Western Selection Plc - Half-year Report

Western Selection Plc - Half-year Report

PR Newswire

London, February 21

Western Selection PLC
("Western" or the "Company")

Unaudited Interim Results for the six months ended 31^stDecember 2018

The Company today announces its unaudited interim results for the six months ended 31^stDecember 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 31^stDecember 2018 compared with 30^thJune 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 20^thFebruary 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 31^stDecember 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 31^stDecember 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 30^thJune 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 31^stDecember 2018 was £3,564,000 (30^thJune 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 30^thJune 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 31^stDecember 2018 was £2,730,000 (30^thJune 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 30^thSeptember 2018 on 11^thDecember 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 31^stDecember 2018 was £1,647,000 (30^thJune 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 31^stDecember 2018 is a loss after tax of £92,000 (2017 - profit after tax of £81,000). At 31^stDecember 2018, Western owned 49.5% of Tudor Rose International. The carrying value of the Company's equity investment in Tudor Rose International on 31^stDecember 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 31^stDecember 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.	[phone]
Cairn Financial Advisers LLP James Caithie / Liam Murray	[phone]

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 shareholders	(432)		158		(241)
Other comprehensive income
Profit on partial disposal of investment in Swallowfield plc	-		-		443
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 attributable to equity holders	(2.4)p		0.9p		(1.3)p
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 capital	Share premium account	Capital reserve account	Unrealised profits on investments	Share of undistributed profits/ (losses) of associates	Realised profits	Total
	GBP000	GBP000	GBP000	GBP000	GBP000	GBP000	GBP000
Period ended 31st Dec 2018
Balances at 1st July 2018	7,180	2,654	3	5,846	(168)	1,827	17,342
Loss for the period	-	-	-	(312)	(108)	(12)	(432)
Other comprehensive loss	-	-	-	(3,279)	-	-	(3,279)
Dividends paid	-	-	-	-	-	(206)	(206)
Balances at 31st Dec 2018	7,180	2,654	3	2,255	(276)	1,609	13,425
Period ended 31st Dec 2017 (Restated)
Balances at 1st July 2017	7,180	2,654	3	6,018	(151)	1,421	17,125
Profit/(Loss) for the period	-	-	-	(7)	24	141	158
Other comprehensive income	-	-	-	29	-	-	29
Dividends paid	-	-	-	-	-	(197)	(197)
Balances at 31st Dec 2017	7,180	2,654	3	6,040	(127)	1,365	17,115

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 payables	(92)		(103)		(97)
Net current assets/(liabilities)	1,046		20		746
Financial Liabilities due after more than one year	(1,400)		(1,200)		(975)
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.