Final Results

RNS Number : 1672A

LMS Capital PLC

18 March 2013

 



18 March 2013

LMS Capital plc

Preliminary Results for the year ended 31 December 2012

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 2012.

·    The Net Asset Value at 31 December 2012 was £192.1 million, (31 December 2011: £245.0 million), per share 85p (31 December 2011: 90p).

·      £40 million returned to shareholders by way of a tender offer at 84 pence per share. 

·      £43.2million of proceeds realised in the year.

·      Unrealised gains on the unquoted and funds portfolio of £8.0 million were offset by adverse price movements on a number of our quoted investments of £5.5 million and unrealised currency losses of £5.6 million.

·       Overheads (excluding one-off items) were reduced from £7.9 million in 2011 to £4.4 million in 2012.

·    The investment management business loss for the year was £12.2 million (2011: loss of £0.4 million).

·    At the date of this report the US dollar has strengthened relative to pound sterling such that the unrealised currency losses incurred in 2012 have reversed.

·    Outstanding fund commitments reduced from £18.9 million to £10.4 million over the year.

·    Realisations have continued in 2013; on 12 March we announced the sale of our interest in Apogee for cash proceeds of £16 million and Pims Group, a co-investment, has been sold with proceeds to us of £3.3 million. Both transactions were at or above our December 2012 carrying value.

Richard Christou, Chairman of LMS Capital, said: 

"During 2012 the Board made satisfactory progress in implementing the asset realisation strategy approved by shareholders in November 2011. We acted to reduce costs and made a first distribution to shareholders in November. The economic background remains difficult, but the Board believes that the Company's plans for the orderly wind-down of the business should continue to deliver value to shareholders.

As a consequence of the change in strategy the Board was reconstituted at the beginning of 2012. Given the reducing size of the Company, the consequent need to reduce overheads and the successful commencement of the realisation strategy, Mark Sebba and I have decided not to stand for re-election at the forthcoming Annual General Meeting.  I am delighted that Martin Knight has agreed to take over as Chairman."

Martin Knight, Chairman designate of LMS Capital, said: 

"I should like to thank Richard and Mark for their contribution to the Company - Richard has been a director of the Company since the demerger in 2006 and Mark since 2010. Both have played a significant part in the work of the Board and its committees, most recently including the transition to the revised strategy. I look forward to continuing with the realisation strategy to achieve an efficient return of cash and optimise value to shareholders."

For further information please contact:

LMS Capital plc	020 7935 3555
Nick Friedlos, Director
Tony Sweet, Chief Financial Officer
J.P. Morgan Cazenove	020 7742 4000
Michael Wentworth-Stanley
MHP Communications	020 3128 8794
Tim McCall
Katie Hunt

About LMS Capital

LMS Capital is an investment company which, following a general meeting on 30 November 2011, is undertaking a realisation strategy with the aim of achieving a balance between an efficient return of cash to shareholders and optimising the value of the Company's investments. Its investment portfolio consists of small to medium sized companies in the consumer, energy and business services sectors.

www.lmscapital.com

Chairman's statement

2012 was the first year of the realisation strategy approved by shareholders at the general meeting on 30 November 2011. The change of strategy is intended to provide liquidity for shareholders and achieve a balance between an efficient return of cash to shareholders and maximising the value of the Company's investments. More information on the implementation of this revised strategy is set out in the Operating Review.

Your Board made satisfactory progress in implementing this change in strategy during the year and the Directors believe that the Company's plans for the orderly wind-down of the business should continue to deliver value to shareholders.

Results

During 2012 the Company received proceeds of £43.2 million from its investment portfolio and In November your Board was able to announce a first return to shareholders under the realisation strategy by way of a tender offer. This completed at the beginning of December and returned £40 million to shareholders, retiring 47.6 million shares at 84 pence per share being 17.4% of shares in issue before the tender. This was a satisfactory result against the background of the uncertain economic environment.

The Board is not recommending payment of a dividend for the year ended 31 December 2012 (2011: £nil).

Net Asset Value per share at the end of 2012 was 85 pence, a decrease of 6% from a year ago.  Adverse movements in some of our quoted investments and a 4% movement in the US dollar exchange rate relative to pound sterling were factors in this. At the date of this statement, we have seen a reversal of the negative currency impact seen last year.

The investment portfolio at 31 December 2012 was valued at £179.3 million (31 December 2011: £218.5 million); cash at 31 December 2012 was £20.1 million (31 December 2011: £30.6 million). The Company has no borrowings.

The Group as a whole (including consolidation of the portfolio subsidiaries) showed a consolidated loss for the year from continuing operations of £12.9 million (2011: loss of £1.0 million).

Board and management

The change in strategy has placed special demands on a smaller management team and your Board would like to extend its appreciation to all the Company's employees for their contribution in 2012.

As a consequence of the change in strategy the Board was reconstituted at the beginning of 2012. Given the

reducing size of the Company, the consequent need to reduce overheads and the successful commencement of the realisation strategy, Mark Sebba and I have decided not to stand for re-election at the forthcoming Annual General Meeting.  I am delighted that Martin Knight has agreed to take over as Chairman.

As the asset base of the business diminishes, continued steps are being taken to reduce overheads and further changes in our management structure will be implemented in the first half of 2013.

Outlook

To date in 2013 we have seen further realisations and your Board believes that the investment portfolio will continue to release cash to shareholders. The economic background remains uncertain, but on the basis that there is no significant worsening of the business environments in the UK and the US your Board expects to progress the orderly wind-down of the business in the coming year and will focus on optimising value and cash flow for the benefit of shareholders.

Richard Christou

Chairman

18 March 2013

Operating review

This review provides an update on progress during 2012 with the realisation strategy approved by shareholders in November 2011.

Corporate strategy and investment policy

At the general meeting on 30 November 2011 shareholders approved proposals to modify the Company's objectives and its investment policy. The revised investment policy is to conduct an orderly realisation of the assets of the Company, to be effected in a manner that seeks to achieve a balance between an efficient return of cash to shareholders and maximising the value of the Company's investments.

Accordingly, no investments will be made in new opportunities. Follow-on investments will be made in existing assets to honour commitments made at the time of the initial investment and/or to which the Company is legally obligated, or where the investment is made to protect or enhance the value of an existing asset or to facilitate its orderly realisation. The portfolio as a whole will be managed with a view to progressively returning funds to shareholders over a period of time.

At the beginning of 2012, immediately following the change in strategy, the Directors:

·    reviewed the realisation prospects for each portfolio holding in the context of seeking to achieve a balance between an efficient return of cash to shareholders and maximising the value of the Company's investments;

·    established a plan to focus on the realisation of key investments; and

·    reduced the operating costs of the Company - this principally took the form of headcount reductions. As the asset base decreases the Board will continue to seek to reduce operating costs.

Asset realisation and cost reduction plans are kept under regular review by the management team and the Board in the light of progress on particular investments and market developments. We continue to monitor opportunities within the secondary market, in particular for our fund interests.

Realisations and cash

Realisations from the portfolio in the year totalled £43.2 million. This came from a number of sources as noted below and included £18.1 million from the sale of the investment in Method, held through San Francisco Equity Partners.

Outstanding uncalled commitments to funds were reduced by £8.5 million, reflecting not only fund calls in the year but also the sale at book value of a fund at an early stage of its investment period with a large outstanding commitment, as well as the renegotiation of commitments where possible.

In November 2012 the Directors made the first return of cash to shareholders under the realisation strategy by way of a tender offer, and aim to make further realisations to enable a distribution to shareholders during 2013. The Directors' current expectation is that the realisation of the portfolio is likely to be substantially completed in some two to four years, in line with previously disclosed estimates.

Shareholders should note that whilst these are the best estimates of the Board as at the date of this report, they are subject to a number of uncertainties including general market conditions, the future performance of investee companies, the behaviour of other shareholders in investee companies (where the Company is a minority investor) and the level of activity in the mergers and acquisitions market across the geographies of the Company's assets.

The Board will keep shareholders informed on progress through the Company's half-yearly and annual reports, and significant individual realisations will be announced as appropriate.

Results and review of portfolio

NAV per share declined over the year by 5 pence. Underlying this, the unquoted investments and funds have shown a value increase of £8.0 million, offset by the negative share price performance of our quoted investments of £5.5 million and unrealised currency losses of £5.6 million. We have also implemented and recognised in these accounts our carried interest arrangements resulting in a non-cash charge of £3.1 million.  Overheads including restructuring costs were £5.3 million (2011: £12.9 million).

Our key reportable metrics are:

		2012	2011	2010
Net (loss)/profit (£m)		(12.2)	(0.4)	17.6
NAV per share (pence)		85	90	90
Cash from realisations (£'million)		43.2	62.7	24.3

The above table sets out the results of our investment management business as defined in Note 2 to our financial statements.

Quoted investments

At the end of 2012 our quoted holdings were valued at £17.1 million (2011: £24.2 million), of which our interest in Weatherford International, at £14.1 million, continues to be the principal element.

The Weatherford International share price performed poorly in 2012 - the price in US dollars at the end of December 2012 was 24% lower than at 31 December 2011 and (excluding currency effects) this reduced our NAV per share year on year by 2p.

Proceeds from sales of other quoted holdings during the year were £0.8 million (2011: £31.6 million, which included £22.9 million from the sale of our interest in ProStrakan Group).

Fund interests

The maturity of our funds portfolio is reflected in the related cash flows during 2012. Distributions from funds were £32.2 million (2011: £11.7 million) and calls paid were £5.3 million (2011: £13.1 million). Distributions included £18.1 million from San Francisco Equity Partners ("SFEP") following its sale of Method in the third quarter.

Our uncalled fund commitments continue to decrease and at 31 December 2012 stood at a maximum of £10.4 million, down from £18.9 million at the end of 2011.

Our fund holdings at the end of 2012 had a book value of £56.3 million (2011: £63.5 million), excluding SFEP, and include the following principal interests:

			31 December
General partner			2012	2011
			£ million	£ million
Brockton Capital	UK property		13.0	15.8
BV investments	US buyouts		8.1	10.9
Voreda Capital	UK property		5.3	5.3
Primus Capital	US buyouts		5.1	4.7
Opus Capital Venture Partners	US venture capital		3.7	3.2
Amadeus Capital Partners	UK venture capital		3.2	3.8
CMEA Ventures	US venture capital		2.4	3.3

The above holdings represent 72% (2011: 74%) of the funds portfolio (excluding SFEP).

At the end of 2012 the carrying value of our interest in SFEP was £20.2 million (2011: £41.4 million) and the principal investments in its portfolio are Yes To (£8.3 million - consumer sector), Penguin Computing (£4.2 million - technology sector) and Luxury Link (£4.2 million - consumer sector).

 Direct investments

We received £6.2 million when our US co-investment Rave Reviews Cinemas was sold and £2.2 million from the sale of our small interest in Agilisys, a provider of outsourcing services principally to the public sector. We have recognised net valuation increases of £6.7 million, principally in relation to:

·     Apogee, which increased revenues and EBITDA in 2012 and was able to withstand increased competitor pricing pressure. We increased the carrying value of our interest to £15.0 million (2011: £11.5 million) at the end of 2012 and we sold our interest in the company in March 2013 for £16 million.

·     Updata, which continued to expand its operations during the year and gained a significant number of contract wins. Our carrying value has increased to £14.5 million (2011: £12.7 million).

Our other large holdings are as follows:

·     HealthTech Holdings has continued to perform strongly in 2012 but lower valuation multiples of comparable quoted companies has resulted in no significant change to our carrying value.

·     Nationwide Energy Partners has continued to increase the number of its revenue generating metered units, the full benefit of which will be reflected in its results in 2013 and beyond.

We made only one follow-on investment during 2012 - we increased our direct investment in Zoom Eyeworks (a portfolio company of SFEP) by £2.0 million in connection with the refinancing of its third party borrowing facility.

Our principal direct investments at book value are:

			31 December
			2012	2011
			£ million	£ million
HealthTech Holdings	US technology		22.3	23.9
Apogee Corporation	UK technology		15.0	11.5
Updata Infrastructure	UK technology		14.5	12.7
Nationwide Energy Partners	US energy		10.0	10.5
Entuity	UK technology		4.0	4.0
Wesupply	UK technology		3.3	3.3

The above holdings represent 81% (2011: 74%) of the direct portfolio.

Financial review

Basis of preparation of financial information

The financial statements have not been prepared on a going concern basis as the Company is seeking to realise the investment portfolio, return the capital to shareholders and then liquidate the Company, as outlined in the strategy approved by shareholders on 30 November 2011 - see note 1 to the consolidated financial information.

The Company reports its results under International Financial Reporting Standards as adopted for use in the European Union ("Adopted IFRS"), and the consolidated financial statements include the consolidation of portfolio companies which are also subsidiaries ("portfolio subsidiaries"). Since the Board manages the Company as an investment business, this financial review focuses on the results of the investment management operations. Note 2 to the consolidated financial information includes the separate results and net assets of the investment management business. Where appropriate, this review includes comments on the results and financial position of the portfolio subsidiaries.

Investment management

NAV at 31 December 2012 was £192.1 million (31 December 2011: £245.0 million); NAV per share was 85 pence (31 December 2011: 90 pence). 

The Group's return on its investment portfolio for the year ended 31 December 2012 excluding carried interest charges of £3.1 million was a loss of £4.1 million (2011: gain of £8.7 million) as follows:

				Year ended 31 December
				2012		2011
Gains/(losses)				£'000		£'000
Quoted securities				(6,317)		(7,728)
Direct investments				3,517		12,995
Funds				(1,295)		3,467
				(4,095)		8,734
Being:
Realised (losses)/gains, net				(1,034)		6,358
Unrealised (losses)/gains, net				(3,061)		2,376
Total				(4,095)		8,734

Approximately 56% of the portfolio at 31 December 2012 is denominated in US dollars (31 December 2011: 65%) and the above table includes the impact of currency movements. In the year ended 31 December 2012, the weakening of the US dollar against pound sterling (year on year) resulted in an unrealised foreign currency loss of £5.6 million (2011: unrealised gain of £0.3 million). It is the Board's current policy not to hedge the Company's underlying non-sterling investments.

The loss on our quoted portfolio reflects the net impact of the changes in the capital markets during the year. Of the total of £6.3 million, £5.3 million is attributable to our holding in Weatherford International.

The net gain on our direct investments includes valuation increases of our interests in Apogee, Updata and Pims Group totalling £7.2 million, offset by smaller downward valuation adjustments on other unquoted holdings and foreign currency losses of £2.2 million.

Changes in valuations reflect changes in the revenue and profitability multiples of comparable businesses, which are used in the underlying calculations, combined with the operating performance of the individual businesses within the portfolio. In most cases the multiples used are similar to those prevailing at the end of 2011. The unrealised gains or losses for 2012 arise principally as a result of the companies' performance.

For the valuation of our fund interests we utilise reports from the general partners of our funds as at the end of the third quarter in establishing our year end carrying value, with adjustments made for calls, distributions and foreign currency movements since that date. We also carry out our own review of individual funds and their portfolios to satisfy ourselves that the underlying valuation bases are consistent with our knowledge of the investments and the sectors in which they operate.

As well as the investment portfolio return, the loss for the year of £12.2 million (2011: loss of £0.4 million) includes the items discussed below.

Income from investments in the year was £1.2 million (2011: £3.7 million) and comprises interest and dividends from portfolio companies, dividends on quoted securities and management charges made to portfolio companies.

Administration expenses for the year were £5.3 million (2011: £12.9 million). The figure for 2012 includes one-off costs of £0.9 million, principally in connection with headcount reductions. 2011 included one-off costs of £5.0 million comprising £1.6 million of charges for professional fees incurred in relation to the change in investment policy of the Company, £0.9 million compensation payments to staff members who left before the end of the year and £2.5 million to provide for the costs of a management fee commitment regarded as onerous following the change in strategy.

Interest income for the year was £0.1 million (2011: net expense of £0.1 million) reflecting the fact that the Company repaid its loan facility in May 2011. There was a tax charge for the year of £1.0 million (2011: credit of £0.2 million), being principally withholding tax on distributions from US funds.

Investments

The Group's investments are carried at fair values determined in accordance with the International Private Equity and Venture Capital Valuation Guidelines.

Additions to the investment portfolio during the year were £7.3 million (2011: £19.3  million) of which £5.3 million (2011: £13.1 million) was to meet capital calls from funds and £2.0 million (2011: £3.6 million) for follow-on investments. There were no new investments (2011: £2.6 million). 

Proceeds of realisations were £43.2 million (2011: £62.7 million). Distributions from funds were £32.2 million (2011: £11.7 million) including £18.1 million from SFEP following its sale of Method Products in the third quarter. Sales of direct investments were £9.2 million (2011: £4.8 Million) and quoted securities £0.8 million (2011: £31.6 millionwhich included £22.9 million from the sale of our interest in ProStrakan Group).

At 31 December 2012 the Group had commitments of £10.4 million (31 December 2011: £18.9 million) to meet outstanding capital calls from its fund interests. Cash in the investment management business was £20.1 million (31 December 2011: £30.6 million) with no debt.

Consolidated results

Consolidated revenues for the year from continuing operations were £60.8 million (2011: £47.3 million), all in the portfolio subsidiaries. The increase over the previous year reflects the inclusion of 365iTMS for a full year (acquired in September 2011), as well as increased revenues at Entuity, NEP, Updata and Wesupply.  

Consolidated operating expenses of continuing operations were £62.8 million (2011: £55.9 million). The increase in operating expenses reflects principally the inclusion of 365iTMS (for a full year), as well as higher costs associated with the revenue growth at most companies.

The portfolio subsidiaries continued to make good progress during 2012:

·    Updata's revenues in 2012 were 8% higher compared to 2011 with the proportion of rental (contractual) revenues continuing to increase as installation revenues have declined. Operating profits were held back by investment in new contract wins which are expected to come on stream in 2013.

·    Nationwide Energy Partners grew revenues by 25% in 2012, albeit operating profits were flat. The company invested in new contract wins during the year with the benefit expected to be seen in the 2013 results.

·    Wesupply's revenues were 12% ahead of last year with operating profits ahead by more than 50%.

·    Entuity performed well with revenues up by 11% year on year and operating profits benefitting from a lower cost base.

·    365iTMS started the year well but difficult trading conditions impacted revenues and profits in the second half of the year. The company is addressing this in 2013.

The consolidated loss from continuing operations was £12.9 million (2011: loss of £1.0 million), the downturn compared to last year being in the investment management business.

Financial position

The consolidated statement of financial position at 31 December 2012 includes cash and cash equivalents of £26.8 million (31 December 2011: £34.9 million) and borrowings of £15.3 million (31 December 2011: £11.8 million).

N Friedlos                                                                                                                           A Sweet

Director                                                                                                                               Chief Financial Officer

18 March 2013

Consolidated income statement

		Notes	Year ended 31 December 2012 £'000	Year ended 31 December 2011 £'000
Continuing operations
Revenue from sales of goods and services		2	60,762	47,334
Gains and losses on investments		2	(9,472)	7,912
Interest income			88	65
Dividend income			130	801
Other income from investments			308	360
			51,816	56,472
Operating expenses			(62,752)	(55,903)
(Loss)/profit  before finance costs			(10,936)	569
Finance costs			(758)	(941)
Loss before tax			(11,694)	(372)
Taxation			(1,201)	(595)
Loss from continuing operations			(12,895)	(967)
Discontinued operations
Gain from discontinued operations (net of taxation)		3	-	2,232
(Loss)/profit for the year			(12,895)	1,265
Attributable to:
Equity holders of  the parent			(12,951)	561
Non-controlling interests			56	704
			(12,895)	1,265
(Loss)/earnings per ordinary share - basic		4	(4.8)p	0.2p
(Loss)/earnings per ordinary share - diluted		4	(4.8)p	0.2p
Continuing operations
Loss per ordinary share - basic		4	(4.8)p	(0.6)p
Loss per ordinary share - diluted		4	(4.8)p	(0.6)p

Consolidated statement of comprehensive income

		Year ended 31 December 2012 £'000	Year ended 31 December 2011 £'000
(Loss)/profit for the year		(12,895)	1,265
Exchange differences on translation of foreign operations		(917)	216
Total comprehensive (loss)/profit for the year		(13,812)	1,481
Attributable to:
Equity holders of the parent		(13,401)	777
Non-controlling interests		(411)	704
		(13,812)	1,481

Consolidated statement of financial position

		31 December 2012 £'000	31 December 2011 £'000
Non-current assets
Property, plant and equipment		7,367	6,931
Intangible assets		36,694	33,381
Investments		144,419	185,201
Other long-term assets		73	20
Non-current assets		188,553	225,533
Current assets
Inventories		1,975	200
Operating and other receivables		14,751	14,881
Cash and cash equivalents		26,832	34,858
Current assets		43,558	49,939
Total assets		232,111	275,472
Current liabilities
Interest-bearing loans and borrowings		(3,712)	(2,420)
Operating and other payables		(17,482)	(10,163)
Deferred income		(8,758)	(7,221)
Current tax liabilities		(1,055)	(1,406)
Current liabilities		(31,007)	(21,210)
Non-current liabilities
Interest-bearing loans and borrowings		(11,621)	(9,406)
Deferred income		(1,990)	(1,777)
Deferred tax liabilities		(200)	(469)
Provisions and other long-term liabilities		(1,723)	(2,222)
Non-current liabilities		(15,534)	(13,874)
Total liabilities		(46,541)	(35,084)
Net assets		185,570	240,388
Equity
Share capital		22,625	27,268
Share premium		508	17
Capital redemption reserve		10,397	5,635
Merger reserve		84,083	84,083
Foreign exchange translation reserve		665	1,115
Retained earnings		64,642	118,794
Equity attributable to owners of the parent		182,920	236,912
Non-controlling interests		2,650	3,476
Total equity		185,570	240,388

Consolidated statement of changes in equity

	Share capital £'000	Share premium £'000	Capital redemption reserve £'000	Merger reserve £'000	Translation reserve £'000	Retained earnings £'000	Total £'000	Non-controlling interests £'000	Total equity £'000
Balance at 1 January 2011	27,265	-	5,635	84,083	899	117,827	235,709	3,121	238,830
Total comprehensive income for the year
Profit for the year	-	-	-	-	-	561	561	704	1,265
Exchange differences on translation of foreign operations	-	-	-	-	216	-	216	-	216
Changes in ownership interests
Acquisition of non-controlling interest with a change in control	-	-	-	-	-	-	-	233	233
Transactions with owners, recorded directly in equity
Distributions to non-controlling interests	-	-	-	-	-	-	-	(582)	(582)
Share-based payments	-	-	-	-	-	406	406	-	406
Shares issued in the year	3	17	-	-	-	-	20	-	20
Balance at 31 December 2011	27,268	17	5,635	84,083	1,115	118,794	236,912	3,476	240,388
Total comprehensive income for the year
Loss for the year	-	-	-	-	-	(12,951)	(12,951)	56	(12,895)
Exchange differences on translation of foreign operations	-	-	-	-	(450)	-	(450)	(467)	(917)
Transactions with owners, recorded directly in equity
Distributions to non-controlling interests	-	-	-	-	-	-	-	(415)	(415)
Share-based payments	-	-	-	-	-	(109)	(109)	-	(109)
Repurchase of shares	(4,762)	-	4,762	-	-	(40,482)	(40,482)	-	(40,482)
Share options exercised in the year	119	491	-	-	-	(610)	-	-	-
Balance at 31 December 2012	22,625	508	10,397	84,083	665	64,642	182,920	2,650	185,570

Consolidated cash flow statement

		Year ended 31 December 2012 £'000	Year ended 31 December 2011 £'000
Cash flows from operating activities
(Loss)/profit for the year		(12,895)	1,265
Adjustments for:
Depreciation and amortisation		3,742	3,505
Losses/(gains) on investments		9,472	(7,912)
Gain on sale of discontinued operations, net of income tax		-	(3,300)
Translation differences		134	557
Share-based payments		(109)	406
Finance costs		758	941
Interest income		(88)	(65)
Income tax expense		1,201	595
		2,215	(4,008)
Change in inventories		(1,775)	1,537
Change in operating and other receivables		130	(2,860)
Change in operating and other payables		4,323	4,563
		4,893	(768)
Interest paid		(758)	(941)
Income tax paid		(1,552)	(1,458)
Net cash from/(used in) operating activities		2,583	(3,167)
Cash flows from investing activities
Interest received		88	65
Acquisition of property, plant and equipment		(3,690)	(2,628)
Acquisition of deferred installation asset		(4,416)	(2,365)
Disposals of property, plant and equipment		79	39
Disposal of discontinued operations, net of cash disposed of		-	1,079
Acquisition of investments		(7,264)	(15,398)
Acquisition of subsidiaries, net of cash acquired		-	(2,651)
Proceeds from sale of investments		42,500	57,967
Net cash from investing activities		27,297	36,108
Cash flows from financing activities
Issue of new shares		-	20
Repurchase of own shares		(40,482)	-
Drawdown of interest bearing loans		4,303	7,919
Repayment of interest bearing loans		(796)	(18,685)
Distributions paid to non-controlling interests		(415)	(582)
Net cash used in financing activities		(37,390)	(11,328)
Net (decrease)/increase in cash and cash equivalents		(7,510)	21,613
Cash and cash equivalents at the beginning of the year		34,858	13,229
Effect of exchange rate fluctuations on cash held		(516)	16
Cash and cash equivalents at the end of the year		26,832	34,858

Notes

1.         Principal accounting policies

Reporting entity

LMS Capital plc ("the Company") is domiciled in the United Kingdom. These financial statements are presented in pounds sterling because that is the currency of the principal economic environment of the Company's operations. The consolidated financial statements of the Company for the year ended 31 December 2012 comprise the Company and its subsidiaries (together "the Group").

The Company was formed on 17 March 2006 and commenced operations on 9 June 2006 when it received the demerged investment division of London Merchant Securities. The consolidated financial statements are prepared as if the Group had always been in existence. The difference between the nominal value of the Company's shares issued and the amount of the net assets acquired at the date of demerger has been credited to merger reserve.

The Company is an investment company but because it holds majority stakes in certain investments it is required to prepare group accounts that consolidate the results of such investments. In order to present information that is consistent with other investment companies, the results of the Group's investment business on a standalone basis are set out in Note 2.

Basis of preparation

This financial information has been prepared in accordance with International Financial Reporting Standards as adopted for use in the European Union ("Adopted IFRS") although the financial information in this announcement is not sufficient to comply with Adopted IFRS.

On 30 November 2011 shareholders approved a change in the investment policy of the Company with the objective of conducting an orderly realisation of the assets of the Company in a manner that seeks to achieve a balance between an efficient return of cash to shareholders and maximising the value of the Company's investments. As the Directors intend to liquidate the Company following the realisation and settlement of the remaining net assets, which may be over a number of years, these consolidated financial statements have not been prepared on a going concern basis.

On 31 October 2012, the International Accounting Standards Board issued Investment Entities (amendments to IFRS 10, IFRS 12 and IAS 27). These amendments provide an exception to existing IFRS 10 consolidation requirements, and require investment entities to measure certain subsidiaries at fair value through the profit or loss account rather than consolidating, as currently required. The amendments also set out certain disclosure requirements for investment entities.

The directors believe that the Company meets the Investment Entity criteria. The standard and its amendments are not to be adopted until EU adoption, which is expected in 2013. It is not possible to early adopt these amendments.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2012 or 2011 but is derived from those accounts. Statutory accounts for 2011 have been delivered to the registrar of companies, and those for 2012 will be delivered in due course. The auditor has reported on those accounts; their report on the accounts for 2012 was (i) unqualified and (ii) drew attention by way of emphasis without qualifying their report to the accounts not being prepared on a going concern basis and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. Their report on the accounts for 2011 was (i) unqualified, (ii) drew attention by way of emphasis without qualifying their report to the accounts not being prepared on a going concern basis and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The financial statements have been prepared on the historical cost basis except for investments held at fair value through profit or loss which are measured at fair value.

2.         Operating segments

The information below has been prepared using the definition of an operating segment in IFRS 8: Operating Segments. The Group determines and presents information on operating segments based on the information that is provided internally to the directors to enable them to assess performance and allocate resources.

As an investment company, the Group's primary focus is on the performance of its investment management business. Financial information for this segment is prepared on the basis that all investments are accounted for at fair value.

The information set out below therefore presents summarised financial information for the investment management business on a standalone basis, together with the adjustments arising from the summarised results and financial position of the portfolio subsidiaries.

The consolidation adjustments included below reflect the adjustments necessary to restate the portfolio subsidiaries from the basis included in the investment management business (investments carried at fair value) to full consolidation in the Group's financial statements. These adjustments include the elimination of intra-group transactions and adjustments in relation to goodwill.

Segment profit or loss

		Reconciliation
	Investment management	Portfolio subsidiaries	Consolidation adjustments	Group total
Year ended 31 December 2012	£'000	£'000	£'000	£'000
Revenues from sales of goods and services	-	60,762	-	60,762
Gains and losses on investments	(7,221)	-	(2,251)	(9,472)
Interest income	75	13	-	88
Dividend income	130	-	-	130
Other income from investments	1,029	229	(950)	308
Finance costs	-	(2,373)	1,615	(758)
Profit/(loss) for the year	(12,211)	435	(1,119)	(12,895)

		Reconciliation
	Investment management	Portfolio subsidiaries	Discontinued operations	Consolidation adjustments	Group total
Year ended 31 December 2011	£'000	£'000	£'000	£'000	£'000
Revenues from sales of goods and services	-	47,334	-	-	47,334
Gains and losses on investments	8,734	-	-	(822)	7,912
Interest income	54	11	-	-	65
Dividend income	801	-	-	-	801
Other income from investments	2,861	3	-	(2,504)	360
Finance costs	(179)	(3,081)	-	2,319	(941)
Continuing operations	(434)	112	-	(645)	(967)
Discontinued operations	-	-	2,232	-	2,232
Profit/(loss) for the year	(434)	112	2,232	(645)	1,265

Segment net assets

		Reconciliation
	Investment management	Portfolio subsidiaries	Consolidation adjustments	Group total
31 December 2012	£'000	£'000	£'000	£'000
Property, plant and equipment	633	6,734	-	7,367
Intangible assets	-	20,809	15,885	36,694
Investments	179,299	-	(34,880)	144,419
Other non-current assets	-	73	-	73
Non-current assets	179,932	27,616	(18,995)	188,553
Cash and cash equivalents	20,117	6,715	-	26,832
Other current assets	1,114	15,653	(41)	16,726
Total assets	201,163	49,984	(19,036)	232,111
Total liabilities	(9,057)	(56,599)	19,115	(46,541)
Net assets/(liabilities)	192,106	(6,615)	79	185,570

		Reconciliation
	Investment management	Portfolio subsidiaries	Consolidation adjustments	Group total
31 December 2011	£'000	£'000	£'000	£'000
Property, plant and equipment	759	6,172	-	6,931
Intangible assets	-	17,369	16,012	33,381
Investments	218,476	-	(33,275)	185,201
Other non-current assets	-	20	-	20
Non-current assets	219,235	23,561	(17,263)	225,533
Cash and cash equivalents	30,602	4,256	-	34,858
Other current assets	2,516	12,629	(64)	15,081
Total assets	252,353	40,446	(17,327)	275,472
Total liabilities	(7,360)	(46,775)	19,051	(35,084)
Net assets/(liabilities)	244,993	(6,329)	1,724	240,388

The net asset value of the investment management business at 31 December 2012 and at 31 December 2011 is wholly attributable to the equity holders of the parent.

The carrying amount and gain and losses of the investments of the investment management business can be further analysed as follows:

	31 December 2012				31 December 2011
	UK	US	Total		UK	US	Total
Asset type	£'000	£'000	£'000		£'000	£'000	£'000
Funds	29,879	46,638	76,517		32,610	72,361	104,971
Quoted	1,014	16,114	17,128		860	23,339	24,199
Unquoted	47,476	38,178	85,654		42,570	46,736	89,306
	78,369	100,930	179,299		76,040	142,436	218,476
	Year ended 31 December 2012				Year ended 31 December 2011
	Realised gains/(losses)	Unrealised gains/(losses)	Total		Realised gains/(losses)	Unrealised gains/(losses)	Total
Asset type	£'000	£'000	£'000		£'000	£'000	£'000
Funds	(100)	(1.195)	(1,295)		719	2,748	3,467
Quoted	34	(6,351)	(6,317)		5,758	(13,486)	(7,728)
Unquoted	(968)	1,359	391		(119)	13,114	12,995
	(1,034)	(6,187)	(7,221)		6,358	2,376	8,734

Unrealised gains/(losses) above include a charge of £3.1 million (2011: 0.4 million) in respect of the Group's carried interest plans.

Revenues

The Group's revenues from external customers comprise:

			Year ended 31 December 2012		Year ended 31 December 2011
			£'000		£'000
Continuing operations
IT services and software			44,650		34,419
Energy and related services			16,112		12,915
			60,762		47,334

Geographical information

	Revenues			Non-current assets
	Year ended 31 December 2012	Year ended 31 December 2011		31 December 2012	31 December 2011
	£'000	£'000		£'000	£'000
Continuing operations
United Kingdom	38,782	28,810		75,576	75,278
United States of America	18,095	15,200		112,977	150,255
Other countries	3,885	3,324		-	-
	60,762	47,334		188,553	225,533

Geographical information on revenue is based on the location of customers and on assets is based on the location of the assets.

Major customers

No single customer contributed more than 10% of the Group's total revenues in either 2012 or 2011.

3.         Discontinued operations

In April 2011 the Group sold its entire interests in CopperEye Limited and Kizoom Limited.

In October 2011 ITS (US) Holdings Inc, sold its entire interest in its two operating subsidiaries ITS Engineered Systems Inc, and ITS Water Solutions Inc.

4.         (Loss)/earnings per ordinary share

The calculation of the basic and diluted (loss)/earnings per share, in accordance with IAS 33, is based on the following data:

		Year ended 31 December 2012	Year ended 31 December 2011
		£'000	£'000
(Loss)/earnings
(Loss)/earnings for the purposes of earnings per share being net profit attributable to equity holders of the parent		(12,951)	561
Loss for the purposes of continuing earnings per share being net loss from continuing operations attributable to equity holders of the parent		(12,951)	(1,671)
Number of shares		Number	Number
Weighted average number of ordinary shares for the purposes of basic earnings per shares		269,495,938	272,662,870
Effect of dilutive potential ordinary shares:
Share options and performance shares		1,618,736	4,230,301
Weighted average number of ordinary shares for the purposes of diluted earnings per share		271,114,674	276,893,171
(Loss)/earnings per share
Basic		(4.8)p	0.2p
Diluted		(4.8)p	0.2p

Loss per share - continuing operations
Basic		(4.8)p	(0.6)p
Diluted		(4.8)p	(0.6)p

There was no dilution effect on the loss for the year.

5.         Capital commitments

			2012		2011
			£'000		£'000
Outstanding commitments to funds			10,420		18,894

The outstanding commitments to funds comprise unpaid calls in respect of funds where a member

of the Group is a limited partner.

 

END

 

 

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