23rd Mar 2010 07:00
23 March 2010 LMS Capital plc Preliminary Results for the year ended 31 December 2009
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 2009.
Financial highlights*
* Net Asset Value per share was 84p (31 December 2008: 89p), a decrease of
6%, attributable in large part to foreign currency movements in the period
* Net Asset Value was £227.7 million (31 December 2008: £241.5 million)
* The return on the investment portfolio was a loss of £4.9 million after
recording unrealised currency losses of £13.5 million (2008: loss of £36.7
million after unrealised currency gains of £45.5 million)
* The loss for the year was £12.7 million (2008: loss of £40.8 million)
* The business had cash of £14.4 million at 31 December 2009 and no debt
* Investment management business
Operational highlights:
* Investment of £6.2 million for a 53.3% interest in Updata Infrastructure UK
Limited in support of a management buyout * Sale of 7 Global Limited to 365 iT plc
* Successful migration of the Company's shares to trading on the Main Market
of the London Stock Exchange
* Appointment of Glenn Payne as Chief Executive from 1 March 2010
Robert Rayne, Chairman Designate, said:
"LMS Capital's risk diversified investment strategy has produced a resilientperformance in 2009 in the context of an uncertain global economic environment.Our low levels of debt and broadly balanced investment portfolio position uswell to take advantage of future investment opportunities, while safeguardingour existing assets where we are seeing encouraging signs of growth."
For further information please contact:
LMS Capital plc 020 7935 3555Glenn Payne, Chief Executive OfficerRobert Rayne, Chairman DesignateTony Sweet, Chief Financial OfficerJ.P. Morgan Cazenove Limited 020 7588 2828Michael Wentworth-StanleyBrunswick Group LLP 020 7404 5959Simon SporborgOliver HughesAbout LMS CapitalLMS Capital plc is an international investment company whose shares are listedon the London Stock Exchange. The investment portfolio comprises investmentsprimarily in the US and the UK, with a spread of early stage and second roundtechnology investments, development capital and mature company buyouts.
www.lmscapital.com
Chairman's statement
2009 was a year of uncertainty and instability in the financial markets and theeffect on the private equity sector was to reduce fund raising and transactionactivities to the lowest level seen for many years. The Company focussed itsefforts on maintaining its strong balance sheet and on managing its existingportfolio. One acquisition was made through participation in a managementbuyout and there were some small disposals, both of quoted and unquotedinterests.The Company ended 2009 with a Net Asset Value per share of 84p, a reduction of6% compared to the end of 2008; much of this decline was attributable to astrengthening of Sterling against the US dollar. At the year end the Company'sbalance sheet showed net cash of £14.4 million and no borrowings. During theyear there was also a reduction in the Company's outstanding commitments tofunds from £71.1 million to £58.7 million and we expect this reducing trend tocontinue.Results
The return on the investment portfolio for the year was a net loss of £4.9million (2008: net loss of £36.7 million). Included in this is a small realisednet loss for the year of £0.1 million (2008: realised gains of £17.3 million,most of which related to the sale of Energy Cranes) and net unrealised lossesof £4.8 million, significantly reduced from £54.1 million last year. Afteroverheads, the loss for the year ended 31 December 2009 was £12.7 million (yearended 31 December 2008: loss of £40.8 million).
The investment portfolio at 31 December 2009 was valued at £215.6 million (31 December 2008: £202.0 million), an increase of £13.6 million or 7%.
The quoted portfolio (to which there were no additions in 2009) recoveredsomewhat in value during the year, although our holdings in the oilfieldservices sector in particular have yet to benefit from a sustained increase inglobal demand for energy. We have continued to take a cautious view of thecarrying values of our unquoted holdings since the recovery in public marketsis not yet fully reflected in private transactions.
For the Group as a whole (including consolidation of the portfolio subsidiaries) the consolidated loss for the year was £14.8 million (2008: loss of £6.1 million).
The Board is not recommending payment of a dividend for the year ended 31 December 2009 (year ended 31 December 2008: Nil).
Balance Sheet
At the year end the Company had no direct debt. Further, as the primary methodof funding development capital is equity, there is very little external debt inthe unquoted portfolio.Board and managementLast month the Company announced the appointment of Glenn Payne as ChiefExecutive with effect from 1 March 2010. His experience will provide impetus tothe Company's next phase of development. The appointment of a new chiefexecutive is an appropriate time for me to step down from your Board, which Ishall do at the conclusion of the forthcoming Annual General Meeting. YourBoard has appointed Robert Rayne to succeed me as Chairman. This appointmentmeans that the Company will continue to benefit from his many contacts and longexperience in the private equity sector and I wish Robbie Rayne and Glenn Paynein their new roles every success in taking the business forward.David Verey joined the Board in September 2009 and his considerable experienceas an investment banker and in private equity will be of great value to theCompany. Martin Pexton left the Company at the end of September and on behalfof the Board I should like to thank him for his contribution to the businesssince it became independent in 2006.2009 was a year of change at LMS Capital when many of its investee companieswere required to make significant reductions in headcount and overheads inorder to adjust to a difficult operating environment. Your Board would like toextend its appreciation to all the Company's employees, as well as to themanagement teams of our investee companies, for their contribution to theGroup's continuing progress.
Share capital
As in previous years, at the forthcoming Annual General Meeting the Companywill be seeking authority to purchase up to 14.99% of its issued share capital.The Company also needs, once again, to obtain a waiver in respect of theTakeover Code obligations which a repurchase of shares above a certain limitwould place on the Rayne family shareholders.
There were no purchases of shares by the Company during 2009; the current number of ordinary shares in issue is 272,640,952.
Outlook
Although your Board does not expect a fundamental change in economic conditionsin 2010, we are hopeful of a slow and steady recovery of the principaleconomies in which your Company invests; there are currently signs of mergerand acquisition activity increasing in 2010.Your Board believes that our continued strategy of a risk diversified portfolioand our strong financial position will enable us to surmount these challenges.We shall continue to seek exit opportunities for selected investments and toensure that capital outlays are subject to rigorous review and due diligence.Your Board is confident that the Company is well positioned to protect itsexisting assets and take advantage of increased investment opportunities in
theshort to medium term.Jonathan AgnewChairman23 March 2010Operating Review
The Company's resilience following the turbulence in international markets inthe closing months of 2008 is a testimony to the key fundamentals of ourinvestment strategy - a risk and geographically diversified portfolio ofinvestments. This resilience also reflects the low levels of debt in theoverall portfolio. These principles have enabled us to see out these recenteconomic difficulties while at the same time taking advantage of opportunitieswhich the current environment presents.The last year has seen considerably reduced activity in the private equityarena and while we have maintained a satisfactory level of deal flow,transaction levels have been very low in the face of reduced liquidity in thefinancial markets. Consequently we have added only one new investment duringthe year and made relatively few realisations.Our primary focus during 2009 has been on managing our existing portfoliocompanies to ensure that each has adapted to the current business environmentof reduced demand and reduced liquidity. Faced with the expectation that thisenvironment will continue at least through 2010, we have also used this periodto review our longer term strategy for each investment.Our objective remains unchanged. We aim to deliver sustained medium tolong-term growth for our shareholders; we are not constrained by the fixedinvestment periods of most private equity funds and we are therefore able tohold investments for longer than many other funds where we believe that thiswill deliver greater shareholder value. We understand the drivers of demand inthe sectors in which we invest and this enables us to recognise the potentialof both new ideas and young companies requiring growth funding.
Investment Portfolio
The portfolio in the Group's core investment management business is risk diversified and comprises:
* early stage companies;
* companies requiring development or growth finance where the normal holding
period has been three to five years but could now be seven or eight years;
and * shorter term investments in the pre- and post-IPO market which usually provide liquidity within three to four years.
Analysis of portfolio by investment stage
2009 2008 £ millions % £ % millions Early stage 20.0 9 24.5 12 Development 84.4 39 72.7 36 Growth 54.1 25 52.3 26 Post IPO 57.1 27 52.5 26 215.6 100 202.0 100
Analysis of portfolio by type of investment
2009 2008 £ millions £ millions £ millions £ millions UK US Total Total Quoted 17.3 34.6 51.9 46.5 Unquoted 39.8 20.5 60.3 53.2 Funds 30.2 73.2 103.4 102.3 87.3 128.3 215.6 202.0
Analysis of portfolio by sector
2009 2008 £ millions % £ millions % Applied technology 65.8 31 61.3 30 Media & consumer 52.3 24 50.1 25 Energy & water 39.8 18 30.8 15 Healthcare & medical 23.9 11 22.9 11 Real estate 18.7 9 15.9 8 Other 15.1 7 21.0 11 215.6 100 202.0 100
The movement in the investment portfolio during the year was as follows:
2009 2008 £ millions £ millions 1 January 202.0 282.1 Additions in the year 32.7 51.6 Realisations (14.3) (77.6) Valuation adjustments, net 8.7 (99.6) Foreign currency( losses)/ (13.5) 45.5 gains 31 December 215.6 202.0 Additions include £7.6 million (2008: £12.4 million) of new investments and £25.1 million (2008: £39.2 million) of follow on funding, including £14.8million (2008: £15.8 million) of capital calls from funds. The figure forrealisations relates principally to sales of quoted stocks and adjustments forfund distributions (the figure for 2008 included £65.0 million in respect ofEnergy Cranes International Limited).The foreign currency gains or losses are unrealised and reflect the weakeningof the US dollar against the pound sterling, principally in the first part ofthe year. It is the Board's current policy not to hedge the Company'sunderlying non-sterling investments.
Applied Technology
In July we acquired a 53.3% interest in Updata Infrastructure UK Limited("Updata") investing £6.2 million in a management buyout. Updata designs,builds and manages cost-effective high-capacity broadband networks for publicsector organisations in the UK and differentiates itself from its competitorsthrough its culture of excellence in customer service. In the first six monthssince our investment Updata has performed strongly with growth in revenues andprofits which are in line with our expectations at the time of investment.In November we completed the sale of our interest in 7 Global Limited to 365 iTplc ("365iT"), a private company which provides a comprehensive suite of ITservices and solutions to UK businesses. We received shares in 365iT in returnfor our 7 Global shares and since the end of the year we have participated in afund raising by 365iT which has taken our holding to 15%.Wesupply Limited enjoyed strong sales growth in 2009 with revenues increasingby around 70% compared to 2008. In particular the company, in partnership withIBM, secured a contract with Sainsbury's to be its business-to-business ("B2B")platform for connectivity to 4,000 of its suppliers. Despite the increase inrevenues the company traded at a loss in 2009 and we have taken steps to reducethe cost base of the business in 2010.Entuity Limited had a successful year - it increased revenues year on year by16% and achieved a positive EBITDA result for the first time in its history.The company has a clear strategy and we expect further progress in 2010.
Coppereye Limited had a disappointing performance in 2009 after a strong 2008. Its unique technology has a long sales cycle.
Kizoom's revenues improved 20% over the prior year and this coupled with costreductions resulted in a substantially reduced loss for the year. However thisperformance was below expectations and we are currently reviewing the strategicoptions for this business.In the USA, Penguin Computing, which provides high performance computing("HPC") solutions using Linux cluster servers, continued to make good progress.In August the company launched HPC as a Service, offering on-demand access tohigh performance clusters over the Internet, thereby significantly reducingcustomers' capital outlays for HPC.
Energy and water
This sector was particularly affected by the difficult economic conditions in2009 as activity levels fell in the face of reduced world demand. Most of ourinterests in this sector are in quoted stocks, in particular WeatherfordInternational Ltd which experienced difficult trading conditions during 2009 inline with the oilfield services sector generally. However the company's shareprice recovered from a low of $9 around the end of 2008 to just under $18 atthe end of 2009. We made no purchases or sales of shares in the company duringthe year.
In August Venture Production plc was acquired by Centrica plc, a transaction that produced cash of £4.1 million for the Company.
Pims Group Limited, a private UK-based company which designs, installs andservices pumping systems for domestic and commercial water systems, performedwell in a difficult trading environment. It has also continued to make bolt-onacquisitions to expand its presence in its chosen markets. Pims is aco-investment with Inflexion 2006 Buyout Fund.Offshore Tool and Energy Corporation, which specialises in fabrication projectsfor the oil and gas and water industries, made good progress during the firsthalf of 2009 but could not sustain this in the second half of the year.Increasing order intake is a priority for the business in the first quarter of2010, following rigorous cost cutting measures during the second half of lastyear.Healthcare and medical
This sector has proved to be more resilient than most during 2009. We made nopurchases or sales in this sector during the year but our existing portfoliohas made strong progress.ProStrakan Group continues to report good progress in line with its strategicobjectives and expects 2010 to be its first full year of operatingprofitability. This progress has not yet been reflected in a sustainedimprovement in the company's share price which, despite movements during 2009,was little changed at the end of the year compared to the end of 2008. However,the price improved during January 2010 on the back of an encouraging tradingupdate for 2009 and positive expectations for 2010.HealthTech Holdings (formerly Healthcare Management Systems) which is based inthe USA has enjoyed a successful 2009 as the hospital market in which itoperates has shown resilience in the generally difficult trading environment.Since the end of the year it has acquired a complementary business whichextends its offering to Accident & Emergency departments.
Media and consumer
Our principal interest in this sector is via San Francisco Equity Partners, theUS fund in which we are the major investor. For Method Products, Inc, whichsells environmentally friendly homecare products, 2009 was a year ofconsolidation, during which it reviewed and rationalised its various productlines. The company believes that the resulting improved product focus willdrive significant growth in revenues and profitability in the medium term. Thebeginning of 2010 has seen the launch of its new laundry products with verypositive media and consumer reaction to date.
Yes To Inc has become one of the fastest growing brands in the worldwide natural personal-care market, and its award-winning products are currently sold by leading retailers across North America, Europe and Asia. The company is benefitting from consumers' growing preference for natural products over synthetic.
Rave Reviews Cinemas, a co-investment with one of our fund interests, had asuccessful year in 2009, during which it improved revenues and cash flow. Atthe end of the year it completed a restructuring which substantially reducedits debt and which should result in the business paying dividends in the mediumterm.Other
In July we sold part of our interest in Inflexion 2006 Buyout Fund for approximately £1 million in cash. This transaction also reduced our outstanding commitment to this fund by £1.4 million.
Also in July, Viking Moorings, an investment in the Inflexion 2003 Buyout Fund, was sold in a secondary buyout, producing proceeds to the Company of £2.5 million.
Financial review
Basis of preparation of financial information
The Company reports its results under International Financial ReportingStandards as adopted for use in the European Union ("Adopted IFRS"), and theconsolidated financial statements include the consolidation of portfoliocompanies which are also subsidiaries ("portfolio subsidiaries"). Since theBoard manages the Company as an investment business, this financial reviewfocuses on the results of the investment management operations. Note 2 to thefinancial information includes the separate results and net assets of theinvestment management business. Where appropriate, this review includescomments on the results and financial position of the portfolio subsidiaries.
Investment management
Net Asset Value at 31 December 2009 was £227.7 million (31 December 2008: £ 241.5 million), a decrease of £13.8 million or 6%. The Net Asset Value per share was 84p (31 December 2008: 89p).
The Group's return on its investment portfolio for the year ended 31 December2009 was a loss of £4.9 million (year ended 31 December 2008: loss of £36.7million) as follows: Year ended 31 December 2009 2008 £'000 £'000 Realised gains/ (losses) Quoted securities 2,503 574 Unquoted (1,867) 14,620securities Funds (755) 2,114 (119) 17,308 Unrealised gains/ (losses) Quoted securities 9,741 (31,122) Unquoted (8,491) (27,506)securities Funds (6,007) 4,572 (4,757) (54,056) Total gain/(loss) (4,876) (36,748)
Approximately 60% of the portfolio at 31 December 2009 is denominated in USdollars (2008: 59%) and the above table includes the impact of currencymovements. In the year ended 31 December 2009 the weakening of the US dollaragainst pound sterling resulted in an unrealised foreign currency loss of £13.5million. During the year ended 31 December 2008 there was a significantstrengthening of the dollar against pound sterling and the unrealised gain forthat year was £45.5 million.Realised gains on quoted securities include £2.0 million in connection with thesale of our shares in Venture Production plc to Centrica plc, with the balancearising on the sale of other, smaller holdings during the year. The realisedlosses on unquoted securities arose on the sale of 7 Global to 365iT.
The unrealised gains on our quoted portfolio reflect the net impact of the changes in the capital markets during the year. Of the total of £9.7 million, £ 7.5 million is attributable to our holding in Weatherford International.
The principal constituents of the net unrealised loss for the year on our unquoted securities are as follows:
Unrealised gain/(loss) £'000 Coppereye (5,226) Kizoom (3,240) Offshore Tool & Energy (1,861) Updata 1,800 Rave Reviews Cinemas (1,745) HealthTech Holdings 3,580 (6,692) Other investments (net) (1,799) Total net unrealised loss (8,491)
The unrealised losses above reflect the combined impact on our valuation criteria of changes in the revenue and profitability multiples of comparable businesses which are used in the underlying calculations and the operating performances of the individual businesses within the portfolio.
In most cases the multiples used are either the same as or more favourable thanthose prevailing at the end of 2008. The unrealised gains or losses set outabove for 2009 arise principally as a result of the companies' performance. Inparticular, the results of Kizoom and Coppereye in 2009 were belowexpectations, such that a strategic review of these businesses is in progresswhich is likely to result in exit by us. Conversely the performances of Updataand HealthTech Holdings have resulted in a higher valuation for thosebusinesses.The unrealised valuation loss on our fund interests reflects the fact that manyof these are US funds and the net decrease in our carrying value arises fromthe weakening of the US dollar against the pound sterling, principally in thefirst half of the year. The net unrealised loss for the year was £6.0 million,being unrealised foreign currency losses of £7.8 million offset by netvaluation adjustments of £1.8 million.In line with other funds of funds we rely on reports from general partners asat the end of the third quarter in establishing our year end carrying value,with adjustments made for calls, distributions and foreign currency movementssince that date. We also carry out our own review of individual funds and theirportfolios to satisfy ourselves that the underlying valuation bases areconsistent with our knowledge of the investments and the sectors in which theyoperate.Income from investments in the year was £0.5 million (2008: £0.6 million) andcomprises dividends on quoted securities and management charges made toportfolio companies. Administration expenses for the year were £8.0 million(2008: £5.6 million); the current year includes a number of non-recurringcharges (including £0.4 million for the costs of the Company moving to theOfficial List and £0.8 million as compensation for loss of office to adirector) whereas 2008 benefitted from a one-off VAT refund of £1.1 million.Net interest income for the year was £0.2 million (2008: £1.8 million)reflecting the lower interest rates during the year as well as the lower levelsof uninvested cash. The tax charge for the year was £0.3 million (2008: £0.6million).Investments
The Group's investments are included in the balance sheet at fair values determined in accordance with industry guidelines.
Additions to the investment portfolio during the year were £32.7 million (2008:£51.6 million) of which £7.6 million (2008: £12.4 million) was for newinvestments and £25.1 million (2008: £39.2 million) for follow on investmentsincluding £14.8 million (2008: £15.8 million) for capital calls from funds.There were no additions to quoted securities during the year (2008: £17.5million); the most significant new investment was £6.2 million for our stake inUpdata. The follow on investments (excluding fund calls) included £9.5 million(2008: £12.0 million) for the UK unquoted portfolio and £0.8 million (2008: £0.9 million) for the US portfolio.Proceeds of realisations were £13.9 million (2008: £97.1 million, of which £82.9 million was from the sale of Energy Cranes), including sales of quotedsecurities of £6.9 million (2008: £3.9 million) and distributions from funds of£5.6 million (2008: £8.1 million).At 31 December 2009 the Group had commitments of £58.7 million (31 December2008: £71.1 million) to meet capital calls from its fund interests which theDirectors estimate will be called over the next five years. In terms ofassessing the level of the Group's commitment in this area, the Directors donot expect fund commitments to exceed liquid assets (being cash and quotedsecurities); at 31 December 2009 liquid assets were £66.3 million.
Consolidated results
Consolidated revenues for the year were £32.5 million (2008: £19.8 million),all in the portfolio subsidiaries. The increase over the previous year reflectsthe inclusion of Updata for the first time (from acquisition in July 2009), theinclusion of Citizen Limited for a full year (2008: four months only) and theimproved revenue performances by Entuity, Kizoom and Wesupply.Consolidated operating expenses were £51.1 million for the year (2008: £46.1million), including goodwill impairment charges of £4.6 million (2008: £11.2million). Excluding goodwill impairment, the increase in operating expensesreflects principally the inclusion of Updata and Citizen as set out above.
Financial position
The consolidated balance sheet at 31 December 2009 includes cash and cash equivalents of £17.0 million (31 December 2008: £42.6 million) and borrowings of £7.6 million (31 December 2008: £2.8 million) in the portfolio subsidiaries.
Cash in the investment management business was £14.4 million (31 December 2008:£41.3 million). Part of the Company's cash has been and will be committedduring 2010 to meets calls from funds and to provide further funding forexisting unquoted investments. The business also has a £15 million borrowingfacility with The Royal Bank of Scotland, which is due to expire in April 2011.The investment management business had no borrowings during 2009.Robert RayneChairman Designate23 March 2010
LMS Capital plc - Top 20 investments by valuation 31 December 2009*
Investment Geography Type of Date of initial Book % of net Investment investment Value assets £000 1 Weatherford US Quoted 2001 22,647 10% International Ltd Oilfield services 2 Method Products US Fund 2004 17,265 8% portfolio Consumer products company 3 Prostrakan Group plc UK Quoted 1999 15,226 7% Specialty pharmaceuticals 4 Updata Infrastructure UK Unquoted 2009 8,000 4% UK Limited Wide area networks 5 Rave Reviews Cinemas US Unquoted 2002 7,115 3% Cinema operations 6 HealthTech Holdings, US Unquoted 2007 7,000 3% Inc Hospital information systems 7 Penguin Computing US Fund 2004 5,586 2% portfolio Linux server systems company 8 Wesupply Limited UK Unquoted 2000 5,500 2% Supply chain connectivity software 9 Entuity Limited UK Unquoted 2000 4,500 2% Network management software 10 Elateral Limited UK Unquoted 2000 4,500 2% Marketing software 11 Gulfmark Offshore Inc US Quoted 2008 4,363 2% International offshore services 12 Luxury Link US Fund 2006 4,283 2% portfolio Internet commerce company 13 KizoomLimited UK Unquoted 1997 4,000 2% Transport information services 14 Yes To, Inc US Fund 2008 3,726 2% portfolio Consumer products company 15 Chyron Corporation US Quoted 1995 3,501 2% Media technology 16 Pims Group UK Unquoted 2008 2,905 1% Waste water systems and services 17 BJ Services US Quoted 2007 2,870 1% Oil and gas field services 18 Agilisys Holdings UK Unquoted 2000 2,000 1% Limited IT services and outsourcing 19 Vio Worldwide Limited UK Unquoted 2002 2,000 1% Advertising workflow services 20 Offshore Tool and US Unquoted 1998 2,000 1% Energy Corporation Specialist engineering
* Investment management business
Consolidated income statement Notes Year ended Year ended 31 December 31 December 2009 2008 £'000 £'000 Continuing operations Revenue from sales of goods and 2 32,526 19,790services Gains and losses on investments 3,998 (32,137) Interest income 166 1,802 Investment and other income 973 582 37,663 (9,963) Operating expenses (51,133) (46,114) Loss before finance costs (13,470) (56,077) Finance costs (342) (221) Loss before tax (13,812) (56,298) Taxation (939) (579) Loss from continuing operations (14,751) (56,877) Discontinued operations Profit from discontinued 3 - 50,755operations (net of taxation) Loss for the year (14,751) (6,122) Attributable to: Equity holders of the parent (15,148) (5,929) Minority interests 397 (193) (14,751) (6,122) Basic and diluted loss per 4 (5.6)p (2.1)pordinary share Continuing operations Basic and diluted loss per 4 (5.6)p (20.1)pordinary share
Consolidated statement of comprehensive income
Year ended Year ended 31 December 31 December 2009 2008 £'000 £'000 Loss for the year (14,751) (6,122) Exchange differences on translation of foreign (200) 1,083operations Total comprehensive loss for the year (14,951) (5,039) Attributable to: Equity holders of the parent (15,348) (4,846) Minority interests 397 (193) (14,951) (5,039)
Consolidated statement of financial position
31 December 31 December 2009 2008 £'000 £'000 Non-current assets Property, plant and equipment 7,057 3,216 Intangible assets 29,525 26,798 Investments 188,133 179,546 Other long-term assets 80 15 Non-current assets 224,795 209,575 Current assets Inventories 812 319 Operating and other receivables 10,768 8,309 Cash and cash equivalents 16,950 42,615 Current assets 28,530 51,243 Total assets 253,325 260,818 Current liabilities Bank overdrafts (369) - Interest-bearing loans and borrowings (2,394) (1,656) Operating and other payables (7,921) (10,335) Deferred income (8,704) (3,426) Current tax liabilities (1,007) (410) Current liabilities (20,395) (15,827) Non-current liabilities Interest-bearing loans and borrowings (4,795) (1,170) Deferred income (2,116) (2,697) Deferred tax liabilities (401) (41) Non-current liabilities (7,312) (3,908) Total liabilities (27,707) (19,735) Net assets 225,618 241,083 Equity Share capital 27,265 27,265 Capital redemption reserve 5,635 5,635 Merger reserve 84,083 84,083 Foreign exchange translation reserve 1,012 1,212 Retained earnings 106,773 122,741 Equity attributable to owners of the parent 224,768 240,936 Minority interests 850 147 Total equity 225,618 241,083
Consolidated statement of changes in equity
Foreign Capital exchange Share redemption Merger translation Retained Minority Total capital reserve reserve Reserve earnings Total interests equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 28,643 4,257 84,083 (867) 133,047 249,163 5,283 254,446January 2008 Total - - - 1,083 (5,929) (4,846) (193) (5,039)recognised income and expense Distribution to - - - - - - (575) (575)minority interests Disposal of - - - 996 3,372 4,368 (4,368) -portfolio subsidiaries Re-purchase of (1,378) 1,378 - - (8,638) (8,638) - (8,638)shares Share-based - - - - 889 889 - 889payments Balance at 31 27,265 5,635 84,083 1,212 122,741 240,936 147 241,083December 2008 Total - - - (200) (15,148) (15,348) 397 (14,951)recognised income and expense Acquisition of - - - - - - 306 306portfolio subsidiary Share-based - - - - (820) (820) - (820)payments Balance at 31 27,265 5,635 84,083 1,012 106,773 224,768 850 225,618December 2009
Consolidated cash flow statement
Year ended Year ended 31 December 31 December 2009 2008 £'000 £'000
Cash flows from operating activities
Loss for the year (14,751) (6,122) Adjustments for: Depreciation and amortisation 1,762 1,199 Goodwill impairment 4,598 11,224 (Gains)/losses on investments (3,998) 32,137 Gain on discontinued operations, net of income - (49,436)tax
Loss on sale of property, plant and equipment 56
- Translation differences 433 (1,958) Share-based payments (422) 889 Finance costs 342 221 Interest income (166) (1,802) Income tax expense 939 579 (11,207) (13,069) Change in inventories (147) (9,878) Change in operating and other receivables 1,396
13,342
Change in operating and other payables (2,219) (3,397) (12,177) (13,002) Interest paid (342) (221) Income tax paid (321) (183) Net cash used in operating activities (12,840)
(13,406)
Cash flows from investing activities
Interest received 166 1,802 Acquisition of property, plant and equipment (2,749)
(1,685)
Proceeds from disposals of property, plant and 3
12equipment Disposal of discontinued operations, net of - 80,543cash disposed of Acquisition of investments (18,853) (40,019) Acquisition of subsidiaries, net of cash (6,116) (5,645)acquired Proceeds from sale of investments 13,981
11,503
Net cash (used in)/from investing activities (13,568)
46,511
Cash flows from financing activities
Repurchase of own shares - (8,638) Drawdown of interest bearing loans 554
1,855
Distribution to minority interests -
(575)
Net cash from/(used in) financing activities 554
(7,358)
Net (decrease)/increase in cash and cash (25,854) 25,747equivalents Cash and cash equivalents at the beginning of 42,615 14,263the period Effect of exchange rate fluctuations on cash (180) 2,605held Cash and cash equivalents at the end of the 16,581 42,615year
Cash and cash equivalents above comprise
Cash and cash equivalents 16,950 42,615 Bank overdrafts (369) - Cash and cash equivalents at the end of the 16,581 42,615year Notes
1. Principal accounting policies
Reporting entity
LMS Capital plc ("the Company") is domiciled in the United Kingdom. Thesefinancial statements are presented in pounds sterling because that is thecurrency of the principal economic environment of the Company's operations. Theconsolidated financial statements of the Company for the year ended 31 December2009 comprise the Company and its subsidiaries (together "the Group").The Company was formed on 17 March 2006 and commenced operations on 9 June 2006when it received the demerged investment division of London MerchantSecurities. The consolidated financial statements are prepared as if the Grouphad always been in existence. The difference between the nominal value of theCompany's shares issued and the amount of the net assets acquired at the dateof demerger has been credited to Merger reserve.The Company is an investment company but because it holds majority stakes incertain investments it is required to prepare group accounts that consolidatethe results of such investments. In order to present information that iscomparable with other investment companies, the results of the Group'sinvestment business on a stand alone basis are set out in Note 2.
Basis of preparation
This financial information has been prepared in accordance with InternationalFinancial Reporting Standards as adopted for use in the European Union("Adopted IFRS") although the financial information in this announcement is notsufficient to comply with Adopted IFRS.The financial information set out in this unaudited preliminary statement doesnot constitute the Company's statutory accounts for the years ended 31 December2009 or 2008. The financial information for 2008 is derived from the statutoryaccounts for 2008 which have been delivered to the registrar of companies. Theauditors have reported on the 2008 accounts; their report was (i) unqualified,(ii) did not include a reference to any matters to which the auditors drewattention by way of emphasis without qualifying their report and (iii) did notcontain a statement under section 237 (2 ) or (3) of the Companies Act 1985.The statutory accounts for 2009 will be finalised on the basis of the financialinformation presented by the directors in this preliminary announcement andwill be delivered to the registrar of companies in due course.The financial statements have been prepared on the historical cost basis exceptfor investments held at fair value through profit or loss which are measured atfair value.Operating segmentsThe Group adopted IFRS 8: Operating Segments ("IFRS 8") early with effect fromthe financial year ended 31 December 2007. IFRS 8 defines requirements for thedisclosure of financial information of an entity's operating segments and iseffective for reporting periods beginning on or after 1 January 2009.
2. Operating segments
The information below has been prepared using the definition of an operatingsegment in IFRS 8: Operating Segments. The Group determines and presentsinformation on operating segments based on the information that is providedinternally to the directors to enable them to assess performance and allocateresources.As an investment company, the Group's primary focus is on the performance ofits investment management business. Financial information for this segment isprepared on the basis that all investments are accounted for at fair value.The information set out below therefore presents summarised financialinformation for the investment management business on a stand alone basis,together with the adjustments arising from the summarised results and financialposition of the portfolio subsidiaries. Adjustments for Energy CranesInternational Limited ("Energy Cranes") are shown separately in the prior yearbecause of the size of this business relative to the others.The consolidation adjustments included below reflect the adjustments necessaryto restate the portfolio subsidiaries from the basis included in the investmentmanagement business (investments carried at fair value) to full consolidationin the Group's financial statements.Segment profit or loss Reconciliation Investment Portfolio Consolidation Group management subsidiaries adjustments totalYear ended 31 December 2009 £'000 £'000 £'000 £'000 Revenues from sales of - 32,526 - 32,526goods and services Gains and losses on (4,876) - 8,874 3,998investments Interest income 159 7 - 166 Investment and other 494 479 - 973income Goodwill impairment loss - - (4,598) (4,598) Finance costs - (6,341) 5,999 (342) (Loss)/profit for the (12,660) 2,177 (4,268) (14,751)year Reconciliation Discontinued operations Investment Portfolio Energy Consolidation Group management subsidiaries Cranes Other adjustments totalYear ended 31 £'000 £'000 £'000 £'000 £'000 £'000 December 2008Revenues from - 19,790 - - - 19,790sales of goods and services Gains and losses (36,748) - - - 4,611 (32,137)on investments Interest income 1,754 48 - - - 1,802 Investment and 582 - - - - 582other income Goodwill - - - - (11,224) (11,224)impairment loss Finance costs - (4,267) - - 4,046 (221) Continuing (40,796) (13,514) - - (2,567) (56,877)operations Discontinued - - 57,556 (6,801) - 50,755operations (Loss)/profit for (40,796) (13,514) 57,556 (6,801) (2,567) (6,122)the year
2. Operating segments (continued)
Segment net assets Reconciliation Investment Portfolio Consolidation Group management subsidiaries adjustments total 31 December 2009 £'000 £'000 £'000 £'000 Property, plant and equipment 158 6,899 - 7,057 Intangible assets - 11,817 17,708 29,525 Investments 215,632 1 (27,500) 188,133 Other non-current assets - 80 - 80 Non-current assets 215,790 18,797 (9,792) 224,795 Cash and cash equivalents 14,416 2,534 - 16,950 Other current assets 462 11,182 (64) 11,580 Total assets 230,668 32,513 (9,856) 253,325 Total liabilities (2,802) (79,519) 54,614 (27,707) Net assets/(liabilities) 227,866 (47,006) 44,758 225,618 The net asset value of the investment management business at 31 December 2009includes £227,719,000 attributable to the equity holders of the parent and £147,000 attributable to minority interests. Reconciliation Investment Portfolio Consolidation Group Management subsidiaries adjustments total 31 December 2008 £'000 £'000 £'000 £'000 Property, plant and equipment 288 2,928 - 3,216 Intangible assets - 3,196 23,602 26,798 Investments 202,049 1 (22,504) 179,546 Other non-current assets - 15 - 15 Non-current assets 202,337 6,140 1,098 209,575 Cash and cash equivalents 41,293 1,322 - 42,615 Other current assets 309 8,319 - 8,628 Total assets 243,939 15,781 1,098 260,818 Total liabilities (2,283) (70,604) 53,152 (19,735) Net assets/(liabilities) 241,656 (54,823) 54,250 241,083 The net asset value of the investment management business at 31 December 2008includes £241,509,000 attributable to the equity holders of the parent and £147,000 attributable to minority interests.
2. Operating segments (continued)
The carrying amount and gains and losses of the investments of the investment management business can be further analysed as follows:
31 December 2009 31 December 2008 UK US Total UK US Total Asset type £'000 £'000 £'000 £'000 £'000 £'000 Funds 30,259 73,194 103,453 29,911 72,390 102,301 Quoted 17,274 34,601 51,875 19,409 27,097 46,506 Unquoted 39,849 20,455 60,304 33,686 19,556 53,242 87,382 128,250 215,632 83,006 119,043 202,049 Year ended 31 December 2009 Year ended 31 December 2008 Realised Unrealised Total Realised Unrealised Total gains/ gains/ gains/ gains/ (losses) (losses) (losses) (losses) Asset type £'000 £'000 £'000 £'000 £'000 £'000 Funds (755) (6,007) (6,762) 2,114 4,572 6,686 Quoted 2,503 9,741 12,244 574 (31,122) (30,548) Unquoted (1,867) (8,491) (10,358) 14,620 (27,506) (12,886) (119) (4,757) (4,876) 17,308 (54,056) (36,748) Revenues
The Group's revenues from external customers comprise:
Year ended Year ended 31 December 31 December 2009 2008 £'000 £'000 Continuing operations IT services and software 24,885 12,431 Specialist manufacturing 7,641 7,359 32,526 19,790Geographical information Revenues Non-current assets Year ended Year ended 31 December 31 December 31 December 31 December 2009 2008 2009 2008 £'000 £'000 £'000 £'000 Continuing operations United Kingdom 17,640 7,066 88,298 99,378 United States of 8,925 6,521 136,497 110,197America Other countries 5,961 6,203 - - 32,526 19,790 224,795 209,575
Geographical information on revenue is based on the location of customers and on assets is based on the location of the assets.
Major customers
Revenues from the ten largest customers represent approximately 39% of the Group's total revenues (year ended 31 December 2008: 33%).
3. Discontinued operations
There were no disposals constituting discontinued operations in the year ended31 December 2009. In March 2008 the Group sold its entire interest in EnergyCranes International Limited and in June 2008 the Group sold its entireinterest in AssetHouse Technology limited.
4. Basic and diluted loss per ordinary share
The calculation of basic loss per ordinary share is based on the loss of £15,148,000 (year ended 31 December 2008: loss of £5,929,000), being the lossfor the year attributable to the parent, divided by the weighted average numberof ordinary shares in issue during the year 272,640,952 (year ended 31 December2008: 281,758,491).The calculation of basic loss per ordinary share for continuing operations isbased on the loss of £15,148,000 (year ended 31 December 2008: loss of £56,684,000), being the loss for the year attributable to the parent, divided bythe weighted average number of ordinary shares in issue during the year of272,640,952 (year ended 31 December 2008: 281,758,491).
There was no dilution effect on the loss for the year or the loss from continuing operations in either year.
5. Capital commitments 2009 2008 £'000 £'000 Outstanding commitments to funds 58,709 71,104 58,709 71,104
The outstanding commitments to funds comprise unpaid calls in respect of funds where a member of the Group is a limited partner.
vendorRelated Shares:
Lms Capital