LONDON FINANCE & INVESTMENT GROUP P.L.C.
3rd March 2005
TO THE MEMBERS
The Directors are pleased to present the unaudited interim results of the
Company for the six months ended 31st December 2004
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 2004, 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 �121,000 compared with
a profit of �151,000 last year. Our operating profits have decreased from �
136,000 to �118,000 after a fall in net income from management services of �
41,000 due to the timing of fees for special work. Our profit after tax and
minority interest was �130,000 (2003 - �152,000) giving earnings per share of
0.50p (2003 - 0.59p).
Our net assets per share have increased 16% to 41.6p at 31st December 2004 from
35.8p at 30th June 2004. Our Strategic Investments have increased in value by
21% and our General Portfolio net of overdrafts and other liabilities has
increased by 11%. This compares with the rise in the FTSE 100 index of 6% over
the half year. At the close of business on 28th February 2005, our net asset
value had further increased to 47.9p.
Strategic Investments
Western Selection P.L.C. ("Western")
The Company owns 17,611,928 shares, being 40.48% of the issued share capital,
and 3,238,072 warrants. On 31st January 2005, Western announced a profit after
tax of �114,000 for its half year to 31st December 2004 and earnings per share
of 0.26p (2003 - 0.24p). Western's net assets at market value were �10.3
million, equivalent to 23.8p per share, an increase of 3% from 23.2p at 30th
June 2004.
The market value of the Company's investment in Western at 31st December 2004
was �2.5 million and this represents 23.3% 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 �4.2 million (30th June 2004 - �4.1 million).
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 2004 show a profit
after tax of �1,022,000 (2003 - �515,000), equivalent to earnings of 4.5p
per share (2003 - 4.6p). Our income in the period from Creston amounted to
�16,158 (2003 - �32,000, which included a final dividend and a special
interim dividend).
Western exercised its option for 308,264 Creston shares at a price of �
1.31 per share and now owns 2,308,264 shares, being 10.05% of Creston's
issued share capital. The market value of the company's holding in Creston
on 31st December 2004 was �3,174,000 (30th June 2004 - �2,620,000), being
26.7% of Western's net assets.
I am the non-executive chairman of Creston.
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 compliments
its production capability. Swallowfield plans "to raise shareholder
returns by driving down total input costs, improving manufacturing
efficiencies, presenting new and exciting product ranges and improving our
pricing strategies".
Swallowfield's latest published results for the year to 30th June 2004
showed a profit after tax, but before exceptional restructuring costs, of
�1,094,000 (2003 - �718,000). Exceptional restructuring costs of �396,000
relating to a series of restructuring actions designed to generate annual
overhead savings of �500,000 were incurred during the year. The value of
this business is underpinned by net assets in excess of �1 per share.
We own 1,000,000 shares in Swallowfield being 8.88% of the issued share
capital. The market value of the company's holding in Swallowfield on 31st
December 2004 was �885,000 (30th June 2004 - �775,000) being 7.5% of the
net assets of the Company.
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 2004 was �2.6 million compared
with a market value of �2.5 million, which represents 23.7% 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.
Both Mr. Robotham and I are non-executive directors of MWB.
Finsbury Food Group plc ("Finsbury Food")
At 31st December 2004, the Company owned 4,800,000 shares in Finsbury Food and
3,000,000 warrants, representing 22.7% of their share capital and 47.2% of
their warrants. The market value of our holding was �2.8 million on 31st
December 2004 compared to a cost of �847,000, this represents 26.1% 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.
On 18 January 2005, Finsbury Food announced that it had had a successful
completion to their 2004 Christmas programme by focussing on producing a group
of higher margin core products, more efficiently and more profitably.
Finsbury's speciality breads business is performing ahead of expectations and
the Nestl� programme is progressing as expected.
I am a non-executive director 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 74%
of the portfolio by value at 31st December 2004 and 83% at 30th June 2004. A
list of the holdings can be found below.
The year ahead
The share prices of our Strategic Investments in small listed companies will
remain volatile, but we expect these investments to provide good value to
shareholders over the longer term. We believe that all our strategic
investments will outperform the market this year and so enhance our asset
value.
As is our practice, we only declare one dividend a year, which was paid in
October 2004 for the year ended 30th June 2004. It is our intention, subject to
unforeseen circumstances, to maintain a policy of progressive increases in
annual dividends.
David C. Marshall
Chairman
Unaudited Consolidated Profit & Loss Account
Half year ended Year ended
31st December 30th June
2004 2003 2004
�000 �000 �000
Operating Income
Dividends received 96 80 154
Interest and sundry income 14 14 28
Profit on sales of investments 180 189 225
---------- ---------- ----------
290 283 407
Management services income 234 275 533
---------- ---------- ----------
524 558 940
---------- ---------- ----------
Administrative expenses
Investment operations (150) (140) (281)
Management services (256) (282) (518)
---------- ---------- ----------
Total administrative expenses (406) (422) (799)
---------- ---------- ----------
Operating profit 118 136 141
Share of result of associated undertaking 55 47 139
Interest payable (52) (32) (72)
---------- ---------- ----------
Profit on ordinary activities before taxation 121 151 208
Tax on result of ordinary activities (1) (1) (9)
---------- ---------- ----------
Profit on ordinary activities after taxation 120 150 199
Minority interest 10 2 (9)
---------- ---------- ----------
Profit attributable to members of the holding 130 152 190
company
Proposed dividend - - (233)
---------- ---------- ----------
Retained profit/(loss) for the period 130 152 (43)
====== ====== ======
Earnings per share 0.50p 0.59p 0.74p
Headline earnings per share 0.50p 0.59p 0.74p
Fully diluted earnings per share 0.50p 0.58p 0.73p
Dividend per share Nil Nil 0.90 p
Unaudited Consolidated Balance Sheet
31st December 30th June
2004 2003 2004
�000 �000 �000
Fixed assets
Tangible assets 432 442 437
Investments 7,440 7,308 7,390
---------- ---------- ----------
7,872 7,750 7,827
Current assets
Listed investments 3,218 2,928 3,077
Debtors 121 171 272
Cash, bank balances and deposits 79 81 30
---------- ---------- ----------
3,418 3,180 3,379
Creditors falling due within one year (1,540) (1,195) (1,655)
---------- ---------- ----------
Net Current Assets 1,878 1,985 1,724
---------- ---------- ----------
Total Assets less Current Liabilities 9,750 9,735 9,551
====== ====== ======
Capital and Reserves
Called up share capital 1,311 1,295 1,295
Share premium account 1,096 1,033 1,033
Reserves 361 361 361
Profit and loss account 6,910 6,975 6,780
---------- ---------- ----------
Shareholders funds 9,678 9,664 9,469
Minority equity interest 72 71 82
---------- ---------- ----------
9,750 9,735 9,551
====== ====== ======
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 2004. 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 2004 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 25,960,112 (December 2003 - 25,714,981
and June 2004 - 25,809,406), in issue during the period.
Consolidated Cash Flow Statement
Half year ended Year ended
31st December 30th June
2004 2003 2004
�000 �000 �000
Cash inflow/(outflow) on operating activities 5 (194) (479)
---------- ---------- ----------
Returns on investments and servicing of finance
Dividend received 193 172 246
Interest paid (43) (28) (60)
---------- ---------- ----------
Net cash inflow from returns on investments and
servicing of finance 150 144 186
---------- ---------- ----------
Taxation paid (1) (1) (9)
---------- ---------- ----------
Investing activities
Fixed assets investments purchases (100) - -
---------- ---------- ----------
Net cash outflow from investment activities (100) - -
---------- ---------- ----------
Equity dividend paid - Company (233) (218) (218)
---------- ---------- ----------
Financing
Share capital issued 78 72 72
Net drawdown of loan facility 150 250 450
---------- ---------- ----------
Net cash inflow from financing 228 322 522
---------- ---------- ----------
Increase in cash 49 53 2
====== ====== ======
(a) Reconciliation of operating profit to net cash flow from operating
activities
31st December 30th
June
2004 2004
�000 �000
Operating profit 118 141
Dividends receivable (96) (154)
Depreciation charges 5 15
Decrease/(increase) in debtors 151 (105)
(Decrease)/increase in creditors (32) 16
Increase in current asset investments (141) (392)
---------- ----------
5 (479)
====== ======
(b) Reconciliation of net cash flow to movement in net debt
At start Cash At end of
of period flow period
�000 �000 �000
2004/2005
Cash at bank 30 49 79
Bank loan (1,250) (150) (1,400)
---------- ---------- ----------
(1,220) (101) (1,321)
====== ====== ======
2003/2004
Cash at bank 28 2 30
Bank loan (800) (450) (1,250)
---------- ---------- ----------
(772) (448) (1,220)
====== ====== ======
Balance Sheet Analysis taking investments at market value
31st December 30th June
2004 2003 2004
�000 �000 �000
Principal investments at market value:
Marylebone Warwick Balfour Group Plc 2,580 1,545 2,463
Finsbury Food Group plc 2,847 3,435 2,467
Western Selection P.L.C. 2,535 2,507 1,650
---------- ---------- ----------
General equity portfolio - (see analysis 3,924 3,417 3,679
attached)
Tangible fixed assets 432 442 437
Cash, bank balances and deposits 79 81 30
Bank loan (1,400) (1,050) (1,250)
Other net (liabilities)/assets (19) 26 (133)
Minority interests (72) (71) (82)
---------- ---------- ----------
Net assets 10,906 10,332 9,260
---------- ---------- ----------
Net Assets per share 41.6p 39.9p 35.8p
Net Assets per share at 28th February 2005 47.9p
Market Value of General Portfolio
31st December 2004
�000 %
Nestl� 204 5.2
UBS 166 4.2
Cadbury Schweppes 136 3.5
Shell Transport & Trading Co 133 3.4
ING Groep 130 3.3
Reckitt Benckiser 126 3.2
Pernod-Ricard 120 3.1
Roche Holdings 120 3.1
BOC 119 3.1
Associated British Foods 117 3.0
HSBC Holding 114 2.9
Imperial Tobacco Group 114 2.9
Tesco 113 2.9
Diageo 111 2.8
Land Securities Group 110 2.8
Hilton Group 108 2.8
British American Tobacco 108 2.8
Smith & Nephew 107 2.7
Novartis 105 2.7
Lloyds TSB Group 104 2.7
Credit Suisse Group 103 2.6
BP 102 2.6
Vodafone Group 99 2.5
Johnson Matthey 99 2.5
Boots Group 98 2.5
GlaxoSmithKline 98 2.5
Reed Elsevier 96 2.4
Rexam 92 2.3
Liberty International 87 2.2
Scottish & Newcastle 87 2.2
Intercontinental Hotels Group 87 2.2
Carlsberg 79 2.0
Heineken 79 2.0
Beiersdorf 73 1.9
L'Oreal 67 1.7
Schindler-Holdings 57 1.4
Smiths Group 56 1.4
---------- ----------
3,924 100.0
====== ======
END
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