24 September, 2009

LIVERMORE INVESTMENTS GROUP LIMITED

("Livermore" or "the Company")

UNAUDITED INTERIM RESULTS FOR SIX MONTHS ENDED 30 JUNE 2009

Livermore Investments Group Limited today announces its interim results for the six months ended 30 June 2009. 

Highlights

• Net Asset Value per share - USD 0.53 (June 2008: USD 0.97, December 2008: USD 0.63)

• Net cash, cash equivalents and marketable securities at 30 June 2009 - USD 28.7m (June 2008: USD 42.5m, December 2008: USD 23.5m)

• Revenues from operations - USD 5.1m (June 2008: USD 11.9m, Dec 2008: USD 17.5m)

• Administrative expenses during the period (excluding other administrative expenses) were USD 1.6m, representing 1% of the NAV

• Net loss after tax of - USD 21.5m (June 2008: USD 4.4m, Dec 2008: USD 61.9m loss) mainly related to non-cash items including Atlas Estates Ltd. (USD 5.4m), DTH-Boom (USD 11.2m), and CALS (USD 5m)

• Improved trading environment relating to most investments since Q2. Profitable trading activity in corporate bond portfolio

• As of 23 September 2009, the unaudited estimated net asset value per share increased to USD 0.56 and net cash, cash equivalents and marketable securities increased by USD 5m to USD 33.7m.

Commenting on the results, Noam Lanir, CEO, said: "We have continued to witness the impact of the challenging economic environment on our investments in Eastern Europe - Atlas Estates and DTH Boom. At the same time, however, I am pleased to report that the trading environment relating to most of our other investments improved in 2009. This is reflected in the performance of the financial portfolio which performed well in the reporting period and continued to perform well in July and August. The Company is well positioned to benefit from opportunities that may arise as economic conditions improve". 

For further investor information please go to www.livermore-inv.com.

  Chairman's and Chief Executive's Review

Introduction

We are pleased to report the interim results for Livermore Investments Group Limited ("Livermore" or "the Company") for the half year ended 30 June 2009.  

The Company holds a portfolio of private and public value investments focused in Europe and Asia with an investment horizon of 2-5 years. In addition, the Company holds yielding investments, which cover its operational costs and generate additional resources for investments in special opportunities. 

Investment Environment

During first half of 2009, global financial markets showed some signs of improvement following the extreme levels of stress that had been seen during the last quarter of 2008, which at one stage had culminated in the near-paralysis of credit markets. 

As the "green shoots of recovery" began to take hold and rate of decline in economic indicators slowed in the second quarter, global credit, equity and commodity markets witnessed one of their best ever rallies.  During this period, the MSCI World Index recovered by 19.7% to end the quarter positive year-to-date, the S&P 500 Index rose 15.2% and the Dow Jones STOXX 600 Index climbed 23.2%. Emerging markets recovered very significantly with a rise in stock prices of 33.6%, as measured by the MSCI Emerging Markets Index. Credit spreads continued to contract from the historically high levels seen towards the end of 2008. At the end of the second quarter of 2009, credit spreads in the high yield corporate sector were about 50% above their historical average, compared with 200% higher in December 2008. Fears of rising inflation due to increasing public debt across the world contributed to government bonds underperforming corporate bonds in the second quarter of 2009, a reversal of the situation in recent quarters.

Central banks continued to keep short-term interest rates at historically low levels during the second quarter, and signalled that they could remain low until economic recovery materializes. Long-term interest rates were more volatile during the period, reflecting concerns about the implications of government stimulus efforts on future inflation expectations.

Financial Review

The NAV of the Group at 30 June 2009 was approximately USD 154.4m.  The net loss was USD 21.5m, which represents a loss per share of USD 0.07. 

Administrative expenses (excluding other administrative expenses) were USD 1.6m, representing 1% of the NAV. 

The overall loss and decrease in NAV is primarily attributable to non-cash items including Atlas Estates (USD 5.4m), DTH Boom (USD 11.2m) and CALS (USD 5m).

The Company's portfolio is distributed amongst the asset classes listed below:

Updates on Significant Investments

Wyler Park - Switzerland

Wyler Park, Berne is a top quality real estate investment in Switzerland. The property consists of a commercial lettable area of 16800 sqm, a residential lettable area of 4140 sqm, and additional commercial development rights of 7800 sqm.

The commercial part is let out to SBB (AAA rated), the Swiss national transport authority wholly owned by the Swiss Confederation, until at least July 2019 and serves as headquarters of their Passenger Traffic division.

Having successfully completed the development of high quality, modern apartments at Wyler Park, the management has signed rental agreements for 31 of the 39 apartments with the remaining expected to be rented out shortly. The additional annual rental income expected from the residential development is CHF 1.1m.  The total project is now at 95% occupancy. At full occupancy, the rental income is estimated at CHF 5.3m.  

The rental income from the commercial components of the project was stable with a 2.26% increment in the rental income due to the indexation of rent. Over 800 SBB employees occupy the Wyler I and Wyler II commercial building which is much more than SBB had initially planned. SBB has recently sought our approval to enhance the basement of the property at their own cost, which is expected to be around CHF 2m. 

The investment in Wyler Park was made through a wholly owned Swiss subsidiary, Livermore Investments AG. The loan outstanding on the project is CHF 79m, which matures in 2014 and is a non-recourse loan to Livermore Investments AG secured only on this property. The loan to value (LTV) has been reduced to 72% from 85% at inception. 

Atlas Estates ("Atlas") - Central and Eastern Europe.  

The global economic crisis has had a significant impact on the Central and Eastern European region resulting in a sharp reduction in credit availability, depreciation of local currencies, and low transactional volumes in real estate. Hungary and Romania have had to seek financial support from the International Monetary Fund ("IMF"). Poland, however, where the majority of Atlas' assets are located, has demonstrated the most resilience in the region. 

Atlas' results for 2009 have been impacted by these difficult credit and market conditions. The IFRS NAV has declined from EUR 3.68 per share at 31 December 2008 to EUR 2.6 per share as at 30 June 2009. The NAV declined mainly as a result of the decrease in valuations of the investment and hotel properties and depreciation in Central and Eastern Europe currencies. The trading results, relating mainly to the majority of properties concentrated in Poland, have somewhat improved over recent months.

In the six months to 30 June 2009, Atlas's revenue increased to EUR 24.7m (Jun 2008: EUR 21.1m).  Loss from operations was EUR 17.9m (Jun 2008: EUR 5.5m) and profit from operations before movement in valuations and provisions against inventories was EUR 3.1m. Depreciating currencies had a significant impact resulting in unrealized foreign exchange losses of EUR 9.8m (Jun 2008: gain EUR 6.3m) in the income statement and EUR 9.8m (Jun 2008: gain EUR 9.9m) in reserves. Net Asset Value declined to EUR 121.85m with NAV per share at EUR 2.6 whereas Adjusted NAV declined to EUR 3.35 per share.  

As at 30 June 2009, Atlas had bank loans of EUR 252m (30 June 2008: EUR 221m). The company has reported covenant breaches on four loans granted to subsidiaries totalling EUR 92.4m, up from two loans totalling EUR 67.7m as at year end 2008. The banks have been made aware of all these breaches and have not asked for repayment of the loans. Atlas received a written covenant waiver from its lender for the 2008 breach and the lender will continue to extend the EUR 63.1 million facility. 

On the operational side, the trading environment relating to residential sales has improved during recent months. Atlas pre-sold an additional 16 Platinum Towers apartments in Warsaw. At the Capital Art Apartments development in Warsaw, Atlas has completed construction of the first stage and is in the process of constructing and completing the second stage. To date, Atlas has sold 182 out of 219 apartments in stage 1, with a further 35 apartments in stage 1 and 152 apartments out of 300 apartments in stage 2 having been pre-sold. In the Hilton Hotel, occupancy rates fell in the first six months of 2009 to 57% from 69% in the first six months of 2008. Cost containment measures have been undertaken and as a result operating margin levels of 32%-33% have been maintained. In Hungary, the company has reported the loss of a key client from the automotive supplier industry at Ikarus Business Park due to economic pressures. Atlas Management Company (AMC) continues to actively market the vacant space.

Although liquidity is a concern, Atlas management has taken measures to retain cash within the company and has slashed dividends, cut costs, and refinanced some properties. Further, some management fees due to AMC have been accrued and not paid out in cash. Over the next three to five years, taking account of more uncertain market conditions, the company will be seeking to realise value through property disposals and the completion of its ongoing development projects. 

Livermore management has been involved in discussions with representatives of the Atlas Board on issues relating to cost reduction, liquidity and measures to close the NAV gap such as the future of AMC. Livermore believes that the liquidity generated by the residential sales in the Polish developments should be used in 2010 to develop additional residential projects in Warsaw. Livermore believes that the agreement with AMC must be terminated in order to allow for the future development of the Company and to enhance access to capital markets. These concerns have been actively voiced to the Atlas Board and suggestions to terminate the Property Management Contract were made when there was a change of control at AMC.  Livermore continues to urge action by the Atlas Board on this issue. 

Given current credit conditions, we believe that certain development properties may face refinancing risk and may be subject to forced sales. In light of this, we have conducted an impairment review and have included the investment in Atlas Estates at a value of EUR 2.07 per share instead of the book value of EUR 2.6 per share. Please see note 13 for details.

SRS Charminar - India

As noted in our 2008 Annual Report, Livermore has invested USD 20m in a leading Indian Real Estate company, in association with SRS Private and other investors as part of a total investment of USD 154m. The investee company controls over 5000 acres across Southern India, with over 650 acres in Hyderabad.  The investee company is the world's first property development company to have been certified by four international standards - ISO 9001 - 2000, ISO 14001 - 2004, OHSAS 18001 - 1999 and SA 8000 - 2001, in one single attempt.

The deal structure included a put option, which could be exercised if the IPO does not take place within 3 years or if certain terms in the agreement are met.  The put option is secured by land valued at around USD 1.3 billion at the time of investment and guarantees a minimum return of approximately 30% IRR if exercised.

Infinite India Limited, the manager for this investment, informed Livermore on 25 February 2009, that following discussions with the promoters of the real estate company on 20 January 2009, the fund served a put option notice in accordance with the investment agreement demanding the return of capital and 30% interest on the investment. As there was a dispute between the founders and the fund as to the grounds for exercising the put option, the parties agreed to invoke arbitration to be held in Mumbai, arbitrated by the retired chief justice of the supreme court of India, the country's supreme judicial body.  

Since the balance sheet date, Livermore has been informed that the arbitration process was completed on 14 August 2009. The arbitrator had ruled in favour of investors, ruling that the breaches by the promoters resulted in an Event of Default. Consequently, the Put Option served by the investors is validated. The promoters have 90 days to appeal the award.

DTH Television Grup SA, BOOM - Romania 

Livermore holds 18.14% of DTH-Boom TV, a digital satellite TV company in Romania. 

Romania and businesses that operate in the country have been significantly impacted by the credit crisis and deteriorating economic conditions. Romania had to avail itself of IMF assistance. Boom has also experienced deterioration in its financial and competitive position due to lack of financing to fund its growth.  The Company is in advanced negotiations to raise additional funds to reach its business plan target of 450,000 subscribers by 2014.  Consequently, and to be prudent, Livermore's management has decided to impair part of the investment in order to best reflect the current investment proposals under negotiation and the uncertain and challenging financial conditions faced by DTH-Boom, as per note 5. 

Montana Tech Components ("Montana") - Europe

Montana, based in Austria, is a leading components manufacturer in the fields of Aerospace Components, Metal Tech and Micro Batteries. 

The Aerospace Components business segment manufactures specialized components for Airbus and Boeing and is the market leader. The facilities are currently located in the US and in Switzerland with a new low cost facility in Romania under construction. The company has over 50% market share in the US with Boeing and is expected to have over 45% in Europe with Airbus after the completion of the Romanian facility. Both Airbus and Boeing have large order backlogs that, despite reduction in build-out rates, have assisted the company in maintaining volumes.  

The Metal Tech business segment operates in a niche area with 60%-70% of world market share in an otherwise highly fragmented industry. This business segment produces tools for identification and marking of Steel products and has performed to expectations due to a large order backlog. This order backlog, however, has been declining as new sales orders have been slow since the latter half of 2008.  

The Micro Batteries business segment has three business units.  Two business units are excellent with strong brand (VARTA Micro Power) and market share in their defined niches - Hearing Aid Batteries and Rechargeable Batteries. The revenues and net incomes have been stable in these business units. The third business unit is based on Lithium Polymer batteries and has recently been restructured to an R&D only organization due to high fixed costs of production. 

In April 2009, the company raised EUR 13m equity from existing shareholders at a price of EUR 1 per share to ensure sufficient funds to cover operational requirements until 2011. The price was deliberately kept low to entice shareholders to participate in the capital raising or risk dilution. At this price, the company is valued at 1x 2008 EBITDA or 1x 2009 EBIT, which is extremely cheap even in a challenging environment for such niche, stable, cash generative companies. Livermore invested EUR 300,000 in the issue.

During the period, Erste Bank conducted a valuation based on management estimates and arrived at a valuation range of EUR 4.2 - EUR 6.2 per share. The valuation range based on Erste bank's worst case estimates was EUR 2.2 - EUR 3.7 per share.

Given that access to primary equity markets is limited at the moment, and based on discussions with the Management of Montana, Livermore now expects an exit by means of an IPO before 2011.  However, if an IPO has not taken place by then Montana management will seek a trade sale of the underlying businesses in 2011.  As all three businesses have a strong franchise value it is expected that a trade sale should generate significant market interest. 

CALS refinery - India 

In December 2007, Livermore entered into a Total Swap Agreement (TSA) with respect to a Global Depositary Receipt (GDR) issued by an Indian refinery company - CALS Refinery. CALS is promoted by Spice group to set up refineries in India. Spice is a USD 2 billion turnover group with interests in Oil & Gas, Aviation, Hotels, and Heavy engineering in India and Africa. CALS is relocating a refinery from Germany to India and the GDR was issued to part-finance the relocation and set up of this refinery in India. CALS expects the refinery to have a capacity of 4.8 million metric tons per annum (MMTPA). 

On the operational front, CALS has received the environment clearance to set up the 5 MMTPA refinery at Haldia, West Bengal, India from the Ministry of Environment and Forests. In addition, the Government of West Bengal has approved a special package of incentives under the West Bengal Incentive Scheme 2004 for the company. In November 2008, CALS signed a crude supply agreement with British Petroleum for supply of 60% of total refining capacity with a minimum off-take of 57.7% of diesel produced and 34.4% of total gasoline produced at prevailing market rates. CALS has further signed a Memorandum of Understanding (MOU) with Bharat Petroleum Corporation Limited (BPCL) for off-take of the by-products such as LPG, Naphtha, ATF/Kerosene, diesel, gasoline benzene, propylene and sulphur. For handling of larger crude parcels, CALS has signed an MOU with Dhamra Port for the use of an oil jetty that is under construction.  

Following the notice of put option exercised by the TSA counterparty to the promoters of CALS, negotiations with the promoters to restructure or increase the collateral is in process. We have been informed that, while no legal steps have been taken to force the transfer of control of the entity holding the collateral, initial discussions to identify buyers for the entity vehicle holding the collateral have begun. The legal process in respect of the issues described above has not yet been initiated in the hope that an amicable workout agreement can be reached with the promoters. Considering the above developments, the reduced collateral value following an overall decline in property values in India, and also considering the decline in price of the underlying GDR, management has decided to impair the investment by 50%, reducing the investment value to USD 5m from USD 10m. 

Financial Investments and Corporate Bond Trading

The Company manages a financial portfolio of over USD 60m, invested mainly in corporate bonds.  Severe stresses in financial markets has caused substantial price dislocation in credit markets over the last 18 months, resulting in historically wide credit spreads on investment grade, high quality corporate bonds and hybrid securities, such as perpetual bonds, especially those issued by large financial institutions where risk of failure was substantially reduced by Government interventions. Livermore capitalized on this opportunity and successfully traded investment grade senior and subordinated debt issued mostly by "Troubled Asset Relief Program" (TARP) protected banks and large European financial institutions. The trading performance has continued to be profitable in July and August 2009. 

The Company also profited from trading in equity markets, investing in certain undervalued banks and commodity producers. This positively contributed to the performance during the reporting period and thereafter.  

In addition to capital gains the Company continues to generate dividend and interest income from its fixed income portfolio. During the reported period the total dividend and interest income totalled USD 3.2m.  

Repurchase of shares

Between the period ended 31 December 2008 and 30 June 2009, the Company repurchased 211,000 shares at an average price of $0.18 per share. No additional shares were purchased between 30 June 2009 and before the beginning of the interim close period. As at 30 June 2009, the Company holds 12,352,961 shares in treasury.

Further share buybacks will be considered in the light of both the discount to net asset value and management's strategic view of the investment portfolio.

Dividends

Due to the challenging economic and financial conditions and its effect on the Company's portfolio, the Board decided not to distribute dividends for the period ended 30 June 2009. 

The Board of Directors will decide on the Company's dividend policy for 2009 based on market conditions and portfolio performance over the financial year. 

Richard Rosenberg                                                        Noam Lanir

Chairman                                                                       Chief Executive

24 September 2009

Livermore Investment Group Limited 

Consolidated Income Statement

for the six months ended 30 June 2009

  Livermore Investment Group Limited 

Consolidated Statement of Comprehensive Income 

for the six months ended 30 June 2009

The total comprehensive loss for the period is wholly attributable to the equity holders of the parent company.

  Livermore Investments Group Limited 

Consolidated Statement of Financial Position 

as at 30 June 2009

  Livermore Investments Group Limited 

Consolidated Statement of Changes in Equity

for the period ended 30 June 2009

  Livermore Investments Group Limited 

Consolidated Statement of Cash Flows   

for the period ended 30 June 2009

Notes to the Financial Statements

1.    Accounting policies 

The condensed consolidated interim financial statements of Livermore have been prepared on the basis of the accounting policies and basis of consolidation stated in the 2008 Annual Report, available on www.livermore-inv.com except for the adoption of IAS 1 "Presentation of Financial Statements".  

Basis of preparation

These results have been prepared on the basis of the accounting policies expected to be adopted in the Company's full year financial statements, which are expected to be prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union.      

The financial information for the period ended 30 June 2008 is extracted from the Company's financial statements for the year ended 31 December 2008 which contained an unqualified audit report.

These interim condensed consolidated financial statements are for the six months ended 30 June 2009. They have been prepared in accordance with IAS 34 "Interim Financial Reporting". They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the group for the year ended 31 December 2008.

The accounting policies have been applied consistently throughout the group for the purpose of the presentation of these condensed consolidated interim financial statements.

Critical accounting judgments and key sources of estimation uncertainties are unchanged from the year end.

2.    Segment information

Management consider investment activity to be a single class of business.

3.    Interest / dividend income

4.    Investment property revenue

5.    Loss on investments

* Impairments primary consist of impairment on DTH-Boom for USD 11.2m and CALS refinery for USD 5.0m. 

6.    Loss on Associated Company

7.    Other administrative expenses

8.    Dividends

The Board of Directors will decide on the Company's dividend policy for 2009 based on market conditions and portfolio performance over the current financial year.  

9.    Earnings per share

Basic earnings per share has been calculated by dividing the net (loss) / profit attributable to ordinary shareholders ((loss) / profit for the period) by the weighted average number of shares in issue during the relevant financial periods.  

Diluted earnings per share is calculated after taking into consideration diluted potential ordinary shares in existence during the period.  There are no anti dilutive shares.

10.    Available-for-sale financial assets

* Financial and minority holdings relate to significant investments (of over USD 5m) which are strategic for the company and are done in the form of equity purchases or convertible loans. Main investments under this category are in the fields of real estates and media.