LMS Capital PLC Third Quarter 2022 Update (4183E)

TIDMLMS

RNS Number : 4183E

LMS Capital PLC

28 October 2022

28 October 2021

LMS CAPITAL PLC

Third Quarter 2022 Update

LMS Capital plc (the "Company") the listed Investment Company, provides the following update covering the period from 30 June 2022 to date.

Financial Highlights

-- Unaudited Net Asset Value ("NAV") at 30 September 2022 was GBP48.8 million (60.5p per share). This compares to GBP47.0 million (58.2 p per share) at 30 June 2022, an increase in the quarter of 4.5% after adjusting for dividends paid;

   --    Interim dividend of GBP0.2 million (0.3p per share) paid in September 2022; and 

-- Cash at 30 September 2022 was GBP18.4 million (22.8p per share) compared to GBP18.9 million (23.5p per share) at 30 June 2022.

The portfolio overall has benefitted from unrealised foreign exchange gains in the quarter with a small net increase in underlying valuations.

As we enter a period of further economic uncertainty our significant cash balances put us in a strong position to evaluate and make the most of opportunities in our chosen sectors.

Unaudited Net Asset Value at 30 September 2022

After adjusting for dividends paid in the quarter of GBP0.2 million, the net increase in NAV during the quarter was GBP2.0 million, comprising the following:

-- Unrealised foreign exchange ("FX") gains of GBP2.1 million on the investment portfolio. The US dollar strengthened by approximately 8.3% against sterling during the quarter. Approximately 75% of the Company's investments are US dollar denominated;

   --    Underlying gains and accrued income on the investment portfolio were GBP0.4 million; 

-- Non portfolio foreign exchange gains of GBP0.2 million, running costs of GBP0.4 million, and investment related costs of GBP0.1 million.

The 30 September 2022 NAV is summarised below:

 
                                   Unaudited       Unaudited 
                                  30 September    30 June 2022 
                                      2022 
                                           GBP 000s 
                                ------------------------------ 
 Quoted Investments                   197                  182 
                                --------------  -------------- 
 Unquoted Investments               17,501              16,093 
                                --------------  -------------- 
 Funds                              15,204              13,970 
                                --------------  -------------- 
 Subtotal Investment 
  portfolio                         32,902              30,245 
                                --------------  -------------- 
 
 Cash                               18,377              18,932 
                                --------------  -------------- 
 Other Net Assets/Liabilities       (2,440)            (2,216) 
                                --------------  -------------- 
 Net Asset Value                    48,839              46,961 
                                --------------  -------------- 
 

The NAV at the end of September is based on the valuation of the Company's investments as at 30 June 2022, adjusted for transactions in the three months ended 30 September 2022, price movements on quoted securities, movements in foreign currency exchange rates, cash calls and distributions from funds, and the latest information available from third party fund managers.

Portfolio Net Gains

The portfolio net unrealised gains during the quarter to 30 September were GBP2.5 million, of which GBP2.1 million were unrealised foreign exchange gains and GBP0.4 million were net unrealised gains in underlying investment valuations. The movements, are summarised below:

Quoted Investments - GBP0.2 million (30 June 2022 - GBP0.2 million)

The Company's quoted investment valuation has not changed materially since the 30 June 2022. The principal investment is a small holding in IDE Group Limited.

Unquoted Investments - GBP17.5 million (30 June 2022 - GBP16.1 million)

The Company's unquoted investments showed unrealised FX gains of GBP1.4 million and an unrealised loss in the underlying investment valuations of GBP0.2 million.

The principal holdings are Dacian Petroleum, Medhost, Elateral and ICU, managed by San Francisco Equity Partners.

 
 Investment           Currency                                      30 Sept.        30 June 
                                                                     2022            2022 
                                                                     GBP' million    GBP' million 
                                   Onshore oil and gas 
                                    production assets in 
 Dacian Petroleum     USD           Romania                             10.6             9.4 
                     -----------  -------------------------------  --------------  -------------- 
                                   Provides cloud based 
                                    enterprise and departmental 
                                    management and healthcare 
                                    engagement solutions 
                                    to community hospitals 
 Medhost              USD           in the US.                           5.8             5.3 
                     -----------  -------------------------------  --------------  -------------- 
                                   UK/US software company 
                                    in the digital marketing 
                                    sector providing marketing 
 Elateral             Sterling      content management solutions         0.6             0.6 
                     -----------  -------------------------------  --------------  -------------- 
                                   Design and distribution 
                                    of eyewear, principally 
                                    reading glasses, through 
 ICU                  USD           large US retailers                   0.3             0.6 
                     -----------  -------------------------------  --------------  -------------- 
                      USD/ 
 Other investments     Sterling                                          0.2             0.2 
                     --------------------------------------------  --------------  -------------- 
 Total                                                                  17.5            16.1 
                                                                   --------------  -------------- 
 

Dacian - The increase in valuation since the half year comprises unrealised FX gains of GBP0.9 million and accrued loan interest of GBP0.3 million. The acquired portfolio of onshore oil and gas wells has now been operated by the Dacian team for 10 months. As reported at the half year, a build up of backlog maintenance prior to Dacian's ownership has required remediation and has diverted the team from some of its planned workover activity during the year. The team is gradually managing the reactive maintenance needs and has conducted some workover projects achieving an increase in production since commencing operations in November 2021. The business is EBITDA positive and cash generative and has benefitted from strong energy prices during the year.

Medhost - The increase in valuation of GBP0.5 million arises from unrealised FX gains, the underlying investment valuation is unchanged from the half year. The company operates in a mature market and continues to be profitable and cash generative and performing in line with budget.

Elateral - The valuation is unchanged from half year. During the quarter Elateral received some additional working capital finance from investors, of which LMS' share was GBP0.2 million.

ICU (managed by San Francisco Equity Partners) - The reduction of GBP0.3 million during the quarter principally comprises a reduction in the underlying valuation reflecting concerns around progress with an exit process that has been underway for several months. Greater clarity around the outcome is anticipated by the year end.

Funds - GBP15.2 million (30 June 2022 - GBP14.0 million)

The Company's fund investments showed unrealised foreign exchange gains of GBP0.7 million and a gain in the underlying asset valuations of GBP0.6 million.

The Company's fund investments include its holding in Brockton Capital Fund I, Opus Capital Partners, Weber Capital Partners ("Weber") and five other smaller fund interests.

 
 Investment           Currency                                       30 Sept.        30 June 
                                                                      2022            2022 
                                                                      GBP' million    GBP' million 
                                   UK real estate fund, 
                                    the remaining asset 
 Brockton                           of which is a debt investment 
  Capital Fund                      in a high end London 
  1                   Sterling      residential development               6.4             6.0 
                     -----------  --------------------------------  --------------  -------------- 
 Opus Venture                      Early-stage technology 
  Capital Fund                      fund with two principal 
  2                   USD           remaining assets                      5.8             5.4 
                     -----------  --------------------------------  --------------  -------------- 
                                   US listed microcap investment 
                                    fund focussed primarily 
 Weber Capital                      on medical and technology 
  Partners            USD           sectors                               2.3             1.8 
                     -----------  --------------------------------  --------------  -------------- 
                      USD/ 
 Other investments     Sterling                                           0.7             0.8 

                     ---------------------------------------------  --------------  -------------- 
 Total                                                                   15.2            14.0 
                                                                    --------------  -------------- 
 

Brockton - The increase in valuation since the half year comprises the third quarter movement in the discounted cash flow valuation of this asset.

Opus - The increased valuation comprises unrealised FX gains of GBP0.5 million less a reduction of GBP0.1 million in the underlying valuation by the third party manager. The reduction in the underlying valuation reflects movement in the general market benchmark values used by the manager for valuation purposes.

Weber - The increased valuation since the half year comprises unrealised FX gains of GBP0.2 million and gains in the underlying market value of the portfolio of GBP0.3 million. Notwithstanding general market conditions this fund benefitted during the quarter from a significant increase in market value of one of its holdings.

The carrying value of the funds is based on the latest available information from the respective fund managers, generally the 30 June 2022 fund valuation reports except for Weber, which is based on a 30 September 2022 valuation.

Portfolio Realisations

There were no portfolio realisations or fund distributions during the third quarter.

The information contained in this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon publication of this announcement, this inside information is now considered to be in the public domain.

For further information please contact:

LMS Capital PLC - Nick Friedlos, Managing Director

0207 935 3555

Shore Capital - Robert Finlay

0207 408 4050

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October 28, 2022 02:00 ET (06:00 GMT)