Lms Capital Regulatory News (LMS)

12 May 2011 07:00

12 May 2011LMS Capital plcInterim Management Statement

LMS Capital plc ("the Company" or "LMS Capital"), the investment company with experience in private equity and development capital investment, is holding its Annual General Meeting today and the Board is pleased to present the Company's Interim Management Statement which relates to the period from 1 January 2011 to 11 May 2011.

The most significant recent developments and financial highlights were as follows:

* Net Asset Value per share was 90 pence as at 31 March 2011, unchanged from 31 December 2010; * Continued refined strategic focus for the Company with realisations from CopperEye Limited and Kizoom Limited. We also sold 80% of our 2010 year end holding of shares in Gulfmark Offshore for proceeds of £5.0 million and a net gain of £1.0 million; * The offer for ProStrakan Group plc completed on 21 April and resulted in cash proceeds to the Company of £22.9 million, a gain of approximately £4.8 million over our carrying value at the end of 2010.

Glenn Payne, Chief Executive of LMS Capital, commented: "Today's update demonstrates our continued focus and execution of our refined strategy outlined last year. With the sale of our legacy holdings and the realisation of funds we expect to have the financial resources to acquire profitable and growing companies. Our acquisition efforts are ongoing both for new portfolio holdings and add-on investments for our existing direct holdings. Our strategy is resonating with a number of stakeholders and we are confident that we can continue to make value enhancing purchases."

Recent developments - good progress since the year end

The Net Asset Value per share was 90 pence as at 31 March 2011, unchanged from 31 December 2010. Valuation improvements on our quoted and fund holdings were offset by unrealised currency losses as the US dollar weakened against Sterling. By the end of April, further weakening of the US dollar coupled with price falls on our larger quoted holdings (principally Weatherford) had reduced this to 87 pence per share.

Over the period we continued our refined strategic focus for the Company with further disposals of underperforming older investments and since the beginning of 2011 we have disposed of our interests in CopperEye Limited and Kizoom Limited. These disposals had no significant impact on the Company's Net Asset Value (following earlier write-downs on these investments) but release management resources to focus on our more profitable and growing investments.

In line with our corporate strategy to liquidate our fund of funds we have made no new commitments to funds. At 31 March 2011 our outstanding commitments to funds were £34.1 million, a reduction of £6.6 million from £40.7 million at the end of 2010. We have also begun the process of exploring the sale of certain fund positions in the secondary market.

The offer for ProStrakan Group plc completed on 21 April and resulted in cash proceeds to the Company of £22.9 million, a gain of approximately £4.8 million over our carrying value at the end of 2010. We have also sold 80% of our 2010 year end holding of shares in Gulfmark Offshore for proceeds of £5.0 million and a net gain of £1.0 million. We continue to monitor the prices of all our quoted holdings and expect to realise the remainder in due course.

With the sale of our legacy holdings and the realisation of funds we expect to have the financial resources to acquire profitable and growing companies. Our acquisition efforts are ongoing both for new portfolio holdings and add-on investments for our existing direct holdings. Our strategy is resonating with a number of stakeholders and we are confident that we can continue to make value enhancing purchases.

Principal direct Investments - strong momentum within the portfolio

Our investee companies have all made good progress. An update on each to 31 March 2011 is as follows:

* Updata continues to perform strongly with revenues for the first quarter approximately 20% ahead of the same period last year; * Apogee is performing in line with expectations and revenues are 8% ahead of the prior year; * NEP continues to perform in line with our expectations, with revenues 15% ahead of the first quarter last year and a large pipeline of potential new retail electric accounts; * Method: revenues for the first quarter are slightly behind last year but 5% ahead of budget. Sales of hand, skin and surface cleaners are on track to grow 20% year on year; * YesTo is trading strongly with revenues 36% ahead of the corresponding period last year. It is now the number 2 in the natural skin care category and was successfully introduced into Walmart; * LuxuryLink is trading profitably and adding new online travel customers; revenues are 16% ahead of last year; * Zoom appointed a new CEO, is adding new accounts and is now number 2 in the non-prescriptive eyeglass category. Although revenues are behind last year they are slightly ahead of budget; * Penguin's sales continue to reflect increasing demand for cloud and high performance computing power. Revenues are behind last year's exceptional first quarter but 40% higher than budget; * Wesupply is now trading profitably after moving into profit for the first time in the fourth quarter of 2010. Revenues are 5% higher than last year's first quarter; * Entuity has achieved revenues significantly ahead of last year and 14% ahead of budget; * ITS continued to experience difficult trading conditions and we are currently reviewing the strategic options for this business.

Financial information

The Company's unaudited Net Asset Value per share at 31 March 2011 was 90 pence, unchanged from 31 December 2010. In the first quarter, unrealised foreign currency losses offset valuation improvements of our quoted and fund interests. At the end of April, Net Asset Value per share was an estimated 87 pence, reflecting price falls on our quoted holdings (principally Weatherford) and further weakening of the US dollar against Sterling.

The carrying value of the portfolio at 31 March 2011 is based on the valuation of the Company's investment portfolio as at 31 December 2010 with adjustments for transactions in the three months ended 31 March 2011 including price movements on quoted securities, movements in foreign currency exchange rates, cash calls and distributions from funds and purchases and sales of quoted and unquoted securities. In addition, where the Company has invested further amounts to meet working capital requirements in its existing unquoted portfolio, such amounts have been written off as fair value adjustments in the period. The next full valuation of the portfolio will be for our half year results as at 30 June 2011.

The Company's investment portfolio at 31 March 2011 (and 31 December 2010) wasas follows: 31 March 2011 31 December 2010 £'000 % £'000 % US Quoted 37,029 14% 42,122 17% Unquoted 32,946 13% 34,031 13% Funds 78,655 31% 79,371 31% US total 148,630 58% 155,524 61% UK Quoted 24,947 10% 21,091 8% Unquoted 41,361 16% 41,361 17% Funds 41,401 16% 35,164 14% UK total 107,709 42% 97,616 39% Total 256,339 100% 253,140 100%

Details of our largest investments by valuation at 31 March 2011, representing about 72% of the total portfolio, are set out in the appendix to this statement.

During the three months ended 31 March 2011 total funds invested by the Company were £8.9 million in unquoted securities and to meet fund calls. Proceeds from fund distributions were £2.5 million and from sales of quoted holdings £5.0 million.

At 31 March 2011 the Company had net debt of £8.3 million; adjusting for receipt of the ProStrakan proceeds referred to above gives a pro forma end March net cash position of £14.6 million. In April we extended our £15 million facility with Royal Bank of Scotland until 30 September 2011.

This statement is a general description of the financial position and performance of the Company for the period from 1 January 2011 to 11 May 2011. It does not contain any profit forecast or forward looking information. Future performance and share price is likely to be affected by a number of factors, including (but not limited to) general economic and market conditions and specific factors affecting the financial performance or prospects of individual investments within the Company's portfolio.

For further information please contact:

LMS Capital plc 020 7935 3555

Glenn Payne, Chief Executive Officer

Tony Sweet, Chief Financial Officer

J.P. Morgan Cazenove Limited 020 7588 2828

Michael Wentworth-Stanley

Brunswick Group LLP 020 7404 5959

Simon SporborgLeonora BurtenshawNotes to Editors

LMS Capital is an investment company with experience in private equity and development capital investment. Our objective is to deliver superior returns for shareholders through ownership of controlling stakes or positions of influence in profitable and growing companies run by experienced managers operating in sectors we know and where we expect to be able to add value. We aim to own companies and make follow-on investments in companies that will produce profits that contribute to an increasingly valuable and profitable LMS Capital. Our focus is on investing in high quality management teams and companies at favourable prices. We will continue to be cautious in our investment approach, aiming to grow our investments (and NAV) by 15%+ per annum without undue risk or investing in unproven businesses.

LMS Capital plc Appendix

Interim management statement - 12 May 2011

The Company's principal investments by valuation at 31 March 2011 were asfollows:Name Geography Sector Date of Book initial value investment £'m Quoted investments Weatherford US Energy 1984 28.8International Prostrakan Group plc UK Pharmaceuticals 1999 22.8 Chyron Corporation US Media/technology 1995 3.8 Direct investments Method Products* US Consumer 2004 17.2 Updata Infrastructure UK Technology 2009 14.0UK HealthTech Holdings US Technology 2007 12.2 Nationwide Energy US Energy 2010 9.3Partners Rave Reviews Cinemas US Consumer 2002 7.1 Apogee Group UK Technology 2010 8.7 Penguin Computing* US Technology 2004 6.9 Entuity UK Technology 2000 5.5 Fund investments Brockton Capital UK Property 2006 14.5 BV Investment Partners US Buyouts 1996 10.2 Scottish Equity UK Technology 2001 6.9Partners Amadeus Capital UK Venture Capital 1998 4.6Partners Spectrum Equity US Technology 1999 4.5Investors Brynwood Partners US Consumer 2004 3.1 Cadent Energy Partners US Energy 2005 3.1 Weber Capital US Post-IPO technology 1999 2.7 companies

*San Francisco Equity Partners manages these investments.