LONDON FINANCE & INVESTMENT GROUP P.L.C.
Preliminary announcement of unaudited results for the year ended 30th 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 30th 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 �765,000 (2006 - �309,000).
Our operating profits have increased to �840,000 from �263,000 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 �489,000 (2006 -
�303,000) 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 �47,821 during the year. On 10th
September 2007, Western announced a profit before associates and exceptional
items of �355,000 for its year to 30th June 2007 (2006 - �316,000). 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 �12,783,000, 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 �
3,490,000 and the book value was �4,567,000. 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 �5.27
million (2006 - �4.68 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 �872,000 in September 2007, assuming that all
Warrants are issued. If all Warrants are exercised �1,693,000 will be raised in
December 2007 and a further �3,848,000 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 �429,000 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 �4,931,000 (2006 - �2,927,000), 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 �4,890,000 (2006 -
�4,845,000), 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 13th
January 2007 and showed a profit of �255,000 (2006 - loss of 695,000 after
reorganisation costs of �677,000)
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 �795,000 (2006 - �455,000), being 5% (2006 - 4%) of
Western's net assets.
Northbridge Industrial Services PLC
Northbridge announced profits of �731,000 for the year ended 31st 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 �2,768,000
(2006 - �1,598,000) 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 �1.2 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 �5.5 million, compared with the book
value of �1.7 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
2nd 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 �900,000 to bring our holding
to 8,000,000 shares, representing 15.66% of their share capital. The market
value of our holding was �9.3 million on 30th June 2007 (cost - �1,893,000) 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 30th 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 �694,000 (2006: �238,000) in this portfolio over the year and the
average value of each holding has increased from �114,000 to �168,000.
We have a �2 million bank facility and at 30th June 2007 had drawn down �
1,247,000. This leaves �753,000 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 12th October 2007 to those members
registered at the close of business on 21st 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 12th September 2007.
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
14th September 2007
Consolidated Income Statement
For the year ended 30th June 2007 2006
�000 �000
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 - exceptional (131) -
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 members of 489 303
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 Fair
share premium Revaluation value Retained Total
capital account reserve reserve earnings
Year ended 30thJune �000 �000 �000 �000 �000 �000
2006
Balances at 1st July 1,310 1,095 330 1,907 6,992 11,634
2005
Profit attributable to - - - - 303 303
shareholders
Fair value adjustment - - - 3,007 - 3,007
on listed
undertakings, net of
profits realised
during the year and
reflected in the
income statement
---------- ---------- ---------- ---------- ---------- ----------
Total income and - - - 3,007 303 3,310
expense for the year
---------- ---------- ---------- ---------- ---------- ----------
New shares issued 2 10 - - - 12
New shares issued in 188 749 - - - 937
respect of warrants
exercised
Dividends paid in - - - - (262) (262)
respect of the
previous year
---------- ---------- ---------- ---------- ---------- ----------
Total transactions 190 759 - - (262) 687
with shareholders for
the year
---------- ---------- ---------- ---------- ---------- ----------
Balances at 30th June 1,500 1,854 330 4,914 7,033 15,631
2006
---------- ---------- ---------- ---------- ---------- ----------
Year ended 30thJune
2007
Balances at 1st July 1,500 1,854 330 4,914 7,033 15,631
2006
---------- ---------- ---------- ---------- ---------- ----------
Profit attributable to - - - - 489 489
shareholders
Fair value adjustment - - - 4,181 - 4,181
on listed
undertakings, net of
profits realised
during the year and
reflected in the
income statement
---------- ---------- ---------- ---------- ---------- ----------
Total income and - - - 4,181 489 4,670
expense for the period
---------- ---------- ---------- ---------- ---------- ----------
New shares issued 60 474 - - - 534
Dividends paid in - - - - (315) (315)
respect of the
previous year
---------- ---------- ---------- ---------- ---------- ----------
Total transactions 60 474 - - (315) 219
with shareholders for
the year
---------- ---------- ---------- ---------- ---------- ----------
Balances at 30thJune 1,560 2,328 330 9,095 7,207 20,520
2007
---------- ---------- ---------- ---------- ---------- ----------
Consolidated Balance Sheet
at 30th June 2007 2006
�000 �000
Non-current Assets
Tangible assets 416 430
Investments 18,305 13,247
---------- ----------
18,721 13,677
---------- ----------
Current Assets
Listed investments 6,564 4,907
Accounts receivable 184 196
Bank balance and deposits 87 171
---------- ----------
6,835 5,274
Current Liabilities
Accounts payable: falling due within one year (1,777) (1,893)
---------- ----------
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
For the year ended 30th June 2007 2006
�000 �000
Cash outflow on operating activities
Cash absorbed by operations, including General Portfolio (1,311) (140)
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 investments 2,080 -
Non-current asset investments - purchased (948) (664)
---------- ----------
Net cash inflow/(outflow) from investment activities 1,132 (676)
---------- ----------
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 5th October 2007 to shareholders on the register on 14th 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 30th 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.
END
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