14 Feb 2008 07:00
Date: 14th February 2008 On behalf of: Western Selection P.L.C. ("the Company") Embargoed until: 0700hrs Western Selection P.L.C.Interim Results
Western Selection P.L.C. , an investment finance company, today announces its unaudited interim results for the six months ended 31st December 2007.
Highlights from last six month period include:
- Completion of innovative warrant issue, raising ‚£2.565 million. - Profit before tax ‚£38,000 compared to loss before exceptionals of ‚£29,000 for the same period last year - Value of general portfolio increased by 4.3% to ‚£5.2 million.
David Marshall,Chairman of Western Selectioncommented:
"The volatile financial markets have been challenging for our strategic investments. However, we remain focused and believe that our Strategic Investments together with the general portfolio, will drive growth forward. The Group has strong cash balances and borrowing facilities and the Board remains confident about its investments and their long term growth potential."
- Ends -Enquiries to:Western Selection P.L.C. Via Redleaf Communications David Marshall/Edward Beale Redleaf Communications 020 7822 0200 Emma Kane/Sanna Lehtinen Ruegg & Co. Limited 020 7584 3663 Brett Miller/Roxane Marffy Notes to Editors:- The Company is an investment finance company and the investment policy is to hold strategic stakes in a few smaller UK quoted companies and maintain a diversified portfolio of U.K. listed equities, together with a few holdings on AIM, PLUS and some unlisted shares. Strategic Investments are minority positions where the Board seeks to maintain a close working relationship with the management of the investee. Western is represented on the boards of two of its three Strategic Investments. The general portfolio is managed by two non-executive directors, Andrew Hall and Michael Robotham, and the Board as a whole takes decisions in relation to both strategic and unlisted investments. TO THE MEMBERS
The Directors are pleased to present the unaudited interim results of the Company for the six months ended 31st December 2007.
The performance over the period appears disappointing because of a significant decrease in the share price of two of our Strategic Investments, Creston plc and Northbridge Industrial Services plc. Creston's share price fell 53% over the period and the company now trades at a price equivalent to about 4.5 times forecast earnings for the year. This and a decrease of almost 20% in the share price of another strategic investment, Northbridge, have been the main cause in the reduction in the Company's net assets per share from 85p at 30th June 2007 (adjusted for the exercise of warrants) to 63p. Despite this volatility in the share price of two of our Strategic Investments, we continue to believe that our mix of Strategic Investments together with a General Portfolio of U.K. stocks remains a sound investment policy for our Company. We have confidence in our Strategic Investments, which still have attractive long term growth prospects.
During the period, shareholders subscribed for 5,130,088 of 2007 Warrants and 7,695,132 of 2010 Warrants. All of the 2007 warrants were exercised in December, bringing the total raised in the period to ‚£2,565,000. The 2010 Warrants are exercisable 28 days after the despatch of the Company's interim and annual reports for each of the financial years ending in 2008 to 2010 and, assuming that they are all exercised, will raise a further ‚£3,848,000 in that period. We are very pleased to have completed this innovative Warrant issue for a total cost of ‚£179,000, under 3% of funds being raised.
The Company made a profit for the half year of ‚£38,000 (0.3p per share). This compares to a loss (before exceptional items) for the same period last year of ‚£29,000 (0.2p per share) after tax. The main difference is the amount included for profits realised on sale of investments of ‚£81,000 compared to ‚£31,000 last year. Professional fees increased substantially in the period and this has triggered a review of our professional advisers.
Western is very liquid with cash balances in excess of ‚£500,000 and ‚£2.5 million of unused borrowing facilities available to take advantage of any investment opportunities.
Investment policy and management
Western's investment policy is to hold strategic stakes in a few special situations and maintain a diversified portfolio of U.K. listed equities, together with a few holdings on AIM, PLUS and some unlisted shares. Strategic investments are minority positions where we seek to maintain a close working relationship with the management of the investee. Western is represented on the boards of two of our three strategic investments and is working to achieve representation on the third.
An analysis of assets is shown on the face of the balance sheet. The general portfolio is managed by two non-executive directors, Andrew Hall and Michael Robotham, and the Board as a whole takes decisions in relation to both our strategic and unlisted investments.
General Portfolio
The value of our general portfolio increased by 4.3% over the period to ‚£ 5,248,000, compared to an increase in the FTSE100 index of 2.0%. This represents 49% of Western's assets. A net ‚£610,000 has been withdrawn from the general portfolio during the period, as the market began to weaken.
Strategic Investments
Creston plc
Creston is a marketing services group whose strategy is to grow within its sector to become a substantial, diversified international marketing services group. Creston's results for the half-year to 30th September 2007 show a profit after tax of ‚£2,280,000 (2006 restated: ‚£790,000), equivalent to earnings of 4.1p per share (2006 restated: 1.6p).
Western owns 3,000,000 shares in Creston (5.4%) with a market value at 31st December 2007 of ‚£2,288,000 (30th June 2006: ‚£4,890,000), being 20.2% of Western's assets.
I am the non-executive chairman of Creston.
Northbridge Industrial Services PLC
Northbridge was formed for the purpose of acquiring companies that hire and sell specialist industrial equipment such as electrical load banks and generators. Northbridge's first acquisition was Crestchic Limited, one of the largest specialist load bank equipment manufacturers in the world, located in Burton-on-Trent, selling and hiring to a national and international customer base.
Northbridge has recently acquired RDS (Technical) Limited ("RDS") which conducts the majority of its activities through a branch office in Baku, Azerbaijan. Its principal business is to provide generators and associated equipment by way of hire, sale and service to the oil and gas industry in the Caspian region. RDS is held by Northbridge (Middle East) FZE, a recently incorporated wholly owned subsidiary of Northbridge, which has been established in the Jebel Ali Free Zone in Dubai, UAE. This will enable its newly formed subsidiary in Dubai to establish an oil and gas business in the Middle East and Caspian region with a broader range of equipment available for hire and sale.
Western owns 1,500,000 shares, representing 20.3% of Northbridge's share capital. The value of this investment at 31st December 2007 was ‚£2,220,000 (30th June 2006: ‚£2,768,000), representing 19.6% of Western's assets.
I am a non-executive director of Northbridge.
Swallowfield plc
Swallowfield is a full service provider for global and household brands operating in the cosmetics and personal care and household goods marketplace. It offers a flexible and tailored service including: contract filling market analysis, design, formulation and testing of products, packaging design and sourcing and distribution of stock.
Swallowfield's latest results, for the year to 30th June 2007, showed profit, before exceptional items, of ‚£683,000 (2006: loss of ‚£295,000).
At 31st December 2007, Western owned 1,000,000 shares in Swallowfield (8.9% of their issued share capital). The market value of the Company's holding in Swallowfield on 31st December 2007 was ‚£740,000 (30th June 2006: ‚£795,000) representing 6.5% of the Company's assets. Since 31st December we have acquired a small number of Swallowfield shares and now own in excess of 9% of the company.
We have unsuccessfully requested the Swallowfield Board's assistance in appointing two new directors: Peter Gyllenhammar (a fellow Swallowfield shareholder owning 29%) and me. We do not believe that the Swallowfield Board contains a broad enough mix of experience and will continue to work with other Swallowfield shareholders to rectify this.
Conclusion
The London stock market and other world markets remain volatile. The Directors continue to believe that holding special situation investments in which we aim to have a close involvement, together with a general portfolio, is the most effective way to enhance shareholder value.
Following the exercise of warrants by shareholders, we have cash balances and borrowing facilities available to take advantage of any buying opportunities presented by the market. We continue to seek out and review possibilities for acquiring new strategic investments, which, in the current market, may well be more readily available than they have previously been.
Western's shares are trading at a large discount to net asset value and we intend to use the authority granted to us by shareholders at the AGM to buy shares into treasury when there is a large discount from time to time.
The Board declared an increased dividend of 2.55p per share for the year to 30th June 2007. It is not the Board's policy to pay interim dividends; subject to unforeseen circumstances, we expect to show satisfactory results for the period to 30th June 2008 and to maintain the dividend for the current year, which the Board anticipates paying in October 2008.
D.C. MARSHALL Chairman
Unaudited Income Statement
Half year ended Year ended 31st December 30th June 2007 2006 2007 ‚£000 ‚£000 ‚£000 Income from investments in: Listed strategic undertakings 99 74 104 Other listed investments 80 66 148 Surplus on disposal of listed undertakings 81 31 517 --------- --------- --------- 260 171 769 Administrative expenses - normal (169) (148) (293) - exceptional - (203) (318) --------- --------- --------- Operating profit 91 (180) 158 Share of results of associated company - - 24 Interest payable and similar charges (52) (52) (121) --------- --------- --------- Profit/(Loss) on ordinary activities before 38 (232) 61 taxation Taxation - - - --------- --------- --------- Profit/(Loss) on ordinary activities after 38 (232) 61 taxation ===== ===== ===== Basic earnings/(loss) per share 0.3p (1.9)p 0.5p
Earnings/(Loss) per share excluding exceptional 0.3p (0.2)p 0.5p costs
Dividend per share Nil Nil 2.55p
Statement of Recognised Gains and Losses
Profit/(Loss) attributable to shareholders 38 (232) 61
Unrealised losses/gains on listed undertakings (3,550) 2,171 1,810
--------- --------- --------- Total recognised (losses)/gains (3,512) 1,939 1,871 ===== ===== =====
Changes in Shareholders' Equity
Total recognised (losses)/gains (3,512) 1,939 1,871
Proceeds of new share issues, net of costs 2,389 617 728
Dividends paid in respect of the previous year (327) (287) (287)
--------- --------- --------- (1,450) 2,269 2,312 Shareholders' funds at start of period 12,783 10,495 10,471 --------- --------- --------- Shareholders' funds at end of period 11,333 12,764 12,783 ===== ===== ===== Unaudited Balance Sheet 31st December 30th June 2007 2006 2007 ‚£000 ‚£000 ‚£000Fixed assets Strategic Investments Creston plc 2,288 6,030 4,890 Swallowfield plc 740 653 795 Northbridge Industrial Services PLC 2,220 2,055 2,768 General Portfolio investments - UK 5,248 5,729 6,121 - Unlisted 268 268 268 --------- --------- --------- 10,764 14,735 14,842 --------- --------- --------- Current assets 511 43 16 Cash at bank and in hand 151 5 6 Bank overdraft - (1,862) (2,035) Current liabilities (93) (157) (46) --------- --------- --------- Net current assets/(liabilities) 569 (1,971) (2,059) --------- --------- --------- Total assets less current liabilities 11,333 12,764 12,783 ===== ===== ===== Capital and Reserves Called up share capital 7,182 5,130 5,130 Share premium account 2,290 2,357 2,469 Fair Value reserve (638) 2,761 2,399 Retained earnings 2,498 2,516 2,785 --------- --------- --------- 11,333 12,764 12,783 ===== ===== ===== Net Assets at market value per share - pence 63p 100p 100p Number of shares in issue 17,955,309 12,825,221 12,825,221Notes:-1. The results for the half-year are unaudited. The financial information in this interim announcement does not constitute statutory accounts within the meaning of Section 240(5) of the Companies Act 1985. The statutory accounts of Western Selection P.L.C. for the year ended 30th June 2007 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 and did not contain a statement under Section 237(2) or 272(3) of the Companies Act 1985. 2. 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. Cash Flow Statement Half year ended Year ended 31st December 30th June 2007 2006 2007 Notes ‚£000 ‚£000 ‚£000 Net cash outflow from operating (a) (438) 80 (39)activities Returns on investments and servicing of finance Interest paid (52) (52) (121) Taxation paid - - - --------- --------- --------- (490) 28 (160) --------- --------- --------- Financial investment Proceeds of disposal of fixed asset 822 500 2,289 investments Purchase of fixed asset investments (212) (1,018) (2,790) --------- --------- --------- Net cash inflow/(outflow) from financial 610 (518) (501)investment activities --------- --------- --------- Financing activities Equity dividend paid (327) (286) (286) Proceeds of new share issues 2,386 429 429 --------- --------- --------- Net cash inflow from financing activities 2,059 143 143 --------- --------- --------- Movement in cash and cash equivalents 2,179 (347) (518)
Net cash and cash equivalents at start of (2,028) (1,510) (1,510) year
--------- --------- --------- Net cash and cash equivalents at end of (b) 151 (1,857) (2,028)year ===== ===== =====Notes:
(a) Reconciliation of operating profit to net cash inflow from operating activities
Profit before taxation 38 (232) 61 Profit on sale of investments (81) (31) (517) Interest paid 52 52 121 Exceptional costs - 186 299 (Increase)/Decrease in debtors and accrued (493) (10) 16 income Increase in creditors 46 115 5 --------- --------- ---------
Net cash outflow from operating activities (438) 80 (39)
===== ===== =====
(b) Reconciliation to movements in net debt
At start Cash At end period flow period Half year ended ‚£000 ‚£000 ‚£000 31stDecember 2007 Cash at bank 6 145 151 Bank overdraft (2,034) 2,034 - --------- --------- --------- (2,028) 2,179 151 ===== ===== ===== 31stDecember 2006 Cash at bank 5 - 5 Bank overdraft (1,515) (347) (1,862) --------- --------- --------- (1,510) (347) (1,857) ===== ===== ===== Year ended 30thJune 2007 Cash at bank 5 1 6 Bank overdraft (1,515) (519) (2,034) --------- --------- --------- (1,510) (518) (2,028) ===== ===== =====
Market value of General Portfolio
Treatt 727,650 13.9 Royal Dutch Shell 271,250 5.2 Equisar IIID Fund 247,023 4.7 BHP Billiton 218,540 4.2 Bioquell 217,250 4.1 Johnson Matthey 188,600 3.6 BP 185,700 3.5 Wynnstay Group 177,025 3.4 Prudential Corporation 165,781 3.2 Diageo 162,150 3.1 Associated British Foods 134,250 2.6 Anglo American 123,880 2.4 Best of the Best 122,450 2.3 Vodafone Group 113,040 2.2 Homeserve 108,928 2.1 GlaxoSmithKline 108,885 2.1 Dawson Holdings 107,000 2.0 National Grid 100,800 1.9 British American Tobacco 99,000 1.9 Forth Ports 96,500 1.8 Lloyds TSB Group 95,050 1.8 Royal & Sun Alliance Insurance 94,900 1.8 Scottish & Newcastle 87,960 1.7 Marstons 84,942 1.6 HSBC Bank 84,450 1.6 Imperial Tobacco Group 80,670 1.5 Balfour Beatty 80,320 1.5 William Hill 76,950 1.5 Ladbrokes 76,560 1.5 United Utilities 76,100 1.5 Standard Chartered 74,040 1.4 Cobham 73,325 1.4 Rotork 68,600 1.3 PZ Cussons 66,600 1.3 Renishaw 63,300 1.2 Ultra Electronics Holdings 58,351 1.1 Marshalls Group 58,320 1.1 Castings 55,260 1.1 Spirax-Sarco Engineering 48,455 0.9 Barr (A.G.) 44,034 0.8 Travis Perkins 35,820 0.7 Others 88,232 1.7 ----------- --------- 5,247,941 100.0 ======= =====
WESTERN SELECTION PLC (WARRANTS)