TIDMLMS
RNS Number : 3281H
LMS Capital PLC
03 August 2021
2 August 2021
LMS CAPITAL PLC
Half year results for the six months ended 30 June 2021
Financial Update
-- Net Asset Value ("NAV") at 30 June 2021 of GBP47.6 million,
59.0p per share, compared to GBP47.9 million (59.4p per share) at
31 December 2020;
-- Realised and unrealised portfolio gains, excluding GBP0.2
million of foreign exchange losses, were GBP1.4 million;
-- Running costs were GBP0.9 million and investment related costs were GBP0.1 million;
-- Cash proceeds of GBP2.4 million from realisations during the half year;
-- Final dividend payment in June 2021 of 0.6 pence per share
for the year ended 31December 2020; and
-- Cash at 30 June 2021 was GBP21.4 million (31 December 2020:
GBP20.6 million), including GBP5.9 million held in subsidiaries and
representing approximately 26.5p per share.
.
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 2021 of 0.3 pence per
share. The dividend will be paid on 15September 2021 to
shareholders on the share register at close of business on 13August
2021 (with an ex-dividend date of 12 August 2021).
Robert Rayne, Chairman, commented:
"The first six months of 2021 have shown further progress
including profitable realisations from our existing portfolio and
continuing to execute our annual dividend policy. The continued
regulatory delay to Dacian, the Romanian oil and gas company in
which we have committed to invest, is frustrating and we are
working hard to conclude the deal. We continue to look actively for
the right opportunities to develop our deal pipeline and deploy
capital in our chosen areas."
2 August 2021
Enquiries:
LMS Capital PLC
0207 935 3555
Robert Rayne, Chairman
Nick Friedlos, Managing Director
Statement from the Chairman and Managing Director
We are pleased to present the financial results of the Company
for the first six months of the year and to provide an update on
the business.
-- Our portfolio valuations have increased during the half year.
Overall portfolio valuations for the current investments are
approximately 7% higher than the level reported at both 31December
2020 and the 31 March 2021 NAV estimates;
-- We received GBP2.4 million of cash proceeds from
realisations, including a GBP1.5 million distribution from San
Francisco Equity Partners ("SFEP") related to ICU Eyewear,
GBP0.8million from the redemption of the Northbridge convertible
debt and GBP0.1million of other fund distributions;
-- Our cash balances increased to GBP21.4 million at 30 June
2021, compared to GBP20.6million at 31 December 2020;
-- We paid a final dividend of 0.6 pence per share for the year
ended 31 December 2020, and the Board has approved an interim
dividend of 0.3 pence per share for the 2021 year; and
-- We continue to focus the investment strategy on our chosen
sectors: energy, real estate and late-stage private equity.
Energy
o Dacian
-- The management team at Dacian, the Romanian oil and gas
production business in which LMS has committed to invest, continue
to await final regulatory approval in Romania for that company's
first acquisition.
-- The approval process has taken substantially longer than
anticipated. LMS remains in close contact with the management team
in Romania and at this stage continues to believe that the merits
of the investment outweigh the delay.
Real Estate
o The Company is working with two experienced teams - in each
case unencumbered by existing assets and well positioned to take
advantage of market opportunities which play to their respective
strengths and have the potential to deliver attractive risk
adjusted returns to LMS.
o Development
-- Cavera was established as a wholly-owned subsidiary of LMS to
work with a successful real estate development team. The team were
founders of Voreda, a development management business that obtained
planning consent and developed over 90,000 square metres of space
in West London for its partners, including student and key worker
accommodation, residential and commercial space and specialist
buildings.
-- The Cavera team is actively seeking opportunities where the
risks can be appropriately allocated and managed and which can be
structured as investment opportunities for LMS and its
co-investment partners.
o Investment
-- LMS, in conjunction with an established team, is working to
build a niche strategy based on regenerating income producing mixed
use assets in regional UK town and city centres. The team has a
succesful track record targeting returns of 12% to 15% per annum,
net of all costs, including an annual income distribution of 5% per
annum.
-- Covid-19 has had a significant impact on how we view our
business model and in particular our selection criteria. We
therefore proceed with caution but still see the opportunity to
create value in this niche.
Late-stage private equity
-- Late-stage private equity is a broadly defined sector and we
have been shown a wide range of opportunities over the last 18
months since our return to internal management.
-- In reviewing these we have sought to identify themes where we
not only have the necessary expertise but also have some
competitive advantages and can differentiate ourselves from the
wider market. We are increasingly focused on opportunities which
have some cross over with our energy and real estate activities and
where new technology and innovation is creating the opportunity to
improve returns in established business segments.
-- We are building our pipeline and have broadened the network
of people with whom we work. We hope to deploy capital during the
second half of the year.
UNAUDITED RESULTS FOR THE SIX MONTHSED 30 JUNE 2021
Net asset value ("NAV") at 30 June 2021 was GBP47.6 million
(59.0p per share). Before taking account of the final dividend for
2020 this represents a small increase in NAV compared to the prior
year end; including the dividend this is a reduction of GBP0.3
million compared to the 31December 2020 reported NAV of GBP47.9
million.
Overall portfolio realised and unrealised gains were GBP1.2
million, including unrealised exchange losses of GBP0.2 million
primarily from the weakening of the US Dollar against sterling
during the first six months of 2021.
Realised and unrealised portfolio changes, excluding unrealised
foreign exchange losses, were GBP1.4 million, the principal items
of which were:
-- Quoted shares
Overall, our quoted portfolio showed net unrealised gains of
GBP0.1 million during the first half of 2021.
-- Unquoted investments
o Our unquoted portfolio recorded realised and unrealised net
losses of GBP0.7million;
o The principal reductions were in relation to Medhost where we
continue to follow the valuation of Primus, the fund manager who
had reduced the valuation by approximately 7% reflecting movement
in public market comparables; and
o ICU, where the company decided to discontinue the sale of
personal protective equipment ("PPE"), resulting in a decline in
the valuation.
-- Fund investments
o Our fund investments showed unrealised gains of GBP2.0 million
for the half year;
o Our investment in Brockton has increased in value by GBP0.8
million, reflecting the unwind of the discount in our discounted
cash flow valuation;
o Our investment in Weber also increased by GBP0.6 million due
to performance of the U.S. microcap equities held in the fund;
o The Opus Capital Ventures fund increased by GBP0.4 million due
to the two main technology investments in the fund; and
o Other fund interests have increased in value by GBP0.2
million.
Non-portfolio reductions in NAV were GBP1.5 million and include
overhead costs of GBP1.0 million (GBP0.9 million of running costs
and GBP0.1 of investment related costs) and GBP0.5 million for the
final 2020 dividend.
Liquidity
The Company and its subsidiaries have cash of GBP21.4 million
available to cover its running costs, fund commitments and to make
new investments. The Company, with its current cash balances, has
more than sufficient liquidity to meet its planned investments and
operating costs. In addition, the Company has deposited $9.1
million (GBP6.6 million) pending the final approval and completion
of the Dacian transaction. Were that transaction not to complete,
these funds would be returned to the Company.
The Company is considered to be a going concern and the accounts
have been prepared on a going concern basis. The Directors believe
that the Company is well placed to manage its business risks
successfully despite the current uncertain economic outlook and
have prepared liquidity forecasts for a three-year period from 1
July 2021.
DIVID
The Company has adopted a progressive dividend policy where the
target for each financial year is 1.5% of the year end NAV to be
paid approximately one third as an interim dividend in September
and the balance as a final dividend in the second quarter following
the year end. The Board has approved the interim dividend for the
2021 year of 0.3 pence per share to be paid on 15 September
2021.
In setting the dividend policy, the Board has taken into account
the general market conditions, the likely liquidity from the
existing unquoted investments and the ability to generate income
from new investments.
CONCLUSION AND OUTLOOK
The Board's objective is to broaden the Company's shareholder
base and develop the Company into an attractive investment for
family offices, high net worth investors, institutions and others
attracted by the returns it achieves and the character of its
investments. In order to achieve this, we will:
-- Further develop our deal pipeline and deploy capital in our chosen sectors;
-- Expand our co-investment programme; and
-- Identify routes to expand the capital base of the Company.
Notwithstanding the impact of the Coronavirus pandemic, and
whilst remaining cautious about the macro environment, we are
mindful of the need to build our pipeline of opportunities and
deploy capital.
We would like to express our appreciation to all those with whom
we work, including our staff, service providers, advisory firms,
management teams and our Board colleagues for their support and
efforts in these challenging times.
We look forward to reporting to you further on our progress.
Robert Rayne
Chairman
Nicholas Friedlos
Managing Director
2 August 2021
Portfolio Management Review
INTRODUCTION
The Company and the Board are responsible for all aspects of the
portfolio management following the Company's return to internal
management with effect from 30 January 2020.
INVESTMENT APPROACH
The investment approach under internal management is now focused
predominantly on three areas: real estate, energy and late stage
private equity investments. The Company will focus on investment
opportunities where it has a competitive advantage due to the
Company's long history, including sectors in which the team has
deep knowledge and experience, a track record of successful
investing and access to exceptional teams and opportunities.
The Company 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% to 15%,
including an annual distribution to shareholders.
The Company will also seek to optimise the value of existing
holdings and, where growth prospects are clear, to preserve and
support longer term value creation.
MARKET BACKGROUND
The first half of 2021 has seen the beginning of a global
economic recovery as markets began to emerge from the impacts of
the Coronavirus pandemic. In the UK, the successful rollout of the
Coronavirus vaccine program has had a positive impact on markets
and the economy but there remain some challenges from the
completion of the UK exit from the European Union and the resulting
Brexit trade negotiations. Both the UK Aim and Small-cap indices
increased 8.2% and 18.9%, respectively. The Bank of England
continues to provide stimulus packages as inflation begins to rise,
and the UK government has supported employment through state-funded
furlough schemes. The US Dollar also weakened against sterling
during the first half of 2021.
The Board and Company continue to closely monitor its portfolio
investments, including impact that the current market volatility
has on the valuations.
PERFORMANCE REVIEW
Cash in the Group at 30 June 2021 was GBP21.4 million (31
December 2020: GBP20.6 million), including GBP15.4 million held by
the Company and GBP6.0 million held by subsidiaries. Significant
outflows for the half year were GBP0.5 million for the final
dividend payment for the year ended 31 December 2020 and GBP1.1
million of other net cash movements. Cash proceeds from
realisations and distributions from funds have totaled GBP2.4
million.
The movement in Net Asset Value during the six months to 30 June
2021 was as follows:
Six months ended
30 June 2021
GBP'000
------------------
Opening NAV 47,923
Gain on investments 1,215
Final dividend to shareholders for year to 31 December 2020 (484)
Overheads, tax and other net movements (1,062)
Closing NAV 47,592
------------------
Cash realisations from the portfolio were as follows:
Six months ended 30 June
----------------------------
2021 2020
GBP'000 GBP'000
----------------------------------------------- ------------- -------------
Proceeds from the sale of investments 750 7,897
Distributions from funds and loan repayments 1,687 256
Total - gross 2,437 8,153
New and follow-on investments - (225)
Fund calls (43) (59)
----------------------------------------------- ------------- -------------
Total - net 2,394 (7,869)
----------------------------------------------- ------------- -------------
Net cash realisations of GBP2.4 million in the six months ended
30 June 2021 include:
-- Proceeds of GBP0.8 million from the repayment of Northbridge convertible instrument;
-- Fund distribution of GBP1.5 million from SFEP for ICU Eyewear; and
-- Other fund distributions of GBP0.1 million.
The fund calls are primarily in respect of SFEP fund
administrative costs.
Below is a summary of the investment portfolio of the Company
and its subsidiaries:
30 June 2021 31 December 2020
---------------------------------- ----------------------------------
Asset type UK US Total UK US Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------- ---------- ---------- ---------- ---------- ---------- ----------
Quoted 245 40 285 119 78 197
Unquoted 517 7,051 7,568 1,226 8,912 10,138
Funds 6,584 6,978 13,562 5,808 6,050 11,858
------------- ---------- ---------- ---------- ---------- ---------- ----------
7,346 14,069 21,415 7,153 15,040 22,193
------------- ---------- ---------- ---------- ---------- ---------- ----------
Basis of valuation:
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 ready market
are valued using the most appropriate valuation technique with
regard to the stage and nature of the investment. 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 a business the value of which is derived
mainly from its underlying net assets rather than its earnings are
valued on the basis of net asset valuation;
-- investments in an established business which is generating
sustainable revenue or positive 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. Convertible instruments are valued by disaggregating the
convertible feature from the debt instrument and valuing it using a
Black-Scholes model;
-- Preference shares are valued at cost and using a different
fair value methodology would not result in a material difference;
and
-- the Company adopted the latest IPEV guidelines effective from
1 January 2019 and in addition, the company adopted the IPEV
special valuation guidelines issued in March 2020 in response to
the significant uncertainty surrounding the Coronavirus
pandemic.
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 and that there have been no material events between the
latest fund statement and the reporting date. Adjustments will be
made to the fund valuation where the Company believes there is
evidence that an alternative valuation is more appropriate.
Performance of the investment portfolio
The return on investments for the six months ended 30 June 2021
was as follows:
Six months ended 30 Six months ended 30
June 2021 June 2020
--------------------------------------- -----------------------------------------
Realised Unrealised Realised Unrealised
Losses gains/(losses) Total gains/(losses) Losses Total
Asset type GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ---------- ---------------- --------- ---------------- ------------ ---------
Quoted - 88 88 (335) (257) (592)
Unquoted (5) (745) (750) 6 (1,171) (1,165)
Funds - 1,877 1,877 - (3,450) (3,450)
---------------- ------------ ---------
(5) 1,220 1,215 (329) (4,878) (5,207)
---------- ---------------- --------- ---------------- ------------ ---------
Credit/(charge) for
incentive plans 43 64
--------- ---------
1,258 (5,143)
Net (losses)/gains on
foreign currency (168) 672
Operating and similar
expenses of subsidiaries (116) (325)
---------------------------------------- ---------------- --------- ---------------- ------------ ---------
974 (4,796)
---------------------------- ---------- ---------------- --------- ---------------- ------------ ---------
The Company operates carried interest arrangements in line with
normal practice in the private equity industry. The movement in
incentive plans during the six months ended 30 June 2021 is a
credit of GBP43,000.
Approximately 65.7% of the portfolio at 30 June 2021 is
denominated in US dollars (31December 2020: 68%) and the above
table includes the impact of currency movements. In the six months
ended 30 June 2021, the weakening of the US dollar against sterling
over the period as a whole resulted in an unrealised foreign
currency loss of GBP 0.2 million (2020: unrealised gain of GBP0.7
million). 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
2021 2020
------------------------ --------------- --------- ------------
Company Sector GBP'000 GBP'000
------------------------ --------------- --------- ------------
IDE Group Holdings UK technology 245 118
Global Green Solutions US energy 17 62
Others - 23 17
285 197
---------------------------------------- --------- ------------
The net gains/(losses) on the quoted portfolio arose as
follows:
Six months ended 30 June
--------------------------------------------
2021 2020
GBP'000 GBP'000
----------------------------------------------- ------------------------- -----------------
Realised
Solaredge Inc. - 381
Gresham House plc - (716)
- (335)
----------------------------------------------- ------------------------- -----------------
Unrealised
IDE Group Holdings 127 (309)
Global Green Solutions (44) -
Weatherford International - (6)
Other quoted holdings 6 57
Unrealised foreign currency (losses)/ gains (1) 1
----------------------------------------------- ------------------------- -----------------
88 (257)
----------------------------------------------- ------------------------- -----------------
Total net gains/(losses) 88 (592)
----------------------------------------------- ------------------------- -----------------
Unquoted investments
30 June 31 December 2020
2021
--------------------------------------------- --------------- --------- -----------------
Company Sector GBP'000 GBP'000
--------------------------------------------- --------------- --------- -----------------
Medhost Inc US technology 5,325 5,704
ICU Eyewear* US consumer 1,661 3,143
Northbridge UK technology - 755
Elateral UK technology 399 399
IDE Group Holdings UK technology 118 73
Yes To* US consumer 65 64
7,568 10,138
------------------------------------------------------------- --------- -----------------
*These are co-investments with SFEP
The net losses on the unquoted portfolio arose as follows:
Six months ended 30 June
----------------------------
2021 2020
GBP'000 GBP'000
--------------------------------------------- ------------- -------------
Realised
Northbridge (5) -
Other - 6
--------------------------------------------- ------------- -------------
(5) 6
--------------------------------------------- ------------- -------------
Unrealised
IDE Group 45 31
ICU Eyewear (361) 871
YesTo 2 (269)
Northbridge Industrial Services - (111)
Elateral - (1,433)
Medhost (320) (764)
Unrealised foreign currency (losses)/ gains (111) 504
--------------------------------------------- ------------- -------------
(745) (1,171)
--------------------------------------------- ------------- -------------
Total net losses (750) (1,165)
--------------------------------------------- ------------- -------------
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 the funds of Primus Capital.
Medhost's financial performance in 2021 is expected to be
profitable and cash generative but broadly flat compared to 2020.
The valuation reflects movements in the valuation of quoted
comparable companies adopted by the fund manager Primus
Capital.
ICU Eyewear
During 2020, ICU was able to generate surplus cash flow from the
U.S. distribution of PPE manufactured by one of its international
suppliers. This was a "one-off" opportunity from which the company
was able to benefit. The cash generated was used to repay
shareholder debt to LMS of GBP0.8 million in Q3 2020 and a further
cash distribution of GBP1.5 million in the first half of 2021. The
PPE business for ICU was an opportunistic response to the situation
in 2020 and the ICU Board has decided that this does not represent
an ongoing line of business for the company, and further activity
will cease. The reduction in carrying value arises principally from
the distribution of GBP1.5 million, reflected in the December 2020
valuation and received in early 2021. The unrealised loss for the
period reflects a valuation reduction following cessation of PPE
activities, partly offset by an uplift in valuation of the eyewear
business.
Northbridge
During the first half of 2021, Northbridge offered its
convertible debt holders the option to redeem the outstanding
principal at a 25% premium. The Company elected to redeem its
convertible debt, receiving proceeds of GBP0.8 million and
recognising a nominal realised loss on the conversion.
Fund interests
30 June 31 December
2021 2020
------------------------------- ---------------------------- --------- ------------
General partner Sector GBP'000 GBP'000
------------------------------- ---------------------------- --------- ------------
Brockton Capital Fund 1 UK real estate 4,900 4.107
Opus Capital Venture Partners US venture capital 3,886 3,505
Weber Capital Partners US micro-cap quoted stocks 2,343 1,813
EMAC ILF UK real estate 805 839
San Francisco Equity Partners US consumer 717 699
Eden Ventures UK venture capital 497 501
Simmons UK energy 382 361
Other interests - 32 33
13,562 11,858
------------------------------------------------------------ --------- ------------
Net gains/(losses) on the Company's funds portfolio for the six
months ended 30 June 2021 were as follows:
Six months ended 30 June
----------------------------
2021 2020
GBP'000 GBP'000
-------------------------------------------- ------------- -------------
Realised
Other funds - -
-------------------------------------------- ------------- -------------
- -
-------------------------------------------- ------------- -------------
Unrealised
Weber Capital Partners 552 195
Opus Capital Venture Partners 422 130
Simmons Parallel Energy 48 (89)
Eden Ventures 122 (152)
Brockton Capital Fund I 792 (1,669)
San Francisco Equity Partners 64 (1,992)
Others (net) (4) (375)
Unrealised foreign currency (losses)/gains (119) 502
-------------------------------------------- ------------- -------------
1,877 (3,450)
-------------------------------------------- ------------- -------------
Total net gain/(losses) 1,877 (3,450)
-------------------------------------------- ------------- -------------
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 investment, YesTo.
-- YesTo - fund carrying value GBP0.7 million (31 December 2020:
GBP0.6 million). A new management team was appointed in mid-2019
and is following a plan to restore growth and profitability. The
company is valued primarily on a sales multiple. Based on current
sales levels, LMS has attributed no value to its equity interest
and has valued only its debt holding in YesTo.
In addition to the fund investments noted above, the Company has
a directly held
co-investment in YesTo of GBP0.1 million (31 December 2020:
GBP0.1 million). The Company's total investment in YesTo at 30 June
2021, via its SFEP fund interest and its co-investment is GBP0.8
million (31 December 2020: GBP0.7 million).
Other fund interests
-- Eden Ventures - Eden has now sold all but one of its assets.
The unrealised gain reflects primarily the increase in value of its
sole remaining asset;
-- Brockton Capital Fund I -The Company's investment represents
its share (via the Brockton Fund) of preferred debt investments in
"High End" central London residential development. The investment
showed an increase in the valuation for the six months ended 30
June 2021 primarily due to the unwinding of the discount rate as
the investment is valued on a discounted cash flow basis;
-- Weber Capital holds US publicly traded mid-cap securities and
showed an unrealised gain of GBP0.6 million reflecting an increase
in the underlying equity prices; and
-- Opus Capital, a US venture fund, showed an unrealised gain of
GBP0.4 million from improvements in its main assets.
Overhead costs
Overheads for the six months to 30 June 2021 (including amounts
incurred by subsidiaries) were GBP 1.0 million (six months to 30
June 2020: GBP 0.9 million) and include GBP0.9 million of running
costs and GBP0.1 million of investment related costs.
Taxation
The Group corporation tax charge for the period is GBP0.1
million (2020: GBP0.3 million).
Financial resources and commitments
At 30 June 2021 cash holdings, including cash in subsidiaries,
were GBP21.4 million (31December 2020: GBP 20.6 million) and
neither the Company nor any of its subsidiaries had any debt.
At 30 June 2021, subsidiary Companies had commitments of GBP2.7
million (31 December 2020: GBP2.7 million) to meet outstanding
capital calls from fund interests.
LMS Capital plc
2 August 2021
Condensed Income Statement
Six months ended 30
June
-----------------------
2021 2020
Notes GBP'000 GBP'000
-------------------------------------- ------- ----------- ----------
Net gains/(losses) on investments 2 974 (4,796)
Interest income 22 66
Other Income 8 2
----------- ----------
1,004 (4,728)
Operating expenses (938) (770)
Net gain/(loss) on foreign currency 72 (571)
----------- ----------
Gain/(loss) before tax 138 (6,069)
Taxation - -
----------- ----------
Profit/(loss) for the period 138 (6,069)
----------- ----------
Attributable to:
Equity shareholders 138 (6,069)
----------- ----------
Profit/(loss) per ordinary share
- basic 3 0.2p (7.5p)
Profit/(loss) per ordinary share
- diluted 3 0.2p (7.5p)
-------------------------------------- ------- ----------- ----------
The notes on pages 21 to 35 form part of these Financial
Statements.
Condensed Statement of Other Comprehensive Income
Six months ended 30
June
------------------------------------
2021 2020
GBP'000 GBP'000
------------------------------------ --------- -------------------------
Profit/(loss) for the period 138 (6,069)
Other comprehensive income - -
--------- -------------------------
Total comprehensive profit/(loss)
for the period 138 (6,069)
------------------------------------- --------- -------------------------
Attributable to:
Equity shareholders 138 (6,069)
------------------------------------- --------- -------------------------
The notes on pages 21 to 35 form part of these Financial
Statements.
Condensed Statement of Financial Position
30 June 31 December
---------- -------------
2021 2020
Notes GBP'000 GBP'000
------------------------------------- ------- ---------- -------------
Non-current assets
Right of use assets 111 125
Investments 5 71,054 70,610
Total non-current assets 71,165 70,735
------------------------------------- ------- ---------- -------------
Current assets
Operating and other receivables 75 67
Cash and cash equivalents 15,429 16,385
------------------------------------- ------- ---------- -------------
Total current assets 15,504 16,452
Total assets 86,669 87,187
------------------------------------- ------- ---------- -------------
Current liabilities
Operating and other payables (357) (415)
Amounts payable to subsidiaries (38,630) (38,747)
---------- -------------
Total current liabilities (38,987) (39,162)
---------- -------------
Non-current liabilities
Other long-term liabilities (90) (102)
------------------------------------- ------- ---------- -------------
Total non-current liabilities (90) (102)
------------------------------------- ------- ---------- -------------
Total liabilities (39,077) (39,264)
---------- -------------
Net assets 47,592 47,923
------------------------------------- ------- ---------- -------------
Equity
Share capital 8,073 8,073
Share premium 508 508
Capital redemption reserve 24,949 24,949
Share-based equity 49 34
Retained earnings 14,013 14,359
------------------------------------- ------- ---------- -------------
Total equity shareholders' funds 47,592 47,923
------------------------------------- ------- ---------- -------------
Net asset value per ordinary share 58.95p 59.36p
------------------------------------- ------- ---------- -------------
The Financial Statements on pages 16 to 20 were approved by the
Board on 2 August 2021 and were signed on its behalf by:
Nicholas Friedlos
Director
The notes on pages 21 to 35 form part of these Financial
Statements.
Statement of Changes in Equity
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
--------- --------- ------------ --------- ---------- ---------
Six months ended 30 June 2020
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 2020 8,073 508 24,949 - 22,428 55,958
Comprehensive income for the period
Loss for the period - - - - (6,069) (6,069)
--------- --------- ------------ --------- ---------- ---------
Equity after total comprehensive
loss for the period 8,073 508 24,949 - 16,359 49,889
Contributions by and distributions
to shareholders
Share-based payments - - - - - -
Dividends - - - - (3,431) (3,431)
Balance at 30 June 2020 8,073 508 24,949 - 12,928 46,458
--------- --------- ------------ --------- ---------- ---------
The notes on pages 21 to 35 form part of these Financial
Statements.
Condensed Cash Flow Statement
Six months ended 30 June
----------------------------
2021 2020
Notes GBP'000 GBP'000
Cash flows from operating activities
Profit/ (loss) for the period 138 (6,069)
Adjustments for non-cash income and expense:
Equity settled share-based payment 15 -
Depreciation on right of use assets 14 -
Interest expense on lease 4 -
(Gains)/ losses on investments 2 (974) 4,796
Other income (22) (2)
Interest income (8) (66)
Adjustments to incentives plans 6 -
Exchange losses on cash and cash equivalents 7 40
(820) (1,341)
Change in operating assets and liabilities
(Increase)/decrease in operating and other receivables (8) 105
Decrease in operating and other payables (70) (1,219)
(Decrease)/increase in amounts payable to subsidiaries (328) 105
-------------------------------------------------------------------- ------------- -------------
Net cash used in operating activities (1,226) (2,310)
----------------------------------------------------------- ------- ------------- -------------
Cash flows from Investing activities
Interest received 22 72
Other income received 8 -
Proceeds from sale of investments - 5,190
Proceeds from redemption of loan investment 750 -
------------- -------------
Net cash from investing activities 780 5,262
----------------------------------------------------------- ------- ------------- -------------
Cash flows from financing activities
Dividend paid (484) (3,431)
Repayment of lease liabilities (19) -
Net cash used in financing activities (503) (3,431)
----------------------------------------------------------- ------- ------------- -------------
Net decrease in cash and cash equivalents (949) (479)
Exchange losses on cash and cash equivalents (7) (40)
Cash and cash equivalents at the beginning of the period 16,385 25,079
------------- -------------
Cash and cash equivalents at the end of the period 15,429 24,560
----------------------------------------------------------- ------- ------------- -------------
The notes on pages 21 to 35 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 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 2020 were approved by the board of directors on 17 April
2021 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, not audited.
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. 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 2020 which were
prepared in accordance with 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
2020.
Basis of preparation
On 31 December 2020, IFRS as adopted by the European Union at
that date was brought into UK law and became UK-adopted
International Accounting Standards, with future changes being
subject to endorsement by the UK Endorsement Board. LMS Capital Plc
transitioned to UK-adopted International Accounting Standards in
its Financial Statements on 1 January 2021. This change constitutes
a change in accounting framework. However, there is no impact on
recognition, measurement or disclosure in the period reported as a
result of the change in framework.
This condensed interim financial report for the half-year
reporting period ended 30 June 2021 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.
Notes to the financial information
1. Principal accounting policies (continued)
Basis of preparation (continued)
Consistent with the year ended 31 December 2020, 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".
The Company is considered to be a going concern and the accounts
have been prepared on a going concern basis. The Directors believe
that the Company is well placed to manage its business risks
successfully despite the current uncertain economic outlook and
have prepared liquidity forecasts for a three-year period from 1
July 2021. In preparing this liquidity forecast, consideration has
been given to the expected impact of Covid-19 on the Company and
the wider Group.
IFRS 16 - Leases
IFRS 16 Leases was issued in January 2016 and provides a single
lessee accounting model, requiring lessees to recognize assets and
liabilities for all leases unless the lease term is 12 months or
less or the underlying asset has a low value.
To determine the split between principal and interest in the
lease, the Company is required to estimate the interest it would
have to pay in order to finance payments under the new lease. 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.
Notes to the financial information
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
2021.
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
-- measure and evaluate the performance of substantially all of
its investments on a fair value basis.
Notes to the financial information
1. Principal accounting policies (continued)
Accounting for subsidiaries (continued)
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
-- recognition of deferred tax asset for carried forward tax losses
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
-- estimate percentage of incremental borrowing rate on lease liability
-- estimate in calculating share option for equity awards
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.
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.
Notes to the financial information
1. Principal accounting policies (continued)
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 ready market
are valued using the most appropriate valuation technique with
regard to the stage and nature of the investment. 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 a business the value of which is derived
mainly from its underlying net assets rather than its earnings are
valued on the basis of net asset valuation; and
-- 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. Convertible instruments are valued by disaggregating the
convertible feature from the debt instrument and valuing it using a
Black-Scholes model;
-- Preference shares are valued at cost and using a different
fair value methodology would not result in a material difference ;
and
-- the Company adopted the latest IPEV guidelines effective from
1 January 2019 and in addition, the company adopted the IPEV
special valuation guidelines issued in March 2020 in response to
the significant uncertainty surrounding the Coronavirus
pandemic.
Notes to the financial information
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.
Impairment of financial assets
Expected credit losses are required to be measured through a
loss allowance at an amount equal to:
-- the 12-month expected credit losses (expected credit losses
from possible default events within 12 months after the reporting
date); or
-- full lifetime expected credit losses (expected credit losses
from all possible default events over the life of the financial
instrument).
A loss allowance for full lifetime expected credit losses is
required for a financial instrument if the credit risk of that
financial instrument has increased significantly since initial
recognition, as well as to contract assets or trade receivables
that do not constitute a financing transaction.
For all other financial instruments, expected credit losses are
measured at an amount equal to the 12-month expected credit
losses.
Impairment losses on financial assets carried at amortised cost
are reversed in subsequent periods if the expected credit losses
decrease.
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.
Notes to the financial information
1. Principal accounting policies (continued)
Operating and other receivables
Operating and other receivables are recognised initially at fair
value. Subsequent to initial recognition, they are measured at
amortised cost using the effective interest method, less any
impairment losses. The assets held at amortised cost are
immaterial.
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.
Notes to the financial information
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 gains/(losses) on investments
The gains and losses on investments were as follows:
Six months ended 30 June 2021 Six months ended 30 June 2020
--------------------------------------------- ---------------------------------------------
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 - 88 88 (335) (257) (592)
Unquoted (5) (745) (750) 6 (1,171) (1,165)
Funds - 1,877 1,877 - (3,450) (3,450)
---------------- ---------------- ---------
(5) 1,220 1,215 (329) (4,878) (5,207)
---------------- ---------------- --------- ---------------- ---------------- ---------
Credit for incentive plans 43 64
--------- ---------
1,258 (5,143)
Net (losses)/gains on foreign currency (168) 672
Operating and similar
expenses of subsidiaries (116) (325)
--------- ---------------- ---------------- ---------
974 (4,796)
------------------------------------------------- --------- ---------------- ---------------- ---------
Notes to the financial information
2. Net gains/(losses) on investments (continued)
In September 2020, a subsidiary of the Company deposited GBP7
million for an investment in Dacian Petroleum, a Romanian oil and
gas production company. The completion of the transaction is
subject to regulatory and local government approvals in Romania,
which are progressing. The GBP7 million investment is structured
primarily as debt with a 7-year maturity and bearing interest at
14% per annum from 20 September 2020. The subsidiary has not
recognised the interest income of GBP0.7 million as the transaction
was not complete at 30 June 2021 but continues to believe it is
probable that the approvals will be obtained and the transaction
will close.
3. Profit/(loss) per ordinary share
The calculation of the basic and diluted profit/(loss) per
share, in accordance with IAS 33, is based on the following
data:
Six months ended
----------------------------------
30 June
30 June 2021 2020
GBP'000 GBP'000
-------------------------------------------- ---------------- ----------------
Profit/(loss)
Profit/(loss) for the purpose of
net profit/(loss) per share attributable
to equity holders of the parent 138 (6,069)
Number of shares
Weighted average number of ordinary
shares for
the purposes of basic profit/(loss)
per share 80,727,450 80,727,450
Profit/(loss) per share
Basic 0.2p (7.5p)
Diluted 0.2p (7.5p)
--------------------------------------------- ---------------- ----------------
4. Dividends
Dividends declared during the period ending 30 June 2021 and 30
June 2020 are as follows.
Dividend Dividend
Dividend date Payment date GBP'000 pence per share
--------------------------- ------------------- ------------------ ---------- ------------------
Special interim dividend 20 December 2019 14 January 2020 3,431 4.25
--------------------------- ------------------- ------------------ ---------- ------------------
Total as at 30 June 2020 3,431 4.25
Final dividend 21 May 2021 14 June 2021 484 0.6
Total as at 30 June 2021 484 0.6
-------------------------------------------------------------------- ---------- ------------------
The Board has approved the interim dividend for the 2021 year of
0.3 pence per share to be paid on 15 September 2021.
Notes to the financial information
5. Investments
The Company's investments comprised the following:
30 June 31 December
--------- -------------
2021 2020
GBP'000 GBP'000
Total investments 71,054 70,610
--------------------------------------- --------- -------------
These comprise:
Investment portfolio of the Company - 755
Investment portfolio of subsidiaries 21,415 21,438
--------------------------------------- --------- -------------
Investment portfolio total 21,415 22,193
Other net assets of subsidiaries 49,639 48,417
71,054 70,610
--------------------------------------- --------- -------------
The carrying amounts of the Company and its subsidiaries
investment portfolios were as follows:
30 June 31 December
-------------------- --------------------
Investment portfolio of the Company 2021 2020
Asset type GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- --------- --------- --------- ---------
Quoted - -
Unquoted - 755
Funds - -
---------------------------------------- --------- --------- --------- ---------
- 755
Investments portfolio of subsidiaries
Asset type
---------------------------------------- --------- --------- --------- ---------
Quoted 285 197
Unquoted 7,568 9,383
Funds 13,562 11,858
---------------------------------------- --------- --------- --------- ---------
Investment portfolio of subsidiaries 21,415 21,438
Other net assets of subsidiaries 49,639 48,417
---------------------------------------- --------- --------- --------- ---------
71,054 71,054 69,855 69,855
---------------------------------------- --------- --------- --------- ---------
71,054 70,610
---------------------------------------- --------- --------- --------- ---------
Notes to the financial information
5. Investments (continued)
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 2020 8,421 9,713 14,107 32,241
Purchases 424 249 906 1,579
Proceeds from disposals (7,715) - - (7,715)
Distributions from partnerships - (894) (965) (1,859)
Fair value adjustments (933) 1,070 (2,190) (2,053)
----------------------------------- ------------ ------------ --------- ---------
Balance at 31 December 2020 197 10,138 11,858 22,193
----------------------------------- ------------ ------------ --------- ---------
Balance at 1 January 2021 197 10,138 11,858 22,193
Proceeds from disposals - (750) - (750)
Distributions from partnerships - (1,471) (216) (1,687)
Contribution from partnership - - 43 43
Fair value adjustments 88 (750) 1,877 1,215
Other adjustment* - 401 - 401
------------ ------------ --------- ---------
Balance at 30 June 2021 285 7,568 13,562 21,415
----------------------------------- ------------ ------------ --------- ---------
*The Company's 31 December 2020 unquoted securities investment
fair value included a provision for overseas tax on dividends
expected to be received. That dividend was received in the first
half of 2021, and the remaining liabilities of GBP0.4 million
related to this tax have been reclassified to current liabilities
at 30 June 2021. This reclassification is included in the Other
adjustments line in the table above.
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.
Notes to the financial information
5. Investments (continued)
The significant unobservable inputs used at 30 June 2021 in
measuring investments categorised as level 3 in this note are
considered below:
1. Unquoted securities (carrying value GBP7.6 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 in the range 4-8 times dependent on the
business of each individual company, its performance and the sector
in which it operates;
-- revenue multiples in the range 0.3-4.0 times, also dependent
on attributes at individual investment level; and
-- discounts applied of up to 90%, to reflect the illiquidity of
unquoted companies compared to similar quoted companies. The
discount used requires the exercise of judgement taking into
account factors specific to individual investments such as size and
rate of growth compared to other companies in the sector.
2. Investments in funds (carrying value GBP13.6 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 2021). 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.
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.
Notes to the financial information
5. Investments (continued)
The Company's investments are analysed as follows:
30 June 31 December
--------- -------------
2021 2020
GBP'000 GBP'000
---------- --------- -------------
Level 1 - -
Level 2 - 755
Level 3 71,054 69,855
---------- --------- -------------
71,054 70,610
---------- --------- -------------
The reconciliation between opening and closing balance of level
3 assets are presented in the table below:
30 June 31 December
--------- -------------
2021 2020
GBP'000 GBP'000
------------------------------------------- --------- -------------
Opening balance 70,610 127,647
Unrealised gains/ (losses) 2,088 (56,757)
Purchases, sales, issues and settlements (1,644) (280)
Closing balance 71,054 70,610
------------------------------------------- --------- -------------
Level 3 amounts include GBP21,415,000 (2020: GBP21,438,000)
relating to the investment portfolios of subsidiaries including
quoted investments of GBP285,000 (2020: GBP197,000) and GBP 49,639
,000 (2020: GBP48,417,000) in relation to the other net assets of
subsidiaries.
There were no transfers between levels during the period ending
30 June 2021.
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 2021
would have decreased by GBP7.1 million (2020: GBP7.0 million). An
increase in the valuation of level 3 category investments by 10% at
the reporting date would have an equal and opposite effect.
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.
Notes to the financial information
6. Capital commitments
30 June 31 December
--------- -------------
2021 2020
GBP'000 GBP'000
----------------------------------- --------- -------------
Outstanding commitments to funds 2,717 2,717
2,717 2,717
----------------------------------- --------- -------------
The outstanding commitments to funds comprise of unpaid calls in
respect of funds where a subsidiary of the Company is a Limited
Partner.
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 2020: GBP210,097) and the Directors fee of the
subsidiaries was GBP21,734 (June 2020: GBP24,177).
With effect from 24 June 2020, the Company entered into a lease
agreement with The Rayne Foundation in respect of the premises
comprising its principal office. Under the terms of the lease, the
Company paid rent of GBP24,585 (2020: GBP16,390) to The Rayne
Foundation. Robert Rayne is the Chairman of The Rayne
Foundation.
As at 30 June 2021, 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
--------------------------- ---------------------------
2021 2020
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
Notes to the financial information
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 (General Partner) 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 address of the Company's subsidiaries are
as follow:
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
--------------------------------------- ------------ -------------
2021 2020
GBP'000 GBP'000
--------------------------------------- ------------ -------------
Net asset value (GBP'000) 47,592 47,923
Number of ordinary shares in issue 80,727,450 80,727,450
Net asset value per share (in pence) 59.0 pence 59.4 pence
---------------------------------------- ------------ -------------
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 26-27 of the Company's Annual
Report for the period ended 30 December 2020 continued in office
during the six months ended 30 June 2021.
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
2 August 2021
INDEPENDENT REVIEW REPORT TO LMS CAPITAL PLC
Introduction
We have been engaged by the Company to review the condensed set
of Financial Statements in the half-yearly financial report for the
six months ended 30 June 2021 which comprises the 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.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of Financial Statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and
has been approved by the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual Financial Statements of the
group will be prepared in accordance with UK adopted international
accounting standards. The condensed set of Financial Statements
included in this interim financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Our responsibility is to express to the Company a conclusion on
the condensed set of Financial Statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of Financial Statements
in the half-yearly financial report for the six months ended 30
June 2021 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.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting its responsibilities in
respect of half-yearly financial reporting in accordance with the
Disclosure 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
2 August 2021
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
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END
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