REG-Lon.Fin.&Inv.Grp.: Unaudited Interim Results and dividend declaration <Origin Href="QuoteRef">LFI.L</Origin>
20/02/2017 07:05
London Finance & Investment Group P.L.C.
(the ‘Company’)
Unaudited Interim Results for the six months ended 31(st) December 2016 and
dividend declaration
The Company today announces its unaudited interim results and dividend
declaration for the six months ended 31(st) December 2016 (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 2016, 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 have decided to early adopt IFRS 9 with effect from this accounting
period, 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 5.6% to 64.9p at 31(st) December 2016 from
61.4p at 30(th) June 2016. Our Strategic Investments, adjusting for the
disposal of part of the investment in Finsbury Foods, which realised a profit
of £1,862,000, increased in value by 8% during the period. Our General
Portfolio increased by 4.5%, compared with increases of 9.8% and 10.3% in the
FTSE 100 index and the FTSEurofirst 300 Index respectively, over the half
year. At the close of business on 15(th) February 2017, our net asset value
was 66.1p per share.
The Group profit before tax for the half year was £2,171,000 compared to a
restated profit of £1,586,000 for the same period last year. The main
differences between these two periods being in the amounts recognised as:
profit realised from the disposal of part of the investment in Finsbury Food,
and the unrealised changes in the value of General Portfolio investments.
Our profit after tax and minority interest was £1,815,000 (2015: £1,315,000
restated) giving earnings per share of 5.8p (2015: 4.2p restated).
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.
On 10(th) February 2017, Western announced a profit after tax of £455,000 for
its half year to 31(st) December 2016 and earnings per share of 2.5p (2015:
earnings per share of 0.4p). Western’s net assets at market value were
£15,018,000 equivalent to 84p per share, an increase of 6.3% from 75p at
30(th) June 2016. Western has announced an interim dividend of 1.1p per
share (2015: 1.05p per share).
The market value of the Company’s investment in Western at 31(st) December
2016 was £3,694,000 representing 18% of the net assets of Lonfin. The
underlying value of the investment in Western, valuing Western’s own
investments at market value, was £6,578,000 (30(th) June 2016:
£6,227,000).
I am the Chairman of Western and Mr. Michael Robotham and Mr Edward Beale are
Non-Executive Directors.
Western’s principal core holdings are in Northbridge Industrial Services
plc, Swallowfield plc, Bilby Plc and Tudor Rose International (previously
Hartim Limited). Extracts from Western's announcement, on 10(th) February
2017, on its core holdings are set out below:
Northbridge Industrial Service plc (“Northbridge”)
Northbridge hires and sells specialist industrial equipment to a non-cyclical
customer base. With offices or agents in the U.K., U.S.A., Dubai, Germany,
Belgium, France, Australia, New Zealand, Singapore, Brazil and Korea,
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, generators, compressors, loadcells 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 2016, showed
a loss after tax of £2,338,000 for the period (2015: loss after tax of
£1,936,000). No interim dividend was declared (2015: 1p per share).
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 2016 was £3,546,000 (30(th) June 2016: £2,772,000),
representing 24% of Western’s 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 to 25(th) June 2016 in September
2016 showing a profit after tax of £2,001,000 compared to a profit of
£746,000 for the prior year. We received a dividend from Swallowfield
during the period of £52,000 (2015: £37,383).
In September 2016, we disposed of 200,000 Swallowfield shares for £520,000
(before selling expenses) and in November 2016 we disposed of a further 50,000
shares for £135,000 (before selling expenses). The market value of the
Company’s holding of shares in Swallowfield on 31(st) December 2016 was
£4,550,000 (30(th) June 2016: £3,570,000), representing 30% of the
Company’s assets.
In January this year, we disposed of a further 120,000 Swallowfield shares for
£318,000 (before selling expenses). Western now owns 1,630,000 Swallowfield
shares (representing 9.66% of Swallowfield’s issued share capital).
Mr Edward Beale is a Non-Executive Director of Swallowfield.
Bilby Plc
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. They have a strategy of
growing organically and by acquisition. Further information about Bilby is
available on their website: www.bilbyplc.com
Bilby announced its interim results for the six month period to 30(th)
September 2016 on 16(th) December 2016 showing a loss after tax of
£833,000. Bilby paid a final dividend of 2.00p per share in September 2016
which provided us with income of £47,000 and an interim dividend of 0.25p per
ordinary share has been paid in February 2017 which provided us with further
income of £6,000.
At 30(th) June 2016, Western owned 2,337,088 Bilby shares. Further investments
of £32,000 for 62,912 Bilby shares, and £58,000 for 100,000 Bilby shares,
were made in December 2016 and February 2017 respectively. Western now holds
2,500,000 Bilby shares which represents 6.3% of Bilby’s issued share
capital. The market value of the Company’s holding in Bilby on 31(st)
December 2016 was £1,344,000 representing 9% of the Company’s 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 2016 is a profit after tax of £57,000 (2015 - profit
after tax of £51,000).
At 31(st) December 2016, 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 2016 was £654,000 (2015: £613,000)
representing 4% of the Company’s assets. In addition, loans of £442,000
(equivalent to a further 3% of the Company’s assets) were outstanding at
31(st) December 2016 from Tudor Rose International and its executive
directors. £250,000 was repaid by Tudor Rose International in December and
we have agreed that the balance of the loan to Tudor Rose International
(£250,000) will be rolled over into preference shares. Subsequent to the
period end we have advanced an additional £250,000 to subscribe for
preference shares and agreed to invest a further £500,000 in preference
shares to support the evolution of their business model.
Mr. Edward Beale and I are Non-Executive Directors of Tudor Rose
International.
Finsbury Food Group plc (“Finsbury Food”)
Finsbury Food 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 Food is
available on its website: www.finsburyfoods.co.uk
In September 2016, Finsbury Food announced audited profits on continuing
operations after tax and minority interests of £8,504,000 for the 52 week
period ended 2(nd) July 2016 (2015: £6,620,000). Finsbury Food paid a final
dividend of 1.87p per share which provided us with income of £112,000.
At 30(th) June 2016, the Group held 8,000,000 shares in Finsbury Food
representing 6.1% of their then issued share capital. On 27(th) September
2016, we sold 1,000,000 Finsbury Food shares for £1,200,000 (before selling
expenses) and, on 29(th) September 2016, we sold a further 1,000,000 Finsbury
Food shares for £1,250,000 (before selling expenses). The Company now holds
6,000,000 Finsbury Food shares which represent 4.6% of Finsbury Food’s
issued share capital. The market value of our holding was £7,320,000 on
31(st) December 2016; this represents 36% of the net assets of Lonfin.
Finsbury Food will be announcing their interim results in March 2017.
Mr Beale was a Non-Executive Director of Finsbury Food until 24(th) November
2016.
General Portfolio
The list of investments included in the General Portfolio is set out at the
end of this announcement. We continue to hold 26 investments, having
invested a net £1,492,000 in the period, financed by funds from the sale of
part of our investment in Finsbury Food.
Lloyd Marshall
It was with great sadness that we announced on 23(rd) November 2016, the death
of Mr Lloyd Marshall. He was a highly valued member of the management team
who brought a wealth of experience, knowledge and common sense to the Company
along with strong principles.
Outlook
The Board expect to see a continuation of the volatility in equity and
currency markets and remain cautious about the remainder of the year.
The Board has declared an interim dividend of 0.55p per share (2015: 0.50p).
20(th) February 2017
D.C. MARSHALL
Chairman
Interim Dividend
The declared interim dividend is 0.55p per share (9.09791 ZAR cents) (2015:
0.50p) and will be paid on Friday 7(th) April 2017 to those members registered
at the close of business on Friday 17(th) March 2017 (SA and UK). Shareholders
on the South African register will receive their dividend in South African
Rand converted from sterling at the closing rate of exchange on Friday 3(rd)
February 2017 being GBP 1 = ZAR 16.54165.
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 17(th)
March 2017. All other shareholders are exempt.
*
The dividend has been declared from income reserves, which funds are sourced
from the Company’s main bank account in the UK and is regarded as a foreign
dividend by South African shareholders.
*
The gross dividend in ZAR cents is 9.09791 cents.
*
The dividend withholding tax rate is 15% resulting in a net dividend of
0.46750 pence (7.73322 ZAR cents) per share to those shareholders who are not
exempt from the dividend withholding tax.
The issued number of shares as at the declaration date is 31,207,479.
The Company’s UK Income Tax reference number is 948/L32120.
Salient dates for dividend:
Last day to trade (SA) Tuesday 14 (th)March 2017
Shares trade ex dividend (SA) Wednesday 15 (th)March 2017
Shares trade ex dividend (UK) Thursday 16 (th)March 2017
Record date (SA and UK) Friday 17 (th)March 2017
Pay date Friday 7 (th)April 2017
Share certificates may not be de-materialised or re-materialised between
Wednesday 15(th) March 2017 and Friday 17(th) March 2017, both dates
inclusive. Shares may not be transferred between registers during this period
either.
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 2016,
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.
The Directors accept responsibility for the contents of this Interim
Statement.
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.
For further information, please contact:
London Finance & Investment Group P.L.C. +44(0) 20 7796 9060
Unaudited Condensed Consolidated Statement of Profit or Loss and Other
Comprehensive Income
Half year ended Year ended
31 (st)December 30 (th)June
Restated Restated
2016 2015 2016
£000 £000 £000
Operating Income
Dividends received 265 270 550
Rental and other income 50 41 82
Profit on sales of investments, including provisions 1,981 1,448 1,448
2,296 1,759 2,080
Management service fees 130 122 252
2,426 1,881 2,332
Administrative expenses
Investment operations (190) (175) (345)
Management services (168) (112) (304)
Total administrative expenses (358) (287) (649)
Operating profit 2,068 1,594 1,683
Unrealised changes in the carrying value of General Portfolio investments 219 39 39
Reversal of previously recognised unrealised changes in the carrying value of investments on sale of General Portfolio investments (116) (31) (56)
2,171 1,602 1,666
Interest payable - (16) (16)
Profit on ordinary activities before taxation 2,171 1,586 1,650
Tax on result of ordinary activities (350) (246) (95)
Profit on ordinary activities after taxation 1,821 1,340 1,745
Non-controlling interest (6) (25) (15)
Profit attributable to shareholders 1,815 1,315 1,730
Other comprehensive income/(expense) – Items that may subsequently be reclassified to profit or loss
Unrealised changes in the carrying value of Strategic Investments 935 3,310 4,260
Reversal of previously recognised unrealised changes in the carrying value of investments on sale of Strategic Investments (1,645) (1,600) (1,600)
Deferred taxation on above items 142 (342) (532)
Total other comprehensive income (568) 1,368 2,128
Total comprehensive income attributable to shareholders 1,247 2,683 3,858
Basic, Diluted and Headline earnings per share 5.8p 4.2p 5.5p
Interim dividend 0.55p 0.50p 0.50p
Final dividend 0.55p
Total in respect of the year 1.05p
Unaudited Condensed Consolidated Statement of Changes in Shareholders’
Equity
Half year ended Year ended
31 (st)December 30 (th)June
2016 2015 2016
£000 £000 £000
Total comprehensive income attributable to shareholders 1,247 2,683 3,858
Dividends paid to equity shareholders (171) (162) (312)
1,076 2,521 3,546
Equity shareholders’ funds at start of period 19,168 15,622 15,622
Equity shareholders’ funds at end of period 20,244 18,143 19,168
Unaudited Condensed Consolidated Statement of Financial Position
31 (st)December 30 (th)June
2016 2015 2016
£000 £000 £000
Non-current assets
Tangible assets 18 26 22
Principal investments:-
Finsbury Food Group Plc 7,320 9,040 8,880
Western Selection P.L.C. 3,694 3,537 3,537
11,032 12,603 12,439
Current assets
Listed investments 8,836 6,040 7,125
Trade and other receivables 178 232 272
Cash, bank balances and deposits 1,588 649 588
10,602 6,921 7,985
Total Assets 21,634 19,524 20,424
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 7,967 7,439 8,539
Share of undistributed profits and losses of subsidiaries and associates 3,647 767 1,821
Company’s retained realised profits and losses 4,750 6,057 4,928
Equity shareholders funds 20,244 18,143 19,168
Trade and other payables falling due within one year 479 256 316
Deferred taxation 815 1,025 850
Non-controlling equity interest 96 100 90
21,634 19,524 20,424
Net assets per share 64.9p 58.1p 61.4p
Number of shares in issue 31,207,479 31,207,479 31,207,479
Unaudited Condensed Consolidated Statement of Cash Flow
Half year ended Year ended
31 (st)December 30 (th)June
Restated Restated
2016 2015 2016
£000 £000 £000
Profit before taxation 2,171 1,586 1,650
Adjustments for non-cash and non-operating expenses:-
Depreciation charges 4 3 9
Profit on disposal of non-current investment (1,862) (1,409) (1,408)
Unrealised changes in the carrying value of General Portfolio investments (219) (39) (39)
Reversal of previously recognised unrealised changes in the carrying value of investments on sale of General Portfolio investments 116 31 55
Net interest paid - 16 16
(1,961) (1,398) (1,367)
Taxation paid (7) (5) (29)
Changes in working capital:-
Decrease/(Increase) in debtors 97 (15) (54)
(Decrease)/Increase in creditors (74) 39 97
(Increase)/Decrease in current asset investments (1,492) 20 20
(1,469) 44 63
Cash (outflow)/inflow on operating activities (1,266) 227 317
Investment activities
Disposal of non-current investment 2,438 1,985 1,984
Net cash inflow from investment activities 2,438 1,985 1,984
Cash flows from financing
Net interest paid - (16) (16)
Drawdown of loan facilities - (1,500) (1,500)
Equity dividends paid (172) (162) (312)
Net cash outflow from financing (172) (1,678) (1,828)
Increase in cash and cash equivalents 1,000 534 473
Cash and cash equivalents at start of period 588 115 115
Cash and cash equivalents at end of period 1,588 649 588
Reconciliation of net cash flow to movement in net debt
At start Cash At end of
of period Flow Period
Half year ended 31 (st)December £000 £000 £000
2016
Cash at bank 588 1,000 1,588
2015
Cash at bank 115 534 649
Bank loan (1,500) 1,500 -
(1,385) 2,034 649
Year ended 30 (th)June 2016
Cash at bank 115 473 588
Bank loan (1,500) 1,500 -
(1,385) 1,973 588
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 2016 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 early adopted IFRS 9 in this period, and the comparative amounts in the Unaudited Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income have been restated on a comparable basis. 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 change in accounting policy has no effect on the
Unaudited Condensed Consolidated Statement of Financial Position, and moves into Other Comprehensive Income certain amounts that were previously recognised as Profit or Loss. Prior to this change there were no amounts recognised in Other Comprehensive
Income. This re-categorisation has changed Profit on ordinary activities after tax from £2,708,000 at 31 (st)December 2015 and £3,873,000 at 30 (th)June 2016. Basic and Headline Earnings per Share have also been restated from 8.6p and 5.0p for the half
year ended 31 (st)December 2015, and 12.4p and 5.2p for the year ended 30 (th)June 2016. Other than mentioned above this report has been prepared in accordance with the accounting policies contained in the Company’s Annual Report and Accounts 2016. It has
been prepared in accordance with International Financial Reporting Standards, and complies with IAS34.
2. Earnings per share: Earnings per share are based on the profit on ordinary activities after taxation and non-controlling interests of £1,815,000 (2015: £1,315,000) and on 31,207,479 (2015 – 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. The dilution effect of these options is negligible. Reconciliation of headline earnings Headline earnings are required to be disclosed by the JSE. Headline earnings per share are
based on the profit on ordinary activities after taxation and non-controlling interests, of £1,815,000 (2015: £1,315,000) and on 31,207,479 (2015 – 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 8-9 of the Group’s 2016 Annual Report and Accounts. The key risks and mitigating activities have not
changed from these: - Stock market vulnerability and economic uncertainty; - 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 %
British American Tobacco 453 5.2
Investor 417 4.8
Schindler-Holdings 407 4.6
Henkel 405 4.6
Philip Morris International 377 4.3
Chevron 371 4.2
Exxon 365 4.1
Diageo 357 4.0
Becton Dickenson 356 4.0
Nestle 351 4.0
Reckitt Benckiser 337 3.8
Unilever 332 3.8
Heineken 329 3.7
Anheuser Busch Inbev 322 3.6
BASF 318 3.6
3M 318 3.6
Imperial Tobacco 315 3.6
L'Oreal 312 3.5
Pernod-Ricard 305 3.4
Procter & Gamble 272 3.1
United Technologies 266 3.0
Danone 258 2.9
Linde 257 2.9
LVMH 248 2.8
ABB 226 2.6
Brown Forman B 190 2.1
Givaudan 186 2.1
Kimberley Clark Corp 185 2.1
8,835 100
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