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13 May 2010 07:00
13 May 2010 LMS Capital plc Interim Management Statement
LMS Capital is holding its Annual General Meeting today and the Board is pleased to present the Company's Interim Management Statement as required by the UK Listing Authority's Disclosure and Transparency Rule 4.3. This statement relates to the period from 1 January 2010 to 12 May 2010.
Overview
LMS Capital is an investment company with over 30 years' experience in private equity and development capital investment. Our objective is to deliver superior absolute returns for shareholders through a portfolio of direct investments; our focus is on small to medium sized companies in our preferred sectors of energy services, applied technology, and media and consumer.
We seek to partner with experienced managers in profitable, growing companies where we expect to be able to add value. Our focus is on buying and investing in management teams and companies at favourable prices: on the assumption of gradual economic improvement our outlook is positive on the investment environment and we expect M&A activity to increase accordingly. 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.
In March we invested £7.9 million to acquire a significant minority stake in Apogee Group Limited ("Apogee"). Apogee is one of the UK's leading independent digital printing solutions providers and offers sales and servicing of printers, photocopiers and multi-function devices to a diversified, growing client base. This is a business that is benefiting from sophisticated workflow management systems and the growth of colour printing. Results for the financial year ended 31st December 2009 and the first quarter of 2010 indicate that Apogee continues to grow sales and profitability in line with our expectations.
At 31 March 2010 LMS Capital had uncalled commitments to funds of £55.8 million; our experience suggests that the full amount is rarely drawn and our review of each fund suggests that the actual funding to be called could be £10 million less. We expect these funds to be called over the next three to five years. Cash and other liquid assets (including the value of our quoted portfolio) were £58.2 million; further, we have a borrowing facility of £15 million of which £10 million remains undrawn.
While recovery from the global recession is still at an early stage, the experience of our portfolio companies is that the worst appears to be behind them. Our management teams remain focused on cost management and we expect revenue growth and improved earnings performance from a number of these portfolio companies over the next 12-24 months.
Portfolio subsidiaries
The latest available trading results for our portfolio subsidiaries are to 31 March.
* We are very pleased with the progress made by Updata which continues to perform in line with our expectations when we invested in July 2009. Revenues and profit are significantly ahead of the same period last year; * Wesupply, Kizoom and CopperEye achieved first quarter revenues ahead of the corresponding period last year and their EBITDA performance, while still negative, is substantially better as a result of the 2009 cost cutting measures. * Entuity experienced strong bookings in the first quarter, especially through partners. Its revenues in the first quarter were lower than last year, but this was due to a timing delay and the current outlook is positive; * ITS (formerly Offshore Tool & Energy) has felt the effects of severe capital spending reductions by customers but the company is seeing an improvement in the outlook for the second half of the year and beyond.
Financial information
The Company's unaudited net asset value per share at 31 March 2010 was 86 pence, an increase of 2% since 31 December 2009. The principal factor in this increase was the strengthening of the US dollar against sterling in the period. The position at the end of April was substantially unchanged.
The carrying value of the portfolio at 31 March 2010 is based on the valuation of the Company's investment portfolio as at 31 December 2009 with adjustments for transactions in the three months ended 31 March 2010 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 in its existing unquoted portfolio, such amounts have been written off as fair value adjustments in the period and investments in new unquoted securities in the period are included at cost. The next full valuation of the portfolio will be for our half year results as at 30 June 2010.
The Company's investment portfolio at 31 March 2010 (and 31 December 2009) wasas follows: 31 March 2010 31 December 2009 £'000 £'000 US Quoted 34,088 34,601 Unquoted 21,618 20,455 Funds 80,548 73,194 US total 136,254 128,250 UK Quoted 17,069 17,274 Unquoted 47,948 39,849 Funds 30,856 30,259 UK total 95,873 87,382 Total 232,127 215,632
During the three months ended 31 March 2010 total funds invested by the Company were £11.7 million in unquoted securities and to meet fund calls. Proceeds from fund distributions were £1.8 million. In April we sold certain of our quoted holdings, including BJ Services, for proceeds of approximately £3.6 million which was in line with the carrying value at the end of March.
The ten largest holdings at 31 March 2010 (excluding fund interests where the Company has only a minority position) were as follows:
Name Geography Type Book % of net value assets £'000 Weatherford US Quoted 21,436 9%International Oilfield services Method Products US SFEP portfolio 18,488 8%Consumer products company Prostrakan Group plc UK Quoted 15,049 7%Specialty pharmaceuticals Updata UK Unquoted 8,000 3%Infrastructure UK Wide area networks Apogee Group UK Unquoted 7,902 3% Digital printing solutions Rave Reviews Cinemas US Unquoted 7,619 3%Cinema operations HealthTech Holdings US Unquoted 7,496 3% Hospital information systems Penguin Computing US SFEP portfolio 5,982 3% company Linux server systems Wesupply B2B UK Unquoted 5,500 2%connectivity software Luxury Link US SFEP portfolio 4,587 2% company Internet commerce 102,059 43%
Note: SFEP is San Francisco Equity Partners, a fund in which the Company has an interest of 80%.
This statement is a general description of the financial position and performance of the Company for the period from 1 January 2010 to 12 May 2010. 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 Sporborg
Oliver Hughes
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