earnings per share excluding 0.28 p (0.88)
exceptional
2.67 c (0.35) c 4.00 c Fully diluted earnings per 0.29 p (0.02)
share
12.58 Nil Nil Dividend per share Nil Nil
Unaudited Consolidated Balance Sheet
30th 31st December 31st December 30th
June June
2002 2001 2002 2002 2001 2
R000 R000 R000 GBP000 GBP000 G
Fixed assets
7 409 8 400 6 366 Tangible assets 461 485 4
121 773 135 100 101 088 Investments 7 320 7 800 7
129 182 143 500 107 454 7 781 8 285 8
Current assets
43 150 44 635 32 784 Listed investments 2 374 2 577 2
676 745 594 Unlisted investments 43 43 4
2 942 2 303 1 574 Debtors 114 133 1
409 797 497 Cash, bank balances 36 46 2
and deposits
47 177 48 480 35 449 2 567 2 799 2
(24 902) (22 863) (8 742) Creditors falling due (633) (1 320) (
within one year
22 275 25 617 26 707 Net Current Assets 1 934 1 479 1
151 457 169 117 134 161 Total Assets less 9 715 9 764 9
Current Liabilities
Capital and Reserves
20 151 22 136 17 690 Called up share 1 281 1 278 1
capital
15 338 16 680 13 465 Share premium account 975 963 9
5 679 6 270 4 985 Reserves 361 362 3
109 298 123 027 96 931 Profit and loss 7 019 7 103 6
account
150 466 168 113 133 071 Shareholders funds 9 636 9 706 9
991 1 004 1 091 Minority equity 79 58 6
interests
151 457 169 117 134 162 9 715 9 764 9
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 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 25,616,945Ù (December 2001 - 25,551,873 and
June 2002 - 25,592,026), in issue during the period.
Balance Sheet Analysis taking investments at market value
30th 31st December 31st December 30th
June June
2002 2001 2002 2002 2001
R000 R000 R000 GBP000 GBP000
Principal investments at
market value:
44 361 45 726 21 032 Marylebone Warwick 1 523 2 640
Balfour Group Plc
16 234 19 364 21 447 Finsbury Food Group plc 1 553 1 118
37 440 45 796 28 918 Western Selection P.L.C. 2 094 2 644
- 9 821 - Merrydown plc - sold 30 - 567
July 2002
98 035 120 707 71 397 5 170 6 969
66 227 64 640 36 044 General equity portfolio 2 610 3 732
(see analysis below)
7 409 8 401 6 366 Tangible fixed assets 461 485
409 797 497 Cash, bank balances and 36 46
deposits
(18 877) (18 187) (6 905) Bank Overdraft (500) (1 050)
(2 407) (1 628) 345 Other net liabilities 25 (94)
(991) (1 005) (1 091) Minority interests (79) (58)
149 805 173 725 106 653 Net assets 7 723 10 030
584.87 c 679.83 c 416.37 c Net Assets per share 30.15 p 39.25 p
Consolidated Cash Flow Statement
Year ended Half year Half year Year
ended ended ended
30th June 31st December 31st December 30th
June
2002 2001 2002 2002 2001 2002
R000 R000 R000 GBP000 GBP000 GBP00
(1 117) 2 442 3 825 Cash inflow/(outflow) on 277 141 (71)
operating activities
Returns on investments
and servicing of finance
3 823 3 152 1 920 Dividend received 139 182 243
(1 227) (745) (359) Interest paid (26) (43) (78)
Net cash inflow from 113 139 165
returns on investments
and servicing
2 596 2 407 1 561 of finance
(79) (17) (14) Taxation paid (1) (1) (5)
Investing activities
- (87) - Tangible fixed assets - - (5) -
purchased
(1 683) (1 819) (1 906) Fixed assets investments (138) (105) (107)
- purchased
47 - 9 156 - proceeds on disposal 663 - 3
(1 636) (1 906) 7 250 Net cash outflow from 525 (110) (297)
investment activities
(4 829) (5 317) (2 831) Equity dividend paid - (205) (307) (307)
Company
Financing
252 35 - Share capital issued - 2 16
4 719 2 598 (9 667) Net (repayment)/drawdown (700) 150 300
of loan facility
4 971 2 633 (9 667) Net cash (outflow)/inflow (700) 152 316
from financing
(94) 242 124 Increase/(Decrease) in 9 14 (6)
cash
Market Value of General Portfolio at 31st December 2002
R000 GBP000 %
2776 Unilever 201 7.7
2721 Nestl (Registered) 197 7.6
2154 UBS (Registered) 156 6.0
1712 HSBC Holding 124 4.7
1699 Barclays Bank 123 4.7
1699 Shell Transport & Trading Co 123 4.7
1685 Lavendon Group 122 4.7
1588 Diageo 115 4.4
1533 AstraZeneca 111 4.3
1491 Cadbury Schweppes 108 4.2
1478 BOC Group 107 4.1
1422 Anglo American 103 4.0
1353 Lloyds TSB Group 98 3.8
1312 GlaxoSmithKline 95 3.7
1257 Novartis (Registered) 91 3.5
1201 ING Groep 87 3.3
1201 Roche Holdings Genusscheine 87 3.3
1160 J. Sainsbury 84 3.2
981 Land Securities Group 71 2.7
967 Boots Company 70 2.7
911 Aviva 66 2.5
911 Prudential Corporation 66 2.5
898 Fortis NL 65 2.5
815 Smiths Group 59 2.3
746 Credit Suisse Group (Registered) 54 2.1
373 Zurich Financial Services 27 1.0
36 044 2 610 100.0
