REG - LMS Capital PLC - Half-year Report
31/07/2024 07:00
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RNS Number : 5467Y LMS Capital PLC 31 July 2024
Interim Report
30 June 2024
31 July 2024
LMS CAPITAL PLC
Half year results for the six months ended 30 June 2024
Financial Update
· Net Asset Value ("NAV") at 30 June 2024 of £36.5 million, 45.2p per
share, compared to £42.1 million (52.2p per share) at 31 December 2023;
· Realised and unrealised underlying portfolio losses of £4.2 million
on the portfolio;
· Running costs were £0.9 million and investment related costs were
£0.5 million;
· Final dividend payment in June 2024 of £0.5 million (0.625 pence per
share) for the year ended 31 December 2023;
· Cash proceeds of £0.4 million from realisations during the half
year; and
· Group cash at 30 June 2024 was £13.0 million (31 December 2023:
£15.5 million).
Interim Dividend
· The Board has approved an interim dividend in respect of the
Company's financial year to 31 December 2024 of 0.3 pence per share. The
dividend will be paid on 13 September 2024 to shareholders on the share
register at close of business on 16 August 2024 (with an ex-dividend date of
15 August 2024).
James Wilson, Chairman, commented:
"The changes to Dacian, whilst resulting in a write down now, we believe have
put Dacian on a sound footing going forward. The result at Brockton is
disappointing and has contributed to an overall poor performance. We do
however continue to see and explore opportunities in the retirement living
sector which we believe would be accretive to value for shareholders. We
acknowledge the need to be able to demonstrate clear progress in the coming
months"
31 July 2024
Enquiries: LMS Capital plc
0207 935 3555
James Wilson, Chairman
Nicholas Friedlos, Managing Director
Chairman and Managing Director's Statement
The financial results of the Company for the first six months of the year and
an update on our portfolio and the direction of the business are set out
below.
OVERVIEW
The results for the six months have been significantly impacted by downward
revisions to the estimated values at Dacian and Brockton.
Dacian's first two and a half years of operation have been below expectations.
The restructuring and board changes were announced on 15 July. Notwithstanding
the immediate reduction in the valuation, the changes to be put in place,
subject to regulatory clearances in Romania will, we believe, enable the
company to take advantage of opportunities open to it going forward and
provide a return to investors.
The Brockton situation is disappointing. Senior lenders to the fund's
remaining investment, a high-end residential development in Mayfair, appointed
administrators in January 2024. Progress has been made with sales of
apartments at target prices. However, at present the pace of sale gives rise
to the risk of the erosion of value to the fund investors by interest costs on
the senior lender's loans. Accordingly, we have taken the prudent view to
write the investment down to nil but will continue to monitor it as an active
position. The fund managers continue to hold the view that some value should
be recovered for fund investors.
The investment at Castle View Windsor has now been under the Company's
ownership for 7 months during which time the focus has been on some
operational changes at the scheme and on market positioning the remaining
units for sale. As reported below, one unit has recently exchanged, and three
further units for which there are firm reservations, potentially complete over
the summer. The relaunched marketing activity is producing a pipeline of
interest.
Castle View is a cornerstone acquisition to build an investment platform in
the retirement living sector. As well as oversight of Castle View we remain
focussed on developing the larger investment platform as a way to generate
returns for our shareholders.
FINANCIAL SUMMARY
The NAV of the Company at 30 June 2024 was £36.5 million, 45.2 pence per
share (31 December 2023: £42.1 million, 52.2 pence per share) and is
summarised below:
30 June 31 December
2024 (unaudited) 2023 (audited)
£'000 £'000
Mature Investment Portfolio
Quoted investments 130 145
Unquoted investments 1,731 1,717
Funds 5,739 9,469
7,600 11,331
New Investment Portfolio
Energy - Dacian 9,701 10,989
Retirement Living - Castle View 6,130 6,130
15,831 17,119
Total Investments 23,431 28,450
Cash 13,050 15,480
Other net assets / (liabilities/provisions) 31 (1,789)
Net Assets 36,512 42,141
The overall decrease of £5.6 million in the half year comprises:
· Dividend payments £0.5 million;
· Portfolio valuation movements - net reduction £4.2 million
summarised below;
· Bank interest £0.3 million;
· Unrealised foreign exchange gains £0.2 million;
· Running costs of £0.9 million, investment related costs of £0.5
million principally associated with developing the retirement living
investment platform and the restructure of Dacian and other net income of
£0.1 million.
PORTFOLIO
The Company's portfolio comprises three distinct groups of assets:
Mature Investments - 30 June 2024 NAV £7.6 million (9.4 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.
During the first half of 2024, this group of investments showed net unrealised
underlying losses of £3.4 million, foreign exchange movements in the period
were not material. The elements were:
· Brockton Fund 1 (£nil at 30 June 2024; £2.5 million decrease in the
half year) - As previously reported, administrators were appointed in January
2024 to the remaining asset in this fund. The value of the investment was
reduced significantly at the year end. Based on discussions with the Brockton
team we have decided prudently to write down the investment down to nil.
Whilst the administrators are making progress and have sold additional units
since January, the current pace of sales, and consequent additional interest
costs, risks erosion of value of the fund's holding. We will continue to
monitor progress and report.
· Elateral: (£1.7 million at 30 June 2024; no change in valuation in
the half year) - The company's financial performance has improved during 2024.
It has shown some success at winning new business. We continue to support the
management in their strategy to return to sustainable sales growth;
· Opus (£3.3m at 30 June 2024; £0.8 million decrease in the half
year) - As reported in our Q1 2024 NAV update this was driven by the fund
manager's valuation primarily reflecting movements in public market
comparables for the fund's two principal remaining assets;
· Weber (£2.0 million at 30 June 2024; £0.2 million decrease in the
half year) - Our investment in Weber decreased by £0.2 million reflecting the
market price performance of the US listed microcap equities held in the fund;
· Other assets (£0.6 million combined value at 30 June 2024; £0.1
million increase in the half year).
Energy - Dacian - 30 June 2024 NAV £9.7 million (12.0 pence per share)
It was announced on 15 July that agreement had been reached between investors
and founders on changes to the governance and financing structure at Dacian
and that those changes would be implemented subject to Romanian regulatory
clearances, which are currently in the process of being sought.
The impact on the Company's NAV of those changes is a reduction of £0.8
million compared to the 31 December 2023 valuation (Note: Compared to the 31
March 2024 valuation the reduction is £1.3 million).
The agreed changes were set out in the 15 July note but in summary:
· Certain of the original investor group, including two of the
Company's directors although not the Company, will provide financing of $1
million to Dacian for one year on an unsecured basis with an entitlement to an
equity subscription of 5% of Dacian's issued share capital, at nominal value;
· The Company's existing interest in senior loan notes in Dacian, along
with the interests of all its co-investors will convert into equity in Dacian
with preferential distribution rights. The effect of the preferential rights
will give the Company 61% of all distributions, and other investors 39% until
the performance criteria have been met;
· The investor group will have increased board representation rights
and will be able to appoint a majority of the Dacian board; and
· The Bridge Loan will take effect immediately but the Equity Swap, the
entitlement of the Bridge Lenders to subscribe for equity and the changes to
the board rights, remain subject to regulatory clearances in Romania.
The background to the changes is:
· Dacian experienced a significant engineering issue in 2023 which
adversely impacted gas production levels and postponed planned production
enhancement projects. Due to this, Dacian has continued to experience lower
than target production levels through 2024 and as such, revenues achieved by
Dacian in 2023 and so far in 2024 have been significantly below expectations;
· Notwithstanding its lower revenues, Dacian has been continuing to
meet its financial obligations, of some $300,000 per month on third-party debt
and $100,000 per month on Romanian Solidarity tax;
· Free cash flow should increase significantly once the third-party
debt is fully repaid which should be by the end of November 2024, and the
Solidarity tax liability settled by April 2025, however it has become clear
that Dacian would benefit from additional financing in the interim period to
ensure it has sufficient working capital; and
· In addition, as it currently stands, due to the total value of the
Senior Loan Notes as at 30 June 2024 (with interest compounded) being $22.1
million, Dacian's capital structure is in a deficit position which under
Romanian Law should be rectified.
Whilst the production levels have been below expectations for the reasons set
out above, the Board considers the prospects for Dacian to be positive in the
medium term. The current cashflow projections for Dacian underpinning the
Restructuring have been rebased on the production levels currently being
achieved and Dacian has also identified cost efficiencies which can be
implemented in the short term which are not expected to impact its maintenance
programme or production. As noted above, free cash flow should increase
significantly during 2025.
Dacian's estate offers opportunities in alternative energy related uses.
Whilst any such opportunities are still at a relatively early stage, the Board
of the Company are optimistic about the potential additional benefit that this
could bring.
Retirement Living - Castle View - 30 June 2024 NAV £6.1 million (7.6 pence
per share)
Castle View retirement village was acquired in December 2023 and was LMS'
first investment in the sector and is intended as the cornerstone for the
creation of a larger retirement living sector investment platform.
Castle View is a retirement living scheme in Windsor comprising 64 apartments,
which are being sold on the basis of 250 year leasehold interests in the
individual apartments. LMS acquired:
· The freehold interest in all the units sold and unsold, which
entitles the freeholder to the annual service charges and deferred management
fees; and
· The leasehold interest in the 15 units unsold at the time of
acquisition, those units having an estimated sale value of £8.3 million.
Financial returns are derived from the sale of units and, in the medium to
longer term from the net deferred management fee income.
The acquisition price was £11.9 million, of which £6.0 million was provided
by LMS and £5.9 million by way of a loan. The loan is paid down from the
proceeds of the sale of the units.
In the first six months of ownership the business plan has been focussed on
making some operational changes and relaunching the sales programme, no
apartment sales were budgeted in the first six months;
Progress during the year to date has included:
· Operational and procedural changes have been made, including
instituting a process of audit and accreditation of operational standards by
ARCO, the industry body, which will measure the operation of the village
against recognised industry best practice;
· A new village manager has been recruited and will be in position
during September;
· The first apartment to be sold under our ownership exchanged contract
for sale on 16 July;
· A further three existing reservations are expected to proceed to
completion over the summer;
· Following the marketing relaunch the list of "interested buyers" is
increasing; and
· In addition deferred management fees of £38,000 have been received
on an apartment resold by owners.
For valuation purposes, the investment continues to be held at acquisition
cost and will be reviewed at the year end.
DIVIDEND
A final dividend of 0.625 pence per share for the year ended 31 December 2023
was approved by shareholders at the AGM in May 2024 and paid in June 2024.
The Board has approved an interim dividend for the 2024 year of 0.3 pence per
share to be paid on 13 September 2024 to shareholders on the share register at
close of business on 16 August 2024 (with an ex-dividend date of 15 August
2024).
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.
James Wilson
Chairman
Nicholas Friedlos
Managing Director
31 July 2024
Portfolio Management Review
The movement in NAV during the six months ended 30 June was as follows:
Six months ended 30 June
2024 2023
£'000 £'000
Opening NAV 42,141 46,541
Income and fair value adjustments on investment portfolio (4,120) (495)
Dividends (505) (505)
Overheads and other net movements (1,004) (959)
Closing NAV 36,512 44,582
Cash realisations and new and follow-on investments from the portfolio were as
follows:
Six months ended 30 June
2024 2023
£'000 £'000
Distributions from funds 430 326
Total - gross cash realisations 430 326
New and follow-on investments - -
Fund calls (55) -
Total - net 375 326
Realisations in 2024 relate to a distribution received from Simmons.
Below is a summary of the investment portfolio of the Company and its
subsidiaries, which reflects all investments held by the Group:
30 June 2024 31 December 2023
Mature investment portfolio GBP denominated USD denominated Total GBP denominated USD denominated Total
£'000 £'000 £'000 £'000 £'000 £'000
Quoted 90 40 130 107 37 144
Unquoted 1,680 51 1,731 1,680 38 1,718
Funds 396 5,343 5,739 3,139 6,330 9,469
2,166 5,434 7,600 4,926 6,405 11,331
Other investments GBP denominated USD denominated Total GBP denominated USD denominated Total
£'000 £'000 £'000 £'000 £'000 £'000
Dacian - 9,701 9,701 - 10,989 10,989
Castle View 6,130 - 6,130 6,130 - 6,130
6,130 9,701 15,831 6,130 10,989 17,119
Total investments 8,296 15,135 23,431 11,056 17,394 28,450
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 was as follows:
Six months ended 30 June 2024 Six months ended 30 June 2023
Realised Unrealised Realised Unrealised
gains/(losses) gains/(losses) Total gains/(losses) gains/(losses) Total
Asset type £'000 £'000 £'000 £'000 £'000 £'000
Quoted - (14) (14) - 1 1
Unquoted - (1,491) (1,491) 62 (864) (802)
Funds - (3,355) (3,355) (9) (339) (348)
- (4,860) (4,860) 53 (1,202) (1,149)
Accrued interest income 740 654
Income and fair value adjustments on investment portfolio (4,120) (495)
Approximately 65% of the portfolio at 30 June 2024 is denominated in US
Dollars (31 December 2023: 61%) and the above table includes the impact of
currency movements. In the first six months of 2024, the weakening of sterling
against the US Dollar resulted in an unrealised foreign currency gain of £0.1
million. (2023: unrealised loss of £1.1 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
2024 2023
Company Sector £'000 £'000
Tialis Essential IT plc UK technology 90 107
Arsenal Digital Holdings Inc US energy 4 10
Weatherford International Inc US energy 36 27
130 144
The changes in valuation on the quoted portfolio arose as follows:
Six months ended 30 June
2024 2023
Fair value increases/(decreases) £'000 £'000
Unrealised
Tialis Essential IT plc (17) (39)
Arsenal Digital Holdings Inc (6) 44
Other quoted holdings 9 (2)
Unrealised foreign currency losses - (2)
Total fair value (decreases)/increases (14) 1
Unquoted investments
30 June 31 December
2024 2023
Company Sector £'000 £'000
Dacian Romanian energy 9,701 10,989
Castle View Retirement living 6,130 6,130
Elateral UK technology 1,680 1,680
Cresco US consumer 51 38
17,562 18,837
The changes in valuation on the unquoted portfolio arose as follows:
Six months ended 30 June
2024 2023
Fair value increases/(decreases) £'000 £'000
Realised
ICU Eyeware - 62
- 62
Unrealised
Dacian (See note below) (1,580) (644)
Cresco 13 -
Medhost - 554
Tialis loan notes - 5
Unrealised foreign currency gains/(losses) 76 (779)
(1,491) (864)
Total fair value decreases (1,491) (802)
Income movements
Interest on Dacian Investment (See note below) 740 654
Note re Dacian: In accordance with the requirements of GAAP, the Company's net
exposure to its investment in Dacian is shown as:
1. Gross interest legally due to the Company on the Dacian loan notes
(regardless of whether or not paid) is shown as Interest Income and added to
the investment value;
2. Withholding tax suffered in Romania on that gross interest is shown as
a tax charge and accumulated as a tax reserve in the Balance Sheet; and
3. any reduction in overall value of its Dacian investment is shown
separately as a fair value adjustment.
The Company's net exposure to Dacian is therefore the aggregate of the
investment minus the tax reserve. The net movement in the Company's NAV in any
period is the aggregate of amounts shown in 1, 2 and 3 above.
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.
Fund interests
30 June 31 December
2024 2023
General partner Sector £'000 £'000
Brockton Capital Fund 1 UK real estate - 2,526
Opus Capital Venture Partners US venture capital 3,345 4,142
GW 2001 Fund US quoted micro-caps 1,981 2,180
EMAC ILF Europe real estate 322 330
Simmons Parallel Energy UK energy 74 283
Other interests 17 8
5,739 9,469
The changes in valuation on the Company's fund portfolio arose as follows:
Six months ended 30 June
2024 2023
Fair value increases/(decreases) £'000 £'000
Realised
San Francisco Equity Partners - (9)
- (9)
Unrealised
Brockton Capital Fund 1 (2,526) 369
Opus Capital Venture Partners (826) (783)
GW 2001 Fund (217) 383
Simmons Parallel Energy 176 42
Eden Ventures - (5)
Others (net) 9 2
Unrealised foreign currency gains/(losses) 29 (347)
(3,355) (339)
Total fair value decreases (3,355) (348)
Costs
Group costs for the period (including £1.0 million incurred by the Company
and £0.4 million by subsidiaries) were £1.5 million (2023: £1.2 million)
which include running costs of £0.9 million and investment related costs of
£0.5 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 (2023: £0.1 million).
Financial Resources and Commitments
At 30 June 2024 cash holdings, including cash in subsidiaries, were £13.0
million (31 December 2023: £15.5 million) and neither the Company nor any of
its subsidiaries had any external debt.
At 30 June 2024, subsidiary companies had commitments of £2.5 million (31
December 2023: £2.7 million) to meet outstanding capital calls from fund
interests.
LMS CAPITAL plc
31 July 2024
Unaudited Condensed Company Income Statement
Six months ended 30 June
2024 2023
Notes £'000 £'000
Net losses on investments 5 (4,509) (716)
Interest income 309 275
Other income 59 64
Total losses on investments (4,141) (377)
Operating expenses (1,042) (1,089)
Foreign currency exchange differences 2 (14)
Loss before tax (5,181) (1,480)
Taxation - -
Loss for the period (5,181) (1,480)
Attributable to:
Equity shareholders (5,181) (1,480)
Loss per ordinary share - basic 6 (6.4p) (1.8p)
Loss per ordinary share - diluted 6 (6.4p) (1.8p)
Unaudited Condensed Company Statement of Other Comprehensive Income
Six months ended 30 June
2024 2023
Notes £'000 £'000
Loss for the period (5,181) (1,480)
Other comprehensive income - -
Total comprehensive loss for the period (5,181) (1,480)
Attributable to:
Equity shareholders (5,181) (1,480)
Unaudited Condensed Company Statement of Financial Position
30 June 2024 31 December 2023
Notes £'000 £'000
Assets
Non-current assets
Right-of-use assets 28 42
Investments 8 16,343 20,854
Amounts receivable from subsidiaries 16,221 15,014
Total non-current assets 32,592 35,910
Current assets
Operating and other receivables 170 135
Cash 12,581 9,027
Total current assets 12,751 9,162
Total assets 45,343 45,072
Liabilities
Current liabilities
Operating and other payables (379) (422)
Amounts payable to subsidiaries (8,452) (2,493)
Total current liabilities (8,831) (2,915)
Non-current liabilities
Other long-term liabilities - (16)
Total non-current liabilities - (16)
Total liabilities (8,831) (2,931)
Net assets 36,512 42,141
Equity
Share capital 8,073 8,073
Share premium 508 508
Capital redemption reserve 24,949 24,949
Share-based equity 264 207
Retained earnings 2,718 8,404
Total equity shareholders' funds 36,512 42,141
Net asset value per ordinary share 11 45.23p 52.20p
Unaudited Condensed Company Statement of Changes in Equity
Six months ended 30 June 2024
Capital Share-
Share Share redemption based Retained Total
capital premium reserve equity earnings equity
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2024 8,073 508 24,949 207 8,404 42,141
Comprehensive loss for the period
Loss for the period - - - - (5,181) (5,181)
Equity after total comprehensive 8,073 508 24,949 207 3,223 36,960
loss for the period
Contributions by and distributions
to shareholders
Share-based payments - - - 57 - 57
Dividends (note 7) - - - - (505) (505)
Balance at 30 June 2024 8,073 508 24,949 264 2,718 36,512
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
Unaudited Condensed Company Cash Flow Statement
Six months ended 30 June
2024 2023
Notes £'000 £'000
Cash flows from operating activities
Loss before tax (5,181) (1,480)
Adjustments for non-cash income and expenses:
Equity settled share-based payments 57 26
Depreciation of right-of-use assets 14 14
Interest expense on lease 1 2
Losses on investments 5 4,509 716
Other income (59) (64)
Interest income (309) (275)
Adjustments to incentive plans - 3
Exchange differences on cash balances (2) 15
(970) (1,043)
Changes in operating assets and liabilities
Increase in operating and other receivables (27) (36)
Decrease in operating and other payables (43) (76)
Increase in amounts receivable from subsidiaries (1,207) (140)
Increase/(decrease) in amounts payable to subsidiaries 5,959 (52)
Net cash from/(used in) operating activities 3,712 (1,347)
Cash flows from investing activities
Interest received 302 263
Other income received 59 64
Net cash from investing activities 361 327
Cash flows from financing activities
Dividends paid (505) (505)
Repayment of principal lease liabilities (15) (14)
Repayment of lease interest (1) (2)
Net cash used in financing activities (521) (521)
Net increase/(decrease) in cash 3,552 (1,541)
Exchange gains/(losses) on cash balances 2 (15)
Cash at the beginning of the period 9,027 14,542
Cash at the end of the period 12,581 12,986
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 2023 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 2023 and are consistent with those
that the Company expects to apply in its financial statements for the year
ended 31 December 2024.
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 2023 were approved by the
Board of Directors on 18 March 2024 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 2023 and 30 June 2024 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
2023.
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 2023.
5. Net losses on investments
The losses on investments were as follows
Six months ended 30 June 2024 Six months ended 30 June 2023
Realised Unrealised Realised Unrealised
gains/(losses) gains/(losses) Total gains/(losses) gains/(losses) Total
Asset type £'000 £'000 £'000 £'000 £'000 £'000
Quoted - (14) (14) - 1 1
Unquoted - (1,491) (1,491) 62 (864) (802)
Funds - (3,355) (3,355) (9) (339) (348)
- (4,860) (4,860) 53 (1,202) (1,149)
Accrued interest income 740 654
(4,120) (495)
Charge for incentive plans - (11)
Net gains/(losses) on foreign currency 76 (128)
Net operating and other expenses of subsidiaries (465) (82)
(4,509) (716)
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
2024 2023
Losses
Losses for the purpose of net profit per share attributable to equity holders (5,181) (1,480)
of the parent (£'000)
Number of shares
Weighted average number of ordinary shares for the purposes of basic loss per 80,727,450 80,727,450
share
Loss per share
Basic (6.4p) (1.8p)
Diluted (6.4p) (1.8p)
7. Dividends
Dividends declared during the periods ending 30 June 2024 and 30 June 2023
were as follows:
Dividend date Payment date Dividend £'000 Pence per share
Final dividend payment for 2023 31 May 2024 21 June 2024 505 0.625
Total as at 30 June 2024 505 0.625
Final dividend payment for 2022 26 May 2023 16 June 2023 505 0.625
Total as at 30 June 2023 505 0.625
The Board has approved an interim dividend for the 2024 year of 0.3 pence per
share to be paid on 13 September 2024.
8. Investments
The Company's investments comprised the following:
30 June 31 December
2024 2023
£'000 £'000
Total investments 16,343 20,854
These comprise:
Investment portfolio of subsidiaries 23,431 28,450
Other net liabilities of subsidiaries (7,088) (7,596)
16,343 20,854
The carrying amounts of the investments of the Company's subsidiaries were as
follows:
30 June 31 December
Investment portfolio of subsidiaries 2024 2023
Asset type £'000 £'000
Quoted 130 144
Unquoted 17,562 18,837
Funds 5,739 9,469
Investment portfolio of subsidiaries 23,431 28,450
Other net liabilities of subsidiaries (7,088) (7,596)
16,343 20,854
8. Investments (continued)
The movement in the investment portfolio were as follows:
Quoted securities Unquoted securities Funds Other net assets/ (liabilities) of subsidiaries Total
£'000 £'000 £'000 £'000 £'000
Balance at 1 January 2023 160 16,771 14,033 37,243 68,207
Accrued interest - 1,373 - - 1,373
Purchases - 6,130 - - 6,130
Proceeds from disposals (6) (7,301) - - (7,307)
Distributions from partnerships - - (55) - (55)
Contributions to partnerships - - 9 - 9
Fair value adjustments (10) 1,864 (4,518) - (2,664)
Dividends paid - - - (45,000) (45,000)
Other movements - - - 161 161
Balance at 31 December 2023 144 18,837 9,469 (7,596) 20,854
Balance at 1 January 2024 144 18,837 9,469 (7,596) 20,854
Accrued interest - 740 - - 740
Distributions from partnerships - - (430) - (430)
Contributions to partnerships - - 55 - 55
Fair value adjustments (14) (1,491) (3,355) - (4,860)
Other movements - (524) - 508 (16)
Balance at 30 June 2024 130 17,562 5,739 (7,088) 16,343
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.
8. Investments (continued)
The significant unobservable inputs used at 30 June 2024 in measuring
investments categorised as level 3 are considered below:
1. Unquoted securities (carrying value £17.6 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 0.3-1.5 times, also dependent on
attributes at individual investment level.
· Discounts applied of up to 50%, to reflect the illiquidity of
unquoted companies compared to similar quoted companies. The discount used
requires the exercise of judgement taking into account factors specific to
individual investments such as size and rate of growth compared to other
companies in the sector.
2. Investments in funds (carrying value £5.7 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 2024). 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
2024 2023
£'000 £'000
Level 1 - -
Level 2 - -
Level 3 16,343 20,854
16,343 20,854
8. Investments (continued)
Level 3 includes:
30 June 31 December
2024 2023
£'000 £'000
Investment portfolio of subsidiaries 23,431 28,450
Other net liabilities of subsidiaries (7,088) (7,596)
16,343 20,854
The investment portfolio of subsidiaries includes quoted investments of
£130,000 (2023: £144,000). There were no transfers between levels during
the period ending 30 June 2024.
9. Capital commitments
30 June 31 December
2024 2023
£'000 £'000
Outstanding commitments to funds 2,469 2,661
2,469 2,661
The outstanding commitments to funds comprise unpaid capital calls in respect
of funds where a subsidiary of the Company is a limited partner.
As of 30 June 2024 the Company has no other contingencies or commitments to
disclose (2023: £nil).
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 were
£243,387 (June 2023: £240,412).
As at 30 June 2024, the Directors of the Company had the following beneficial
interests in the ordinary shares of the Company:
30 June 2024 31 December 2023
Director Number of shares Number of shares
R Rayne 2,670,124 2,670,124
N Friedlos 161,410 161,410
P Harvey 20,000 20,000
G Stedman 20,000 20,000
11. Net asset value per share
The net asset value per ordinary share in issue is as follows:
30 June 31 December
2024 2023
Net assets (£'000) 36,512 42,141
Number of ordinary shares in issue 80,727,450 80,727,450
Net asset value per share (pence) 45.23 52.20
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 24 and 25 of the Company's Annual Report for the
year ended 31 December 2023 continued in office during the six months ended 30
June 2024.
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
31 July 2024
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