City Of Lon Grp PLC (CIN) - Interim Results RNS Number : 3942R City Of London Group PLC 19 November 2012 Half-year results 2012 LSE: CIN 19 November 2012 City of London Group plc ("COLG" or "the Company" or "the Group") Results for the six month period ended 30 September 2012 The Company is a financial services group focused on providing finance to the SME and professional sectors, is pleased to announce its unaudited interim results for the six month period ended 30 September 2012. Highlights Financial · Revenue increased by 169% to £15.2 million · Gross profit increased by 25% to £1.3 million · Operating losses reduced to £143,000 after £733,000 profit on sale of FX Capital · Third party funds under management up by 125% to £51.4 million, with a further £20 million committed in principle · Sales of 'available-for-sale' investments of £1.8 million with realised profits of £950,000 (includes FX Capital) · Successful placing of 10% of issued share capital, raising £1.3 million to fund further growth of business platforms · Interim dividend 0.33p (2011:0.5p) - rebalanced · NAV per share attributable to owners of the Company 59.1p (31 March 2012 68.8p) · Unaudited proforma NAV per share of COLG and including directors' valuation of subsidiaries 111.5p (31 March 2012 114.8p) Platforms Trade Finance Partners (trade finance) · rapidly becoming one of the leading providers of transactional trade finance to the SME sector in the UK · business now trading at a level which is expected to generate revenues of around £24 million per year Therium Capital Management (litigation funding) · signed first managed account with an institutional investor for £5 million, with a view to increasing the fund to £15 million · launching its fourth fund Professions Funding (lending to professional firms) · in August won a mandate to manage £10 million · now manages more than 150 loan agreements, with a book value of £3.2 million Credit Asset Management (SME equipment leasing) · now manages a book of £2.6 million, spread across 215 loans Eric Anstee, Chief Executive, commented: "Our strategy of providing specialist financing to high quality SMEs and the professional services market is proving to be a sound one as traditional bank finance and other funding sources remain challenging. The Group now has the business platforms required to facilitate its ongoing development into a traditional merchant bank model." For further information: City of London Group plc Eric Anstee 0207 628 5518 John Kent N+1 Singer Jonny Franklin-Adams 0203 205 7500 Matt Thomas FTI Consulting Ed Gascoigne-Pees 0207 269 7132 Notes to Editors: City of London Group plc is fully listed on the London Stock Exchange plc (LSE symbol CIN). The Company's strategy is to build a quality financial services group centred on specialist financing and alternative fund management. The Company believes there are particular opportunities in the SME and professional services sectors as major national and foreign banks limit new lending to these borrowers. It therefore seeks to identify and exploit product niches and business models in these sectors where they are supported by strong day to day management teams, providing initial equity, working capital and seed funding for those teams. Since 2009, COLG has developed four specialist financing funds, pledging significant seed capital to Trade Finance Partners Limited, a trade finance provider to the SME market; Therium Capital Management Limited, a third party litigation funder; and Credit Asset Management Limited and Professions Funding Limited, which respectively provide asset backed finance to SME's and working capital loans to professional practice firms. www.cityoflondongroup.com Chairman and Chief Executive's review Operational review Our strategy of providing specialist financing to high quality SMEs and the professional services market is proving to be a sound one as traditional bank finance and other funding sources remain challenging. Following further major disposals from our share portfolio during the period, the transition from an investment company with holdings in listed and unlisted natural resources companies to a backer of a series of focused investment platforms providing a range of specialist financing to the SME and professional services markets, is virtually complete. The Group now has the business platforms required to facilitate its ongoing development into a traditional merchant bank model. In September, the Company successfully completed a placing of 10% of its share capital, which raised £1.3m before expenses. These new funds, together with the sale proceeds from the disposal of our early stage investment in FX Capital, have provided liquidity to continue this progress. Since the start of the financial year third party funds available to the Group's platforms have increased from £22.8m to £51.4m with a further £20m agreed in principle. Management continues to seek additional third party funding to take its investment platforms to optimum scale and to exploit new opportunities. Each of our investment platforms is capable of developing into a major business in its own right and substantial progress has been made in this period in growing both the scale of operations and the funds to be deployed within them. A review of the progress of each of the platforms is set out below: Trade Finance Partners Limited (TFP) TFP provides medium to large scale trade finance facilities to SME's. It has continued its robust development during the period and is rapidly becoming one of the leading providers of transactional trade finance to the SME sector in the UK. The withdrawal of funding from the sector by the major banks continues to create strong demand for TFP's products and services. More recently, it has started to receive an increasing number of enquiries regarding commodity trade finance. Following completion of TFP's three year revolving, multi-option facility with Macquarie Bank in June, the business has the necessary capacity to expand its activities further over the coming year. The facility has a non-utilisation fee which has had an adverse impact on the second quarter trading performance. However, since the facility has 'bedded down', TFP has performed strongly. Compared with the year to 31 March 2012, gross revenues have almost doubled, with annual turnover expected to reach around £24 million if current levels of trading are maintained. Although the loss before tax for the period was £68k, the profit before shareholders' loan interest for the period was £103k. Therium Capital Management Limited (Therium) Therium is one of the leading third party litigation funding businesses in the UK market. The business is progressing well and signed its first managed account with an institutional investor in the period. This mandate is for an initial £5 million, with the party's stated intention, in due course, to increase the size of the fund up to £15 million. Work has commenced on a Therium fund to be launched in Jersey and all the necessary regulatory approvals have now been received. At the same time Therium is continuing to explore opportunities with a number of other institutions and family offices for managed accounts. This is expected to result in further funding, although progress has been slower than originally anticipated. In the meantime, while none of the existing funded cases settled during the period, applications to Therium for new case funding continue to grow and are significantly up on last year. During the period a number of new cases were funded. The management team at Therium has also worked to build up the Novitas joint venture which provides funds to clients of law firms. The Novitas loan book is currently at £2.7 million and demand continues to be strong. Professions Funding Limited (PFL) PFL provides loans to professional firms such as solicitors and accountants, mainly for short term requirements such as the payment of insurance premiums for professional indemnity cover. Its loan book consists of more than 150 loan agreements, with a book value of £3.2 million. It also won a £10 million managed account in August, of which some £2.5 million has so far been deployed. Credit Asset Management Limited (CAM) CAM provides equipment leasing to SMEs and accesses the market largely through brokers and intermediaries. Its leasing book currently stands at £2.6 million spread across 215 leases. It has unutilised facilities of £1.5m and is in advanced discussions with third party funders with the objective of significantly increasing the funds it can deploy. Taken together, PFL and CAM have facilities and managed accounts amounting to £17.5 million of which £9.2 million has been deployed. The activities are now close to breaking even on a month by month basis before paying the dividends due on their preference shares. Bad debts are running below anticipated levels and are no more than 1% of the average outstanding balance. Demand for both professional loans and leases remains high. Other investments (a) Listed and unlisted investments for resale COLG's equity portfolio reduced from £4.1 million (excluding £1.2 million relating to FX Capital) to £2.8 million at 30 September 2012. This decrease of £1.3 million was as a result of sales of £0.7 million and a reduction in value of the remaining portfolio of £0.6 million. Two of our larger value holdings, FAR Ltd and Tertiary Minerals plc suffered from falls in market value of 27% and 22% respectively although their values are still well above cost. The Company aims to release further substantial capital from its listed investment portfolio in order to fund the development of existing and new platforms. (b) Fundamental Tracker Investment Management Limited (FTIM)/The Munro Fund Over the period the investment performance of the fund has improved slightly. However, attracting new funds under management has continued to prove difficult against its three year performance and it continues to be below the critical mass needed to achieve break even. COLG has continued to fund FTIM's operating deficit of c.£100,000 per annum but is undertaking a strategic review of this business. (c) Array Management Limited The objective of this investment is to launch an index-linked, asset-backed product for sale to institutional or high net worth investors. We continue to look for an appropriate asset on which to base a first fund. (d) FX Capital Limited As previously reported, we successfully sold our entire holding in this early stage investment for £1,175,000 cash representing 2.7 times the original cost and £50,000 over the carrying value at 31 March 2012. Related party transactions Related party transactions are disclosed in note 6. Risks The key risk factors faced by the Group are set out in the financial statements to 31 March 2012 and are summarised in note 7. Liquidity and going concern The Company has renewed its bank overdraft facility at £1m through to 30 September 2013, secured on its UK listed investment portfolio. The actual facility size available is restricted to half the value of the Company's UK listed investment portfolio. This is currently around £0.8m which is expected to be sufficient to meet current liquidity requirements. Since the period end the Company has received the proceeds from the share placing of £1.3 million. The Company continues to hold a total portfolio of "available for sale" investments (valued at £2.8 million at 30 September) of which £2.4 million are listed and can be sold at relatively short notice. Liquidity is managed by approving annual budgets for each platform and reviewing monthly performance against those budgets. Rolling 12 month cashflow forecasts for the Group are produced and updated monthly. The financial resources available are expected to meet the needs of the Group for the foreseeable future. The condensed financial statements have therefore been prepared on a going concern basis. Outlook The considerable economic uncertainty in Europe and deleveraging by the banks in the UK and the rest of Europe has continued to make finance in the UK market extremely tight. Therefore the rationale for the Company's strategy of developing investment platforms to provide specialist finance to the SME market remains as sound as ever. However, the uncertain economic climate has meant that attracting third party monies to new investment platforms has been slower than originally envisaged. Despite this, the Company is pursuing a number of opportunities with the aim of increasing third party funds available to the investment platforms in the second half and beyond. Unaudited directors' valuation The directors have included an indication of the incremental value they attribute to the investment platforms which in aggregate show additional value (over book value) of £8.5 million made up of £4.6 million for TFP, £3.1 million for Therium and £0.8 million for Credit Asset Management and Professions Funding combined. This equates to an additional value of 42.0p per share. This valuation is a judgment based on market comparatives. Interim dividend The directors have declared an interim dividend of 0.33p per share (2011: 0.5p) payable on 4 January 2013 to shareholders on the register on 7 December 2012.This reflects the Boards intention to rebalance the payout of potential dividends for the year to market norms of one third at the interim stage. Henry Lafferty Eric Anstee Chairman Chief Executive This half-yearly report may contain certain statements about future outlook for COLG and its subsidiaries. Although the directors believe their expectations are based on reasonable assumptions, any statements about the future outlook may be influenced by factors that could cause actual outcomes to be materially different. This half-yearly report has been drawn up and presented with the purpose of complying with English law. Any liability arising out of or in connection with the half-yearly report for the six months to 30 September 2012 will be determined in accordance with English law. The half-yearly results for 2012 and 2011 are unaudited. 19 November 2012 Unaudited interim results Condensed consolidated income statement 6 months to 6 months to 30/09/12 30/09/11 Year to 31/03/12 £'000 £'000 £'000 Revenue 15,177 5,644 15,540 Cost of sales (13,860) (4,588) (13,773) Gross profit 1,317 1,056 1,767 Administrative expenses (2,436) (2,025) (4,159) Profit on sale of 'available for sale' investments 950 469 1,001 Provision for impairment of investments - - (65) Loss on legal cases (43) (843) (725) Share of profit / (loss) of associate 22 (22) - Other operating income 47 14 208 Operating loss (143) (1,351) (1,973) Financial expenses (309) (58) (157) Loss before tax (452) (1,409) (2,130) Income tax (expense)/credit (158) (101) 54 Loss for the period (610) (1,510) (2,076) Loss for the year attributable to: Owners of the parent (300) (1,303) (1,433) Non-controlling interest (310) (207) (643) (610) (1,510) (2,076) Earnings per share: Basic total earnings per share (1.67p) (7.78p) (8.24p) Diluted total earnings per share (1.67p) (7.78p) (8.24p) Condensed consolidated statement of comprehensive income 6 months to 6 months to 30/09/12 30/09/11 Year to 31/03/12 £'000 £'000 £'000 Loss after tax (610) (1,510) (2,076) Valuation losses on 'available for sale' investments (619) (1,534) (297) Transferred to profit or loss on sale (950) (469) (1,001) Deferred tax provision 158 397 239 Total comprehensive expense (2,021) (3,116) (3,135) Total comprehensive expense attributable to: Owners of the parent (1,711) (2,909) (2,492) Non-controlling interest (310) (207) (643) (2,021) (3,116) (3,135) Condensed consolidated balance sheet As at As at As at 30/09/12 31/03/12 30/09/11 £'000 £'000 £'000 Non-current assets Intangible assets 1,264 1,295 1,244 Property, plant and equipment 187 107 80 'Available-for-sale' financial assets 2,848 5,237 4,323 Operating investments 59 37 930 Investments in legal cases 3,534 2,409 6,353 Loans and leases receivable 3,127 2,201 970 Total non-current assets 11,019 11,286 13,900 Current assets Inventories 69 156 280 Trade and other receivables 16,351 12,071 5,088 Cash and cash equivalents 3,613 2,194 2,677 Total current assets 20,033 14,421 8,045 Total assets 31,052 25,707 21,945 Current liabilities Borrowings (6,000) (4,415) (3,579) Trade and other payables (8,437) (7,314) (6,785) Total current liabilities (14,437) (11,729) (10,364) Non-current liabilities Borrowings (5,897) (2,587) - Trade and other payables - - (1) Derivative - (244) (315) Total non-current liabilities (5,897) (2,831) (316) Total liabilities (20,334) (14,560) (10,680) Net assets 10,718 11,147 11,265 Equity Share capital 2,021 1,837 1,837 Share premium 11,531 10,424 10,428 Fair value reserve on investments 82 1,493 946 Derivative reserve - (197) (242) Retained earnings (1,952) (1,237) (980) Owners of the parent 11,682 12,320 11,989 Non-controlling interests (964) (1,173) (724) Total equity 10,718 11,147 11,265 Condensed consolidated statement of changes in equity Attributable to owners of the parent company Attributable to Fair value Derivative Retained Share Share non-controlling Total reserve reserve earnings premium capital Total interest equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 31 March 2012 1,493 (197) (1,237) 10,424 1,837 12,320 (1,173) 11,147 Available for sale investments -Valuation gains taken to equity (619) - - - - (619) - (619) -Transferred to profit or loss on sale (950) - - - - (950) - (950) -Deferred tax provision writeback 158 - - - - 158 - 158 Total other comprehensive income (1,411) - - - - (1,411) - (1,411) Profit for the period - (300) (300) (310) (610) Total other comprehensive income (1,411) - (300) - - (1,711) (310) (2,021) Value of employee services - - (19) - - (19) - (19) Arising on business combination - 197 (345) - - (148) 519 371 Dividend paid - - (89) - - (89) - (89) Issue of shares - - - 1,107 184 1,291 1,291 Disposal of own shares - - 38 - - 38 - 38 At 30 September 2012 82 - (1,952) 11,531 2,021 11,682 (964) 10,718 Attributable to owners of the parent company Attributable to Fair value Derivative Retained Share Share non-controlling Total reserve reserve earnings premium capital Total interest equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 31 March 2011 2,552 (242) 913 5,797 1,114 10,134 (520) 9,614 Available for sale investments Valuation gains taken to equity (1,534) - - - - (1,534) - (1,534) Transferred to profit or loss on sale (469) - - - - (469) - (469) Deferred tax position 397 - - - - 397 - 397 Total other comprehensive income (1,606) - - - - (1,606) - (1,606) Profit for the period - - (1,303) - - (1,303) (207) (1,510) Total other comprehensive income (1,606) - (1,303) - - (2,909) (207) (3,116) Value of employee services - - (78) - - (78) - (78) investment in subsidiaries - - - - - - 3 3 Dividends - - (184) - - (184) - (184) Issue of shares 4,552 723 5,275 5,275 Sale of treasury shares - - 56 79 - 135 - 135 Purchase of shares by ESOT - - (384) - - (384) - (384) At 30 September 2012 946 (242) (980) (10,428) 1,837 11,989 (724) 11,265 Condensed consolidated statement of cash flows 6 months to Year to 6 months to 30/09/12 30/09/11 31/03/12 £'000 £'000 £'000 Loss before taxation (452) (1,409) (2,120) Adjustments for Depreciation and amortisation 52 25 74 Share based payments (19) (85) (504) Dividends receivable (15) (65) (104) Impairment of 'available for sale' assets - - 65 Profit/loss on disposal of investments (950) 469 (1,001) Profit and loss of associates (22) 22 - Loss on legal cases 43 843 725 Interest receivable (106) (85) (148) Interest payable 141 58 55 Decrease/(increase) in stock 87 (265) (142) Increase in trade and other receivables (2,679) (2,807) (6,654) Increase in trade and other payables 2,867 478 1,285 Cash used in operations (1,053) (2,821) (8,469) Income taxes - - - Net cash used in operating activities (1,053) (2,821) (8,469) Cash flow from investing activities Interest received 16 189 100 Purchase of intangible assets (44) (325) (415) Purchase of property, plant and equipment (107) (12) (63) Purchase of non-current investments (1,243) (2,443) (3,762) Investment by non-controlling interest - 3 - Proceeds from investment in legal cases - 703 4,068 Acquisition of subsidiary companies (85) (5) (3) Dividends received 15 65 104 Proceeds from sale of 'available-for-sale' investments 1,845 705 2,332 Loans advanced (5,670) (2,035) (6,874) Loans repaid 4,523 958 1,522 Net cash used in investing activities (750) (2,197) (2,991) Cash flow from financing activities Interest paid (141) (31) (39) Dividends paid to company's shareholders (89) (184) (268) Proceeds from issue of loans 5,509 - 1,698 Repayment of loans and loan notes (2,298) (1,600) - Proceeds from block discounting loans 867 - 3,322 Proceeds from issue of ordinary shares - 5,275 5,272 Proceeds from issue of preference shares - - 970 Proceeds from shares issued by subsidiary 263 - - Sale of treasury shares - (249) 135 Net cash from financing activities 4,111 3,211 11,090 Net increase/(decrease) in cash and cash equivalents 2,308 (1,807) (380) Cash and cash equivalents brought forward 1,126 1,506 1,506 Net cash and cash equivalents 3,434 (301) 1,126 Cash and cash equivalents 3,613 2,677 2,194 Bank overdraft (179) (2,978) (1,068) Net cash and cash equivalents 3,434 (301) 1,126 Notes to condensed financial statements 1 Basis of preparation 1.1 These interim financial results do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year end 31 March 2012 were approved by the directors on 25 June and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement within the meaning of section 498 of the Companies Act 2006. 1.2 These condensed consolidated financial statements have been prepared in accordance with IAS 34, "Interim Financial Reporting" as adopted by the European Union. They do not include all of the information required for full annual financial statements and should be read in conjunction with the annual financial statements for the year ended 31 March 2012, which were prepared in accordance with IFRS as adopted by the European Union. As required by the Disclosure and Transparency Rules of the Financial Services Authority, the condensed consolidated financial statements have been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the year ended 31 March 2012. 1.3 Because the charge for taxation is for a period of less than one year, the provision is based on the best estimate of the effective rate for the full year. 1.4 On 28 September 2012 the Company placed 1,836,960 ordinary shares of 10p ("Ordinary Shares") at 70p per share. Before costs the placing raised £1,285,872. 1.5 The calculation of earnings per Ordinary Share is based on the loss attributable to equity shareholders of £300,000 (2011: loss £1,303,000; 2011/12 full year: loss £1,433,000) and on the number of shares in issue being the weighted average number of shares in issue during the period (excluding those held in treasury and employee benefit trust) of 17,943,192 (2011: 16,757,641; 2011/12 full year: 17,400,547). Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. Dilutive potential Ordinary Shares relate to share options and shares that may be granted under incentive award. The number is 18,285,713 (2011: 17,299,733; 2011/12 full year: 17,564,453). In accordance with convention, as the EPS is negative, the diluted EPS is deemed to be the same as the undiluted EPS. 1.6 The directors have declared an interim dividend for the year ended 31 March 2013 of 0.33p per Ordinary Share (2011/12: 0.5p per Ordinary Share). The directors recommended a final dividend of 0.5p per Ordinary Share for the year ended 31 March 2012 and this was paid on 2 October 2012. 1.7 The interim report, including the financial information contained therein is the responsibility of, and was approved by, the directors on 19 November 2012. The Listing Rules require that accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing annual accounts except where any changes, and the reason for them, are disclosed. There have been no changes to the Group's accounting policies for the period ended 30 September 2012. 1.8 Each of the persons who is director confirms that as far as they are aware: - The condensed set of financial statements, which has been prepared in accordance with the applicable accounting standards, gives a true and fair view of the assets, liabilities, financial position and profit or loss of the undertakings included in the consolidation as a whole as required by Disclosure and Transparency Rule 4.2.4 - The interim management report includes a fair review of the information required to be included as required by Disclosure and Transparency Rules 4.2.7 and 4.2.8. - These condensed consolidated financial statements have been prepared in accordance with IAS 34, "Interim Financial Reporting" as adopted by the European Union. They do not include all of the information required for full annual financial statements and should be read in conjunction with the annual financial statements for the year ended 31 March 2012, which were prepared in accordance with IFRS as adopted by the European Union. As required by the Disclosure and Transparency Rules of the Financial Services Authority, the condensed consolidated financial statements have been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the year ended 31 March 2012. 2 Available for sale' financial assets As at As at As at 30/09/12 31/03/12 30/09/11 £000 £000 £000 Listed securities Equity Equity securities - Australia 769 1,258 665 - US and Canada 44 63 7 - UK 1,195 1,685 1,726 Cumulative non-redeemable preference shares - UK - 51 46 Non-cumulative non-redeemable preference shares - UK - 46 280 Equity fund - UK 414 410 369 Debt Convertible loan stock - UK - - 125 Convertible loan notes - Australia - 172 150 2,422 3,685 3,368 Unlisted securities Equity securities traded on inactive markets 426 1,552 955 2,848 5,237 4,323 Principal holdings at 30 September 2012 Holding Security Cost Value £'000 £'000 20,055,480 FAR Ltd 279 452 500,300 Munro UK Funds 500 414 7,680,000 Tertiary Minerals plc 351 403 283,340 Hurricane Exploration 120 383 19,500,000 Sunrise Resources plc 210 263 2,100,000 Target Energy Ltd 71 156 472,600 AFC Energy plc 74 121 2,729,583 Netalogue Technologies plc 62 62 Other 1,098 594 Total 2,765 2,848 Principal holdings at 31 March 2012 Holding Security Cost Value £'000 £'000 702,874 FX Capital Limited 387 1,125 25,055,480 FAR Limited 349 812 6,500,000 Tertiary Minerals Plc 301 439 500,300 Munro UK Funds 500 410 283,340 Hurricane Exploration 120 383 22,000,000 Sunrise Resources plc 237 275 20,000 Secure Trust Bank plc 144 208 3,408,075 Target Energy ltd 115 196 672,600 AFC Energy plc 105 175 1,910,397 SIPA Resources 83 129 1,103,570 Platinum Australia 204 123 Other 1,041 962 Total 3,586 5,237 Principal holdings at 30 September 2011 Holding Security Cost Value £'000 £'000 878,000 Flow Energy 522 608 500,300 Munro UK Funds 500 369 7,766,666 Tertiary Minerals plc 359 369 28,334 Hurricane Exploration 120 315 240,000 Barclays 14% Prefs 234 247 672,600 AFC Energy plc 105 225 354,000 Prime People 178 219 19,500,000 Sunrise Resources plc 207 205 2,310,347 SIPA Resources 100 187 150,000 Target Energy Loan Notes 92 150 2,750,000 Red Rock Resources 28 138 165,000 Vatukoula Gold 103 127 125,000 SUSD Loan Notes 125 125 Other 1,266 1,039 Total 3,939 4,323 3 Administrative expenses 6 months to 6 months to 30/09/12 30/09/11 Year to 31/03/12 £'000 £'000 £'000 Staff costs Payroll expenses 1,416 903 2,174 Payroll incentive award 61 (37) (95) Other staff costs 29 96 212 Establishment costs Property costs 75 105 192 Other 256 455 449 Fees due to auditors 48 57 113 Legal fees 229 153 446 Consultancy fees 149 102 291 Other professional fees 213 168 249 Depreciation 24 23 43 Amortisation 28 7 78 Foreign exchange loss / (gain) (92) (7) 7 Total 2,436 2,025 4,159 4 Segmental reporting The principal trading subsidiaries are considered to operate in business segments other than the principal activity of the parent company. Pre-tax profit and loss Operating Financial Pre-tax Revenue profit / expenses profit/(loss) Half-year to September 2012 (loss) £'000 £'000 £'000 £'000 COLG Investment portfolio - 950 - 950 sales Legal cases - (43) - (43) Intra-group 405 405 - 405 Other 35 (1,048) (61) (1,109) 440 264 (61) 203 Platforms Litigation fund 120 (316) (35) (351) management Trade financing 14,410 103 (171) (68) Lease financing 176 (59) (119) (178) Professions financing 268 141 (141) - Legal case financing 99 121 (86) 35 Other 69 (30) (63) (93) Inter company (405) (367) 367 - 15,177 (143) (309) (452) Pre-tax profit and loss Operating Financial Pre-tax Revenue profit / expenses profit/(loss) Half-year to September 2011 (loss) £'000 £'000 £'000 £'000 COLG Investment portfolio - 469 - 469 sales Legal cases - (843) - (843) Intra-group 114 203 - 203 Other 109 (782) (3) (785) 223 (953) (3) (956) Platforms Litigation fund 255 (125) (44) (169) management Trade financing 5,213 73 (91) (18) Lease financing 6 (185) (6) (191) Professions financing 49 30 (28) 2 Legal case financing - (22) - (22) Other 12 (55) - (55) Inter company (114) (114) 114 - 5,644 (1,351) (58) (1,409) Net assets at 30/09/12 Total £'000 £'000 COLG Investment portfolio 2,848 Investment in legal cases 759 Platforms Litigation fund management 1,650 Trade financing 3,446 Lease financing 1,255 Professions financing 1,095 Legal case financing 1,324 Other 431 9,201 12,808 Amount due re share placing 1,291 Other net liabilities (345) Net assets per entity balance sheet 13,754 Net liabilities of subsidiary companies (3,036) Consolidated net assets 10,718 Net assets as at 31/03/12 Total £'000 £'000 COLG Investment portfolio 5,237 Investment in legal cases 916 Platforms Litigation fund management 1,100 Trade financing 2,650 Lease financing 1,255 Professions financing 1,075 Legal case financing 1,489 Other 908 8,477 14,630 Amount due re share placing - Other net liabilities (694) Net assets per entity balance sheet 13,936 Net liabilities of subsidiary companies (2,789) Consolidated net assets 11,147 Net assets at 30/09/11 Total £'000 £'000 Investment COLG portfolio 4,323 Investment in legal cases 1,565 Platforms Litigation fund management 780 Trade financing 2,951 Lease financing 955 Professions financing 850 Legal case financing 299 Other 306 6,141 12,029 FX Capital 949 Other net assets 437 Net assets per entity balance sheet 13,415 Net liabilities of subsidiary companies (2,150) Consolidated net assets 11,265 5 Capital commitments As at As at As at 30/09/12 31/03/12 30/09/11 £'000 £'000 £'000 Investment in legal funds 488 807 382 Trade financing 737 1,358 138 Leases - - 939 Loans - 100 143 1,225 2,265 1,602 6 Related parties J Anstee, an employee of the Company, is considered a related party as he is the son of the Chief Executive, E Anstee. J Anstee received remuneration of £19,345 during the six months to 30 September 2012. A payment of £110,000 was made to the Company by John Greenhalgh in August in connection with a proposed share placing which did not proceed. The payment was repaid three weeks later with an interest at a rate of 4.25% per annum. 7 Risks statement The key risk factors faced by the Group are set out in financial statements to 31 March 2012 and are summarised below. The Board reviews and agrees policies for managing each of these risks. Price risk The Group is subject to price risk on its 'available-for-sale' financial assets, in particular its investment share portfolio which is predominantly in the natural resource sector. The price risk in respect of investments in unlisted companies is managed by the Group having an overall investment portfolio which limits its exposure to unlisted investments. The value of the unlisted investments at 30 September 2012 was £426,000. The Group is mitigating the risk on the total portfolio by steadily unwinding it to invest in the new platforms. Credit risk The Group is subject to credit risk of counterparties to which it has lent or to which it has cash on deposit. The risk is mitigated by upfront credit checks, asset security, guarantees and credit insurance. All cash deposits are made with major financial institutions and the directors are of the opinion that credit risk in relation to cash and cash equivalents is minimal. Cashflow risk The Company has renewed its bank overdraft facility at £1m through to 30 September 2013, secured on its UK listed investment portfolio. The actual facility size available is, however, restricted to half the value of the Company's UK listed investment portfolio. The facility size is currently approximately £0.8m and this is expected to be sufficient to meet current requirements. A considerable portion of the total investment portfolio would be easily realisable if the need arose, but half of any disposals of UK listed investments would be applied to reduce the overdraft facility. Also, there is a risk that if platforms are unable to raise third party funds this would restrict their development. This is mitigated by Group support for attracting third party funds. Fair value estimation The fair value of listed financial assets is established by reference to current bid market prices. The fair value of unlisted investments is estimated based on historical experience and other various factors that are believed to be reasonable. The fair value of investments in legal funds is based on the opinion of legal counsel on the prospect of cases financed by the funds. Legal and regulatory risks The Company may fail to comply with its legal and regulatory obligations, which could have a material adverse effect on its business or lead to its shares being suspended from trading. External advisers are used to provide specialist advice and training is also provided for directors and senior management. Interest rate risk Investee companies are financed through third party borrowings which may lead to an increase in investment risk and exposure to interest rate fluctuations. This is mitigated where possible by passing this risk on to clients in the nature of trade of the underlying business. Litigation risk in funding legal cases There can be no guarantee that legal cases will be successful or will pay the returns targeted by the Board. The risk is mitigated by a screening process, restricting investment levels in any one case to no more than £1m and insurance against costs awarded to the other side if the case is lost. With the asset management model the direct risk for the Company is primarily in relation to its remaining seed investments in legal cases of £759k at 30 September 2012. Indirectly, however, poor outcomes would likely restrict third part fund raising and therefore the development of the business. Competition The Company may become subject to increased competition in sourcing and making investments. This could lead to the Company finding it difficult to raise funds and find attractive investment opportunities. The mitigation is to remain focussed in niche and complex areas where the barriers to entry are higher. Our ability to demonstrate superior returns from investing in the platforms is our best mitigation. Foreign exchange risk The Group's earnings and liquidity are affected by fluctuations in currency exchange rates, principally in respect of 'available-for-sale' financial assets denominated in overseas currencies. This risk is mitigated by the gradual unwinding of the investment portfolio. The Group holds a limited amount of overseas currencies in bank accounts. Independent Review Report to City of London Group plc Introduction We have been engaged by the company to review the condensed set of consolidated financial statements in the half-yearly financial report for the six months ended 30 September 2012 which comprises the condensed consolidated statement of comprehensive income, the condensed consolidated statement in changes of equity, the condensed consolidated balance sheet, the condensed consolidated statement of cash flows and the related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of consolidated financial statements. Directors' responsibilities The half-yearly financial report is the responsibility of and has been approved by the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, ''Interim Financial Reporting'', as adopted by the European Union. Our responsibility Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. Our report has been prepared in accordance with the terms of our engagement to assist the company in meeting its responsibilities in respect of half-yearly financial reporting in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of consolidated financial statements in the half-yearly financial report for the six months ended 30 September 2012 is not prepared, in all material respects, in accordance with International Accounting Standard 34, as adopted by the European Union, and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. BDO LLP Chartered Accountants and Registered Auditors, London, United Kingdom 19 November 2012 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). This information is provided by RNS The company news service from the London Stock Exchange END IR LFFVLLRLTLIF -0- Nov/19/2012 07:00 GMT
City Of Lon Grp PLC CIN Interim Results
Press spacebar to pause and continue. Press esc to stop.