2 Mar 2007 15:40
Western Selection P.L.C. (Incorporated in England - No. 234871) (the "Company" or "Western") 2nd March 2007TO THE MEMBERS
The directors are pleased to present the unaudited interim results of the Company for the six months ended 31st December 2006.
International Financial Reporting Standards ("IFRS") value a company's stockmarket investments at their market price. We believe that this is a more usefulpresentation to shareholders as it gives a clear picture of the underlyingvalue within the Company. We have therefore decided to adopt IFRS for reportingthis year, a year earlier than is required under AIM rules. Under IFRS we maywell not have sufficient earnings to fully cover future dividends, but so longas we have distributable reserves and there is growth in net assets per sharewe intend to continue with our progressive dividend policy.Our net assets have increased to 99.5p per share (‚£12,764,000) from89.8P pershare (‚£10,495,000). This increase of 10.9% is a result of the good performanceof both our strategic and general portfolios. We believe that our mix ofStrategic Investments together with a General Portfolio of U.K. stocks is asound investment policy for our Company.The Company made a loss for the half year of ‚£29,000 (0.2p per share) beforeexceptional costs, and a loss after the exceptional costs of setting up theEmployee Benefit Trust of ‚£232,000 (1.9p per share). This compares to a loss(restated) for the same period last year of ‚£6,000 (0.1p per share) after tax,which included profits realised on sale of investments of ‚£68,000 compared to ‚£31,000 this year.
During the period the balance of the outstanding warrants were exercised and 660,509 shares were issued, raising ‚£267,000. There are now no warrants in issue.
Investment policy and management
Our investment policy is to hold strategic stakes in a few special situationsand maintain a diversified portfolio of U.K. listed equities, together with afew holdings on AIM, PLUS and some unlisted shares. Strategic investments areminority positions where we seek to maintain a close working relationship withthe management of the investee. Western is represented on the boards of two ofour three strategic investments.An analysis of assets is shown on the face of the balance sheet. The generalportfolio is managed by two non-executive directors, Andrew Hall and MichaelRobotham, and the board as a whole takes decisions in relation to both ourstrategic and unlisted investments.
General Portfolio
The value of our general portfolio increased by 7.7% over the period to ‚£ 5,729,000, compared with an increase in the FTSE100 index of 6.6%. This represents 44.9% of Western's assets. During the period we realised profits from our general portfolio of ‚£31,000 (2005 - ‚£68,000).
Strategic Investments
Creston plc
Creston is a marketing services group whose strategy is to grow within itssector both by organic growth and through selective acquisition to become asubstantial, diversified international marketing services group. Creston'sresults for the half-year to 30th September 2006 show a profit after tax underIFRS of ‚£1,017,000 (2005 - ‚£765,000), equivalent to earnings of 2.1p per share(2005 - 2.1p).
Western owns 3,000,000 shares in Creston (5.4%) with a market value at 31st December 2006 of ‚£6,030,000 (30th June 2006 - ‚£4,845,000), being 47% 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 andsell specialist industrial equipment such as load banks and generators.Northbridge is seeking to acquire specialist niche businesses to give it thepotential for expansion into outsourcing providers, capable of supplying anon-cyclical customer base. Northbridge's first acquisition was CrestchicLimited, one of the largest specialist load bank equipment manufacturers in theworld; selling and hiring to a national and international customer base.In March 2006, Northbridge placed 6,437,500 shares at ‚£1 and at the same timeits shares were admitted to trading on AIM. Western invested ‚£1,500,000 for1,500,000 shares, representing 20.3% of Northbridge's share capital. The valueof the investment at 31st December 2006 was ‚£2,055,000 representing 16% ofWestern's assets.
I am a non-executive director of Northbridge.
Swallowfield plc
Swallowfield has a long history of developing and producing aerosol, cosmeticand toiletry products stretching back to 1950. As one of Europe's largecontract manufacturers of such products it offers an unrivalled breadth ofproduct capabilities. Its skill in design, developing and producing gift packsand themed product ranges compliments its production capability.Swallowfield's latest results, for the year to 30th June 2006, showed profit,before exceptional items, of ‚£295,000 (2005 - loss ‚£95,000). The Company hasundergone a comprehensive restructuring and rationalisation programme,incurring exceptional costs of ‚£563,000. Net debt has been reduced by 15.5% andthe Company is now looking to extend product capabilities in China and otherlow cost areas.
Western owns 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 2006 was ‚£653,000 (30th June 2006 - ‚£455,000) representing 5% of the Company's assets.
Conclusion
The London stock market and other world markets showed further strength during 2006 despite evidence of sluggish US economic growth and volatile energy prices. The Directors continue to believe that holding special situation investments together with a general portfolio is the most effective way to enhance shareholder value.
The Board declared an increased dividend of 2.45p per share for the year to30th June 2006. It is not the Board's policy to pay interim dividends, but itis intended, subject to unforeseen circumstances, to maintain the dividend forthe current year, which the Board anticipate paying in October 2007. D.C. MARSHALL Chairman
Unaudited Profit and Loss Account
Half year ended Year ended 31st December 30th June 2006 2005 2006 restated .restated ‚£000 ‚£000 ‚£000 Income from investments in:
Listed strategic undertakings 95 43
43 Other listed investments 45 65 159
Surplus on disposal of listed undertakings 31 68
335 ---------- ---------- ---------- 171 176 537 Administrative expenses (148) (155) (292) ---------- ---------- ---------- Operating profit 23 21 245 Interest receivable - - 1
Interest payable and similar charges (52) (27)
(62) ---------- ---------- ----------
(Loss)/Profit on ordinary activities before (29) (6) 184 exceptional items and taxation
Exceptional costs of establishing an (203) -
- Employee Benefit Trust ---------- ---------- ---------- (Loss)/Profit on ordinary activities before (232) (6) 184 taxation Taxation - - (1) ---------- ---------- ---------- (Loss)/Profit on ordinary activities after (232) (6) 183 taxation ---------- ---------- ----------
Basic (loss)/earnings per share (1.9)p (0.1)p
1.6p
(Loss)/Earnings per share excluding (0.2)p (0.1)p
1.6pexceptional costs Diluted earnings per share n/a (0.1)p 1.6p Dividend per share Nil Nil 2.45p
Statement of Recognised Gains and Losses
Half year ended Year ended 31st December 30th June 2006 2005 2006 ‚£000 ‚£000 ‚£000
(Loss)/Profit attributable to shareholders (232) (6) 183
Unrealised gains on listed undertakings 2,171 1,441 365 ---------- ---------- ---------- Total recognised gains 1,939 1,435 548 ---------- ---------- ----------
Changes in Shareholders' Equity
Half year ended Year ended 31st December 30th June 2006 2005 2006 ‚£000 ‚£000 ‚£000 Total recognised gains 1,939 1,435 548 Proceeds of new share issues 187 519 519
Proceeds of disposal of treasury shares - 20
20
Dividends paid in respect of the previous (286) (252) (252)year
Dividends in respect of the previous years - -
1 forfeit ---------- ---------- ---------- 1,840 1,722 836 Shareholders' funds at start of period 11,382 9,660 9,660 ---------- ---------- ---------- Shareholders' funds at end of period 13,222 11,382 10,495 ---------- ---------- ---------- Unaudited Balance Sheet 31st December 30th June 2006 2005 2006 restated restated ‚£000 ‚£000 ‚£000 Fixed assets Strategic Investments Creston plc 6,030 5,849 4,845 Swallowfield plc 653 455 455 Northbridge Industrial Services PLC 2,055 -
1,598
General Portfolio investments - UK 5,729 5,276 4,869 - Overseas - 671 - - Unlisted 268 276 247 ---------- ---------- ---------- 14,735 12,497 12,014 ---------- ---------- ---------- Current assets 43 411 33 Cash at bank and in hand 5 25 5 Bank overdraft (1,862) (1,161) (1,515) Current liabilities (157) (390) (42) ---------- ---------- ---------- Net current liabilities (1,971) (1,115) (1,519) ---------- ---------- ---------- Total assets less current liabilities 12,764 11,382 10,495 ---------- ---------- ---------- Capital and Reserves Called up share capital 5,130 4,675 4,675 Share premium account 2,357 2,035 2,035 Other reserves 2,761 1,663 589 Warrants reserve - 161 161 Retained earnings 2,516 2,848 3,035 ---------- ---------- ---------- 12,764 11,382 10,495 ---------- ---------- ----------
Net Assets at market value per share - 99.5p 97.4p
89.8ppence Number of shares in issue 12,825,221 11,688,182 11,688,182 Notes:-
1. The results for the half-year are unaudited. They have been prepared on
the basis of IFRS and comparative figures have been amended. The effect is
noted below. 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 2006 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. Effects of implementing IFRS. The only adjustment to the presentation of the financial statements is that the unrealised gains on investments are now brought into account. a) The profit for the comparative period and for the preceding year have
been reduced by ‚£132,000 in respect of recoveries of provisions. That
amount is now recorded, under IFRS, in the Statement of Recognised Gains
and Losses (STRGL) as part of the unrealised gains on investments. The original charge in 2005 to profit and loss to set up the provision, has also been reversed. There is therefore no change in retained earnings. b) The unrealised gains on investments (marking to market) are now
brought into the balance sheet and recorded in the Statement of Recognised
Gains and Losses. The balance value of fixed assets has been increased by
‚£1663,000 at the end of the comparable period, ‚£589,000 at the prior year
end and ‚£2,761,000 at the end of the current period. 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. Cash Flow Statement Half year ended Year ended 31st December 2006 30th June 2006 Notes ‚£000 ‚£000 ‚£000 ‚£000
Net cash inflow/(outflow) from (a) 96
(97) operating activities Returns on investments and servicing of finance Interest paid (52) (63) Interest received - 1 (52) (62) Taxation paid - (1) Financial investment
Proceeds of disposal of fixed 500 3,374
asset investments Purchase of fixed asset (1,018) (3,399) investments ---------- ----------
Net cash outflow from financial (518)
(25) investment activities Equity dividend paid (286) (252) Financing activities Proceeds of new share issues 429 519
Proceeds from sale of treasury - 20
shares Professional fees re EBT (16) - ---------- ----------
Net cash inflow from financing 413
539 activities ---------- ---------- (Increase)/Decrease in debt (347) 102 Net debt at start of year (1,510) (1,612) ---------- ---------- Net debt at end of year (b) (1,857) (1,510) ---------- ---------- Notes:(a) Reconciliation of operating profit to net cash inflow from operatingactivitiesOperating profit 22 378 Profit on sale of investments (31) (335)
Net release of provisions against -
(132)investments Interest received - (1)
Decrease in debtors and accrued 10
34 income
Increase/(Decrease) in creditors 94
(41) ---------- ----------
Net cash inflow/(outflow) from 95
(97)operating activities ---------- ----------
(b) Reconciliation to movements in net debt
At start Cash At end Period flow Period ‚£000 ‚£000 ‚£000 2005 Cash at bank 5 - 5 Bank overdraft (1,515) (347) (1,862) ---------- ---------- ---------- (1,510) (347) (1,857) 2005/2006 ---------- ---------- ---------- Cash at bank 25 (20) 5 Bank overdraft (1,637) 122 (1,515) ---------- ---------- ---------- (1,612) 102 (1,510) ---------- ---------- ----------
Market value of General Portfolio
‚£000 % Treatt 875 15.3 Royal Dutch Shell 231 4.0 UCM Group 226 3.9 Equisar IID Fund 200 3.5 BP 170 3.0 Bioquell 170 3.0 Prudential Corporation 163 2.7 Diageo 150 2.6 Best Of The Best 147 2.6 Vodafone Group 142 2.5 Johnson Matthey 141 2.5 BHP Billiton 131 2.3 Associated British Foods 124 2.2 Homeserve 121 2.1
Wolverhampton & Dudley Breweries 119 2.1
Standard Chartered 119 2.1 Travis Perkins 119 2.1 Wynnstay Group 116 2.0 Lloyds TSB Group 114 2.0 GlaxoSmithKline 114 2.0 Cadbury Schweppes 109 1.9 Forth Ports 108 1.9 Scottish & Newcastle 101 1.8 Ladbrokes 100 1.8
Royal & Sun Alliance Insurance 98 1.7
William Hill 95 1.7 RHM 95 1.7 HSBC Bank PLC 93 1.6 Top Ten Holdings 89 1.5 Cable & Wireless 87 1.5 Gallaher Group 86 1.5 British American Tobacco 86 1.5 Imperial Tobacco Group 80 1.4 United Utilities 78 1.4 Balfour Beatty 71 1.2 Severfield-Rowen 69 1.2 Cobham 68 1.2 Rotork 58 1.0 Marshalls Group 57 1.0 Spirax-Sarco Engineering 55 1.0 Renishaw 52 1.0 PZ Cussons 50 0.9 Castings 48 0.8 Barr (A.G.) 48 0.8 Gibbs & Dandy 44 0.7 Thorntons 42 0.7 National Grid 37 0.6 Zenith Hygiene Group 25 0.4 Futura Medical 8 0.1 ---------- ---------- 5,729 100.0 ---------- ----------
WESTERN SELECTION PLC