City Of Lon Grp PLC CIN Interim Results
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
Sponsored Links
Advertisement
Advertisements
Sponsored Links
Advertisement
Rate this Page