TIDMLMS
RNS Number : 7630H
LMS Capital PLC
02 August 2019
LMS Capital plc
Half Year Results for the six months ended 30 June 2019
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 2019.
-- Net cash held by the Company and its subsidiaries at 30 June
2019 was GBP16.4 million (31 December 2018: GBP17.7 million).
-- The carrying value of Entuity has been increased from
GBP4.925 million at 31 December 2018 to GBP8.67 million. An uplift
of 76% reflecting the sale proceeds expected to be received
following exchange of contracts on 25 July 2019, to sell the
company. Completion is expected to be before 30 September 2019.
-- Net Asset Value at 30 June 2019 was GBP59.1 million, 73.3p
per share (31 December 2018: GBP60.3 million, 74.7p per share).
-- The investment portfolio showed a net loss in the first half
of GBP0.3 million (30 June 2018: net gain of GBP0.2 million) after
including unrealised net currency gains of GBP0.1 million (2018:
unrealised net gains of GBP0.8 million).
-- Significant gains arising on Entuity (GBP3.7 million) and the
Gresham House shares (GBP1.5 million) were offset by unrealised NAV
reductions attributable principally to the Company's investments
with San Francisco Equity Partners, YesTo and Penguin (GBP4.8
million)
-- The loss for the period was GBP1.1 million (six months to 30
June 2018: loss of GBP0.7 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 6275
Gresham House Asset Management Limited
Graham Bird 020 3837 6275
J.P. Morgan Cazenove (Corporate Broker)
Michael Wentworth-Stanley 020 7742 4000
Chairman's statement
The results of the Company for the six months to 30 June 2019
are set out below.
The net asset value, disappointingly, has declined by GBP1.2
million, approximately 2%. Within this overall decline there are
both positives and negatives. Most significantly, Entuity has shown
a positive result, a contract for sale was exchanged on 25 July,
the proceeds of which at completion will produce an uplift in
carrying value of some 76% compared to the to the previously
reported value. Completion is expected before 30 September 2019 and
should generate further cash proceeds in excess of GBP8 million. On
the negative side the US investments, particularly YesTo, performed
very poorly.
The cash balances have reduced by GBP1.3 million compared to the
year end. The movement reflects normal running costs and some
additional follow on investments in legacy assets.
The Company has not made any new investments in the period.
Performance review
The net asset value per share at 30 June 2019 was 73.3 p. per
share (31 December 2018: 74.7 p.)
Portfolio net losses (realised and unrealised) for the six
months were GBP0.3 million (six months to 30 June 2018: net gains
GBP0.2 million). These amounts are stated after the impact of
unrealised exchange gains of GBP0.1 million (six months to 30 June
2018: gains of GBP0.8 million).
The major impacts on the portfolio were:
-- Entuity - an unrealised gain of GBP3.7m has been recognised
on Entuity, one of the Company's directly held legacy technology
investments. Negotiations to sell Entuity have been in progress for
some months and contracts for sale were exchanged on 25 July 2019.
The increased valuation reflects the proceeds, net of transaction
costs, expected to be received on completion prior to 30 September
2019. The increase in value represents a 76% gain on the previous
carrying value.
-- Gresham House - the holding in shares of Gresham House has
performed well, showing a gain in the six months of GBP1.5 million.
The Company first acquired its interest in Gresham House shares in
August and September 2016 at an average price of 294p per share,
since which time the share price has more than doubled as the group
has grown assets under management;
-- YesTo - an unrealised loss of GBP4.1 million has been
recognised in relation to the investment in YesTo, which has
experienced a slowdown in its growth compared to earlier years and
required additional funding from shareholders in Q2 2019 in order
to maintain adequate working capital;
-- Penguin - an unrealised loss of GBP0.7 million has been
recognised being a reduction in the estimated additional proceeds
to be received following the sale of this investment in June
2018.
-- Other - other net movements in the portfolio amounted to an
unrealised loss of GBP0.7 million.
The overhead costs of the Company and its subsidiaries continue
to be managed tightly and amounted to GBP0.7 million in the
period.
The cash balances of the Company and its subsidiaries at 30 June
2019 were GBP16.4 million (31 December 2018: GBP17.7 million). Upon
completion of the transaction to sell Entuity, cash balances will
be increased by the consideration, currently expected to be in
excess of GBP8 million.
Conclusion and outlook
GHAM continues to manage the existing portfolio to optimise
value and, where appropriate, to take advantage of opportunities to
realise assets whilst reducing costs and positioning the Company
for growth
As reported in my statement in the 2018 Report and Accounts, the
Board regards the deployment of the Company's cash in accordance
with its investment policy, as a matter of priority.
As announced by the Company on 26 July 2019, ahead of the third
anniversary of the appointment of GHAM, the Board has commenced a
process to review its investment management arrangements on behalf
of all shareholders and will report in due course on the outcome of
the process.
Martin Knight
Chairman
02 August 2019
Manager's Review - 30 June 2019
Introduction
Gresham House Asset Management ("GHAM") was appointed investment
manager in August 2016, and the half year to 30 June 2019 brings to
almost three years its tenure as manager.
The objective for the first 12-18 months following appointment
was to transition the Company to being externally managed and to
fulfill the Company's commitment, made in July 2016, to return a
maximum of a further GBP11 million of capital to shareholders,
alongside targeting annual cost savings.
These objectives were fully achieved, ahead of expectations. New
investment management processes were established, and an
independent investment committee appointed. Annualised cost savings
in excess of GBP1.4 million have been achieved.
During the period, our strategic focus has continued to be on
maximizing value from existing investments and beginning the
process of building pipeline to re-invest proceeds in accordance
with the investment policy adopted in August 2016 and aiming to
scale the Company. Whilst the reduction in net asset value in the
period has been frustrating, with weak performances from YesTo and
Penguin in particular, masking a number of positive portfolio
developments, the company now has significant cash resources with
which to re-invigorate its strategy.
Shortly after the period end, we exchanged contracts for the
sale of Entuity, one of LMS's directly held UK private investments.
The transaction, which is currently expected to complete before the
end of September led to an uplift in the value of Entuity of GBP3.7
million., The sale follows a successful two years' of turnaround at
the company. A Gresham House representative joined the board and a
new CEO was appointed in February 2017 and the following two years
saw a resumption of growth and a significant improvement in
profitability and cash generation which in turn has led to the
attractive sale price and significant uplift in NAV. This will be a
good result for LMS and an example of the manager driving value
from the portfolio.
The portfolio also benefitted from strong performances of quoted
holdings Solaredge and Gresham House, which contributed GBP520k and
GBP1,486k to NAV respectively. Solaredge shares were received from
a distribution in specie from LMS's investment in Opus. The shares
rose from $35.07 at the end of December to $62.44 at the end of
June. In the case of Gresham House, which was first acquired as a
strategic holding when GHAM took on the LMS management contract,
the share price rose from 454p to 605p.
These positive developments, were more than offset by
significant write downs in each of YesTo and Penguin, two of LMS's
US investments held through San Francisco Equity Partners, and a
reduction in carrying value of another US holding, Medhost.
Together, these three investments led to a GBP5.5 million reduction
in NAV. More details of each of these is provided later in this
report.
Gresham House's recent acquisition of assets and teams from
Livingbridge, including the Baronsmead VCT's and the respective
teams, has provided further private equity resource and capability
within GHAM. Importantly, now that the teams have been fully
integrated into GHAM, we expect to see increased deal flow
providing new opportunities for LMS to scale and generate strong
capital returns.
At 30 June 2019 the Group had GBP16.4 million of cash. This
should increase by over GBP8 million when the Entuity deal closes.
The deployment of this cash is under active consideration by GHAM
in conjunction with the Board, consistent with the investment
policy and minimising additional fee layers
Investment approach
The investment approach 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 enterprise 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 manager will seek to optimise the value of existing
holdings and, where growth prospects are clear, to preserve and
support longer term value creation.
Market background
2019 saw a strong start in markets, after the weakness and
volatility which dominated much of 2018. The first few months of
2019 have seen a stabilization of economic data and political and
monetary/fiscal initiatives designed to support market confidence.
The domestic environment is likely to continue to be dominated by
political uncertainty and Brexit until the end of the year.
Although more positive in the short to medium term on the global
economy, we remain cautious on a longer term view.
2018 represented another active year for private equity fund
raising and transaction values, capping the strongest five-year
stretch in history. As we entered 2019, the industry was coming off
a backdrop of deal multiples at historic high levels and private
equity 'dry powder' at record absolute levels, although not so when
compared to recent deal values and volumes. Whilst this has led to
greater competition in mid-market and larger private equity target
markets, we continue to believe that there are significant
inefficiencies at the smaller end of the market, focusing on
established smaller private companies below GBP50 million
enterprise value where there tends to be less competition for deals
and where valuations are more attractive. This segment of the
market is frequently 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 movement in Net Asset Value during the six months to 30 June
2019 was as follows:
Six months ended
30 June 2019
GBP'000
Opening Net Asset Value 1 January 2019 60,275
Return on investments (597)
Net Costs (535)
-------------------
Closing Net Asset Value 30 June 2019 59,143
-------------------
Net cash movements in the group from the portfolio were as
follows:
Six months ended
30 June
--------------------
2019 2018
GBP'000 GBP'000
-------------------------------------------- --------- ---------
Net proceeds from investment realisations 40 12,498
-------------------------------------------- --------- ---------
Follow-on investments and fund calls (584) (394)
New investments - (600)
Total - net (544) 11,504
-------------------------------------------- --------- ---------
There have been no significant realisations in the six months to
30 June 2019.
The follow-on investments and fund calls relate principally to a
working capital loan for Elateral, a UK direct investment, and a
capital call from San Francisco Equity Partners in connection with
a working capital loan required by YesTo, described more fully on
page 13.
Below is a summary of the investment portfolio of the Company
and its subsidiaries:
30 June 2019 31 December 2018
---------------------------------- ----------------------------------
Asset type UK US Total UK US Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------- ---------- ---------- ---------- ---------- ---------- ----------
Quoted 6,082 1,251 7,333 4,814 947 5,761
Unquoted 11,155 10,006 21,161 7,223 11,101 18,324
Funds 7,508 9,246 16,754 7,375 13,423 20,798
------------- ---------- ---------- ---------- ---------- ---------- ----------
24,745 20,503 45,248 19,412 25,471 44,883
------------- ---------- ---------- ---------- ---------- ---------- ----------
The principal investments, with carrying values in excess of
GBP2 million, at 30 June 2019 comprising 61.2% of the net asset
value, and 80.1% of the remaining portfolio, are shown below. Group
cash comprises a further 27.7% (31 December 2018: 29.3%) of the net
asset value.
Name Geography Sector Book value % of
Net asset
value
----------------------- ------------ ------------- ------------------------ ------------
30 31 December 30
June 2018 June
2019 2019
GBP'000 GBP'000
Quoted investments
Gresham House plc UK Financial 5,955 4,469 10.1%
Unquoted investments
Entuity UK Technology 8,670 4,925 14.6%
Medhost Inc US Technology 7,711 8,276 13.0%
Fund investments
YesTo, Inc* US Consumer 5,798 9,265 9.8%
Brockton Capital UK Property 4,922 4,922 8.3%
Opus Capital Venture
Partners US Technology 3,167 3,115 5.4%
*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 - generally, unless alternative method
is more appropriate, multiple of revenues or earnings of comparable
quoted companies with appropriate discounts for marketability;
and
-- 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 2019
was as follows:
Six months ended 30 June
----------------------------------------------------------------------------------------------
2019 2018
---------------------------------------------- ----------------------------------------------
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 - 1,572 1,572 43 (1,866) (1,823)
Unquoted 36 2,505 2,541 770 1,259 2,029
Funds - (4,372) (4,372) 119 (146) (27)
-------------------- ---------------- ---------------- ---------- ---------------- ----------------- ---------
36 (295) (259) 932 (753) 179
-------------------- ---------------- ---------------- ---------- ---------------- ----------------- ---------
Charge (338) -
for incentive
plans
-------------------- ---------------- ---------------- ---------- ---------------- ----------------- ---------
(597) 179
Net gain/(loss)
on foreign
currency 354 (42)
Operating and
similar
income/(expenses)
of subsidiaries (25) (144)
-------------------- ---------------- ---------------- ---------- ---------------- ----------------- ---------
(268) (7)
-------------------- ---------------- ---------------- ---------- ---------------- ----------------- ---------
There is a charge of GBP338,000 for incentive plans in the six
months to 30 June 2019 (2018: nil). This represents provision for
incentive payments, under legacy schemes, due on the sale of
Entuity at its 30 June 2019 carrying value. The previous provision
has been increased to reflect the increase in value. GHAM was
appointed manager in August 2016 and is not entitled to performance
fees or incentives on any of the investments in the portfolio prior
to that date.
Approximately 45% of the portfolio at 30 June 2019 is
denominated in US dollars (31 December 2018: 57%) and the above
table includes the impact of currency movements. In the six months
ended 30 June 2019, the strengthening of the US Dollar against
sterling resulted in an unrealised foreign currency gain of
GBP124,000 (2018: unrealised gain of GBP812,000). 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
2019 2018
----------------------------- --------------- --------- ------------
Company Sector GBP'000 GBP'000
----------------------------- --------------- --------- ------------
Gresham House plc UK financial 5,955 4,469
Solaredge Inc. US energy 1,179 659
IDE Group Holdings
(formerly Coretx Holdings) UK technology 127 345
Weatherford International US energy 17 236
Others - 55 52
7,333 5,761
--------------------------------------------- --------- ------------
The net gain on the quoted portfolio arose as follows:
Six months ended
30 June
----------------------
2019 2018
GBP'000 GBP'000
----------------------------------- ---------- ----------
Realised
Gresham House plc - 43
- 43
----------------------------------- ---------- ----------
Unrealised
Gresham House 1,486 273
Solaredge Inc. 515 (164)
Weatherford International (221) (317)
IDE Group Holdings (218) (1,670)
Other quoted holdings 2 (8)
Unrealised foreign currency gains 8 20
----------------------------------- ---------- ----------
1,572 (1,866)
----------------------------------- ---------- ----------
Total net gain/( loss) 1,572 (1,823)
----------------------------------- ---------- ----------
Gresham House plc
At 30 June 2019 the Company held 984,329 shares in Gresham House
plc. The Gresham House share price increased from 454p at 31
December 2018 to 605p at 30 June 2019.
Weatherford
Following a financial reconstruction at Weatherford in May 2019
which involved exchanging substantial amounts of debt for equity,
the shares were delisted. No material value is expected to be
recovered.
IDE Group
The performance of IDE Group has been disappointing and, as
previously reported, the share price fell substantially during
2018. The Company continues to hold these shares in anticipation of
recovery of at least part of the value.
Solaredge Inc
Solaredge Inc shares, received by the Company by way of
distribution in specie from its fund investment, Opus Capital
Venture Partners. These shares had a carrying value at 30 June 2019
of GBP1,179,000.
Other quoted
These shares have performed well.
Unquoted investments
30 June 31 December
2019 2018
-------------------- --------------- --------- ------------
Company Sector GBP'000 GBP'000
-------------------- --------------- --------- ------------
Entuity UK technology 8,670 4,925
Medhost Inc US technology 7,711 8,276
Elateral UK technology 1,610 1,610
ICU Eyewear* US consumer 1,576 1,568
Yes To* US consumer 537 927
Penguin Computing* US technology 181 329
Other interests - 876 689
21,161 18,324
------------------------------------ --------- ------------
*These are co-investments with SFEP
The net gain on the unquoted portfolio arose as follows:
Six months ended
30 June
--------------------
2019 2018
----------------------------------- --------- ---------
GBP'000 GBP'000
----------------------------------- --------- ---------
Realised
Brockton Capital LLP - 617
Penguin - 153
Other unquoted investments 36 -
36 770
----------------------------------- --------- ---------
Unrealised valuation adjustments
Medhost (607) -
Elateral (250) -
Entuity 3,745 187
Penguin Computing (150) 833
YesTo (478) 2
Northbridge 187 -
Unrealised foreign currency gains 58 237
----------------------------------- --------- ---------
2,505 1,259
----------------------------------- --------- ---------
Total net gain 2,541 2,029
----------------------------------- --------- ---------
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, in
which the Company has previously had investments. Medhost's
financial performance has been satisfactory in 2019 showing
progress towards its goals of growth in recurring revenues,
profitability and cash generation. The reduction in value reflect
changes in the valuation multiples of comparable quoted companies
which are part of the valuation assumption.
Entuity
Contracts were exchanged on 25 July 2019 for the sale of
Entuity. Completion is conditional on certain legal formalities
being satisfied and is expected to occur before 30 September 2019.
Upon completion the contract price will result in net proceeds to
the Company of approximately GBP8.67 million, net of all
transaction costs, but before provision for incentive payments due
under legacy LMS schemes. The exact amount of the final payment
will be adjusted to reflect certain normal course of business
movements in working capital between exchange and completion. The
valuation of Entuity at 30 June 2019 has been increased to GBP8.67
million to reflect the expected proceeds at completion.
Elateral
The Company's re-engineered software platform continues to be
well received by existing and new clients. Five significant new
multi-national clients wins have been achieved over the last 12
months and there is a pipeline of further opportunities. The
company sells its product to companies many times larger than
itself and experiences a protracted sales cycle, however it expects
the rate of new client signings to accelerate over the next 6
months.
Penguin Computing
The Company's interests are held both through its investment in
SFEP and directly through a co-investment with SFEP. The amount
shown above relates to the directly held co-investment. As
explained below, the carrying value represents the estimated
further proceeds that may be received following the sale of the
business in June 2018. The estimate has been reduced at 30 June
2019 based on latest information received.
YesTo
The Company's interests are held both through its investment in
SFEP and directly through a co-investment with SFEP. The amount
shown above relates to the directly held co-investment. This
holding has been valued on the same assumptions as used in the SFEP
valuation as explained below.
Fund interests
30 June 31 December
2019 2018
------------------------ -------------------------- --------- ------------
General partner Sector GBP'000 GBP'000
------------------------ -------------------------- --------- ------------
San Francisco Equity
Partners US consumer & technology 5,549 9,534
Brockton Capital Fund
1 UK property 4,922 4,922
Opus Capital Venture
Partners US venture capital 3,166 3,115
US micro-cap quoted
Weber Capital Partners stocks 486 687
Eden Ventures UK venture capital 1,126 1,100
Other interests - 1,505 1,440
------------------------ --------------------------- --------- ------------
16,754 20,798
--------------------------------------------------- --------- ------------
(Losses) and gains on the Company's funds portfolio for the six
months ended 30 June 2019 were as follows:
Six months ended
30 June
----------------------
2019 2018
GBP'000 GBP'000
----------------------------------- ---------- ----------
Realised
Realised on distributions - 119
- 119
----------------------------------- ---------- ----------
Unrealised valuation adjustments
San Francisco Equity Partners (4,240) (1,272)
Eden Ventures - (1)
Brockton Capital - 155
Opus Capital Venture Partners 73 174
Weber Capital Partners (206) 248
Others (net) (57) (4)
Unrealised foreign currency gains 58 554
----------------------------------- ---------- ----------
(4,372) (146)
----------------------------------- ---------- ----------
Total net losses (4,372) (27)
----------------------------------- ---------- ----------
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 one remaining active investment, YesTo, plus an
interest in the additional proceeds expected to be received
following the sale of Penguin Computing ("Penguin").
The sale of Penguin in June 2018 has enabled the General Partner
of SFEP to meet performance thresholds and become entitled to
carried interest payments in accordance with the SFEP 1 fund
agreement. An estimate of these payments has been included in
arriving at the carrying values for the SFEP 1 fund interests in
YesTo and Penguin below:
-- YesTo - fund carrying value GBP5,261,000 (31 December 2018:
GBP8,338,000) After strong sales growth in 2017, the company
experienced a flattening of revenues in 2018 which has continued
into 2019 to date. Actions are in hand to restore sales growth and
profitability. In April 2019 the company sought additional working
capital funding from its investors. LMS' share of the additional
funding was $700,000 ($637,000 via its SFEP fund interest and
$63,000 via its co-investment interest).
The valuation recognises the debt investment but, in line with
the approach of the General Partner of SFEP, has reduced the value
of the equity to take account of the impact of the debt and to
reflect a lower enterprise value until the successful outcome of
the various actions can be demonstrated.
In addition to the fund investments noted above the Company has
a directly held co- investment in YesTo of GBP537,000 (31 December
2018: GBP927,000) to which the same valuation approach has been
applied.
The Company's total investment in YesTo at 30 June 2019, via its
SFEP fund interest and its co-investment is GBP5,798,000 (31
December 2018: GBP9,265,000).
-- Penguin - fund carrying value GBP581,000 (31 December 2018:
GBP1,176,000). Penguin was sold in June 2018, and an initial
payment of consideration received. The carrying value at 30 June
2019 represents an estimate of the amounts of sale consideration
still to be received from the release of initial purchase
consideration amounts retained in escrow. This estimate has been
revised downwards reflecting recent information received from the
General Partner of SFEP.
In addition to the fund investments noted above the Company has
a co-investment in Penguin of GBP181,000 (31 December 2018:
GBP329,000) to which the same valuation approach has been
applied.
The Company's total investment in Penguin at 30 June 2019, via
its SFEP fund interest and its co-investment is GBP762,000 (31
December 2018: GBP1,505,000).
Other fund interests
-- Eden Ventures - Notwithstanding asset sales in Q4 2018, the
fund has performed below expectations over its life. An extension
has recently been agreed to allow the investments in the fund to be
realised. The Company has valued its remaining interest at a
discount to the fund net asset value published by the General
Partner;
-- Brockton Capital -The Company's investment in this fund is
represented by an interest in the preferred debt, in one of the
Fund's development projects. The Company has adjusted the discount
rate used in its discounted cash flow valuation of this asset,
which results in the valuation being held at the 31 December 2018
level; and
-- Opus Capital, a US venture fund, is based on the valuation
received from the General Partner and has not changed significantly
since the year end.
Overhead costs
Overhead costs for the six months to 30 June 2019 (including
amounts incurred by subsidiaries) were GBP708,000 (six months to 30
June 2018: GBP871,000).
Taxation
The Company has no tax charge for the six months ended 30 June
2019 (30 June 2018: GBP2,000).
Financial resources and commitments
Including cash in subsidiaries, cash holdings were GBP16,361,000
(31 December 2018: GBP17,680,000) with no debt.
At 30 June 2019 subsidiary companies had commitments of
GBP3,478,000 (31 December 2018: GBP3,123,000) to meet outstanding
capital calls from fund interests. The increase since the year end
relates to additional management fees due to Eden Ventures where
the fund life has been extended.
Outlook
GHAM is focussed on managing the existing portfolio. Whilst in
many cases exits are under the control of third party managers,
GHAM maintains a close dialogue and seeks to influence outcomes to
the extent it can.
The Company's available cash enables it actively 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 capabilities within
GHAM. The Board and the Manager continue to evaluate strategic
options for the Company.
Gresham House Asset Management Limited
02 August 2019
Principal risks and uncertainties
The principal risks and uncertainties that affect the Company
are described on pages 6 to 7 of the Company's Annual Report for
the year ended 31 December 2018. 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 near future, the market risk factors set out in the 2018
Annual Report are expected to be influenced by the UK's decision to
leave the European Union. The volatility and uncertainty as
negotiations continue 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; and
-- 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
02 August 2019
Condensed income statement
Six months ended 30
June
-------------------------------------- ------ -----------------------
2019 2018
Note GBP'000 GBP'000
-------------------------------------- ------ ----------- ----------
Loss on Investments 2 (268) (7)
Interest income 89 18
Dividend Income 30 -
----------- ----------
(149) 11
Operating expenses (617) (768)
Net (loss)/gain on foreign currency (366) 55
----------- ----------
Loss before tax (1,132) (702)
Taxation - 2
----------- ----------
Loss for the period (1,132) (700)
----------- ----------
Attributable to:
Equity shareholders (1,132) (700)
----------- ----------
Loss per ordinary share - basic 3 (1.4p) (0.9p)
Loss per ordinary share - diluted 3 (1.4p) (0.9p)
-------------------------------------- ------ ----------- ----------
The notes on pages 23 to 30 form part of these financial
statements.
Condensed statement of other comprehensive income
Six months ended 30
June
----------------------------------- -----------------------
2019 2018
GBP'000 GBP'000
----------------------------------- ----------- ----------
Loss for the period (1,132) (700)
Other comprehensive income - -
----------- ----------
Total comprehensive loss for the
period (1,132) (700)
------------------------------------ ----------- ----------
Attributable to:
Equity shareholders (1,132) (700)
------------------------------------ ----------- ----------
The notes on pages 23 to 30 form part of these financial
statements.
Condensed statement of financial position
30 June 31 December
2019 2018
Note GBP'000 GBP'000
----------
Non-current assets
Investments 4 134,714 135,092
---------- -------------
Non-current assets 134,714 135,092
---------- -------------
Current assets
Operating and other receivables 42 40
Cash and cash equivalents 14,847 15,440
---------- -------------
Current assets 14,889 15,480
---------- -------------
Total assets 149,603 150,572
----------------------------------- ------ ---------- -------------
Current liabilities
Operating and other payables (248) (465)
Amounts payable to subsidiaries (90,212) (89,832)
---------- -------------
Current liabilities (90,460) (90,297)
---------- -------------
Total liabilities (90,460) (90,297)
----------------------------------- ------ ---------- -------------
Net assets 59,143 60,275
----------------------------------- ------ ---------- -------------
Equity
Share capital 8,073 8,073
Share premium 508 508
Capital redemption reserve 24,949 24,949
Retained earnings 25,613 26,745
-------------
Total equity shareholders' funds 59,143 60,275
----------------------------------- ------ ---------- -------------
The financial statements on pages 18 to 22 were approved by the
Board on 02 August 2019 and were signed on its behalf by:
Neil Lerner
Director
The notes on pages 23 to 30 form part of these financial
statements.
Statement of changes in equity
Six months ended 30 June 2019
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
2019 8,073 508 24,949 26,745 60,275
Total comprehensive
income
for the period
Loss for the period - - - (1,132) (1,132)
Balance at 30 June
2019 8,073 508 24,949 25,613 59,143
----------------------- --------- --------- ------------ ---------- ---------
Six months ended 30 June 2018
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
2018 8,073 508 24,949 30,958 64,488
Total comprehensive
income
for the period
Loss for the period - - - (700) (700)
Balance at 30 June
2018 8,073 508 24,949 30,258 63,788
----------------------- --------- --------- ------------ ---------- ---------
The notes on pages 23 to 30 form part of these financial
statements.
Condensed cash flow statement
Six months ended 30
June
-------------------------------------------- -----------------------
2019 2018
GBP'000 GBP'000
Cash flows from operating activities
Loss for the period (1,132) (700)
Adjustments for:
Loss on investments 238 7
Interest Income (89) (18)
--------------------------------------------- ----------- ----------
(983) (711)
Change in operating and other receivables 12 164
Change in operating and other payables (217) (646)
Change in amounts payable to subsidiaries 494 10,212
--------------------------------------------- ----------- ----------
Net cash (utilised by)/generated
from operating activities (694) 9,019
--------------------------------------------- ----------- ----------
Cash flows from Investing activities
Interest received 71 51
Dividend received 30 -
Purchase of investments - (3,541)
Proceeds from sale of investments - 3,050
----------- ----------
Net cash from/(used by) Investing
activities 101 (440)
--------------------------------------------- ----------- ----------
Net (decrease)/increase in cash
and cash equivalents (593) 8,579
Cash and cash equivalents at the
beginning of the period 15,440 2,283
----------- ----------
Cash and cash equivalents at the
end of the period 14,847 10,862
--------------------------------------------- ----------- ----------
The notes on pages 23 to 30 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 2018 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 2018 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
2018 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 2018,
except as noted below.
New accounting standards effective during the Period
IFRS 16 "Leases" is effective on or after accounting periods
beginning on or after 1 January 2019.
The adoption of the above standard will have no impact on the
Company's reported net assets.
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 2018, 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".
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.
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. 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.
2. Gain/(loss) on investments
The gains and losses on investments were as follows:
Six months ended 30 June Six months ended 30 June
2019 2018
--------------------------------------- ---------------------------------------
Realised Unrealised Realised Unrealised
gains gains/(losses) Total gains gains/(losses) Total
Asset type GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ---------- ---------------- --------- ---------- ---------------- ---------
Quoted - 1,572 1,572 43 (1,866) (1,823)
Unquoted 36 2,505 2,541 770 1,259 2,029
Funds - (4,372) (4,372) 119 (146) (27)
---------- ---------------- ---------
36 (295) (259) 932 (753) 179
---------- ---------------- --------- ---------- ---------------- ---------
Charges for incentive (338) -
plans
--------- ---------
(597) 179
Net gain/(loss)
on foreign currency 354 (42)
Operating and
similar expenses
of subsidiaries (25) (144)
---------- ---------------- --------- ---------- ---------------- ---------
(268) (7)
------------------------ ---------- ---------------- --------- ---------- ---------------- ---------
3. Loss per ordinary share
The calculation of the basic and diluted loss per share, in
accordance with IAS 33, is based on the following data:
Six months ended
------------------------------
30 June 2019 30 June 2018
GBP'000 GBP'000
-------------------------------------- -------------- --------------
Loss
Loss for the purpose of loss
per share being
net loss attributable to equity
holders of the parent (1,132) (700)
Number of shares
Weighted average number of ordinary
shares for the
purposes of basic loss per share 80,727,450 80,727,450
Effect of dilutive potential
ordinary shares
Share options and performance
shares* 78,531 78,531
--------------------------------------- -------------- --------------
Weighted average number of ordinary
shares for the
purposes of diluted loss 80,805,981 80,805,981
--------------------------------------- -------------- --------------
Loss per share
-------------------------------------- -------------- --------------
Basic (1.4p) (0.9p)
--------------------------------------- -------------- --------------
*There were no potentially dilutive shares in the period to June
2019 and June 2018 since the Company made a loss.
4. Investments
The Company's investments comprised the following:
30 June 2019 31 December
2018
GBP'000 GBP'000
-------------- -------------
Total investments 134,714 135,092
--------------------------------------- -------------- -------------
These comprise:
Investment portfolio of the Company 6,742 5,069
Investment portfolio of subsidiaries 38,506 39,814
Other net assets of subsidiaries 89,466 90,209
134,714 135,092
--------------------------------------- -------------- -------------
The carrying amounts of the Company and its subsidiaries
investment portfolios were as follows:
30 June 2019 31 December 2018
-------------------- --------------------
Investment portfolio
of the Company
Asset type GBP'000 GBP'000 GBP'000 GBP'000
------------------------ --------- --------- --------- ---------
Quoted 5,955 4,469
Unquoted direct 787 600
Funds - -
------------------------ --------- --------- --------- ---------
6,742 5,069
Investments portfolio
of subsidiaries
Asset type
------------------------ --------- --------- --------- ---------
Quoted 1,378 1,292
Unquoted direct 20,374 17,724
Funds 16,754 20,798
Other net assets of
subsidiaries 89,466 90,209
------------------------ --------- --------- --------- ---------
127,972 127,972 130,023 130,023
------------------------ --------- --------- --------- ---------
134,714 135,092
------------------------ --------- --------- --------- ---------
The movements in the investment portfolio were as follows:
Quoted Unquoted
securities securities Funds Total
GBP'000 GBP'000 GBP'000 GBP'000
Carrying value
Balance at 1 January 2018 8,644 22,904 32,270 63,818
Purchases 4,133 1,072 51 5,256
Disposals (3,007) (6,353) - (9,360)
Distributions from partnerships - - (8,495) (8,495)
Fair value adjustments (4,009) 701 (3,028) (6,336)
------------ ------------ --------- ---------
Balance at 31 December 2018 5,761 18,324 20,798 44,883
---------------------------------- ------------ ------------ --------- ---------
Balance at 1 January 2019 5,761 18,324 20,798 44,883
Purchases - 332 252 584
Disposals - - - -
Distributions from partnerships - - - -
Fair value adjustments 1,572 2,505 (4,296) (219)
------------ ------------ --------- ---------
Balance at 31 June 2019 7,333 21,161 16,754 45,248
---------------------------------- ------------ ------------ --------- ---------
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 2019 31 December 2018
GBP'000 GBP'000
---------- -------------- ------------------
Level 1 5,955 4,469
Level 2 787 600
Level 3 127,972 130,023
-------------- ------------------
134,714 135,092
---------- -------------- ------------------
Level 3 amounts include GBP38,506,000 (2018: GBP39,814,000)
relating to the investment portfolios of subsidiaries (including
quoted investments of GBP1,378,000 (2018: GBP1,292,000)) and
GBP89,466,000 (2018: GBP90,209,000) in relation to the other net
assets of subsidiaries.
Basis of valuation:
-- Quoted investments - bid price of security quoted on relevant securities exchange;
-- Unquoted investments - generally, unless an alternative
method is more appropriate, multiple of revenues or earnings of
comparable quoted companies with appropriate discounts for
marketability; and
-- Fund interests - based on amounts reported by the general
partner unless the reported value is not in line with the Company's
valuation policy.
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 2019
would have decreased by GBP12.8 million (2018: GBP13.6 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 2019 31 December 2018
GBP'000 GBP'000
----------------------------------- -------------- ------------------
Outstanding commitments to funds 3,478 3,123
3,478 3,123
----------------------------------- -------------- ------------------
The outstanding commitments to funds comprise unpaid calls in
respect of funds where a subsidiary of the Company is a limited
partner.
6. Related party transactions
Gresham House Asset Management Limited, the investment manager
of LMS Capital plc charged GBP442,000 to 30 June 2019 (six months
to 30 June 2018: GBP439,000).
7. Subsidiaries
The Company's subsidiaries are as follows:
Holding
Name Country of incorporation % Activity
------------------------------- -------------------------- --------- --------------------
International Oilfield Bermuda 100 Investment Holding
Services Limited
LMS Capital (Bermuda) Bermuda 100 Investment Holding
Limited
LMS Capital (ECI) Limited England and Wales 100 Investment Holding
LMS Capital (General Bermuda 100 Investment Holding
Partner) Limited
LMS Capital (GW) Limited Bermuda 100 Investment Holding
LMS Capital Group Limited England and Wales 100 Investment Holding
LMS Capital Holdings England and Wales 100 Investment Holding
Limited
LMS NEP Holdings Inc United States 100 Investment Holding
of America
Lioness Property Investments England and Wales 100 Investment Holding
Limited
Lion Property Investments England and Wales 100 Investment Holding
Limited
Lion Investments Limited England and Wales 100 Investment Holding
Lion Cub Investments England and Wales 100 Dormant
Limited
Lion Cub Property Investments England and Wales 100 Investment Holding
Limited
Tiger Investments Limited England and Wales 100 Investment Holding
LMS Tiger Investments England and Wales 100 Investment Holding
Limited
LMS Tiger Investments England and Wales 100 Investment Holding
(II) Limited
Westpool Investment Trust England and Wales 100 Investment Holding
PLC
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: Two London
Bridge, London, SE1 9RA.
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 Two
London Bridge London SE1 9RA.
8. Net asset value per share
The net asset value per ordinary shares in issue are as
follows:
30 June 31 December
2019 2018
--------------------------------------- ------------ -------------
Net asset value (GBP'000) 59,143 60,275
Number of ordinary shares in issue 80,727,450 80,727,450
Net asset value per share (in pence) 73.3p 74.7p
---------------------------------------- ------------ -------------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR PTMBTMBMMBJL
(END) Dow Jones Newswires
August 02, 2019 07:30 ET (11:30 GMT)
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