Final Results
LONDON FINANCE & INVESTMENT GROUP P.L.C.
Preliminary announcement of unaudited results for the year ended 30th June 2003
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 very
heavily influenced by overall stock market performance which has had a third
successive year in decline. The profit after tax for the year is more than
double last year's profit, but is still below levels that we would wish to
achieve. 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 30th June 2003, 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 year of £113,000 compared with a
loss of £159,000 last year (excluding our share of Western Selection P.L.C.'s
exceptional profit of £219,000). Our operating profits have increased from £
27,000 to £52,000 as a result of higher profits realised on sales of
investments and increased management services income, which is offset by lower
dividend income. Our profit after tax and minority interest was £93,000 (2002:
£44,000) giving earnings per share of 0.36p (2002: 0.17p).
To reflect the improvement in the earnings, the Board has decided to increase
the dividend for the year to 0.85p per share (2002: 0.80p).
Our net assets per share have fallen 11% to 33.2p at 30th June 2003 from 37.2p
last year. Our Strategic Investments have fallen in value by 3% and our General
Portfolio by 1 5% after taking into account additions and disposals of
investments. This compares with the fall in the FTSE 100 index of 13% and the
FTSE Eurotop 3 00 index of 18 % over the year.
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, of Western. On 19th August 2003, Western announced a
profit after tax of £260,000 for its year to 30th June 2003, earnings per share
of 0.60p (2002 - 0.61p), and a 4% increase in dividend to 0.52p (2002 - 0.50p).
Western's net assets at market value were £8,748,000 million, equivalent to
20.1p per share, a fall of 9% from 22.1p last year .
The market value of the Company's investment in Western at 30th June 2003 was £
2.3 million and the book value was £4.0 million. At market value this
represents 27.2% 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 £3.5 million (2002 - £3.9 million).
I am the Chairman of Western and Mr. Robotham is a non-executive director.
Western has strategic investments in Creston plc, The Sanctuary Group PLC,
Swallowfield plc and Doctors Direct 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. The company's strategy is to grow
within its sector both by organic growth and acquisition.
The results for the year to 31st March 2003 show a profit after tax of £
715,000 (2002 - £138,000), equivalent to earnings of 6.4p per share (2002
- 1.2p) and Creston's directors are confident of achieving continued
growth.
The Sanctuary Group PLC
Sanctuary is a diversified international media group specialising in the
ownership and commercial exploitation of Intellectual Property Rights
within the field of entertainment.
Sanctuary's last published results were for the six months to 31st March
2003 and showed a profit of £1,951,000 (2002 - £1,712,000). Earnings per
share increased by 11% from 0.54p to 0.60p..
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's latest published results were for the 28 weeks to 11th
January 2003 which showed a profit of £164,000 (2002 - £1,265,000). This
sharp fall in profits was caused when margins fell while trying to satisfy
an unexpected surge in business volumes that could not be accommodated
within the existing capacities and business infrastructure. However, we
consider that the business model remains sound, backed up with a committed
management team and underpinned by net assets in excess of £1 per share.
Doctors Direct plc
Doctors Direct provides a visiting GP service in the London area to
private patients and corporate clients. It is also the leading provider of
GP medical assistance to UK and international insurance groups and their
agents.
Doctors Direct's latest published results are for the half year to 31st
December 2002 and show a loss of £221,000 (2002 - £80,000) reflecting
expenditure on the development of the business.
Marylebone Warwick Balfour Group Plc ('MWB')
The Company owns 3,000,000 shares in MWB, representing 2.79 per cent of its
issued share capital. The market value at 30th June, 2003 was £1.8 million,
compared with the book value of £2.5 million, this represents 21.2 per cent 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. MWB intends to make
cash distribution s , which should be completed by December 2005. It is
targeting gross cash returns in excess of 200p per share which will be
distributed in a tax efficient and transparent manner. No interim dividend was
declared in respect of the half year ended 31st December 2002.
Both Mr. Robotham and I are non-executive director s of MWB.
Finsbury Food Group plc ('Finsbury Foods')
At 30th June 2003, the Company owned 4,500,000 shares in Finsbury Foods and
3,000,000 warrants, representing 21.47% of their share capital and 45.79% of
their warrants. On 22nd July 2002, the company announced that it had entered
into conditional agreements to acquire the issued share capital of Memory Lane
Cakes Limited for £9.5 million to be satisfied by payment of £8.5 million in
cash and the issue of 3,333,333 new ordinary shares. Following this
announcement, we purchased 200,000 shares on 24th July 2002, increasing our
holding to 4,500,000 shares and during the year we purchased 1,566,667
warrants. The market value of our holding was £2.1 million on 30th June 2003
compared to a cost of £747,000, this represents 24.1% of the net assets of
Lonfin.
Memory Lane Cakes is a supplier of boxed ambient cakes to most of the UK's
major supermarket chains. Ambient cakes are baked cakes that have not been
frozen and are generally retailed at room temperature. Asda, Safeway, Sainsbury
Somerfield and Tesco are major customers. On 19th February 2003, Finsbury Foods
announced the acquisition of the trade and assets of Nicholas and Harris, a
supplier of speciality breads and boxed ambient cakes, for an initial
consideration of £2.5 million. Additional consideration of up to £2.5 million
is payable depending on earnings.
Finsbury Food has now repositioned itself as a speciality foods business
focused on niche markets. Its directors believe that the UK food sector is
increasingly polarised between substantial manufacturers and a large number of
smaller independent businesses and believe that, in this environment,
opportunities exist to acquire and develop profitable niche businesses.
Finsbury Food's directors, of which I am one, continue to review the sector and
seek further suitable acquisitions.
General Portfolio
The General Portfolio is dominated by holdings in banking, insurance, food,
beverages and consumer goods. These sectors accounted for 5 7% of the portfolio
by value at 30th June 2003 and 65% at 30th June 2002. 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.
We have increased the number of holdings in the General Portfolio from 27 to 36
over the year in order to increase diversification and plan to top up on some
of our smaller holdings as buying opportunities occur.
We have £1.2m available to increase the portfolio, having drawn £800,000 of our
£2 million bank facility at the balance sheet date.
The year ahead
We expect the share prices of our Strategic Investments to remain volatile, but
to provide good value to shareholders over the longer term. We are cautiously
optimistic for the coming year and expect the value of our General Portfolio to
improve over the next 12 months.
We have reduced our gearing during the past year and, although the outlook for
both the short and medium term continues to be uncertain, with our low gearing,
we are able to take advantage of any investment opportunities that may arise.
3rd September 2003
Consolidated Profit and Loss Account
For the year ended 30th June 2003 2002
£000 £000
Operating Income
Investment operations 314 276
Management services 520 495
Administrative expenses
Investment operations (277) (263)
Management services (505) (481)
---------- ----------
Operating profit 52 27
Share of result of associated undertaking - Beneficial 124 (98)
- Exceptional - 219
Interest payable (63) (88)
---------- ----------
Profit on ordinary activities before taxation 113 60
Tax on result of ordinary activities (10) (9)
---------- ----------
Profit on ordinary activities after taxation 103 51
Equity minority interest (10) (7)
---------- ----------
Profit attributable to members of the holding company 93 44
Proposed dividend (218) (205)
---------- ----------
Retained (loss) for the financial year (125) (161)
---------- ----------
Earnings per share 0.36p 0.17 p
Earnings/(loss) per share excluding exceptional 0.36p (0.68)p
Fully diluted earnings per share 0.36p 0.17 p
Balance Sheets
at 30th June Group Company
2003 2002 2003 2002
£000 £000 £000 £000
Fixed Assets
Tangible assets 451 471 447 457
Investments in Group companies - - 5,755 6,127
Investments 7,358 7,741 - -
---------- ---------- ---------- ----------
7,809 8,212 6,202 6,584
---------- ---------- ---------- ----------
Current Assets
Listed investments 2,685 2,743 2,685 2,743
Unlisted investments - 43 - 43
Debtors 167 187 79 45
Bank balance and deposits 28 26 27 20
---------- ---------- ---------- ----------
2,880 2,999 2,791 2,851
Current Liabilities
Creditors: falling due within one (1,176) (1,583) (1,198) (1,551)
year
---------- ---------- ---------- ----------
Net Current Assets 1,704 1,416 1,593 1,300
---------- ---------- ---------- ----------
Total Assets less Current Liabilities 9,513 9,628 7,795 7,884
====== ====== ====== ======
Capital and Reserves
Called up share capital 1,281 1,281 1,281 1,281
Share premium account 975 975 975 975
Reserves 361 361 480 480
Profit and loss account 6,823 6, 948 5,059 5,148
---------- ---------- ---------- ----------
Equity shareholders' funds 9,440 9,565 7,795 7,884
Minority equity interests 73 63 - -
---------- ---------- ---------- ----------
9,513 9,628 7,795 7,884
====== ====== ====== ======
Consolidated Cash Flow Statement
For the year ended 30th June 2003 2002
£000 £000
Cash inflow/(outflow) on operating activities (74) (71)
---------- ----------
Returns on investments and servicing of finance
Dividends received 211 243
Interest paid (47) (78)
---------- ----------
Net cash inflow from returns on investments and servicing 164 165
of finance
---------- ----------
Taxation (7) (5)
----------
Investing activities
Fixed asset investments - purchased (138) (107)
- proceeds on disposal 662 3
---------- ----------
Net cash inflow/(outflow) from investment activities 524 (104)
---------- ----------
Equity dividend paid - Company (205) (307)
---------- ----------
Financing
Share capital issued - 16
Net (repayment)/draw down of loan facility (400) 300
---------- ----------
Net cash (outflow)/inflow from financing (400) 316
---------- ----------
Increase/decrease in cash 2 (6)
---------- ----------
Notes
1. The exceptional item for 2002 comprised the Company's share of Western
Selection P.L.C.'s exceptional profits for its year to 30th June 2002.
2. The dividend for the year of 0.8 5p per share (2002 - 0.80p) will be paid
on 3rd October 2003 to shareholders on the register on 12th September 2003.
3. Earnings per share are based on the result of ordinary activities after
taxation and minority interests and on 25,615,862(2002- 25,592,026) being
the weighted average of the number of shares in issue during the year.
4. The net assets attributable to shareholders, taking investments at market
value, are before providing for any tax that may arise on realisation
5. 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 30 th June 2002 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.
6 Changes in Equity 2003 2002
£000 £000
Profit for the financial year 93 44
Proposed dividend (218) (205)
Shares issued during the year - 17
---------- ----------
(125) (144)
Opening equity shareholders' funds 9,565 9,709
---------- ----------
Closing equity shareholders' funds 9,440 9,565
---------- ----------
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