Final Results

RNS Number : 9555G

LMS Capital PLC

10 March 2015

 



10 March 2015

LMS Capital plc

Preliminary Results for the year ended 31 December 2014

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 2014.

·     The Net Asset Value at 31 December 2014 was £135.1 million, 93p per share (31 December 2013: £165.3 million, 88p per share).

·     In May £40 million was returned to shareholders by way of a tender offer; this brought to £115 million the total returned to shareholders since the commencement of the realisation strategy at the end of 2011.

·     The proceeds received from the investment portfolio during the year were £45.9 million (2013: £44.4 million), including £31.8 million from the sale of Updata Infrastructure (UK) and £2.6 million from the sale of part of our holding in Weatherford International.

·     Net gains on the investment portfolio were £16.6 million (2013: £17.2 million) before deducting charges for incentive plans of £2.5 million (2013: £4.0 million).

·      Overheads were £3.6 million (2013: £3.8 million).

·     The profit for the year was £10.3 million (2013: £9.0 million).

·      Outstanding fund commitments reduced from £8.1 million to £7.0 million over the year.

Martin Knight, Chairman of LMS Capital, said: 

"In 2014 the Board made further progress in implementing the asset realisation strategy approved by shareholders in November 2011 and we were able to make a third distribution to shareholders. Markets have seen a rise in the level of transaction activity and your Board expects continued progress in the orderly wind-down of the business in the coming year."

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

Katie Hunt

Naomi Lane

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 across a range of sectors.

The Company's ten largestinvestments by valuation at 31 December 2014 were as follows:

Name	Geography	Type	Sector	Date of initial investment	Book value £ million
Brockton Capital	UK	Fund	Property	2006	15.2
Weatherford International	US	Quoted	Energy	1984	13.6
Medhost Inc	US	Unquoted	Technology	2007	13.4
Nationwide Energy Partners	US	Unquoted	Energy	2010	10.5
Yes To, Inc*	US	Unquoted	Consumer	2008	8.0
ICU Eyewear*	US	Unquoted	Consumer	2010	6.8
Penguin Computing*	US	Unquoted	Technology	2004	6.5
BV Investment Partners	US	Funds	Buyouts	1996	5.4
Entuity	UK	Unquoted	Technology	2000	5.0
Voreda Real Estate	UK	Fund	Property	2008	5.0

*A portfolio company of San Francisco Equity Partners. .

The above represent 67% of the investment portfolio.

www.lmscapital.com

Chairman's statement   

In 2014 your Board has continued to progress the realisation strategy approved by shareholders at the general meeting on 30 November 2011.

Realisation proceeds to date

This year, realisations from the portfolio were £45.9 million and in May £40.0 million was returned to shareholders by way of a tender offer.

At the time of the general meeting in November 2011, the market capitalisation of the Company was approximately £153.0 million and the Net Asset Value at the end of 2011 was £245.0 million. Since then a total of £115.0 million has been returned to shareholders by way of tender offers; the Net Asset Value of the Company at 31 December 2014 was £135.1 million.

The capital returned equates to around 47% of the Net Asset Value at the end of 2011 and approximately 74% of the Company's market capitalisation at the time of the November 2011 general meeting.

At the year end the Company had cash of £9.2 million; the Board will consider a further return of capital in the light of realisations in the coming year.The Board is not recommending payment of a dividend for the year ended 31 December 2014 (2013: £nil).

Portfolio performance

Net Asset Value per share at the end of 2014 was 93p, an increase of 6% from 88p a year ago.

Total portfolio net gains before carried interest charges (realised and unrealised) for the year were £16.6 million (2013: £17.2 million), the key elements of which were:

·     £10.3 million relates to the realised gain on the sale of Updata;

·     Other unquoted investments contributed £5.1 million (2013: £4.7 million);

·     Our quoted investments generated a net loss of £0.8 million for the year (2013: net gain of £7.6 million). The share price of Weatherford International performed strongly during 2013 and the first half of 2014 and in May we sold 205,000 shares at an average price of $21 per share, for net proceeds of £2.6 million. However, its share price was impacted significantly by the unexpectedly steep fall in world oil prices in the second half;

·     Our fund interests showed a net gain of £2.0 million (2013: £4.9 million).

The portfolio net gains for the year include unrealised exchange gains of £5.9 million (2013: unrealised exchange losses of £2.2 million).

Future realisations

There are active sales processes underway on a number of the Company's investments and we are also exploring potential realisation opportunities in the secondary market. These initiatives are at an early stage and their likely outcome cannot yet be anticipated. We shall keep shareholders informed through our normal reporting channels and significant individual realisations will be announced as appropriate.

The Company's ability to exert control or influence over the realisation process for individual assets depends on its rights as an investor in each case. For some direct investments it has control rights; for funds and other minority investments, the Company may have a degree of influence, but no control. In all cases the Company monitors the performance of its investments both through the receipt of regular information and through its relationships with the fund manager and in the case of direct investments with the investee management, and by actively exercising its investor rights.

Managing the portfolio

As the asset base of the business reduces, continued steps are being taken to contain overheads; these were further reduced in 2014 compared to the prior year.

Conclusion and outlook

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 2014.

Your Board believes that the investment portfolio will continue to release cash to shareholders in the medium term. Markets have seen a rise in the level of transaction activity and your Board expects continued progress in the orderly wind-down of the business in the coming year. We shall focus on optimising value and cash flow for the benefit of shareholders.

Martin Knight

Chairman

10 March 2015

Strategic report    

LMS Capital plc is an international investment company whose shares are traded on the London Stock Exchange. 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.

This report is in three parts:

1.   A summary of the Company's objectives and strategy, including a description of its business model;

2.   A review of the Company's performance in 2014 against the background of these strategic objectives; and

3.   A statement of the principal risks and uncertainties faced by the Company in its operations and strategy.

1          Objectives and strategy

The focus of the Company's directors is to optimise realisations from the investment portfolio and return the proceeds to shareholders on a timely basis. The investment portfolio comprises publicly quoted and private company investments in the UK and the US held directly and through funds. To date returns to shareholders have taken the form of tender offers and the directors expect the use of tender offers to continue as the realisation strategy progresses.

Under the terms of the realisation strategy, 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 Company's investment portfolio is managed by appropriately qualified and experienced investment professionals. Since the change in strategy at the end of 2011, the Company has sought to reduce its overall costs and this process has included headcount reductions. 

Overall management of the business is the responsibility of the two Executive Directors. Mr Friedlos has responsibility for overseeing the orderly realisation of the assets of the Company and financial matters are the responsibility of Mr Sweet; both act within delegated authority limits and in accordance with clearly defined systems of control.

The Board regularly reviews reports prepared by the Executive Directors on the realisation prospects for each portfolio holding in the context of the Company's overall objectives, including the factors affecting the likely amount and timing of the realisations. These factors include:

·     The performance of each underlying investment which is monitored regularly with commentary on trends and risks at each investee company.

·     The level of confidence in the economy in which both the investee company and a potential acquirer operate. This includes prospects for the investee company in its chosen markets as well as the likely availability of finance generally for investment, including the degree of liquidity in capital markets.

·     The likely value of any realisation based on comparable trading multiples for quoted companies in the same sector as well as the price of other purchase transactions.

·     Recent prices within secondary markets.

The Directors' current expectation is that the realisation of the portfolio is likely to be substantially completed over the next two to three years. 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 (in particular 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.

2          Review of performance in 2014

The following are the key performance indicators for 2014:

		Cumulative1	2014	2013
Cash realisations from the investment portfolio - gross	£'million	133.5	45.9	44.4
Cash realisations from the investment portfolio - net	£'million	109.1	36.2	37.0
Cash returned to shareholders	£'million	115.0	40.0	35.0
Cumulative returns to shareholders compared to opening market capitalisation2	%	74%	26%	23%
Cumulative returns to shareholders compared to opening Net Asset Value3	%	48%	17%	15%
Net Asset Value	£'million		135.1	165.3
Net Asset Value per share	pence		93	88

Notes

1              The cumulative column refers to the three years from 1 January 2012.

2              Market capitalisation at the time of the November 2011 general meeting to approve the realisation strategy.

3              Net Asset Value at the end of 2011.         

Net cash realisations from the portfolio in the year were as follows:

	Cumulative1	2014	2013
	£'000		£'000
Sales of investments	66,035	34,726	21,142
Capital restructurings and loan repayments	9,172	763	7,677
Distributions from funds	58,168	10,390	15,531
Total - gross	133,375	45,879	44,350
Fund calls	(10,191)	(1,658)	(3,274)
Other follow-on investments	(8,173)	(3,198)	(2,970)
Carried interest payments	(5,931)	(4,833)	(1,098)
Total - net	109,080	36,190	37,008

The principal follow-on investments during 2014 were:

·     £2.1 million to provide working capital for ICU Eyewear; and

·     £1.0 million to provide working capital for Elateral, one of our UK direct investments.

In May 2014 the Directors made the third return of cash to shareholders under the realisation strategy by way of a tender offer.

Net Asset Value per share increased over the year by 5p - the profit for the year was £10.3 million (2013: £9.0 million). The principal factor in the results is the return on the investment portfolio which was as follows:

			2014		2013
	Realised gains/(losses)	Unrealised gains/(losses)	Total		Realised gains	Unrealised gains	Total
Asset type	£'000	£'000	£'000		£'000	£'000	£'000
Funds	(142)	2,144	2,002		2,273	2,613	4,886
Quoted	879	(1,642)	(763)		174	7,430	7,604
Unquoted	11,537	3,837	15,374		1,512	3,215	4,727
	12,274	4,339	16,613		3,959	13,258	17,217
Charges for incentive plans			(2,462)				(4,030)
			14,151				13,187

Approximately 64% of the portfolio at 31 December 2014 is denominated in US dollars (31 December 2013: 59%) and the above table includes the impact of currency movements. In the year ended 31 December 2014, the strengthening of the US dollar against pound sterling (year on year) resulted in an unrealised foreign currency gain of £5.9 million (2013: unrealised loss of £2.2 million). As is common practice in private equity investment, it is the Board's current policy not to hedge the Company's underlying non-sterling investments.

Charges for incentive plans include £2.7 million (2013: £1.5 million) for carried interest and a credit of £0.2 million (2013: charge of £2.5 million) in respect of the Executive Directors' incentive plan.

Quoted investments

The loss on the quoted portfolio reflects the net impact of the changes in the capital markets during the year. The total net loss of £0.8 million (2013: gain of £7.6 million) arose as follows:

		2014		2013
Gains/(losses), net		£'000		£'000
Realised
Weatherford International - sale of 10% of our opening holding		648		-
Other quoted holdings		209		158
Dividend income		22		16
		879		174
Unrealised
Weatherford International		(5,227)		5,601
ChyronHego Corporation		1,555		2,069
Other quoted holdings		187		469
Unrealised foreign currency gains/(losses)		1,843		(709)
		(1,642)		7,430
Total gains/(losses), net		(763)		7,604

At the end of 2014 our quoted holdings were valued at £20.3 million (31 December 2013: £24.0 million), of which our interest in Weatherford International, at £13.6 million (31 December 2013: £19.1 million), continues to be the principal element.

The share price of Weatherford International performed strongly during 2013 and the first half of 2014, but was impacted significantly by the unexpectedly steep fall in world oil prices in the second half. Unrealised losses in the second half of £13.4 million more than reversed the gains of the previous eighteen months.

ChyronHego Corporation's share price has continued to perform well and in November 2014 the company announced that it had reached agreement to be acquired by Vector Capital. This is reflected in the quoted price at the end of 2014 - our carrying value was £5.0 million (31 December 2013: £3.1 million).

Direct investments

The realised net gain on our direct investments was £11.5 million (2013: £1.5 million), including £10.3 million (2013: £0.8 million) on sales of investments (all Updata in 2014) and £1.2 million (2013: £0.7 million) interest and dividend income.

The unrealised net valuation increase was £3.8 million (2013: £3.2 million), of which unrealised foreign currency gains were £2.1 million (2013: unrealised foreign exchange losses of £0.8 million). Valuation adjustments were as follows:

	Unrealised gain/(loss)
	2014	2013
Name	£'000	£'000
Wesupply Limited	1,000	400
365iTMS	500	(643)
Medhost Inc	-	(3,760)
Nationwide Energy Partners	-	-
ICU Eyewear	-	-
Entuity Limited	-	2,863
Updata Infrastructure	-	7,000
Others (net)	196	(3,441)
Total	1,696	2,419

Changes in valuations reflect a combination of two factors:

·     the operating performance of the individual businesses within the portfolio; and

·     changes in the revenue and profitability multiples and transaction prices of comparable businesses, which are used in the underlying calculations.

In most cases the multiples we used this year are similar to those prevailing at the end of 2013 and therefore the unrealised gains or losses set out in the table above arise principally as a result of the companies' performance or other market-related factors.

Factors reflected in the valuation of individual companies were as follows:

Name	Sector	Comment on valuation
Wesupply Limited	Technology	The company performed well during 2014 and the higher valuation reflects this.
365 ITMS Limited	Technology	After disappointing results in the previous year, 365 made good progress during 2014 and this is reflected in the valuation increase.
Medhost Inc	Technology	The company performed well during 2014 but market factors mean that we have left our carrying value (in US$) unchanged.
Nationwide Energy Partners	Energy	The company grew revenues and profits during 2014 but the uncertainty (reported last year) over possible regulatory changes affecting the company remains. Therefore we have left our carrying value (in US$) unchanged.
ICU Eyewear	Consumer	This is a co-investment with SFEP. The company gained a number of new customer wins in 2014 and is now focussing on achieving profitability in 2015.

Fund interests

The maturity of our funds portfolio is reflected in the related cash flows during 2014. Distributions from funds were £10.4 million (2013: £15.5 million) and calls paid were £1.7 million (2013: £3.3 million).

We are the majority investor in San Francisco Equity Partners (as opposed to our other fund interests where we have only a minority stake) and at the end of 2014 the carrying value of our interest was £16.3 million (31 December 2013: £17.5 million) and the principal investments in its portfolio are Yes To (£7.1 million (2013: £8.5 million) - consumer sector), Penguin Computing (£5.0 million (2013: £4.3 million) - technology sector) and Luxury Link (£2.4 million (2013: £4.0 million) - consumer sector).

Our other fund holdings at the end of 2014 (excluding SFEP) had a book value of £46.3 million (31 December 2013: £51.6 million), and include the following principal interests:

		31 December
General partner		2014	2013
		£'000	£'000
Brockton Capital	UK property	15,168	15,168
BV investments	US buyouts	5,438	6,036
Voreda Real Estate	UK property	4,994	2,216
Opus Capital Venture Partners	US venture capital	4,085	3,927
Eden Ventures	UK venture capital	3,624	2,570
Weber Capital Partners	US micro-cap quoted stocks	3,372	3,847
Primus Capital	US buyouts	2,874	4,260
Amadeus Capital Partners	UK venture capital	2,847	3,340

The above holdings represent 92% of the funds portfolio (excluding SFEP).

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 basis of valuation and knowledge of the investments and the sectors in which they operate.

Other income statement items

As well as the investment portfolio return, the profit for the year of £10.3 million (2013: £9.0 million) includes the following:

·     Directors' and other fees from portfolio companies were £0.1 million (2013: £0.1 million);

·     Overhead costs in 2014 were £3.6 million (2013: £3.8 million), a 5% reduction over the previous year;

·     Interest income for the year was £26,000 (2013: £62,000);

·     The tax charge for the year was £0.4 million (2013: £0.5 million), being principally US withholding tax on distributions.

Financial resources and commitments

Cash holdings were £9.2 million (31 December 2013: £17.8 million) with no debt.  At 31 December 2014 the Group had commitments of £7.0 million (31 December 2013: £8.1 million) to meet outstanding capital calls from its fund interests.

Employees

The number of employees (including directors) was as follows:

				2014				2013
		Male	Female	Total		Male	Female	Total
Directors		6	-	6		6	-	6
Senior management		-	-	-		-	-	-
Other employees		2	5	7		2	5	7
		8	5	13		8	5	13

The Directors do not consider that information on environmental matters and social, community and human rights issues is necessary for an understanding of the development, performance or position of the Company's business; this information is therefore included in the Directors' Report.

3          Principal risks and uncertainties

The Board is responsible for risk management and for ensuring that the Group has an effective internal control framework. On behalf of the Board the Audit Committee has responsibility for ensuring that the Group has an effective process to identify, document and assess those risks which might impact the Group's performance and its achievement of its strategy. This process, which is overseen by the Executive Directors, includes reporting the mitigating action taken to address the risks identified.

The Group's risk profile derives from a combination of two elements - the Group's own strategy, including the actions taken within that strategic framework, and the effects of changes in the external economic environment in which it operates, including the impact on the companies in its investment portfolio. The Board is satisfied that the Group's risk management process is appropriate in the context of the objectives and strategy set out above. Set out below is a summary of the principal risks and uncertainties that could have a material adverse effect on the group's strategy, performance and financial condition.

Principal risks	Consequences	Mitigation
Market risk
Economic instability and low growth in the markets where the Group or its investments operate	Negative impact on the performance and growth rates of the Company's investments. This may result in the Company's NAV declining and ultimately lower realisation proceeds and returns to shareholders.	Regular monitoring of the trading, cash flows and prospects (including exit opportunities) of the investment portfolio to identify the impact on individual investments and on the realisation strategy.
Volatility in listed equity prices, foreign currency rates and interest rates. At 31 December 2014 64% of the Group's investment portfolio is denominated in US dollars.
Investments fail to perform in line with original expectations or management's plans. Investment performance may be impacted by competition, regulatory changes or other market developments.
Investment risk
Lack of liquidity in capital markets	The Company may not be able to realise its investments in line with planned timings and values leading to realisations being lower and/or later than planned. This could impact the timing and amount of capital returned to shareholders under the Company's asset realisation strategy.	Review of investment performance and regular communication with the lead investor.
Where we have only minority stakes in investments we may not be able to influence performance initiatives or exit strategy.
Financial risk
Many of our investments produce little or no recurring income and the timing of realisations to provide working capital cannot be ascertained with certainty.	Failure to meet future financial obligations (including capital calls to funds) could expose the Group to potential legal action and/or loss of value (to a fund investment).	Working capital requirements (including   exposure to uncalled fund commitments) are reviewed regularly. In addition, the Group's quoted investments act as a store of potential standby liquidity.
The Group has made investments in private equity funds under the terms of which it may be obliged to make further capital contributions. Whilst the maximum amount of the future commitment is known, the timing of such capital contributions cannot be predicted with certainty.
Operational risk
Failure of the Group's internal processes and systems to ensure that it complies with all legal, regulatory and financial reporting obligations.	Reputational damage and/or financial loss.	The Audit Committee, on behalf of the Board, regularly reviews the systems in respect of the principal operational risks, as well as reports on the Company's related risk management procedures.

By order of the Board

N Friedlos                          

Director

10 March 2015

Consolidated income statement

			Year ended 31 December
			2014		2013
		Notes	£'000		£'000
Net gains on investments		2	14,151		13,187
Directors' and other fees from investments			88		115
Interest income			26		62
			14,265		13,364
Operating expenses			(3,566)		(3,847)
Profit before tax			10,699		9,517
Taxation			(409)		(469)
Profit for the year			10,290		9,048
Attributable to:
Equity holders of  the parent			10,290		9,048
Earnings per ordinary share - basic		3	6.3p		4.3p
Earnings per ordinary share - diluted		3	6.3p		4.3p

Consolidated statement of comprehensive income

		Year ended 31 December
		2014	2013
		£'000	£'000
Profit for the year		10,290	9,048
Exchange differences on translation of foreign operations		34	81
Total comprehensive profit for the year		10,324	9,129
Attributable to:
Equity holders of the parent		10,324	9,129

Consolidated statement of financial position

			31 December
			2014	2013
			£'000	£'000
Non-current assets
Property, plant and equipment			387	513
Investments			132,875	157,721
Non-current assets			133,262	158,234
Current assets
Operating and other receivables			240	532
Cash and cash equivalents			9,158	17,824
Current assets			9,398	18,356
Total assets			142,660	176,590
Current liabilities
Operating and other payables			(4,843)	(7,123)
Current tax liabilities			(492)	(641)
Current liabilities			(5,335)	(7,764)
Non-current liabilities
Provisions and other long-term liabilities			(2,217)	(3,572)
Non-current liabilities			(2,217)	(3,572)
Total liabilities			(7,552)	(11,336)
Net assets			135,108	165,254
Equity
Share capital			14,525	18,736
Share premium			508	508
Capital redemption reserve			18,497	14,286
Merger reserve			35,422	84,083
Foreign exchange translation reserve			812	778
Retained earnings			65,344	46,863
Equity attributable to owners of the parent			135,108	165,254

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 equity £'000
Balance at 1 January 2013	22,625	508	10,397	84,083	697	73,796	192,106
Total comprehensive income for the year
Profit for the year	-	-	-	-	-	9,048	9,048
Exchange differences on translation of foreign operations	-	-	-	-	81	-	81
Transactions with owners, recorded directly in equity
Share-based payments	-	-	-	-	-	(602)	(602)
Repurchase of shares	(3,889)	-	3,889	-	-	(35,379)	(35,379)
Balance at 31 December 2013	18,736	508	14,286	84,083	778	46,863	165,254
Total comprehensive income for the year
Profit for the year	-	-	-	-	-	10,290	10,290
Exchange differences on translation of foreign operations	-	-	-	-	34	-	34
Transactions with owners, recorded directly in equity
Repurchase of shares	(4,211)	-	4,211	-	-	(40,470)	(40,470)
Release from merger reserve	-	-	-	(48,661)	-	48,661	-
Balance at 31 December 2014	14,525	508	18,497	35,422	812	65,344	135,108

Consolidated cash flow statement

		Year ended 31 December
		2014	2013
		£'000	£'000
Cash flows from operating activities
Profit for the year		10,290	9,048
Adjustments for:
Depreciation and amortisation		131	133
Gains on investments		(14,151)	(13,187)
Translation differences		(825)	311
Share-based payments		(114)	(233)
Interest income		(26)	(62)
Income tax expense		409	469
		(4,286)	(3,521)
Change in operating and other receivables		136	581
Change in operating and other payables		(6,284)	(2,084)
		(10,434)	(5,024)
Income tax paid		(930)	(504)
Net cash used in operating activities		(11,364)	(5,528)
Cash flows from investing activities
Interest received		26	62
Acquisition of property, plant and equipment		(5)	(13)
Acquisition of investments		(4,856)	(6,244)
Proceeds from sale of investments		45,879	44,350
Other income from investments		1,265	689
Net cash from investing activities		42,309	38,844
Cash flows from financing activities
Repurchase of own shares		(40,470)	(35,379)
Net cash used in financing activities		(40,470)	(35,379)
Net decrease in cash and cash equivalents		(9,525)	(2,063)
Cash and cash equivalents at the beginning of the year		17,824	20,117
Effect of exchange rate fluctuations on cash held		859	(230)
Cash and cash equivalents at the end of the year		9,158	17,824

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 2014 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.

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. The accounting policies adopted are consistent with those of the previous financial year.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2014 or 2013 but is derived from those accounts. Statutory accounts for 2013 have been delivered to the registrar of companies, and those for 2014 will be delivered in due course. The auditor has reported on those accounts; their report on the accounts for 2014 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 2013 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.         Net gains on investments

Gains and losses on investments were as follows:

	Year ended 31 December
			2014		2013
	Realised gains/(losses)	Unrealised gains/(losses)	Total		Realised gains	Unrealised gains	Total
Asset type	£'000	£'000	£'000		£'000	£'000	£'000
Funds	(142)	2,144	2,002		2,273	2,613	4,886
Quoted	879	(1,642)	(763)		174	7,430	7,604
Unquoted	11,537	3,837	15,374		1,512	3,215	4,727
	12,274	4,339	16,613		3,959	13,258	17,217
Charges for incentive plans			(2,462)				(4,030)
			14,151				13,187

Charges for incentive plans include £2,723,000 (2013: £1,552,000) for carried interest and a credit of £261,000 (2013: £2,478,000 charge) in respect of the Executive Directors' incentive plan.  

3.         Earnings per ordinary share

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

		Year ended 31 December
		2014	2013
		£'000	£'000
Earnings
Earnings for the purposes of earnings per share being net profit attributable to equity holders of the parent		10,290	9,048
Number of shares		Number	Number
Weighted average number of ordinary shares for the purposes of basic earnings per shares		162,794,999	210,041,333
Effect of dilutive potential ordinary shares:
Share options and performance shares		78,531	308,878
Weighted average number of ordinary shares for the purposes of diluted earnings per share		162,873,530	210,350,211
Earnings per share
Basic		6.3p	4.3p
Diluted		6.3p	4.3p

4.         Capital commitments

			31 December 2014
			2014		2013
			£'000		£'000
Outstanding commitments to funds			6,994		8,139

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

of the Group is a limited partner.

 

END

 

 

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