Interim Results September 2007

CITY OF LONDON GROUP PLC - INTERIM REPORT AND RESULTS FOR HALF YEAR ENDED 30TH SEPTEMBER, 2007 19 November 2007 CITY OF LONDON GROUP RAISES INTERIM DIVIDEND BY 20P.C. WHILE PURSUING ITS STRATEGY IN FINANCIAL SERVICES * Half Year Pre-Tax Profit Up 23p.c. At £268,000 * Earnings 2.57p Per Share: Interim Payout Of 1.2p Declared * NAV Maintained In Spite Of Market Turbulence * Final US$500,000 Royalty Payment Received From Iron Mountain * FSA Authorisation Given To City Of London Financial Services * 49.9p.c. Stake Taken In New Fund Management Company _____________________________________________________________________________ CHAIRMAN'S STATEMENT We continue in very good shape during a transitional phase, taking our first modest steps into the financial service arena and able to report an improvement in both portfolio value and earnings per share. This has allowed us to raise the interim dividend by 20p.c. to 1.2p per share, which will be paid to shareholders on the register as at 30 November, 2007 and payable on 21 December, 2007. Pre-tax profit for the half year to 30th September amounted to £268,000 (£218,000) helped by capital gains of £175,000 (£229,000) and a contribution of £98,000 (£57,000) from the PR side. At the end of September, 2007 we had unrealised gains of £1.53m compared to £1.60m at the end of March 2007. Group earnings per share came to 2.57p (2.28p). It is pleasing to note that, against a background of turbulence in international markets over the period, NAV per share was 79.5p at the interim stage (rising to 84.4p at end-October), compared to 78.8p at the prior year-end. The fall in 'other operating income' to £87,000 (£101,000) largely reflected the further move into cash towards the end of 2006-07, with the dividend element down from £82,000 to £66,000. This was more than offset, however, by a doubling in interest receipts (shown as 'financial income') to £69,000 (£34,000). Our pre-tax profit has once again been affected by an exchange loss, this time £34,000 (£91,000) mainly due to our US$ deposits, but this loss was mostly offset in balance sheet sterling terms by an exchange gain on A$ investments taken directly to revaluation reserve. To illustrate this point, at the half year end £ investments and cash amounted to £5.3m, US$ investments and cash £1.4m and A$ investments and cash £1.2m. In the half year US$ had fallen 4.1% and the A$ risen 5.4% against sterling. Your Board remains busy on many fronts, actively pursuing acquisition leads, holding discussions and continuing more detailed appraisal of interesting propositions. The future of the PR division is under active consideration. INTERESTS IN FINANCIAL SERVICES During the period, the Group completed the long and arduous process for authorisation by the FSA of City of London Financial Services Limited, wholly owned by COLG, to conduct regulatory business. The authorisation became effective on October 16 2007. Since period end, COLG has subscribed £100,000 for an effective 49.9p.c. stake in Glasgow-based Fundamental Tracker Investment Management Limited and will have a seat on that company's Board. FTIM has launched its first product, The Munro Fund, based on the FTSE 350 and which is aimed at cautious investors taking the longer view. The fund makes low management charges and is weighted to total forecast dividend payouts. Cash dividend generation is what this fund is all about. FINAL IRON MOUNTAIN PAYMENT In September, as planned, a final advance royalty payment of US$500,000 was received from Iron Mountain in connection with the sale of the Archive-it software business. PORTFOLIO INVESTMENTS We took slightly lower profits in total on the sale of investments over the period compared with the corresponding six months of 2006-07. The major contribution of £128,071 to the first half total of £175,000 came from a further sale of Tullow Oil shares (30,000 shares) at around seven times our cost price. We continue to retain a balance of 40,000 shares. A sale of 10,000 shares in BAE Systems chipped in a realised profit of £20,322, leaving a balance of 85,808 shares. The only other realised profit of any note was from the disposal of half our Intel shares. NET ASSETS Net assets at end-September amounted to £8.1m (equivalent to 79.5p per share) boosted by the placing of 627,935 shares at 78p each to an institutional investor and non-executive Board members David Walton Masters and Henry Lafferty. TOTAL VOTING RIGHTS For the purposes of the transitional provisions of the Financial Services Authority's Disclosure and Transparency Rules, the total number of ordinary shares in issue as at the date of this announcement is 10,186,635, with each share carrying the right to one vote. There are no shares held in Treasury. The total number of voting rights in the Company is therefore 10,186,635. The above figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, COLG under the FSA's Disclosure and Transparency Rules. PROSPECTS The first bricks have been laid in the foundation work of building our financial services business but there is much more to do before we bring together and complete a springboard for a major move forward. Successful outcomes to one or more of the situations being examined would speed up the process but will not be entered into by the Board unless the terms for such investment are right for our shareholders. The portfolio should hold up well against the vagaries in the stock market and, hopefully, at least one of our 'special situations' should begin to blossom. In the absence of a dramatic change in market and trading conditions, the Board plans to pursue a progressive dividend policy. JOHN GREENHALGH Chairman 19 November, 2007. Contact: John Chairman City of London Group Tel: Greenhalgh Plc. 020-7628-5518 Peter Doye Deputy City of London Group Chairman Plc. Interim Accounts 30/9/2007 Unaudited Interim Results INCOME STATEMENT 6 mths to 6 mths to Year to 30/09/07 30/09/06 31/03/07 £'000 £'000 £'000 Revenue 206 160 326 Cost of sales (16) (21) (42) Gross profit 190 139 284 Administrative expenses Exchange (loss)/profit (34) (91) (141) Other (219) (194) (403) (253) (285) (544) Profit on sale of investments 175 229 673 Provision for impairment of investments - - (121) Other operating income 87 101 183 Exceptional Item - - (117) Operating profit 199 184 358 Financial income 69 34 99 Profit before tax 268 218 457 Income tax expense (6) - (15) Profit for the period 262 218 442 Attributable to: Equity holders 262 218 442 Earnings per share 2.57p 2.28p 4.52p Unaudited Interim Results BALANCE SHEET As at As at As at 30/9/07 30/9/06 31/3/07 £'000 £'000 £'000 ASSETS Non-current assets Available for sale financial assets 5,768 5,027 5,136 Intangible assets 1 2 2 Property, plant and equipment 5 7 6 5,774 5,036 5,144 Current assets Trade and other receivables 363 359 665 Cash and short-term deposits 2,152 2,033 2,502 2,515 2,392 3,167 TOTAL ASSETS 8,289 7,428 8,311 EQUITY AND LIABILITIES Equity attributable to equity holders of the parent Issued capital 1,019 956 956 Share premium 5,107 4,689 4,689 Retained earnings 447 159 287 Asset revaluation reserve 1,532 1,491 1,601 Total Equity 8,105 7,295 7,533 Current liabilities Trade and other payables 184 133 778 184 133 778 TOTAL EQUITY AND LIABILITIES 8,289 7,428 8,311 Unaudited Interim Results STATEMENT OF CHANGES IN EQUITY Asset- Issued Share Retained revaluation Total capital premium earnings reserve Equity £'000 £'000 £'000 £'000 £'000 Balance at 1 April 2006 956 4,689 (59) 1,910 7,496 Profit for the period - - 218 - 218 Investments revalued in the period - - - (190) (190) Realised on disposal of investments - - - (229) (229) Balance at 30 September 2006 956 4,689 159 1,491 7,295 Profit for the period - - 224 - 224 Equity dividends paid - - (96) - (96) Investments revalued in the period - - - 445 445 Realised on disposal of investments - - - (335) (335) Balance at 31 March 2007 956 4,689 287 1,601 7,533 Profit for the period - - 262 - 262 Equity dividends paid - - (102) - (102) Shares issued 63 418 - - 481 Investments revalued in the period - - - 45 45 Realised on disposal of investments - - - (114) (114) Balance at 30 September 2007 1,019 5,107 447 1,532 8,105 Unaudited Interim Results CASH FLOW STATEMENT 6 mths to 6 mths to Year to 30/09/07 30/09/06 31/03/07 £'000 £'000 £'000 Net cash from operating activities (93) (67) (453) Net cash flows (used in)/from investing activities (146) 655 1,116 Net cash flows (used in)/from financing activities (111) - 394 Net (decrease)/increase in cash and cash equivalents (350) 588 1,057 Cash and cash equivalents at beginning of period 2,502 1,445 1,445 Cash and cash equivalents at end of period 2,152 2,033 2,502 Notes 1. 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. 2. The calculation of earnings per Ordinary Share is based on the profit after taxation of £262,000 (2006 £218,000) and on the number of shares in issue being the weighted average number of shares in issue during the period of 10,186,635 (2006 9,558,700). The weighted average number of ordinary shares in issue has been adjusted to reflect the fact that the funds in respect of the share placement were received in November 2006. 3. These interim financial results do not comprise statutory accounts within the meaning of Section 240 of the Companies Act 1985. Statutory accounts for the year ended 31 March 2007 were approved by the Board of Directors on 29 June 2007 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 under Section 237(2) or Section 237(3) of the Companies Act 1985. 4. This condensed consolidated half-yearly financial information for the half-year ended 30 September 2007 has been prepared in accordance with the Disclosure and Transparency Rules (DTR) of the Financial Services Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union. The half-yearly condensed consolidated financial report should be read in conjunction with the annual financial statements for the year ended 31 March 2007, which have been prepared in accordance with IFRS's as adopted by the European Union. 5. The final dividend of 1p per share for the year ended 31 March 2007 was paid on 7 September 2007, the Directors have declared an interim dividend for the year ended 31 March 2008 of 1.2p per share payable on 21 December 2007. The interim report, including the financial information contained therein, is the responsibility of, and was approved by the directors on 19 November 2007. The Listing Rules require that accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. There have been no changes to the Group's accounting policies for the period ended 30 September 2007. Each of the persons who is a director confirms that as far as they are aware - the condensed set of financial statements, which has been prepared in accordance with the applicable set of 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 DTR 4.2.4. - the interim management report includes a fair review of the information required to be included, as required by DTR's 4.2.7 and 4.2.8. Available for sale financial assets As at As at As at 30/9/07 30/9/06 31/3/07 £'000 £'000 £'000 Listed securities - Equity Securities - Australia 1,018 473 673 - Equity Securities - US and Canada 467 479 533 - Equity Securities - UK 2,374 2,175 1,923 - Debentures - UK 29 59 59 Cumulative redeemable preference shares - UK 99 99 98 Non-cumulative non-redeemable preference shares - UK 1,074 1,236 1,194 Convertible preference shares - UK - 412 431 Convertible loan - UK 130 - - Equity fund - UK 500 - - Unlisted securities - equity securities traded on inactive markets 77 94 225 5,768 5,027 5,136 ---END OF MESSAGE---