Western Selection Plc - Half-year Report PR Newswire

Western Selection PLC

(“Western” or the “Company”)

Unaudited Interim Results for the six months ended 31st December 2019

The Company today announces its unaudited interim results for the six months ended 31st December 2019 (the ‘Interim Statement’).

Chairman’s Statement

The Company’s Business Model

Western’s objectives are to generate growth in value for shareholders over the medium to long-term and pay a progressive dividend.

The Company’s business model is to take sizeable minority stakes in relatively small companies, usually immediately before or as their shares are admitted to trading on one of the UK’s stock exchanges and have directors in common through which we can provide advice and support for these growing companies. These may or may not become associated companies. The aim is that these companies (“Core Holdings”) will grow to a stage at which our support is no longer required and our stake can then be sold over time through the relevant stock market.

Companies that are targeted as Core Holdings will have an experienced management team, a credible business model and also good prospects for growth. Core Holdings may be in any sector where Western’s management feels it has specific competence.

Our objective is not to build a diversified portfolio, but to identify a limited number of good opportunities for growth in value. This may well see risk concentrated even further than it has previously been.

To acquire these stakes in new Core Holdings, we need to be able to react quickly, and so we need to have readily available funds to invest. To achieve this, we maintain a treasury operation consisting of a mix of cash, debt facilities and liquid investments. 

Share prices of small companies, such as our Core Holdings, can be extremely volatile; shareholders should expect to see relatively large short-term swings in our net asset value as a consequence.

There has been an increased focus on Environmental, Social and Governance (ESG) issues in recent years. The Company acknowledges the benefits of socially responsible long-term investment and consideration of ESG issues is integrated in its investment decision-making processes.

Activities

The Company continued to experience challenges in the six months to 31st December 2019. Political uncertainty, coupled with economic uncertainty in the form of stock market and exchange rate volatility, continued to impact on the Core Holdings.

Our net assets per share have decreased by 21.3% to 59p at 31st December 2019 compared with 64p per share at 30th June 2019. This is largely due to adverse market conditions and illiquidity in our investments in Core Holdings quoted on AIM, which has led to large decreases in the value of our quoted Core Holdings as a result of relatively low transaction volumes. Our quoted Core Holdings decreased in value by 1.7% during the reporting period, taking into account the purchase of a further 3,636,363 shares in Bilby PLC for £400,000. At the close of business on 31st January 2020, our net asset value was 60p per share.

Bilby did not pay a dividend in the period and as a result dividend income during the period from Core Holdings has decreased to £56,550 compared with £109,000 for the same period last year.

The Company is reporting a loss before tax for the period of £221,000 with loss per share of 1.2p compared with a loss before tax of £427,000 and a loss per share of 2.4p for the same period last year. 

An analysis of assets is shown in the unaudited Statement of Financial Position.

Treasury Operations

Treasury operations comprise available bank borrowing facilities of £1,900,000, cash and liquid investments. Following a series of disposals of liquid investments, at 31st December 2019, the Company had net cash of £2,448,000 (2018: net debt of £1,254,000) and no liquid investments (2018: liquid investments valued at £4,117,000). The Company had no outstanding bank borrowing at 31st December 2019 (2018: bank borrowings of £1,400,000). Cash holdings are split (roughly equally) between US Dollars, Swiss Francs and Euros with a small amount in Sterling. Due to foreign exchange rate movements, there is an unrealised loss on these currency cash holdings.

Core Holdings

Northbridge Industrial Service Plc (“Northbridge”)

Northbridge hires and sells specialist industrial equipment to a non-cyclical customer base. With offices or agents in the UK, USA, Dubai, Germany, Belgium, France, Australia, New Zealand, Singapore, 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 and oil tools. Further information about Northbridge, which is admitted to trading on AIM, is available on its website: www.northbridgegroup.co.uk

Northbridge’s latest results, for the half year to 30th June 2019, showed a loss after tax of £122,000 for the period (2018: loss after tax of £1,472,000). No interim dividend payment was recommended (2018: none).

Western owns 3,300,000 Northbridge shares which represent 11.8% of Northbridge’s issued share capital. The market value of this investment at 31st December 2019 was £4,455,000 (30th June 2019: £4,900,500), representing 41.7% of Western’s net assets.

Brand Architekts Group Plc (“Brand Architekts”)

Brand Architekts (formerly, Swallowfield plc) is a beauty brands business specialising in the delivery of innovative products to consumers and retailers. Brand Architekts has developed both organically and through acquisition a portfolio of brands that are owned and managed by the Brand Architekts group. Further information about Brand Architekts, which is admitted to trading on AIM, is available on its website: www.brandarchitektsplc.com

Brand Architekts announced its annual results for the 52 weeks ended 29th June 2019 on 30th September 2019 showing an adjusted profit after tax of £1,590,000 compared to an adjusted profit after tax of £1,932,000 for the comparable period last year. Brand Architekts also announced that a final dividend of 4.35p per share would be paid in December 2019 which provided Western with income of £56,550. 

Western owns 1,300,000 Brand Architekts shares which represent 7.6% of Brand Architekts’ issued share capital). The market value of this investment at 31st December 2019 was £1,976,000 (30th June 2019: £2,502,000), representing 18.5% of Western’s net assets.

Edward Beale, a director of Western, is a non-executive director of Brand Architekts.

Bilby Plc (“Bilby”)

Bilby is an award-winning provider of gas and electrical installation, maintenance and general building services to local authority and housing associations predominantly in London and South East England. It has a strategy of growing organically and by acquisition. Further information about Bilby, which is admitted to trading on AIM, is available on its website: www.bilbyplc.com.

Bilby announced its interim results for the six-month period to 30th September 2019 on 19th December 2019 showing a profit after tax of £542,000 (2018: £1,133,000). Bilby also announced that it would not be recommending the payment of an interim dividend.

Western invested an additional £400,000 in a private placing undertaken by Bilby in November 2019 acquiring an additional 3,636,363 shares at a price of 11p per share.

Western now owns 6,336,363 Bilby shares, which represent 10.8% of Bilby’s issued share capital. The market value of this investment at 31st December 2019 was £1,711,000 (30th June 2019: £877,000) representing 16.0% of Western’s net assets.

Tudor Rose International Limited (“Tudor Rose International”)

Tudor Rose International works closely with a number of leading UK branded fast-moving consumer goods companies, offering a complete sale, marketing and logistical service. Based in Stroud, Gloucestershire, Tudor Rose International sells into 78 countries worldwide including USA, Spain, Portugal, Italy, Czech Republic, Russia, Turkey, South Africa, Saudi Arabia, UAE, Malaysia, Australia and China.

As announced in our Final Results on 30th September 2019, this investment has been fully provided against.

Edward Beale and David Marshall, both directors of Western, are non-executive directors of Tudor Rose International.

Industrial & Commercial Holdings PLC (“ICH”)

ICH is a small unquoted PLC in which Western holds a 29.9% interest. It owns land at Milngavie, adjacent to Dougalston golf course, just north east of Glasgow which, with planning permission, has potential for residential development. Through its development partner, Mactaggart & Mickel Limited, ICH continues to make representations for its land to be included for housing development in the local authority’s next five-year plan.

Western holds 15,252,744 shares in ICH (which represents approximately 29.9% of ICH’s issued share capital).

Edward Beale and David Marshall, both directors of Western, are non-executive directors of ICH.

City Group PLC (“City Group”)

Western holds 48.6% and London Finance & Investment Group PLC (Western’s largest shareholder) holds 51.4% of City Group which provides head office and company secretarial services to both these and other companies. City Group acts as a shared cost centre for related party clients and sells surplus time to unrelated clients.

Edward Beale and David Marshall, both directors of Western, are non-executive directors of City Group.

Outlook                                                                                         

Whilst Brexit has finally been accomplished, the terms on which the UK trades with the EU and the rest of the world have yet to be settled. The timetable for a trade agreement with the EU is tight and negotiating postures could lead to further uncertainty in segments of the market over the remainder of the calendar year. The Company aims to reinvest its cash holdings in good companies when opportunities arise for acquisitions to be made at sensible prices.

Interim Dividend

As the Company is not receiving dividend income from liquid investments, the Board has decided not to recommend the payment of an interim dividend.

21st February 2020
D.C. MARSHALL
Chairman

The Directors confirm that, to the best of their knowledge:

- the unaudited interim results for the six months ended 31st December 2019, have been prepared in accordance with IAS 34 Interim financial reporting, as adopted by the EU; and

- the Interim Statement includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R of the Disclosure and Transparency Rules.

Neither this Interim Statement nor any future interim statements of the Company will be posted to shareholders. The Interim Statement is available as follows:

    --  on the Company’s website at www.westernselectionplc.co.uk; and
    --  by writing to City Group PLC, the Company Secretary, at 1 Ely Place,
        London EC1N 6RY

The information communicated within this announcement is deemed to constitute inside information as

stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this

announcement, this inside information is considered to be in the public domain.

The directors of the Company accept responsibility for the contents of this announcement.

For further information, please contact:


Western Selection PLC        +44 (0) 20 7796 9060

Cairn Financial Advisers LLP
James Caithie / Liam Murray  +44 (0) 20 7213 0880





Statement of Comprehensive Income (Unaudited)


                                                   Half year ended      Year
                                                                       ended

                                                    31st December       30th
                                                                        June

                                                      2019     2018     2019

                                                   GBP'000  GBP'000  GBP'000

Income from investments in:

Listed Core Holdings                                    57      108      150

Other listed investments                                 -       53      117

                                                        57      161      267

Administrative expenses – normal                     (182)    (172)    (332)

Profit on disposal of other investments                  -        -      156

Operating (loss)/profit                              (125)     (11)       91

Share of profits/(losses) of associated companies       15    (108)    (218)

Impairment provisions                                    -        -  (2,424)

Fair value adjustment on treasury investments        (100)    (312)        -

Finance income                                           -       28       14

Finance costs                                         (11)     (24)     (59)

Loss before taxation                                 (221)    (427)  (2,596)

Taxation                                                 -      (5)     (15)

Loss after taxation attributable to equity           (221)    (432)  (2,611)
shareholders

Other comprehensive income

Fair value adjustment on Core Holdings               (539)  (3,279)  (2,901)

Total other comprehensive loss                       (539)  (3,279)  (2,901)

Total comprehensive loss                             (760)  (3,711)  (5,512)

Basic and diluted losses per share attributable to  (0.7)p   (2.4)p  (14.5)p
equity holders

Interim dividend per share                               -    1.10p    1.10p

Final dividend per share                                 -        -        -

Total dividends in respect of the period                 -    1.10p    1.10p





Changes in Shareholders’ Equity (Unaudited)


                Share   Share Capital  Unrealised      Share of Realised   Total
              capital premium reserve  profits on undistributed  profits
                      account account investments      profits/
                                                    (losses) of
                                                     associates

              GBP'000 GBP'000 GBP'000     GBP'000       GBP'000  GBP'000 GBP'000

Period ended
31st Dec 2019

Balances at     7,180   2,654       3       1,547         (386)      428  11,426
1st July 2019

(Loss)/Profit       -       -       -       (100)            15    (136)   (221)
for the
period

Other               -       -       -       (539)             -        -   (539)
comprehensive
loss

Balances at     7,180   2,654       3         908         (371)      292  10,666
31st Dec 2019

Period ended
31st Dec 2018

Balances at     7,180   2,654       3       6,139         (168)    1,534  17,342
1st July 2018

Loss for the        -       -       -       (312)         (108)     (12)   (432)
period

Other               -       -       -     (3,279)             -        - (3,279)
comprehensive
loss

Dividends           -       -       -           -             -    (206)   (206)
paid

Balances at     7,180   2,654       3       2,255         (276)    1,609  13,425
31st Dec 2018





Statement of Financial Position (Unaudited)


                                                 Half year ended      Year ended

                                                  31st December        30th June

                                                    2019        2018        2019

                                                 GBP'000     GBP'000     GBP'000

Non-current Assets

Investment in Associated companies                   168       1,721         153

Investments in Core Holdings

Bilby plc                                          1,711       1,647         878

Northbridge Industrial Services plc                4,455       3,564       4,901

Swallowfield plc                                   1,976       2,730       2,502

Treasury investments                                   -       4,117           -

                                                   8,310      13,779       8,434

Current Assets

Trade and other receivables                           11         992          22

Cash and cash equivalents                          2,448         146       3,093

                                                   2,459       1,138       3,115

Current Liabilities

Trade and other payables                           (103)        (92)       (123)

Net Current Assets                                10,666       1,046       2,992

Financial Liabilities due after more than one          -     (1,400)           -
year

Net assets                                        10,666      13,425      11,426

Equity

Share capital                                      7,180       7,180       7,180

Share premium account                              2,654       2,654       2,654

Capital reserve account                                3           3           3

Unrealised profits on investments                    908       2,255       1,547

Share of undistributed losses of associates        (371)       (276)       (386)

Realised profits                                     292       1,609         428

Shareholders’ funds                               10,666      13,425      11,426

Net assets per share                                 59p         75p         64p

Number of shares in issue                     17,949,872  17,949,872  17,949,872





Statement of Cash Flows (Unaudited)


                                                     Half year ended      Year
                                                                         ended

                                                      31st December       30th
                                                                          June

                                                        2019     2018     2019

                                                     GBP'000  GBP'000  GBP'000

Loss before taxation                                   (221)    (427)  (2,596)

Adjustments for non-cash and non-operating expenses:

Profits on sale of other financial instruments             -        -  (1,847)

Fair value adjustment on other financial instruments       -      312    1,691

Foreign exchange loss                                    100        -       38

Impairment provisions                                      -        -    2,424

Share of results of associates                          (15)      108      218

Net interest paid/(received)                              11      (4)       44

Increase in trade and other receivables                    4        8       13

(Decrease)/Increase in trade and other payables         (10)      (4)       18

Cash absorbed by operations                            (131)      (7)        3

Taxation paid                                              -      (5)     (15)

Net interest (paid)/received                            (14)        4     (37)

Cash outflow from operating activities                 (145)      (8)     (49)

Cash flow from Investment activities

Purchase of Core Holdings                              (400)        -        -

Proceeds of disposal of other financial instruments        -        -    4,586

Purchase of other financial instruments                    -    (100)    (100)

Cash (outflow)/inflow from investment activities       (400)    (100)    4,486

Financing activities

Loan drawdown                                              -      425      600

Loan repayment                                             -        -  (1,575)

Equity dividend paid                                       -    (206)    (404)

Cash inflow/(outflow) from financing activities            -      219  (1,379)

Movement in cash and cash equivalents                  (545)      111    3,058

Cash and cash equivalents at start of year             3,093       35       35

Effect on foreign exchange rate                        (100)        -        -

Cash and cash equivalents at end of year               2,448      146    3,093





Reconciliation to movements in cash and cash equivalents


                           At start     Cash  Exchange     At end

                          of Period     Flow  movement  of Period

Half year ended             GBP'000  GBP'000   GBP'000    GBP'000

31st December 2019

Cash and cash equivalents     3,093    (545)     (100)      2,448

Net cash                      3,093    (545)     (100)      2,448

31st December 2018

Cash and cash equivalents        35      111         -        146

Bank borrowings               (975)    (425)         -    (1,400)

Net debt                      (940)    (314)         -    (1,254)

Year ended 30th June 2019

Cash and cash equivalents        35    3,058         -      3,093

Bank borrowings               (975)      975         -          -

Net debt                      (940)    4,033         -      3,093



Notes: -


1. Basis of preparation:
   The Company’s results for the six months ended 31st December 2019 are
   unaudited. The information contained in this Interim Statement does not
   constitute statutory accounts within the meaning of the Companies Act 2006.
   The Company’s statutory accounts for the year ended 30th June 2019 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.

   A number of new or amended standards became applicable for the current
   reporting period, including IFRS 16 Leases. The Company does not have any
   lease contracts and the standard has no impact on the financial statements.

   This Interim Statement has been prepared in accordance with the accounting
   policies contained in the Company’s 2019 Annual Report and Accounts.

2. Earnings/(loss) per share:
   The calculation of earnings/(loss) per share is based on the weighted average
   number of shares in issue for the period (17,949,872) and the loss on
   ordinary activities after tax of £221,000.