Final Results

RNS Number : 5012S

LMS Capital PLC

18 March 2016

 

18 March 2016

LMS Capital plc

Preliminary Results for the year ended 31 December 2015

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 2015.

·	The Net Asset Value at 31 December 2015 was £95.1 million, 92p per share (31 December     2014: £135.1 million, 93p per share).
·	In December £40.0 million was returned to shareholders by way of a tender offer; this brought to £155.0 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 £43.7 million (2014: £45.9 million).
·	Net gains on the investment portfolio were £6.6 million (2014: £16.6 million) before deducting charges for incentive plans of £2.0 million (2014: £2.5 million).
·        Overheads were £3.3 million (2014: £3.6 million). ·        The profit for the year was £0.5 million (2014: £10.3 million). ·        At 31 December 2015 the Company had liquid assets of £15.9 million (31 December 2014: £29.6 million), being net cash of £6.1 million (31 December 2014: £9.2 million) and quoted securities of £9.8 million (31 December 2014: £20.4 million). Outstanding commitments to funds were £4.0 million, down from £7.0 million at the end of 2014.

Martin Knight, Chairman of LMS Capital, said: 

"In 2015 the Board made further progress in implementing the asset realisation strategy approved by shareholders in November 2011 and we were able to make a fourth distribution to shareholders. This distribution brought to £155 million the amount returned so far to shareholders and equates to 100% of the Company's market capitalisation at the beginning of the realisation strategy.

As the Company's investment portfolio reduces in size, your Board is focussed on optimising shareholder value in a cost effective manner."

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

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.

www.lmscapital.com

The Company's ten largest investments by valuation at 31 December 2015 were as follows:

Name	Geography	Type	Sector	Date of initial investment	Book value £'million
Medhost Inc	US	Unquoted	Technology	2007	14.2
Brockton Capital	UK	Fund	Property	2006	12.3
Nationwide Energy Partners	US	Unquoted	Energy	2010	9.9
Weatherford International	US	Quoted	Energy	1984	8.1
ICU Eyewear*	US	Unquoted	Consumer	2010	7.2
Yes To, Inc*	US	Unquoted	Consumer	2008	7.1
Penguin Computing*	US	Unquoted	Technology	2004	6.8
Opus Capital Venture Partners	US	Fund	Technology	2006	5.4
Entuity	UK	Unquoted	Technology	2000	4.5
Elateral Group	UK	Unquoted	Technology	2000	4.3

*A portfolio company of San Francisco Equity Partners.

The above represent 83% of the investment portfolio.

Chairman's statement   

In 2015, 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 £43.7 million and, in December, £40.0 million was returned to shareholders by way of a tender offer.

At the commencement of the realization strategy, 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 £155.0 million has been returned to shareholders by way of tender offers; the Net Asset Value of the Company at 31 December 2015 was £95.1 million.

The capital returned equates to 100% of the Company's market capitalisation at the time of the November 2011 general meeting and around 63% of the Net Asset Value at the end of 2011.

At the year end the Company had cash of £6.1 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 2015 (2014: £nil).

Portfolio performance

Net Asset Value per share at the end of 2015 was 92p, a 1% decrease from 93p a year ago.

Total portfolio net gains (realised and unrealised) for the year before carried interest charges were £6.6 million (2014: £16.6 million), the key elements of which were:

·	Unquoted investments contributed net gains of £10.1 million (2014: £15.4 million), of which £6.5 million relates to the realised gain on the sale of Wesupply (2014: £10.3 million was the realised gain on the sale of Updata);
·	Our quoted investments generated a net loss of £1 million for the year (2014: net loss of £0.8 million). The share price of Weatherford International has continued to be impacted significantly by low world oil prices; and
·	Our fund interests showed a net loss of £2.5 million (2014: net gains of £2.0 million).

The portfolio net gains for the year include unrealised exchange gains of £3.6 million (2014: £5.9 million).

Managing the portfolio

Your Board regularly reviews the realisation plan for the portfolio on an asset by asset basis to ensure that there is a clear plan which balances the twin aims of concluding the realisation process and optimising value for shareholders. For its direct investments, the Company generally has control of or significant influence over a realisation process and monitors the performance of each company directly with its management. For funds and co-investments the Company may have a degree of influence but no control. The Company monitors these investments by maintaining regular dialogue with the fund manager or lead investor and actively monitors opportunities to realise value in established secondary markets.

Your Board will continue to take measures to contain overheads as part of its consideration of how best to manage the portfolio as it continues to reduce in size.

Conclusion and outlook

The realisation 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 2015.

Your Board believes that the investment portfolio will continue to release cash to shareholders in the medium term. World markets continue to exhibit volatility against the background of uncertain conditions in a number of global economies and your Board will follow developments closely as it continues the orderly wind-down of the business in the coming year.

Martin Knight

Chairman

18 March 2016 

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 four 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 2015 against the background of these strategic objectives;
3.	A statement of the principal risks and uncertainties faced by the Company in its operations and strategy; and
4.	Viability statement.

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. 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; financial and secretarial 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; and
·	Recent prices within secondary markets.

The Directors' intention is that the realisation of the portfolio should be substantially complete within the next two years. However, recent uncertainty in financial markets may significantly impact the timing of future realisations and hence this overall target timetable. Shareholders should note that as well as general market conditions progress with the realisation strategy is subject to a number of other uncertainties including the future performance of investee companies, the actions of other shareholders in investee companies (in particular where the Company is a minority investor) and the level of mergers and acquisitions activity across the geographies relevant to 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 2015

The following are the key performance indicators for 2015:

		Cumulative1	2015	2014
Cash realisations from the investment portfolio - gross	£'million	177.1	43.7	45.9
Cash realisations from the investment portfolio - net	£'million	150.5	41.4	36.2
Cash returned to shareholders	£'million	155.0	40.0	40.0
Returns to shareholders compared to opening market capitalisation2	%	100	26	26
Returns to shareholders compared to opening Net Asset Value3	%	63	17	17
Net Asset Value	£'million		95.1	135.1
Net Asset Value per share	pence		92	93

Notes

1. The cumulative column refers to the four 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 £'000	2015 £'000	2014 £'000
Sales of investments	95,385	29,350	34,726
Capital restructurings and loan repayments	11,928	2,756	763
Distributions from funds	69,793	11,625	10,390
Total - gross	177,106	43,731	45,879
Fund calls	(10,581)	(390)	(1,658)
Other follow-on investments	(8,977)	(804)	(3,198)
Carried interest payments	(7,059)	(1,128)	(4,833)
Total - net	150,489	41,409	36,190

The principal follow-on investments during 2015 were:

·     £0.4 million to Nationwide Energy Partners as part funding for an acquisition; and

·     £0.3 million to provide working capital for Elateral, one of our UK direct investments.

In December 2015, the Directors made the fourth return of cash to shareholders under the realisation strategy by way of a tender offer.

The principal factor in the results for the year is the return on the investment portfolio which was as follows:

Asset type	2015			2014
	Realised gains/(losses) £'000	Unrealised gains/(losses) £'000	Total £'000	Realised gains/(losses) £'000	Unrealised gains/(losses)£'000	Total £'000
Funds	2,518	(5,025)	(2,507)	(142)	2,144	2,002
Quoted	1,511	(2,479)	(968)	879	(1,642)	(763)
Unquoted	8,948	1,142	10,090	11,537	3,837	15,374
	12,977	(6,362)	6,615	12,274	4,339	16,613
Charges for incentive plans			(1,951)			(2,462)
			4,664			14,151

Approximately 66% of the portfolio at 31 December 2015 is denominated in US dollars (31 December 2014: 64%) and the above table includes the impact of currency movements. In the year ended 31 December 2015, the strengthening of the US dollar against pound sterling (year on year) resulted in an unrealised foreign currency gain of £3.6 million (2014: unrealised gain of £5.9 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 £1.4 million (2014: £2.7 million) for carried interest and £0.6 million (2014: credit of £0.2 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 £1.0 million (2014: loss of £0.8 million) arose as follows:

Gains/(losses), net	2015 £'000	2014 £'000
Realised
Weatherford International - sale of 426,000 (2014: 205,000) shares	709	648
ChyronHego Corporation	777	-
Other quoted holdings	-	209
Dividend income	25	22
	1,511	879
Unrealised
Weatherford International	(2,927)	(5,227)
ChyronHego Corporation	-	1,555
Other quoted holdings	(127)	187
Unrealised foreign currency gains	575	1,843
	(2,479)	(1,642)
Total gains/(losses), net	(968)	(763)

The share price of Weatherford International continued to be impacted significantly by low world oil prices.

 At the end of 2015 our quoted holdings were valued at £9.8 million (31 December 2014: £20.3 million), of which our interest of 1,419,000 shares (31 December 2014: 1,845,000 shares) in Weatherford International, at £8.1 million (31 December 2014: £13.6 million), continues to be the principal element.

Direct investments

The realised net gain on our direct investments was £8.9 million (2014: £11.5 million), including £8.3 million (2014: £10.3 million) on sales of investments and £0.6 million (2014: £1.2 million) interest and dividend income. In 2015 the most significant contributor to this was the sale of Wesupply which realised a gain of £6.5 million (2014: all related to the sale of Updata).

The unrealised net valuation increase was £1.1 million (2014: £3.8 million), of which unrealised foreign currency gains were £2.0 million (2014: £2.1 million). 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 2014 and therefore the unrealised gains or losses set out in the table below arise principally as a result of the companies' performance or other market-related factors.

Valuation adjustments were as follows:

Name	Unrealised gain/(loss)
	2015 £'000	2014 £'000
365iTMS	1,000	500
Nationwide Energy Partners	(1,497)	-
Wesupply Limited - sold in 2015	-	1,000
Others, net	(320)	196
Total	(817)	1,696

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

Name	Sector	Comment on valuation
365 ITMS Limited	Technology	365 made good progress during 2015 and this is reflected in the valuation increase.
Nationwide Energy Partners	Energy	The company experienced difficult trading conditions during 2015 as competitors reduced prices to retain market share. This impacted the company's trading margins and overall profitability and we have therefore reduced our carrying value to reflect this.

Other companies:

Name	Sector	Comment on valuation
Medhost Inc	Technology	Medhost performed well during 2015 but the impact of market factors on prices for comparable quoted businesses resulted in us leaving our carrying value (in US$) unchanged.
ICU Eyewear	Consumer	ICU Eyewear, a co-investment with SFEP, traded profitability in 2015 but we left our carrying value unchanged since there was little growth in revenues during the year.

Fund interests

The return on our funds portfolio for the year was a net loss of £2.5 million (2014: net gain of £2.0 million). Unrealised currency gains were £1.0 million (2014: £1.9 million). The principal valuation movements in 2015 were:

·	In the first half of the year we sold five of our fund positions in the secondary market for net proceeds (after costs) of £9.2 million - this was at a discount of around £1.8 million to our opening book value;
·	At the end of the year we wrote down our carrying value in Brockton Capital by £2.8 million based on revised value expectations for the fund;
·	We wrote down our carrying value in San Francisco Equity Partners ("SFEP") by £2.7 million, most of which arose on Luxury Link, one of its portfolio companies, which entered bankruptcy proceedings during the year;
·	Voreda sold its principal asset during the year resulting in a realised gain to us of £1.5 million;
·	Opus Capital benefited from the successful IPO of one of its portfolio companies and our share of the fund's net asset value increased  by £1.4 million; and
·	Net valuation increases on other fund positions were £0.9 million.

The maturity of our funds portfolio is reflected in the related cash flows during 2015. Distributions from funds were £11.6 million (2014: £10.4 million) and calls paid were £0.4 million (2014: £1.7 million). The principal distributions were from Voreda (which completed the sale of its principal asset) £6.5 million, SFEP (which sold The Guild and received escrow proceeds from an earlier disposal) £2.0 million and Inflexion £1.4 million.

We are the majority investor in SFEP (as opposed to our other fund interests where we have only a minority stake) and at the end of 2015 the carrying value of our interest was £11.8 million (31 December 2014: £16.3 million). The principal remaining investments in its portfolio at 31 December 2015 are Yes To (£6.2 million (2014: £7.1 million) - consumer sector) and Penguin Computing (£5.2 million (2014: £5.0 million) - technology sector).

Our other fund holdings at the end of 2015 (excluding SFEP) had a book value of £28.0 million (31 December 2014: £46.3 million), and include the following principal interests:

General partner	Sector	31 December
		2015 £'000	2014 £'000
Brockton Capital	UK property	12,339	15,168
Opus Capital Venture Partners	US venture capital	5,424	4,085
Eden Ventures	UK venture capital	4,085	3,624
Weber Capital Partners	US micro-cap quoted stocks	3,263	3,372

The above holdings represent 90% 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 £0.5 million (2014: £10.3 million) includes the following:

·     Directors' and other fees from portfolio companies were £0.1 million (2014: £0.1 million);

·     The recurring overhead costs in 2015 were £3.3 million (2014: £3.6 million);

·     One off costs associated with the proposed change in investment strategy were £0.8 million;

·     Interest income for the year was £78,000 (2014: £26,000); and

·     The tax charge for the year was £0.3 million (2014: £0.4 million).

Financial resources and commitments

Cash holdings were £6.1 million (31 December 2014: £9.2 million) with no debt. At 31 December 2015 the Group had commitments of £4.0 million (31 December 2014: £7.0 million) to meet outstanding capital calls from its fund interests.

Employees

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

				2015				2014
		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 Directors have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity and a summary of the principal risks and uncertainties that could have a material adverse effect on the Group's strategy, performance and financial condition is set out below.

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 2015 66% 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.

4          Viability statement

Taking into account the Company's current position (as set out in the Chairman's statement and this Strategic report) and the principal risks and uncertainties set out above, the Directors have assessed the Company's prospects and viability over a period longer than twelve months from the date of approval of this Annual report.

The Directors concluded that the appropriate period for this assessment should be the two years commencing 1 January 2016 since this period is expected to see the Company's realisation strategy substantially complete.  This assessment has included consideration of the following:

·	Many of the Company's investments are in private companies for which the timing and amount of income and/or realisation is uncertain. The Board regularly reviews the short and medium term prospects for companies within the investment portfolio which includes consideration of operational issues as well as broader market factors and individual realisation opportunities.  These reviews form the basis for determining when to initiate a sale process and, ultimately, the overall period required for the realisation strategy.
·	The Company will continue to return capital to shareholders through the orderly realisation of its assets and needs to maintain the appropriate level of working capital to ensure it can finance the operations required to fulfil this overall strategic objective. The amounts returned to shareholders are determined only after ensuring that the Company has retained sufficient cash or other liquid resources to meet its working capital requirements, including its obligations in the form of uncalled capital commitments to its fund interests;
·	Where it relies on liquid resources other than cash in making this judgement, the Board considers likely downside risk in the value of marketable securities. This risk typically includes factors impacting the price of the security and the exchange rate against £ sterling of the currency in which it is denominated.

Taking account of the above factors the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of this assessment. However the nature of the realisation strategy means that the Company is not a going concern but it has viability during the period of the implementation of that strategy.

By order of the Board

Nicholas Friedlos                            

Director

18 March 2016

Consolidated income statement

	Notes	Year ended 31 December
		2015 £'000	2014 £'000
Net gains on investments	2	4,664	14,151
Directors' and other fees from investments		55	88
Interest income		78	26
		4,797	14,265
Operating expenses		(4,052)	(3,566)
Profit before tax		745	10,699
Taxation		(294)	(409)
Profit for the year		451	10,290
Attributable to:
Equity holders of the parent		451	10,290
Earnings per ordinary share - basic	3	0.3p	6.3p
Earnings per ordinary share - diluted	3	0.3p	6.3p

Consolidated statement of comprehensive income

	Year ended 31 December
	2015 £'000	2014 £'000
Profit for the year	451	10,290
Other comprehensive income which will be reclassified subsequently to profit or loss when specific conditions are met:
Exchange differences on translation of foreign operations	4	34
Total comprehensive profit for the year	455	10,324
Attributable to:
Equity holders of the parent	455	10,324

Consolidated statement of financial position

		31 December
		2015 £'000	2014 £'000
Non-current assets
Property, plant and equipment		261	387
Investments		95,643	132,875
Non-current assets		95,904	133,262
Current assets
Operating and other receivables		602	240
Cash and cash equivalents		6,105	9,158
Current assets		6,707	9,398
Total assets		102,611	142,660
Current liabilities
Operating and other payables		(3,985)	(4,843)
Current tax liabilities		(715)	(492)
Current liabilities		(4,700)	(5,335)
Non-current liabilities
Provisions and other long-term liabilities		(2,820)	(2,217)
Non-current liabilities		(2,820)	(2,217)
Total liabilities		(7,520)	(7,552)
Net assets		95,091	135,108
Equity
Share capital		10,358	14,525
Share premium		508	508
Capital redemption reserve		22,664	18,497
Merger reserve		23,918	35,422
Foreign exchange translation reserve		816	812
Retained earnings		36,827	65,344
Equity attributable to owners of the parent		95,091	135,108

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 2014	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
Total comprehensive income for the year
Profit for the year	-	-	-	-	-	451	451
Exchange differences on translation of foreign operations	-	-	-	-	4	-	4
Transactions with owners, recorded directly in equity
Repurchase of shares	(4,167)	-	4,167	-	-	(40,472)	(40,472)
Release from merger reserve	-	-	-	(11,504)	-	11,504	-
Balance at 31 December 2015	10,358	508	22,664	23,918	816	36,827	95,091

Consolidated cash flow statement

		Year ended 31 December
		2015	2014
		£'000	£'000
Cash flows from operating activities
Profit for the year		451	10,290
Adjustments for:
Depreciation and amortisation		127	131
Gains on investments		(4,664)	(14,151)
Translation differences		(329)	(825)
Share-based payments		-	(114)
Interest income		(78)	(26)
Income tax expense		295	409
		(4,198)	(4,286)
Change in operating and other receivables		(362)	136
Change in operating and other payables		(2,206)	(6,284)
		(6,766)	(10,434)
Income tax paid		(72)	(930)
Net cash used in operating activities		(6,838)	(11,364)
Cash flows from investing activities
Interest received		78	26
Acquisition of property, plant and equipment		(1)	(5)
Acquisition of investments		(1,194)	(4,856)
Proceeds from sale of investments		43,731	45,879
Other income from investments		1,310	1,265
Net cash from investing activities		43,924	42,309
Cash flows from financing activities
Repurchase of own shares		(40,472)	(40,470)
Net cash used in financing activities		(40.472)	(40,470)
Net decrease in cash and cash equivalents		(3,386)	(9,525)
Cash and cash equivalents at the beginning of the year		9,158	17,824
Effect of exchange rate fluctuations on cash held		859	859
Cash and cash equivalents at the end of the year		6,105	9,158

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 2015 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 2015 or 2014 but is derived from those accounts. Statutory accounts for 2014 have been delivered to the registrar of companies, and those for 2015 will be delivered in due course. The auditor has reported on those accounts; their report on the accounts for 2015 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:

Asset type	Year ended 31 December
	2015			2014
	Realised gains/(losses) £'000	Unrealised gains/(losses) £'000	Total £'000	Realised gains/(losses) £'000	Unrealised gains/(losses) £'000	Total £'000
Funds	2,518	(5,025)	(2,507)	(142)	2,144	2,002
Quoted	1,511	(2,479)	(968)	879	(1,642)	(763)
Unquoted	8,948	1,142	10,090	11,537	3,837	15,374
	12,977	(6,362)	6,615	12,274	4,339	16,613
Charges for incentive plans			(1,951)			(2,462)
			4,664			14,151

Charges for incentive plans include £1,348,000 (2014: £2,723,000) for carried interest and £603,000 (2014: £261,000 credit) 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
		2015	2014
		£'000	£'000
Earnings
Earnings for the purposes of earnings per share being net profit attributable to equity holders of the parent		451	10,290
Number of shares		Number	Number
Weighted average number of ordinary shares for the purposes of basic earnings per shares		143,424,774	162,794,999
Effect of dilutive potential ordinary shares:
Share options and performance shares		78,531	78,531
Weighted average number of ordinary shares for the purposes of diluted earnings per share		143,503,305	162,873,530
Earnings per share
Basic		0.3p	6.3p
Diluted		0.3p	6.3p

4.         Capital commitments

			31 December
			2015		2014
			£'000		£'000
Outstanding commitments to funds			3,961		6,994

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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