Western Selection Plc - Half-year Report PR Newswire

Western Selection PLC

(“Western” or the “Company”)

Unaudited Condensed Interim Financial Statements for the 6 months ended

31 December 2021

The Company today announces its unaudited interim results for the six months ended 31 December 2021 (the ‘Interim Statement’).

Chairman’s Statement

Business Model

The Company’s business model has been to seek to generate growth in value for shareholders over the medium to long term by taking sizeable minority stakes in relatively small companies, maintaining a dialogue through which the Company could provide advice and support to these growing companies until support was no longer required and the stake could be sold.  

Companies that were targeted as Core Holdings had an experienced management team, a credible business model and good prospects for growth.  Core Holdings were made in any sector where management felt it had specific competence.  The Company also maintains a Treasury Operation consisting of a mix of cash and debt facilities as well as the liquid investments in a General Portfolio of shares which consist of investments, primarily in blue-chip companies in the USA, UK and Europe. The Company aspired to pay a progressive dividend.

Much has changed over the last few years and the concentration of the Company's investment into a small number of illiquid companies, all of which stopped paying dividends over the Covid period, and the increasing regulatory costs of maintaining the listing has taken its toll, resulting in the Company needing to pause its dividend in September 2019. The Board is actively considering strategies to reduce the share price discount to net asset value and establish shareholder value.

Activities

With continuing uncertainty over the effects of Covid-19, the Company has maintained a cautious investment strategy over the period.  Our quoted Core Holdings, Northbridge Industrial Services Plc (“Northbridge”) and Kinovo Plc (“Kinovo”), have continued to trade throughout the period and their share prices have increased by 44.8% and 10.8% respectively.

We sold 495,500 Northbridge shares in the period and made some changes to Treasury Investments, realising cash of £915,000 and net profits of £286,000 compared to the cost of these investments. In January 2022, we sold a further 1,427,500 Northbridge shares. Proceeds from these sales are being reinvested over time in the Treasury portfolio and, subsequent to the period end, have been used to repay all borrowings.

A dividend of £37,500 was received from Kinovo on 22 September 2021 compared with £Nil dividends received for the same period last year. Northbridge did not pay a dividend in the period (2020: £Nil).

Operating expenses were £136,000 in the half year (2020: £170,000). 

The Company is reporting a profit before tax for the period of £117,000 with earnings per share of 0.64p compared with a loss before tax of £260,000 and a loss per share of 1.5p for the same period last year.

As a result, net assets per share have increased to 68p at 31 December 2021 compared with 56p per share at 30 June 2021. At the close of business on 31 January 2021, our net asset value was 66p per share. An analysis of assets is shown in the unaudited Statement of Financial Position.

Treasury Operations

Treasury operations started the period with £4,001,000 in an international selection of blue-chip investments. A net £520,000 was invested in blue-chip shares in the period and at the period end the market value of these investments had risen to £4,708,000.

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 load banks, 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 30 June 2021, showed a profit after tax of £77,000 for the period (2020: loss after tax of £7,295,000). No interim dividend payment was recommended (2020: £Nil).

During the period, we sold 495,500 Northbridge shares and subsequent to the period end we sold a further 1,427,500 Northbridge shares. At 28 January 2022, Western owned 1,377,000 Northbridge shares which represented 4.74% of Northbridge’s issued share capital. At 31 December 2021, the market value of this investment was £4,712,000 (30 June 2021: £3,828,000), representing 38.8% of Western’s net assets.

Kinovo Plc (“Kinovo”)

Kinovo 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 Kinovo, which is admitted to trading on AIM, is available on its website: www.kinovoplc.com.

Kinovo announced its interim results for the six-month period to 30 September 2021 on 7 December 2021 showing a profit after tax of £834,000 (2020: loss after tax - £361,000). Western received a final dividend of £37,500 on 22 September 2021. No interim dividend has been recommended during the current financial year.

Western owns 7,500,000 Kinovo shares, which represents 12.1% of Kinovo’s issued share capital. The market value of this investment at 31 December 2021 was £3,075,000 (30 June 2021: £2,775,000) representing 25.3% of Western’s net assets.

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 I 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 I are non-executive directors of City Group. 

Outlook

Most countries are gradually adapting to living with Covid.  The big exception is China which continues to have a zero Covid policy.  Recent supply chain disruptions are gradually diminishing, although they could re-occur if Covid outbreaks in China or elsewhere lead to major new lockdowns.

The Company remains cautious over future investments during these uncertain times. While considering options for providing greater value to shareholders, the Company will continue to reinvest the proceeds from the sale of its investments when opportunities arise to buy shareholdings in good companies at sensible prices.

Interim Dividend

As the Company is not receiving sufficient dividend income from investments to cover operating costs, and only has distributable reserves as a result of unrealised fair value uplifts on investments, the Board does not recommend the payment of an interim dividend.

18 February 2022

D.C. MARSHALL

Chairman

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

- the unaudited interim results for the six months ended 31 December 2021, 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 contained in this announcement was previously classified as inside information for the purposes of the UK Market Abuse Regulation. Upon the publication of this announcement, this 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




Condensed Statement of Comprehensive Income

Half year ended Year ended
31 December 30 June
2021 2020 2021
£000 £000 £000
Income from investments in:
Listed Core Holdings 37 - -
Other listed investments 47 4 49
84 4 49
Administrative expenses – normal (136) (170) (287)
(Loss)/Profit on disposal of treasury investments (30) - 76
Fair value adjustment on treasury investments 180 38 209
Operating (loss)/profit 98 (128) 47
Share of profits of associated companies 23 12 22
Impairment provisions - - (169)
Foreign exchange on bank balances - (137) -
Finance costs (4) (7) (3)
Profit/(Loss) before taxation 117 (260) (103)
Taxation (3) (1) (6)
Profit/(Loss) after taxation attributable to equity shareholders 114 (261) (109)
Other comprehensive income
Profit/(Loss) on disposal of Core Holdings 324 - (22)
Fair value adjustment on Core Holdings 1,647 646 2,042
Total other comprehensive profit/(loss) 1,971 646 2,020
Total comprehensive income/(loss) 2,085 385 1,911
Basic and diluted earnings/(loss) per share attributable to equity holders 0.64p (1.5)p (1.0)p



Condensed Changes in Shareholders’ Equity

Ordinary Share capital Share premium account Capital reserve account Unrealised profits/
 (losses) on investments
Share of undistributed profits/
(losses) of associates
Realised profits/
 losses
Total
£000 £000 £000 £000 £000 £000 £000
Period ended 31 Dec 2021
Balances at 1 July 2021 7,1802,654 3 679 (64) (414) 10,038
Profit/(Loss) for the period - - - 187 23 (96) 114
Other comprehensive profit - - - 1,648 - 323 1,971
Balances at 31 Dec 2021
7,180

2,654

3

2,514

(41)

(187)

12,123
Period ended 31 Dec 2020
Balances at 1 July 2020 7,180 2,654 3 (1,451) (86) (173) 8,127
(Loss)/Profit for the period - - - (99) 12 (174) (261)
Other comprehensive profit/(loss) - - - 668 - (22) 646
Balances at 31 Dec 2020
7,180

2,654

3

(882)

(74)

(369)

8,512



Condensed Statement of Financial Position

Half year ended Year ended
31 December 30 June
2021 2020 2021
£000 £000 £000
Non-current Assets
Investment in Associated companies 197 164 174
Investments in Core Holdings 7,787 4,821 6,603
7,984 4,985 6,777
Current Assets
Treasury portfolio investments 4,708 1,240 4,001
Trade and other receivables 8 8 18
Cash and cash equivalents 198 2,385 26
4,914 3,633 4,045
Current Liabilities
Trade and other payables (75) (106) (84)
Net Current Assets 4,839 2,287 3,961
Financial Liabilities due after more than one year (700) - (700)
Net assets 12,123 8,512 10,038
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 2,514 (882) 679
Share of undistributed losses of associates (41) (74) (64)
Realised profits and losses (187) (369) (414)
Shareholders’ funds 12,123 8,512 10,038
Net assets per share 68p 47p 56p
Number of shares in issue 17,949,872 17,949,872 17,949,872



Condensed Statement of Cash Flows

Half year ended Year ended
31 December 30 June
2021 2020 2021
£000 £000 £000
Profit/(Loss) before taxation 117 (261) (103)
Adjustments for non-cash and non-operating expenses:
Loss on disposal of treasury investments 37 - -
Fair value adjustment on treasury investments (187) (38) (209)
Foreign exchange loss - 137 169
Share of results of associates (23) (12) (22)
Net interest paid 4 7 3
Decrease in trade and other receivables 9 19 10
Decrease in trade and other payables (8) (20) (43)
Cash absorbed by operations (51) (168) (271)
Taxation paid (3) (1) (6)
Net interest paid (4) (7) (3)
Cash outflow from operating activities (58) (176) (280)
Cash flow from Investment activities
Purchase of Core Holdings - - (408)
Proceeds of disposal of Core Holdings 787 1,425 1,424
Purchase of treasury portfolio investments (685) (1,202) (3,973)
Proceeds on disposal of treasury investments 128 257
Cash inflow/(outflow) from investment activities 230 223 (2,980)
Financing activities
Loan drawdown - - 700
Cash inflow/(outflow) from financing activities - - 700
Movement in cash and cash equivalents 172 47 (2,280)
Cash and cash equivalents at start of year 26 2,475 2,475
Effect on foreign exchange rate - (137) (169)
Cash and cash equivalents at end of year 198 2,385 26



Reconciliation to movements in cash and cash equivalents

At start Cash Exchange At end
of Period Flow movement of Period
Half year ended £000 £000 £000 £000
31 December 2021
Cash and cash equivalents 26 172 - 198
Bank borrowings (700) - - (700)
Net debt (674) 172 - (502)
31 December 2020
Cash and cash equivalents 2,475 47 (137) 2,385
Bank borrowings - - - -
Net cash 2,475 47 (137) 2,385
Year ended 30 June 2021
Cash and cash equivalents 2,475 (2,280) (169) 26
Bank borrowings - (700) - (700)
Net cash/(debt) 2,475 (2,980) (169) (674)

Notes to the condensed financial statements

1. Basis of preparation

The Company’s results for the six months ended 31 December 2021 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 30 June 2021 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.

This Interim Statement has been prepared in accordance with the accounting policies contained in the Company’s 2021 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 profit on ordinary activities after tax of £114,000.

3. Treasury Investments

Half year ended Year ended
31 December 30 June
2021 2020 2021
£000 £000 £000
Cost 3,756 - -
Fair value adjustment 209 - -
Balance brought forward 4,001 - -
Additions 685 1,202 3,973
Disposals - cost (165) - (181)
Fair value adjustment 180 38           209
Fair value adjustment released on disposal 7 - -
Balance carried forward 4,708 1,240 4,001



Composition of Treasury Investments as at 31 December 2021

Stock Current Value GBP'000       %
BASF 187 4
Qualcomm 147 4
ResMed 138 3
Essilor Luxotica 129 3
Diageo 126 3
Procter & Gamble 125 3
Trane Technologies 124 3
Otis 122 3
Nestle 122 3
Novozymes 121 3
J P Morgan 116 3
Raytheon 114 2
GlaxoSmithKline 114 2
Pernod Ricard 114 2
Barclays 113 2
Lloyds Banking Group 111 2
Astra Zeneca 111 2
Amazon 106 2
Air Products and Chemicals 104 2
Chemours 102 2
Legal and General 102 2
Sociedad Quimica y Minera 102 2
Ecolab 102 2
Credit Agricole 101 2
Caterpillar 101 2
Schindler 100 2
Reckitt Benckiser 100 2
Holcim 100 2
BHP Group 99 2
BAE Systems 99 2
Fisher & Paykel Healthcare Corporation 98 2
Johnson & Johnson 98 2
Heineken 98 2
Brown Forman 97 2
Mastercard 97 2
FedEx 96 2
Bank of America 96 2
Visa Inc 95 2
Unilever 92 2
Iberdrola 90 2
Vestas Wind Systems 85 2
Rio Tinto 80 2
Henkel 75 2
Bloom Energy Corporation 59 1
Total 4,708 100