Preliminary results for the year ended 31 Decem...
23 March 2010
LMS Capital plc
Preliminary Results for the year ended 31 December 2009
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 2009.
Financial highlights*
* Net Asset Value per share was 84p (31 December 2008: 89p), a decrease of
6%, attributable in large part to foreign currency movements in the period
* Net Asset Value was £227.7 million (31 December 2008: £241.5 million)
* The return on the investment portfolio was a loss of £4.9 million after
recording unrealised currency losses of £13.5 million (2008: loss of £36.7
million after unrealised currency gains of £45.5 million)
* The loss for the year was £12.7 million (2008: loss of £40.8 million)
* The business had cash of £14.4 million at 31 December 2009 and no debt
* Investment management business
Operational highlights:
* Investment of £6.2 million for a 53.3% interest in Updata Infrastructure UK
Limited in support of a management buyout
* Sale of 7 Global Limited to 365 iT plc
* Successful migration of the Company's shares to trading on the Main Market
of the London Stock Exchange
* Appointment of Glenn Payne as Chief Executive from 1 March 2010
Robert Rayne, Chairman Designate, said:
"LMS Capital's risk diversified investment strategy has produced a resilient
performance in 2009 in the context of an uncertain global economic environment.
Our low levels of debt and broadly balanced investment portfolio position us
well to take advantage of future investment opportunities, while safeguarding
our existing assets where we are seeing encouraging signs of growth."
For further information please contact:
LMS Capital plc 020 7935 3555
Glenn Payne, Chief Executive Officer
Robert Rayne, Chairman Designate
Tony Sweet, Chief Financial Officer
J.P. Morgan Cazenove Limited 020 7588 2828
Michael Wentworth-Stanley
Brunswick Group LLP 020 7404 5959
Simon Sporborg
Oliver Hughes
About LMS Capital
LMS Capital plc is an international investment company whose shares are listed
on the London Stock Exchange. The investment portfolio comprises investments
primarily in the US and the UK, with a spread of early stage and second round
technology investments, development capital and mature company buyouts.
www.lmscapital.com
Chairman's statement
2009 was a year of uncertainty and instability in the financial markets and the
effect on the private equity sector was to reduce fund raising and transaction
activities to the lowest level seen for many years. The Company focussed its
efforts on maintaining its strong balance sheet and on managing its existing
portfolio. One acquisition was made through participation in a management
buyout and there were some small disposals, both of quoted and unquoted
interests.
The Company ended 2009 with a Net Asset Value per share of 84p, a reduction of
6% compared to the end of 2008; much of this decline was attributable to a
strengthening of Sterling against the US dollar. At the year end the Company's
balance sheet showed net cash of £14.4 million and no borrowings. During the
year there was also a reduction in the Company's outstanding commitments to
funds from £71.1 million to £58.7 million and we expect this reducing trend to
continue.
Results
The return on the investment portfolio for the year was a net loss of £4.9
million (2008: net loss of £36.7 million). Included in this is a small realised
net loss for the year of £0.1 million (2008: realised gains of £17.3 million,
most of which related to the sale of Energy Cranes) and net unrealised losses
of £4.8 million, significantly reduced from £54.1 million last year. After
overheads, the loss for the year ended 31 December 2009 was £12.7 million (year
ended 31 December 2008: loss of £40.8 million).
The investment portfolio at 31 December 2009 was valued at £215.6 million (31
December 2008: £202.0 million), an increase of £13.6 million or 7%.
The quoted portfolio (to which there were no additions in 2009) recovered
somewhat in value during the year, although our holdings in the oilfield
services sector in particular have yet to benefit from a sustained increase in
global demand for energy. We have continued to take a cautious view of the
carrying values of our unquoted holdings since the recovery in public markets
is not yet fully reflected in private transactions.
For the Group as a whole (including consolidation of the portfolio
subsidiaries) the consolidated loss for the year was £14.8 million (2008: loss
of £6.1 million).
The Board is not recommending payment of a dividend for the year ended 31
December 2009 (year ended 31 December 2008: Nil).
Balance Sheet
At the year end the Company had no direct debt. Further, as the primary method
of funding development capital is equity, there is very little external debt in
the unquoted portfolio.
Board and management
Last month the Company announced the appointment of Glenn Payne as Chief
Executive with effect from 1 March 2010. His experience will provide impetus to
the Company's next phase of development. The appointment of a new chief
executive is an appropriate time for me to step down from your Board, which I
shall do at the conclusion of the forthcoming Annual General Meeting. Your
Board has appointed Robert Rayne to succeed me as Chairman. This appointment
means that the Company will continue to benefit from his many contacts and long
experience in the private equity sector and I wish Robbie Rayne and Glenn Payne
in their new roles every success in taking the business forward.
David Verey joined the Board in September 2009 and his considerable experience
as an investment banker and in private equity will be of great value to the
Company. Martin Pexton left the Company at the end of September and on behalf
of the Board I should like to thank him for his contribution to the business
since it became independent in 2006.
2009 was a year of change at LMS Capital when many of its investee companies
were required to make significant reductions in headcount and overheads in
order to adjust to a difficult operating environment. Your Board would like to
extend its appreciation to all the Company's employees, as well as to the
management teams of our investee companies, for their contribution to the
Group's continuing progress.
Share capital
As in previous years, at the forthcoming Annual General Meeting the Company
will be seeking authority to purchase up to 14.99% of its issued share capital.
The Company also needs, once again, to obtain a waiver in respect of the
Takeover Code obligations which a repurchase of shares above a certain limit
would place on the Rayne family shareholders.
There were no purchases of shares by the Company during 2009; the current
number of ordinary shares in issue is 272,640,952.
Outlook
Although your Board does not expect a fundamental change in economic conditions
in 2010, we are hopeful of a slow and steady recovery of the principal
economies in which your Company invests; there are currently signs of merger
and acquisition activity increasing in 2010.
Your Board believes that our continued strategy of a risk diversified portfolio
and our strong financial position will enable us to surmount these challenges.
We shall continue to seek exit opportunities for selected investments and to
ensure that capital outlays are subject to rigorous review and due diligence.
Your Board is confident that the Company is well positioned to protect its
existing assets and take advantage of increased investment opportunities in the
short to medium term.
Jonathan Agnew
Chairman
23 March 2010
Operating Review
The Company's resilience following the turbulence in international markets in
the closing months of 2008 is a testimony to the key fundamentals of our
investment strategy - a risk and geographically diversified portfolio of
investments. This resilience also reflects the low levels of debt in the
overall portfolio. These principles have enabled us to see out these recent
economic difficulties while at the same time taking advantage of opportunities
which the current environment presents.
The last year has seen considerably reduced activity in the private equity
arena and while we have maintained a satisfactory level of deal flow,
transaction levels have been very low in the face of reduced liquidity in the
financial markets. Consequently we have added only one new investment during
the year and made relatively few realisations.
Our primary focus during 2009 has been on managing our existing portfolio
companies to ensure that each has adapted to the current business environment
of reduced demand and reduced liquidity. Faced with the expectation that this
environment will continue at least through 2010, we have also used this period
to review our longer term strategy for each investment.
Our objective remains unchanged. We aim to deliver sustained medium to
long-term growth for our shareholders; we are not constrained by the fixed
investment periods of most private equity funds and we are therefore able to
hold investments for longer than many other funds where we believe that this
will deliver greater shareholder value. We understand the drivers of demand in
the sectors in which we invest and this enables us to recognise the potential
of both new ideas and young companies requiring growth funding.
Investment Portfolio
The portfolio in the Group's core investment management business is risk
diversified and comprises:
* early stage companies;
* companies requiring development or growth finance where the normal holding
period has been three to five years but could now be seven or eight years;
and
* shorter term investments in the pre- and post-IPO market which usually
provide liquidity within three to four years.
Analysis of portfolio by investment stage
2009 2008
£ millions % £ %
millions
Early stage 20.0 9 24.5 12
Development 84.4 39 72.7 36
Growth 54.1 25 52.3 26
Post IPO 57.1 27 52.5 26
215.6 100 202.0 100
Analysis of portfolio by type of investment
2009 2008
£ millions £ millions £ millions £
millions
UK US Total Total
Quoted 17.3 34.6 51.9 46.5
Unquoted 39.8 20.5 60.3 53.2
Funds 30.2 73.2 103.4 102.3
87.3 128.3 215.6 202.0
Analysis of portfolio by sector
2009 2008
£ millions % £ millions %
Applied technology 65.8 31 61.3 30
Media & consumer 52.3 24 50.1 25
Energy & water 39.8 18 30.8 15
Healthcare & medical 23.9 11 22.9 11
Real estate 18.7 9 15.9 8
Other 15.1 7 21.0 11
215.6 100 202.0 100
The movement in the investment portfolio during the year was as follows:
2009 2008
£ millions £ millions
1 January 202.0 282.1
Additions in the year 32.7 51.6
Realisations (14.3) (77.6)
Valuation adjustments, net 8.7 (99.6)
Foreign currency( losses)/ (13.5) 45.5
gains
31 December 215.6 202.0
Additions include £7.6 million (2008: £12.4 million) of new investments and £
25.1 million (2008: £39.2 million) of follow on funding, including £14.8
million (2008: £15.8 million) of capital calls from funds. The figure for
realisations relates principally to sales of quoted stocks and adjustments for
fund distributions (the figure for 2008 included £65.0 million in respect of
Energy Cranes International Limited).
The foreign currency gains or losses are unrealised and reflect the weakening
of the US dollar against the pound sterling, principally in the first part of
the year. It is the Board's current policy not to hedge the Company's
underlying non-sterling investments.
Applied Technology
In July we acquired a 53.3% interest in Updata Infrastructure UK Limited
("Updata") investing £6.2 million in a management buyout. Updata designs,
builds and manages cost-effective high-capacity broadband networks for public
sector organisations in the UK and differentiates itself from its competitors
through its culture of excellence in customer service. In the first six months
since our investment Updata has performed strongly with growth in revenues and
profits which are in line with our expectations at the time of investment.
In November we completed the sale of our interest in 7 Global Limited to 365 iT
plc ("365iT"), a private company which provides a comprehensive suite of IT
services and solutions to UK businesses. We received shares in 365iT in return
for our 7 Global shares and since the end of the year we have participated in a
fund raising by 365iT which has taken our holding to 15%.
Wesupply Limited enjoyed strong sales growth in 2009 with revenues increasing
by around 70% compared to 2008. In particular the company, in partnership with
IBM, secured a contract with Sainsbury's to be its business-to-business ("B2B")
platform for connectivity to 4,000 of its suppliers. Despite the increase in
revenues the company traded at a loss in 2009 and we have taken steps to reduce
the cost base of the business in 2010.
Entuity Limited had a successful year - it increased revenues year on year by
16% and achieved a positive EBITDA result for the first time in its history.
The company has a clear strategy and we expect further progress in 2010.
Coppereye Limited had a disappointing performance in 2009 after a strong 2008.
Its unique technology has a long sales cycle.
Kizoom's revenues improved 20% over the prior year and this coupled with cost
reductions resulted in a substantially reduced loss for the year. However this
performance was below expectations and we are currently reviewing the strategic
options for this business.
In the USA, Penguin Computing, which provides high performance computing
("HPC") solutions using Linux cluster servers, continued to make good progress.
In August the company launched HPC as a Service, offering on-demand access to
high performance clusters over the Internet, thereby significantly reducing
customers' capital outlays for HPC.
Energy and water
This sector was particularly affected by the difficult economic conditions in
2009 as activity levels fell in the face of reduced world demand. Most of our
interests in this sector are in quoted stocks, in particular Weatherford
International Ltd which experienced difficult trading conditions during 2009 in
line with the oilfield services sector generally. However the company's share
price recovered from a low of $9 around the end of 2008 to just under $18 at
the end of 2009. We made no purchases or sales of shares in the company during
the year.
In August Venture Production plc was acquired by Centrica plc, a transaction
that produced cash of £4.1 million for the Company.
Pims Group Limited, a private UK-based company which designs, installs and
services pumping systems for domestic and commercial water systems, performed
well in a difficult trading environment. It has also continued to make bolt-on
acquisitions to expand its presence in its chosen markets. Pims is a
co-investment with Inflexion 2006 Buyout Fund.
Offshore Tool and Energy Corporation, which specialises in fabrication projects
for the oil and gas and water industries, made good progress during the first
half of 2009 but could not sustain this in the second half of the year.
Increasing order intake is a priority for the business in the first quarter of
2010, following rigorous cost cutting measures during the second half of last
year.
Healthcare and medical
This sector has proved to be more resilient than most during 2009. We made no
purchases or sales in this sector during the year but our existing portfolio
has made strong progress.
ProStrakan Group continues to report good progress in line with its strategic
objectives and expects 2010 to be its first full year of operating
profitability. This progress has not yet been reflected in a sustained
improvement in the company's share price which, despite movements during 2009,
was little changed at the end of the year compared to the end of 2008. However,
the price improved during January 2010 on the back of an encouraging trading
update for 2009 and positive expectations for 2010.
HealthTech Holdings (formerly Healthcare Management Systems) which is based in
the USA has enjoyed a successful 2009 as the hospital market in which it
operates has shown resilience in the generally difficult trading environment.
Since the end of the year it has acquired a complementary business which
extends its offering to Accident & Emergency departments.
Media and consumer
Our principal interest in this sector is via San Francisco Equity Partners, the
US fund in which we are the major investor. For Method Products, Inc, which
sells environmentally friendly homecare products, 2009 was a year of
consolidation, during which it reviewed and rationalised its various product
lines. The company believes that the resulting improved product focus will
drive significant growth in revenues and profitability in the medium term. The
beginning of 2010 has seen the launch of its new laundry products with very
positive media and consumer reaction to date.
Yes To Inc has become one of the fastest growing brands in the worldwide
natural personal-care market, and its award-winning products are currently sold
by leading retailers across North America, Europe and Asia. The company is
benefitting from consumers' growing preference for natural products over
synthetic.
Rave Reviews Cinemas, a co-investment with one of our fund interests, had a
successful year in 2009, during which it improved revenues and cash flow. At
the end of the year it completed a restructuring which substantially reduced
its debt and which should result in the business paying dividends in the medium
term.
Other
In July we sold part of our interest in Inflexion 2006 Buyout Fund for
approximately £1 million in cash. This transaction also reduced our outstanding
commitment to this fund by £1.4 million.
Also in July, Viking Moorings, an investment in the Inflexion 2003 Buyout Fund,
was sold in a secondary buyout, producing proceeds to the Company of £2.5
million.
Financial review
Basis of preparation of 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
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
Net Asset Value at 31 December 2009 was £227.7 million (31 December 2008: £
241.5 million), a decrease of £13.8 million or 6%. The Net Asset Value per
share was 84p (31 December 2008: 89p).
The Group's return on its investment portfolio for the year ended 31 December
2009 was a loss of £4.9 million (year ended 31 December 2008: loss of £36.7
million) as follows:
Year ended 31
December
2009 2008
£'000 £'000
Realised gains/
(losses)
Quoted securities 2,503 574
Unquoted (1,867) 14,620
securities
Funds (755) 2,114
(119) 17,308
Unrealised gains/
(losses)
Quoted securities 9,741 (31,122)
Unquoted (8,491) (27,506)
securities
Funds (6,007) 4,572
(4,757) (54,056)
Total gain/(loss) (4,876) (36,748)
Approximately 60% of the portfolio at 31 December 2009 is denominated in US
dollars (2008: 59%) and the above table includes the impact of currency
movements. In the year ended 31 December 2009 the weakening of the US dollar
against pound sterling resulted in an unrealised foreign currency loss of £13.5
million. During the year ended 31 December 2008 there was a significant
strengthening of the dollar against pound sterling and the unrealised gain for
that year was £45.5 million.
Realised gains on quoted securities include £2.0 million in connection with the
sale of our shares in Venture Production plc to Centrica plc, with the balance
arising on the sale of other, smaller holdings during the year. The realised
losses on unquoted securities arose on the sale of 7 Global to 365iT.
The unrealised gains on our quoted portfolio reflect the net impact of the
changes in the capital markets during the year. Of the total of £9.7 million, £
7.5 million is attributable to our holding in Weatherford International.
The principal constituents of the net unrealised loss for the year on our
unquoted securities are as follows:
Unrealised
gain/(loss)
£'000
Coppereye (5,226)
Kizoom (3,240)
Offshore Tool & Energy (1,861)
Updata 1,800
Rave Reviews Cinemas (1,745)
HealthTech Holdings 3,580
(6,692)
Other investments (net) (1,799)
Total net unrealised loss (8,491)
The unrealised losses above reflect the combined impact on our valuation
criteria of changes in the revenue and profitability multiples of comparable
businesses which are used in the underlying calculations and the operating
performances of the individual businesses within the portfolio.
In most cases the multiples used are either the same as or more favourable than
those prevailing at the end of 2008. The unrealised gains or losses set out
above for 2009 arise principally as a result of the companies' performance. In
particular, the results of Kizoom and Coppereye in 2009 were below
expectations, such that a strategic review of these businesses is in progress
which is likely to result in exit by us. Conversely the performances of Updata
and HealthTech Holdings have resulted in a higher valuation for those
businesses.
The unrealised valuation loss on our fund interests reflects the fact that many
of these are US funds and the net decrease in our carrying value arises from
the weakening of the US dollar against the pound sterling, principally in the
first half of the year. The net unrealised loss for the year was £6.0 million,
being unrealised foreign currency losses of £7.8 million offset by net
valuation adjustments of £1.8 million.
In line with other funds of funds we rely on reports from general partners 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.
Income from investments in the year was £0.5 million (2008: £0.6 million) and
comprises dividends on quoted securities and management charges made to
portfolio companies. Administration expenses for the year were £8.0 million
(2008: £5.6 million); the current year includes a number of non-recurring
charges (including £0.4 million for the costs of the Company moving to the
Official List and £0.8 million as compensation for loss of office to a
director) whereas 2008 benefitted from a one-off VAT refund of £1.1 million.
Net interest income for the year was £0.2 million (2008: £1.8 million)
reflecting the lower interest rates during the year as well as the lower levels
of uninvested cash. The tax charge for the year was £0.3 million (2008: £0.6
million).
Investments
The Group's investments are included in the balance sheet at fair values
determined in accordance with industry guidelines.
Additions to the investment portfolio during the year were £32.7 million (2008:
£51.6 million) of which £7.6 million (2008: £12.4 million) was for new
investments and £25.1 million (2008: £39.2 million) for follow on investments
including £14.8 million (2008: £15.8 million) for capital calls from funds.
There were no additions to quoted securities during the year (2008: £17.5
million); the most significant new investment was £6.2 million for our stake in
Updata. The follow on investments (excluding fund calls) included £9.5 million
(2008: £12.0 million) for the UK unquoted portfolio and £0.8 million (2008: £
0.9 million) for the US portfolio.
Proceeds of realisations were £13.9 million (2008: £97.1 million, of which £
82.9 million was from the sale of Energy Cranes), including sales of quoted
securities of £6.9 million (2008: £3.9 million) and distributions from funds of
£5.6 million (2008: £8.1 million).
At 31 December 2009 the Group had commitments of £58.7 million (31 December
2008: £71.1 million) to meet capital calls from its fund interests which the
Directors estimate will be called over the next five years. In terms of
assessing the level of the Group's commitment in this area, the Directors do
not expect fund commitments to exceed liquid assets (being cash and quoted
securities); at 31 December 2009 liquid assets were £66.3 million.
Consolidated results
Consolidated revenues for the year were £32.5 million (2008: £19.8 million),
all in the portfolio subsidiaries. The increase over the previous year reflects
the inclusion of Updata for the first time (from acquisition in July 2009), the
inclusion of Citizen Limited for a full year (2008: four months only) and the
improved revenue performances by Entuity, Kizoom and Wesupply.
Consolidated operating expenses were £51.1 million for the year (2008: £46.1
million), including goodwill impairment charges of £4.6 million (2008: £11.2
million). Excluding goodwill impairment, the increase in operating expenses
reflects principally the inclusion of Updata and Citizen as set out above.
Financial position
The consolidated balance sheet at 31 December 2009 includes cash and cash
equivalents of £17.0 million (31 December 2008: £42.6 million) and borrowings
of £7.6 million (31 December 2008: £2.8 million) in the portfolio subsidiaries.
Cash in the investment management business was £14.4 million (31 December 2008:
£41.3 million). Part of the Company's cash has been and will be committed
during 2010 to meets calls from funds and to provide further funding for
existing unquoted investments. The business also has a £15 million borrowing
facility with The Royal Bank of Scotland, which is due to expire in April 2011.
The investment management business had no borrowings during 2009.
Robert Rayne
Chairman Designate
23 March 2010
LMS Capital plc - Top 20 investments by valuation 31 December 2009*
Investment Geography Type of Date of initial Book % of net
Investment investment Value assets
£000
1 Weatherford US Quoted 2001 22,647 10%
International Ltd
Oilfield services
2 Method Products US Fund 2004 17,265 8%
portfolio
Consumer products company
3 Prostrakan Group plc UK Quoted 1999 15,226 7%
Specialty
pharmaceuticals
4 Updata Infrastructure UK Unquoted 2009 8,000 4%
UK Limited
Wide area networks
5 Rave Reviews Cinemas US Unquoted 2002 7,115 3%
Cinema operations
6 HealthTech Holdings, US Unquoted 2007 7,000 3%
Inc
Hospital information
systems
7 Penguin Computing US Fund 2004 5,586 2%
portfolio
Linux server systems company
8 Wesupply Limited UK Unquoted 2000 5,500 2%
Supply chain
connectivity software
9 Entuity Limited UK Unquoted 2000 4,500 2%
Network management
software
10 Elateral Limited UK Unquoted 2000 4,500 2%
Marketing software
11 Gulfmark Offshore Inc US Quoted 2008 4,363 2%
International
offshore services
12 Luxury Link US Fund 2006 4,283 2%
portfolio
Internet commerce company
13 KizoomLimited UK Unquoted 1997 4,000 2%
Transport information
services
14 Yes To, Inc US Fund 2008 3,726 2%
portfolio
Consumer products company
15 Chyron Corporation US Quoted 1995 3,501 2%
Media technology
16 Pims Group UK Unquoted 2008 2,905 1%
Waste water systems
and services
17 BJ Services US Quoted 2007 2,870 1%
Oil and gas field
services
18 Agilisys Holdings UK Unquoted 2000 2,000 1%
Limited
IT services and
outsourcing
19 Vio Worldwide Limited UK Unquoted 2002 2,000 1%
Advertising workflow
services
20 Offshore Tool and US Unquoted 1998 2,000 1%
Energy Corporation
Specialist
engineering
* Investment management business
Consolidated income statement
Notes Year ended Year ended
31 December 31 December
2009 2008
£'000 £'000
Continuing operations
Revenue from sales of goods and 2 32,526 19,790
services
Gains and losses on investments 3,998 (32,137)
Interest income 166 1,802
Investment and other income 973 582
37,663 (9,963)
Operating expenses (51,133) (46,114)
Loss before finance costs (13,470) (56,077)
Finance costs (342) (221)
Loss before tax (13,812) (56,298)
Taxation (939) (579)
Loss from continuing operations (14,751) (56,877)
Discontinued operations
Profit from discontinued 3 - 50,755
operations (net of taxation)
Loss for the year (14,751) (6,122)
Attributable to:
Equity holders of the parent (15,148) (5,929)
Minority interests 397 (193)
(14,751) (6,122)
Basic and diluted loss per 4 (5.6)p (2.1)p
ordinary share
Continuing operations
Basic and diluted loss per 4 (5.6)p (20.1)p
ordinary share
Consolidated statement of comprehensive income
Year ended Year ended
31 December 31 December
2009 2008
£'000 £'000
Loss for the year (14,751) (6,122)
Exchange differences on translation of foreign (200) 1,083
operations
Total comprehensive loss for the year (14,951) (5,039)
Attributable to:
Equity holders of the parent (15,348) (4,846)
Minority interests 397 (193)
(14,951) (5,039)
Consolidated statement of financial position
31 December 31
December
2009 2008
£'000 £'000
Non-current assets
Property, plant and equipment 7,057 3,216
Intangible assets 29,525 26,798
Investments 188,133 179,546
Other long-term assets 80 15
Non-current assets 224,795 209,575
Current assets
Inventories 812 319
Operating and other receivables 10,768 8,309
Cash and cash equivalents 16,950 42,615
Current assets 28,530 51,243
Total assets 253,325 260,818
Current liabilities
Bank overdrafts (369) -
Interest-bearing loans and borrowings (2,394) (1,656)
Operating and other payables (7,921) (10,335)
Deferred income (8,704) (3,426)
Current tax liabilities (1,007) (410)
Current liabilities (20,395) (15,827)
Non-current liabilities
Interest-bearing loans and borrowings (4,795) (1,170)
Deferred income (2,116) (2,697)
Deferred tax liabilities (401) (41)
Non-current liabilities (7,312) (3,908)
Total liabilities (27,707) (19,735)
Net assets 225,618 241,083
Equity
Share capital 27,265 27,265
Capital redemption reserve 5,635 5,635
Merger reserve 84,083 84,083
Foreign exchange translation reserve 1,012 1,212
Retained earnings 106,773 122,741
Equity attributable to owners of the parent 224,768 240,936
Minority interests 850 147
Total equity 225,618 241,083
Consolidated statement of changes in equity
Foreign
Capital exchange
Share redemption Merger translation Retained Minority Total
capital reserve reserve Reserve earnings Total interests equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 28,643 4,257 84,083 (867) 133,047 249,163 5,283 254,446
January 2008
Total - - - 1,083 (5,929) (4,846) (193) (5,039)
recognised
income and
expense
Distribution to - - - - - - (575) (575)
minority
interests
Disposal of - - - 996 3,372 4,368 (4,368) -
portfolio
subsidiaries
Re-purchase of (1,378) 1,378 - - (8,638) (8,638) - (8,638)
shares
Share-based - - - - 889 889 - 889
payments
Balance at 31 27,265 5,635 84,083 1,212 122,741 240,936 147 241,083
December 2008
Total - - - (200) (15,148) (15,348) 397 (14,951)
recognised
income and
expense
Acquisition of - - - - - - 306 306
portfolio
subsidiary
Share-based - - - - (820) (820) - (820)
payments
Balance at 31 27,265 5,635 84,083 1,012 106,773 224,768 850 225,618
December 2009
Consolidated cash flow statement
Year ended Year ended
31 December 31 December
2009 2008
£'000 £'000
Cash flows from operating activities
Loss for the year (14,751) (6,122)
Adjustments for:
Depreciation and amortisation 1,762 1,199
Goodwill impairment 4,598 11,224
(Gains)/losses on investments (3,998) 32,137
Gain on discontinued operations, net of income - (49,436)
tax
Loss on sale of property, plant and equipment 56 -
Translation differences 433 (1,958)
Share-based payments (422) 889
Finance costs 342 221
Interest income (166) (1,802)
Income tax expense 939 579
(11,207) (13,069)
Change in inventories (147) (9,878)
Change in operating and other receivables 1,396 13,342
Change in operating and other payables (2,219) (3,397)
(12,177) (13,002)
Interest paid (342) (221)
Income tax paid (321) (183)
Net cash used in operating activities (12,840) (13,406)
Cash flows from investing activities
Interest received 166 1,802
Acquisition of property, plant and equipment (2,749) (1,685)
Proceeds from disposals of property, plant and 3 12
equipment
Disposal of discontinued operations, net of - 80,543
cash disposed of
Acquisition of investments (18,853) (40,019)
Acquisition of subsidiaries, net of cash (6,116) (5,645)
acquired
Proceeds from sale of investments 13,981 11,503
Net cash (used in)/from investing activities (13,568) 46,511
Cash flows from financing activities
Repurchase of own shares - (8,638)
Drawdown of interest bearing loans 554 1,855
Distribution to minority interests - (575)
Net cash from/(used in) financing activities 554 (7,358)
Net (decrease)/increase in cash and cash (25,854) 25,747
equivalents
Cash and cash equivalents at the beginning of 42,615 14,263
the period
Effect of exchange rate fluctuations on cash (180) 2,605
held
Cash and cash equivalents at the end of the 16,581 42,615
year
Cash and cash equivalents above comprise
Cash and cash equivalents 16,950 42,615
Bank overdrafts (369) -
Cash and cash equivalents at the end of the 16,581 42,615
year
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
2009 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
comparable with other investment companies, the results of the Group's
investment business on a stand alone 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.
The financial information set out in this unaudited preliminary statement does
not constitute the Company's statutory accounts for the years ended 31 December
2009 or 2008. The financial information for 2008 is derived from the statutory
accounts for 2008 which have been delivered to the registrar of companies. The
auditors have reported on the 2008 accounts; their report was (i) unqualified,
(ii) did not include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report and (iii) did not
contain a statement under section 237 (2 ) or (3) of the Companies Act 1985.
The statutory accounts for 2009 will be finalised on the basis of the financial
information presented by the directors in this preliminary announcement and
will be delivered to the registrar of companies in due course.
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.
Operating segments
The Group adopted IFRS 8: Operating Segments ("IFRS 8") early with effect from
the financial year ended 31 December 2007. IFRS 8 defines requirements for the
disclosure of financial information of an entity's operating segments and is
effective for reporting periods beginning on or after 1 January 2009.
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 stand alone basis,
together with the adjustments arising from the summarised results and financial
position of the portfolio subsidiaries. Adjustments for Energy Cranes
International Limited ("Energy Cranes") are shown separately in the prior year
because of the size of this business relative to the others.
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.
Segment profit or loss
Reconciliation
Investment Portfolio Consolidation Group
management subsidiaries adjustments total
Year ended 31 December 2009 £'000 £'000 £'000 £'000
Revenues from sales of - 32,526 - 32,526
goods and services
Gains and losses on (4,876) - 8,874 3,998
investments
Interest income 159 7 - 166
Investment and other 494 479 - 973
income
Goodwill impairment loss - - (4,598) (4,598)
Finance costs - (6,341) 5,999 (342)
(Loss)/profit for the (12,660) 2,177 (4,268) (14,751)
year
Reconciliation
Discontinued
operations
Investment Portfolio Energy Consolidation Group
management subsidiaries Cranes Other adjustments total
Year ended 31 £'000 £'000 £'000 £'000 £'000 £'000 December 2008
Revenues from - 19,790 - - - 19,790
sales of goods
and services
Gains and losses (36,748) - - - 4,611 (32,137)
on investments
Interest income 1,754 48 - - - 1,802
Investment and 582 - - - - 582
other income
Goodwill - - - - (11,224) (11,224)
impairment loss
Finance costs - (4,267) - - 4,046 (221)
Continuing (40,796) (13,514) - - (2,567) (56,877)
operations
Discontinued - - 57,556 (6,801) - 50,755
operations
(Loss)/profit for (40,796) (13,514) 57,556 (6,801) (2,567) (6,122)
the year
2. Operating segments (continued)
Segment net assets
Reconciliation
Investment Portfolio Consolidation Group
management subsidiaries adjustments total
31 December 2009 £'000 £'000 £'000 £'000
Property, plant and equipment 158 6,899 - 7,057
Intangible assets - 11,817 17,708 29,525
Investments 215,632 1 (27,500) 188,133
Other non-current assets - 80 - 80
Non-current assets 215,790 18,797 (9,792) 224,795
Cash and cash equivalents 14,416 2,534 - 16,950
Other current assets 462 11,182 (64) 11,580
Total assets 230,668 32,513 (9,856) 253,325
Total liabilities (2,802) (79,519) 54,614 (27,707)
Net assets/(liabilities) 227,866 (47,006) 44,758 225,618
The net asset value of the investment management business at 31 December 2009
includes £227,719,000 attributable to the equity holders of the parent and £
147,000 attributable to minority interests.
Reconciliation
Investment Portfolio Consolidation Group
Management subsidiaries adjustments total
31 December 2008 £'000 £'000 £'000 £'000
Property, plant and equipment 288 2,928 - 3,216
Intangible assets - 3,196 23,602 26,798
Investments 202,049 1 (22,504) 179,546
Other non-current assets - 15 - 15
Non-current assets 202,337 6,140 1,098 209,575
Cash and cash equivalents 41,293 1,322 - 42,615
Other current assets 309 8,319 - 8,628
Total assets 243,939 15,781 1,098 260,818
Total liabilities (2,283) (70,604) 53,152 (19,735)
Net assets/(liabilities) 241,656 (54,823) 54,250 241,083
The net asset value of the investment management business at 31 December 2008
includes £241,509,000 attributable to the equity holders of the parent and £
147,000 attributable to minority interests.
2. Operating segments (continued)
The carrying amount and gains and losses of the investments of the investment
management business can be further analysed as follows:
31 December 2009 31 December 2008
UK US Total UK US Total
Asset type £'000 £'000 £'000 £'000 £'000 £'000
Funds 30,259 73,194 103,453 29,911 72,390 102,301
Quoted 17,274 34,601 51,875 19,409 27,097 46,506
Unquoted 39,849 20,455 60,304 33,686 19,556 53,242
87,382 128,250 215,632 83,006 119,043 202,049
Year ended 31 December 2009 Year ended 31 December 2008
Realised Unrealised Total Realised Unrealised Total
gains/ gains/ gains/ gains/
(losses) (losses) (losses) (losses)
Asset type £'000 £'000 £'000 £'000 £'000 £'000
Funds (755) (6,007) (6,762) 2,114 4,572 6,686
Quoted 2,503 9,741 12,244 574 (31,122) (30,548)
Unquoted (1,867) (8,491) (10,358) 14,620 (27,506) (12,886)
(119) (4,757) (4,876) 17,308 (54,056) (36,748)
Revenues
The Group's revenues from external customers comprise:
Year ended Year ended
31 December 31 December
2009 2008
£'000 £'000
Continuing operations
IT services and software 24,885 12,431
Specialist manufacturing 7,641 7,359
32,526 19,790
Geographical information
Revenues Non-current assets
Year ended Year ended 31 December 31 December
31 December 31 December 2009 2008
2009 2008
£'000 £'000 £'000 £'000
Continuing
operations
United Kingdom 17,640 7,066 88,298 99,378
United States of 8,925 6,521 136,497 110,197
America
Other countries 5,961 6,203 - -
32,526 19,790 224,795 209,575
Geographical information on revenue is based on the location of customers and
on assets is based on the location of the assets.
Major customers
Revenues from the ten largest customers represent approximately 39% of the
Group's total revenues (year ended 31 December 2008: 33%).
3. Discontinued operations
There were no disposals constituting discontinued operations in the year ended
31 December 2009. In March 2008 the Group sold its entire interest in Energy
Cranes International Limited and in June 2008 the Group sold its entire
interest in AssetHouse Technology limited.
4. Basic and diluted loss per ordinary share
The calculation of basic loss per ordinary share is based on the loss of £
15,148,000 (year ended 31 December 2008: loss of £5,929,000), being the loss
for the year attributable to the parent, divided by the weighted average number
of ordinary shares in issue during the year 272,640,952 (year ended 31 December
2008: 281,758,491).
The calculation of basic loss per ordinary share for continuing operations is
based on the loss of £15,148,000 (year ended 31 December 2008: loss of £
56,684,000), being the loss for the year attributable to the parent, divided by
the weighted average number of ordinary shares in issue during the year of
272,640,952 (year ended 31 December 2008: 281,758,491).
There was no dilution effect on the loss for the year or the loss from
continuing operations in either year.
5. Capital commitments
2009 2008
£'000 £'000
Outstanding commitments to funds 58,709 71,104
58,709 71,104
The outstanding commitments to funds comprise unpaid calls in respect of funds
where a member of the Group is a limited partner.
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