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 2018

The Company today announces its unaudited interim results for the six months ended 31st December 2018 (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. Our 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. 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.

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.  

Change in accounting policies

The company has implemented IFRS9 “Financial Instruments” for the first time in these results. Under IFRS9, the company has elected to classify its long-term Core Holdings as financial instruments which are held at fair value with realised and unrealised changes in value taken to Other Comprehensive Income. Gains and losses on disposal are not recycled to profit or loss. Realised and unrealised changes in the fair values of the treasury investments, previously recognised in the Other Comprehensive Income, will now be recorded in Other income/expenses through profit and loss. This will result in highly volatile reported profit and loss figures.

This change in accounting policy will have no effect on the Statement of Financial Position.

Activities

Our net assets per share have decreased by 22% to 75p at 31st December 2018 compared with 30th June 2018. This is mainly due to adverse market conditions and illiquidity in our investments in Core Holdings quoted on the AIM market, which has led to large decreases in the value of our quoted Core Holdings as a result of relatively low volumes of sales orders.  Our quoted Core Holdings and treasury investments decreased in value by 29% and 5% respectively during the reporting period.  At the close of business on 20th February 2019, our net asset value was 79p per share.

Dividend income during the period from Core Holdings has increased from £93,000 to 109,000. Dividend income from treasury operations decreased slightly to £52,000 and overall dividend income was £161,000 (2017: £151,600).

The Company is reporting a loss before tax for the half year of £427,000 with loss per share of 2.4p compared with restated profit before tax of £164,000 and restated earnings per share of 0.9p for the same period last year. 

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

Treasury Operations

Treasury operations comprise bank borrowing facilities of £1,900,000 and liquid investments. At 31st December 2018 the Company had net debt of £1,254,000 (2017: £1,131,000) and liquid investments valued at £4,117,000 (2017: £5,266,000). The Company had drawn down £1,400,000 of the bank borrowing facilities available as at 31st December 2018 (2017: £1,200,000).

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 loadbanks, transformers and oil tools.  Further information about Northbridge is available on its website: www.northbridgegroup.co.uk

Northbridge’s latest results, for the half year to 30th June 2018, showed a loss after tax of                 £1,472,000 for the period (2017: loss after tax of £2,308,000). No interim dividend was declared (2017: none).

Western owns 3,300,000 Northbridge shares, representing 11.8% of Northbridge’s issued share capital.  The market value of this investment at 31st December 2018 was £3,564,000 (30th June 2018: £4,290,000), representing 26.5% of Western’s net assets.

I am a non-executive director of Northbridge.

Swallowfield plc (“Swallowfield”)

Swallowfield is a market leader in the development, formulation, manufacture and supply of cosmetics, toiletries and related household products for global brands and retailers operating in the cosmetics, personal care and household goods market.  Further information about Swallowfield is available on its website: www.swallowfield.com

Swallowfield announced its annual results for the 53 weeks ended 30th June 2018 in September 2018 showing a profit after tax of £3,633,000 compared to a profit of £2,572,000 for the comparable period last year.  Swallowfield paid a final dividend of 4.2 per share in December 2018 which provided us with income of £54,600.  

The market value of the Company’s holding of shares in Swallowfield on 31st December 2018 was £2,730,000 (30th June 2018: £4,095,000), representing 20% of the Company’s net assets.

Western owns 1,300,000 Swallowfield shares (representing 7.6% of Swallowfield’s issued share capital).

Edward Beale is a non-executive director of Swallowfield.

Bilby Plc (“Bilby”)

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

Bilby announced its interim results for the six month period to 30th September 2018 on 11th December 2018 showing a profit after tax of £1,133,000 (2017: £1,966,000). Bilby paid an interim dividend of 0.5p per share in January 2019 which provided us with income of £13,500.

Western owns 2,700,000 Bilby shares, which represent 6.7% of Bilby’s issued share capital.  The market value of the Company’s holding in Bilby on 31st December 2018 was £1,647,000 (30th June 2018: £2,835,000) representing 12% of the Company’s net assets.

Tudor Rose International Limited (previously Hartim 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.

Our share of Tudor Rose International’s estimated results for the period ended 31st December 2018 is a loss after tax of £92,000 (2017 – profit after tax of £81,000).  At 31st December 2018, Western owned 49.5% of Tudor Rose International. The carrying value of the Company’s equity investment in Tudor Rose International on 31st December 2018 was £1,542,000 (2017: £1,674,000) representing 11.5% of the Company’s net assets. In addition, loans of £191,756 (equivalent to a further 1% of the Company’s net assets) were outstanding at 31st December 2018 from Tudor Rose International’s executive directors. 

Edward Beale and I 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 with potential for residential planning permission at Milngavie, adjacent to Dougalston golf course, just north east of Glasgow.  Through its development partner, Mactaggart & Mickel Limited (“M&M”) a family-controlled firm of contractors that were appointed in December 2016, 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 P.L.C. (“City Group”)

Western holds 48.6% and London Finance & Investment Group P.L.C. (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                                                                                         

As Brexit negotiations draw to a close, the eventual outcome of Brexit is still unknown. Stock markets and exchange rates remain volatile. Global interest rates have recently started to stabilise. All these factors have impacted on the value of the Company’s investments. Nevertheless, the Company’s balance sheet remains strong and provides a solid base from which the Company can capitalise on investment opportunities in the future.

Interim Dividend

The Board has declared an interim dividend of 1.1p per share (prior year: 1.1p) that will be paid on 25  March 2019 to shareholders on the register at the close of business on 8  March 2019.

22 February 2019

D.C. MARSHALL
Chairman


For further information, please contact:


Western Selection P.L.C.     +44 (0) 20 7796 9060

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



Dividend Timetable

The dividend timetable is as follows:


Shares trade ex-dividend 7 March 2019

Record date              8 March 2019

Payment date             25 March 2019




Statement of Comprehensive Income (Unaudited)


                                                      Half year ended      Year
                                                                          ended

                                                        31st December 30th June

                                                       2018      2017      2018

                                                             Restated  Restated

                                                     GBP000    GBP000    GBP000

Income from investments in:

Core holdings                                           108        93       132

Other listed investments                                 53        59       135

                                                        161       152       267

Administrative expenses – normal                      (172)     (157)     (348)

Profit on disposal of treasury investments                -       175       483

Operating (loss)/profit                                (11)       170       402

Share of (losses)/profits of associated companies     (108)        23      (17)

Fair value adjustment on treasury investments         (312)       (6)     (582)

Interest receivable                                      28         5        26

Finance expense                                        (24)      (28)      (52)

(Loss)/Profit before taxation                         (427)       164     (223)

Taxation                                                (5)       (6)      (18)

(Loss)/Profit after taxation attributable to equity   (432)       158     (241)
shareholders

Other comprehensive income

Profit on partial disposal of investment in               -         -       443
Swallowfield plc

Fair value adjustment on Core Holdings              (3,279)        29       410

Total comprehensive (loss)/income                   (3,711)       187       612

Basic and diluted (losses)/earnings per share        (2.4)p      0.9p    (1.3)p
attributable to equity holders

Interim dividend per share                             1.1p      1.1p     1.10p

Final dividend per share                                  -         -     1.15p

Total dividends in respect of the period               1.1p      1.1p     2.25p



Changes in Shareholders’ Equity (Unaudited)


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

               GBP000  GBP000  GBP000      GBP000        GBP000   GBP000  GBP000

Period ended
31st Dec 2018

Balances at     7,180   2,654       3       5,846         (168)    1,827  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

Period ended
31st Dec 2017
(Restated)

Balances at     7,180   2,654       3       6,018         (151)    1,421  17,125
1st July 2017

Profit/(Loss)       -       -       -         (7)            24      141     158
for the
period

Other               -       -       -          29             -        -      29
comprehensive
income

Dividends           -       -       -           -             -    (197)   (197)
paid

Balances at     7,180   2,654       3       6,040         (127)    1,365  17,115
31st Dec 2017




Statement of Financial Position (Unaudited)


                                                     Half year ended  Year ended

                                                       31st December   30th June

                                                    2018        2017        2018

Non-current assets                                GBP000      GBP000      GBP000

Core holdings

Bilby plc                                          1,647       3,051       2,835

Northbridge Industrial Services plc                3,564       2,966       4,290

Swallowfield plc                                   2,730       4,950       4,095

Investments in Associates                          1,721       1,870       1,830

Treasury investments                               4,117       5,266       4,329

Trade and other receivables                            -         192         192

                                                  13,779      18,295      17,571

Current assets - trade and other receivables         992          54         808

Cash at bank                                         146          69          35

Other current liabilities - trade and other         (92)       (103)        (97)
payables

Net current assets/(liabilities)                   1,046          20         746

Financial Liabilities due after more than one    (1,400)     (1,200)       (975)
year

Net assets                                        13,425      17,115      17,342

Equity

Share capital                                      7,180       7,180       7,180

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

Capital reserve                                        3           3           3

Unrealised profits on investments                  2,255       6,040       5,846

Share of undistributed (losses) of associates      (276)       (127)       (168)

Realised profits                                   1,609       1,365       1,827

Shareholders’ funds                               13,425      17,115      17,342

Net assets per share                                 75p         84p         96p

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

                                                       2018      2017      2018

                                                             Restated  Restated

                                                     GBP000    GBP000    GBP000

Profit before taxation                                (427)       164     (223)

Adjustments for non-cash and non-operating expenses:

Profits on sale of treasury investments                   -     (175)     (483)

Fair value adjustment on treasury investments           312         6       582

Share of results of associates                          108      (23)        17

Net interest paid/(received)                            (4)        23        26

Increase in debtors and accrued income                    8      (14)      (19)

Increase in creditors                                   (4)        11         6

                                                        (7)       (8)      (94)

Taxation paid                                           (5)       (6)      (18)

Net interest (paid)/received                              4      (23)      (26)

Cash (absorbed)/generated by operations                 (7)      (37)     (138)

Cash flow from Investment activities

Proceeds of disposal of treasury investments              -       250       919

Purchase of treasury investments                      (100)         -         -

                                                                  250       919

Investment in associate                                   -         -     (750)

Disposal of part of core holdings                         -         -       666

Purchase of core holdings                                 -         -      (95)

Net cash inflow/(outflow) from investment activities  (100)       250       740

Financing activities

Loan drawdown                                           425       675     2,525

Loan repayment                                            -     (700)   (2,775)

Equity dividend paid                                  (206)     (197)     (395)

Net cash outflow from financing activities              219     (222)     (645)

Movement in cash and cash equivalents                   111       (9)      (43)

Cash and cash equivalents at start of year               35        78        78

Cash and cash equivalents at end of year                146        69        35




Reconciliation to movements in cash and cash equivalents


                           At start    Cash     At end

                          of Period    Flow  of Period

Half year ended              GBP000  GBP000     GBP000

31st December 2018

Cash and cash equivalents        35     111        146

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

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

31st December 2017

Cash and cash equivalents        78     (9)         69

Bank borrowings             (1,225)      25    (1,200)

Net debt                    (1,147)      16    (1,131)

Year ended 30th June 2018

Cash and cash equivalents        78    (43)         35

Bank borrowings             (1,225)     250      (975)

Net debt                    (1,147)     207      (940)



Notes: -


1. Basis of preparation:
   The results for the six months ended 31st December 2018 are unaudited. The
   information contained in this Interim Statement does not constitute statutory
   accounts within the meaning of the Companies Act 2006. The statutory accounts
   of Western Selection P.L.C. for the year ended 30th June 2018 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.

   The company has implemented IFRS9 “Financial Instruments” for the first time
   in these results. Under IFRS9, the company has elected to classify its
   long-term Core Holdings as financial instruments which are held at fair value
   with unrealised changes in value taken to Other Comprehensive Income. Gains
   and losses on disposal of Core Holdings are not recycled to profit or loss.
   Changes in the fair values of the treasury investments, previously recognised
   in the Other Comprehensive Income, will now be recorded in Other
   income/expenses through profit and loss. Gains and losses realised on the
   sale of these financial assets will be recorded in the profit and loss to the
   extent of the difference between sale price and original cost.

   This change in accounting policy will have no effect on the Statement of
   Financial Position
   This re-categorisation has led to restated Profit after tax for the year
   ended 30th June 2018 from £784,000 to a loss after tax of £241,000.

   Except for this change in accounting policy, this Interim Statement has been
   prepared in accordance with the accounting policies contained in the
   Company’s 2018 Annual Report and Accounts.

2. Earnings per share:
   The calculation of earnings 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.



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.westernselection.co.uk ; and
    --  by writing to City Group P.L.C., the Company Secretary, at 1 Ely Place,
        London, EC1N 6RY

This Interim Statement contains information that was previously inside information for the purposes of Article 7 of EU Regulation 596/2014.

The Directors accept responsibility for the contents of this Interim Statement.