TIDMLMS
RNS Number : 0828M
LMS Capital PLC
26 July 2017
26 July 2017
LMS Capital plc
Half Year Results for the Six Months Ended 30 June 2017
The Board of LMS Capital plc ("LMS Capital" or "the Company") is
pleased to announce the Company's half year results for the six
months to 30 June 2017.
-- Proceeds of realisations in the period were GBP19.9 million
bringing to GBP21.9 million the total received since the circular
to shareholders in July 2016.
-- The Company has today announced the launch of a tender offer to return up to GBP11 million to shareholders.
-- First half proceeds included:
o A distribution from San Francisco Equity Partners of GBP9.0
million following the recapitalisation and partial realisation of
its portfolio company, Yes To;
o Distributions from other funds of GBP5.6 million;
o GBP3.6 million forming the stage one payment on the sale of
Nationwide Energy Partners;
o The sale of 176,000 shares in Weatherford International for
net proceeds of GBP0.7 million;
o Proceeds of GBP1.1 million from the sale of 365iTMS.
-- Net Asset Value at 30 June 2017 was GBP71.7 million, 74p per
share (31 December 2016: GBP68.1 million, 71p per share).
-- The investment portfolio showed a net gain in the first half
of GBP7.3 million (2016: net loss of GBP8.6 million) before
unrealised net currency losses of GBP1.9 million (2016: unrealised
net gains of GBP6.8 million) and carried interest charges of GBP0.2
million (2016: GBP0.1 million).
-- The profit for the period was GBP3.5 million (2016: loss of GBP3.9 million).
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulation (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
For further information please contact:
LMS Capital plc
Martin Knight, Chairman 020 3837 6270
Gresham House Asset Management
Limited
Graham Bird 020 3837 6270
J.P. Morgan Cazenove (Corporate
Broker) 020 7742 4000
Michael Wentworth-Stanley
Chairman's statement
I am pleased to report that the Company has made significant
progress during the first half of 2017 and we have today launched a
tender offer to return up to GBP11 million to shareholders. This is
the full amount of the further returns proposed in the circular
sent to shareholders on 27 July 2016 and marks a significant
landmark as the Company implements the new investment strategy set
out in that circular.
Performance review
Net Asset Value per share at 30 June 2017 was 74p (31 December
2016: 71p) a return of 4.2% for the first half of the year.
Portfolio gains (realised and unrealised) for the six months
were GBP5.4 million net (2016: net losses of GBP1.8 million), the
key elements of which were:
-- Following the recapitalisation and partial sale of the
portfolio company, Yes To, the net gain on the Company's interest
in San Francisco Equity Partners was GBP7.8 million;
-- The sale of 365iTMS resulted in a net gain of GBP1.9 million;
-- The Company reduced its carrying value for the co-investment
Medhost by GBP1.6 million, based on the latest carrying value
reported by the lead investor.
The portfolio gains for the period are stated after the impact
of unrealised exchange losses of GBP1.9 million (2016: gains of
GBP6.8 million), reflecting the strengthening of sterling against
the US dollar.
Overhead costs were GBP1.6 million, significantly lower than the
previous year (2016: GBP2.1 million). The amount for the first half
of 2017 includes costs totalling GBP0.7 million which are not
expected to recur once the transition to external management is
complete.
Conclusion and outlook
The return of GBP11 million to shareholders referred to above
marks the close of an important chapter in the Company's recent
history and will bring to GBP172 million total cash returns to
shareholders in the last five and a half years. This compares to a
market capitalisation of the Company five and a half years ago, at
the start of its realisation strategy, of GBP155 million.
The Board and the Manager are now focussed on growing the
investment portfolio and net asset value for shareholders. In
future, it is the intention of the Company to generate a dividend
yield over the longer term.
Martin Knight
Chairman
26 July 2017
Manager's review - 30 June 2017
Gresham House Asset Management ("GHAM") has made significant
progress since being appointed investment manager in August 2016.
With input from the LMS Capital Board it has adopted a staged
approach towards achieving the objectives outlined at that
time.
The 'first stage', which is now substantially complete, has seen
transition to external management, including:
-- Implementing a new investment process and governance
structure, including the newly appointed Investment Committee;
-- Detailed review of portfolio holdings to frame future
strategy and drive potential growth and liquidity
opportunities;
-- Significant engagement with the management teams of
underlying portfolio investments in order to identify catalysts for
stabilisation, value creation and long term growth. This includes
members of GHAM joining the boards of 365iTMS (until its sale),
Entuity, Elateral, and Nationwide Energy Partners; and
-- Appointing external administrators and driving targeted annualised cost savings.
The 'second stage' is focused on realisation and return of
capital to shareholders alongside investing appropriately to
optimise the value of the portfolio where there is a clear plan for
longer term value creation with portfolio companies. This stage is
now also substantially complete as shown by:
-- The tender offer to return up to GBP11 million to
shareholders, details of which are being sent to shareholders
today, and which returns in full the amount set out in the circular
to shareholders dated 27 July 2016;
-- The sale of 365iTMS in April, partly for cash but largely for
shares in Coretx Holdings plc to enable LMS Capital to participate
in the expected future growth of the combined business;
-- Completion of the arrangements to sell the Company's interest
in Nationwide Energy Partners back to the founders; and
-- The redemption of most of the Company's interest in the Weber Capital funds.
The 'third stage' will be focused primarily on new investment in
direct private equity opportunities at the smaller end of the
market and alternative, specialist asset classes targeting long
term, illiquid strategies, in each case leveraging the expertise,
experience and network of the investment team and newly formed
Investment Committee. The team will also seek to scale the Company
appropriately to generate additional shareholder value.
Investment approach
New investment is now focused predominantly on private equity
investment and alternative, specialist asset classes using the
experience of the GHAM team in asset management, private equity and
public markets:
-- The manager will invest in and partner with management teams
of profitable and cash generative businesses and investments to
create value, targeting an annual return on equity of 12% -15% net
of costs over the long-term;
-- The focus will primarily be on smaller private investment
opportunities below GBP50 million value where the manager believes
there to be significant market inefficiencies which create
opportunities for superior long-term returns and to leverage the
experience of the investment team;
-- Investments may include alternative, specialist asset classes
which target long term, illiquid strategies both through
co-investment and fund opportunities on preferred terms; and
-- The focus is also on optimising the value of existing
holdings and, where growth prospects are clear, to preserve and
support longer term value creation.
Market background
The first half of 2017 has been characterised by uncertainty
with several significant political events in the UK, Europe and the
US. Investors have had to navigate continued uncertainty over the
terms of Brexit, the impact of the US presidential election as well
as pockets of uncertainty in Europe and a snap election in the UK.
This is in addition to slowing growth in Asia, continued oil price
volatility, and uncertainty surrounding the prospect of interest
rate rises on the back of rising inflation. The FTSE All Share
reached an all-time high in May and we have also seen strong GDP
growth in Germany and renewed focus on European equities.
High valuations, fund raising and increased competition for
deals means private equity firms have high levels of uninvested
funds, particularly for the larger enterprise value deals. We
believe there are significant inefficiencies at the smaller end of
the market, focusing on established smaller private companies below
GBP50 million enterprise value where there can be less competition
for deals and valuations are more attractive. This segment of the
market tends to be off radar for venture and early stage funding
providers and sub-threshold for mid-market private equity
investors, creating an opportunity to generate superior long-term
returns.
Performance review
The following are the key performance indicators ("KPIs")
considered by the Board and the Manager in assessing the Company's
performance against its objectives. These KPIs are:
Return on equity over the long term
The Company's objective is to achieve a return on equity (on new
investments) of between 12% and 15% per year over the long
term.
The NAV per ordinary share total return
The Company's net asset value per share total return was 4.2%
for the six months ended 30 June 2017. This compared with 3.3% for
the FTSE All-Share Index.
The share price total return
The Company's share price total return was minus 6.5% for the
six months ended 30 June 2017. This compared with the 3.3% gain for
the FTSE All-Share Index.
Cash realisations from the portfolio in the first half of 2017
were as follows:
Six months
ended
30 June
------------------
2017 2016
GBP'000 GBP'000
--------------------------- -------- --------
Sales of investments 6,179 4,490
Distributions from funds 13,727 4,139
--------------------------- -------- --------
Total - gross 19,906 8,629
Follow-on investments (250) (730)
Fund calls (57) (190)
Carried interest payments - (273)
--------------------------- -------- --------
Total - net 19,599 7,436
--------------------------- -------- --------
In the first half of 2017 the proceeds of GBP19.9 million arose
principally from:
-- A distribution of GBP9.0 million from San Francisco Equity
Partners following the recapitalisation and partial disposal of its
interest in Yes To;
-- GBP3.6 million as the stage one payment on the sale of Nationwide Energy Partners;
-- Distributions from Brockton Capital of GBP2.4 million;
-- GBP2.9 million from the liquidation of the Company's
interests in funds managed by Weber Capital;
-- GBP0.7 million from sales of shares in Weatherford International; and
-- Proceeds of GBP1.1 million from the sale of 365iTMS.
The only follow-on investment was to provide working capital for
Elateral.
The following is a summary of the Company's net assets at 30
June 2017:
30 June 31 December
2017 2016
GBP'000 GBP'000
Investment portfolio
of the Company 2,727 2,481
Investment portfolio
of subsidiaries 56,383 70,951
--------------------------------- -------- ------------
59,110 73,432
Cash and cash equivalents 16,598 1,249
Other net assets/(liabilities) (4,046) (6,565)
--------------------------------- -------- ------------
Total net assets 71,662 68,116
--------------------------------- -------- ------------
Below is a summary of the investment portfolio of the Company
and its subsidiaries:
30 June 2017 31 December 2016
------------ ---------------------------- ----------------------------
UK US Total UK US Total
Asset type GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------ -------- -------- -------- -------- -------- --------
Quoted 5,970 1,866 7,836 2,481 2,995 5,476
Unquoted 7,197 15,268 22,465 9,384 21,987 31,371
Funds 7,663 21,146 28,809 11,149 25,436 36,585
------------ -------- -------- -------- -------- -------- --------
20,830 38,280 59,110 23,014 50,418 74,432
------------ -------- -------- -------- -------- -------- --------
The principal investments at 30 June 2017 comprising 84% of the
total portfolio were:
Name Geography Sector Book value % of
Net
asset
value
--------------------- ---------- ----------- -------------------- -------
30 June 31 December 30 June
2017 2016 2017
GBP'000 GBP'000
Quoted investments
Coretx Holdings UK Technology 3,243 - 4.5%
Gresham House UK Financial 2,727 2,481 3.8%
Unquoted investments
Medhost Inc US Technology 9,895 12,070 13.8%
Elateral UK Technology 3,500 3,900 4.9%
Entuity UK Technology 3,600 3,000 5.0%
Fund investments
San Francisco
Equity Partners
Penguin Computing* US Technology 12,365 10,133 17.3%
Yes To, Inc* US Consumer 5,765 8,387 8.0%
Others
Brockton Capital UK Property 4,452 6,651 6.2%
Opus Capital
Venture Partners US Technology 4,173 4,505 5.8%
*includes holdings by SFEP and co-investments held by the
Company
Basis of valuation:
-- Quoted investments - bid price of security quoted on relevant securities exchange;
-- Unquoted investments - multiple of revenues or earnings of
comparable quoted companies with appropriate discounts for
marketability;
-- Fund interests - based on amounts reported by the general
partner unless the reported value is not in line with the Company's
valuation policy.
Performance of the investment portfolio
The return on investments for the six months ended 30 June 2017
was as follows:
Six months ended 30 June
------------------------------------------------------------------------------------
2017 2016
----------------------------------------- -----------------------------------------
Realised Unrealised Realised Unrealised
gains/(losses) gains/(losses) Total gains/(losses) gains/(losses) Total
Asset type GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- --------------- --------------- ------- --------------- --------------- -------
Quoted 44 (180) (136) (23) (1,236) (1,259)
Unquoted 2,488 (2,833) (345) - (723) (723)
Funds 3,572 2,333 5,905 183 22 205
----------------- --------------- --------------- ------- --------------- --------------- =======
6,104 (680) 5,424 160 (1,937) (1,777)
----------------- --------------- --------------- --------------- ---------------
Charges
for incentive
plans (168) (41)
----------------- --------------- --------------- ------- --------------- --------------- -------
5,256 (1,818)
Operating
and similar
expenses
of subsidiaries (224) (429)
----------------- --------------- --------------- ------- --------------- --------------- -------
5,032 (2,247)
----------------- --------------- --------------- ------- --------------- --------------- -------
Approximately 65% of the portfolio at 30 June 2017 is
denominated in US dollars (31 December 2016: 69%) and the above
table includes the impact of currency movements. In the six months
ended 30 June 2017, the strengthening of sterling against the US
dollar resulted in an unrealised foreign currency loss of
GBP1,939,000 (2016: unrealised gain of GBP6,836,000). As is common
practice in private equity investment, it is the Board's current
policy not to hedge the Company's underlying non-sterling
investments.
Quoted investments
30 June 31 December
2017 2016
--------------------------- --------------- -------- ------------
Company Sector GBP'000 GBP'000
--------------------------- --------------- -------- ------------
Coretx Holdings UK technology 3,243 -
Gresham House UK financial 2,727 2,481
Weatherford International US energy 1,655 2,909
Others - 211 86
7,836 5,476
------------------------------------------- -------- ------------
The net loss on the quoted portfolio arose as follows:
Six months ended
30 June
------------------
2017 2016
Gains/(losses), net GBP'000 GBP'000
-------------------------------------------- -------- --------
Realised
Weatherford International 46 (42)
Other quoted holdings (2) 18
Dividend income - 1
-------------------------------------------- -------- --------
44 (23)
-------------------------------------------- -------- --------
Unrealised
Weatherford International (449) (1,652)
Gresham House 246 -
Coretx Holdings 147 -
Other quoted holdings 26 (18)
Unrealised foreign currency (losses)/gains (150) 434
-------------------------------------------- -------- --------
(180) (1,236)
-------------------------------------------- -------- --------
Total net losses (136) (1,259)
-------------------------------------------- -------- --------
During the first half of 2017 the Company sold 176,000 shares
(2016: 600,000 shares) of its holding in Weatherford International
for net proceeds of GBP704,000 (2016: GBP3,368,000). The unrealised
losses on this investment during the period reflect the continuing
pressure on this company's share price to date in 2017.
The shares in Coretx Holdings were received in part
consideration for the sale of 365iTMS.
Unquoted investments
30 June 31 December
2017 2016
-------------------- --------------- -------- ------------
Company Sector GBP'000 GBP'000
-------------------- --------------- -------- ------------
Medhost Inc US technology 9,895 12,070
Entuity UK technology 3,600 3,000
Elateral UK technology 3,500 3,900
Nationwide Energy
Partners US energy 3,067 7,703
Penguin Computing* US technology 1,815 1,449
Yes To* US consumer 491 765
365iTMS UK technology - 2,100
Other interests - 97 384
-------------------- ---------------- -------- ------------
22,465 31,371
------------------------------------ -------- ------------
*These are co-investments with SFEP
The net loss on the unquoted portfolio arose as follows:
Six months ended
30 June
------------------
2017 2016
-------------------------------------------- -------- --------
Gains/(losses), net GBP'000 GBP'000
-------------------------------------------- -------- --------
Realised
365ITMS 1,932 -
Yes To 556 -
2,488 -
-------------------------------------------- -------- --------
Unrealised valuation adjustments
Nationwide Energy Partners (785) (3,521)
Medhost (1,632) -
365ITMS - 500
Entuity 671 (1,219)
Elateral (650) (200)
Penguin Computing 442 -
Yes To 39 (24)
Others - (9)
Unrealised foreign currency (losses)/gains (918) 3,750
-------------------------------------------- -------- --------
(2,833) (723)
-------------------------------------------- -------- --------
Total net losses (345) (723)
-------------------------------------------- -------- --------
In April the Company's investment in 365ITMS was sold to Coretx
Holdings plc. The Company received gross cash proceeds of GBP1.1
million plus 9,826,400 shares in Coretx Holdings with a value on
completion of GBP3.0 million. The shares are subject to a 24-month
orderly market agreement.
In June, Yes To (a portfolio company of SFEP) was the subject of
a recapitalisation and partial sale. The amounts in the above table
for Yes To reflect the gains resulting from this transaction for
the Company's co-investment with SFEP.
Valuations are sensitive to changes in the following two
inputs:
-- The operating performance of the individual businesses within the portfolio; and
-- Changes in the revenue and profitability multiples and
transaction prices of comparable businesses, which are used in the
underlying calculations.
In most cases the multiples used at 30 June 2017 are similar to
those prevailing at the end of 2016 and therefore the unrealised
gains or losses set out in the table above arise principally as a
result of the companies' performance.
Comments on individual companies are set out below.
Medhost
Medhost is a co-investment with one of the Company's fund
interests, Primus Capital, who are the lead investment manager.
Medhost has recently announced that an advisor has been appointed
to find a buyer for the business. The Company has based its
carrying value on the carrying value reported by the general
partner.
ICU Eyewear
The Company fully wrote off its interest at the end of 2016 and
there have been no developments to date in 2017 to change this
approach.
Nationwide Energy Partners ("NEP")
In January 2017 the Company reached agreement to sell its
interest back to the founder in a two stage transaction. The stage
one payment of $4.5 million was received in January 2017. The
second and final stage will be settled either as a one off payment
of $5 million in January 2018 or a loan note repayable with
interest in instalments over 4 years. The carrying value is the
present value of the Company's current estimate of amounts
receivable from stage two of the transaction.
Entuity
Following completion of the strategic review in 2016 a new CEO
was appointed and took up his post in February 2017. The new team
is performing satisfactorily and is focussed on future value
growth.
Elateral
Elateral has invested heavily in recent years to re-engineer and
upgrade its technology platform as a precursor to retaining and
growing its multinational client base. The company has made good
progress in its financial year to March 2017 and is seeing year on
year growth in underlying recurring revenue.
There have been changes in the leadership team in the first half
of 2017 and the company is looking to continue the progress of the
previous year. The write down reflects the need to provide
additional capital following a review by the new team.
Penguin Computing
This is a co-investment with SFEP. The business has made good
progress in the last 18 months and the improved results are
reflected in the write up of its carrying value.
Fund interests
30 June 31 December
2017 2016
---------------------- -------------------------- -------- ------------
General partner Sector GBP'000 GBP'000
---------------------- -------------------------- -------- ------------
San Francisco
Equity Partners US consumer & technology 16,088 16,748
Brockton Capital UK property 4,452 6,651
Opus Capital Venture
Partners US venture capital 4,173 4,505
Weber Capital US micro-cap quoted
Partners stocks 572 3,784
Eden Ventures UK venture capital 1,686 2,964
Other interests - 1,838 1,933
---------------------- --------------------------- -------- ------------
28,809 36,585
------------------------------------------------- -------- ------------
Gains and losses on the Company's funds portfolio for the six
months ended 30 June 2017 were as follows:
Six months ended
30 June
------------------
2017 2016
Gains/(losses), net GBP'000 GBP'000
-------------------------------------------- -------- --------
Realised
Realised on distributions 3,572 183
-------------------------------------------- -------- --------
Unrealised valuation adjustments
San Francisco Equity Partners 4,278 119
Eden Ventures (1,325) (567)
Brockton Capital 211 (1,789)
Simmons Parallel Energy (59) (282)
Opus Capital Venture Partners 229 (130)
Weber Capital - 155
Others (net) (130) (136)
Unrealised foreign currency (losses)/gains (871) 2,652
-------------------------------------------- -------- --------
2,333 22
-------------------------------------------- -------- --------
Total net gains 5,905 205
-------------------------------------------- -------- --------
San Francisco Equity Partners ("SFEP")
LMS Capital is the majority investor in SFEP (as opposed to the
other fund interests where the Company has only a minority
stake).
SFEP has two remaining investments:
-- Penguin Computing - fund carrying value GBP10,550,000. The
company continues to make good progress and is performing ahead of
expectations. The Company has increased its carrying value for this
portfolio company by GBP1.9 million;
-- Yes To - fund carrying value GBP5,274,000. In June this
company was subject to a transaction which resulted in its
recapitalisation and a partial sale of SFEP's interest at a
significant premium to the previous book value. The realised gain
on the transaction was GBP3.6 million and the unrealised uplift on
the remaining interest was GBP2.3 million.
Other fund interests
-- Eden Ventures' portfolio performed below expectations during
the period which is reflected in the reduction in the carrying
value of the Company's interest
-- Brockton Capital - the overall decrease reflects
distributions received in the first half of the year. The Company's
valuation methodology for this investment results in a small uplift
for its remaining interest;
-- Opus Capital, a US venture fund, made stock distributions in
kind during the first half of 2017 totalling GBP278,000;
-- The Company's interest in Weber Capital Partners includes two
funds, and during the first half the Company has liquidated
substantially all of its positions in both funds.
Overhead costs
Overhead costs in the first half (including amounts incurred by
subsidiaries) were GBP1,635,000 significantly lower than the
corresponding period last year (2016: GBP2,084,000).
Taxation
There is no tax charge for the six months ended 30 June 2017
(2016: nil) - in both periods tax deductible expenses exceed
taxable income. The excess of these tax deductible expenses will be
surrendered to subsidiaries of the Company to offset taxable income
in those companies.
Financial resources and commitments
Including cash in subsidiaries, cash holdings were GBP17,413,000
(31 December 2016: GBP1,632,000) with no debt.
At 30 June 2017 subsidiary companies had commitments of
GBP3,525,000 (31 December 2016: GBP3,577,000) to meet outstanding
capital calls from fund interests.
Outlook
GHAM has engaged with portfolio companies and is working with
the management teams to identify catalysts for growth and to drive
long-term value; we are also focused on progressing and initiating
sale processes for certain holdings. We are looking to access and
reinvest in direct private equity opportunities at the smaller end
of the market and alternative asset classes targeting long term,
illiquid strategies, in each case leveraging the expertise and
experience of our investment team and Investment Committee.
Gresham House Asset Management Limited
26 July 2017
Principal risks and uncertainties
The principal risks and uncertainties that affect the Company
are described on pages 7 to 9 of the Company's Annual Report for
the year ended 31 December 2016. These are still considered the
most relevant risks and uncertainties which the Company faces and
they could have an impact on the Company's performance in the
second half of the financial year.
For the foreseeable future, the market risk factors set out in
the 2016 Annual Report are expected to be influenced by the UK's
decision to leave the European Union. The volatility and
uncertainty as negotiations commence in connection with that
decision may include:
-- Reduction in the demand for the products and services of the
Company's investments, which may negatively impact the performance,
growth rates and overall value of those investments;
-- A lack of liquidity in the capital markets and an increased
aversion to risk on the part of potential buyers could mean that
the Company may not be able to realise its investments in line with
planned timings and values;
-- Changes in market prices for the Company's quoted
investments, as well as movements in interest rates and exchange
rates. A significant proportion of the investment portfolio is
denominated in a currency other than pounds sterling, principally
US dollars. It is the Board's current policy not to hedge the
Company's underlying non-sterling investments.
Going concern
As stated in note 1 to the condensed financial statements, the
directors are satisfied that the Company has sufficient resources
to continue in operation for the foreseeable future, a period of
not less than twelve months from the date of this report.
Accordingly, they continue to adopt the going concern basis in
preparing the condensed financial statements.
Martin Knight
Chairman
26 July 2017
Condensed income statement
Six months ended
30 June
------------------------------ ------ -------------------
2017 2016
Notes GBP'000 GBP'000
------------------------------ ------ --------- --------
Net gains/(losses) on
investments 2 5,032 (2,247)
Directors' and other fees
from investments - 20
Interest income 5 12
------------------------------- ------ --------- --------
5,037 (2,215)
Operating expenses (1,491) (1,655)
------------------------------- ------ --------- --------
Profit/(loss) before tax 3,546 (3,870)
Taxation - -
------------------------------ ------ --------- --------
Profit/(loss) for the
period 3,546 (3,870)
------------------------------- ------ --------- --------
Attributable to:
Equity shareholders 3,546 (3,870)
------------------------------- ------ --------- --------
Earnings/(loss) per ordinary
share - basic 3 3.7p (3.7)p
Earnings/(loss) per ordinary
share - diluted 3 3.7p (3.7)p
------------------------------- ------ --------- --------
The notes on pages 20 to 24 form part of these financial
statements.
Condensed statement of other comprehensive income
Six months ended
30 June
----------------------------------- -------------------
2017 2016
GBP'000 GBP'000
----------------------------------- --------- --------
Profit/(loss) for the period 3,546 (3,870)
Other comprehensive income - -
Total comprehensive profit/(loss)
for the period 3,546 (3,870)
------------------------------------ --------- --------
Attributable to:
Equity shareholders 3,546 (3,870)
------------------------------------ --------- --------
The notes on pages 20 to 24 form part of these financial
statements.
Condensed statement of financial position
30 June 31 December
2017 2016
Notes GBP'000 GBP'000
Non-current assets
Property, plant and equipment - 32
Investments 4 137,536 148,312
Non-current assets 137,536 148,344
--------------------------------- ------ --------- ------------
Current assets
Operating and other receivables 96 248
Cash and cash equivalents 16,598 1,249
--------------------------------- ------ --------- ------------
Current assets 16,694 1,497
--------------------------------- ------ --------- ------------
Total assets 154,230 149,841
--------------------------------- ------ --------- ------------
Current liabilities
Operating and other payables (2,190) (4,078)
Amounts payable to subsidiaries (79,940) (76,743)
--------------------------------- ------ --------- ------------
Current liabilities (82,130) (80,821)
--------------------------------- ------ --------- ------------
Non-current liabilities
Provisions and other
long-term liabilities (438) (904)
Non-current liabilities (438) (904)
--------------------------------- ------ --------- ------------
Total liabilities (82,568) (81,725)
--------------------------------- ------ --------- ------------
Net assets 71,662 68,116
--------------------------------- ------ --------- ------------
Equity
Share capital 9,644 9,644
Share premium 508 508
Capital redemption reserve 23,378 23,378
Retained earnings 38,132 34,586
--------------------------------- ------ --------- ------------
Total equity shareholders'
funds 71,662 68,116
--------------------------------- ------ --------- ------------
The financial statements on pages 15 to 24 were approved by the
Board on 26 July 2017 and were signed on its behalf by:
Martin Knight
Chairman
The notes on pages 20 to 24 form part of these financial
statements.
Statement of changes in equity
Six months ended 30 June 2017
Capital
Share Share redemption Retained Total
capital premium reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ---------- ---------- ------------ ----------- ----------
Balance at
1 January
2017 9,644 508 23,378 34,586 68,116
Total comprehensive
income for
the period
Profit for
the period - - - 3,546 3,546
Balance at
30 June 2017 9,644 508 23,378 38,132 71,662
--------------------- ---------- ---------- ------------ ----------- ----------
Six months ended 30 June 2016
Capital
Share Share redemption Retained Total
capital premium reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ---------- ---------- ------------ ----------- ----------
Balance at
1 January
2016 10,358 508 22,664 61,561 95,091
Total comprehensive
income for
the period
Loss for the
period - - - (3,870) (3,870)
Balance at
30 June 2016 10,358 508 22,664 57,691 91,221
--------------------- ---------- ---------- ------------ ----------- ----------
The notes on pages 20 to 24 form part of these financial
statements.
Condensed cash flow statement
Six months ended
30 June
-------------------
2017 2016
GBP'000 GBP'000
------------------------------------ --------- --------
Cash flows from operating
activities
Profit/(loss) for the period 3,546 (3,870)
Adjustments for:
Depreciation and amortisation 32 63
(Gains)/losses on investments (5,032) 2,247
Interest income (5) (12)
(1,459) (1,572)
Dividends received 12,720 9,275
Change in operating and other
receivables 152 (74)
Change in operating and other
payables (2,522) (292)
Change in amounts payable
to subsidiaries 6,453 (2,715)
------------------------------------- --------- --------
Net cash from operating activities 15,344 4,622
------------------------------------- --------- --------
Cash flows from investing
activities
Interest received 5 12
Acquisition of property,
plant and equipment - (3)
Net cash from investing activities 5 9
------------------------------------- --------- --------
Net increase in cash and
cash equivalents 15,349 4,631
Cash and cash equivalents
at the beginning of the period 1,249 4,083
Cash and cash equivalents
at the end of the period 16,598 8,714
------------------------------------- --------- --------
The notes on pages 20 to 24 form part of these financial
statements.
Notes to the financial information
1. Principal accounting policies
Reporting entity
LMS Capital plc ("the Company") is domiciled in the United
Kingdom. These condensed financial statements are presented in
pounds sterling because that is the currency of the principal
economic environment of the Company's operations.
These condensed financial statements do not constitute the
statutory accounts of the Company within the meaning of section
434(3) and 435(3) of the Companies Act 2006. The comparative
figures for the financial year ended 31 December 2016 are not the
Company's statutory accounts for that financial year. Those
accounts have been reported on by the Company's auditor and
delivered to the registrar of companies. The report of the auditor
on the Company's statutory accounts for the financial year ended 31
December 2016 was (i) unqualified and (ii) did not contain a
statement under section 498(2) or (3) of the Companies Act
2006.
The Company was formed on 17 March 2006 and commenced operations
on 9 June 2006 when it received the demerged investment division of
London Merchant Securities.
Statement of compliance
These condensed financial statements have been prepared in
accordance with IAS 34: Interim Financial Reporting as adopted by
the EU. 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 December
2016 which were prepared in accordance with International Financial
Reporting Standards as adopted by the EU ("Adopted IFRS").
As required by the Disclosure and Transparency Rules of the
Financial Conduct Authority the condensed financial statements have
been prepared applying the accounting policies and presentation
that were applied in the preparation of the Company's published
financial statements for the year ended 31 December 2016.
Basis of preparation
These condensed financial statements have been prepared in
accordance with International Financial Reporting Standards as
adopted for use in the European Union ("Adopted IFRS").
Consistent with the year ended 31 December 2016 the Directors
have concluded that the Company has all the elements of control as
prescribed by IFRS 10 "Consolidated Financial Statements" in
relation to all its subsidiaries and that the Company satisfies the
criteria to be regarded as an investment entity as defined in IFRS
10, IFRS 12 "Disclosure of Interests in Other Entities" and IAS 27
"Consolidated and Separate Financial Statements". Subsidiaries are
therefore measured at fair value through profit or loss, in
accordance with IFRS 13 " Fair Value Measurement" and IAS 39
"Financial Instruments: Recognition and Measurement".
Taking account of the financial resources available to the
Company, the directors believe that the Company is well placed to
manage its business risks successfully despite the current
uncertain economic outlook. After making enquiries the directors
have a reasonable expectation that the Company has adequate
resources for the foreseeable future, a period of not less than
twelve months from the date of this report. Accordingly, they
continue to adopt the going concern basis in preparing the
condensed financial statements.
These condensed financial statements were approved by the Board
of Directors on 26 July 2017.
Use of estimates and judgements
The preparation of condensed financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
2. Gains/(losses) on investments
The gains and losses on investments were as follows:
Six months ended 30 June
-------------------------------------------------------------------------------
2017 2016
----------------------------------------- ------------------------------------
Realised Unrealised Realised Unrealised
gains/(losses) gains/(losses) Total gains/(losses) gains Total
Asset type GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- --------------- --------------- ------- --------------- ---------- -------
Quoted 44 (180) (136) (23) (1,236) (1,259)
Unquoted 2,488 (2,833) (345) - (723) (723)
Funds 3,572 2,333 5,905 183 22 205
----------------- --------------- --------------- ------- --------------- ---------- =======
6,104 (680) 5,424 160 (1,937) (1,777)
----------------- --------------- --------------- --------------- ----------
Charges
for incentive
plans (168) (41)
----------------- --------------- --------------- ------- --------------- ---------- -------
5,256 (1,818)
Operating
and similar
expenses
of subsidiaries (224) (429)
----------------- --------------- --------------- ------- --------------- ---------- -------
5,032 (2,247)
----------------- --------------- --------------- ------- --------------- ---------- -------
3. Earnings/(loss) per ordinary share
The calculation of the basic and diluted earnings/(loss) per
share, in accordance with IAS 33, is based on the following
data:
Six months ended 30
June
-------------------------
2017 2016
GBP'000 GBP'000
---------------------------------------- ----------- ------------
Earnings/(loss)
Earnings/(loss) for the
purposes of earnings/(loss)
per share being net profit/(loss)
attributable to equity
holders of the parent 3,546 (3,870)
Number of shares
Weighted average number
of ordinary shares for
the purposes of basic earnings/(loss)
per share 96,441,735 103,584,592
Effect of dilutive potential
ordinary shares
Share options and performance 78,531 -
shares
---------------------------------------- ----------- ------------
Weighted average number
of ordinary shares for
the purposes of diluted
earnings/(loss) per share 96,520,266 103,584,592
----------------------------------------- ----------- ------------
Earnings/(loss) per share
---------------------------------------- ----------- ------------
Basic 3.7p (3.7)p
Diluted 3.7p (3.7)p
----------------------------------------- ----------- ------------
There were no potentially dilutive shares in 2016 since the
Company made a loss.
4. Investments
The Company's investments comprised the following:
30 June 31 December
2017 2016
GBP'000 GBP'000
--------------------------------- ------- -----------
Total investments 137,536 148,312
----------------------------------- ------- -----------
These comprise:
Investment portfolio of
the Company 2,727 2,481
Investment portfolio of
subsidiaries 56,383 70,951
Other net assets of subsidiaries 78,426 74,880
137,536 148,312
--------------------------------- ------- -----------
The carrying amounts of the Company's and its subsidiaries'
investment portfolios were as follows:
30 June 2017 31 December 2016
---------------------------- ----------------------------
UK US Total UK US Total
Asset type GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------ -------- -------- -------- -------- -------- --------
Quoted 5,970 1,866 7,836 2,481 2,995 5,476
Unquoted 7,197 15,268 22,465 9,384 21,987 31,371
Funds 7,663 21,146 28,809 11,149 25,436 36,585
------------ -------- -------- -------- -------- -------- --------
20,830 38,280 59,110 23,014 50,418 73,432
------------ -------- -------- -------- -------- -------- --------
The following table analyses investments carried at fair value
at the end of the period, by the level in the fair value hierarchy
into which the fair value measurement is categorised. The different
levels have been defined as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets;
Level 2: inputs other than quoted prices included within level 1 that are observable for
the asset, either directly (i.e. as prices) or indirectly (i.e.
derived from prices); and
Level 3: inputs for the asset that are not based on observable
market data (unobservable inputs such as trading comparables and
liquidity discounts).
Fair value measurements are based on observable and unobservable
inputs. Observable inputs reflect market data obtained from
independent sources, while unobservable inputs reflect the
Company's view of market assumptions in the absence of observable
market information.
The Company's investments are analysed as follows:
30 June 31 December
2017 2016
GBP'000 GBP'000
--------- -------- ------------
Level 1 2,566 2,366
Level 2 - -
Level 3 134,970 145,946
137,536 148,312
--------- -------- ------------
Level 3 amounts include GBP56,383,000 (31 December 2016:
GBP70,951,000) relating to the investment portfolios of
subsidiaries (including quoted investments of GBP5,109,000 (31
December 2016: GBP2,995,000)) and GBP78,426,000 (31 December 2016:
GBP74,880,000) in relation to the other net assets of
subsidiaries
If the valuation for level 3 category investments declined by
10% from the amount at the reporting date, with all other variables
held constant, the profit for the six months ended 30 June 2017
would have decreased by GBP13.5 million (2016: loss increased by
GBP20.6 million). An increase in the valuation of level 3 category
investments by 10% at the reporting date would have an equal and
opposite effect.
5. Capital commitments
30 June 31 December
2017 2016
GBP'000 GBP'000
------------------------- -------- ------------
Outstanding commitments
to funds 3,525 3,577
3,525 3,577
------------------------- -------- ------------
The outstanding commitments to funds comprise unpaid calls in
respect of funds where one of the Company's subsidiaries is a
limited partner.
6. Related party transactions
Transactions with related parties during the period were
consistent in nature and scope with those disclosed in Note 20 to
the Company's annual financial statements for the year ended 31
December 2016.
7. Subsidiaries
The Company's subsidiaries are as follows:
Country of Holding
Name incorporation % Activity
-------------------------- --------------- -------- -----------
International Oilfield Bermuda 100 Investment
Services Limited holding
LMS Capital (Bermuda) Bermuda 100 Investment
Limited holding
LMS Capital (ECI) England and 100 Investment
Limited Wales holding
LMS Capital (General Bermuda 100 Investment
Partner) Limited holding
LMS Capital (GW) Bermuda 100 Investment
Limited holding
LMS Capital Group England and 100 Investment
Limited Wales holding
LMS Capital Holdings England and 100 Investment
Limited Wales holding
LMS NEP Holdings United States 100 Investment
Inc of America holding
Lioness Property England and 100 Investment
Investments Limited Wales holding
Lion Property Investments England and 100 Investment
Limited Wales holding
Lion Investments England and 100 Investment
Limited Wales holding
Lion Cub Investments England and 100 Dormant
Limited Wales
Lion Cub Property England and 100 Investment
Investments Limited Wales holding
Tiger Investments England and 100 Investment
Limited Wales holding
LMS Tiger Investments England and 100 Investment
Limited Wales holding
LMS Tiger Investments England and 100 Investment
(II) Limited Wales holding
Westpool Investment England and 100 Investment
Trust PLC Wales holding
-------------------------- --------------- -------- -----------
In addition to the above, certain of the Company's carried
interest arrangements are operated through five limited
partnerships (LMS Capital 2007 LP, LMS Capital 2008 LP, LMS Capital
2009 LP, LMS Capital 2010 LP and LMS Capital 2011 LP) which are
registered in Bermuda.
The registered addresses of the Company's subsidiaries are as
follows:
Subsidiaries incorporated in England and Wales: 100 George
Street, London W1U 8NU.
Subsidiaries and partnerships incorporated in Bermuda: Clarendon
House, 2 Church Street, Hamilton HM 11, Bermuda.
Subsidiary incorporated in the United States of America: c/o 100
George Street, London W1U 8NU.
Statement of Directors' responsibilities
With the exception of Mr Duroc-Danner who stood down as a
Director of the Company at the conclusion of the AGM on 25 May
2017, the Directors listed on pages 23 and 24 of the Company's
Annual Report for the year ended 31 December 2016 continued in
office during the six months ended 30 June 2017.
The Directors confirm that to the best of their knowledge:
a the condensed financial statements have been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU; and
b the interim management report includes a fair review of the information required by:
i DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
six months of the current financial year and their impact on the
condensed financial statements, and a description of the principal
risks and uncertainties for the remaining six months of the year;
and
ii DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the Company
during that period; and any changes in the related party
transactions described in the last annual report that could do
so.
For and on behalf of the Board
Martin Knight
Chairman
26 July 2017
Independent review report to LMS Capital plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2017 which comprises the condensed income
statement, the condensed statement of financial position, the
condensed statement of changes in equity, the condensed cash flow
statement and the related explanatory 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 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 Conduct Authority.
As disclosed in note 1, the annual financial statements of the
Company 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
Conduct 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 Financial Reporting Council 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 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 financial statements
in the half-yearly financial report for the six months ended 30
June 2017 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 Conduct Authority.
BDO LLP
Chartered Accountants
London
United Kingdom
26 July 2017
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
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