Lms Capital Regulatory News (LMS)

29 April 2020

LMS Capital plc

1st Quarter 2020 Update

LMS Capital plc (the "Company"), the listed investment company, stated in its year end results announcement on 15 April 2020 that, whilst at that stage it was not able to quantify the impact, it expected the valuations of its portfolio to be reduced at 31 March 2020 as a result of the disruption to businesses and financial markets from the Coronavirus pandemic. The Company has now completed the necessary work to make an estimate of the impact of this and the results are set out below as an update covering the period from 31 December 2019 to date.

The Company has significant cash balances. During April it has considered it prudent to convert to cash those of its quoted investments that were relatively liquid.

Financial Highlights

• Unaudited Net Asset Value ("NAV") at 31 March 2020 was £44.4 million (55.0p per share);

• This compares to £52.6 million (65.1p per share) being the 31 December 2019 reported NAV of £56.0 million adjusted for the special dividend of £3.4 million, declared in December 2019 but paid in early January 2020; and

• Cash at 31 March 2020 was £22.2 million. Taking account of the proceeds of realisation of quoted shares during April, plus normal monthly working capital movements, cash balances at 27 April 2020 were approximately £28 million (34.7p per share).

Unaudited Net Asset Value at 31 March 2020

The reductions in the portfolio value represent approximately an 18% reduction in the value of quoted investments, and a reduction of 30% in the underlying valuation of the unquoted direct investments and fund investments, offset by approximately 3% unrealised foreign exchange gains on these assets.

The unaudited NAV at 31 March 2020 is based on the value of the Company's investments at 31 December 2019, adjusted for:

- Transactions in the first three months of the year, including sales of quoted securities and cash calls or distributions from funds;

- Price movements on quoted securities;

- Movements in foreign currency exchange rates; and

- Estimated change in the value of unquoted investments and funds based on information available to the Board.

31 March NAV comprises

Quoted securities

The Company's principal quoted holdings at 31 March 2020 comprised its shares in Gresham House and Solaredge which together represented 95% of the quoted portfolio.

The Company's quoted investment valuations reduced by a net £1.5 million (18%), during the first quarter of 2020. This comprised unrealised underlying market price reductions of £1.6 million, offset by unrealised foreign exchange gains of £0.1 million. In addition, the Company realised a loss of £0.1 million on quoted shares sold during the quarter. The reduction reflects declines in both the UK and US equity markets due to the impact of the Coronavirus pandemic.

During April the Company has realised the remainder of its shares in Gresham House and approximately two-thirds of its holding in Solaredge. The realisations produced proceeds of £6.2 million compared to 31 March 2020 values of £5.9 million.

Unquoted investments managed by San Francisco Equity Partners ("SFEP")

The Company's unquoted investments managed by SFEP comprise two assets, YesTo and ICU Eyewear.

The valuation of these assets has reduced by £2.1 million as a result of a reduction in the carrying value of YesTo. YesTo had previously reset its business plan to a significantly reduced level of sales, which was reflected in the write down of this investment in December 2019. The 2020 estimated sales are now projected to be further negatively impacted by the Coronavirus pandemic, and YesTo has indicated it will need additional funding imminently, the terms of which are under discussion. The carrying value has been adjusted to reflect the deterioration in the company's trading and the uncertainty around the financing negotiations.

The carrying value of ICU Eyewear is unchanged from the 31 December 2019 position.

Unquoted investments held directly

Directly held unquoted investments include holdings in Medhost, Elateral and Northbridge Industrial Services PLC.

The valuation of the Company's directly held unquoted investments decreased £1.9 million during the quarter, comprising a £2.2 million reduction in the underlying value of the investments, offset by £0.3 million of unrealised foreign currency gains.

The reductions reflect the impact of the Coronavirus pandemic on the underlying businesses as well as the impact on public market valuation multiples.

Funds

The Company's fund investments include its holding in Brockton Capital Fund 1, Opus Capital and three other smaller fund interests.

Valuations reduced by a net £2.4 million during the first quarter, comprising a £2.7 million reduction in underlying asset value offset by £0.3 million of unrealised foreign currency gains. The carrying value of the funds is based on information from the fund manager, generally the 31 December 2019 fund valuation reports, overlaid with an estimate by the Company of the potential impact on those values of the Coronavirus pandemic during the first quarter of 2020.

The Company received cash and "in specie" distributions from its funds of £0.7 million in the first quarter.

Liquidity

At 31 March 2020 the Company and its subsidiaries had cash balances of £22.2 million.

As noted above, during April the Company realised the bulk of its quoted holdings. Cash balances at 27 April 2020 were approximately £28 million reflecting the realisation proceeds from sales of quoted shares and normal monthly working capital movements.

Movements in prices of quoted securities and foreign exchange rates since 31 March 2020 have not been material.

Outlook

As stated in its 15 April announcement, whilst the Board's overall objectives have not changed, the landscape in which these will be pursued as a result of the Coronavirus pandemic will change profoundly.

The Company has significant cash balances and has considered it prudent during April to convert to cash, those of its quoted investments that were relatively liquid. The Company remains highly cautious about the way its liquid resources are deployed. It will continue to build relationships and develop opportunities, but these will be viewed in the context of the Coronavirus pandemic and its impact on businesses and financial markets, including a potentially prolonged recession. The Board is also mindful of its stated intentions in relation to a return of capital and to future dividend payments. At present it is keeping under review its options, pending greater clarity on liquidity from the existing unquoted asset pool, the ability to generate income from new investments to cover, at least in part, a dividend and some indication of how the current economic uncertainty may begin to settle. Further updates on our distribution policy will be provided in announcements over the coming months.

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

Robert Rayne, Chairman

Nick Friedlos, Managing Director

Tel +44 207 935 3555; +44 7802 686584

Shore Capital

Robert Finlay

Tel +44 207 408 4050