LMS Capital PLC Company Update and NAV Estimate as at 31 Dec 2019 (4394B)

TIDMLMS

RNS Number : 4394B

LMS Capital PLC

30 January 2020

30 January 2020

LMS Capital plc

Company Update and NAV Estimate as at 31 December 2019

LMS Capital plc (the "Company") the listed Investment Company provides the following Company update and estimate of net asset value as at 31 December 2019.

Company update

The new Board appointed on 28 November 2019 is pleased to report that in the two months since the shareholder meeting the Company has commenced making the necessary changes to transition to internal management.

- As reported in its announcement on 29 November 2019, the Company submitted a request to the FCA for registration as an AIFM, which is necessary for internal management. The Company was notified on 20 December 2019 that the FCA is minded to approve the application for registration as an AIFM, subject to the Company agreeing early termination of the Gresham House Asset Management Limited ("GHAM") contract;

- On 29 January 2020, the Company agreed with GHAM to terminate the GHAM contract with immediate effect upon the entry of the Company on the register of small registered UK AIFMs maintained by the FCA, at which point the Company will be internally managed. The Company expects this to happen imminently;

- The Company is actively considering a number of proposals which may lead to investments during the first half of 2020; and

- In addition, prior its appointment the new Board indicated it would pay a special dividend of 4.25p per share if appointed. This dividend was paid on 15 January 2020.

Further information on the Company's new internal management arrangements, investment approach and its pipeline of opportunities will be provided in the Company's full results announcement in March 2020.

Net Asset Value estimate

The Company has commenced the year end valuation review process which is based on the latest performance updates from portfolio companies and third-party fund manager valuations. The Board currently estimates that the year-end net asset value ("NAV"), after deducting GBP3.4 million (4.25p per share) for the special dividend paid on 15 January 2020, will be in the region of GBP52.6 million (65.1p per share). Prior to accounting for the dividend, NAV at 31 December 2019 would be in the region of GBP56.0 million (69.4p per share); this compares to GBP58.7 million (72.7p per share) at 30 September 2019, GBP59.1 million (73.3p per share) at 30 June 2019 and GBP60.3 million (74.7p per share) at 31 December 2018.

This estimate reflects information currently available to the Board on the performance and prospects of individual investments in the Company's portfolio and is subject to further evaluation as well as completion of the annual audit.

The valuation methodology and policy adopted is consistent with prior years and is in line with IPEV guidelines.

The GBP3.1 million reduction in NAV, before accounting for the special dividend, compared to the half year comprises the following principal elements:

-- A reduction in the investment portfolio of GBP(0.6), being unrealised foreign exchange losses arising from the weakening of the US Dollar compared to sterling in the period 30 June 2019 to 31 December 2019;

-- Realised foreign currency gains of GBP0.6 million on the sale of US Dollars principally from the sale of Entuity in August 2019;

-- Excluding the effect of foreign exchange rate changes, the portfolio showed a net loss of GBP(0.6) million in the second half of 2019:

o an increase of GBP2.5 million in the net proceeds on the sale of Entuity in August, with a corresponding increase in the NAV, over and above the net proceeds anticipated in the 30 June 2019 valuation;

o an increase of GBP1.2 million in the market valuation of quoted stocks, principally Solaredge and IDE Group;

o other portfolio gains of GBP0.6 million;

o a reduction of GBP(2.8) million in the value of YesTo. This reduction reflects a deterioration in trading during 2019, the requirement to make changes in the company's management and operating structure and the need to provide additional working capital finance;

o a reduction of GBP(2.1) million in the value of Medhost reflecting a corresponding reduction in value by Primus, the lead investment manager, in its latest available fund report; and

   --    Other movements were a reduction of GBP2.5 million being: 

o Overheads of GBP1.1 million in the second half of 2019. Full year 2019 overheads were GBP1.8 million (GBP1.5 million in 2018) and increased over the prior year primarily due to the cessation in August 2019 of a credit of GBP0.3 million per year, as required by GAAP, arising from amortising shares received by the Company from GHAM at the inception of the management contract;

o One-off exceptional costs of GBP1.4 million, in relation to the resetting of the Company's investment strategy and its return to internal management;

The one-off exceptional costs arise from the review of the investment management arrangements which culminated in the General Meeting on 28th November 2019. They include:

-- the costs of the former independent directors in running a tender process for the Company's investment management arrangements (as referenced in the Company's announcement on 26 July 2019);

-- the costs of the circular and other shareholder communications, both for and against the proposals, leading up to the general meeting;

-- other advisory costs incurred by the parties in the course of seeking to resolve the differences of view as to the investment management arrangements for the Company; and

-- provision for amounts payable to GHAM for the period January 2020 to May 2020 in accordance with the termination arrangements agreed between the Company and GHAM.

Further information on the performance of the portfolio, underlying investment valuations and changes during the current year will be included in the Company's audited results for the year ended 31 December 2019, which it expects to announce in March 2020.

Group cash balances at 31 December 2019 were GBP26.7 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

Nick Friedlos, Managing Director 020 7935 3555 or 0207 938 2440

Shore Capital

Robert Finlay 0207 405 4850

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 [e-mail] or visit www.rns.com.

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January 30, 2020 05:21 ET (10:21 GMT)