REG-Lon.Fin.&Inv.Grp.: Half-year Report for 6 months ended 31 December 2017 <Origin Href="QuoteRef">LFI.L</Origin>
06/02/2018 07:05
London Finance & Investment Group P.L.C.
(the ‘Company’)
Unaudited Interim Results for the six months ended 31(st) December 2017 and
dividend declaration
The Company today announces its unaudited interim results and dividend
declaration for the six months ended 31(st) December 2017 (the ‘Interim
Statement’).
Chairman’s Statement
Introduction
As an investment company our target is to achieve growth in shareholder value
in real terms over the medium to long term. In the short term our results
can be influenced by overall stock market performance, particularly the
valuation of our Strategic Investments. We continue to believe that a
combination of Strategic Investments and a General Portfolio is the most
effective 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 medium to longer term and these are balanced by a
General Portfolio which consists of investments in major U.S., U.K. and
European equities.
At 31(st) December 2017, we held two Strategic Investments: Western Selection
P.L.C., and Finsbury Food Group plc. Detailed comments on our Strategic
Investments are given below.
Change in accounting policies
The Board has adopted IFRS 9, and the comparatives in the income statement
have been restated to reflect the resulting change in accounting policy.
Strategic investments are a fundamental part of the Company’s investment
strategy to secure long term capital appreciation and by their very nature the
investments are largely illiquid. Consequently, the directors have elected to
present the unrealised changes in value of these specific investments as part
of other comprehensive income as it better reflects the underlying performance
of the Company within its primary statements. This does not change the basis
of valuation or the amounts reported in the statement of financial position.
The effect of the change in accounting policy is further described in Note 1
below.
Results
Our net assets per share increased 1.8% to 66.8p at 31(st) December 2017 from
65.6p at 30(th) June 2017. Our Strategic Investments decreased in value by
0.8% during the period. Our General Portfolio increased by 4.9%, compared
with increases of 5.1% and 2.5% in the FTSE 100 index and the FTSEurofirst 300
Index respectively, over the half year. At the close of business on 31(st)
January 2018, our net asset value was 67.1p per share.
The Group profit before tax for the half year was £615,000 compared to a
restated profit of £426,000 for the same period last year. Our total
comprehensive income after tax and minority interest was £524,000 (2016:
£1,247,000 restated) giving earnings per share of 1.8p (2016: 0.2p restated).
On 4(th) October 2017, the Company entered into an interest rate swap
agreement with Coutts & Co, expiring on 30(th) September 2022, in the sum of
£1,500,000 at a fixed rate of 1.06% per annum over base rate and margin, with
a view to providing insurance against rising interest rates.
Strategic Investments
Western Selection P.L.C. (“Western”)
The Group owns 7,860,515 Western shares, representing 43.8% of Western’s
issued share capital. Western is a strategic investment which is technically a
subsidiary of the Company that has not been consolidated due to the
application of the investment entity exemption under IFRS 10.
On 5(th) February 2018, Western announced a profit before tax of £170,000 for
its half year to 31(st) December 2017 and earnings per share of 0.91p (2016:
earnings per share of 2.5p). Western’s net assets at market value were
£17,115,000 equivalent to 95p per share. Western also announced an interim
dividend of 1.1p per share (2016: 1.1p per share).
The market value of the Company’s investment in Western at 31(st) December
2017 was £4,166,000 representing 20% of the net assets of Lonfin. The
underlying value of the investment in Western, valuing Western’s own
investments at market value, was £5,266,000 (30(th) June 2017:
£5,348,000).
I am the Chairman of Western and Edward Beale is a non-executive director.
Michael Robotham was a non-executive director of Western until his resignation
on 5(th) December 2017.
Western’s main Core Holdings are Northbridge Industrial Services Plc,
Swallowfield Plc, Bilby Plc and Tudor Rose International Limited.
An extract from Western’s interim results announcement relating to its main
Core Holdings is set out below:
Core Holdings
Northbridge Industrial Service plc (“Northbridge”)
Northbridge hires and sells specialist industrial equipment to a non-cyclical
customer base. With offices or agents in the UK, USA, Dubai, Germany,
Belgium, France, Australia, New Zealand, Singapore, Brazil, Korea and
Azerbaijan, Northbridge has a global customer base. This includes utility
companies, the oil and gas sector, shipping, construction and the public
sector. The product range includes loadbanks, transformers and oil tools.
Further information about Northbridge is available on its website:
www.northbridgegroup.co.uk
Northbridge’s latest results, for the half year to 30(th) June 2017, showed
a loss after tax of £2,308,000 for the period (2016: loss after tax of
£2,338,000). No interim dividend was declared (2016: none).
Western owns 3,223,632 Northbridge shares, representing 12.45% of
Northbridge’s issued share capital. The market value of this investment at
31(st) December 2017 was £2,966,000 (30(th) June 2017: £3,320,000),
representing 17% (2016: 24%) of Western’s net assets.
I am a non-executive director of Northbridge.
Swallowfield plc (“Swallowfield”)
Swallowfield is a market leader in the development, formulation, manufacture
and supply of cosmetics, toiletries and related household products for global
brands and retailers operating in the cosmetics, personal care and household
goods market. Further information about Swallowfield is available on its
website: www.swallowfield.com
Swallowfield announced its annual results for the 52 weeks ended 24(th) June
2017 in September 2017 showing a profit after tax of £2,572,000 compared to a
profit of £2,001,000 for the comparable period last year. Swallowfield paid
a final dividend of 3.5p per share in December 2017 which provided us with
income of £52,500.
The market value of the Company’s holding of shares in Swallowfield on
31(st) December 2017 was £4,950,000 (30(th) June 2017: £5,700,000),
representing 29% of the Company’s net assets.
Western owns 1,500,000 Swallowfield shares (representing 8.90% of
Swallowfield’s issued share capital).
Edward Beale is a non-executive director of Swallowfield.
Bilby Plc (“Bilby”)
Bilby is an established, and award winning, provider of gas installation,
maintenance and general building services to local authority and housing
associations across London and South East England. It has a strategy of
growing organically and by acquisition. Further information about Bilby is
available on its website: www.bilbyplc.com.
Bilby announced its interim results for the six month period to 30(th)
September 2017 on 21(st)
November 2017 showing a loss after tax of £1,966,000 (2016: loss after tax of
£833,000). Bilby will pay an interim dividend of 0.5p per share in January
2018 which will provide us with income of £13,500.
Western owns 2,699,280 Bilby shares, which represent 6.8% of Bilby’s issued
share capital. The market value of the Company’s holding in Bilby on
31(st) December 2017 was £3,051,000 representing 18% of the Company’s net
assets.
Tudor Rose International Limited (previously Hartim Limited) (“Tudor Rose
International”)
Tudor Rose International works closely with a number of leading UK branded
fast-moving consumer goods companies, offering a complete sales, marketing and
logistical service. Based in Stroud, Gloucestershire, Tudor Rose
International sells into 78 countries worldwide including USA, Spain,
Portugal, Italy, Czech Republic, Russia, Turkey, South Africa, Saudi Arabia,
UAE, Malaysia, Australia and China.
Our share of Tudor Rose International’s estimated results for the period
ended 31(st) December 2017 is a profit after tax of £81,000 (2016: profit
after tax of £57,000).
At 31(st) December 2017, Western owned 49.5% of Tudor Rose International.
The carrying value of the Company’s equity investment in Tudor Rose
International on 31(st) December 2017 was £1,674,000 (2016: £654,000)
representing 9.8% of the Company’s net assets. In addition, loans of
£191,756 (equivalent to a further 1% of the Company’s net assets) were
outstanding at 31(st) December 2017 from Tudor Rose International’s
executive directors.
Western has two nominees on the board of Tudor Rose International: Edward
Beale and I are the directors.
Finsbury Food Group plc (“Finsbury”)
Finsbury is one of the largest producers and suppliers of premium cakes, bread
and morning goods in the UK and currently supplies most of the UK's major
supermarket chains. Further information about Finsbury, which is admitted to
trading on AIM, is available on its website: www.finsburyfoods.co.uk
At 31(st) December 2017, Lonfin held 6,000,000 Finsbury shares, representing
approximately 4.6% of Finsbury’s issued share capital. The market value of
the holding was £6,420,000 as at 31(st) December 2017 (cost - £1,724,000)
and represents approximately 31% (2016: 34%) of Lonfin’s net assets.
On 18(th) September 2017, Finsbury announced audited profits on continuing
operations after tax and minority interests of £12,958,000 for the 52 weeks
ended 1(st) July 2017 (2016: £12,754,000).
Finsbury paid a final dividend of 2.0 per share, making 3.0p for the year
(2016: 2.8p). This provided the Company with further income of £120,000.
General Portfolio
The portfolio is diverse with material interests in Food and Beverages,
Natural Resources, Chemicals and Tobacco. We believe that the portfolio of
quality companies we hold has the potential to outperform the market in the
medium to long term.
At 31(st) December 2017, the number of holdings in the General Portfolio was
30 (2016: 26).
Board Change
On 31(st) January 2018, the Company announced the appointment of Warwick
Marshall to the Board. His substantial business experience in the
development of the Monteagle Group in South Africa and particularly its
trading division will assist the Board in the assessment of the performance of
investments and will complement the skills and experience of existing board
members. He has extensive investment experience in his private capacity and
he now resides in Zug, Switzerland.
Outlook
Although markets have shown resilience and strength over the course of the
last year, they are close to an all-time high. The Board remains cautious
about the potential impact of major geo-political risks. Accordingly, the
Board expects to see continued volatility in the equity and currency markets.
These may have a material impact on the value of our investments.
The Board has declared an interim dividend of 0.55p per share (2016: 0.55p).
6(th) February 2018
D.C. MARSHALL
Chairman
Interim Dividend
The Board recommends an interim gross dividend of 0.55p per share (9.36442 SA
cents) (2016: 0.55p) which will be paid on Friday 6(th) April 2018 to those
members registered at the close of business on Friday 16(th) March 2018 (SA
and UK). Shareholders on the South African register will receive their
dividend in SA Rand converted from sterling at the closing rate of exchange on
Thursday 1(st) February 2018 being GBP 1 = SA Rand 17.02622.
In respect of the normal gross cash dividend, and in terms of the South
African Tax Act, the following dividend tax ruling only applies to those
shareholders who are registered on the South African register on Friday 16(th)
March 2018. All other shareholders are exempt.
Shareholders registered on the South African register are advised that the
dividend withholding tax will be withheld from the gross final dividend amount
of 9.36442 SA cents per share at a rate of 20% unless a shareholder qualifies
for an exemption; shareholders registered on the South African register who do
not qualify for an exemption will therefore receive a net dividend of 7.49154
SA cents per share. The dividend withholding tax and the information contained
in this paragraph is only of direct application to shareholders registered on
the South African register, who should direct any questions about the
application of the dividend withholding tax to Computershare Investor Services
(Pty) Limited, Tel: +27 11 370 5000
*
The number of shares in issue now and as at the dividend declaration date is
31,207,479;
*
The interim gross dividend in SA cents is 9.36442 cents.
*
The dividend has been declared from income reserves, which funds are sourced
from the Company’s main bank account in London and is regarded as a foreign
dividend by South African shareholders; and
*
The Company’s UK Income Tax reference number is 948/L32120.
Dividend dates:
Last day to trade (SA) Tuesday 13 (th)March 2018
Shares trade ex-dividend (SA) Wednesday 14 (h)March 2018
Shares trade ex-dividend (UK) Thursday 15 (th)March 2018
Record date (SA and UK) Friday 16 (th)March 2018
Pay date Friday 6 (th)April 2018
Share certificates may not be de-materialised or re-materialised between
Wednesday 14(th) March 2018 and Friday 16(th) March 2018, both dates
inclusive. Shares may not be transferred between registers in London and South
Africa between Wednesday 14(th) March 2018 and Friday 16(th) March 2018, both
dates inclusive.
Statement of Directors’ responsibility
The Directors confirm that, to the best of their knowledge:
- the unaudited interim results for the six months ended 31(st) December 2017,
have been prepared in accordance with IAS 34 as adopted by the EU; and
- the Interim Statement includes a fair review of the information required by
DTR 4.2.7R and DTR 4.2.8R of the Disclosure and Transparency Rules.
Neither this Interim Statement nor any future interim statements of the
Company will be posted to shareholders. The Interim Statement is available
as follows:
* on the Company’s website at
www.city-group.com/london-finance-investment-group-plc/; and
* by writing to City Group P.L.C., the Company Secretary, at 6 Middle Street,
London EC1A 7JA
This Interim Statement contains inside information for the purposes of Article
7 of EU Regulation 596/2014.
The Directors accept responsibility for the contents of this Interim
Statement.
For further information, please contact:
London Finance & Investment Group P.L.C Sponsor: Sasfin Capital (a member of the Sasfin group). +44(0) 20 7796 9060
Consolidated Statement of Total Comprehensive Income (Unaudited)
Half year ended Year Ended
31 (st)December 30 (th)June
Restated Restated
2017 2016 2017
£000 £000 £000
Operating Income
Dividends received 311 265 608
Rental and other income 50 50 109
Profit on sales of investments, including provisions 26 3 3
387 318 720
Management service fees 118 130 296
505 448 1,016
Administrative expenses
Investment operations (229) (190) (352)
Management services (162) (168) (389)
Total administrative expenses (391) (358) (741)
Operating profit 114 90 275
Unrealised changes in the carrying value of General Portfolio investments 501 335 989
Interest payable (1) - (33)
Profit before taxation 615 425 1,231
Tax expense (49) (350) (121)
Profit after taxation 566 75 1,110
Non-controlling interest (3) (6) (7)
Profit attributable to shareholders 563 69 1,103
Other comprehensive income/(expense) – Items that may subsequently be reclassified to profit or loss
Unrealised changes in the carrying value of Strategic Investments (87) 819 477
Profit on sale of strategic investments - 217 217
Deferred tax 48 142 99
Corporation tax - - (238)
Total other comprehensive income (39) 1,178 555
Total comprehensive income attributable to shareholders 524 1,247 1,658
Basic and Diluted earnings per share 1.8p 0.2p 3.5p
Adjustment for the unrealised changes in the carrying value of investments, net of tax (1.5)p (1.1)p (2.5)p
Headline earnings per share 0.3p (0.9)p 1.0p
Interim dividend 0.55p 0.55p 0.50p
Final dividend - - 0.55p
Total in respect of the period 0.55p 0.55p 1.05p
Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)
Half year ended Year ended
31 (st)December 30 (th)June
2017 2016 2017
£000 £000 £000
Total comprehensive income attributable to shareholders 531 1,247 1,658
Dividends paid to equity shareholders (172) (171) (343)
359 1,076 1,315
Equity shareholders’ funds at start of period 20,483 19,168 19,168
Equity shareholders’ funds at end of period 20,842 20,244 20,483
Consolidated Statement of Financial Position (Unaudited)
31 (st)December 30 (th)June
2017 2016 2017
£000 £000 £000
Non-current assets
Property, plant and equipment 15 18 14
Strategic investments: -
Finsbury Food Group Plc 6,420 7,320 6,900
Western Selection P.L.C. 4,166 3,694 3,773
10,601 11,032 10,687
Current assets
Listed investments 11,295 8,836 10,766
Trade and other receivables 63 178 220
Cash, at bank 277 1,588 222
11,635 10,602 11,208
Total Assets 22,236 21,634 21,895
Capital and Reserves
Called up share capital 1,560 1,560 1,560
Share premium account 2,320 2,320 2,320
Unrealised profits and losses on investments 8,514 7,967 8,265
Share of retained profits and losses of subsidiaries 4,007 3,647 3,794
Company’s retained realised profits and losses 4,441 4,750 4,544
Total Capital and Reserves attributable to owners 20,842 20,244 20,483
Trade and other payables falling due within one year 483 479 486
Deferred taxation 818 815 829
Non-controlling equity interest 93 96 97
22,236 21,634 21,895
Net assets per share 66.8p 64.9p 65.9p
Number of shares in issue 31,207,479 31,207,479 31,207,479
Consolidated Statement of Cash Flows (Unaudited)
Half year ended Year ended
31 (st)December 30 (th)June
Restated Restated
2017 2016 2017
£000 £000 £000
Cash flows from operating activities
Profit before tax 615 425 1,231
Adjustments for non-cash -
Finance expense 1 - 33
Depreciation charges 4 4 8
Unrealised changes in the fair value of investments (501) (335) (989)
Decrease/(Increase)in trade and other receivables 157 97 52
(Decrease)/Increase in trade and other payables (3) (74) (66)
Overseas Taxes paid (11) (7) (45)
Net cash inflow from operating activities 262 110 224
Cash flows from investment activity
(Increase)/Decrease in current asset investments (727) (1,376) (2,652)
Disposal of investment 698 2,438 2,438
Purchase of IT software (5) - -
Net cash inflow/(outflow) from investment activity (34) 1,062 (214)
Cash flows from financing
Interest paid (1) - (33)
Equity dividends paid (172) (172) (343)
Net cash outflow from financing (173) (172) (376)
(Decrease)/Increase in cash and cash equivalents 55 1,000 (366)
Cash and cash equivalents at the beginning of the year 222 588 588
Cash and cash equivalents at end of the year 277 1,588 222
Reconciliation of net cash flow to movement in net debt
At start Cash At end of
of Period Flow Period
Half year ended £000 £000 £000
31 (st)December 2017
Cash and cash equivalents 222 205 427
Bank overdraft 0 (150) (150)
Net cash and cash equivalents 222 55 277
31 (st)December 2016
Cash and cash equivalents 588 1,000 1,588
Year ended 30 (th)June 2017
Cash and cash equivalents 588 (366) 222
Notes: -
1. Basis of preparation: The results for the half-year are unaudited. The information contained in this report does not constitute statutory accounts within the meaning of the Companies Act 2006. The statutory accounts of the Group for the year ended 30
(th)June 2017 have been reported on by the Company's auditors and have been delivered to the Registrar of Companies. The report of the auditors was unqualified.
The Company has adopted IFRS 9. Under IFRS 9, the Company has elected to classify its long term Strategic Investments as financial instruments which are held at fair value with unrealised changes in value taken directly to Other Comprehensive Income.
General Portfolio investments are held at fair value with unrealised changes in fair value recognised in Profit or Loss. Strategic and General Portfolio investments are quoted investments, and their fair value continues to be calculated using quoted
prices. This report has been prepared in accordance with the accounting policies contained in the Group’s 2017 Annual Report and Accounts and International Financial Reporting Standards, and complies with IAS 34.
2. Earnings per share: Earnings per share are based on the profit on ordinary activities after taxation and non-controlling interests of £563,000 (2016: £70,000) and on 31,207,479 (2016: 31,207,479) shares being the weighted average of number of shares in
issue during the year. There are options outstanding over 80,000 shares. Reconciliation of headline earnings Headline earnings are required to be disclosed by the JSE. Headline earnings per share are based on the profit attributable to the shareholders
after tax and non-controlling interests, before unrealised changes in the fair value of investments net of tax, of £11,000 (2016: £279,000 loss) and on 31,207,479 (2016: 31,207,479) shares being the weighted average of number of shares in issue during the
year.
3. Going Concern: After making enquiries, the Board is satisfied that the Group will be able to operate within the level of its facilities for the foreseeable future. For this reason, the Board considers it appropriate for the Group to adopt the going concern
basis in preparing its financial statements.
4. Principal risks and uncertainties: The principal risks and uncertainties which could impact the Group’s long-term performance are disclosed on pages 9-10 of the Group’s 2017 Annual Report and Accounts, The key risks and mitigating activities have not
changed from these: - Stock market vulnerability and economic uncertainty including Brexit; - Possible volatility of share prices of investments; - Dividend income; - Ability to make strategic investments; and - Liquidity of equity investments in strategic
investments.
Composition of General Portfolio
Value
£000 %
Investor 624 5.5
British American Tobacco 492 4.4
Schindler Holding 484 4.3
Diageo 463 4.1
LVMH Moet Hennessy 436 3.9
HSBC Holdings 422 3.7
Brown Forman 417 3.7
Heineken Holding 417 3.7
Unilever 416 3.7
Pernod Ricard 405 3.6
Henkel 405 3.6
Antofagasta 402 3.6
Phillip Morris 398 3.5
Nestle 384 3.4
3M 383 3.4
Danone 373 3.3
Chevron 361 3.2
Givaudan 358 3.2
Royal Dutch Shell 357 3.2
L'Oreal 346 3.1
BASF 342 3.0
Reckitt Benckiser 339 3.0
United Technologies 321 2.8
Exxon Mobil 309 2.7
Anheuser Busch 308 2.7
Procter & Gamble 306 2.7
Kimberley Clark 303 2.7
Imperial Brands 281 2.3
Compagnie Financiere Richemont 222 2.0
Becton Dickinson 221 2.0
11,295 100
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