TIDMLMS
RNS Number : 5843U
LMS Capital PLC
02 August 2022
1 August 2022
LMS CAPITAL PLC
Half year results for the six months ended 30 June 2022
Financial Update
-- Net Asset Value ("NAV") at 30 June 2022 of GBP47.0 million,
58.2p per share, compared to GBP49.1 million (60.8p per share) at
31 December 2021;
-- net realised and unrealised portfolio losses, including
GBP2.6 million of foreign exchange gains, were GBP1.3 million;
-- running costs were GBP0.9 million and investment related costs were GBP0.2 million;
-- cash proceeds of GBP0.4 million from realisations during the half year;
-- final dividend payment in May 2022 of 0.625 pence per share
for the year ended 31 December 2021; and
-- cash at 30 June 2022 was GBP18.9 million (31 December 2021:
GBP20.1 million), including GBP3.2 million held in
subsidiaries.
Interim Dividend
-- Under the Company's progressive annual dividend policy, the
Board targets a dividend in respect of each financial year of
approximately 1.5% of that year's closing net asset value.
-- The Board has approved an interim dividend in respect of the
Company's financial year to 31 December 2022 of 0.3 pence per
share. The dividend will be paid on 12 September 2022 to
shareholders on the share register at close of business on 12
August 2022 (with an ex-dividend date of 11 August 2022).
Robert Rayne, Chairman, commented:
"The first six months of 2022 have been challenging due to the
overall market conditions and the consequential impact on capital
markets and valuations. The team running our most recent
investment, Dacian Petroleum, are making good progress and the
business has been cash generative since day one. We continue to
focus on identifying opportunities in our three main investment
themes, energy, real estate and late stage private equity.
1 August 2022
Enquiries:
LMS Capital PLC
0207 935 3555
Robert Rayne, Chairman
Nick Friedlos, Managing Director
Statement from the Chairman and the Managing Director
We are pleased to report the financial results of the Company
for the first six months of the year 2022 and to provide an update
on our portfolio and the direction of the overall business.
After adjusting for the payment of the final dividend of 0.625
pence per share on the 2021 year, the overall NAV at 30 June 2022
is down 3.3% from the 31 December 2021 position and down 5.7%
compared to 31 March 2022.
The movements are discussed in more detail below. Overall the
NAV has benefitted from portfolio unrealised foreign exchange gains
reflecting the strengthening of the U.S. Dollar against sterling.
Underlying investment valuations overall have reduced, largely
reflecting reductions in the public market comparables and
transaction evidence used in the valuation exercise rather than
adverse changes in the underlying businesses.
The Dacian team have now been operating the business for some 8
months and are making good progress. The business is EBITDA and
cash flow positive.
Principal risks
Details on the Group's principal risks and previously identified
material existing and emerging risks and how such risks are manage
is available in the LMS Capital plc Annual Report 2021 (pages 22 to
23), or online at www.lmscapital.com. There have been no
significant changes to these principal risks or previously
identified material existing and emerging risks in the period other
than as set out below.
We have continued to monitor the impact of the Russian invasion
of Ukraine, and there has been no significant direct impact on our
portfolio investments. We do not hold any investments that have
operations in Russia or Ukraine. As previously reported, Elateral,
our investment in the digital marketing sector, utilises contract
staff in Ukraine, Russia and Belarus for its software development
and has implemented a plan to manage the disruption.
UNAUDITED RESULTS FOR THE SIX MONTHSED 30 JUNE 2022
Net Asset Value ("NAV") overview
The NAV of the company at 30 June 2022 was GBP47.0 million, 58.2
pence per share (31 December 2021 GBP49.1 million, 60.8 pence per
share). After dividend payments of GBP0.5 million, this represents
a decrease of GBP1.6 million on the 2021 year end and
comprises:
-- net increase in the portfolio from GBP2.6 million of foreign
exchange gains from the strengthening of the US Dollar against
sterling;
-- net decrease of GBP3.9 million being unrealised net
reductions in value on the mature asset portfolio;
-- increase of GBP0.6 million being accrued interest on Dacian;
-- fee income of GBP0.1 million from our Dacian investment;
-- running costs of GBP0.9 million and investment related costs
of GBP0.2 million principally associated with developing real
estate deal opportunities; and
-- other net increase GBP0.1 million.
The Company's NAV comprises three distinct groups of assets:
Mature Investments - 30 June 2022 NAV GBP20.8 million (25.8
pence per share )
The Mature Portfolio comprises investments which originate from
the Company's strategy pre-2012 and are currently managed with a
view to optimising the realisation values. It is our expectation
that these assets will be substantially realised over the next 1-3
years.
During the first half of 2022, this group of investments had
realised and unrealised net losses of GBP2.2 million, including
foreign exchanges gains of GBP1.7 million from the strengthening of
the U.S. Dollar against sterling.
Unrealised portfolio losses, excluding foreign exchange gains,
were GBP3.9 million, the principal items of which were:
-- Quoted shares
Overall, our quoted portfolio showed net unrealised losses of
GBP0.2 million during the first half of 2022.
-- Unquoted investments
Our unquoted portfolio recorded net unrealised losses of GBP2.9
million:
o Medhost, where we continue to follow the valuation of Primus,
the lead investment manager, shows an unrealised loss of GBP1.1
million as the fund manager reduced its most recent valuation.
Medhost operates in a mature market and it continues to be cash
generative and perform in line with budget;
o ICU shows an unrealised loss of GBP1.4 million, reflecting a
decrease in the valuation based on current market conditions and
indicative valuations during the early stages of an exit process
currently underway; and
o Elateral reduced by GBP0.4 million during the first half of
2022. The company has historically focused on winning key
multinational clients, which it has generally been successful in
retaining. However, the sales cycle to such clients is slow and
achieve its valuation potential the company needs to demonstrate
more rapid revenue growth, in particular in the SME sector. The
write down reflects the company's need for working capital support,
over and above what was expected, whilst it implements a new sales
growth plan.
-- Fund investments
Our fund investments showed net unrealised losses of GBP0.8
million for the half year:
o Opus increased by GBP0.9 million, primarily due to the
increase in the fund manager's valuation of one of its key
remaining assets;
o our investment in Brockton has increased by GBP0.4 million,
mainly reflecting the unwinding of the discount in our discounted
cash flow valuation;
o our investment in Weber decreased by GBP1.1 million due to
performance of the U.S. microcap equities held in the fund;
o Eden recorded an unrealised loss of GBP0.4 million as the fund
manager wrote down its last remaining investment to its anticipated
exit value;
o our investment in EMAC was written down by GBP0.4 million due
to prevailing market conditions and as the fund has encountered
challenges in selling its remaining assets; and
o other fund investments recorded net unrealised losses of
GBP0.2 million.
New Investments - 30 JUNE 2022 NAV GBP9.4 million (11.7 pence
per share)
New Investments comprise the Company's investment in Dacian,
which has now been operating for 7 months to the end of June 2022
and continues to make good progress. Energy prices are
substantially higher than when the deal was originally underwritten
in August 2020. Set against this is a significant well maintenance
backlog that has created a number of interruptions to production in
the early months of operation and has diverted the team from some
of its planned workover projects that have been identified to
increase production. The team is gradually managing the reactive
maintenance needs, conducting some workover projects and has
managed to increase production since its initial operations in
November 2021. The business is EBITDA positive and cash generative
to date.
During the first half of 2022, this investment had unrealised
net foreign exchange gains of GBP0.9 million from the strengthening
of the U.S. Dollar against sterling.
The Company's accrued interest on the loans through which the
investment is structured have added GBP0.6 million to NAV in the
first half of 2022.
The Company has also benefitted from GBP0.1 million being the
first six months of fee income from Dacian. This income offsets our
running costs.
Liquidity - Cash less other net liabilities
Cash
Cash balances in the Company and its subsidiaries at 30 June
2022 were GBP18.9 million (31 December 2021: GBP20.1 million).
Significant outflows during the six months were GBP1.6 million,
the cash portion of running costs and investment related costs,
GBP0.5 million of dividend payments, GBP0.3 million of new capital
invested in Elateral and GBP0.1 million of fund calls.
Portfolio inflows were GBP0.4 million and include a GBP0.3
million distribution from Medhost for the redemption of preferred
shares plus accrued interest and GBP0.1 million of other fund
distributions.
Net Liabilities
Net liabilities of GBP2.2 million consist primarily of accruals
for income taxes, historic carried interest liabilities for one
remaining asset and other sundry costs.
DIVID POLICY
A final dividend of 0.625 pence per share for the year ended 31
December 2021 was approved by shareholders at the AGM in May 2022
and paid in early June 2022.
The Board has approved the interim dividend for the 2022 year of
0.3 pence per share to be paid on 12 September 2022 to shareholders
on the share register at close of business on 12 August 2022 (with
an ex-dividend date of 11 August 2022).
NEW INVESTMENT
We continue to focus on our three themes, energy, real estate
and - where there is some cross over with our two main themes -
later stage private equity.
In energy, we anticipate further opportunities to invest with
the Dacian team in late life oil and gas production opportunities,
although the priority for the team for the rest of this year is to
focus on "bedding in" the initial acquisition.
On the real estate development side we see opportunities in
developing specialist use real estate and to that end have been
looking at retirement living as a sector with strong demand drivers
and where our real estate land assembly and planning skills can be
deployed. We are investigating several potential sites, but in
evaluating those sites are mindful of the current escalating
construction costs and general economic uncertainty. This is a
medium to long-term project and we will only take sites forward if
we are clear that the risk adjusted returns are acceptable and
consistent with the Company's overall returns criteria.
On the real estate investment side we anticipate opportunities
arising in the coming months to acquire assets arising and are
positioning ourselves to be able to take advantage of market
conditions. The focus will be on smaller lot sizes, where we
believe there is less competition from other buyers, and across
sectors where we see value .
CONCLUSION AND OUTLOOK
The first half of 2022 was challenging due to overall market
conditions and the consequential impact on capital markets and
valuations. The Company's objective remains the preservation and
creation of wealth for its shareholders with a target to deliver
returns, net of costs, of between 12% and 15% over the longer
period.
Looking forward our focus remains:
-- to support the Dacian team in developing a clear operating
plan to achieve the production objectives envisaged at the time the
investment was made;
-- execute on the opportunities with our real estate teams; and
-- continue to focus on realising the investments in our mature
portfolio, where opportunities to do so arise.
We would like to express our appreciation for the support from
our team and from the network of people with whom we work on a
regular basis. We would also like to express our appreciation for
the continued support of our shareholders. We look forward to
reporting to you further on our progress
Robert Rayne
Chairman
Nicholas Friedlos
Managing Director
1 August 2022
PORTFOLIO MANAGEMENT REVIEW
Introduction
During the first half of 2022, the Company recorded net realised
and unrealised losses on its mature portfolio investments of GBP1.3
million, including GBP2.6 million of foreign exchange gains, and an
additional GBP0.6 million of accrued interest income on its new
portfolio investment, Dacian Petroleum. Portfolio realisations
totalled GBP0.4 million during the period, primarily from GBP0.3
million of cash distributions from Medhost for the redemption of
preferred shares and GBP0.1 million from other fund
distributions.
Market background
The first half of 2022 began with the UK economy returning to
pre-pandemic levels but was soon impacted by global events that
changed the direction and outlook of the global economy and capital
markets. The Russia invasion of Ukraine and renewed Covid-19
lockdowns in China created upward pressure on commodity prices and
continued the existing supply chain constraints. Significant
inflation, both in the UK and globally, has created concern that a
global recession may be forthcoming. The Bank of England has
increased interest rates four times in the first half of 2022 and
further increases are anticipated in the second half of 2022.
Sterling weakened against the U.S. Dollar during the period and
global equity markets saw declines, with the FTSE 100 down nearly
3%, while the U.S. S&P 500 Index declined nearly 21%. The FTSE
AIM 100 and SmallCap indices declined 31% and 16%,
respectively.
The risk of further inflation and a possible recession create
further uncertainly for the remainder of 2022. The Board and the
Company continue to closely monitor the economic environment and
capital markets, including the impact this has on the investment
portfolio and its valuations.
Performance review
The movement in NAV during the six months ended 30 June was as
follows:
Six months ended 30 June
----------------------------
2022 2021
GBP'000 GBP'000
Opening NAV 49,109 47,923
(Losses)/gains on investments portfolio (1,256) 1,215
Investment interest income 598 -
Dividends (505) (484)
Overheads and other net movements (985) (1,062)
------------------------------------------ ------------- -------------
Closing NAV 46,961 47,592
------------------------------------------ ------------- -------------
Cash realisations and new and follow-on investments from the
portfolio were as follows:
Six months ended 30 June
----------------------------
2022 2021
GBP'000 GBP'000
----------------------------------------------- ------------- -------------
Proceeds from redemption of convertible debt - 750
Proceeds from redemption of preference share 353 -
Distributions from funds and loan repayments 68 1,687
----------------------------------------------- ------------- -------------
Total - gross cash realisations 421 2,437
New and follow-on investments (263) -
Fund calls (105) (43)
----------------------------------------------- ------------- -------------
Total - net 53 2,394
----------------------------------------------- ------------- -------------
Realisations of GBP0.4 million in 2022 include:
-- GBP0.3 million from Medhost for the redemption of the
preferred shares and accrued interest; and
-- GBP0.1 million of distributions from Brockton and Simmons.
The fund calls are primarily for SFEP management fees.
Below is a summary of the investment portfolio of the Company
and its subsidiaries, which reflects all investments held by the
group:
30 June 31 December
--------------------------------------- ----------------------------------
2022 2021
---------------------------------- ----------------------------------
UK US Total UK US Total
Mature investment portfolio GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ---------- ---------- ---------- --- ---------- ---------- ----------
Quoted 145 37 182 218 165 383
Unquoted 717 5,943 6,660 924 7,744 8,668
Funds 6,669 7,301 13,970 7,242 6,687 13,929
------------------------------ ---------- ---------- ---------- --- ---------- ---------- ----------
7,531 13,281 20,812 8,384 14,596 22,980
UK US Total UK US Total
New investment portfolio GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ---------- ---------- ---------- --- ---------- ---------- ----------
Quoted - - - - - -
Unquoted - 9,433 9,433 - 7,958 7,958
Funds - - - - - -
------------------------------ ---------- ---------- ---------- --- ---------- ---------- ----------
- 9,433 9,433 - 7,958 7,958
------------------------------ ---------- ---------- ---------- --- ---------- ---------- ----------
Total investments 7,531 22,714 30,245 8,384 22,554 30,938
------------------------------ ---------- ---------- ---------- --- ---------- ---------- ----------
Basis of valuation:
Quoted investments
Quoted investments for which an active market exists are valued
at the closing bid price at the reporting date.
Unquoted direct investment
Unquoted direct investments for which there is no active market
are valued using the most appropriate valuation technique with
regard to the stage and nature of the investment or based on recent
indicative offers for investments with an exit strategy. Valuation
methods that may be used include:
-- investments in an established business are valued using
revenue or earnings multiples depending on the stage of development
of the business and the extent to which it is generating
sustainable revenue or earnings;
-- investments in an established business which is generating
sustainable revenue or earnings but for which other valuation
methods are not appropriate are valued by calculating the
discounted cash flow of future cash flows;
-- investments in debt instruments or loan notes are determined
on a standalone basis, with the initial investment recorded at the
price of the transaction and subsequent adjustments to the
valuation are considered for changes in credit risk or market
rates; and
-- convertible instruments are valued by disaggregating the
convertible feature from the debt instrument and valuing it using a
Black-Scholes model.
Funds
Investments in managed funds are valued at fair value. The
general partners of the funds will provide periodic valuations on a
fair value basis, the latest available of which the Company will
adopt provided it is satisfied that the valuation methods used by
the funds are not materially different from the Company's valuation
methods. Adjustments will be made to the fund valuation where the
Company believes there is evidence available for an alternative
valuation.
Performance of the investment portfolio
The return on investments for the six months ended 30 June 2022
was as follows:
Six months ended 30 June Six months ended 30 June
2022 2021
--------------------------------------- ---------------------------------------
Realised Unrealised Realised Unrealised
gains gains/(losses) Total losses gains/(losses) Total
Asset type GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------- ---------- ---------------- --------- ---------- ---------------- ---------
Quoted - (201) (201) - 88 88
Unquoted 24 (1,123) (1,099) (5) (745) (750)
Funds - 44 44 - 1,877 1,877
---------- ---------------- ---------
24 (1,280) (1,256) (5) 1,220 1,215
---------- ---------------- --------- ---------- ---------------- ---------
Credit for incentive
plans 85 43
--------- ---------
(1,171) 1,258
Net gains/(losses) on foreign
currency 763 (168)
Net operating and other
expenses of subsidiaries (76) (116)
--------- ---------- ---------------- ---------
(484) 974
------------------------------------------- --------- ---------- ---------------- ---------
The Company operates carried interest arrangements in line with
normal practice in the private equity industry. The credit for
incentive plans for the Company is GBP13,000 and for subsidiaries
is a credit of GBP72,000 for carried interest and other incentives
relating to historic arrangements. The credit for the carried
interest incentive plan is included in the Net gains/losses on
Investments in the Income Statement.
Approximately 75% of the portfolio at 30 June 2022 is
denominated in US dollars (31 December 2021: 73%) and the above
table includes the impact of currency movements. In the first six
months of 2022, the strengthening of the US dollar against sterling
resulted in a significant unrealised foreign currency gain of
GBP2.6 million (2021: unrealised loss of GBP0.2 million). As a
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
--------- ------------
2022 2021
Company Sector GBP'000 GBP'000
------------------------------------ --------------- --------- ------------
IDE Group Holdings UK technology 145 218
Arsenal Digital Holdings
Inc
(formerly Global Green Solutions) US energy 17 139
Others - 20 26
182 383
---------------------------------------------------- --------- ------------
The net gains and losses on the quoted portfolio arose as
follows:
Six months ended 30 June
----------------------------
2022 2021
Gains/(losses), net GBP'000 GBP'000
-------------------------------------------- ------------- -------------
Unrealised
IDE Group Holdings (73) 127
Arsenal Digital Holdings Inc
(formerly Global Green Solutions) (130) (44)
Other quoted holdings (9) 6
Unrealised foreign currency gains/(losses) 11 (1)
-------------------------------------------- ------------- -------------
Total net (losses)/gains (201) 88
-------------------------------------------- ------------- -------------
The main decrease in the quoted portfolio was due to a decline
in the share price of IDE Group Holdings and Global Green
Solutions, which was consolidated into Arsenal Digital Holdings
Inc. Arsenal Digital Holdings is an illiquid investment traded on
the U.S. OTC market, and we are exploring options to secure our
liquidity.
Unquoted investments
30 June 31 December
--------- -------------
2022 2021
Company Sector GBP'000 GBP'000
---------------- --------------- --------- -------------
Dacian EU energy 9,433 7,959
Medhost Inc US technology 5,299 5,997
Elateral UK technology 636 817
ICU Eyewear* US consumer 605 1,746
IDE loan notes UK technology 81 107
Cresco US consumer 39 -
16,093 16,626
-------------------------------- --------- -------------
*These are co-investments with SFEP
The net gains and losses on the unquoted portfolio arose as
follows:
Six months ended 30 June
----------------------------
2022 2021
Gains/(losses), net GBP'000 GBP'000
-------------------------------------------- ------------- -------------
Realised
Medhost 24 -
Northbridge - (5)
24 (5)
-------------------------------------------- ------------- -------------
Unrealised
Yes To - 2
IDE Group (27) 45
Elateral (443) -
Medhost (1,032) (320)
ICU Eyewear (1,376) (361)
Unrealised foreign currency gains/(losses) 1,755 (111)
-------------------------------------------- ------------- -------------
(1,123) (745)
-------------------------------------------- ------------- -------------
Total net losses (1,099) (750)
-------------------------------------------- ------------- -------------
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.
Comments on individual companies are set out below.
Medhost
Medhost is a co-investment with funds of Primus Capital.
Medhost's financial performance in 2022 is expected to be
profitable and cash generative. A recent transaction comparable in
the sector was lower, resulting in a decrease to the valuation by
the fund manager for the period.
Elateral
The Company provided funding of GBP0.3 million in loan notes to
Elateral during the first six months of 2022 for working capital
requirements. The additional funding provided by the Company and
other investors was part of a plan to provide Elateral with working
capital while it implements a new sales growth plan. The write down
reflects the company's need for working capital support, over and
above what was expected, whilst it implements a new sales growth
plan.
ICU Eyewear
The decline in the ICU valuation reflects the decline in current
market conditions and indicative valuations during the early stages
of an exit process currently underway.
Fund interests
30 June 31 December
--------- -------------
2022 2021
General partner Sector GBP'000 GBP'000
------------------------ --------------------- --------- -------------
Brockton Capital Fund
1 UK real estate 5,979 5,635
Opus Capital Venture
Partners US venture capital 5,405 3,948
US micro-cap quoted
Weber Capital Partners stocks 1,848 2,644
EMAC ILF EU real estate 368 733
Simmons UK energy 245 381
Eden Ventures UK venture capital 76 494
San Francisco Equity
Partners US consumer 14 55
Other interests - 35 39
------------------------ --------------------- --------- -------------
13,970 13,929
---------------------------------------------- --------- -------------
The net gains and losses on the Company's funds portfolio for
the six months ended 30 June 2022 were as follows:
Six months ended
30 June
----------------------
2022 2021
Gains/(losses), net GBP'000 GBP'000
---------------------------------------- ---------- ----------
Unrealised
Opus Capital Venture Partners 931 422
Brockton Capital Fund I 401 792
San Francisco Equity Partners ("SFEP") (89) 64
Simmons Parallel Energy (154) 48
Eden Ventures (418) 122
Weber Capital Partners (1,063) 552
Others (net) (392) (4)
Unrealised foreign currency gains 828 (119)
---------------------------------------- ---------- ----------
Total net gains 44 1,877
---------------------------------------- ---------- ----------
San Francisco Equity Partners
LMS is the majority investor in SFEP as opposed to the other
fund interests where the Company has only a minority stake. SFEP no
longer has significant assets and holds a small interest in ICU,
which is currently in an exit process.
Other funds
-- Brockton Capital Fund I - the Company's investment represents
its share (via the Brockton Fund) of preferred debt investments in
a Super Prime central London residential development. The
investment showed an increase in the valuation of GBP0.4 million
for the first half of 2022 due to unrealised gains from the
unwinding of the discount rate as the investment is valued on a
discounted cash flow basis;
-- Weber Capital - holds U.S. publicly traded micro-cap
securities and showed an unrealised loss of GBP1.1 million
reflecting a decrease in the underlying equity prices;
-- Opus Capital - a U.S. venture fund, showed an unrealised gain
of GBP0.9 million from valuation gains on one of its two main
assets; and
-- Eden Ventures - the remaining asset is in an exit process,
and the unrealised loss of GBP0.4 million reflects the decrease in
value of its sole remaining asset.
Costs
Group costs for the period (including GBP0.9 million incurred by
the Company and GBP0.2 million by subsidiaries) were GBP1.1 million
(30 June 2021: GBP1.0 million) which include running costs of
GBP0.9 million and investment related costs of GBP0.2 million for
support costs for real estate and co-investment activities.
Taxation
The Group tax provision for the period, all of which arose in
the subsidiaries, is GBP0.6 million (30June 2021: GBP0.1
million).
Financial Resources and Commitments
At 30 June 2022 cash holdings, including cash in subsidiaries,
were GBP18.9 million (31December 2021: GBP20.1 million) and neither
the Company nor any of its subsidiaries had any external debt.
At 30 June 2022, subsidiary companies had commitments of GBP2.7
million (31 December 2021: GBP2.7 million) to meet outstanding
capital calls from fund interests.
LMS CAPITAL PLC
1 August 2022
LMS Capital plc
Unaudited Condensed Income Statement
Six months ended 30
June
-----------------------
2022 2021
Notes GBP'000 GBP'000
-------------------------------------- ------- ----------- ----------
Net (losses)/gains on investments 2 (484) 974
Interest income 37 22
Other income 49 8
----------- ----------
Total (losses)/gains on investments (398) 1,004
Operating expenses (940) (938)
Net (loss)/gain on foreign currency (331) 72
----------- ----------
(Loss)/profit before tax (1,669) 138
Taxation - -
----------- ----------
(Loss)/profit for the period (1,669) 138
----------- ----------
Attributable to:
Equity shareholders (1,669) 138
----------- ----------
(Loss)/profit per ordinary share
- basic 3 (2.1) 0.2p
(Loss)/profit per ordinary share
- diluted 3 (2.1) 0.2p
-------------------------------------- ------- ----------- ----------
The notes on pages 20 to 34 form part of these Financial
Statements.
LMS Capital plc
Unaudited Condensed Statement of Other Comprehensive Income
Six months ended 30
June
-----------------------
2022 2021
GBP'000 GBP'000
------------------------------------ ----------- ----------
(Loss)/profit for the period (1,669) 138
Other comprehensive income - -
----------- ----------
Total comprehensive (loss)/profit
for the period (1,669) 138
------------------------------------- ----------- ----------
Attributable to:
Equity shareholders (1,669) 138
------------------------------------- ----------- ----------
The notes on pages 20 to 34 form part of these Financial
Statements.
LMS Capital plc
Unaudited Condensed Statement of Financial Position
30 June 31 December
------------------- -------------
2022 2021
Notes GBP'000 GBP'000
--------------------------------------- ------- ------------------- -------------
Assets
Non-current assets
Right of use assets 83 97
Investments 5 67,963 68,461
Amounts receivable from subsidiaries 4,957 5,191
Total non-current assets 73,003 73,749
--------------------------------------- ------- ------------------- -------------
Current assets
Operating and other receivables 133 51
Cash and cash equivalents 15,725 14,518
--------------------------------------- ------- ------------------- -------------
Total current assets 15,858 14,569
Total assets 88,861 88,318
--------------------------------------- ------- ------------------- -------------
Liabilities
Current liabilities
Operating and other payables (286) (394)
Amounts payable to subsidiaries (41,553) (38,740)
------------------- -------------
Total current liabilities (41,839) (39,134)
------------------- -------------
Non-current liabilities
Other long-term liabilities (61) (75)
--------------------------------------- ------- ------------------- -------------
Total non-current liabilities (61) (75)
--------------------------------------- ------- ------------------- -------------
Total liabilities (41,900) (39,209)
------------------- -------------
Net assets 46,961 49,109
--------------------------------------- ------- ------------------- -------------
Equity
Share capital 8,073 8,073
Share premium 508 508
Capital redemption reserve 24,949 24,949
Share-based equity 101 75
Retained earnings 13,330 15,504
--------------------------------------- ------- ------------------- -------------
Total equity shareholders' funds 46,961 49,109
--------------------------------------- ------- ------------------- -------------
Net asset value per ordinary share 58.17 60.83p
--------------------------------------- ------- ------------------- -------------
The Financial Statements on pages 20 to 34 were approved by the
Board on 1 August 2022 and were signed on its behalf by:
Nicholas Friedlos
Director
The notes on pages 20 to 34 form part of these Financial
Statements.
LMS Capital plc
Unaudited Statement of Changes in Equity
Six months ended 30 June 2022
Capital Share-
Share Share redemption based Retained Total
capital premium reserve equity earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 January
2022 8,073 508 24,949 75 15,504 49,109
Comprehensive loss for
the period
Loss for the period - - - - (1,669) (1,669)
--------- --------- ------------ --------- ---------- ---------
Equity after total comprehensive
loss for the period 8,073 508 24,949 75 13,835 47,440
Contributions by and
distributions
to shareholders
Share-based payments - - - 26 - 26
Dividends (note 4) - - - - (505) (505)
Balance at 30 June 2022 8,073 508 24,949 101 13,330 46,961
--------- --------- ------------ --------- ---------- ---------
Six months ended 30 June 2021
Capital Share-
Share Share redemption based Retained Total
capital premium reserve equity earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- ------------ --------- ---------- ---------
Balance at 1 January 2021 8,073 508 24,949 34 14,359 47,923
Comprehensive income for the period
Profit for the period - - - - 138 138
--------- --------- ------------ --------- ---------- ---------
Equity after total comprehensive
income for the period 8,073 508 24,949 34 14,497 48,061
Contributions by and distributions
to shareholders
Share-based payments - - - 15 - 15
Dividends (note 4) - - - - (484) (484)
Balance at 30 June 2021 8,073 508 24,949 49 14,013 47,592
--------- --------- ------------ --------- ---------- ---------
The notes on pages 20 to 34 form part of these Financial
Statements.
LMS Capital plc
Unaudited Condensed Statement of Cash flow
Six months ended 30 June
2022 2021
Notes GBP'000 GBP'000
Cash flows from operating activities
(Loss)/profit for the period (1,669) 138
Adjustments for non-cash income and expense:
Equity settled share-based payment 26 15
Depreciation on right of use assets 14 14
Interest expense on lease 3 4
Losses/(gains) on investments 2 484 (974)
Other income (37) (22)
Interest income (49) (8)
Adjustments to incentives plans 13 6
Exchange (gain)/loss on cash and cash equivalents (69) 7
(1,284) (820)
Change in operating assets and liabilities
Increase in operating and other receivables (71) (8)
Decrease in operating and other payables (116) (70)
Decrease/(increase) in amounts receivable from subsidiaries 234 (328)
Increase/(decrease) in amounts payable to subsidiaries 2,813 -
-------------------------------------------------------------- ---- ----------- -----------
Net cash from/(used in) operating activities 1,576 (1,226)
-------------------------------------------------------------- ---- ----------- -----------
Cash flows from investing activities
Interest received 26 22
Other income received 49 8
Proceeds from redemption of loan investment - 750
----------- -----------
Net cash from investing activities 75 780
-------------------------------------------------------------- ---- ----------- -----------
Cash flows from financing activities
Dividend paid 4 (505) (484)
Repayment of principal lease liabilities (5) (19)
Repayment of lease interest (3) -
Net cash used in financing activities (513) (503)
-------------------------------------------------------------- ---- ----------- -----------
Net increase/(decrease) in cash and cash equivalents 1,138 (949)
Exchange gain/(loss) on cash and cash equivalents 69 (7)
Cash and cash equivalents at the beginning of the period 14,518 16,385
----------- -----------
Cash and cash equivalents at the end of the period 15,725 15,429
-------------------------------------------------------------- ---- ----------- -----------
The notes on pages 20 to 34 form part of these Financial
Statements.
LMS Capital plc
Notes to the unaudited 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 interim Financial Statements do not comprise
statutory accounts within the meaning of section 434 of the
Companies Act 2006. Statutory accounts for the year ended 31
December 2021 were approved by the board of directors on 9 March
2022 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 498 of the Companies Act 2006.
The Financial statements have been reviewed in accordance with
International Standards on Review Engagements 2410.
The Company was formed on 7 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. 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 2021 which were
prepared in accordance with UK adopted International Financial
Reporting Standards.
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
2021.
Basis of preparation
This condensed interim financial report for the half-year
reporting period ended 30 June 2022 has been prepared in accordance
with the UK-adopted International Accounting Standard 34, 'Interim
Financial Reporting' and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
Consistent with the year ended 31 December 2021, 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 IFRS 9
"Financial Instruments: Recognition and Measurement".
LMS Capital plc
Notes to the unaudited financial information (continued)
1. Principal accounting policies (continued)
Going concern
The Financial Statements are prepared on a going concern basis
and the Directors considered this and concluded that the use of the
going concern basis continued to be appropriate. The Directors have
carried out a robust assessment of the emerging and principal risks
and concluded that they have a reasonable expectation that the
Company will continue in operation and meet its liabilities as they
fall due over a three year period from the date of this report.
This assessment included reviewing the liquidity forecasts of the
Company that include the flexibility in the dividend policy and
lack of any external debt, the significant cash balances on hand at
30 June 2022, the expected future expenditures and commitments and
the latest report on the investment portfolio.
IFRS 16 - Leases
In June 2020, the Company entered into lease agreement with The
Rayne Foundation. The interest rate used by the Company is based on
the incremental borrowing rate of 6.5%. The term of the lease is 5
years and when the Company renegotiates the contractual terms of a
lease with the lessor, the accounting depends on the nature of the
modification:
-- if the renegotiation results in one or more additional assets
being leased for an amount commensurate with the standalone price
for the additional rights-of-use obtained, the modification is
accounted for as a separate lease in accordance with the above
policy;
-- in all other cases where the renegotiated increases the scope
of the lease (whether that is an extension to the lease term, or
one or more additional assets being leased), the lease liability is
remeasured using the discount rate applicable on the modification
date, with the right-of-use asset being adjusted by the same
amount; and
-- if the renegotiation results in a decrease in the scope of
the lease, both the carrying amount of the lease liability and
right-of-use asset are reduced by the same proportion to reflect
the partial of full termination of the lease with any difference
recognised in profit or loss. The lease liability is then further
adjusted to ensure its carrying amount reflects the amount of the
renegotiated payments over the renegotiated term, with the modified
lease payments discounted at the rate applicable on the
modification date. The right-of-use asset is adjusted by the same
amount.
LMS Capital plc
Notes to the unaudited financial information (continued)
1. Principal accounting policies (continued)
IFRS 2 - Share-based payment
IFRS 2 - Share-based payment requires an entity to recognise
equity-settled share-based payments measured at fair value at the
date of grant. The fair value determined at the grant date of the
equity-settled share-based payments is expensed over the vesting
period, together with a corresponding increase in other capital
reserves, based upon the Company's estimate of the shares that will
eventually vest, which involves making assumptions about any
performance and service conditions over the vesting period. The
vesting period is determined by the period of time the relevant
participant must remain in the Company's employment before the
rights to the shares transfer unconditionally to them. The total
expense is recognised over the vesting period, which is the period
over which all the specified vesting conditions are to be
satisfied. At the end of each period, the Company revises its
estimates on the number of awards it expects to vest based on the
service conditions.
Any awards granted are to be settled by the issuance of equity
are deemed to be equity settled share-based payments, accounted for
in accordance with IFRS 2 "Share-Based Payment".
Where the terms of an equity-settled transaction are modified,
as a minimum, an expense is recognised as if the terms had not been
modified. In addition, an expense is recognised for any increase in
the value of the transaction as a result of the modification, as
measured at the date of modification.
Where an equity-settled transaction is cancelled, it is treated
as if it had vested on the date of the cancellation, and any
expense not yet recognised for the transaction is recognised
immediately. However, if a new transaction is substituted for the
cancelled transaction and designated as a replacement transaction
on the date that it is granted, the cancelled and new transactions
are treated as if they were a modification of the original
transaction, as described in the previous paragraph.
Per the management share plan, the vesting period for any awards
issued can be up to 5 years and subject to certain conditions. The
first awards were issued in the year ended 31 December 2020 and
there have been no new issuances in the period ended 30 June
2022.
Accounting for subsidiaries
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 continues to satisfy the three essential criteria to be
regarded as an investment entity as defined in IFRS 10, IFRS 12
"Disclosure of Interests in Other Entities" and IAS 27 "Separate
Financial Statements". The three essential criteria are such that
the entity must:
-- obtain funds from one or more investors for the purpose of
providing these investors with professional investment management
services;
-- commit to its investors that its business purpose is to
invest its funds solely for returns from capital appreciation,
investment income or both; and
LMS Capital plc
Notes to the unaudited financial information (continued)
1. Principal accounting policies (continued)
Accounting for subsidiaries (continued)
-- measure and evaluate the performance of substantially all of
its investments on a fair value basis.
ln satisfying the second essential criteria, the notion of an
investment timeframe is critical. An investment entity should not
hold its investments indefinitely but should have an exit strategy
for their realisation. Although the Company has invested in equity
interests that have an indefinite life, it invests typically for a
period of up to ten years. ln some cases, the period may be longer,
depending on the circumstances of the investment, however,
investments are not made with intention of indefinite hold. This is
a common approach in the private equity industry.
Subsidiaries are therefore measured at fair value through profit
or loss, in accordance with IFRS 13 "Fair Value Measurement" and
IFRS 9 "Financial instruments".
The Company's subsidiaries, which are wholly - owned and over
which it exercises control, are listed in note 8.
Use of estimates and judgements
The preparation of the Financial Statements require 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. Estimates and underlying assumptions
are reviewed on an ongoing basis; revisions to accounting estimates
are recognised in the period in which the estimates are revised and
in any future periods affected.
The areas involving significant judgements are:
-- valuation technique selected in estimating fair value of unquoted investments - note 5;
-- valuation technique selected in estimating fair value of
investment held in Funds - note 5; and
-- valuation model used to value equity award scheme.
The areas involving significant estimates are:
-- estimate inputs used in calculating fair value of unquoted investments - note 5;
-- estimated inputs used in calculating fair value of investment held in Funds - note 5;
-- estimates in calculating the fair value of equity awards; and
-- estimate percentage of incremental borrowing rate on lease liability.
Estimates and judgements are continually evaluated. They are
based on historical experience and other factors, including
expectations of future events that may have financial impact on the
entity and that are believed to be reasonable under the
circumstances.
LMS Capital plc
Notes to the unaudited financial information (continued)
1. Principal accounting policies (continued)
Use of estimates and judgements (continued)
There were no material revisions to the significant judgements
and estimates compared to the Annual Financial Statements for the
year ending 31 December 2021.
Investments in subsidiaries
The Company's investments in subsidiaries are stated at fair
value which is considered to be the carrying value of the net
assets of each subsidiary. On disposal of such investments the
difference between net disposal proceeds and the corresponding
carrying amount is recognised in the income statement.
Valuation of investments
The Company and its subsidiaries manage their investments with a
view to profit from the receipt of dividends and increase in fair
value of equity investments which can be realised on sale.
Therefore, all quoted, unquoted and managed fund investments are
realised on sale and carried in the Statement of Financial Position
at fair value.
Fair values have been determined in accordance with the
International Private Equity and Venture Capital Valuation (IPEV)
Guidelines. These guidelines require the valuer to make judgments
as to the most appropriate valuation method to be used and the
results of the valuations.
Quoted investments
Quoted investments for which an active market exists are valued
at the bid price at the reporting date.
Unquoted direct investments
Unquoted direct investments for which there is no active market
are valued using the most appropriate valuation technique with
regard to the stage and nature of the investment or based on recent
indicative offers for investments with an exit strategy. Valuation
methods that may be used include:
-- investments in an established business are valued using
revenue or earnings multiples depending on the stage of development
of the business and the extent to which it is generating
sustainable revenue or earnings;
-- investments in an established business which is generating
sustainable revenue or earnings but for which other valuation
methods are not appropriate are valued by calculating the
discounted cash flow of future cash flows or earnings;
-- investments in debt instruments or loan notes are determined
on a standalone basis, with the initial investment recorded at the
price of the transaction and subsequent adjustments to the
valuation are considered for changes in credit risk or market
rates; and
-- convertible instruments are valued by disaggregating the
convertible feature from the debt instrument and valuing it using a
Black-Scholes model.
LMS Capital plc
Notes to the unaudited financial information (continued)
1. Principal accounting policies (continued)
Funds
Investments in managed funds are valued at fair value. The
General Partners of the funds will provide periodic valuations on a
fair value basis, the latest available of which the Company will
adopt provided it is satisfied that the valuation methods used by
the funds are not materially different from the Company's valuation
methods. Adjustments will be made to the fund valuation where the
Company believes there is evidence available for an alternative
valuation.
Carried interest
The Company historically offered its executives, including Board
executives, the opportunity to participate in the returns from
successful investments. A variety of incentive and carried interest
arrangements were put in place during the years up to and including
2011. No new schemes have been introduced since. As is commonplace
in the private equity industry, executives may, in certain
circumstances, retain their entitlement under such schemes after
they have left the employment of the Company. The liability under
such incentive schemes is accrued if its performance conditions,
measured at the balance sheet date, would be achieved if the
remaining assets in that scheme were realised at their fair value
at the balance sheet date. An accrual is made equal to the amount
which the Company would have to pay to any remaining scheme
participants from a realisation at the balance sheet value at the
balance sheet date. Employer's national insurance, where
applicable, is also accrued.
Foreign currencies
Transactions in foreign currencies are recorded at the rate of
exchange at the date of transaction. Monetary assets and monetary
liabilities denominated in foreign currencies at the reporting date
are reported at the rates of exchange prevailing at that date and
exchange differences are included in the income statement.
Right of use assets
Right of use assets are initially measured at the amount of the
lease liability. Subsequent to initial measurement, lease
liabilities increase as a result of interest charged at a constant
rate on the balance outstanding and are reduced for lease payments
made. Right-of-use assets are amortised on a straight-line basis
over the remaining term of the lease.
Intercompany receivables
The Company measured intercompany receivables and other
receivables at amortised cost less expected credit losses.
Financial assets held at amortised cost
The Company recognises trade receivables as financial assets
classified at amortised cost. These are recognised initially at
fair value. Subsequent to initial recognition, these are measured
at amortised cost, less any expected credit losses.
LMS Capital plc
Notes to the unaudited financial information (continued)
1. Principal accounting policies (continued)
Financial assets held at amortised cost (continued)
Expected credit losses for these financial assets are measured
using the simplified approach to the credit loss model. Under the
simplified credit loss model approach, a provision is recognised
based on the expectation of default rates over the full lifetime of
the financial assets without the need to identify significant
increases on credit risk on these assets.
Cash and cash equivalents
Cash, for the purpose of the cash flow statement, comprises of
cash in hand and cash equivalents.
Cash equivalents are short-term highly liquid investments that
are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value.
Financial liabilities
The Company's financial liabilities include operating and other
payables. These are initially recognised at fair value. Subsequent
measurement is at amortised cost using the effective interest
method.
Dividend payable
Dividend distributions to shareholders are recognised as a
liability in the Company's Financial Statements when approved at an
Annual General Meeting by the shareholders for final dividends.
Interim dividends are recognised when paid.
Income
Gains and losses on investments
Realised and unrealised gains and losses on investments are
recognised in the income statement in the period in which they
arise.
Interest income
Interest income is recognised as it accrues using the effective
interest method.
Dividend income
Dividend income is recognised on the date the Company's right to
receive payment is established.
Expenditure
Income tax expense
Income tax expense comprises of current and deferred tax. Income
tax expense is recognised in the income statement except to the
extent that it relates to items recognized in other comprehensive
income or directly in equity.
LMS Capital plc
Notes to the unaudited financial information (continued)
1. Principal accounting policies (continued)
Expenditure (continued)
Income tax expense (continued)
Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted at
the reporting date, and any adjustment to tax payable in respect of
previous years.
Deferred tax is recognised using the balance sheet liability
approach, providing for temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. Deferred tax is
measured at the tax rates that are expected to be applied to the
temporary differences when they reverse, based on the laws that
have been enacted or substantively enacted by the reporting date. A
deferred tax asset is recognised to the extent that it is probable
that future taxable profits will be available against which
temporary differences can be utilised. Deferred tax assets are
reviewed at each reporting date and are reduced to the extent that
it is no longer probable that the related tax benefit will be
realised.
Additional income taxes that arise from the distribution of
dividends are recognised at the same time as the liability to pay
the related dividend is recognised.
2. Net (losses)/gains on investments
The gains and losses on investments were as follows:
Six months ended 30 June Six months ended 30 June
2022 2021
--------------------------------------- ---------------------------------------
Realised Unrealised Realised Unrealised
gains gains/(losses) Total losses gains/(losses) Total
Asset type GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------- ---------- ---------------- --------- ---------- ---------------- ---------
Quoted - (201) (201) - 88 88
Unquoted 24 (1,123) (1,099) (5) (745) (750)
Funds - 44 44 - 1,877 1,877
---------- ---------------- ---------
24 (1,280) (1,256) (5) 1,220 1,215
---------- ---------------- --------- ---------- ---------------- ---------
Credit for incentive
plans 85 43
--------- ---------
(1,171) 1,258
Net gains/(losses) on foreign
currency 763 (168)
Net operating and other
expenses of subsidiaries (76) (116)
--------- ---------- ---------------- ---------
(484) 974
------------------------------------------- --------- ---------- ---------------- ---------
Net operating and other expenses of subsidiaries includes
interest income of GBP0.6 million (June 2021: GBPnil) from Dacian
Petroleum investment.
LMS Capital plc
Notes to the unaudited financial information (continued)
3. (Loss)/profit per ordinary share
The calculation of the basic and diluted profit per share, in
accordance with IAS 33, is based on the following data:
Six months ended
--------------------------------
30 June
30 June 2022 2021
GBP'000 GBP'000
---------------------------------------- -------------- ----------------
(Loss)/profit
(Loss)/profit for the purpose
of net profit per share attributable
to equity holders of the parent (1,669) 138
Number of shares
Weighted average number of ordinary
shares for
the purposes of basic profit per
share 80,727,450 80,727,450
(Loss)/profit per share
Basic (2.1p) 0.2p
Diluted (2.1p) 0.2p
----------------------------------------- -------------- ----------------
4. Dividends
Dividends declared during the period ending 30 June 2022 and 30
June 2021 are as follows.
Dividend
Dividend date Payment date GBP'000 Pence per share
---------------------------------- ---------------- --------------- ---------- -----------------
Final dividend payment for 2020 21 May 2021 14 June 2021 484 0.600
---------------------------------- ---------------- --------------- ---------- -----------------
Total as at 30 June 2021 484 0.600
Final dividend payment for 2021 27 May 2022 17 Jun 2022 505 0.625
Total as at 30 June 2022 505 0.625
--------------------------------------------------------------------- ---------- -----------------
The Board has approved the interim dividend for the 2022 year of
0.3 pence per share to be paid on 12 September 2022.
LMS Capital plc
Notes to the unaudited financial information (continued)
5. Investments
The Company's investments comprised the following:
30 June 31 December
--------- -------------
2022 2021
GBP'000 GBP'000
Total investments 67,963 68,461
--------------------------------------- --------- -------------
These comprise:
Investment portfolio of subsidiaries 30,245 30,938
Other net assets of subsidiaries 37,718 37,523
67,963 68,461
--------------------------------------- --------- -------------
The carrying amounts of the investments of the Company's
subsidiaries were as follows:
30 June 31 December
--------- -------------
Investments portfolio of subsidiaries 2022 2021
Asset type GBP'000 GBP'000
---------------------------------------- --------- -------------
Quoted 182 383
Unquoted 16,093 16,626
Funds 13,970 13,929
---------------------------------------- --------- -------------
Investment portfolio of subsidiaries 30,245 30,938
Other net assets of subsidiaries 37,718 37,523
---------------------------------------- --------- -------------
67,963 68,461
---------------------------------------- --------- -------------
The movements in the investment portfolio were as follows:
Quoted Unquoted
securities securities Funds Total
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- ------------ ------------ --------- ---------
Balance at 1 January 2021 197 10,138 11,858 22,193
Purchases - 8,394 - 8,394
Proceeds from disposal - (750) - (750)
Distributions from partnerships - (1,586) (445) (1,916)
Contribution to partnerships - 115 43 158
Fair value adjustments 186 (95) 2,473 2,564
Reclassification of withholding tax* - 410 - 410
--------------------------------------- ------------ ------------ --------- ---------
Balance at 31 December 2021 383 16,626 13,929 30,938
--------------------------------------- ------------ ------------ --------- ---------
Balance at 1 January 2022 383 16,626 13,929 30,938
Purchases - 900 - 900
Proceeds from disposals - (375) - (375)
Distributions from partnerships - - (67) (67)
Contribution to partnership - 41 64 105
Fair value adjustments (201) (1,099) 44 (1,256)
------------ ------------ --------- ---------
Balance at 30 June 2022 182 16,093 13,970 30,245
--------------------------------------- ------------ ------------ --------- ---------
LMS Capital plc
Notes to the unaudited financial information (continued)
5. Investments (continued)
*As at 31 December 2020, unquoted securities investment fair
value included a provision for withholding tax on distributions.
This distribution was received in the first quarter of 2021 and the
remaining estimated withholding tax liability of GBP0.4 million was
reclassified to current liabilities as at 31 December 2021.
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 significant unobservable inputs used at 30 June 2022 in
measuring investments categorised as level 3 in this note are
considered below:
1. Unquoted securities (carrying value GBP16.1 million) are
valued using the most appropriate valuation technique such as a
revenue-based approach, an earnings-based approach, or a discounted
cash flow approach. These investments are sensitive to both the
overall market and industry specific fluctuations that can impact
multiples and comparable company valuations. In most cases the
valuation method uses inputs based on comparable quoted companies
for which the key unobservable inputs are:
-- EBITDA multiples of approximately 5 times dependent on the
business of each individual company, its performance and the sector
in which it operates; and
-- revenue multiples in the range 0.5-1.5 times, also dependent
on attributes at individual investment level.
2. Investments in funds (carrying value GBP14.0 million) are
valued using reports from the general partners of the fund
interests with adjustments made for calls, distributions and
foreign currency movements since the date of the report (if prior
to 30 June 2022). The Company also carries out its own review of
individual funds and their portfolios to satisfy ourselves that the
underlying valuation bases are consistent with our basis of
valuation and knowledge of the investments and the sectors in which
they operate. However, the degree of detail on valuations varies
significantly by fund and, in general, details of unobservable
inputs used are not available.
LMS Capital plc
Notes to the unaudited financial information (continued)
5. Investments (continued)
The valuation of the investments in subsidiaries makes use of
multiple interdependent significant unobservable inputs and it is
impractical to sensitise variations of any one input on the value
of the investment portfolio as a whole. Estimates and underlying
assumptions are reviewed on an ongoing basis however inputs are
highly subjective. Changes in any one of the variables, earnings or
revenue multiples or illiquidity discounts could potentially have a
significant effect on the valuation.
The Company's investments are analysed as follows:
30 June 31 December
--------- -------------
2022 2021
GBP'000 GBP'000
---------- --------- -------------
Level 1 - -
Level 2 - -
Level 3 67,963 68,461
---------- --------- -------------
67,963 68,461
---------- --------- -------------
The reconciliation between opening and closing balance of level
3 assets are presented in the table below:
30 June 31 December
--------- -------------
2022 2021
GBP'000 GBP'000
------------------------------------------- --------- -------------
Opening balance 68,461 65,235
Unrealised (loss)/gains (1,280) 2,564
Purchases, sales, issues and settlements 782 662
Closing balance 67,963 68,461
------------------------------------------- --------- -------------
Level 3 amounts include GBP30,245,000 (2021: GBP30,938,000)
relating to the investment portfolios of subsidiaries including
quoted investments of GBP182,000 (2021: GBP383,000) and
GBP37,718,000 (2021: GBP 37,523 , 000) in relation to the other net
assets of subsidiaries.
There were no transfers between levels during the period ending
30 June 2022.
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 30June 2022
would have decreased by GBP6.8 million (2021: GBP6.8 million). An
increase in the valuation of level 3 category investments by 10% at
the reporting date would have an equal and opposite effect.
LMS Capital plc
Notes to the unaudited financial information (continued)
6. Capital commitments
30 June 31 December
--------- -------------
2022 2021
GBP'000 GBP'000
----------------------------------- --------- -------------
Outstanding commitments to funds 2,681 2,665
2,681 2,665
----------------------------------- --------- -------------
The outstanding commitments to funds comprise of unpaid calls in
respect of funds where a subsidiary of the Company is a Limited
Partner.
As of 30 June 2022, the Company has no other contingencies or
commitments to disclose (2021: GBPnil).
7. Related party transactions
The related parties of LMS Capital plc are its Directors.
The salary paid for the Directors of the Company for the period
was GBP232,180 (June 2021: GBP232,180) and the Directors fee of the
subsidiaries was GBP23,742 (June 2021: GBP21,734).
On 24 June 2020, the Company entered into a lease agreement with
The Rayne Foundation in respect of the premises comprising its
principal office. During the period, the Company paid rent of
GBP8,195 (June 2021: GBP24,585) to The Rayne Foundation. Robert
Rayne is the Chairman of The Rayne Foundation.
As at 30 June 2022, the following shareholders of the Company
that are related to LMS Capital Plc had the following interests in
the issued shares of the Company:
30 June 31 December
--------------------------- ---------------------------
2022 2021
Share Holders Number of Shares Number of Shares
---------------- --------------------------- ---------------------------
R Rayne 2,670,124 Ordinary Shares 2,670,124 Ordinary Shares
N Friedlos 161,410 Ordinary Shares 161,410 Ordinary Shares
P Harvey 20,000 Ordinary Shares 20,000 Ordinary Shares
G Stedman 20,000 Ordinary Shares 20,000 Ordinary Shares
LMS Capital plc
Notes to the unaudited financial information (continued)
8. Subsidiaries
The Company's subsidiaries are as follows:
Name Country of incorporation Holding % Activity
----------------------------------------- -------------------------- ----------- --------------------
International Oilfield Services Limited Bermuda 100 Investment holding
LMS Capital (Bermuda) Limited Bermuda 100 Investment holding
LMS Capital Group Limited England and Wales 100 Investment holding
LMS Capital Holdings Limited England and Wales 100 Investment holding
Lioness Property Investments Limited England and Wales 100 Investment holding
Lion Property Investments Limited England and Wales 100 Investment holding
Lion Investments Limited England and Wales 100 Investment holding
Lion Cub Property Investments Limited England and Wales 100 Dormant
Tiger Investments Limited England and Wales 100 Investment holding
LMS Tiger Investments (II) Limited England and Wales 100 Investment holding
Westpool Investment Trust plc England and Wales 100 Investment holding
Cavera Limited England and Wales 100 Trading
LMS Co-Invest Limited England and Wales 100 Trading
----------------------------------------- -------------------------- ----------- --------------------
The registered office addresses of the Company's subsidiaries
are as follows:
Subsidiaries incorporated in England and Wales: 3 Bromley Place,
London, United Kingdom, W1T 6DB.
Subsidiaries and partnerships incorporated in Bermuda: Clarendon
House, 2 Church Street, Hamilton HM 11, Bermuda.
9. Net asset value per share
The net asset value per ordinary shares in issue are as
follows:
30 June 31 December
--------------------------------------- ------------- -------------
2022 2021
GBP'000 GBP'000
--------------------------------------- ------------- -------------
Net asset value (GBP'000) 46,961 49,109
Number of ordinary shares in issue 80,727,450 80,727,450
Net asset value per share (in pence) 58.17 pence 60.83 pence
---------------------------------------- ------------- -------------
LMS Capital plc
Notes to the unaudited financial information (continued)
10. Subsequent Event
There are no subsequent events that would materially affect the
interpretation of these Financial Statements.
Statement of Directors' responsibilities
The Directors listed on pages 24-35 of the Company's Annual
Report for the period ended 30 December 2021 continued in office
during the six months ended 30 June 2022.
We confirm that to the best of our knowledge:
a the condensed Financial Statements have been prepared in
accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority; 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.
Nicholas Robert Friedlos
Director
1 August 2022
INDEPENDENT REVIEW REPORT TO LMS CAPITAL PLC
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 2022 is not prepared, in all material respects, in accordance
with UK adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
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 2022 which comprises Condensed Income
Statement, Condensed Statement of Other Comprehensive Income,
Condensed Statement of Financial Position, Statement of Changes in
Equity and the Condensed Cash Flow Statement and all accompanying
notes.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" ("ISRE (UK) 2410"). 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.
As disclosed in note 1, the annual financial statements of the
company are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410, however future events or conditions
may cause the company to cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the
Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statement in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the
Disclosure Guidance 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.
BDO LLP
Chartered Accountants
London, UK
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
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END
IR GLGDIUGGDGDD
(END) Dow Jones Newswires
August 02, 2022 02:09 ET (06:09 GMT)
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