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LONDON FINANCE AND INVEST. GRP PLC - Interim results and declaration of dividend

Release Date: 28/02/2014 16:30
Code(s): LNF     PDF:  
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Interim results and declaration of dividend

London Finance & Investment Group P.L.C.
(Incorporated in England – No. 201151)
Code: LNF ISSN: GB0002994001
(“Lonfin” or “the Company”)



LONDON FINANCE & INVESTMENT GROUP P.L.C.
INTERIM RESULTS AND DECLARATION OF DIVIDEND
Lonfin (LSE: LFI, JSE: LNF), today announces its unaudited interim results for the six months
ended 31st December 2013 and dividend declaration.


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 31st December 2013, we held two Strategic Investments in which we have board representation:
our associated company Western Selection P.L.C. and Finsbury Food Group plc. Detailed
comments on our Strategic Investments are given below.

Results
Our net assets per share increased 1.5% to 46.4p at 31st December 2013 from 45.7p at 30th June
2013. Our Strategic Investments increased in value by 3% during the period, reflecting a strong
performance in Western’s share price and weakness in the share price of Finsbury Food. Our
General Portfolio increased by 6%, compared with increases of 9% in the FTSE 100 index, and
14% in the FTSEurofirst 300 Index over the half year. At the close of business on 25th February
2014, our net asset value was 45.3p per share.

The Group profit before tax for the half year was £385,000 compared to a profit of £1,389,000 for
the same period last year, which included the unrealised profit on a strong performance in Finsbury
Food’s share price. Our profit after tax and minority interest was £355,000 (2012 profit:
£1,359,000) giving profits per share of 1.1p (2012 – 4.4p).

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 26th February 2014, Western announced a profit after tax of £336,000 for its half year to 31st
December 2013 and a profit per share of 1.9p (2012: profit 0.4p). Western’s net assets at market
value were £16,769,000 equivalent to 93p per share, an increase of 13% from 82p at 30th June
2013. Western has announced an interim dividend of 0.95p per share, an increase of 12% on the
prior year.

The market value of the Company’s investment in Western at 31st December 2013 was £4,323,000
representing 30% of the net assets of Lonfin. The underlying value of the investment in Western,
valuing Western’s own investments at market value, was £7.3million (30th June 2013: £6.5
million).

I am the Chairman of Western and Mr. Robotham is a Non-Executive Director. Western has
strategic investments in Creston plc, Northbridge Industrial Services PLC, Swallowfield plc and
Hartim Limited. Extracts from Western's announcement on its strategic investments are set out
below:

Creston plc (“Creston”)
Creston is a digitally focussed insight and communications group with a strategy to grow within its
sector to become a substantial, diversified international group. Further information about Creston is
available on its website: www.creston.com.

Creston's results for the half-year to 30th September 2013 show a profit after tax of £1,148,000
(2012: £8,259,000 - including a one off item of £3,450,000 primarily deferred consideration write-
back). Creston declared an interim dividend of 1.20p per share, an increase of 20% on the prior
year.

Western owns 3,000,000 shares in Creston (5.0%) with a market value at 31st December 2013 of
£2,790,000 (30th June 2013: £3,240,000), being 17% of Western’s assets.

I am a Non-Executive Director of Creston.

Northbridge Industrial Services 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, Singapore,
India, 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, 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 30th June 2013, showed profit after tax of
£1,949,000 (2012: £1,027,000). Northbridge declared an interim dividend of 2.00p per share, an
increase of 8% on the prior year.

Western owns 2,000,000 shares, representing 11.6% of Northbridge’s share capital. The market
value of this investment has increased substantially and at 31st December 2013 was £9,200,000
(30th June 2013: £7,040,000), representing 55% 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’s latest results, for the year to 30th June 2013, showed a loss after tax (and after
restructuring costs of £491,000), of £815,000 (2012: profit of £1,263,000). Swallowfield did not
declare a final dividend (2012: 4.1p).
Western owns 1,869,149 shares in Swallowfield (16.5% of their issued share capital). The market
value of the Company’s holding in Swallowfield on 31st December 2013 was £1,570,000 (30th
June 2013: £1,495,000) representing 9% of the Company’s assets.


Hartim Limited (“Hartim”)
Hartim offers a complete export sales, marketing and logistical service to a number of well known
UK branded fast moving consumer goods companies. This investment was acquired on 28th March
2009 and is accounted for as an associated company.

Our share of Hartim’s estimated results for the period ended 31st December 2013 is a profit of
£161,000 (2012: £1,000) after tax, plus an exceptional profit of £167,000 due to the release of
surplus provisions relating to the closure of its Australian subsidiary.

On 18th December 2013 we announced that we were making a loan of £500,000 to Hartim to
provide funds to support its continuing growth. The loan is convertible into equity if not repaid by
31st December 2016, carries interest at 6% over base rate and is secured over Hartim’s principal
asset, its operating subsidiary, Tudor Rose Ltd.

We also announced loans of £160,000 to Hartim’s executive management team to assist them with
the purchase of shares in Hartim formerly owned by the retiring managing director. These loans
bear interest at 4.5% over base rate, are repayable by 31st December 2018, and are secured over
shares in Hartim. The Western board has decided that it is in the best interests of Western's
shareholders that the current executive directors of Hartim should have a material stake in the
success of Hartim, and these loans are a pragmatic way of achieving this objective.

These loans substantially increase Western's exposure to Hartim, but the business is performing
well, the loans generate a positive return to Western, and the structure encourages the payment of a
dividend on Western's original investment.

At 31st December 2013, Western owned 49.5% of Hartim. The carrying value of the Company’s
equity investment in Hartim on 31st December 2013 was £514,000 (30th June 2013: £185,000)
representing 3% of the Company’s assets. In addition, loans of £660,000 (equivalent to a further
4% of the Company’s assets) have been made to Hartim and its executive directors.

Mr. Beale is a Non-Executive Director of Hartim.

Finsbury Food Group plc (“Finsbury Food”)
Finsbury Food is a supplier of ambient cakes to most of the UK's major supermarket chains and
speciality breads to Waitrose including low fat products. Further information about Finsbury Food
is available on its website: www.finsburyfoods.co.uk.

The Group holding in Finsbury Food is 9,000,000 shares, representing 13.6% of their share capital.
The market value of our holding was £5,400,000 on 31st December 2013 compared to a cost of
£2,283,000; this represents 37% of the net assets of Lonfin.

Finsbury Food will be announcing their interim results on 24th March 2014.

I am a Non-Executive Director of Finsbury Food.

General Portfolio
The list of investments included in the General Portfolio is set out at the end of this announcement.
We added to a few of our holdings during the period and we initiated positions in 3M and United
Technologies. We also took the decision to dispose of our holdings in BHP Billiton and Siemens.
Dividends
The Board has declared an interim dividend of 0.45p per share (2013: 0.4p).


Outlook
Expansionary policies of central bankers of the developed world have been a key driver of share
prices and markets in general for quite some time, but the Board remain cautious given the fragile
global economic conditions. The volatile start to the calendar year comes as no surprise and we
expect investor sentiment to be a lot more erratic during the remainder of the year.

David C. Marshall
Chairman

Interim Dividend
The declared interim dividend is 0.45p per share (ZAR 8.09708 cents) (2012 - 0.4p) and will be
paid on Friday, 11th April 2014 to those members registered at the close of business on Thursday
20th March 2014 (SA) or Friday 21st March 2014 (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 26th February 2014.

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)                         Thursday, 13th March 2014
Shares trade ex dividend (SA)                  Friday, 14 March 2014
Shares trade ex dividend (UK)                  Wednesday, 19th March 2014
Record date (SA)                               Thursday, 20th March 2014
Record date (UK)                               Friday, 21st March 2014
Pay date                                       Friday, 11th April 2014

Shareholders are hereby advised that the exchange rate to be used will be GBP 1 = ZAR 17.9935.
This has been calculated as the average of the bid/ask spread at 16.00 (United Kingdom time) being
the close of business on 26th February 2014. Consequently, the dividend of 0.45p will be equal to
8.09708 South African cents.

The JSE Listings Requirements require disclosure of additional information in relation to any
dividend payments.

Shareholders registered on the Johannesburg register are reminded that the dividend withholding tax
will be withheld from the gross final dividend amount of 8.09708 SA cents per share at a rate of
15%, unless a shareholder qualifies for an exemption; shareholders registered on the Johannesburg
register who do not quality for an exemption will therefore receive a net dividend of 6.88252 SA
cents per share. The Company, as a non-resident of South Africa, was not subject to the secondary
tax on companies (STC) applicable before 1st April 2012, and accordingly, no STC credits are
available for set-off against the dividend withholding tax liability on the final net dividend amount.
The dividend is payable in cash as a ‘Dividend’ (as defined in the South African Income Tax Act,
58 of 1962, as amended) by way of a payment out of income reserves. The dividend withholding
tax and the information contained in this paragraph is only of direct application to shareholders
registered on the Johannesburg register, who should direct any questions about the application of
the dividend withholding tax to Computershare Investor Services (Pty) Limited, Tel: +27 11 373-
0004.

No dematerialisation or rematerialisation of share certificates, nor transfer of shares between the
registers in London and South Africa will take place between Friday 14th March 2014 and
Thursday 20th March 2014 all dates inclusive.

UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                                                                 Half year ended        Year ended
                                                                 31st December           30th June
                                                                2013           2012          2013
                                                                £000           £000          £000
Operating Income
 Dividends received                                              173           106            313
 Interest and sundry income                                        -             -             58
Profit on sales of investments, including provisions             205           131            215
                                                                 378           237            586
 Management services income                                      134           134            228
                                                                 512           371            814
Administrative expenses
 Investment operations                                          (158)         (148)          (295)
 Management services                                            (173)         (146)          (315)
Total administrative expenses                                   (331)         (294)          (610)
Operating profit                                                 181             77           204
Unrealised changes in the carrying value of investments          206          1,321         4,629
Interest payable                                                  (2)            (9)          (33)
Profit on ordinary activities before taxation                    385          1,389         4,800
Tax on result of ordinary activities                             (45)           (34)         (180)
Profit on ordinary activities after taxation                     340          1,355         4,620
Non-controlling interest                                          15              4            17
Total comprehensive income - profit attributable to
members of the holding company                                   355          1,359         4,637


RECONCILIATION OF HEADLINE EARNINGS
Earnings per share                                               1.1p          4.4 p         14.9p
Adjustment for unrealised changes in the carrying value of
investments and exceptional items, net of tax                  (0.6)p         (4.3)p       (14.2)p
Headline earnings per share                                      0.5p          0.1 p          0.7p


Interim dividend                                               0.45p           0.4 p          0.4p
Final dividend                                                                                0.4p
Total in respect of the year                                                                  0.8p



UNAUDITED CONSOLIDATED CHANGES IN SHAREHOLDERS’ EQUITY

                                                              31st December            30th June
                                                              2013          2012           2013
                                                              £000          £000           £000
Total comprehensive income attributable to members                      355         1,359         4,637
Dividends paid to equity shareholders                                  (125)         (109)         (234)
                                                                        230         1,250         4,403
Equity shareholders’ funds at start of period                        14,258         9,855         9,855
Equity shareholders’ funds at end of period                          14,488        11,105        14,258

UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                                                       31st December           30th June
                                                                       2013          2012          2013
                                                                       £000          £000          £000
Non-current assets
Tangible assets                                                           2              3             3
Principal investments:-
 Finsbury Food Group Plc                                              5,400          3,359        5,490
 Western Selection P.L.C.                                             4,323          2,987        3,930
                                                                      9,725          6,349        9,423

Current assets
Listed investments                                                    5,775          4,746        5,601
Trade and other receivables                                             254            269          256
Cash, bank balances and deposits                                        123          1,108          116
                                                                      6,152          6,123        5,973
Total Assets                                                         15,877         12,472       15,396

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                          5,037          1,727        4,831
Share of undistributed profits and losses of subsidiaries   and
associates                                                             (387)          (576)        (499)
Company’s retained realised profits and losses                        5,958          6,074        6,046
Equity shareholders funds                                            14,488         11,105       14,258

Trade and other payables falling due within one year                  1,067          1,274          853
Deferred taxation                                                       255               -         204
Non-controlling equity interest                                          67             93           81
                                                                     15,877         12,472       15,396



Net assets per share                                                   46.4p          35.6p        45.7p

Number of shares in issue                                         31,207,479    31,207,479    31,207,479


Unaudited Consolidated Statement of Cash Flow
                                                                       Half year ended        Year ended
                                                                       31st December           30th June
                                                                        2013           2012         2013
                                                                        £000           £000         £000
Profit before taxation                                                  385          1,389        4,800
Adjustments for non-cash and non-operating expenses:-
 Depreciation charges                                                     1              1             1
Unrealised changes in the carrying value of fixed asset                (206)        (1,321)       (4,629)
 investments
Net interest paid                                             2          9          33
                                                           (203)    (1,311)     (4,595)
Taxation paid                                                 (3)       (4)        (22)

Changes in working capital:-
Decrease/(Increase) in debtors                               11         3         (16)
Increase in creditors                                        69        26          64
(Increase)/Decrease in current asset investments           (300)      222        (375)
                                                           (220)      251        (327)
Cash (outflow)/inflow on operating activities               (41)      325         (144)
Investment activities
Purchase of additional shares in strategic investment          -     (366)       (390)
Net cash outflow from investment activities                     -    (366)       (390)
Cash flows from financing
Net interest paid                                            (2)       (9)         (33)
Drawdown/(Repayment) of loan facilities                     175      (950)      (1,300)
Equity dividends paid                                      (125)     (109)        (234)
Net cash inflow/(outflow) from financing                     48     (1,068)     (1,567)

Increase/(Decrease) in cash and cash equivalents              7     (1,109)     (2,101)
Cash and cash equivalents at start of period                116     2,217        2,217
Cash and cash equivalents at end of period                  123      1,108        116


RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
                                                         At start     Cash    At end of
                                                        of period     Flow       Period
Half year ended 31st December                               £000      £000        £000
2013
Cash at bank                                                116         7         123
Bank loan                                                  (650)     (175)       (825)
                                                           (534)     (168)       (702)
2012
Cash at bank                                              2,217     (1,109)      1,108
Bank loan                                                (1,950)       950      (1,000)
                                                            267      (159)         108
Year ended 30th June 2013
Cash at bank                                              2,217     (2,101)       116
Bank loan                                                (1,950)     1,300       (650)
                                                            267       (801)      (534)


Composition of General Portfolio
31st December 2013                                       Current
                                                          Value
                                                           £000         %

Nestlé                                                       303       5.3
L'Oreal                                                      299       5.2
Diageo                                                       293       5.1
British American Tobacco                                     283       4.9
Investor                                                     279       4.8
Henkel                                                       260       4.5
Schindler                                                           259             4.5
Royal Dutch Shell 'B'                                               249             4.3
Pernod-Ricard                                                       238             4.1
Heineken                                                            237             4.1
Reckitt Benckiser                                                   234             4.1
Philip Morris International                                         233             4.0
BASF                                                                224             3.9
Unilever                                                            218             3.8
ABB                                                                 211             3.7
Imperial Tobacco                                                    208             3.6
Novartis                                                            193             3.3
Danone                                                              174             3.0
Exxon Mobil                                                         169             2.9
Holcim                                                              168             2.9
Procter & Gamble                                                    162             2.8
Chevron                                                             156             2.7
Linde                                                               152             2.6
Anheuser Busch Inbev                                                111             1.9
Glencore Xstrata                                                    110             1.9
Givaudan                                                            110             1.9
LVMH                                                                103             1.8
3M                                                                   72             1.2
United Technologies                                                  67             1.2
                                                                  5,775           100.0



Notes:-

1.    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 2013 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.
2.    This report has been prepared in accordance with the accounting policies contained in the Company’s
      Annual Report and Accounts 2013, International Financial Reporting Standards and comply with
      IAS34.
3.    The calculation of earnings per share is based on the weighted average number of shares in issue for
      the period and the profit on ordinary activities after tax.

28 February 2014
Johannesburg

Sponsor
Sasfin Capital (a division of Sasfin Bank Limited)

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