London Finance & Investment Group Plc - Half-year Report

London Finance & Investment Group PLC
(‘Lonfin’ or the ‘Company’)

Unaudited Interim Results for the six months ended 31^st December 2018 and interim dividend declaration

The Company today announces its unaudited interim results and interim dividend declaration for the six months ended 31^st December 2018 (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 2018, we held two Strategic Investments: Western Selection PLC, and Finsbury Food Group plc. Detailed comments on our Strategic Investments are given below.

Results

Our net assets per share decreased 5.2% to 62.0p at 31^st December 2018 from 65.4p at 30^th June 2018. Our Strategic Investments decreased in value by 4% during the period. Our General Portfolio decreased by 8%, compared with decreases of 11.9% and 10.5% in the FTSE 100 index and the FTSEurofirst 300 Index respectively, over the half year. At the close of business on 31^st January 2019, our net asset value was 59.9p per share.

The Group loss before tax for the half year was £721,000 compared to a profit of £615,000 for the same period last year. Our total comprehensive loss after tax and minority interest was £872,000 (2017: £524,000) giving a loss per share of 1.7p (2017: earning per share 1.8p).

Strategic Investments

Western Selection PLC (“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 22^nd February 2019, Western announced a loss before tax of £427,000 for its half year to 31^st December 2018 and a loss per share of 2.4p (2017: restated earnings per share of 0.9p). Western’s net assets at market value were £13,425,000 equivalent to 75p per share. Western also announced an interim dividend of 1.1p per share (2017: 1.1p per share).

The market value of the Company’s investment in Western at 31^st December 2018 was £4,087,000 representing 21% of the net assets of Lonfin. The underlying value of the investment in Western, valuing Western’s own investments at market value, was £4,117,000 (30^th June 2018: £4,329,000). 

I am the Chairman of Western and Edward Beale is a non-executive director.

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 2018, showed a loss after tax of                 £1,472,000 for the period (2017: loss after tax of £2,308,000). No interim dividend was declared (2017: none).

Western owns 3,300,000 Northbridge shares, representing 11.8% of Northbridge’s issued share capital.  The market value of this investment at 31^st December 2018 was £3,564,000 (30^th June 2018: £4,290,000), representing 26.5% 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 53 weeks ended 30^th June 2018 in September 2018 showing a profit after tax of £3,633,000 compared to a profit of £2,572,000 for the comparable period last year.  Swallowfield paid a final dividend of 4.2 per share in December 2018 which provided us with income of £54,600.  

The market value of the Company’s holding of shares in Swallowfield on 31^st December 2018 was £2,730,000 (30^th June 2018: £4,095,000), representing 20% of the Company’s net assets.

Western owns 1,300,000 Swallowfield shares (representing 7.6% 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 2018 on 11^th December 2018 showing a profit after tax of £1,133,000 (2017: £1,966,000). Bilby paid an interim dividend of 0.5p per share in January 2019 which provided us with income of £13,500.

Western owns 2,700,000 Bilby shares, which represent 6.7% of Bilby’s issued share capital.  The market value of the Company’s holding in Bilby on 31^st December 2018 was £1,647,000 (30^th June 2018: £2,835,000) representing 12% 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 2018 is a loss after tax of £92,000 (2017 – profit after tax of £81,000).

At 31^st December 2018, 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 2018 was £1,542,000 (2017: £1,674,000) representing 11.5% 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 2018 from Tudor Rose’s executive directors. 

Edward Beale and I are non-executive directors of Tudor Rose International.

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 2018, Lonfin held 6,000,000 Finsbury shares, representing approximately 4.6% of Finsbury’s issued share capital. The market value of the holding was £6,120,000 as at 31^st December 2018 (cost - £1,724,000) and represents approximately 32% (2017: 31%) of Lonfin’s net assets.

On 18^th September 2018, Finsbury announced audited profits on continuing operations after tax and minority interests of £2,037,000 for the 52 weeks ended 30^th June 2018 (2017: £5,638,000).

Finsbury paid a final dividend of 2.2 per share, making 3.3p for the year (2017: 3p). This provided the Company with income of £132,000.

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 2018, the number of holdings in the General Portfolio was 30 (2017: 30).

Outlook

The Company’s investment performance since the year end has been affected by the volatility in the markets and by the reduction in value of our Strategic Holdings.  Although global stock markets have shown resilience and strength over the course of the last year, they are now close to all-time highs at a time when there is continued economic and political uncertainty. Accordingly, the Board remains cautious about the potential impact of major geo-political risks and expects to see continued volatility in the equity and currency markets. These may impact further on the value of our investments.

The Board has declared an interim dividend of 0.55p per share (2017: 0.55p).

25^th February 2019

D.C. MARSHALL

Chairman

Interim Dividend

The Board recommends an interim gross dividend of 0.55p per share (10.28561 SA cents) (2017: 0.55p) which will be paid on Friday 5^th April 2019 to those members registered at the close of business on Friday 15^th March 2019 (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 14^th February 2019 being GBP 1 = SA Rand 18.7011.

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 15^th March 2019. 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 10.28561 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 8.22849 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: [phone]

-      The number of shares in issue now and as at the dividend declaration date is 31,207,479;

-      The interim gross dividend is 10.28561 SA cents;

-      The interim net dividend is 8.22849 SA 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 12th March 2019
Shares trade ex-dividend (SA)	Wednesday 13th March 2019
Shares trade ex-dividend (UK)	Thursday 14th March 2019
Record date (SA and UK)	Friday 15th March 2019
Pay date	Friday 5th April 2019

Share certificates may not be de-materialised or re-materialised between Wednesday 13^th March 2019 and Friday 15^th March 2019, both dates inclusive. Shares may not be transferred between registers in London and South Africa between Wednesday 13^th March 2019 and Friday 15^th March 2019, 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 2018, have been prepared in accordance with IAS 34, ‘Interim financial reporting’, 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 PLC, the Company Secretary, at 1 Ely Place, London EC1N 6RY

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 PLC Sponsor: Sasfin Capital (a member of the Sasfin Group).

[phone]

Consolidated Statement of Total Comprehensive Income (Unaudited)

	Half year ended				Year Ended
	31st December				30th June
	2018		2017		2018
	£000		£000		£000
Operating Income
Dividends received	335		311		674
Rental and other income	55		50		107
Profit on sales of investments, including provisions	15		26		26
	405		387
Management service fees	132		118		274
	537		505		1,081
Administrative expenses
Investment operations	(209)		(229)		(411)
Management services	(191)		(162)		(364)
Total administrative expenses	(400)		(391)		(775)
Operating profit	137		114		306
Unrealised changes in the carrying value of General Portfolio investments	(814)		501		(117)
Exceptional costs – office move	(35)		-		-
Interest payable	(9)		(1)		(14)
(Loss)/Profit before taxation	(721)		615		175
Tax expense	182		(49)		20
(Loss)/Profit after taxation	(539)		566		195
Non-controlling interest	19		(3)		(8)
(Loss)/Profit attributable to shareholders	(520)		563		187
Other comprehensive income/(expense) –
Unrealised changes in the carrying value of Strategic Investments	(443)		(87)		(23)
Deferred tax	90		48		42
Corporation tax	-		-		50
Total other comprehensive (expense)/income	(353)		(39)		69
Total comprehensive (expense)/income attributable to shareholders	(873)		524		256
Basic and Diluted (loss)/earnings per share	(1.7)p		1.8p		0.6p
Adjustment for the unrealised changes in the carrying value of investments, net of tax	2.0p		(1.5)p		0.2p
Headline earnings per share	0.3p		0.3p		0.8p
Interim dividend	0.55p		0.55p		0.55p
Final dividend			-		0.60p
Total in respect of the period	0.55p		0.55p		1.15p

Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)

	Ordinary Share Capital	Share Premium Account	Unrealised Profits and Losses on Investments	Share of Retained profits and losses Results of Subsidiaries	Retained Realised Profits &   Losses	Total	Non-Controlling Interests	Total Equity
	£000	£000	£000	£000	£000	£000	£000	£000
Period ended 31st Dec 2018
Balances at 1st July 2017	1,560	2,320	8,056	4,207	4,253	20,396	105	20,501
(Loss)/Profit for the Period	-	-	(613)	198	(105)	(520)	(19)	(539)
Other Comprehensive Expense	-	-	(353)	-	-	(353)	-	(353)
Total comprehensive (expense)/income	-	-	(966)	198	(105)	(873)	(19)	(892)
Dividends paid and total transactions with shareholders	-	-	-	-	(187)	(187)	-	(187)
Balances at 31st Dec 2018	1,560	2,320	7,090	4,405	3,961	19,336	86	19,422

   

	Ordinary Share Capital	Share Premium Account	Unrealised Profits and Losses on Investments	Share of Retained profits and losses Results of Subsidiaries	Retained Realised Profits &   Losses	Total	Non-Controlling Interests	Total Equity
	£000	£000	£000	£000	£000	£000	£000	£000
Period ended 31st Dec 2017
Balances at 1st July 2017	1,560	2,320	8,265	3,794	4,544	20,483	97	20,580
Profit for the Period	-	-	288	206	68	563	3	566
Other Comprehensive Expense	-	-	(39)	-	-	(39)	-	(39)
Total comprehensive income	-	-	249	206	68	524	3	527
Dividends paid and total transactions with shareholders	-	-	-	-	(172)	(172)	-	(172)
Balances at 31st Dec 2017	1,560	2,320	8,514	4,000	4,441	20,835	100	20,935

Consolidated Statement of Financial Position (Unaudited)

	31st December				30th June
	2018		2017		2018
	£000		£000		£000
Non-current assets
Property, plant and equipment	46		15		13
Strategic investments: -
Finsbury Food Group Plc	6,120		6,420		6,720
Western Selection PLC	4,087		4,166		3,930
	10,253		10,601		10,663
Current assets
Listed investments	9,829		11,295		10,676
Trade and other receivables	227		63		251
Cash and cash equivalents	495		277		304
	10,551		11,635		11,231
Current liabilities
Trade and other payables falling due within one year	(943)		(483)		(671)
Net Current Assets	9,608		11,152		10,560
Deferred taxation	(439)		(818)		(722)
Total Assets less Total Liabilities	19,422		20,935		20,501
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	7,090		8,514		8,056
Share of retained profits and losses of subsidiaries	4,405		4,000		4,207
Company’s retained realised profits and losses	3,961		4,441		4,253
Total Capital and Reserves attributable to owners	19,336		20,835		20,396
Non-controlling equity interest	86		100		105
	19,422		20,935		20,501
Net assets per share	62.0p		66.8p		65.4p
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
	31st December				30th June
	2018		2017		2018
	£000		£000		£000
Cash flows from operating activities
(Loss)/Profit before tax	(721)		615		175
Adjustments for non-cash -
Finance expense	9		1		14
Depreciation charges	6		4		9
Unrealised changes in the fair value of investments	814		(501)		117
Realised gain on disposal of investments	(15)		-		(26)
Decrease/(Increase)in trade and other receivables	26		157		(32)
Increase/(Decrease) in trade and other payables	45		(3)		96
Overseas Taxes paid	(11)		(11)		(230)
Net cash inflow from operating activities	153		262		123
Cash flows from investment activity
Acquisition of property, plant and equipment	(39)		(5)		(8)
Acquisition of current investments	(611)		(727)		(699)
Disposal of current investment	660		698		698
Net cash inflow/(outflow) from investment activity	10		(34)		(9)
Cash flows from financing
Interest paid	(9)		(1)		(14)
Equity dividends paid	(188)		(172)		(343)
Net drawdown of loan facilities	225		-		325
Net cash inflow/(outflow) from financing	28		(173)		(32)
Increase in cash and cash equivalents	191		55		82
Cash and cash equivalents at the beginning of the year	304		222		222
Cash and cash equivalents at end of the year	495		277		304

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
31st December 2018
Cash and cash equivalents	304		191		495
Bank revolving credit facility	(325)		(225)		(550)
Net cash and cash equivalents	(21)		(34)		(55)
31st December 2017
Cash and cash equivalents	222		55		277
Year ended 30th June 2018
Cash and cash equivalents	222		82		304
Bank revolving credit facility	-		(325)		(325)
Net cash and cash equivalents	222		(243)		(21)

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 30th June 2018 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.
	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 2018 Annual Report and Accounts and International Financial Reporting Standards, and complies with IAS 34, ‘Interim financial reporting’ as adopted by the EU.  The financial information contained in this report has not been audited or reviewed by the Company’s auditors.
2.	Earnings per share: Earnings per share are based on the (loss)/profit on ordinary activities after taxation and non-controlling interests of £(520,000) (2017: £563,000) and on 31,207,479 (2017: 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 £93,000 (2017: £11,000) and on 31,207,479 (2017: 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 and its performance over the remaining six months of the financial year are disclosed on pages 9-10 of the Group’s 2018 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		%
Diageo		475		4.8
LVMH Moet Hennessey		464		4.7
Investor AB		462		4.7
Pernod Ricard		444		4.5
Schindler-Holdings AG		436		4.4
Royal Dutch Shell		421		4.3
Unilever		414		4.2
Nestle		384		3.9
Brown Forman		383		3.9
L'Oreal		381		3.9
Givaudan		381		3.9
Heineken Holding		374		3.8
HSBC Holding		356		3.6
Exxon Mobil Corp		353		3.6
Danone		331		3.4
3M Co		329		3.3
Procter & Gamble Co		325		3.3
Henkel		318		3.2
Antofagasta		313		3.2
Reckitt Benckiser Group		295		3.0
United Technologies Corp		284		2.9
Phillip Morris International Inc		267		2.7
Becton Dickinson & Co		248		2.5
British American Tobacco		245		2.5
BASF		228		2.3
Imperial Brands		212		2.2
Anheuser Busch Inbev		193		2.0
AP Moeller-Maersk		187		1.9
Compagnie Financiere Richemont		166		1.7
Deutsche Post		160		1.6
		9,829		100

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