Lms Capital Regulatory News (LMS)

26 Mar 2008 07:01

LMS Capital PLC26 March 2008 26 March 2008 LMS Capital plc Preliminary Results for the year ended 31 December 2007 The Board of LMS Capital plc ("LMS Capital" or the "Company") is pleased toannounce its preliminary results for the year ended 31 December 2007. Financial Highlights* •Net Asset Value per share was 101p (31 December 2006: 90p), an increase of 12% •Shareholders' return on equity was 12% (nine months ended 31 December 2006: loss) •Net Asset Value was £289.0 million (31 December 2006: £258.5 million) •The valuation of the investment portfolio was £282.1 million (31 December 2006: £234.9 million) •Net gains on investments were £36.7 million (nine months ended 31 December 2006: net loss of £6.4 million) •Profit after tax was £29.8 million (nine months ended 31 December 2006: loss of £10.8 million) *investment management business Operational Highlights •Discussions are taking place regarding the sale of Energy Cranes •The Company entered the real estate sector through investments in Brockton Capital Fund I (UK), Illyrian Land Fund II (South Eastern and Eastern Europe) and Patson VNO Holdings (USA) •The investment in Gourmet Holdings plc was increased Robert Rayne, Chief Executive Officer of LMS Capital, said: "These strong results demonstrate the resilience of our business despite theuncertain market conditions we have seen since the middle of 2007. We expectmarket conditions to be harder in the future and we continue to take a cautiousapproach to valuations, both in our existing portfolio and in assessing newinvestment opportunities. We believe that with our risk diversification,experienced management team and long-term outlook we are well placed to makegood progress. We also perceive the current conditions as being an opportunityfor us to make further investments at favourable prices." For further information please contact: LMS Capital plc 020 7935 3555 Robert Rayne, Chief Executive Officer Martin Pexton, Managing Director Tony Sweet, Chief Financial Officer Arbuthnot Securities Limited 020 7012 2000 Alastair Moreton Brunswick Group LLP 020 7404 5959 Simon Sporborg Leonora Pou www.lmscapital.com Chairman's statement During 2007 the Company continued to make good progress with its objectives forthe investment portfolio. Results The Group achieved realised gains on investments of £6.7 million for the yearended 31 December 2007 (31 December 2006: £5.1 million). Net unrealised gains onthe investment portfolio were £30.0 million (nine months ended 31 December 2006:losses of £11.5 million). The profit from our investment management business forthe year ended 31 December 2007 was £29.8 million (31 December 2006: loss of£10.8 million). For the Group as a whole (including the portfolio subsidiaries)the loss for the period was £0.4 million (nine months ended 31 December 2006:loss of £21.6 million). The Board is not recommending payment of a dividend inrespect of the year ended 31 December 2007 (2006: Nil). The valuation of the investment portfolio at 31 December 2007 was £282.1million, an increase of £47.2 million, 20%, compared to 31 December 2006. Thenet asset value per share of the Company at 31 December 2007 was 101p (31December 2006: 90p). Our quoted portfolio has performed well during 2007 and we have been able totake advantage of price improvements to reduce the number of our holdings,particularly where the holding was relatively small. Our directly managedinvestments have undergone strategic reviews by the new investment managers andwe are already seeing the benefits in the companies' underlying performance. Inthe US we have introduced a partner into San Francisco Equity Partners,realising part of our investment and at the same time expanding the size of thatfund. Board and management On behalf of the Board I should like to record our thanks to the management andstaff of the Company for their efforts in consolidating the business and layingthe foundations for the future. Share purchase authority At the forthcoming Annual General Meeting the Company will be seeking authorityto purchase up to 14.99% of its issued share capital, as is usual practice byinvestment companies. The Company also needs to obtain a waiver in respect ofthe Takeover Code obligations that a repurchase of shares above a certain limitwould place on the Rayne family shareholders. Full details will be provided inthe Notice of Annual General Meeting which will accompany the Annual Report. Your Board regularly reviews the possibility of purchasing shares in the marketand the Directors will use such authority only if they believe, at the relevanttime, that it is in the best interests of the shareholders and would result inan increase in net asset value per share of the Company. Outlook The Company has a broadly-based, risk-diversified portfolio of investments insectors where the management team has considerable experience and we are seeinga sustained inflow of new investment opportunities. The current economicenvironment is uncertain but your Board is confident that the Company's strategywill result in strong medium to long-term growth in shareholder value. Jonathan Agnew Chairman 26 March 2008 Business Review Strategy LMS Capital plc is an independent investment company. Our objective is todeliver sustained medium to long-term growth for our shareholders through arisk-diversified portfolio of investments in public and private companies. We understand the drivers of demand in the sectors in which we invest and thisenables us to recognise the potential of both new ideas and young companiesrequiring growth funding. These sectors currently include applied technology,energy, healthcare and medical, media and leisure and real estate. We do,however, retain the freedom to invest outside our core sectors in order to takeadvantage of opportunities when they arise. Investments are principally in the UK and US, although the Company is notrestricted from expanding into other markets. A deep knowledge of our chosen sectors acquired over many years allows LMSCapital to invest in and with leading management teams, however, the Companyundertakes rigorous inquiry and carries out full due diligence into newinvestments to understand the investee company's business, evaluate informationon their market place and competition, meet their management, directors andexisting shareholders and if necessary commission reports from external experts. We also understand the cyclical nature of the sectors in which we are working inand through taking long-term positions are able to adjust our economic interestto reflect the longer holding period. One of the principal characteristics ofLMS Capital which differentiates us from other private equity investors is thetime horizon over which we are able to invest. As an active, and supportive,long-term investor we are not constrained by the fixed investment periods(typically three to five years) of most private equity funds. It is not uncommonfor us to hold investments for longer than this where we believe that this willdeliver greater shareholder value. The Board will continue to manage the Company's portfolio in line with itsoverall objective. In this regard, we may make realisations from within theexisting portfolio where we believe that the proceeds of realisation couldgenerate better returns if deployed elsewhere. Investment Portfolio The portfolio is risk diversified and comprises: •early stage companies where we expect high return multiples; •companies requiring development finance where the normal holding period would be three to five 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 2007 2006 ______________ _____________ £ millions % £ millions % Early stage 27.6 10 24.5 10Development 77.2 27 64.6 28Growth 106.7 39 71.2 30Post IPO 70.6 24 74.6 32 _________ _________ _________ _________ 282.1 100 234.9 100 _________ _________ _________ _________ Analysis of portfolio by type of investment 2007 2006 __________________ ______________ UK US Total Total Quoted 17.5 46.3 63.8 69.4Unquoted 116.5 15.4 131.9 99.3Funds 28.6 57.8 86.4 66.2 _________ _________ _________ _________ 162.6 119.5 282.1 234.9 _________ _________ _________ _________ At 31 December 2007, 42% of our portfolio was US based (31 December 2006: 47%),which includes £57.8 million (31 December 2006: £54.7 million) in US privateequity funds. Analysis of portfolio by sector 2007 2006 _____________ ______________ £ millions % £ millions % Applied technology 84.2 30 84.8 36Energy 105.7 37 66.6 28Healthcare & medical 18.0 6 23.5 10Media & leisure 44.5 16 46.5 20Real estate 15.4 5 - -Financial services 2.3 1 7.5 3Funds 12 4 6.0 3 _________ _________ _________ _________ 282.1 100 234.9 100 _________ _________ _________ _________ Operational Review Additions to the investment portfolio during the year were £57.2 million (ninemonths ended 31 December 2006: £48.1 million) of which £30.5 million was for newinvestments and £26.7 million for follow on investments and capital calls onfunds. Energy Energy Cranes International ("Energy Cranes") is our largest investment by valueand the business has continued to make good progress during the year. It hasfurther consolidated its global position in the provision of offshore craneservices by acquiring Marine and Mainland, based in Houston and AberdeenHydraulic Services, based in Aberdeen. Weatherford International Limited remains our second largest investment; ourholding has a book value of £28.3 million at 31 December 2007. A quoted UScompany, Weatherford is one of the world's largest diversified upstream oilfieldservice companies. In September 2007, we sold part of our holding for £3.2million. During the year, we invested £3.6 million in BJ Services, a company whose corebusiness comprises cementing, stimulation, downhole tools and coiled tubingservices to the oil and gas industry worldwide. BJ Services also providestubular services, process and pipeline services, and specialty chemical servicesin selected geographic markets. Its shares are listed on the New York StockExchange. We also purchased an interest in Venture Production plc at a cost of £3.4million. The company is involved in acquiring, operating and revitalisingstranded oil and gas assets - fields with proven but untapped potential. We soldhalf our holding in the third quarter and the closing value of our remainingholding is £2.0 million. Another new investment in the year is Stratic Energy Corporation, aCanadian-incorporated international oil and gas company involved in theproduction, development, appraisal and exploration of hydrocarbons. Thecompany's key interests are in the North Sea, Italy and the Black Sea, withfurther interests in Syria, Tunisia, Slovenia, Romania and Morocco. Thecompany's asset portfolio encompasses near-term production, development,appraisal and exploration properties. We have also committed US$5 million to Energy Ventures Fund III, a Norwegianfund focusing on upstream oil & gas technology and service companies with globalpotential. The management team have an impressive track record in their firsttwo funds. During 2007 ITS Engineered Systems Inc, which provides custom engineering andfabrication services to the oil and gas industry, has significantly improved itsoperating performance following a reappraisal of the business' strategy andfocus. New management has been appointed who have improved all aspects ofoperational procedures including cost controls. The company has also continuedresearch into new processes within the energy sector, including development of anew wastewater treatment and recycling process. In December 2007, the Company invested £0.9 million in Global Green SolutionsInc, which is a Canadian quoted company. Global Green is engaged in thedevelopment of alternative energy activities to reduce greenhouse gas emissionsand to generate carbon credits. Real estate Capitalising on management's knowledge and experience of the real estate sector,the Company acquired an interest in Brockton Capital Fund I, a UK real estateopportunity fund, from Derwent London in June 2007 at a cost of £7.9 million.There have been capital calls since then of £4 million with approximately an £11million commitment remaining to be called. The fund focuses on UK directproperty and UK asset-backed private equity. The Brockton team, which is wellknown to us, has a deep analytical understanding of property and how best toenhance value. As part of the development of our real estate interests we have made two furthercommitments. We committed €5 million to Illyrian Land Fund II, whichconcentrates on high growth or undervalued assets in South Eastern and EasternEurope. This fund is managed by Emerging Markets Advisory Corporation Limited inwhich we have an 8.8% interest. We also agreed a $5 million loan facility to Patson VNO Holdings. Patson,managed by a team well known to us over a number of years, focuses on themanagement and development of commercial property opportunities in California. Media & leisure The Company has been invested in this sector for a number of years. A long-terminvestment is Rave Reviews Cinemas, an independent multiplex cinema operator inthe US. Rave is a co-investment with Boston Ventures, with whom we have beenpartners for many years The Company is invested in Gourmet Holdings plc, which is quoted on AIM. Gourmetis the owner of the Richoux chain, four upmarket patisseries located in CentralLondon. During 2007, Gourmet underwent a management reorganisation and receivedan injection of capital. As a result, we now own approximately 21% of Gourmet.In September 2007, Gourmet acquired an Italian patisserie brand, Amato, and willroll out new patisseries under this brand during 2008. Since May 2006, the Company has been invested in Prime Foods Limited. PrimeFoods trades as Prime Star and is the leader in the sandwich sector in Moscow,with 12 outlets. The fast food sector is one of the fastest growing in Moscowand the Company owns 8.8% of the company. Healthcare & medical The Company owns approximately 9.0% of ProStrakan Group plc, a listed UK companyin the rapidly growing specialty pharmaceutical sector. The company is engagedin the in-licensing, development and commercialisation of prescription medicinesfor the treatment of unmet therapeutic needs in major markets. It continues tomake good progress in its chosen markets and we expect to continue to hold thisinvestment in expectation of increases in value in the medium term. During 2007 we invested $1 million in O2 Medtech Investment Group LP, a singlepurpose limited partnership created to invest in O2 Medtech which has developeda new technique to measure oxygen flow to the blood during surgical procedures. Applied technology In September 2007, we invested US$5 million for an 8% interest in a buyout ofHealthcare Management Systems (HMS), a transaction led by Primus Capital Funds,which is one of our US General Partners. HMS is a provider of integratedIT solutions and business services to over 550 hospitals in the US. The companyoffers clinical as well as financial solutions for hospitals. During the year, the Company invested £0.6 million in Bond InternationalSoftware plc, a worldwide provider of software solutions in the field of humancapital management. It supplies staffing and talent management software forrecruitment consultancies and corporations of all sizes, and provides HR,e-recruitment and payroll solutions to the public, education and publishingsectors. We sold our investments in Atheros Communications and Covad and reduced ourholding in Digital Generation Systems. A total of £4.4 million was raised fromthese disposals. Overall our UK unquoted investments in this sector made good progress during2007. Each has recently evaluated its strategic options and formulated a clearlydefined plan. However, in the current uncertain market conditions we continue toadopt a prudent approach to the valuation of these businesses. Financial services Following the takeover of Bridgewell Group plc by Landsbanki in August 2007, theCompany received shares in Landsbanki which it subsequently sold in the market.Although this investment did not meet our original expectations in terms ofvalue on exit, we nevertheless achieved an internal rate of return of over 10%on our investment. Funds During the year, the Company invested £28.3 million in various funds throughoutits core investment sectors. Income distributions received for the year from ourfund investments totalled £14.3 million. Financial Review Basis of preparation of financial information The Company is for the first time reporting its full year results underInternational Financial Reporting Standards (IFRS), and the consolidatedfinancial statements include the consolidation of portfolio companies which arealso subsidiaries ("portfolio subsidiaries"). Since the Board manages theCompany as an investment business, this financial review focuses on the resultsof the investment management operations. Note 2 to the financial informationshows the separate results and net assets of the investment management business.Where appropriate, this review comments on the results and financial position ofthe portfolio subsidiaries. The financial information of the Group for the year ended 31 December 2007 andthe nine months ended 31 December 2006 has been prepared on a merger accountingbasis as if it had been in existence in its current form throughout both theseperiods. The Company was formed on 17 March 2006 and commenced operations on 9June 2006. Further details of the basis of preparation are set out in Note 1 tothe financial information. Results of operations Net Asset Value at 31 December 2007 was £289.0 million (31 December 2006: £258.5million), an increase of £30.5 million or 12%. The Net Asset Value per share was101p (31 December 2006: 90p). The investment portfolio increased by £47.2million (22%) to £282.1 million. The Group's return on its investment portfolio for the year ended 31 December2007 was £36.7 million, 16%, (nine months ended 31 December 2006: loss of £6.4million) as follows: Year ended Nine months ended 31 December 2007 31 December 2006 £'000 £'000Realised gains/(losses)Quoted securities 2,910 364Unquoted securities - 1,913Funds 3,794 2,774 ____________ ____________ 6,704 5,051 ____________ ____________Unrealised gains/(losses)Quoted securities 8,240 (2,552)Unquoted securities 15,374 (4,213)Funds 6,421 (4,705) ____________ ____________ 30,035 (11,470) ____________ ____________ Total gain/(loss) 36,739 (6,419) ____________ ____________ There were no disposals of unquoted securities in 2007. Approximately 42% of the portfolio at 31 December 2007 is denominated in USdollars (2006: 47%) and the above table includes the impact of unrealisedcurrency movements. In the nine months ended 31 December 2006 the weakening ofthe US dollar against pound sterling resulted in an unrealised foreign currencyloss of £13.4 million. During the year ended 31 December 2007, despitefluctuations in the dollar/sterling exchange rate, the overall weakening of thedollar was substantially less and the unrealised loss for the year was £1.4million. Unrealised gains on quoted securities reflect particularly the strength of theoilfield services sector during 2007 - the increase in the share price ofWeatherford International during the year contributed £11.6 million to the gainson quoted securities. Offsetting this, the weakness of the Pro-Strakan Groupshare price resulted in an unrealised loss of £7.9 million. The unrealised gains for the year on our unquoted securities arise as follows: Unrealised gain/ (loss) £'000Investments in the Top 20Energy Cranes 31,000AssetHouse (3,360)Entuity (2,245)Vio Worldwide (1,650)Wesupply (1,029)CopperEye (1,013) -------- 21,703Other smaller investments (6,329) --------Total net unrealised gain 15,374 -------- Energy Cranes has enjoyed a successful 2007 - revenues for the year grew to£113.9 million from £99 million for the full year 2006 and EBITDA increased from£9.9 million to £12.2 million. It also completed the acquisitions of AberdeenHydraulics and Marine & Mainland during the year such that it closed 2007 withan annual run rate of revenues of £125 million. Our valuation of this businessat 31 December 2007 was £65 million, an increase of £31 million over 31 December2006 to reflect this. Whilst we are pleased with the progress made by most of the companies in ourportfolio of technology investments, we have continued to take a cautiousapproach to valuation, particularly given the current uncertain investmentmarket. AssetHouse has had a disappointing year and has not been able to improve itssales performance. The write down includes £1.4 million in respect of additionalfunds advanced during the year to cover operating costs and £2 million to reducethe previously reported carrying value. Entuity has also failed to make its sales plan - we have written off £0.9million of additional funding provided during the year and reduced the carryingvalue by £1.3 million. Vio Worldwide has made good progress during the year - management changes haveresulted in delay to its planned performance but the changes are already beingreflected in improving results. We injected a further £1.7 million into thecompany this year and consider it prudent not to reflect this in the currentcarrying value. Wesupply has made significant progress during 2007 and the additional funding weintroduced of £3.6 million during the year has enabled the company to generatesubstantially higher levels of interest and orders from its target market.However the company is currently behind plan and so the carrying value does notreflect the full amount of the amount advanced during the year. CopperEye was refinanced during the year following a strategic investment andlicensing program with In-Q-Tel, the investment firm that identifies technologysolutions for the US intelligence community. In total we invested a further £2.5million in the company during the year and are confident in its futuredirection. However at the end of 2007 we do not consider that the carrying valueyet supports this additional funding and so we have written off £1 million ofthe new funds introduced. Income from investments in the year was £1.5 million (nine months ended 31December 2006: £1.4 million) and comprises preference dividends paid by EnergyCranes and dividends on quoted securities. Administration expenses for the yearwere £7.4 million (nine months ended 31 December 2006: £4.9 million). Netinterest income for the year was £0.8 million (nine months ended 31 December2006: £1.3 million) reflecting the lower levels of cash during the year. The taxcharge for the year was £0.4 million (nine months ended 31 December 2006: creditof £0.7 million). Investments The Group's investments are included in the balance sheet at fair valuesdetermined in accordance with industry guidelines. Additions to the investmentportfolio during the year were £57.2 million (nine months ended 31 December2006: £48.1 million) of which £30.5 million was for new investments and £26.7million for follow on investments and capital calls on funds. The largest new investment was £7.9 million to acquire an interest in BrocktonCapital Fund I, a real estate opportunity fund, including £0.3 million for aninterest in the managing general partner of the fund. Since the acquisition ofour interest in June 2007 the fund has called a further £4.1 million taking ourtotal investment in fund to £11.7 million at the end of the year. As part of the development of our real estate interests we have made two furthercommitments. One is to a vehicle focusing on commercial property opportunitiesin California where our commitment is $5 million of which £0.6 million ($1.2million) had been advanced by the end of 2007. The other is to Illyrian LandFund II, which concentrates on high growth or undervalued assets in SouthEastern and Eastern Europe. Our commitment to the fund is €5 million of which£2.8 million (€3.7 million) had been drawn down by the end of the year. Purchases of quoted stocks totalled £11.7 million, with a focus on the energysector, in particular oilfield services. £3.6 million was invested in BJServices, listed on the New York Stock Exchange, and £3.4 million in VentureProduction, a UK listed company which is involved in acquiring, operating andrevitalising oil and gas fields with proven yet untapped potential. We invested £17.3 million in our unquoted investments of which £12.9 million wasfollow-on funding for our UK portfolio. In the US we invested £2.5 million inHealthcare Management Systems as a co-investment with one of our US fundinterests. HMS provides software systems and related services to community andspecialty hospitals in the US. Proceeds of realisations were £46.8 million (nine months ended 31 December 2006:£30.2 million) of which sales of quoted stocks provided £28.5 million. Distributions from funds were £14.3 million. In addition in November 2007 wereceived £4 million for 20% of our interest in San Francisco Equity Partnerswhich we sold to a leading European institution at book value. The pricereceived will increase to a premium based on a formula as future realisationsfrom the fund are achieved. There is no change in our capital commitment to thefund following the sale and the buyer has agreed to commit additional capital toincrease the overall fund size. At 31 December 2007 the Group had commitments to meet capital calls from itsfund interests in the US and the UK totalling £62.5 million. Financial position The consolidated balance sheet at 31 December 2007 includes cash and cashequivalents of £14.5 million (31 December 2006: £29.9 million) and borrowings of£44.7 million (31 December 2006: £26.3 million). Cash in the investment management business of £8.2 million was £15.9 millionlower than at the end of 2006 reflecting the investment activity for the year.This included quoted stocks which may be sold if needed to provide liquidity.The business also has a US$53 million borrowing facility with the Royal Bank ofScotland which was not used during the year. The borrowings are in Energy Cranes and were taken out to finance theacquisitions made by the business since 2003. Its borrowings were most recentlyrefinanced in August 2007 following its acquisitions of Aberdeen Hydraulics andMarine and Mainland. Outlook We expect difficult market conditions in the future, but believe that with ourrisk diversity, experienced management team and long-term outlook we are wellplaced to address these. In addition, we perceive the current conditions asbeing an opportunity for us to make further investments at favourable prices. The Company has a broadly-based, risk-diversified portfolio of investments insectors where the management team has considerable experience. We are seeing asustained inflow of new investment opportunities and are pursuing a number ofthese. The objective for the Company is to grow to net assets of £500 millionwithin five years, targeting an annual return of between 15% and 20%. There willbe fewer, but larger, investment positions within the portfolio with more directinvestments. The geographical breakdown will also change as we invest inopportunities outside the UK and the US. We believe that the Company is wellplaced to meet these objectives. Robert Rayne Chief Executive Officer 26 March 2008 Principal investments The top 20 investments by valuation as at 31 December 2007 are provided in thetable below: Book value 31 December Name Country Activity 2007 2006 £'000 £'000 Energy Cranes UK Offshore crane operations 65,000 34,000InternationalWeatherford US Oilfield services 28,349 19,630International IncSan Francisco US Technology, media and 21,731 21,729Equity Partners retailCityspace Limited UK Urban information 12,902 12,500 networksProStrakan Group UK Speciality 11,705 19,427plc pharmaceuticalsBrockton Capital UK Real estate opportunity 11,668 n/aFund fundChyron Corporation US Media technology 7,303 4,846Rave Reviews US Cinema operator 7,253 7,854CinemasVio Worldwide UK Digital workflow 7,000 7,000Limited management solutionsWesupply Limited UK Supply chain execution 6,650 4,000 management softwareSpectrum IV US Communications and IT 6,044 8,208Amadeus II LP UK Early stage technology 5,634 4,994Boston Ventures LP US Media and leisure 4,749 5,465VIAssetHouse UK Content services 4,000 6,000Technology Limited infrastructure softwareEntuity Limited UK Network management 4,000 5,300 softwareCopperEye Limited UK Indexing technology 4,000 2,500 softwareInflexion Fund II UK Mid-market buyouts 3,666 2,248Boston Ventures LP US Media, publishing, 3,389 3,511V communications and leisureBJ Services US Oil and gas fields 3,056 n/a services7 Global Limited UK Software hosting services 3,000 3,000 Consolidated income statement Notes Year Nine months ended ended 31 December 31 December 2007 2006 £'000 £'000___________________________ _______ _______________ ________________Revenue from sales of goods 129,784 82,109and servicesGains and losses on 10,899 (13,369)investments held at fairvalue through profit orlossInterest income 918 1,410Investment and other income 507 157___________________________ _______ _______________ ________________ 142,108 70,307Operating expenses (137,000) (84,039)Other expenses - (3,097)___________________________ _______ _______________ ________________Profit/(loss) before 5,108 (16,829)finance costsFinance costs (2,445) (4,225)___________________________ _______ _______________ ________________Profit/(loss) before tax 2,663 (21,054)Taxation (3,055) (573)___________________________ _______ _______________ ________________Loss for the period (392) (21,627)___________________________ _______ _______________ ________________Attributable to:Equity holders of the (529) (21,860)parentMinority interests 137 233___________________________ _______ _______________ ________________ (392) (21,627)___________________________ _______ _______________ ________________Basic loss per ordinary 3 (0.2)P (7.6)pshareDiluted loss per ordinary 3 (0.2)P (7.6)pshare___________________________ _______ _______________ ________________ Consolidated balance sheet 31 December 2007 2006 £'000 £'000_________________________________________________________________________ ________ ________Non-current assetsProperty, plant and equipment 14,255 12,558Intangible assets 71,257 35,714Investments held at fair value through profit or loss 183,512 188,370Interests in joint ventures 197 208_________________________________________________________________________ ________ ________Non-current assets 269,221 236,850_________________________________________________________________________ ________ ________Current assetsInventories 5,738 8,395Operating and other receivables 46,299 30,978Cash and cash equivalents 14,548 29,859_________________________________________________________________________ ________ ________Current assets 66,585 69,232_________________________________________________________________________ ________ _________________________________________________________________________________ ________ ________Total assets 335,806 306,082_________________________________________________________________________ ________ ________Current liabilitiesBank overdrafts (285) (293)Interest-bearing loans and borrowings (7,842) (2,188)Operating and other payables (29,891) (26,823)Deferred income (2,199) (1,441)Current tax liabilities (601) (203)_________________________________________________________________________ ________ ________Current liabilities (40,818) (30,948)_________________________________________________________________________ ________ ________Non-current liabilitiesInterest-bearing loans and borrowings (36,576) (23,866)Deferred income (2,582) -Deferred tax liabilities - (320)Provision for liabilities and charges (1,384) -_________________________________________________________________________ ________ ________Non-current liabilities (40,542) (24,186)_________________________________________________________________________ ________ _________________________________________________________________________________ ________ ________Total liabilities (81,360) (55,134)_________________________________________________________________________ ________ ________Net assets 254,446 250,948_________________________________________________________________________ ________ ________EquityShare capital 28,643 28,643Capital redemption reserve 4,257 4,257Merger reserve 84,083 84,083Foreign exchange translation reserve (867) (927)Retained earnings 133,047 130,548_________________________________________________________________________ ________ ________Equity attributable to owners of the parent 249,163 246,604Minority interest 5,283 4,344_________________________________________________________________________ ________ ________Total Equity 254,446 250,948_________________________________________________________________________ ________ ________ Consolidated statement ofrecognised income and expense Year Nine months ended ended 31 December 31 December 2007 2006 £'000 £'000________________________________________________________ _______________ ________________Exchange differences on translation of foreign 56 (809)operations________________________________________________________ _______________ ________________Net income/(loss) recognised directly in equity 56 (809)Loss for the year (392) (21,627)________________________________________________________ _______________ ________________Total recognised income and expense (336) (22,436)________________________________________________________ _______________ ________________Attributable to:Equity holders of the parent (469) (22,446)Minority interests 133 10________________________________________________________ _______________ ________________ (336) (22,436)________________________________________________________ _______________ ________________ Consolidated cash flow statement Year ended Nine months ended 31 December 2007 31 December 2006 £'000 £'000Cash flows from operating activitiesProfit (loss) for the period (392) (21,627)Adjustments for:Depreciation 2,190 1,258(Gains)/losses on investments held at fair value (10,899) 13,369Translation differences 53 1,322Share based payments 3,522 -Finance costs 2,445 4,225Interest income (918) (1,410)Income tax expense 3,055 573________________________________________________ __________ _________ (944) (2,290)Change in inventories 4,224 (2,357)Change in trade and other receivables (12,183) (4,004)Change in trade and other payables 1,977 6,931________________________________________________ __________ _________ (6,926) (1,720)Interest paid (2,445) (4,225)Income tax paid (2,997) (2,181) Net cash provided by/(used in) operating (12,368) (8,126)activities________________________________________________ __________ _________ Cash flows from investing activitiesInterest received 918 1,410Acquisition of property, plant and equipment (4,764) (5,292)Proceeds from disposals of property, plant and 2,757 -equipmentAcquisition of investments (54,671) (45,660)Acquisition of subsidiaries (12,388) -Proceeds from sale of investments 46,849 30,174 Net cash used in investing activities (21,299) (19,368) Cash flows from financing activitiesIssue of preference shares - 50Repurchase of own shares - (30,239)Redemption of preference shares - (50)Drawdown of interest bearing loans 18,364 10,041Distribution to minority shareholders - (16,138)Funding from group pre-demerger - 48,661________________________________________________ __________ _________Net cash from financing activities 18,364 12,325________________________________________________ __________ _________ Net decrease in cash and cash equivalents (15,303) (15,169)Cash and cash equivalents at the beginning of 29,566 44,735the period________________________________________________ __________ _________Cash and cash equivalents at the end of the 14,263 29,566period________________________________________________ __________ _________ Cash and cash equivalents above compriseCash and cash equivalents 14,548 29,859Bank overdrafts (285) (293)________________________________________________ __________ _________Cash and cash equivalents at the end of the 14,263 29,566period________________________________________________ __________ _________ Notes 1. Basis of preparation LMS Capital plc ("the Company") is domiciled in the United Kingdom. Thisfinancial information is 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 December2007 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 Merchant Securities.Consolidated financial statements were prepared for the nine months ended 31December 2006 to reflect the two step demerger process: this comprised aninitial common control transaction followed by a subsequent demerger of theGroup. The consolidated financial statements are prepared as if the Group hadalways been in existence. The difference between the nominal value of theCompany's shares issued and the amount of the net assets acquired at the date ofdemerger 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 isconsistent with other investment companies, the results of the Group'sinvestment business on a stand alone basis are set out in Note 2. This financial information has been prepared in accordance with InternationalFinancial Reporting Standards as adopted for use in the European Union ("IFRS"),although the financial information in this announcement is not sufficient tocomply with IFRS. The Group has prepared its financial information in accordancewith IFRS for the first time and has applied IFRS 1, First-time Adoption ofInternational Financial Reporting Standards. The disclosures required by IFRS 1concerning the transition from UK GAAP to IFRS are given in Note 5. The Group has decided to adopt early IFRS 8: Operating Segments ("IFRS 8"),which defines requirements for the disclosure of financial information of anentity's operating segments. IFRS 8 replaces IAS 14: Segment Reporting. Itfollows the 'management approach', which is the basis for managing thebusinesses. IFRS 8 is effective for reporting periods beginning on or after 1January 2009. Early adoption is permitted. Certain amendments to standards and interpretations are not yet effective forthe year ended 31 December 2007 and have not been applied in preparing theseconsolidated financial statements: Revised IAS 23: Borrowing Costs and IFRIC 11:IFRS 2 - Group and Treasury Share Transactions. The financial information set out in this unaudited preliminary statement doesnot comprise LMS Capital plc's statutory accounts within the meaning of section240(5) of the Companies Act 1985. The statutory accounts of LMS Capital plc forthe year ended 31 December 2007, currently unaudited and to be published in duecourse, will be finalised on the basis of the financial information presented bythe Directors in this unaudited preliminary statement and will be delivered tothe Registrar of Companies in due course and will also be sent to shareholders. The comparative figures for the nine months ended 31 December 2006 are not theCompany's statutory accounts for that financial period. Those accounts, whichwere prepared under UK GAAP, have been reported on by the Company's auditors anddelivered to the registrar of companies. The report of the auditors was: (i)unqualified, (ii) did not include a reference to any matters to which theauditors drew attention by way of emphasis without qualifying their report and(iii) did not contain a statement under section 237(2) or (3) of the CompaniesAct 1985. The financial statements have been prepared on the historical cost basis exceptfor the revaluation of investments held at fair value through profit or loss. 2. Operating segments The information below has been prepared using the definition of an operatingsegment in IFRS 8: Operating Segments which sets out the requirements for thedisclosure of financial information of an entity's operating segments. IFRS 8requires an entity to present segment information on the same basis as thefinancial information which is reviewed regularly by management to assessperformance and to allocate resources. As an investment company, the Group's primary focus is on the performance of itsinvestment 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 as asingle segment, together with the adjustments arising from the summarisedresults and financial position of the portfolio subsidiaries. Adjustments forEnergy Cranes are shown separately because of the size of this business relativeto the others. The consolidation adjustments included below reflect the adjustments necessaryto restate the portfolio subsidiaries from the basis included in the investmentmanagement segment (investments carried at fair value) to full consolidation inthe Group's financial statements. Consolidated income statement Year ended 31 December 2007 Reconciliation Portfolio subsidiaries Investment Energy Other Consolidation Group management Cranes adjustments total £'000 £'000 £'000 £'000 £'000 ___________ _________ _______ __________ ________Revenues from sales of - 113,874 15,910 - (129,784)goods and servicesto external customersGains and losses on 36,739 - (260) (25,580) 10,899investments held at fairvalue through profit orlossInterest income 814 89 15 - 918Investment and other income 1,508 - - (1,001) 507 _________ _______ ________ ________ _________Finance costs - (2,943) (1,942) 2,440 (2,445) _______ ________ ________ _________ _________Profit/(loss) for the 29,836 1,425 (8,351) (23,302) (392)period _______ ________ ________ _________ _________ Nine months ended 31 December 2006 Reconciliation Portfolio subsidiaries Investment Energy Other Consolidation Group management Cranes adjustments total £'000 £'000 £'000 £'000 £'000 ________ ________ ________ _________ _______Revenues from sales of - 74,827 7,282 - 82,109goods and servicesto external customersGains and losses on (6,419) - 941 (7,891) (13,369)investments held at fairvalue through profit orlossInterest income 1,340 63 7 - 1,410Investment and other income 1,546 - - (1,389) 157 ________ ________ ________ _______ ________Finance costs (50) (3,687) (488) - (4,225) ________ ________ ________ _______ ________ Profit/(loss) for the (10,847) 2,261 (3,761) (9,280) (21,627)period ________ ________ ________ _______ ________ Consolidated balance sheet 31 December 2007 Reconciliation Portfolio subsidiaries Investment Energy Other Consolidation Group management Cranes adjustments total £'000 £'000 £'000 £'000 £'000_______________________________________ ___________ ________ _______ __________ ________Property, plant and equipment 311 11,197 2,747 - 14,255Intangible assets - 32,497 - 38,760 71,257Investments held at fair value through 282,120 - 200 (98,808) 183,512profit or lossInterests in joint ventures - 197 - - 197_______________________________________ ___________ ________ _______ __________ ________Non current assets 282,431 43,891 2,947 (60,048) 269,221_______________________________________ ___________ ________ _______ __________ ________Cash and cash equivalents 8,240 5,060 1,248 - 14,548_______________________________________ ___________ ________ _______ __________ ________Other current assets 1,557 43,878 6,602 - 52,037_______________________________________ ___________ ________ _______ __________ ________Total assets 292,228 92,829 10,797 (60,048) 335,806_______________________________________ ___________ ________ _______ __________ ________Total liabilities (2,504) (71,391) (40,954) 33,489 (81,360)_______________________________________ ___________ ________ _______ __________ ________Net assets/(liabilities) 289,724 21,438 (30,157) (26,559) 254,446_______________________________________ ___________ ________ _______ __________ ________ The net asset value of the investment management business at 31 December 2007includes £289,005,000 attributable to the equity holders of the parent and£719,000 attributable to minority interests. 31 December 2006 Reconciliation Portfolio subsidiaries Investment Energy Other Consolidation Group management Cranes adjustments total £'000 £'000 £'000 £'000 £'000_______________________________________ ___________ ________ _______ __________ ________ Property, plant and equipment 9 10,675 1,874 - 12,558Intangible assets - 18,688 - 17,026 35,714Investments held at fair value through 234,910 - 760 (47,300) 188,370profit or lossInterests in joint ventures - 208 - - 208_______________________________________ ___________ ________ _______ __________ ________Non current assets 234,919 29,571 2,634 (30,274) 236,850_______________________________________ ___________ ________ _______ __________ ________Cash and cash equivalents 24,120 4,910 829 - 29,859_______________________________________ ___________ ________ _______ __________ ________Other current assets 1,472 33,785 4,116 - 39,373_______________________________________ ___________ ________ _______ __________ ________Total assets 260,511 68,266 7,579 (30,274) 306,082_______________________________________ ___________ ________ _______ __________ ________Total liabilities (1,331) (47,161) (14,885) 8,243 (55,134)_______________________________________ ___________ ________ _______ __________ ________Net assets/(liabilities) 259,180 21,105 (7,306) (22,031) 250,948_______________________________________ ___________ ________ _______ __________ ________ The net asset value of the investment management business at 31 December 2006includes £258,461,000 attributable to the equity holders of the parent and£719,000 attributable to minority interests. 3. Loss per ordinary share Basic The calculation of basic loss per ordinary share is based on the loss of£529,000 (nine months ended 31 December 2006: loss of £21,860,000), being theloss for the period attributable to the parent, divided by the weighted averagenumber of ordinary shares in issue during the period of 286,429,228 (nine monthsended 31 December 2006: 303,383,617). Diluted The calculation of diluted loss per ordinary share is based on the loss of£529,000, divided by the weighted average number of ordinary shares in issueduring the period of 290,725,438 after taking account of the dilutive potentialeffect of share options issued under the Company's share option plans. There was no dilution effect in the nine months ended 31 December 2006. 4. Capital and reserves Reconciliation of movement in capital and reserves Share Capital Merger Translation Retained Total Minority Total capital Redemption Reserve Reserve earnings interest equity Reserv £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 __________ ______ _________ _______ _________ _______ ______ ________ _______Balance at 1 32,900 - 35,837 (341) 182,647 251,043 20,473 271,516April 2006Total - - - (586) (21,860) (22,446) 10 (22,436)recognisedincome andexpenseRepurchase (4,257) 4,257 - - (30,239) (30,239) - (30,239)of shares bytender offerMovement in - - 48,246 - - 48,246 - 48,246mergerreserveDistribution - - - - - - (16,139) (16,139)to minority__________ ______ _________ _______ _________ _______ ______ ________ _______ Balance at 28,643 4,257 84,083 (927) 130,548 246,604 4,344 250,94831 December2006Total - - - 60 (529) (469) 133 (336)recognisedincome andexpenseShare based - - - - 3,028 3,028 494 3,522paymentsMinority - - - - - - 312 312interest onacquisitions__________ ______ _________ _______ _________ _______ ______ ________ _______Balance at 28,643 4,257 84,083 (867) 133,047 249,163 5,283 254,44631 December2007__________ ______ _________ _______ _________ _______ ______ ________ _______ 5. Explanation of transition to IFRS The financial information for the year ended 31 December 2007 is the firstperiod that the Company has presented its results under IFRS. IFRS 1: First timeadoption of International Financial Reporting Standards sets out the rules foradopting IFRS in the Group's first statutory accounts under IFRS. The Group hasapplied consistent accounting policies to prepare the financial information forthe year ended 31 December 2007 and the nine months ended 31 December 2006 andfor the preparation of the opening balance sheet under IFRS at 1 April 2006 (theGroup's date of transition to IFRS). IFRS 1 contains certain optional exemptions in the transition to IFRS and theGroup has elected to use the following: IFRS 3: Business combinations - The Group has taken advantage of the optionalexemption not to apply the requirements of IFRS 3 to business combinations priorto the date of transition and to account for these business combinations basedon the fair value at the date of transition of the assets and liabilitiesacquired. IAS 21: The effects of changes in foreign exchange rates - The Group has deemedcumulative translation differences relating to foreign operations as zero at thedate of transition. The information below sets out the impact of the transition from UK GAAP to IFRSat the date of transition (1 April 2006) and for the nine months ended 31December 2006. The most significant impact of the adoption of IFRS is the requirement for theGroup to consolidate certain of its portfolio companies as subsidiaries. Theoperating results of these portfolio subsidiaries are included in the Group'sconsolidated income statement and their assets and liabilities are included inthe consolidated balance sheet. The portfolio subsidiaries' UK GAAP financialstatements are consolidated and restatements are made to comply with IFRS. The tables below summarise the adjustments made to the UK GAAP financialinformation in this regard. Reconciliation of net assets 31 December Pro-forma 2006 1 April 2006____________________________________________________________ __________ _________ £'000 £'000Previously reported - UK GAAPNet assets 259,180 267,951___________________________________________________________ __________ _________AdjustmentsIncrease in property, plant and equipment 12,549 9,262Increase in intangible assets 35,714 36,613Decrease in investments (46,332) (39,549)Increase in cash and cash equivalents 5,739 722Increase in inventories 8,395 6,038Increase in operating and other receivables 29,506 25,802Increase in current liabilities (29,617) (19,310)Increase in non-current liabilities (24,186) (16,013)____________________________________________________________ __________ _________Net impact of consolidation of subsidiaries previously (8,232) 3,565classified as investments____________________________________________________________ __________ _________Restated - IFRSNet assets 250,948 271,516____________________________________________________________ __________ _________ Reconciliation of loss after tax Nine months ended 31 December 2006_________________________________________________________________ ________ £'000Previously reported - UK GAAPLoss on ordinary activities after taxation before minority (10,847)interests_________________________________________________________________ ________AdjustmentsIncrease in revenue from sales of goods and services 82,109Decrease in gains and losses on investments held at fair value (6,950)through profit and lossIncrease in interest income 70Decrease in investment and other income (1,389)Increase in operating expenses (79,184)Increase in taxation (1,261)Increase In finance costs (4,175)_________________________________________________________________ ________Net impact of consolidation of subsidiaries previously classified (10,780)as investments_________________________________________________________________ ________Restated - IFRSLoss for the period after tax (21,627)_________________________________________________________________ ________ Reconciliation of net decrease in cash and cash equivalents Nine months ended 31 December 2006_____________________________________________________________ _____________ £'000Previously reported - UK GAAPNet decrease in cash and cash equivalents (19,893)_____________________________________________________________ _____________AdjustmentsIncrease in net cash used in operating activities (688)Increase in net cash used in investing activities (4,629)Increase in net cash from financing activities 10,041_____________________________________________________________ _____________Net impact of consolidation of subsidiaries previously 4,724classified as investments_____________________________________________________________ _____________Restated - IFRSNet decrease in cash and cash equivalents (15,169)_____________________________________________________________ _____________ This information is provided by RNS The company news service from the London Stock Exchange