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RNS
LMS Capital PLC  -  LMS   

Final Results

Released 07:00 18-Mar-2013

RNS Number : 1672A
LMS Capital PLC
18 March 2013
 



18 March 2013

 

LMS Capital plc

Preliminary Results for the year ended 31 December 2012

 

The Board of LMS Capital plc, ("LMS Capital" or "the Company"), is pleased to announce the Company's preliminary results for the year ended 31 December 2012.

 

·    The Net Asset Value at 31 December 2012 was £192.1 million, (31 December 2011: £245.0 million), per share 85p (31 December 2011: 90p).

 

·      £40 million returned to shareholders by way of a tender offer at 84 pence per share. 

 

·      £43.2million of proceeds realised in the year.

 

·      Unrealised gains on the unquoted and funds portfolio of £8.0 million were offset by adverse price movements on a number of our quoted investments of £5.5 million and unrealised currency losses of £5.6 million.

 

·       Overheads (excluding one-off items) were reduced from £7.9 million in 2011 to £4.4 million in 2012.

 

·    The investment management business loss for the year was £12.2 million (2011: loss of £0.4 million).

 

·    At the date of this report the US dollar has strengthened relative to pound sterling such that the unrealised currency losses incurred in 2012 have reversed.

 

·    Outstanding fund commitments reduced from £18.9 million to £10.4 million over the year.

 

·    Realisations have continued in 2013; on 12 March we announced the sale of our interest in Apogee for cash proceeds of £16 million and Pims Group, a co-investment, has been sold with proceeds to us of £3.3 million. Both transactions were at or above our December 2012 carrying value.

 

 

 

Richard Christou, Chairman of LMS Capital, said: 

 

"During 2012 the Board made satisfactory progress in implementing the asset realisation strategy approved by shareholders in November 2011. We acted to reduce costs and made a first distribution to shareholders in November. The economic background remains difficult, but the Board believes that the Company's plans for the orderly wind-down of the business should continue to deliver value to shareholders.

 

As a consequence of the change in strategy the Board was reconstituted at the beginning of 2012. Given the reducing size of the Company, the consequent need to reduce overheads and the successful commencement of the realisation strategy, Mark Sebba and I have decided not to stand for re-election at the forthcoming Annual General Meeting.  I am delighted that Martin Knight has agreed to take over as Chairman."

 

Martin Knight, Chairman designate of LMS Capital, said: 

 

"I should like to thank Richard and Mark for their contribution to the Company - Richard has been a director of the Company since the demerger in 2006 and Mark since 2010. Both have played a significant part in the work of the Board and its committees, most recently including the transition to the revised strategy. I look forward to continuing with the realisation strategy to achieve an efficient return of cash and optimise value to shareholders."

 

 

For further information please contact:

 

LMS Capital plc

020 7935 3555

 

Nick Friedlos, Director


Tony Sweet, Chief Financial Officer

 


J.P. Morgan Cazenove

020 7742 4000

Michael Wentworth-Stanley

 


MHP Communications

020 3128 8794

Tim McCall


Katie Hunt

 


 

About LMS Capital

 

LMS Capital is an investment company which, following a general meeting on 30 November 2011, is undertaking a realisation strategy with the aim of achieving a balance between an efficient return of cash to shareholders and optimising the value of the Company's investments. Its investment portfolio consists of small to medium sized companies in the consumer, energy and business services sectors.

 

www.lmscapital.com

 

 

Chairman's statement

 

 

2012 was the first year of the realisation strategy approved by shareholders at the general meeting on 30 November 2011. The change of strategy is intended to provide liquidity for shareholders and achieve a balance between an efficient return of cash to shareholders and maximising the value of the Company's investments. More information on the implementation of this revised strategy is set out in the Operating Review.

 

Your Board made satisfactory progress in implementing this change in strategy during the year and the Directors believe that the Company's plans for the orderly wind-down of the business should continue to deliver value to shareholders.

 

Results

 

During 2012 the Company received proceeds of £43.2 million from its investment portfolio and In November your Board was able to announce a first return to shareholders under the realisation strategy by way of a tender offer. This completed at the beginning of December and returned £40 million to shareholders, retiring 47.6 million shares at 84 pence per share being 17.4% of shares in issue before the tender. This was a satisfactory result against the background of the uncertain economic environment.

 

The Board is not recommending payment of a dividend for the year ended 31 December 2012 (2011: £nil).

 

Net Asset Value per share at the end of 2012 was 85 pence, a decrease of 6% from a year ago.  Adverse movements in some of our quoted investments and a 4% movement in the US dollar exchange rate relative to pound sterling were factors in this. At the date of this statement, we have seen a reversal of the negative currency impact seen last year.

 

The investment portfolio at 31 December 2012 was valued at £179.3 million (31 December 2011: £218.5 million); cash at 31 December 2012 was £20.1 million (31 December 2011: £30.6 million). The Company has no borrowings.

 

The Group as a whole (including consolidation of the portfolio subsidiaries) showed a consolidated loss for the year from continuing operations of £12.9 million (2011: loss of £1.0 million).

 

Board and management

 

The change in strategy has placed special demands on a smaller management team and your Board would like to extend its appreciation to all the Company's employees for their contribution in 2012.

 

As a consequence of the change in strategy the Board was reconstituted at the beginning of 2012. Given the

reducing size of the Company, the consequent need to reduce overheads and the successful commencement of the realisation strategy, Mark Sebba and I have decided not to stand for re-election at the forthcoming Annual General Meeting.  I am delighted that Martin Knight has agreed to take over as Chairman.

 

As the asset base of the business diminishes, continued steps are being taken to reduce overheads and further changes in our management structure will be implemented in the first half of 2013.

 

Outlook

 

To date in 2013 we have seen further realisations and your Board believes that the investment portfolio will continue to release cash to shareholders. The economic background remains uncertain, but on the basis that there is no significant worsening of the business environments in the UK and the US your Board expects to progress the orderly wind-down of the business in the coming year and will focus on optimising value and cash flow for the benefit of shareholders.

 

 

 

Richard Christou

Chairman

18 March 2013

 

 

Operating review

 

This review provides an update on progress during 2012 with the realisation strategy approved by shareholders in November 2011.

 

Corporate strategy and investment policy

 

At the general meeting on 30 November 2011 shareholders approved proposals to modify the Company's objectives and its investment policy. The revised investment policy is to conduct an orderly realisation of the assets of the Company, to be effected in a manner that seeks to achieve a balance between an efficient return of cash to shareholders and maximising the value of the Company's investments.

 

Accordingly, no investments will be made in new opportunities. Follow-on investments will be made in existing assets to honour commitments made at the time of the initial investment and/or to which the Company is legally obligated, or where the investment is made to protect or enhance the value of an existing asset or to facilitate its orderly realisation. The portfolio as a whole will be managed with a view to progressively returning funds to shareholders over a period of time.

 

At the beginning of 2012, immediately following the change in strategy, the Directors:

·    reviewed the realisation prospects for each portfolio holding in the context of seeking to achieve a balance between an efficient return of cash to shareholders and maximising the value of the Company's investments;

·    established a plan to focus on the realisation of key investments; and

·    reduced the operating costs of the Company - this principally took the form of headcount reductions. As the asset base decreases the Board will continue to seek to reduce operating costs.

 

Asset realisation and cost reduction plans are kept under regular review by the management team and the Board in the light of progress on particular investments and market developments. We continue to monitor opportunities within the secondary market, in particular for our fund interests.

 

Realisations and cash

 

Realisations from the portfolio in the year totalled £43.2 million. This came from a number of sources as noted below and included £18.1 million from the sale of the investment in Method, held through San Francisco Equity Partners.

 

Outstanding uncalled commitments to funds were reduced by £8.5 million, reflecting not only fund calls in the year but also the sale at book value of a fund at an early stage of its investment period with a large outstanding commitment, as well as the renegotiation of commitments where possible.

 

In November 2012 the Directors made the first return of cash to shareholders under the realisation strategy by way of a tender offer, and aim to make further realisations to enable a distribution to shareholders during 2013. The Directors' current expectation is that the realisation of the portfolio is likely to be substantially completed in some two to four years, in line with previously disclosed estimates.

 

Shareholders should note that whilst these are the best estimates of the Board as at the date of this report, they are subject to a number of uncertainties including general market conditions, the future performance of investee companies, the behaviour of other shareholders in investee companies (where the Company is a minority investor) and the level of activity in the mergers and acquisitions market across the geographies of the Company's assets.

 

The Board will keep shareholders informed on progress through the Company's half-yearly and annual reports, and significant individual realisations will be announced as appropriate.

 

Results and review of portfolio

 

NAV per share declined over the year by 5 pence. Underlying this, the unquoted investments and funds have shown a value increase of £8.0 million, offset by the negative share price performance of our quoted investments of £5.5 million and unrealised currency losses of £5.6 million. We have also implemented and recognised in these accounts our carried interest arrangements resulting in a non-cash charge of £3.1 million.  Overheads including restructuring costs were £5.3 million (2011: £12.9 million).

 

Our key reportable metrics are:

 



2012

2011

2010

Net (loss)/profit (£m)


(12.2)

(0.4)

17.6

NAV per share (pence)


85

90

90

Cash from realisations (£'million)


43.2

62.7

24.3

 

The above table sets out the results of our investment management business as defined in Note 2 to our financial statements.

 

 

Quoted investments

 

At the end of 2012 our quoted holdings were valued at £17.1 million (2011: £24.2 million), of which our interest in Weatherford International, at £14.1 million, continues to be the principal element.

 

The Weatherford International share price performed poorly in 2012 - the price in US dollars at the end of December 2012 was 24% lower than at 31 December 2011 and (excluding currency effects) this reduced our NAV per share year on year by 2p.

 

Proceeds from sales of other quoted holdings during the year were £0.8 million (2011: £31.6 million, which included £22.9 million from the sale of our interest in ProStrakan Group).

 

Fund interests

 

The maturity of our funds portfolio is reflected in the related cash flows during 2012. Distributions from funds were £32.2 million (2011: £11.7 million) and calls paid were £5.3 million (2011: £13.1 million). Distributions included £18.1 million from San Francisco Equity Partners ("SFEP") following its sale of Method in the third quarter.

 

Our uncalled fund commitments continue to decrease and at 31 December 2012 stood at a maximum of £10.4 million, down from £18.9 million at the end of 2011.

 

Our fund holdings at the end of 2012 had a book value of £56.3 million (2011: £63.5 million), excluding SFEP, and include the following principal interests:

 




31 December


General partner



2012

2011





£ million

£ million


Brockton Capital

UK property


13.0

15.8


BV investments

US buyouts


8.1

10.9


Voreda Capital

UK property


5.3

5.3


Primus Capital

US buyouts


5.1

4.7


Opus Capital Venture Partners

US venture capital


3.7

3.2


Amadeus Capital Partners

UK venture capital


3.2

3.8


CMEA Ventures

US venture capital


2.4

3.3


 

The above holdings represent 72% (2011: 74%) of the funds portfolio (excluding SFEP).

 

At the end of 2012 the carrying value of our interest in SFEP was £20.2 million (2011: £41.4 million) and the principal investments in its portfolio are Yes To (£8.3 million - consumer sector), Penguin Computing (£4.2 million - technology sector) and Luxury Link (£4.2 million - consumer sector).

 

 Direct investments

 

We received £6.2 million when our US co-investment Rave Reviews Cinemas was sold and £2.2 million from the sale of our small interest in Agilisys, a provider of outsourcing services principally to the public sector. We have recognised net valuation increases of £6.7 million, principally in relation to:

 

·     Updata, which continued to expand its operations during the year and gained a significant number of contract wins. Our carrying value has increased to £14.5 million (2011: £12.7 million).

 

Our other large holdings are as follows:

 

·     HealthTech Holdings has continued to perform strongly in 2012 but lower valuation multiples of comparable quoted companies has resulted in no significant change to our carrying value.

 

·     Nationwide Energy Partners has continued to increase the number of its revenue generating metered units, the full benefit of which will be reflected in its results in 2013 and beyond.

 

We made only one follow-on investment during 2012 - we increased our direct investment in Zoom Eyeworks (a portfolio company of SFEP) by £2.0 million in connection with the refinancing of its third party borrowing facility.

 

Our principal direct investments at book value are:

 




31 December





2012

2011





£ million

£ million


HealthTech Holdings

US technology


22.3

23.9


Apogee Corporation

UK technology


15.0

11.5


Updata Infrastructure

UK technology


14.5

12.7


Nationwide Energy Partners

US energy


10.0

10.5


Entuity

UK technology


4.0

4.0


Wesupply

UK technology


3.3

3.3


 

The above holdings represent 81% (2011: 74%) of the direct portfolio.

 

 

Financial review

 

Basis of preparation of financial information

 

The financial statements have not been prepared on a going concern basis as the Company is seeking to realise the investment portfolio, return the capital to shareholders and then liquidate the Company, as outlined in the strategy approved by shareholders on 30 November 2011 - see note 1 to the consolidated financial information.

 

The Company reports its results under International Financial Reporting Standards as adopted for use in the European Union ("Adopted IFRS"), and the consolidated financial statements include the consolidation of portfolio companies which are also subsidiaries ("portfolio subsidiaries"). Since the Board manages the Company as an investment business, this financial review focuses on the results of the investment management operations. Note 2 to the consolidated financial information includes the separate results and net assets of the investment management business. Where appropriate, this review includes comments on the results and financial position of the portfolio subsidiaries.

 

Investment management

 

NAV at 31 December 2012 was £192.1 million (31 December 2011: £245.0 million); NAV per share was 85 pence (31 December 2011: 90 pence). 

 

The Group's return on its investment portfolio for the year ended 31 December 2012 excluding carried interest charges of £3.1 million was a loss of £4.1 million (2011: gain of £8.7 million) as follows:

 





Year ended 31 December





2012


2011

Gains/(losses)




£'000


£'000








Quoted securities




(6,317)


(7,728)

Direct investments




3,517


12,995

Funds




(1,295)


3,467





(4,095)


8,734

Being:







Realised (losses)/gains, net




(1,034)


6,358

Unrealised (losses)/gains, net




(3,061)


2,376

Total




(4,095)


8,734

 

 

Approximately 56% of the portfolio at 31 December 2012 is denominated in US dollars (31 December 2011: 65%) and the above table includes the impact of currency movements. In the year ended 31 December 2012, the weakening of the US dollar against pound sterling (year on year) resulted in an unrealised foreign currency loss of £5.6 million (2011: unrealised gain of £0.3 million). It is the Board's current policy not to hedge the Company's underlying non-sterling investments.

 

The loss on our quoted portfolio reflects the net impact of the changes in the capital markets during the year. Of the total of £6.3 million, £5.3 million is attributable to our holding in Weatherford International.

 

The net gain on our direct investments includes valuation increases of our interests in Apogee, Updata and Pims Group totalling £7.2 million, offset by smaller downward valuation adjustments on other unquoted holdings and foreign currency losses of £2.2 million.

 

Changes in valuations reflect changes in the revenue and profitability multiples of comparable businesses, which are used in the underlying calculations, combined with the operating performance of the individual businesses within the portfolio. In most cases the multiples used are similar to those prevailing at the end of 2011. The unrealised gains or losses for 2012 arise principally as a result of the companies' performance.

 

For the valuation of our fund interests we utilise reports from the general partners of our funds as at the end of the third quarter in establishing our year end carrying value, with adjustments made for calls, distributions and foreign currency movements since that date. We also carry out our own review of individual funds and their portfolios to satisfy ourselves that the underlying valuation bases are consistent with our knowledge of the investments and the sectors in which they operate.

 

As well as the investment portfolio return, the loss for the year of £12.2 million (2011: loss of £0.4 million) includes the items discussed below.

 

Income from investments in the year was £1.2 million (2011: £3.7 million) and comprises interest and dividends from portfolio companies, dividends on quoted securities and management charges made to portfolio companies.

 

Administration expenses for the year were £5.3 million (2011: £12.9 million). The figure for 2012 includes one-off costs of £0.9 million, principally in connection with headcount reductions. 2011 included one-off costs of £5.0 million comprising £1.6 million of charges for professional fees incurred in relation to the change in investment policy of the Company, £0.9 million compensation payments to staff members who left before the end of the year and £2.5 million to provide for the costs of a management fee commitment regarded as onerous following the change in strategy.

 

Interest income for the year was £0.1 million (2011: net expense of £0.1 million) reflecting the fact that the Company repaid its loan facility in May 2011. There was a tax charge for the year of £1.0 million (2011: credit of £0.2 million), being principally withholding tax on distributions from US funds.

 

Investments

 

The Group's investments are carried at fair values determined in accordance with the International Private Equity and Venture Capital Valuation Guidelines.

 

Additions to the investment portfolio during the year were £7.3 million (2011: £19.3  million) of which £5.3 million (2011: £13.1 million) was to meet capital calls from funds and £2.0 million (2011: £3.6 million) for follow-on investments. There were no new investments (2011: £2.6 million). 

 

Proceeds of realisations were £43.2 million (2011: £62.7 million). Distributions from funds were £32.2 million (2011: £11.7 million) including £18.1 million from SFEP following its sale of Method Products in the third quarter. Sales of direct investments were £9.2 million (2011: £4.8 Million) and quoted securities £0.8 million (2011: £31.6 millionwhich included £22.9 million from the sale of our interest in ProStrakan Group).

 

At 31 December 2012 the Group had commitments of £10.4 million (31 December 2011: £18.9 million) to meet outstanding capital calls from its fund interests. Cash in the investment management business was £20.1 million (31 December 2011: £30.6 million) with no debt.

 

Consolidated results

 

Consolidated revenues for the year from continuing operations were £60.8 million (2011: £47.3 million), all in the portfolio subsidiaries. The increase over the previous year reflects the inclusion of 365iTMS for a full year (acquired in September 2011), as well as increased revenues at Entuity, NEP, Updata and Wesupply.  

 

Consolidated operating expenses of continuing operations were £62.8 million (2011: £55.9 million). The increase in operating expenses reflects principally the inclusion of 365iTMS (for a full year), as well as higher costs associated with the revenue growth at most companies.

 

The portfolio subsidiaries continued to make good progress during 2012:

 

·    Updata's revenues in 2012 were 8% higher compared to 2011 with the proportion of rental (contractual) revenues continuing to increase as installation revenues have declined. Operating profits were held back by investment in new contract wins which are expected to come on stream in 2013.

·    Nationwide Energy Partners grew revenues by 25% in 2012, albeit operating profits were flat. The company invested in new contract wins during the year with the benefit expected to be seen in the 2013 results.

·    Wesupply's revenues were 12% ahead of last year with operating profits ahead by more than 50%.

·    Entuity performed well with revenues up by 11% year on year and operating profits benefitting from a lower cost base.

·    365iTMS started the year well but difficult trading conditions impacted revenues and profits in the second half of the year. The company is addressing this in 2013.

 

The consolidated loss from continuing operations was £12.9 million (2011: loss of £1.0 million), the downturn compared to last year being in the investment management business.

 

Financial position

 

The consolidated statement of financial position at 31 December 2012 includes cash and cash equivalents of £26.8 million (31 December 2011: £34.9 million) and borrowings of £15.3 million (31 December 2011: £11.8 million).

 

 

N Friedlos                                                                                                                           A Sweet

Director                                                                                                                               Chief Financial Officer

 

18 March 2013

 

 

 

 

Consolidated income statement

 

 

 


 

 

 

 

Notes

 

Year ended

31 December 2012

£'000

 

Year ended

31 December 2011

£'000






Continuing operations





Revenue from sales of goods and services


 

2

60,762

47,334

Gains and losses on investments


2

(9,472)

7,912

Interest income


 

 

88

65

Dividend income


 

 

130

801

Other income from investments


 

 

308

360




51,816

56,472

Operating expenses


 

 

(62,752)

(55,903)

(Loss)/profit  before finance costs



(10,936)

569

Finance costs


 

 

(758)

(941)

Loss before tax



(11,694)

(372)

Taxation


 

 

(1,201)

(595)

Loss from continuing operations



(12,895)

(967)

Discontinued operations




 

 

Gain from discontinued operations (net of taxation)


 

3

-

2,232

(Loss)/profit for the year



(12,895)

1,265






Attributable to:





Equity holders of  the parent



(12,951)

561

Non-controlling interests



56

704




(12,895)

1,265






(Loss)/earnings per ordinary share - basic


 

4

(4.8)p

0.2p

(Loss)/earnings per ordinary share - diluted                                               


 

4

(4.8)p

0.2p

Continuing operations


 

 



Loss per ordinary share - basic


 

4

(4.8)p

(0.6)p

Loss per ordinary share - diluted


 

4

(4.8)p

(0.6)p

 

 

 

Consolidated statement of comprehensive income

 

 



Year ended

31 December 2012

£'000

Year ended

31 December 2011

£'000

(Loss)/profit for the year


(12,895)

1,265

Exchange differences on translation of foreign operations


(917)

216

Total comprehensive (loss)/profit for the year


(13,812)

1,481





Attributable to:




Equity holders of the parent


(13,401)

777

Non-controlling interests


(411)

704



(13,812)

1,481

 

 

 

Consolidated statement of financial position

 

 



31 December

2012

£'000

31 December

2011

£'000

Non-current assets




Property, plant and equipment


7,367

6,931

Intangible assets


36,694

33,381

Investments


144,419

185,201

Other long-term assets


73

20

Non-current assets


188,553

225,533





Current assets




Inventories


1,975

200

Operating and other receivables


14,751

14,881

Cash and cash equivalents


26,832

34,858

Current assets


43,558

49,939





Total assets


232,111

275,472





Current liabilities




Interest-bearing loans and borrowings


(3,712)

(2,420)

Operating and other payables


(17,482)

(10,163)

Deferred income


(8,758)

(7,221)

Current tax liabilities


(1,055)

(1,406)

Current liabilities


(31,007)

(21,210)





Non-current liabilities




Interest-bearing loans and borrowings


(11,621)

(9,406)

Deferred income


(1,990)

(1,777)

Deferred tax liabilities


(200)

(469)

Provisions and other long-term liabilities


(1,723)

(2,222)

Non-current liabilities


(15,534)

(13,874)





Total liabilities


(46,541)

(35,084)





Net assets


185,570

240,388





Equity




Share capital


22,625

27,268

Share premium


508

17

Capital redemption reserve


10,397

5,635

Merger reserve


84,083

84,083

Foreign exchange translation reserve


665

1,115

Retained earnings


64,642

118,794

Equity attributable to owners of the parent


182,920

236,912

Non-controlling interests


2,650

3,476

Total equity


185,570

240,388

               

 

 

 

Consolidated statement of changes in equity

 


 

 

 

Share capital

£'000

 

 

 

Share premium

£'000

 

 

Capital

redemption

reserve

£'000

 

 

 

Merger

reserve

£'000

 

 

 

Translation

reserve

£'000

 

 

 

Retained earnings

£'000

Total

£'000

Non-controlling

interests

£'000

 

 

 

Total equity

£'000











Balance at

1 January 2011

 

27,265

 

-

 

5,635

 

84,083

 

899

 

117,827

235,709

3,121

238,830

Total comprehensive income for the year










Profit for the year

-

-

-

-

-

561

561

704

1,265

Exchange differences on translation of foreign operations

-

-

-

-

216

-

216

-

216

Changes in ownership interests










Transactions with owners, recorded directly in equity










Distributions to non-controlling interests

-

-

-

-

-

-

-

(582)

(582)

Share-based payments

-

-

-

-

-

406

406

-

406

Shares issued in the year

3

17

-

-

-

-

20

-

20

Balance at 31 December 2011

27,268

17

5,635

84,083

1,115

118,794

236,912

3,476

240,388

Total comprehensive income for the year










Loss for the year

-

-

-

-

-

(12,951)

(12,951)

56

(12,895)

Exchange differences on translation of foreign operations

-

-

-

-

(450)

-

(450)

(467)

(917)

Transactions with owners, recorded directly in equity










Distributions to non-controlling interests

-

-

-

-

-

-

-

(415)

(415)

Share-based payments

-

-

-

-

-

(109)

(109)

-

(109)

Repurchase of shares

(4,762)

-

4,762

-

-

(40,482)

(40,482)

-

(40,482)

Share options exercised in the year

119

491

-

-

-

(610)

-

-

-

Balance at 31 December 2012

22,625

508

10,397

84,083

665

64,642

182,920

2,650

185,570

 

 

Consolidated cash flow statement

 

 

 



Year ended

31 December 2012

£'000

Year ended

31 December 2011

£'000

Cash flows from operating activities








(Loss)/profit for the year


(12,895)

1,265





Adjustments for:




Depreciation and amortisation


3,742

3,505

Losses/(gains) on investments


9,472

(7,912)

Gain on sale of discontinued operations, net of income tax


-

(3,300)

Translation differences


134

557

Share-based payments


(109)

406

Finance costs


758

941

Interest income


(88)

(65)

Income tax expense


1,201

595



2,215

(4,008)

Change in inventories


(1,775)

1,537

Change in operating and other receivables


130

(2,860)

Change in operating and other payables


4,323

4,563



4,893

(768)

Interest paid


(758)

(941)

Income tax paid


(1,552)

(1,458)

Net cash from/(used in) operating activities


2,583

(3,167)





Cash flows from investing activities




Interest received


88

65

Acquisition of property, plant and equipment


(3,690)

(2,628)

Acquisition of deferred installation asset


(4,416)

(2,365)

Disposals of property, plant and equipment


79

39

Disposal of discontinued operations, net of cash disposed of


-

1,079

Acquisition of investments


(7,264)

(15,398)

Acquisition of subsidiaries, net of cash acquired


-

(2,651)

Proceeds from sale of investments


42,500

57,967

Net cash from investing activities


27,297

36,108





Cash flows from financing activities




Issue of new shares


-

20

Repurchase of own shares


(40,482)

-

Drawdown of interest bearing loans


4,303

7,919

Repayment of interest bearing loans


(796)

(18,685)

Distributions paid to non-controlling interests


(415)

(582)

Net cash used in financing activities


(37,390)

(11,328)





Net (decrease)/increase in cash and cash equivalents


(7,510)

21,613

Cash and cash equivalents at the beginning of the year


34,858

13,229

Effect of exchange rate fluctuations on cash held


(516)

16

Cash and cash equivalents at the end of the year


26,832

34,858





 

 

 

 

Notes

 

1.         Principal accounting policies

 

Reporting entity

 

LMS Capital plc ("the Company") is domiciled in the United Kingdom. These financial statements are presented in pounds sterling because that is the currency of the principal economic environment of the Company's operations. The consolidated financial statements of the Company for the year ended 31 December 2012 comprise the Company and its subsidiaries (together "the Group").

 

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. The consolidated financial statements are prepared as if the Group had always been in existence. The difference between the nominal value of the Company's shares issued and the amount of the net assets acquired at the date of demerger has been credited to merger reserve.

 

The Company is an investment company but because it holds majority stakes in certain investments it is required to prepare group accounts that consolidate the results of such investments. In order to present information that is consistent with other investment companies, the results of the Group's investment business on a standalone basis are set out in Note 2.

 

Basis of preparation

 

This financial information has been prepared in accordance with International Financial Reporting Standards as adopted for use in the European Union ("Adopted IFRS") although the financial information in this announcement is not sufficient to comply with Adopted IFRS.

 

On 30 November 2011 shareholders approved a change in the investment policy of the Company with the objective of conducting an orderly realisation of the assets of the Company in a manner that seeks to achieve a balance between an efficient return of cash to shareholders and maximising the value of the Company's investments. As the Directors intend to liquidate the Company following the realisation and settlement of the remaining net assets, which may be over a number of years, these consolidated financial statements have not been prepared on a going concern basis.

 

On 31 October 2012, the International Accounting Standards Board issued Investment Entities (amendments to IFRS 10, IFRS 12 and IAS 27). These amendments provide an exception to existing IFRS 10 consolidation requirements, and require investment entities to measure certain subsidiaries at fair value through the profit or loss account rather than consolidating, as currently required. The amendments also set out certain disclosure requirements for investment entities.

 

The directors believe that the Company meets the Investment Entity criteria. The standard and its amendments are not to be adopted until EU adoption, which is expected in 2013. It is not possible to early adopt these amendments.

 

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2012 or 2011 but is derived from those accounts. Statutory accounts for 2011 have been delivered to the registrar of companies, and those for 2012 will be delivered in due course. The auditor has reported on those accounts; their report on the accounts for 2012 was (i) unqualified and (ii) drew attention by way of emphasis without qualifying their report to the accounts not being prepared on a going concern basis and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. Their report on the accounts for 2011 was (i) unqualified, (ii) drew attention by way of emphasis without qualifying their report to the accounts not being prepared on a going concern basis and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

 

The financial statements have been prepared on the historical cost basis except for investments held at fair value through profit or loss which are measured at fair value.

 

 

2.         Operating segments

 

The information below has been prepared using the definition of an operating segment in IFRS 8: Operating Segments. The Group determines and presents information on operating segments based on the information that is provided internally to the directors to enable them to assess performance and allocate resources.

 

As an investment company, the Group's primary focus is on the performance of its investment management business. Financial information for this segment is prepared on the basis that all investments are accounted for at fair value.

 

The information set out below therefore presents summarised financial information for the investment management business on a standalone basis, together with the adjustments arising from the summarised results and financial position of the portfolio subsidiaries.

 

The consolidation adjustments included below reflect the adjustments necessary to restate the portfolio subsidiaries from the basis included in the investment management business (investments carried at fair value) to full consolidation in the Group's financial statements. These adjustments include the elimination of intra-group transactions and adjustments in relation to goodwill.

 

 

Segment profit or loss

 



Reconciliation



Investment management

Portfolio

subsidiaries

Consolidation

adjustments

 

Group total

Year ended 31 December 2012

£'000

£'000

£'000

£'000






Revenues from sales of goods and services

-

60,762

-

60,762

Gains and losses on investments

(7,221)

-

(2,251)

(9,472)

Interest income

75

13

-

88

Dividend income

130

-

-

130

Other income from investments

1,029

229

(950)

308






Finance costs

-

(2,373)

1,615

(758)






Profit/(loss) for the year

(12,211)

435

(1,119)

(12,895)

 

 

 



Reconciliation



Investment management

Portfolio

subsidiaries

Discontinued operations

Consolidation

adjustments

 

Group total

Year ended 31 December 2011

£'000

£'000

£'000

£'000

£'000







Revenues from sales of goods and services

 

-

 

47,334

 

-

 

-

 

47,334

Gains and losses on investments

8,734

-

-

(822)

7,912

Interest income

54

11

-

-

65

Dividend income

801

-

-

-

801

Other income from investments

2,861

3

-

(2,504)

360







Finance costs

(179)

(3,081)

-

2,319

(941)







Continuing operations

(434)

112

-

(645)

(967)

Discontinued operations

-

-

2,232

-

2,232

Profit/(loss) for the year

(434)

112

2,232

(645)

1,265

 

 

 

Segment net assets

 



Reconciliation



Investment management

Portfolio subsidiaries

Consolidation

adjustments

Group total

31 December 2012

£'000

£'000

£'000

£'000






Property, plant and equipment

633

6,734

-

7,367

Intangible assets

-

20,809

15,885

36,694

Investments

179,299

-

(34,880)

144,419

Other non-current assets

-

73

-

73

Non-current assets

179,932

27,616

(18,995)

188,553






Cash and cash equivalents

20,117

6,715

-

26,832

Other current assets

1,114

15,653

(41)

16,726






Total assets

201,163

49,984

(19,036)

232,111






Total liabilities

(9,057)

(56,599)

19,115

(46,541)






Net assets/(liabilities)

192,106

(6,615)

79

185,570






 

 



Reconciliation



Investment management

Portfolio subsidiaries

Consolidation

adjustments

Group total

31 December 2011

£'000

£'000

£'000

£'000






Property, plant and equipment

759

6,172

-

6,931

Intangible assets

-

17,369

16,012

33,381

Investments

218,476

-

(33,275)

185,201

Other non-current assets

-

20

-

20

Non-current assets

219,235

23,561

(17,263)

225,533






Cash and cash equivalents

30,602

4,256

-

34,858

Other current assets

2,516

12,629

(64)

15,081






Total assets

252,353

40,446

(17,327)

275,472






Total liabilities

(7,360)

(46,775)

19,051

(35,084)






Net assets/(liabilities)

244,993

(6,329)

1,724

240,388






 

The net asset value of the investment management business at 31 December 2012 and at 31 December 2011 is wholly attributable to the equity holders of the parent.

  

The carrying amount and gain and losses of the investments of the investment management business can be further analysed as follows:

 


31 December 2012


31 December 2011


UK

US

Total


UK

US

Total

Asset type

£'000

£'000

£'000


£'000

£'000

£'000









Funds

29,879

46,638

76,517


32,610

72,361

104,971

Quoted

1,014

16,114

17,128


860

23,339

24,199

Unquoted

47,476

38,178

85,654


42,570

46,736

89,306


78,369

100,930

179,299


76,040

142,436

218,476


















Year ended 31 December 2012


Year ended 31 December 2011


Realised gains/(losses)

Unrealised gains/(losses)

 

Total


Realised gains/(losses)

Unrealised gains/(losses)

 

Total

Asset type

£'000

£'000

£'000


£'000

£'000

£'000









Funds

(100)

(1.195)

(1,295)


719

2,748

3,467

Quoted

34

(6,351)

(6,317)


5,758

(13,486)

(7,728)

Unquoted

(968)

1,359

391


(119)

13,114

12,995


(1,034)

(6,187)

(7,221)


6,358

2,376

8,734









 

Unrealised gains/(losses) above include a charge of £3.1 million (2011: 0.4 million) in respect of the Group's carried interest plans.

 

Revenues

 

The Group's revenues from external customers comprise:

 




 

Year ended

31 December 2012


 

Year ended

31 December 2011




£'000


£'000

Continuing operations






IT services and software



44,650


34,419

Energy and related services



16,112


12,915




60,762


47,334

 

Geographical information

 


Revenues


Non-current assets


 

Year ended

31 December 2012

 

Year ended

31 December 2011


 

31 December 2012

 

31 December 2011


£'000

£'000


£'000

£'000

Continuing operations






United Kingdom

38,782

28,810


75,576

75,278

United States of America

18,095

15,200


112,977

150,255

Other countries

3,885

3,324


-

-


60,762

47,334


188,553

225,533

 

Geographical information on revenue is based on the location of customers and on assets is based on the location of the assets.

 

Major customers

 

No single customer contributed more than 10% of the Group's total revenues in either 2012 or 2011.

 

 

3.         Discontinued operations

           

In April 2011 the Group sold its entire interests in CopperEye Limited and Kizoom Limited.

 

In October 2011 ITS (US) Holdings Inc, sold its entire interest in its two operating subsidiaries ITS Engineered Systems Inc, and ITS Water Solutions Inc.

 

 

4.         (Loss)/earnings per ordinary share

 

The calculation of the basic and diluted (loss)/earnings per share, in accordance with IAS 33, is based on the following data:

 



Year ended

31 December 2012

Year ended

31 December 2011



£'000

£'000

(Loss)/earnings




(Loss)/earnings for the purposes of earnings per share being net profit attributable to equity holders of the parent

 


(12,951)

561

Loss for the purposes of continuing earnings per share being net loss from continuing operations attributable to equity holders of the parent


(12,951)

(1,671)





Number of shares


Number

Number

Weighted average number of ordinary shares for the purposes of basic earnings per shares


269,495,938

272,662,870





Effect of dilutive potential ordinary shares:




Share options and performance shares


1,618,736

4,230,301

Weighted average number of ordinary shares for the purposes of diluted earnings per share


271,114,674

276,893,171





(Loss)/earnings per share




Basic


(4.8)p

0.2p

Diluted


(4.8)p

0.2p

 

Loss per share - continuing operations




Basic


(4.8)p

(0.6)p

Diluted


(4.8)p

(0.6)p

 

There was no dilution effect on the loss for the year.

 

 

5.         Capital commitments

 




2012


2011




£'000


£'000







Outstanding commitments to funds



10,420


18,894

 

The outstanding commitments to funds comprise unpaid calls in respect of funds where a member

of the Group is a limited partner.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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