GlobalCapital plc - Interim Results

GlobalCapital plc published its financial statements for the six months ended 30 June 2007 following a Board of Directors’ meeting held on 24 August 2007. No interim dividend was declared by the Directors whereas in the first half of 2006 the Group distributed a gross dividend of 2c per share.

During the first six months of 2007 GlobalCapital’s income from commission and fees receivable mainly arising from investment and advisory services and agency and brokerage services remained unchanged at Lm1.04 million. While revenue from investment and advisory services dropped by 15% to Lm0.6 million, income from agency and brokerage services increased by 12.8% to Lm0.3 million. The balance on the insurance technical account before tax showed a loss of Lm0.4 million despite a strong growth in premium income from Lm1.7 million to Lm3.4 million. On the other hand, gains on investment property more than doubled from Lm0.8 million in the first half of 2006 to Lm1.7 million during the period under review. This fair value gain was determined on the basis of a professional valuation carried out by a leading independent residential and commercial property consultancy firm.

Administrative expenses incurred by the Group in the first half of 2007 increased by 18.6% to Lm1.1 million with commissions payable and direct marketing costs remaining unchanged at Lm0.3 million. After accounting for a goodwill impairment of Lm0.1 million, the Group’s operating profit during the first half of the year increased by 21.9% to Lm0.8 million. However, while in the first six months of 2006 the Group received net investment income of Lm0.4 million, during the period under review GlobalCapital incurred a net investment expense of Lm0.7 million. The Directors reported that during the first half of the year, the Group incurrent significant fair value losses on investments attributable to negative market conditions.

The net investment expense forced the Group’s pre-tax profits to drop to only Lm0.1 million in the first half of the year, significantly lower than the Lm1.1 million generated in the same period of 2006. GlobalCapital provided for a tax credit of Lm0.2 million while in the comparative period a tax charge of Lm0.3 million was recognised. This tax credit helped the Group’s profit for the period increase to Lm0.4 million. Despite this, profits after tax declined by 47% in the first half of 2007 with earnings per share of 2c9 compared to 5c6 in June 2006.

Total assets as at 30 June 2007 amounted to Lm43.8 million, an increase of 5.7% since the start of the year mainly as a result of an increase in the value of investment property as well as other financial investments. Shareholders’ funds dropped 1% to Lm12.6 million resulting in a net asset value per share of Lm0.95.

The Group’s post-tax return on equity (profit after tax divided by average shareholders’ funds) decreased from 13.5% in June 2006 to 6.5%. Similarly, Group return on assets (pre-tax profit divided by average assets) dropped to 1.9% in June 2007 from 4.6% a year earlier.

The Directors stated in the Half-Yearly Report that they expect trading activity to be sustained during the second half of the year. However, they warned that the recent international stock market volatility and global economic uncertainty may effect the Group’s trading and investment performance.