PLUS1
| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Lms Capital Plc | NEX:LMS.GB | NEX | Ordinary Share | GB00B12MHD28 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.0% | 49.05 | 45.60 | 52.50 | 49.198 | 47.629 | 49.05 | 45,187 | 16:30:08 |
| Industry Sector | Turnover (m) | Profit (m) | EPS - Basic | PE Ratio | Market Cap (m) |
|---|---|---|---|---|---|
| - | - | - | - |
LMS Capital PLC Results for the six months ended 30 June 2019
02/08/2019 12:30pm
UK Regulatory (RNS & others)
Lms Capital (NEX:LMS.GB)
Historical Stock Chart
6 Months : From Jun 2019 to Dec 2019
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
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