10 Sep 2007 16:13
Western Selection P.L.C.
Preliminary announcement of unaudited results for the year ended 30th June 2007
Western Selection is an investment company with a mix of Strategic Investments and a General Portfolio, primarily of U.K. stocks. The Company's objective is to generate real growth in value for shareholders over the medium to long term and pay a progressive dividend. Our total shareholder return over the last 5 years is in line with the return from the FTSE 250 index and slightly above the return on the FTSE 100 index.
The Board realises that shareholder value is not only affected by the value of the underlying investments, but also the discount at which the Company's shares trade. As part of ongoing efforts to reduce that discount, shareholders have recently been sent an invitation to subscribe for Warrants. The funds raised from this subscription and from the exercise of the Warrants will be used to increase the assets under management, improving the ratio of assets invested to operating expenses.
The offer was structured to raise ‚£872,000 in September 2007, assuming that all Warrants are issued. If all Warrants are exercised ‚£1,693,000 will be raised in December 2007 and a further ‚£3,848,000 in the period 2008-2010. Additional information on the Offer is included in the section on "Share Capital and EGM" below.
During the year the Board has maintained the Company's primary focus on the U.K. and invested a further ‚£1,000,000 in the General Portfolio, thereby increasing borrowing to ‚£2,034,000 (after allowing for the ‚£428,000 which was received following the final conversion of the 2006 warrants).
Overall, the net asset value per share including investments at market value has increased over the year to 30th June 2007 from 90p to 100p. The value of the Strategic Investments improved due to the outstanding performance of Northbridge and a recovery in the value of Swallowfield.
The Company made a profit of ‚£355,000 (2.94p per share) before associates, exceptional items and tax, compared to ‚£316,000 (2.76p per share) last year. Including the results of associates and after one off exceptional costs of the Employee Benefit Trust, approved by shareholders at the Annual General Meeting held on 29th September 2006, the profit for the year was ‚£61,000 (2006 - ‚£ 312,000). We have declared a dividend of 2.55p per share compared with 2.45p per share for 2006, an increase of 4%.
Strategic Investments
Creston plc
Creston is a marketing services group whose strategy is to grow within its sector both by organic growth and through selective acquisition to become a substantial, diversified international marketing services group. Creston made three further acquisitions during its financial year, ICM in research, TMW in direct and digital marketing and PAN in healthcare advertising and communications, being some of the larger UK groups in their sectors. The results for the year to 31st March 2007, show a profit after tax of ‚£4,931,000 (2006 - ‚£2,927,000), equivalent to earnings of 9.43p per share (2006 - 8.04p).
Western maintained its holding of 3,000,000 shares in Creston during the year which is 5.4% of Creston's issued share capital. The market value of the Company's holding in Creston on 30th June 2007 was ‚£4,890,000 (2006 - ‚£ 4,845,000), being 33% (2006 - 40%) of Western's net assets.
Mr. Marshall is the non-executive chairman of Creston. At its recent AGM held on 31st July, Creston's directors expressed their confidence in current trading conditions being experienced by the enlarged group.
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 complements its production capability.
Swallowfield's latest published results were for the 28 weeks to 13th January 2007 and showed a profit of ‚£255,000 (2006 - loss of ‚£695,000 after reorganisation costs of ‚£677,000).
Western owns 1,000,000 shares in Swallowfield which is 8.9% of the issued share capital. The market value of the Company's holding in Swallowfield on 30th June 2007 was ‚£795,000 (2006 - ‚£455,000), being 5% (2006 - 4%) of Westerns' net assets.
Northbridge Industrial Services PLC
Northbridge announced profits of ‚£731,000 for the year ended 31st December 2006 and declared a maiden dividend of 2p per share. Western maintained its holding of 1,500,000 shares in Northbridge. The value of the investment at 30th June 2007 was ‚£2,768,000 (2006 - ‚£1,598,000) being 19% (2006 - 13%) of Western's assets.
Northbridge was formed for the purpose of acquiring companies that hire and sell specialist industrial equipment such as generators, load banks, pumps, air compressors, heaters and chillers. Northbridge is seeking to acquire specialist niche businesses to give it the potential for expansion into outsourcing providers, capable of supplying a non-cyclical customer base. Northbridge's first acquisition was Crestchic Limited, one of the largest electrical load bank equipment manufacturers in the world; selling and hiring to leading national and international customers.
Industrial & Commercial Holdings PLC
ICH is a small unlisted PLC in which Western holds 29.9%. It owns land with potential to receive planning permission for housing at Milngavie, adjacent to Dougalston golf course, just north east of Glasgow. ICH is currently making representations for inclusion in the local authority's next five year plan, but it may take some time for the permission to be received. Western is in discussion with the board of ICH to consider an acquisition of an active business. Mr. Marshall and Mr. Robotham are directors of ICH.
City Group PLC
Western holds 48.57% and London Finance & Investment Group PLC holds 51.43% of City Group, which provides office and secretarial services to both of these and other companies.
General Portfolio
The General Portfolio performed well, with an overall increase of 14.23% compared with an increase in the FTSE100 of 13.26%. The investments in FTSE100 and FTSE250 stocks, which comprise 66% of the General Portfolio, increased in value by 15%. The investments in FTSE Small Cap and FTSE Fledgling stocks, which make up 22% of the General Portfolio, increased by 21%.
Share Capital and EGM
Shareholders received an offer to subscribe for Warrant Units on the basis of one Warrant Unit for every five shares held. The offer of warrants was approved overwhelmingly by shareholders at an Extraordinary General Meeting held on 9th August 2007 and was closed on 17th August 2007 as applications had been received from shareholders for all of the Warrant Units.
Each Warrant Unit comprises two 2007 Warrants, exercisable at 33p each on 10th December 2007, and three 2010 Warrants. The 2010 Warrants are exercisable at 50p each 28 days after the despatch of the annual and interim reports of the Company in each of the years 2008 to 2010. The Warrants will be admitted to trading on PLUS from 17th September 2007. PLUS has been chosen over AIM because of the lower cost. Most brokers who deal in AIM quoted shares and warrants also deal in PLUS quoted shares and warrants.
At the EGM, shareholders approved a potential increase in the size of the shareholding of our largest shareholder, London Finance & Investment Group P.L.C. ("Lonfin"), from 41% to 48%. This increase permitted Lonfin to make an excess application for Warrant Units not subscribed for by other shareholders. As Lonfin undertook to subscribe for additional Warrant Units, this reduced the number of Warrant Units that needed to be underwritten and the cost of underwriting.
Dividend
The Board is pleased to recommend an increased dividend of 2.55p per share for the year, compared to 2.45p per share for 2006, an increase of 4% per cent. The dividend will be paid on 12th October 2007 to shareholders on the register at the close of business on 21st September 2007.
Employee Benefit Trust
The Board is assisted in its responsibilities by City Group P.L.C., in particular by its two executive directors, to which we outsource our administration. Following shareholder approval at the last AGM, we have contributed to an equity based incentive scheme set up by City Group P.L.C. to reward their performance and to delegate more responsibility to them for the management of the Strategic Portfolio.
International Financial Reporting Standards
AIM rules require reporting under International Financial Reporting Standards (IFRS) for the year ended 30th June 2008 at the latest. Western has opted for early adoption of IFRS for the year ending 30th June 2007. The only significant difference resulting from the change to IFRS is that investments are valued in the balance sheet at fair value rather than cost less provisions. The change in values of ‚£2,399,000 (2006 - ‚£589,000) goes directly to reserves.
Western is required under IFRS28 to equity account for its interest in associated companies, City Group P.L.C. and Industrial & Commercial Holdings PLC. The earnings for the current year have been increased by ‚£25,000 and the accumulated results to the start of the year were decreased by ‚£24,000. The carrying value of these investments at 30th June 2007 has therefore been increased by ‚£1,000. Under UK GAAP equity accounting was not required for non-consolidated accounts.
In current circumstances it is difficult to predict the outcome for the forthcoming year, however it is the Board's intention to maintain our progressive dividend policy
D.C. MarshallChairman31st August 2007 Income StatementFor the year ended 30th June 2007 2007 2006 Restated ‚£000 ‚£000 Income from investments in: Listed strategic undertakings 104 43 Other listed undertakings 148 159 -------- -------- 252 202 Administrative expenses (611) (292) Normal (293) (292) Exceptional (318) - Surplus on disposal of investments 517 335 Release of provisions against investments - 132 -------- -------- Operating profit 158 377 Share of results of associates 24 (3) Finance income - 1 Finance costs (121) (62) -------- -------- Profit on ordinary activities after exceptional items before 61 313taxation Taxation - (1) -------- --------
Profit on ordinary activities after taxation attributable to 61 312 equity shareholders
===== ===== Basic and diluted earnings per share 0.51p 2.73p
All profits and losses are on continuing activities.
Statement of Changes in Equity
Ordinary Share Fair share premium Warrants value Retained Total capital account reserve reserve earnings
Year ended 30thJune ‚£000 ‚£000 ‚£000 ‚£000 ‚£000 ‚£000 2006
Balances as reported 4,351 1,646 355 - 2,951 9,303 30th June 2005 Adjustment for fair - - - 357 - 357 values Adjustment for share - - - - (21) (21)of results of associate ---------- -------- ---------- ---------- ---------- ---------- Restated balances 4,351 1,646 355 357 2,930 9,639 ---------- ---------- ---------- ---------- ---------- ---------- Profit attributable to - - - - 312 312 shareholders Fair value adjustment - - - 232 - 232 on listed undertakings, net of profits realised during the year and reflected in the income statement ---------- ---------- ---------- ---------- ---------- ---------- Total income and - - - 232 312 544 expense for the year ---------- ---------- ---------- ---------- ---------- ---------- New shares issued 324 195 - - - 519 Warrants reserve - 194 (194) - - - released Forfeit dividends - - - - 1 1 Disposal of fractions - - - - 20 20 Dividends paid in - - - - (252) (252)respect of the previous year ---------- ---------- ---------- ---------- ---------- ---------- Total transactions 324 389 (194) - (231) 288 with shareholders for the year ---------- ---------- ---------- ---------- ---------- ---------- Balances at 30th June 4,675 2,035 161 589 3,011 10,471 2006 Year ended 30thJune 2007 Balances at 1st July 4,675 2,035 161 589 3,011 10,471 2006 ---------- ---------- ---------- ---------- ---------- ---------- Profit attributable to - - - - 61 61 shareholders Fair value adjustment - - - 1,810 - 1,810 on listed undertakings, net of profits realised during the year and reflected in the income statement ---------- ---------- ---------- ---------- ---------- ---------- Total income and - - - 1,810 61 1,871 expense for the period ---------- ---------- ---------- ---------- ---------- ---------- New shares issued 455 273 - - - 728 Warrants reserve - 161 (161) - - - released Dividends paid in - - - - (287) (287)respect of the previous year ---------- ---------- ---------- ---------- ---------- ---------- Total transactions 455 434 (161) - (287) 441 with shareholders for the year ---------- ---------- ---------- ---------- ---------- ---------- Balances at 30thJune 5,130 2,469 - 2,399 2,785 12,783 2007 ====== ====== ====== ====== ====== ====== Balance Sheet At 30th June 2007 2007 2006 Restated ‚£000 ‚£000 Non-current Assets Investments 14,842 11,990 ---------- ---------- Current Assets Trade and other receivables 16 33 Cash and cash equivalents 6 5 ---------- ---------- 22 38
Current Liabilities (amounts falling due within one year) (2,081) (1,557)
---------- ---------- Net Current Liabilities (2,059) (1,519) ---------- ---------- Net Assets 12,783 10,471 ====== ====== Equity Share capital 5,130 4,675 Share premium account 2,469 2,035 Warrants reserve - 161 Fair value reserve 2,399 589 Profit and loss account 2,785 3,011 ---------- ---------- Shareholders' Funds 12,783 10,471 ====== ====== Cash Flow Statement For the year ended 30th June 2007 2007 2007 2006 2006 ‚£000 ‚£000 ‚£000 ‚£000 Cash outflow from operating activities Cash absorbed by operations (39) (97) Interest paid (121) (63) Interest received - 1 Taxation paid - (1) -------- -------- Net cash generated by operations (160) (160) Cash flow from investing activities Proceeds on disposal of investments 2,289 3,374 Purchase of investments (2,790) (3,399) -------- -------- Cash absorbed by investing activities (501) (25) Cashflow from financing activities Proceeds from issue of new shares 429 519 Proceeds of treasury shares arising from - 20 consolidation Equity dividend paid (286) (252) -------- -------- 143 287 -------- -------- Movement in cash and cash equivalents (518) 102 Net cash and cash equivalents at start of (1,510) (1,612)year -------- --------- Net cash and cash equivalents at end of year (2,028) (1,510) ===== ===== Notes:- 1. The dividend for the year of 2.55p per share (2006 - 2.45p) will be paid on 12th October 2007 to shareholders on the register at the close of business on 21st September 2007. 2. Earnings per share are based on the profit on ordinary activities after taxation and on 12,078,903 (2006 - 11,444,996) being the weighted average number of shares in issue during the period. 3. The net assets per share are calculated taking investments at market value. The Company has estimated Corporation Tax losses which cover the potential liability on the unrealised gains on investments. 4. The financial information contained in this preliminary announcement of results has been prepared under the recognition and measurement principles of International Financial Reporting Standards. Comparatives have been restated to a consistent basis. The financial information does not give sufficient information to comply with IFRSs which will be contained in the statutory accounts sent to shareholders. 5. The financial information set out above does not constitute the company's statutory accounts for the years ended 30th June 2007 or 2006. Statutory accounts for 2006 have been delivered to the Registrar of Companies. The auditors have reported on those accounts; their reports were unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports and did not contain statements under the Companies Act 1985, s 237(2) or (3). The audit of the statutory accounts for the year ended 30 June 2007 is not yet complete. These accounts will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the company's annual general meeting
Western Selection P.L.C.
David Marshall/Edward Beale
020 7448 8950Ruegg & Co LimitedBrett Miller/Roxane Marfy020 7584 3663
Copies of this notification are held at the Company's office, 30 City Road, London, EC1Y 2AG (tel. 020 7448 8950) and are available for a period of 14 days from the date of this announcement.
WESTERN SELECTION PLC