REG - LMS Capital PLC - Half year results for the 6 months ended 30.06.23
01/08/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230801:nRSA8185Ha&default-theme=true
RNS Number : 8185H LMS Capital PLC 01 August 2023
1 August 2023
LMS CAPITAL PLC
Half year results for the six months ended 30 June 2023
Financial Update
· Net Asset Value ("NAV") at 30 June 2023 of £44.6 million, 55.2p per
share, compared to £46.5 million (57.7p per share) at 31 December 2022;
· Realised and unrealised underlying portfolio gains of £0.6 million
on the mature portfolio, offset by £1.1 million of unrealised foreign
exchange losses;
· Running costs were £0.9 million and investment related costs were
£0.3 million;
· Cash proceeds of £0.3 million from realisations during the half
year;
· Final dividend payment in June 2023 of 0.625 pence per share for the
year ended 31 December 2022; and
· Cash at 30 June 2023 was £16.5 million (31 December 2022: £17.9
million).
Interim Dividend
· The Board has approved an interim dividend in respect of the
Company's financial year to 31 December 2023 of 0.3 pence per share. The
dividend will be paid on 12 September 2023 to shareholders on the share
register at close of business on 11 August 2023 (with an ex-dividend date of
10 August 2023).
Robert Rayne, Chairman, commented:
"We remain focused on the prudent deployment of our capital and during the
period, our team has been engaged in active negotiations in the retirement
living space. On energy, the Dacian team continues work to bed down the assets
acquired in late 2021. Good progress is being made streamlining the cost base,
but equipment failures leading to interruptions in production are continuing
to delay progress with the business plan, although these are being worked
through. We hope to report progress on all fronts in the second half of the
year"
1 August 2023
Enquiries: LMS Capital plc
0207 935 3555
Robert Rayne, Chairman
Nicholas Friedlos, Managing Director
LMS CAPITAL plc
Statement from the Chairman and the Managing Director
We are pleased to report the financial results of the Company for the first
six months of the year and to provide an update on our portfolio and the
direction of the business.
The NAV of the company at 30 June 2023 was £44.6 million, 55.2 pence per
share (31 December 2022 £46.5 million, 57.7 pence per share) and is
summarised below.
30 June 31 December
2023 (unaudited) 2022 (audited)
£'000 £'000
Mature Investment Portfolio
Unquoted investments 6,669 6,626
Funds 13,662 14,033
Quoted investments 161 160
20,492 20,819
New Investment Portfolio
Dacian 9,660 10,145
9,660 10,145
Total Investments 30,152 30,964
Cash 16,500 17,906
Other net assets/liabilities (2,070) (2,329)
Net assets 44,582 46,541
After adjusting for the payment of the final dividend of 0.625 pence per share
for the 2022 year, the overall NAV at 30 June 2023 is down 3.1% from the 31
December 2022 position and down 2.3% compared to 31 March 2023.
This overall decrease of £1.9 million comprises:
· Dividend payments £0.5 million
· Net income and fair value adjustments on the investment portfolio
result in an overall valuation decrease of £0.5 million in the investment
portfolio:
o net increases in underlying investment values of £0.6 million on the
mature asset portfolio;
o offset by net decrease of £1.1 million from foreign exchange losses from
the weakening of the US Dollar against sterling of which £0.6 million relates
to the mature portfolio and £0.5 million to the investment in Dacian; and
o no net underlying increase or decrease in the value of Dacian.
· management fee income for LMS of £0.1 million from Dacian;
· bank interest £0.3 million; and
· running costs of £0.9 million, investment related costs of £0.3
million principally associated with developing real estate deal opportunities
and other net outflows of £0.1 million.
The Company's NAV comprises three distinct groups of assets:
Mature Investments - 30 June 2023 NAV £20.5 million (25.4 pence per share)
The Mature Portfolio comprises investments which originate from the Company's
strategy pre-2012 and are currently managed with a view to optimising the
realisation values. As noted in our 2022 Annual Report, we continue to expect
progress on realisation of these assets mainly in 2024 and 2025.
During the first half of 2023, this group of investments showed net realised
and unrealised underlying gains of £0.6 million, offset by foreign exchanges
losses of £0.6 million from the weakening of the US Dollar against sterling,
and realisations of £0.3 million, resulting in an overall reduction of £0.3
million.
The underlying gains of £0.6 million, excluding foreign exchange losses, were
as follows:
· Unquoted investments
The unquoted portfolio recorded net unrealised gains of £0.6 million:
o Medhost: £0.6 million increase. We continue to follow the valuation of
Primus, the lead investment manager, which shows an unrealised gain of £0.6
million in the most recent valuation. Medhost operates in a mature market and
it continues to be cash generative and perform in line with budget; and
o Elateral: no change in valuation. The company's financial performance has
improved since mid 2022. It has shown some success at winning new business and
is currently EBITDA positive. We continue to support the management in their
strategy to return to sustainable sales growth.
· Fund investments
The fund investments showed neither a gain nor loss for the half year:
o Opus: £0.8 million decrease. As reported in our Q1 2023 NAV update this
was driven the fund manager's valuation primarily reflecting movements in
public market comparables for the fund's two principal remaining assets;
o Our investment in Brockton has increased by £0.4 million, reflecting the
unwind of the discount in our discounted cash flow valuation; and
o Our investment in Weber increased by £0.4 million reflecting the market
price performance of the US listed microcap equities held in the fund.
· Quoted shares
Overall, the quoted portfolio showed neither a gain nor loss during the first
half of 2023.
Energy - Dacian - 30 JUNE 2023 NAV £9.7 million (12.0 pence per share)
In the first six months of the year, oil and gas revenues, net of applicable
royalties and windfall taxes were $9.9 million. This was lower than budget due
to a combination of lower pricing and, as explained below, lower production.
On the positive side, the team continue to take actions to reduce the cost
base they inherited when they took over the business in late 2021. In the six
months the cost reductions have more than offset lower revenues and the
business is ahead of budget at the EBITDA level.
Management's aim has been to stabilise production at approximately 1,000
barrels of oil equivalent per day ("BOEPD") and from that base, build
additional production through workover activity. It appeared in late 2022 and
early 2023 that this stabilised level of production had been achieved.
However, particularly in the second quarter the company has experienced
further interruptions due to technical failures in equipment resulting in lost
production and delayed progress on workovers. Production in the six months has
averaged some 8% below the 1,000 BOEPD base level. The team's priority is to
achieve consistent production at the stabilised base level and then to focus
on the workover activity.
In recognition of the delays in the six months, whilst interest continues to
be due and payable on the Company's loan notes, no net interest accrual has
been recognised in the results for the half year. This will be reviewed at the
year end in light of Dacian's progress during the second half of the year and
prevailing market conditions.
The Dacian investment is denominated in US Dollars and is showing an
unrealised foreign exchange loss of £0.5 million in the period.
The Company has benefitted from £0.1 million being six months' management fee
income.
Liquidity - Cash less other net liabilities
Cash
Cash balances in the Company and its subsidiaries at 30 June 2023 were £16.5
million (31 December 2022: £17.9 million).
Significant outflows during the six months were running costs net of interest
income and management fees received of £0.9 million, investment related costs
of £0.3 million and dividend payments of £0.5 million.
Portfolio inflows were £0.3 million being proceeds from the sale by SFEP of
ICU.
Net Liabilities
Net liabilities of £2.1 million consist primarily of accruals for income
taxes, historic carried interest liabilities for one remaining asset and other
sundry costs.
Dividend policy
A final dividend of 0.625 pence per share for the year ended 31 December 2022
was approved by shareholders at the AGM in May 2023 and paid in June 2023.
The Board has approved an interim dividend for the 2023 year of 0.3 pence per
share to be paid on 12 September 2023 to shareholders on the share register at
close of business on 11 August 2023 (with an ex-dividend date of 10 August
2023).
Looking forward
A priority for 2023 is to bring to fruition for investors the work that has
been undertaken with our real estate teams, particularly on the development
side where we have been actively seeking opportunities in the later living
sector. We see the potential for strong growth in sector generally and it
offers the opportunity to combine our real estate skills with operating know
how. From an investment perspective, the sector offers attractive returns in
the medium to longer term for capital from LMS' balance sheet alongside its
co-investors.
During the last six months we have been actively engaged in negotiations to
acquire both operational retirement village assets as well as development
sites. Whilst we are keen to deploy capital, we remain disciplined in our
approach to the evaluation of all these opportunities.
In energy, we anticipate further opportunities to invest with the Dacian team
in late life oil and gas production opportunities, although the priority for
the team for the rest of this year remains to focus on the initial
acquisition.
We would like to express our appreciation for the support from our team and
from the network of people with whom we work on a regular basis. We would also
like to express our appreciation for the continued support of our
shareholders. We look forward to reporting to you further on our progress.
Robert Rayne
Chairman
Nicholas Friedlos
Managing Director
1 August 2023
LMS CAPITAL plc
PORTFOLIO MANAGEMENT REVIEW
Market background
Ongoing geopolitical tensions and domestic challenges in key markets are
slowing any return to sustained growth. Domestically both inflation and
interest rates remains high.
Sterling strengthened against the US Dollar during the period and whilst
global equity markets saw some recovery, with the US S&P 500 Index
increasing by nearly 16%, the FTSE 100 remained flat. The FTSE AIM 100 and
SmallCap indices declined by 11% and 2%, respectively.
The Board and the Company continue to monitor closely the economic environment
and capital markets, including the impact this has on the investment portfolio
and its valuations.
Performance review
The movement in NAV during the six months ended 30 June was as follows:
Six months ended 30 June
2023 2022
£'000 £'000
Opening NAV 46,541 49,109
Income and fair value adjustments on investment portfolio (495) (658)
Dividends (505) (505)
Overheads and other net movements (959) (985)
Closing NAV 44,582 46,961
Cash realisations and new and follow-on investments from the portfolio were as
follows:
Six months ended 30 June
2023 2022
£'000 £'000
Proceeds from redemption of preference share - 353
Distributions from funds and loan repayments 326 68
Total - gross cash realisations 326 421
New and follow-on investments - (263)
Fund calls - (105)
Total - net 326 53
Realisations relate to the sale of ICU Eyeware, the last investment held
through San Francisco Equity Partners ("SFEP").
Below is a summary of the investment portfolio of the Company and its
subsidiaries, which reflects all investments held by the Group:
30 June 31 December
2023 2022
Mature investment portfolio UK US Total UK US Total
£'000 £'000 £'000 £'000 £'000 £'000
Quoted 82 79 161 121 39 160
Unquoted 687 5,982 6,669 681 5,945 6,626
Funds 7,033 6,629 13,662 6,676 7,357 14,033
7,802 12,690 20,492 7,478 13,341 20,819
New investment portfolio UK US Total UK US Total
£'000 £'000 £'000 £'000 £'000 £'000
Unquoted - 9,660 9,660 - 10,145 10,145
- 9,660 9,660 - 10,145 10,145
Total investments 7,802 22,350 30,152 7,478 23,486 30,964
Basis of valuation:
Quoted investments
Quoted investments for which an active market exists are valued at the closing
bid price at the reporting date.
Unquoted direct investments
Unquoted direct investments for which there is no active market are valued
using the most appropriate valuation technique with regard to the stage and
nature of the investment.
Valuation methods that may be used include:
· investments in an established business are valued using revenue or
earnings multiples depending on the stage of development of the business and
the extent to which it is generating sustainable revenue or earnings;
· investments in an established business which is generating
sustainable revenue or earnings but for which other valuation methods are not
appropriate are valued by calculating the discounted value of future cash
flows;
· investments in debt instruments or loan notes are determined on a
standalone basis, with the initial investment recorded at the price of the
transaction and subsequent adjustments to the valuation are considered for
changes in credit risk or market rates; and
· convertible instruments are valued by disaggregating the convertible
feature from the debt instrument and valuing it using a Black-Scholes model.
Funds
Investments in managed funds are valued at fair value. The general partners of
the funds will provide periodic valuations on a fair value basis, the latest
available of which the Company will adopt provided it is satisfied that the
valuation methods used by the funds are not materially different from the
Company's valuation methods. Adjustments will be made to the fund valuation
where the Company believes the evidence available supports an alternative
valuation.
Performance of the investment portfolio
The return on investments for the six months ended 30 June 2023 was as
follows:
Six months ended 30 June 2023 Six months ended 30 June 2022
Realised Unrealised Realised Unrealised
gains/(losses) gains/(losses) Total gains/(losses) gains/(losses) Total
Asset type £'000 £'000 £'000 £'000 £'000 £'000
Quoted - 1 1 - (201) (201)
Unquoted 62 (864) (802) 24 (1,123) (1,099)
Funds (9) (339) (348) - 44 44
53 (1,202) (1,149) 24 (1,280) (1,256)
Accrued interest income 654 598
Income and fair value adjustments on investment portfolio (495) (658)
As noted in the commentary on page 5, no net benefit has been recognised in
these interim financial statements from the interest accruing on the Dacian
loan notes for the period January to June 2023. In order to comply with GAAP
the £0.654 million entitlement to interest must be recognised as income and
this is then adjusted down by an equal amount as part of the fair value
adjustments and is included in the £0.864 million unrealised loss adjustment
on unquoted investments in the table above.
Approximately 74% of the portfolio at 30 June 2023 is denominated in US
Dollars (31 December 2022: 76%) and the above table includes the impact of
currency movements. In the first six months of 2023, the strengthening of
sterling against the US Dollar resulted in a significant unrealised foreign
currency loss of £1.1 million of which £0.6 million relates to the mature
portfolio and £0.5 million to the investment in Dacian (2022: unrealised gain
of £2.6 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.
Quoted investments
30 June 31 December
2023 2022
Company Sector £'000 £'000
Tialis Essential IT plc UK technology 82 121
Arsenal Digital Holdings Inc US energy 56 13
Others - 23 26
161 160
The changes in valuation on the quoted portfolio arose as follows:
Six months ended 30 June
Fair value increases/(decreases) 2023 2022
£'000 £'000
Unrealised
Tialis Essential IT plc (39) (73)
Arsenal Digital Holdings Inc 44 (130)
Other quoted holdings (2) (9)
Unrealised foreign currency (losses)/gains (2) 11
Total fair value increases/(decreases) 1 (201)
Unquoted investments
30 June 31 December
2023 2022
Company Sector £'000 £'000
Dacian Romanian energy 9,660 10,145
Medhost Inc US technology 5,944 5,673
Elateral UK technology 599 599
ICU Eyewear* US consumer - 232
Tialis loan notes UK technology 87 82
Cresco US consumer 39 40
16,329 16,771
*Co-investment with SFEP
The changes in valuation on the unquoted portfolio arose as follows:
Six months ended 30 June
2023 2022
Fair value increases/(decreases) £'000 £'000
Realised
Medhost - 24
ICU Eyeware 62 -
62 24
Unrealised
Dacian (see note on page 9) (644) -
Medhost 554 (1,032)
Elateral - (443)
ICU Eyewear - (1,376)
Tialis loan notes 5 (27)
Unrealised foreign currency (losses)/gains (779) 1,755
(864) (1,123)
Total fair value decreases (802) (1,099)
Income movements
Interest on Dacian Investment 654 598
Valuations are sensitive to changes in the following two inputs:
· 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.
Comments on individual companies are set out below.
Medhost
Medhost is a co-investment with funds of Primus Capital. Medhost's financial
performance in 2023 is expected to be profitable and cash generative and
slightly up on EBITDA compared to budgets. This resulted in an increase to the
valuation by the fund manager for the period.
ICU Eyewear
This was the only remaining asset in the SFEP III fund and was sold during the
period realising a gain of £62,000.
Fund interests
30 June 31 December
2023 2022
General partner Sector £'000 £'000
Brockton Capital Fund 1 UK real estate 6,406 6,036
Opus Capital Venture Partners US venture capital 4,263 5,275
GW 2001 Fund US micro-cap quoted stocks 2,329 2,046
EMAC ILF Europe real estate 332 341
Simmons Parallel Energy UK energy 296 262
Eden Ventures UK venture capital - 37
Other interests - 36 36
13,662 14,033
The changes in valuation on the Company's fund portfolio for the six months
ended 30 June 2023 were as follows:
Six months ended 30 June
Fair value increases/(decreases) 2023 2022
£'000 £'000
Unrealised
Brockton Capital Fund 1 369 401
Opus Capital Venture Partners (783) 931
GW 2001 Fund 383 (1,063)
Simmons Parallel Energy 42 (154)
Eden Ventures (5) (418)
San Francisco Equity Partners - (89)
Others (net) 2 (392)
Unrealised foreign currency (losses)/gains (347) 828
Realised
San Francisco Equity Partners (9) -
Total fair value (decreases)/increases (348) 44
Fund interests
· Brockton Capital Fund 1 - The Company's investment represents its
share (via the Brockton Fund) of preferred debt investments in a "Super Prime"
central London residential development. The investment showed an increase in
the valuation of £0.4 million for the first half of 2023 due to unrealised
gains from the unwinding of the discount rate as the investment is valued on a
discounted cash flow basis;
· GW 2001 Fund - holds US publicly traded micro-cap securities and
showed an unrealised gain of £0.4 million reflecting an increase in the
underlying equity prices; and
· Opus Capital - a US venture fund, showed an unrealised loss of £0.8
million from valuation losses on its two main assets, primarily due to
movements in quoted market comparables for its two main remaining assets.
Costs
Group costs for the period (including £1.1 million incurred by the Company
and £ 0.1 million by subsidiaries) were £1.2 million (2022: £1.1 million)
which include running costs of £0.9 million and investment related costs of
£0.3 million for support costs for real estate and co-investment activities.
Taxation
The Group tax provision for the period, all of which arose in the
subsidiaries, is £0.1 million (2022: £0.6 million).
Financial Resources and Commitments
At 30 June 2023 cash holdings, including cash in subsidiaries, were £16.5
million (31 December 2022: £17.9 million) and neither the Company nor any of
its subsidiaries had any external debt.
At 30 June 2023, subsidiary companies had commitments of £2.7 million (31
December 2022: £2.7 million) to meet outstanding capital calls from fund
interests.
LMS CAPITAL PLC
1 August 2023
LMS Capital plc
Unaudited Condensed Company Income Statement
Six months ended 30 June
2023 2022
Notes £'000 £'000
Net losses on investments 5 (716) (484)
Interest income 275 37
Other income 64 49
Total losses on investments (377) (398)
Operating expenses (1,089) (940)
Net losses on foreign currency (14) (331)
Losses before tax (1,480) (1,669)
Taxation - -
Losses for the period (1,480) (1,669)
Attributable to:
Equity shareholders (1,480) (1,669)
Loss per ordinary share - basic 6 (1.8p) (2.1p)
Loss per ordinary share - diluted 6 (1.8p) (2.1p)
LMS Capital plc
Unaudited Condensed Company Statement of Other Comprehensive Income
Six months ended 30 June
2023 2022
£'000 £'000
Losses for the period (1,480) (1,669)
Other comprehensive income - -
Total comprehensive loss for the period (1,480) (1,669)
Attributable to:
Equity shareholders (1,480)
(1,669)
LMS Capital plc
Unaudited Condensed Company Statement of Financial Position
30 June 31 December
2023 2022
Notes £'000 £'000
Assets
Non-current assets
Right of use assets 55 70
Investments 8 67,487 68,207
Amounts receivable from subsidiaries 5,298 5,158
Total non-current assets 72,840 73,435
Current assets
Operating and other receivables 119 71
Cash 12,986 14,542
Total current assets 13,105 14,613
Total assets 85,945 88,048
Liabilities
Current liabilities
Operating and other payables (352) (428)
Amounts payable to subsidiaries (40,979) (41,032)
Total current liabilities (41,331) (41,460)
Non-current liabilities
Other long-term liabilities (32) (47)
Total non-current liabilities (32) (47)
Total liabilities (41,363) (41,507)
Net assets 44,582 46,541
Equity
Share capital 8,073 8,073
Share premium 508 508
Capital redemption reserve 24,949 24,949
Share-based equity 154 128
Retained earnings 10,898 12,883
Total equity shareholders' funds 44,582 46,541
Net asset value per ordinary share 11 55.23p 57.65p
LMS Capital plc
Unaudited Condensed Company Statement of Changes in Equity
Six months ended 30 June 2023
Capital Share-
Share Share redemption based Retained Total
capital premium reserve equity earnings equity
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2023 8,073 508 24,949 128 12,883 46,541
Comprehensive loss for the period
Loss for the period - - - - (1,480) (1,480)
Equity after total comprehensive 8,073 508 24,949 128 11,403 45,061
loss for the period
Contributions by and distributions
to shareholders
Share-based payments - - - 26 - 26
Dividends (note 7) - - - - (505) (505)
Balance at 30 June 2023 8,073 508 24,949 154 10,898 44,582
Six months ended 30 June 2022
Capital Share-
Share Share redemption based Retained Total
capital premium reserve equity earnings equity
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2022 8,073 508 24,949 75 15,504 49,109
Comprehensive loss for the period
Loss for the period - - - - (1,669) (1,669)
Equity after total comprehensive 8,073 508 24,949 75 13,835 47,440
loss for the period
Contributions by and distributions
to shareholders
Share-based payments - - - 26 - 26
Dividends (note 7) - - - - (505) (505)
Balance at 30 June 2022 8,073 508 24,949 101 13,330 46,961
LMS Capital plc
Unaudited Condensed Company Statement of Cash flow
Six months ended 30 June
2023 2022
Notes £'000 £'000
Cash flows from operating activities
Losses for the period (1,480) (1,669)
Adjustments for non-cash income and expense:
Equity settled share-based payment 26 26
Depreciation on right of use assets 14 14
Interest expense on lease 2 3
Losses on investments 5 716 484
Other income (64) (37)
Interest income (275) (49)
Adjustments to incentives plans 3 13
Exchange loss/(gain) on cash balances 15 (69)
(1,043) (1,284)
Change in operating assets and liabilities
Increase in operating and other receivables (36) (71)
Decrease in operating and other payables (76) (116)
(Increase)/decrease in amounts receivable from subsidiaries (140) 234
(Decrease)/increase in amounts payable to subsidiaries (52) 2,813
Net cash (used in)/from operating activities (1,347) 1,576
Cash flows from investing activities
Interest received 263 26
Other income received 64 49
Net cash from investing activities 327 75
Cash flows from financing activities
Dividend paid 7 (505) (505)
Repayment of principal lease liabilities (14) (5)
Repayment of lease interest (2) (3)
Net cash used in financing activities (521) (513)
Net (decrease)/increase in cash and cash equivalents (1,541) 1,138
Exchange (loss)/gain on cash balances (15) 69
Cash at the beginning of the period 14,542 14,518
Cash at the end of the period 12,986 15,725
LMS Capital plc
Notes to the unaudited financial information
1. Reporting entity
LMS Capital plc ("the Company") is a public limited company limited by shares
incorporated in the United Kingdom under the Companies Act and registered in
England. These unaudited condensed interim financial statements are presented
in pounds sterling because that is the currency of the principal economic
environment of the Company's operations.
The Company was formed on 7 March 2006 and commenced operations on 9 June 2006
when it received the demerged investment division of London Merchant
Securities.
2. Statement of compliance and basis of preparation
These condensed interim financial statements have been prepared in accordance
with IAS 34: 'Interim Financial Reporting'. They do not include all of the
information required for full annual financial statements and should be read
in conjunction with the Annual Report and Accounts for the year ended 31
December 2022 which were prepared in accordance with UK adopted International
Financial Reporting Standards.
The financial information presented in these interim results has been prepared
in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006. The principal accounting policies
adopted in the preparation of the financial information in these interim
results are primarily unchanged from those used in the Company's financial
statements for the year ended 31 December 2022 and are consistent with those
that the Company expects to apply in its financial statements for the year
ended 31 December 2023.
These condensed interim financial statements do not comprise statutory
accounts within the meaning of section 434 of the Companies Act 2006.
Statutory accounts for the year ended 31 December 2022 were approved by the
Board of Directors on 17 March 2023 and delivered to the Registrar of
Companies. The report of the auditors on those accounts was unqualified, did
not contain an emphasis of matter paragraph and did not contain any statement
under section 498 of the Companies Act 2006. The financial information for the
periods ended 30 June 2022 and 30 June 2023 are unaudited and have not been
reviewed by the Company's auditors.
3. Estimates and management judgements
The preparation of the unaudited condensed interim financial statements
requires management to make judgements, estimates and assumptions that affect
the application of accounting policies and the reported amounts of assets and
liabilities, income and expense. Actual results may differ from these
estimates.
In preparing these unaudited condensed interim financial statements, the
significant judgements made by management in applying the Company's accounting
policies and the key sources of estimation were the same as those that applied
to the Company financial statements as at and for the year ended 31 December
2022.
4. Financial risk management
The Company's financial risk management objectives and policy are consistent
with those disclosed in the Company financial statements as at and for the
year ended 31 December 2022.
LMS Capital plc
Notes to the unaudited financial information (continued)
5. Net losses on investments
The losses on investments were as follows:
Six months ended 30 June 2023 Six months ended 30 June 2022
Realised Unrealised Realised Unrealised
gains gains/(losses) Total gains gains/(losses) Total
Asset type £'000 £'000 £'000 £'000 £'000 £'000
Quoted - 1 1 - (201) (201)
Unquoted 62 (864) (802) 24 (1,123) (1,099)
Funds (9) (339) (348) - 44 44
53 (1,202) (1,149) 24 (1,280) (1,256)
Accrued interest income 654 598
(495) (658)
(Charge)/credit for incentive plans (11) 85
Net (losses)/gains on foreign currency (128) 763
Net operating and other expenses of subsidiaries (82) (674)
(716) (484)
6. Loss per ordinary share
The calculation of the basic and diluted loss per share, in accordance with
IAS 33, is based on the following data:
Six months ended
30 June 2023 30 June 2022
Losses
Losses for the purpose of net profit per share attributable to equity holders (1,480) (1,669)
of the parent (£'000)
Number of shares
Weighted average number of ordinary shares for
the purposes of basic loss per share 80,727,450 80,727,450
Loss per share
Basic (1.8p) (2.1p)
Diluted (1.8p) (2.1p)
LMS Capital plc
Notes to the unaudited financial information (continued)
7. Dividends
Dividends declared during the period ending 30 June 2023 and 30 June 2022 are
as follows.
Dividend date Payment date Dividend Pence per share
£'000
Final dividend payment for 2022 26 May 2023 16 June 2023 505 0.625
Total as at 30 June 2023 505 0.625
Final dividend payment for 2021 27 May 2022 17 June 2022 505 0.625
Total as at 30 June 2022 505 0.625
The Board has approved the interim dividend for the 2023 year of 0.3 pence per
share to be paid on 12 September 2023.
8. Investments
The Company's investments comprised the following:
30 June 31 December
2023 2022
£'000 £'000
Total investments 67,487 68,207
These comprise:
Investment portfolio of subsidiaries 30,152 30,964
Other net assets of subsidiaries 37,335 37,243
67,487 68,207
The carrying amounts of the investments of the Company's subsidiaries were as
follows:
30 June 31 December
Investments portfolio of subsidiaries 2023 2022
Asset type £'000 £'000
Quoted 161 160
Unquoted 16,329 16,771
Funds 13,662 14,033
Investment portfolio of subsidiaries 30,152 30,964
Other net assets of subsidiaries 37,335 37,243
67,487 68,207
LMS Capital plc
Notes to the unaudited financial information (continued)
8. Investments (continued)
The movements in the investment portfolio were as follows:
Quoted Unquoted
securities securities Funds Total
£'000 £'000 £'000 £'000
Balance at 1 January 2022 383 16,626 13,929 30,938
Accrued interest - 1,274 - 1,274
Purchases - 427 - 427
Proceeds from disposals (2) - - (2)
Distributions from partnerships - (375) (56) (431)
Contributions to partnerships - 80 52 132
Fair value adjustments (221) (1,261) 108 (1,374)
Balance at 31 December 2022 160 16,771 14,033 30,964
Balance at 1 January 2023 160 16,771 14,033 30,964
Accrued interest - 654 - 654
Distributions from partnerships - (294) (32) (326)
Contributions to partnerships - - 9 9
Fair value adjustments 1 (802) (348) (1,149)
Balance at 30 June 2023 161 16,329 13,662 30,152
The following table analyses investments carried at fair value at the end of
the period, by the level in the fair value hierarchy into which the fair value
measurement is categorised. The different levels have been defined as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets;
Level 2: inputs other than quoted prices included within level 1 that are
observable for the asset, either directly (i.e. as prices) or indirectly (i.e.
derived from prices); and
Level 3: inputs for the asset that are not based on observable market data
(unobservable inputs such as trading comparables and liquidity discounts).
Fair value measurements are based on observable and unobservable inputs.
Observable inputs reflect market data obtained from independent sources, while
unobservable inputs reflect the Company's view of market assumptions in the
absence of observable market information.
LMS Capital plc
Notes to the unaudited financial information (continued)
The significant unobservable inputs used at 30 June 2023 in measuring
investments categorised as level 3 in this note are considered below:
1. Unquoted securities (carrying value £16.3 million) are
valued using the most appropriate valuation technique such as a revenue-based
approach, an earnings-based approach, or a discounted cash flow approach.
These investments are sensitive to both the overall market and industry
specific fluctuations that can impact multiples and comparable company
valuations. In most cases the valuation method uses inputs based on comparable
quoted companies for which the key unobservable inputs are:
· EBITDA multiples of approximately 5 times dependent on the business
of each individual company, its performance and the sector in which it
operates; and
· revenue multiples in the range 0.5-1.5 times, also dependent on
attributes at individual investment level.
2. Investments in funds (carrying value £13.7 million) are
valued using reports from the general partners of the fund interests with
adjustments made for calls, distributions and foreign currency movements since
the date of the report (if prior to 30 June 2023). The Company also carries
out its 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. However, the degree of detail on valuations varies significantly by
fund and, in general, details of unobservable inputs used are not available.
The valuation of the investments in subsidiaries makes use of multiple
interdependent significant unobservable inputs and it is impractical to
sensitise variations of any one input on the value of the investment portfolio
as a whole. Estimates and underlying assumptions are reviewed on an ongoing
basis however inputs are highly subjective. Changes in any one of the
variables, earnings or revenue multiples or illiquidity discounts could
potentially have a significant effect on the valuation.
The Company's investments are analysed as follows:
30 June 31 December
2023 2022
£'000 £'000
Level 1 - -
Level 2 - -
Level 3 67,487 68,207
67,487 68,207
.
LMS Capital plc
Notes to the unaudited financial information (continued)
8. Investments (continued)
The reconciliation between opening and closing balance of level 3 assets are
presented in the table below:
30 June 31 December
2023 2022
£'000 £'000
Opening balance 68,207 68,461
Unrealised losses (1,202) (1,397)
Purchases, sales, issues and settlements 482 1,143
Closing balance 67,487 68,207
Level 3 amounts include £30,152,000 (2022: £30,964,000) relating to the
investment portfolios of subsidiaries including quoted investments of
£161,000 (2022: £160,000) and £37,335,000 (2022: £37,243,000) in relation
to the other net assets of subsidiaries.
There were no transfers between levels during the period ending 30 June 2023.
The reported values of the level 3 investments would change, should there be a
change in the underlying assumptions and unobservable inputs driving these
values. The Company has performed a sensitivity analysis to assess the overall
impact of a 10% movement in these reported values of investments, on the
profit for the period. The effect on profit / (loss) is shown in the table
below:
30 June 31 December
2023 2022
£'000 £'000
Effect of 10% decrease in investment value (6,700) (6,800)
Effect of 10% increase in investment value 6,700 6,800
9. Capital commitments
30 June 31 December
2023 2022
£'000 £'000
Outstanding commitments to funds 2,656 2,674
2,656 2,674
The outstanding commitments to funds comprise of unpaid calls in respect of
funds where a subsidiary of the Company is a Limited Partner.
As of 30 June 2023, the Company has no other contingencies or commitments to
disclose (2022: £nil).
LMS Capital plc
Notes to the unaudited financial information (continued)
10. Related party transactions
The related parties of LMS Capital plc are its Directors.
The salaries paid to the Directors of the Company for the period was £240,412
(June 2022: £232,180).
During the period, the Company paid rent of £16,390 (June 2022: £8,195) to
The Rayne Foundation. Robert Rayne is the Chairman of The Rayne Foundation.
As at 30 June 2023, the following Directors of the Company had the following
interests in the issued shares of the Company:
30 June 2023 31 December 2022
Shareholders Number of Shares Number of Shares
R Rayne 2,670,124 Ordinary Shares 2,670,124 Ordinary Shares
N Friedlos 161,410 Ordinary Shares 161,410 Ordinary Shares
P Harvey 20,000 Ordinary Shares 20,000 Ordinary Shares
G Stedman 20,000 Ordinary Shares 20,000 Ordinary Shares
11. Net asset value per share
The net asset value per ordinary shares in issue are as follows:
30 June 31 December
2023 2022
Net asset value (£'000) 44,582 46,541
Number of ordinary shares in issue 80,727,450 80,727,450
Net asset value per share (pence) 55.23 57.65
12. Subsequent Events
There are no subsequent events that would materially affect the interpretation
of these Financial Statements.
Statement of Directors' responsibilities
The Directors listed on pages 30-31 of the Company's Annual Report for the
period ended 31 December 2022 continued in office during the six months ended
30 June 2023.
We confirm that to the best of our knowledge:
a the condensed interim financial statements have been prepared in
accordance with UK adopted International Accounting Standard 34, 'Interim
Financial Reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority; and
b the interim management report includes a fair review of the
information required by:
i DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred
during the first six months of the current financial year
and their impact on the condensed interim financial statements, and a
description of the principal risks and uncertainties for the remaining six
months of the year; and
ii DTR 4.2.8R of the Disclosure and Transparency Rules, being related
party transactions that have taken place in the first
six months of the current financial year and that have materially affected the
financial position or performance of the Company during that period; and any
changes in the related party transactions described in the last Annual Report
that could do so.
Nicholas Friedlos
Director
1 August 2023
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR FFFSIDAILVIVRecent news on LMS Capital
See all newsREG - LMS Capital PLC - 1st Quarter Results
AnnouncementREG - LMS Capital PLC - Investor Presentation
AnnouncementREG - LMS Capital PLC - Holding(s) in Company
AnnouncementREG - LMS Capital PLC - Notice of AGM
AnnouncementREG - LMS Capital PLC - 2023 Final Results
Announcement