REG - LMS Capital PLC - Third Quarter 2022 Update

LMS CapitalAnnouncement

28/10/2022 07:00

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RNS Number : 4183E  LMS Capital PLC  28 October 2022

 
 

 

 

 

 

 

 

 

 

 

 

 

28 October 2021

 

 

LMS CAPITAL PLC

Third Quarter 2022 Update

 

 

LMS Capital plc (the "Company") the listed Investment Company, provides the
following update covering the period from 30 June 2022 to date.

 

Financial Highlights

 

·    Unaudited Net Asset Value ("NAV") at 30 September 2022 was £48.8
million (60.5p per share). This compares to £47.0 million (58.2 p per share)
at 30 June 2022, an increase in the quarter of 4.5% after adjusting for
dividends paid;

·    Interim dividend of £0.2 million (0.3p per share) paid in September
2022; and

·    Cash at 30 September 2022 was £18.4 million (22.8p per share)
compared to £18.9 million (23.5p per share) at 30 June 2022.

 

The portfolio overall has benefitted from unrealised foreign exchange gains in
the quarter with a small net increase in underlying valuations.

 

As we enter a period of further economic uncertainty our significant cash
balances put us in a strong position to evaluate and make the most of
opportunities in our chosen sectors.

 

Unaudited Net Asset Value at 30 September 2022

 

After adjusting for dividends paid in the quarter of £0.2 million, the net
increase in NAV during the quarter was £2.0 million, comprising the
following:

·    Unrealised foreign exchange ("FX") gains of £2.1 million on the
investment portfolio. The US dollar strengthened by approximately 8.3% against
sterling during the quarter. Approximately 75% of the Company's investments
are US dollar denominated;

·    Underlying gains and accrued income on the investment portfolio were
£0.4 million;

·    Non portfolio foreign exchange gains of £0.2 million, running costs
of £0.4 million, and investment related costs of £0.1 million.

 

The 30 September 2022 NAV is summarised below:

 

                                 Unaudited             Unaudited

                                 30 September 2022     30 June 2022

                                 £ 000s
 Quoted Investments              197                   182
 Unquoted Investments            17,501                16,093
 Funds                           15,204                13,970
 Subtotal Investment portfolio   32,902                30,245

 Cash                            18,377                18,932
 Other Net Assets/Liabilities    (2,440)               (2,216)
 Net Asset Value                 48,839                46,961

 

 

The NAV at the end of September is based on the valuation of the Company's
investments as at 30 June 2022, adjusted for transactions in the three months
ended 30 September 2022, price movements on quoted securities, movements in
foreign currency exchange rates, cash calls and distributions from funds, and
the latest information available from third party fund managers.

 

Portfolio Net Gains

 

The portfolio net unrealised gains during the quarter to 30 September were
£2.5 million, of which £2.1 million were unrealised foreign exchange gains
and £0.4 million were net unrealised gains in underlying investment
valuations. The movements, are summarised below:

 

Quoted Investments - £0.2 million (30 June 2022 - £0.2 million)

 

The Company's quoted investment valuation has not changed materially since the
30 June 2022. The principal investment is a small holding in IDE Group
Limited.

 

Unquoted Investments - £17.5 million (30 June 2022 - £16.1 million)

 

The Company's unquoted investments showed unrealised FX gains of £1.4 million
and an unrealised loss in the underlying investment valuations of £0.2
million.

 

The principal holdings are Dacian Petroleum, Medhost, Elateral and ICU,
managed by San Francisco Equity Partners.

 

 Investment         Currency                                                                                   30 Sept. 2022  30 June 2022

                                                                                                               £' million     £' million
 Dacian Petroleum   USD        Onshore oil and gas production assets in Romania                                10.6           9.4
 Medhost            USD        Provides cloud based enterprise and departmental management and healthcare      5.8            5.3
                               engagement solutions to community hospitals in the US.
 Elateral           Sterling   UK/US software company in the digital marketing sector providing marketing      0.6            0.6
                               content management solutions
 ICU                USD        Design and distribution of eyewear, principally reading glasses, through large  0.3            0.6
                               US retailers
 Other investments  USD/                                                                                       0.2            0.2

                    Sterling
 Total                                                                                                         17.5           16.1

 

Dacian - The increase in valuation since the half year comprises unrealised FX
gains of £0.9 million and accrued loan interest of £0.3 million. The
acquired portfolio of onshore oil and gas wells has now been operated by the
Dacian team for 10 months. As reported at the half year, a build up of backlog
maintenance prior to Dacian's ownership has required remediation and has
diverted the team from some of its planned workover activity during the year.
The team is gradually managing the reactive maintenance needs and has
conducted some workover projects achieving an increase in production since
commencing operations in November 2021. The business is EBITDA positive and
cash generative and has benefitted from strong energy prices during the year.

 

Medhost - The increase in valuation of £0.5 million arises from unrealised FX
gains, the underlying investment valuation is unchanged from the half year.
The company operates in a mature market and continues to be profitable and
cash generative and performing in line with budget.

 

Elateral - The valuation is unchanged from half year. During the quarter
Elateral received some additional working capital finance from investors, of
which LMS' share was £0.2 million.

 

ICU (managed by San Francisco Equity Partners) - The reduction of £0.3
million during the quarter principally comprises a reduction in the underlying
valuation reflecting concerns around progress with an exit process that has
been underway for several months. Greater clarity around the outcome is
anticipated by the year end.

 

Funds - £15.2 million (30 June 2022 - £14.0 million)

 

The Company's fund investments showed unrealised foreign exchange gains of
£0.7 million and a gain in the underlying asset valuations of  £0.6
million.

 

The Company's fund investments include its holding in Brockton Capital Fund I,
Opus Capital Partners, Weber Capital Partners ("Weber") and five other smaller
fund interests.

 

 Investment                   Currency                                                                                30 Sept. 2022  30 June 2022

                                                                                                                      £' million     £' million
 Brockton Capital Fund 1      Sterling   UK real estate fund, the remaining asset of which is a debt investment in a  6.4            6.0
                                         high end London residential development
 Opus Venture Capital Fund 2  USD        Early-stage technology fund with two principal remaining assets              5.8            5.4
 Weber Capital Partners       USD        US listed microcap investment fund focussed primarily on medical and         2.3            1.8
                                         technology sectors
 Other investments            USD/                                                                                    0.7            0.8

                              Sterling
 Total                                                                                                                15.2           14.0

 

Brockton - The increase in valuation since the half year comprises the third
quarter movement in the discounted cash flow valuation of this asset.

 

Opus - The increased valuation comprises unrealised FX gains of £0.5 million
less a reduction of £0.1 million in the underlying valuation by the third
party manager. The reduction in the underlying valuation reflects movement in
the general market benchmark values used by the manager for valuation
purposes.

 

Weber - The increased valuation since the half year comprises unrealised FX
gains of £0.2 million and gains in the underlying market value of the
portfolio of £0.3 million. Notwithstanding general market conditions this
fund benefitted during the quarter from a significant increase in market value
of one of its holdings.

 

The carrying value of the funds is based on the latest available information
from the respective fund managers, generally the 30 June 2022 fund valuation
reports except for Weber, which is based on a 30 September 2022 valuation.

 

Portfolio Realisations

 

There were no portfolio realisations or fund distributions during the third
quarter.

 

The information contained in this announcement is deemed to constitute inside
information as stipulated under the Market Abuse Regulation (EU) No. 596/2014.
Upon publication of this announcement, this inside information is now
considered to be in the public domain.

 

For further information please contact:

LMS Capital PLC - Nick Friedlos, Managing Director

0207 935 3555

 

Shore Capital - Robert Finlay

0207 408 4050

 

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