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LNF
LOJM
London Finance & Investment Group P.L.C. - Unaudited Interim Results For The Six
Months Ended 31st December 2005
LONDON FINANCE & INVESTMENT GROUP P.L.C.
(Incorporated in England - No. 201151)
Code: LNF ISSN: GB0002994001
Directors
D.C. Marshall, Chairman
F.W.A.A. Lucas, PhD
J.H. Maxwell, CA, CCMI, FRSA
J.M. Robotham, OBE, FCA, MSI
Registered office
30 City Road
London, EC1Y 2AG
27th February 2006
TO THE MEMBERS
The Directors are pleased to present the unaudited interim results of the
Company for the six months ended 31st December 2005
Introduction
As an investment company our target is to achieve growth in shareholder value in
real terms over the long term. In the short term our results are influenced by
overall stock market performance. We continue to believe that a combination of
Strategic Investments and a General Portfolio is the most prudent 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 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 2005, 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
The Group made a profit before tax for the half year of GBP85,000 compared with
a profit of GBP121,000 last year. Our profit after tax and minority interest
was GBP101,000 (2004 -GBP130,000) giving earnings per share of 0.38p (2004 -
0.50p).
The exceptional item of GBP40,000 included in administration expenses is the
cost of the move in July, after more than thirty years, of the administrative
offices together with the costs related to the termination of the lease on the
previous offices.
Our net assets per share have increased 36% to 50p at 31st December 2005 from
44p at 30th June 2005. Our Strategic Investments have increased in value by 42%
and our General Portfolio has increased by 10%. This compares with the rise in
the FTSE 100 index of 10% over the half year. At the close of business on 15th
February 2006, our net asset value had further increased to 51.96p.
The last time that warrant holders had the right to exercise their warrants was
October 2005 and I am pleased to report that all of the outstanding warrants
were exercised at that time. This resulted in an inflow of GBP953,000. The
Board decided to exercise the warrants held in Western Selection at a cost of
GBP518,000 and to increase the investment in Finsbury Food. The cost of these
two purchases was GBP664,000.
Strategic Investments
Western Selection P.L.C. ("Western")
During the period Western carried out a four for one consolidation of its share
register and the Company"s holding is now held in 40p shares, compared with 10p
shares previously. Additionally, on 26th October 2005, the Company exercised
all of the warrants held in Western. As a result the Company now holds
5,212,000 shares, being 44.6% of Western"s issued share capital. On 31st
January 2006, Western announced a profit after tax of GBP126,000 for its half
year to 31st December 2005 and earnings per share of 1.14p (2004 - 1.04p).
Western"s net assets at market value were GBP11,382,000, equivalent to 97.4p per
share, an increase of 12.6% from 86.5p at 30th June 2005.
The market value of the Company"s investment in Western at 31st December 2005
was GBP3.3 million against a book value of GBP4.6 million. At market value this
represents 22% 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 GBP5.1m (30th June 2005 - GBP3.9m).
I am the Chairman of Western and Mr. Robotham is a non-executive director.
Western has strategic investments in Creston 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, operating in the U.K., with significant
international clients, whose strategy is to grow within its sector both by
organic growth and acquisition.
Creston"s results for the half year to 30th September 2005 show a profit after
tax under IFRS of GBP765,000 (2004 - GBP729,000), equivalent to earnings of
2.14p per share (2004 - 3.17p). Creston"s headline earnings per share have
increased 54% to 6.70p from 4.34p.
Western owns 2,873,998 shares in Creston (8.2%) with a market value at 31st
December 2005 of GBP5,849,000 (30th June 2005 - GBP4,455,000), being 51% of
Western"s net assets.
Swallowfield plc
Swallowfield formulates, manufactures and packages high quality household goods,
toiletries and cosmetics across the whole spectrum of consumer markets for own
label and brand names. Swallowfield announced in December that as it only
expected to break even for the year (before restructuring costs), it would not
be paying an interim dividend, and it would shortly finalise a comprehensive
reorganisation and rationalisation programme across the entire business.
Swallowfield"s latest published results for the year to 30th June 2005 showed a
profit after tax, but before exceptional restructuring costs, of GBP76,000 (2004
- GBP816,000). The value of this business is underpinned by net assets in
excess of 85p per share, compared to the current price of 45p.
We own 1,000,000 shares in Swallowfield (8.88% of their issued share capital).
The market value of the Company"s holding in Swallowfield on 31st December 2005
was GBP455,000 (30th June 2005 - GBP765,000) representing 4% of Western"s net
assets.
Marylebone Warwick Balfour Group Plc ("MWB")
The Company owns 3,000,000 shares in MWB, representing 2.73% of its issued share
capital. The book value at 31st December, 2005 was GBP2.5 million compared with
a market value of GBP4.5 million, which represents 30% 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 end of December 2007. 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")
During the period the Company purchased 200,000 shares in Finsbury Food at a
cost of GBP145,900 and at 31st December 2005, it owned 5,000,000 shares in
Finsbury Food and 3,000,000 warrants, representing 21.85% of their share capital
and 47.03% of their warrants. The market value of our holding was GBP4.8
million on 31st December 2005 compared to a cost of GBP1 million; this
represents 32% of the net assets of Lonfin.
Finsbury Food is a supplier of boxed ambient cakes to most of the UK"s major
supermarket chains and speciality breads to Waitrose. In November 2005 Finsbury
acquired 3 businesses in Scotland supplying supermarkets with specialist cakes
and breads, including gluten-free and low fat products.
I am the deputy chairman of Finsbury Food.
General Portfolio
The General Portfolio is dominated by holdings in oils & natural resources,
pharmaceuticals, foods & beverages and banking. These sectors accounted for 76%
of the portfolio by value at 31st December 2005 and 73% at 30th June 2005.
The year ahead
The share prices of our Strategic Investments in smaller quoted companies will
remain volatile, nevertheless we expect these investments to provide superior
returns over the long term. We are nervous of the imbalance of the World
economy, in particular the delicate balance within the global energy markets.
As is our practice, we only declare one dividend a year which was paid in
October 2005 for the year ended 30th June 2005. It is our intention, subject to
unforeseen circumstances, to maintain that policy.
David C. Marshall
Chairman
Unaudited Consolidated Profit & Loss Account
Half year ended Year ended
31st December 30th June
2005 2004 2005
Restated Restated
GBP000 GBP000 GBP000
Operating Income
Dividends received 99 96 179
Interest and sundry income 15 14 28
Profit on sales of investments 179 180 365
293 290 572
Management services income 285 234 501
578 524 1,073
Administrative expenses
Investment operations (163) (150) (294)
Management services (295) (256) (551)
Exceptional item (40) - -
Total administrative expenses (498) (406) (845)
Operating profit 80 118 228
Share of result of associated 68 55 90
undertaking
Interest payable (63) (52) (116)
Profit on ordinary activities 85 121 202
before taxation
Tax on result of ordinary (1) (1) (12)
activities
Profit on ordinary activities 84 120 190
after taxation
Minority interest 17 10 22
Profit attributable to members 101 130 212
of the holding company
Earnings per share 0.38p 0.50p 0.81p
Headline earnings per share 0.38p 0.50p 0.81p
Fully diluted earnings per share 0.38p 0.50p 0.80p
Dividend per share Nil Nil 1.00p
Consolidated Statement of Recognised Gains and Losses
Unrealised gains on investments
held as :-
Fixed assets 3,080 1,332 2,131
Current assets 449 104 130
Deferred taxation on unrealised (1,036) (68) (176)
gains
2,493 1,368 2,085
Profit attributable to members 101 130 212
Share capital issued 953 79 -
Dividend paid in respect of the (262) (233) (233)
previous year
Total recognised gains and losses 3,285 1,343 2,064
for the year
Unaudited Consolidated Balance Sheet
31st December 30th
June
2005 2004 2005
Restat Restat
ed ed
GBP00 GBP000 GBP000
0
Fixed assets
Tangible assets 436 432 431
Investments 12,47 7,962 8,776
3
12,90 8,394 9,207
9
Current assets
Listed investments 4,687 3,924 4,265
Debtors 239 121 178
Cash, bank balances and deposits 93 79 48
5,019 4,124 4,491
Creditors falling due within one year (1,75 (1,540 (1,827
3) ) )
Net Current Assets 3,266 2,584 2,664
Deferred taxation (1,21 (68) (176)
2)
14,96 10,910 11,695
3
Capital and Reserves
Called up share capital 1,501 1,311 1,310
Share premium account 1,859 1,096 1,095
Reserves 4,729 1,521 2,237
Profit and loss account 6,831 6,910 6,992
Shareholders funds 14,92 10,838 11,634
0
Minority equity interest 43 72 61
14,96 10,910 11,695
3
Consolidated Cash Flow Statement
Half year ended Year
ended
31st December 30th
June
2005 2004 2005
GBP000 GBP00 GBP00
0 0
Cash (outflow)/inflow on (57) 5 (244)
operating activities
Returns on investments and
servicing of finance
Dividend received 201 193 277
Interest paid (64) (43) (89)
Net cash inflow from returns on 137 150 188
investments and servicing
of finance
Taxation paid (1) (1) (15)
Investing activities
Tangible assets purchased (11) - (4)
Fixed assets investments (664) (100) (101)
purchases
Net cash outflow from investment (675) (100) (105)
activities
Equity dividend paid - Company (262) (233) (233)
Financing
Share capital issued 953 78 77
Net (repayment)/drawdown of loan (50) 150 350
facility
Net cash inflow from financing 903 228 427
Increase in cash 45 49 18
(a) Reconciliation of operating profit to net cash flow from
operating activities
31st 30th June
December
2005 2005
GBP000 GBP000
Operating profit 80 228
Dividends receivable (99) (180)
Depreciation charges 5 10
(Increase)/Decrease in debtors (59) 100
(Decrease)/increase in creditors (28) 55
Decrease in current asset investments 44 (457)
(57) (244)
(b) Reconciliation of net cash flow to movement in net debt
At start Cash At end of
of period flow period
GBP000 GBP000 GBP000
Cash at bank 48 45 93
Bank loan (1,600) (50) (1,550)
(1,552) (5) (1,457)
2004/2005
Cash at bank 30 49 79
Bank loan (1,250) (150) (1,400)
(1,220) (101) (1,321)
Balance Sheet Analysis taking investments at market value
31st December 30th
June
2005 2004 2005
GBP00 GBP00 GBP00
0 0 0
Principal investments at market value:
Marylebone Warwick Balfour Group Plc 4,455 2,580 3,180
Finsbury Food Group plc 4,760 2,847 3,195
Western Selection P.L.C. 3,258 2,535 2,401
12,47 7,962 8,776
3
General equity portfolio - (see 4,687 3,924 4,265
analysis attached)
Tangible fixed assets 436 432 431
Cash, bank balances and deposits 93 79 48
Bank loan (1,55 (1,40 (1,60
0) 0) 0)
Other net (liabilities)/assets 36 (19) (48)
Deferred taxation (1,21 (68) (176)
2)
(Minority interests (43) (72) (61)
Net assets 14,92 10,83 11,63
0 8 5
Net Assets per share 49.73 41.23 P 44.38
p p p
Net Assets per share at 15th February 2006 51.96p
Notes:-
The results are presented under International Financial Reporting Standards and
comparative amounts have been restated onto the same basis. There is no effect
on the results in the comparative periods, other than the non-provision for the
proposed dividend in the year ended 30 June 2005. The reconciliations to explain
the effect of the transition on the comparative equity amounts is as follows:-
31st 30th June
December
2005 2005
GBP000 GBP000
UK GAAP reported equity 9,678 9,496
Fair value adjustments to (208) (208)
investments under IAS 39 - for years
prior to 1 July 2004
Fair value adjustments to 1,368 2,085
investments under IAS 39 (detailed
in the statement of recognised gains
and losses)
Dividend proposed not provided for - 262
under IAS 10 - Events after the
balance sheet date
IFRS restated 10,838 11,635
The results for the half-year are unaudited and have been otherwise prepared on
the basis of the accounting policies adopted in the accounts for the year ended
30th June 2005. 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 2005 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.
Earnings per share are based on the profit after taxation and minorities, and on
the average number of shares 26,785,377 (December 2004 - 25,960,112 and June
2005 - 26,113,943), in issue during the period.
Market Value of General Portfolio
31st December
2005
GBP000 %
ING Groep 167 3.5
BOC Group 144 3.1
UBS 144 3.1
Hilton Group 138 3.0
Reckitt Benckiser 134 2.9
Pernod-Ricard 132 2.8
Land Securities Group 131 2.8
Roche Holdings 131 2.8
Nestl 130 2.8
British American Tobacco 130 2.8
Standard Chartered 130 2.7
Beiersdorf 129 2.7
Diageo 126 2.7
Associated British Foods 126 2.7
BP 124 2.6
Novartis 122 2.6
Imperial Tobacco Group 122 2.6
HSBC Holding 121 2.6
Royal Dutch Shell 120 2.6
Rio Tinto 119 2.5
Anglo American 119 2.5
Cadbury Schweppes 118 2.5
GlaxoSmithKline 117 2.5
Total 117 2.5
Tesco 116 2.5
Schindler-Holdings 115 2.4
Johnson Matthey 113 2.4
Heineken 110 2.3
L"Oreal 108 2.3
Smith & Nephew 107 2.3
BHP Billiton 104 2.2
Rexam 102 2.2
Barclays 98 2.1
Carlsberg 94 2.0
Smiths Group 94 2.0
Vodafone Group 88 1.9
Koninklijke 83 1.8
Schering 78 1.7
Credit Suisse Group 70 1.5
ABN AMRO 68 1.5
Eni 48 1.0
4,687 100.0
Sponsor
Imara Corporate Finance South Africa (Pty) Ltd
Date: 27/02/2006 09:00:22 AM Produced by the JSE SENS Department
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