Lms Capital Regulatory News (LMS)

15 Mar 2007 07:03

LMS Capital PLC15 March 2007 LMS Capital plc Consolidated Profit and Loss Account £000 Nine months ended 31 December Pro-forma year ended 31 March 2006 2006 Notes Revenue Capital Total Revenue Capital Total ------ ------- ------- -------- ------- ------ ---------Realised gainson investments - 5,051 5,051 7,638 7,638Unrealisedlosses oninvestments 1 - (11,470) (11,470) (7,593) (7,593)Income frominvestments 1,384 - 1,384 196 196 ------- ------- -------- ------- ------ --------- 1,384 (6,419) (5,035) 196 45 241Investmentmanagement fees 1 162 - 162 1,834 - 1,834Administrationexpenses 1 (4,855) - (4,855) (7,855) - (7,855)Exceptional costs 2 (3,097) - (3,097) - - -Net financeincome 3 1,290 - 1,290 1,849 - 1,849 ------- ------- -------- ------- ------ ---------(Loss)/profitbeforetaxation 4 (5,116) (6,419) (11,535) (3,976) 45 (3,931)Taxation 6 - 688 688 - 15,686 15,686 ------- ------- -------- ------- ------ ---------(Loss)/profitafter taxation (5,116) (5,731) (10,847) (3,976) 15,731 11,755Equityminorityinterest - - - 766 - 766 ------- ------- -------- ------- ------ ---------(Loss)/profitfor the period (5,116) (5,731) (10,847) (3,210) 15,731 12,521 ------- ------- -------- ------- ------ --------- (Loss)/earningsper ordinaryshare 7 (3.6)p 3.8p The total columns of this statement represent the consolidated profit and lossprepared in accordance with the Companies Act. The revenue and capital columnsare supplementary to this and are prepared under guidance from the Associationof Investment Trust Companies. The Revenue and Capital columns above for the nine months ended 31 December 2006relate to continuing operations. The amounts for the year ended 31 March 2006include discontinued operations - see Note 16. The notes on pages 5 to 30 form part of these financial statements. LMS Capital plc Balance Sheets Group Pro-forma Group Company 31 December 31 March 31 December 2006 2006 2006 Notes £000 £000 £000-------------------- ------ --------- ------------ ---------Fixed assetsTangible fixed assets 8 9 - -Investments 9 234,910 226,600 293,510-------------------- ------ --------- ------------ --------- 234,919 226,600 293,510-------------------- ------ --------- ------------ ---------Current assetsDebtors 10 1,472 1,172 16,791Cash and short-term deposits 11 24,120 44,013 21,908-------------------- ------ --------- ------------ --------- 25,592 45,185 38,699Creditors: amounts fallingdue within one year 12 (1,331) (2,470) (74,369)-------------------- ------ --------- ------------ ---------Net current assets 24,261 42,715 (35,670)-------------------- ------ --------- ------------ ---------Total assets less currentliabilities 259,180 269,315 257,840Deferred taxation 13 - (1,364) --------------------- ------ --------- ------------ ---------Net assets 259,180 267,951 257,840-------------------- ------ --------- ------------ --------- Capital and reservesCalled up share capital 14 28,643 32,900 28,643Capital redemption reserve 15 4,257 - 4,257Merger reserve 15 84,083 35,837 -Profit and loss account 15 141,478 182,356 224,940-------------------- ------ --------- ------------ --------- 258,461 251,093 257,840Minority interests 22 719 16,858 --------------------- ------ --------- ------------ ---------Shareholders' funds 259,180 267,951 257,840-------------------- ------ --------- ------------ --------- These financial statements were approved by the board of directors on 14 March2007 and were signed on its behalf by RA Rayne Director The notes on pages 5 to 30 form part of these financial statements. LMS Capital plc Consolidated Cash Flow Statement Nine months Pro-forma year ended ended 31 December 31 March 2006 2006 Notes £000 £000---------------------- ------ ------------ -------------Net cash outflow from operatingactivities 17a (9,374) (4,555) Returns on investments and servicing offinanceInterest received 1,278 1,246Interest paid (50) (87)Investment income received 1,384 195 ------------ -------------Net cash inflow from returns oninvestments and servicing of finance 2,612 1,354 Taxation paid (676) (442) Capital expenditure and financialinvestmentAcquisition of tangible fixed assets 8 (10) (514)Proceeds on disposal of tangiblefixed assets - 555Purchases of investments 9 (48,070) (72,465)Proceeds on realisations ofinvestments 33,341 73,533 ------------ -------------Net cash (outflow)/inflow fromcapital expenditure andfinancial investment (14,739) 1,109 ------------ -------------Net cash outflow beforemanagement of liquid resourcesand financing (22,177) (2,534) ------------ ------------- FinancingDistribution to minorityshareholders (16,138) -Redemption of preference shares 14 (50) -Redemption of shares by tenderoffer 15 (30,239) -Funding from LMS Group 17b 48,661 25,330Issue of Preference shares 14 50 - ------------ -------------Net cash inflow from financing 2,284 25,330 ------------ -------------(Decrease)/increase in cash inthe period 17c (19,893) 22,796 ------------ ------------- The notes on pages 5 to 30 form part of these financial statements. LMS Capital plc Consolidated Statement of Total Recognised Gains and Losses Nine months Pro-forma year ended 31 ended 31 March December 2006 2006 £000 £000------------------------- ------------ -------------(Loss)/profit for the financialperiod (10,847) 12,521Waiver of inter-company debt - 22,500Currency translation differenceson foreign currency netinvestments 208 171------------------------- ------------ -------------Total recognised (losses)/gainsrelating to the financial period (10,639) 35,192------------------------- ------------ ------------- Note of Consolidated Historical Cost Profits and Losses Nine months Pro-forma year ended 31 ended December 2006 31 March 2006 £000 £000------------------------- ------------ -------------Profit on ordinaryactivities before taxation (11,535) (3,931)Realisation of investmentrevaluation (deficits)/surplusesof previous periods 3,012 4,747------------------------- ------------ -------------Historical cost (loss)/profit onordinary activities before taxation (8,523) 816Historical cost (loss)/profitretained after taxation, minorityinterests and dividends (7,835) 17,268------------------------- ------------ ------------- Reconciliation of Movements in Shareholders' Funds Group Group Nine months Pro-forma year ended 31 ended December 2006 31 March 2006 £000 £000------------------------- ------------ -------------Total recognised (losses)/gainsrelating to the financial period (10,639) 35,192Repurchase of shares by tenderoffer (30,239) -Movement in merger reserve 48,246 (14,602)------------------------- ------------ -------------Movement in shareholders' funds 7,368 20,590Minority interests 719 16,858Shareholders' funds at beginningof period 251,093 230,503------------------------- ------------ -------------Shareholders' funds at end ofperiod 259,180 267,951------------------------- ------------ ------------- LMS Capital plc Notes to the Financial Statements 1. Principal Accounting Policies Basis of preparation On 9 June 2006, the Investment Division of London Merchant Securities plc wasdemerged to form the LMS Capital Group. The consolidated financial statementshave been prepared in accordance with the principles of merger accounting as setout in the Financial Reporting Standard 6 'Acquisitions and Mergers', as if theLMS Capital Group had been in existence from 1 April 2005. The financialyear-end for the Group has changed to 31 December with comparative figures forthe year ended 31 March 2006. On demerger share capital of £32,900,151 was issued by the Company. Onconsolidation, the difference between the nominal value of the Company's sharesissued and the amount of the net assets acquired at the date of demerger hasbeen credited to merger reserve. The company was formed on 17 March 2006 and commenced operations on 9 June 2006;accordingly it has no statutory comparative figures. The results for the Groupfor the year ended 31 March 2006, together with the financial position at thatdate, have been presented in these financial statements on a pro forma basis forcomparative purposes. The principles set out below have been applied in preparing the consolidatedfinancial statements. Accounting convention The financial information has been prepared under the historical costconvention, modified to include the revaluation of fixed asset investments andin accordance with applicable accounting standards and with the Companies Act.The accounting policies applied are consistent in dealing with items deemedmaterial in relation to the Group's financial information. Basis of consolidation The consolidated financial statements comprise the financial statements of theParent and its operating subsidiaries up to 31 December 2006. Operatingsubsidiary undertakings acquired as part of the demerger have been accounted forusing merger accounting. All intra Group transactions and profit or losses are eliminated onconsolidation. Certain subsidiary undertakings which are fixed asset investments are carried atvaluation in accordance with the Group's normal accounting policy for suchinvestments, and are not consolidated as required by FRS 2 'Accounting forSubsidiary Undertakings'. These investments within the LMS Capital Groupportfolio are held for resale with a view to the realisation of capital gains.The LMS Capital Group's exposure to these companies is limited to its investmentat the balance sheet date. Consequently, the Directors consider thatconsolidation would not give a true and fair view of the LMS Capital Group'sinterest in these investments. See note 9 on the effect of non-consolidation ofcertain subsidiaries. Under section 230(4) of the Companies Act 1985 the Company is exempt from therequirement to present its own profit and loss account. Investments Investments are included in the balance sheet at fair value. Fair values havebeen determined in accordance with the International Private Equity and VentureCapital Valuation Guidelines. These guidelines require the valuer to makejudgments as to the most appropriate valuation method to be used and the resultsof the valuations. Each investment is reviewed individually with regards to the stage, nature andcircumstances of the investment and the most appropriate valuation methodselected. The valuation results are then reviewed and any amendment to thecarrying value of investments is made as considered appropriate. • Quoted investments Quoted investments for which an active market exists are valued at the closingbid price at the balance sheet date. • Unquoted direct investments Unquoted direct investments for which there is no ready market are valued usingthe most appropriate valuation technique with regard to the stage and nature ofthe investment. Valuation methods that may be used include: •Recent investments are valued at cost subject to an impairment review. •Investments in which there has been a recent funding round involving significant financing from external investors are valued at the price of the recent funding, discounted if an external investor is motivated by strategic considerations. •Investments in an established business which is generating sustainable profits and positive cash flows are valued using earnings multiples. •Investments in a business where the value of which is derived mainly from its underlying net assets rather than its earnings are valued on the basis of net asset valuation. •Investments in an established business which is generating sustainable profits and positive cash flows but for which other valuation methods are not appropriate are valued by calculating the discounted cash flow of future cash flows or earnings. •Investments in a business which is not generating sustainable profits or positive cash flows and for which there has not been any recent independent funding are valued by calculating the discounted cash flow of the investment to the investors. This valuation basis will primarily be used in determining whether there is any impairment to the carrying value of the asset. Due to the subjective nature of the calculation and the dependence on the outcome of unknown future events, will only give rise to a valuation increase in exceptional circumstances and where there is also additional evidence of an increase in value, such as additional funding or profit generation. • Funds Investments in managed funds are valued at fair value. The General Partners ofthe funds will provide periodic valuations on a fair value basis which the LMSCapital Group will adopt provided it is satisfied that the valuation methodsused by the funds are not materially different from the Group's valuationmethods. Tangible fixed assets These comprise computer equipment which is depreciated on a straight-line basisover its estimated useful life of between 3 and 5 years. Foreign currencies Transactions in foreign currencies are recorded at the rate of exchange at thedate of transaction. Assets and liabilities denominated in foreign currencies atthe balance sheet date are reported at the rates of exchange prevailing at thatdate, and exchange differences are included in the profit and loss account. Investments denominated in foreign currencies are translated at the closingrates ruling at the balance sheet date as part of the fair value adjustment andare taken as a gain or loss in the current year's profit and loss account. The results and balance sheets of overseas operations are translated at theclosing rates ruling at the balance sheet date. Exchange differences arising ontranslation of the opening net assets are dealt with through reserves. Cash and liquid resources Cash, for the purpose of the cash flow statement, comprises cash in hand andshort-term deposits, less overdrafts payable on demand. Liquid resources are current asset investments which are disposable withoutcurtailing or disrupting the business and are either readily convertible intoknown amounts of cash at or close to their carrying values or traded in anactive market. Liquid resources include short-term cash deposits. Taxation Corporation tax payable both in the UK and Overseas is provided on taxableprofits at the current rate. Deferred tax assets and liabilities arise fromtiming differences between the recognition of gains and losses in the accountsand their recognition in a tax computation. In accordance with FRS 19 'DeferredTax', deferred tax is provided in respect of all timing differences that haveoriginated, but not reversed, at the balance sheet date that may give rise to anobligation to pay more or less tax in the near future. Deferred tax is measuredon a non-discounted basis and is provided for at 30%. No deferred tax isrecognised in the period to 31 December 2006, as its ability to recover theamounts in the near future is not certain. Unrealised losses on investments This represents fair value adjustments arising during the period. Investment management fees Investment management fees comprise fees receivable from investments. Administration costs Included in both the 31 December and pro-forma 31 March 2006 profit and lossaccounts is an allocation of pre demerger expenses borne by London MerchantSecurities plc. The allocation basis for historical purposes has been calculatedas follows: Pre demerger Remuneration of directors and employees There were no staff or directors directly employed in LMS Capital plc prior todemerger. There were seven full time staff employed by London MerchantSecurities who spent substantially all of their time on activities relating tothe LMS Capital Group. 100 per cent of their remuneration has been recharged tothe LMS Capital Group. Other administrative costs An allocation has been made and recharged, primarily based on staff costs, hasbeen made to reflect estimated usage by the LMS Capital Group in respect ofother administrative support such as office space and related costs,depreciation, insurance, staff welfare costs, legal and professional fees, etc. Post demerger Remuneration of directors and employees There are seven full time staff employed by London Merchant Securities who spendsubstantially all of their time on activities relating to the LMS Capital Group.100 per cent of their remuneration has been recharged to the LMS Capital Groupunder the terms of a Transitional Services Agreement with London MerchantSecurities. Other administrative costs These are based on agreed annual charges set out in the Transitional ServicesAgreement referred to above. Notes to the Financial Statements (continued) 2. Exceptional costs Nine months Year ended ended 31 December 31 March 2006 2006 £000 £000----------------------- ------------- ----------Demerger costs 2,201 -Tender Offer costs 896 ------------------------ ------------- ---------- 3,097 ------------------------ ------------- ---------- The above costs relate to professional services incurred by the Company inconnection with the Demerger in June 2006 and the repurchase of shares by tenderoffer in July 2006. 3. Net finance income Nine months Year ended ended 31 December 31 March 2006 2006 £000 £000Interest payable----------------------- ------------- ----------Short term loan (50) (66)----------------------- ------------- ---------- Interest receivableCash and short term deposits 1,340 1,237Exchange (loss)/gain on dollar deposits - 678----------------------- ------------- ---------- 1,340 1,915----------------------- ------------- --------------------------------- ------------- ---------- 1,290 1,849----------------------- ------------- ---------- 4. Loss before taxation Nine months Year ended ended 31 December 2006 31 March 2006 £000 £000----------------------- ------------- ----------Loss before taxation is stated after charging: Depreciation of fixed assets 1 64 Auditors' remuneration 102 61Audit related services- to Parent company 40 -- to subsidiary companies 62 61Non-audit related services- taxation advisory services 13 21- audit and related services - 30- demerger transactionalservices 156 ------------------------ ------------- ---------- 5. Staff costs Nine months Year ended ended 31 December 2006 31 March 2006 £000 £000----------------------- ------------- ----------- Wages and salaries 1,499 3,299- Social security costs 150 388- Pension contributions 137 377----------------------- ------------- ---------- 1,786 4,064----------------------- ------------- ----------Number of employees 7 16 Staff costs provided in the table above include amounts recharged by LondonMerchant Securities plc for employees and directors. The reduction from lastyear in the average number of full time staff working for the LMS Capital Groupreflects the sale by Inflexion plc of its business in March 2006 and thatcompany's subsequent liquidation. Details of directors' remuneration are included in the Remuneration Report. 6. Taxation Year ended Year ended 31 December 31 March 2006 2006 £000 £000----------------------- ------------- ----------Analysis of taxation credit for periodUK corporation tax charge on profit for theperiod 46 137Group relief receivable - (17,431)Adjustments relating to prior periods (6) (98)US taxation on disposal of venture capitalinvestments 636 521Other US taxation - 256----------------------- ------------- ----------Total current tax 676 (16,615)Total deferred tax (credit)/charge (1,364) 929----------------------- ------------- ----------Total tax credit for the period (688) (15,686)----------------------- ------------- ---------- The group relief receivable of £17.4 million at 31 March 2006 relates tounrealised capital losses that were surrendered to the London MerchantSecurities Group. Factors affecting the tax credit for the year Group Group Year ended Year ended 31 December 31 March 2006 2006 £000 £000--------------------------- ----------- ---------- Loss before taxation (11,535) (3,931) Multiplied by the standard UK rate ofcorporation tax at 30% (3,461) (1,179)Capital profits sheltered by losses (465) (32)Group relief receivable - (17,431)Fair value adjustments not currentlytaxable 4,908 2,299Overseas (profits)/losses not available forcurrent deduction (2,004) 60Non deductible expenditure 930 -Non taxable income (424) -Deferred tax asset not recognised (108) -Adjustments to tax charge in respect ofprior periods (6) (98)Other items (58) 695--------------------------- ----------- ----------Current tax credit for the period (688) (15,686)--------------------------- ----------- ---------- 7. (Loss) /earnings per ordinary share The loss per share at 31 December 2006 of 3.6p (31 March 2006 earnings per shareof 3.8p) is based on the loss for the period of £10,847,000 (31 March 2006profit - £12,521,000) and the weighted number of shares in issue during theperiod of 303,383,617 (31 March 2006 - 329,001,513). There is no dilution effectin either period. 8. Tangible fixed assets Group Group Company 31 December 31 March 31 December 2006 2006 2006 £000 £000 £000-------------------- ----------- ---------- -----------CostAt the beginning of theperiod - 314 -Additions at cost 10 514 -Disposals - (828) --------------------- ----------- ---------- -----------At the end of the period 10 - --------------------- ----------- ---------- ----------- Accumulated DepreciationAt the beginning of theperiod - 209 -Charge for the period 1 64 -Disposals - (273) --------------------- ----------- ---------- -----------At the end of the period 1 - --------------------- ----------- ---------- ----------- Net book value beginningof the period - 105 --------------------- ----------- ---------- -----------Net book value end ofthe period 9 - --------------------- ----------- ---------- ----------- Tangible fixed assets at 31 December 2006 comprise computer equipment. 9. Investments Group Inflexion Total Funds Listed Unlisted Investments Group £000 £000 £000 £000 £000------------- ------- ------- ------- -------- --------At 31 March 2005 46,331 29,269 128,116 24,509 228,225Reclassification 8,557 13,296 (21,853) - -Additions at cost 24,909 9,712 23,305 13,540 71,466Disposals (19,522) (8,212) (2,356) (38,049) (68,139)Revaluations 12,170 12,756 (29,878) - (4,952)------------- ------- ------- ------- -------- --------At 31 March 2006 72,445 56,821 97,334 - 226,600Reclassification - 3,266 (3,266) -Additions at cost 15,909 14,526 17,635 48,070Disposals (17,472) (2,677) (8,141) (28,290)Revaluations (4,705) (2,552) (4,213) (11,470)------------- ------- ------- ------- -------- --------At 31 December 2006 66,177 69,384 99,349 - 234,910------------- ------- ------- ------- -------- -------- The fund investment, listed investment and unlisted investment categories shownabove comprise the portfolio of investments managed directly by the LMS CapitalGroup. The top 10 investments by valuation as at 31 December 2006 are provided in thetable below. Name Activity Geography Stake Original cost Valuation % £'000 £'000--------------- ---------- -------- ------ ------- -------Energy Cranes Offshore craneInternational operations UK 82% 17,816 34,000San Francisco Technology, mediaEquity Partners and retail US 99% 19,528 21,729Weatherford OilfieldInternational services US