Last checked at 
15 Nov 2010 07:00
15 November 2010 LMS Capital plc Interim Management Statement
The Board of LMS Capital ("LMS" or "the Company) 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 July 2010 to 12 November 2010.
The most significant recent developments and financial highlights were as follows:
* The Company invested a further $1.8 million (£1.3 million) in Nationwide Energy Partners ("NEP") to enable it to fund its first purchase of an existing infrastructure as opposed to new construction; * San Francisco Equity Partners ("SFEP"), the private equity firm in which LMS Capital is the majority partner, acquired Zoom Eyeworks, Inc. a leading designer of innovative, expressive eyewear products; * We continued our refined strategic focus for the Company with realisations from underperforming older investments. This included the sale of our interest in Citizen Limited (trading as Vio), the sale of Kizoom Limited's software division, and the sale of our stake in Corizon Limited; * Net Asset Value per share was 83 pence at 30 September 2010 unchanged from 30 June 2010.
Glenn Payne, Chief Executive of LMS Capital, commented:
"LMS Capital is now implementing the change in focus we highlighted in our half year statement. We continue to demonstrate our credentials as a partner of choice in direct investments in growing, profitable businesses in the energy, consumer and applied technology sectors where we have demonstrable expertise.
While speed of recovery from the global recession remains uncertain, 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 the portfolio companies."
Recent developments
In July we invested a further $1.8 million (£1.3 million) in NEP to enable it to fund its first purchase of an existing infrastructure as opposed to new construction. The company's ability to expand its operations in this way was a key factor in our initial investment thesis.
In August, SFEP acquired a controlling stake in Zoom Eyeworks, Inc, one of the leading providers of non-prescription reading glasses in the U.S., as well as sunglasses and accessories. Zoom's brands, which include Zoom, Dr. Dean Edell and ICU, are sold in approximately 15,000 outlets throughout the drug, food, convenience and speciality retail channels in the US. LMS provided capital of $6.6 million (£4.2 million) for this investment.
In the Company's half year statement (dated 10 August 2010) we outlined our plans to exit certain underperforming older investments. In line with this plan, in September we concluded the following transactions:
* We sold our interest in Citizen Limited (trading as Vio) to the company for which Vio had been acting as a value added reseller in the UK; * Kizoom Limited sold its software division and we are working with management on plans for its remaining hardware business; * We sold our stake in Corizon Limited for a nominal sum which covered our costs of disposal.
The above transactions had no significant impact on the Company's net asset value (following write downs on these investments at 30 June this year) but release management resources to focus on our more profitable and growing investments.
In line with the Company's revised investment focus we have made no further commitments to funds. At 30 September 2010 LMS Capital had uncalled commitments to funds of £44.2 million which we expect to be called over the next three to five years. Cash and other liquid assets, including the value of our quoted portfolio, were £53.8 million; our borrowing facility of £15 million is fully drawn.
Consolidated Portfolio subsidiaries
The latest available trading results for our portfolio subsidiaries are to 30 September.
* Updata 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's revenues were slightly behind the corresponding period last year as a result of timing differences although their EBITDA performance, while still negative, is substantially better as a result of the 2009 cost cutting measures; * Revenues at Entuity are significantly ahead of last year and EBITDA for the first nine months of the year is higher than budgeted; * ITS (formerly Offshore Tool & Energy) continues to feel the effects of severe capital spending reductions by customers but the company expects to see an improvement in its prospects from the fourth quarter of this year; * NEP continues to perform in line with our expectations. EBITDA is 25% ahead of the prior year and a large pipeline of new accounts is being pursued; * Cost reductions at Kizoom and CopperEye have significantly reduced the losses in these businesses which are being marketed for sale.
Financial information
The Company's unaudited net asset value per share at 30 September 2010 was 83 pence, unchanged from 30 June; in the third quarter, unrealised foreign currency losses offset valuation improvements of our quoted and fund interests. The position at the end of October was substantially unchanged.
The carrying value of the portfolio at 30 September 2010 is based on the valuation of the Company's investment portfolio as at 30 June 2010 with adjustments for transactions in the three months ended 30 September 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 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 full year results as at 31 December 2010.
The Company's investment portfolio at 30 September 2010 (and 30 June 2010) wasas follows: 30 30 June September 2010 2010 £'000 £'000 US Quoted 32,638 26,625 Unquoted 29,623 31,386 Funds 79,869 82,130 US total 142,130 140,141 UK Quoted 14,165 13,695 Unquoted 45,329 45,370 Funds 34,815 31,064 UK total 94,309 90,129 Total 236,439 230,270
Details of our largest investments by valuation at 30 September 2010, representing about 71% of the total portfolio, are set out in the appendix to this statement.
During the three months ended 30 September 2010 total funds invested by the Company were £10.5 million in unquoted securities and to meet fund calls. Proceeds from fund distributions were £5.2 million. We sold certain of our smaller quoted holdings for proceeds of approximately £0.8 million.
This statement is a general description of the financial position and performance of the Company for the period from 1 July 2010 to 12 November 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 SporborgLeonora BurtenshawAbout LMS Capital
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 & utilities, applied technology (software and services), and consumer.
We seek to partner with experienced managers in profitable, growing companies where we expect to be able to add value. We continue to be cautious in our investment approach, aiming to grow our investments (and NAV) by 15%+ per annum via acquisitions and follow-on funding without undue risk or investing in unproven businesses.
LMS Capital plc Appendix
Interim management statement - 15 November 2010
The Company's principal investments by valuation at 30 September 2010 were asfollows:Name Geography Sector Date of Book initial value investment £'000 Quoted investments Weatherford US Oilfield services 1984 22,075International Prostrakan Group plc UK Quoted 1999 12,057 Gulfmark Offshore US International offshore 2008 4,830 services Direct investments Method Products* US Consumer products 2004 17,646 Updata Infrastructure UK Wide area networks 2009 13,000UK Nationwide Energy US Energy service 2010 8,877Partners provider Rave Reviews Cinemas US Cinema operations 2002 7,952 HealthTech Holdings US Hospital information 2007 7,911 systems Apogee Group UK Digital printing 2010 7,902 solutions Penguin Computing* US Linux server systems 2004 5,738 Wesupply UK Supply chain 2000 5,500 connectivity software Luxury Link* US Internet commerce 2006 5,113 Entuity UK Network management 2000 5,000 software Fund investments Brockton UK Real estate 2006 15,377 (Funds I & II) BV Investment Partners US Media and 1996 8,475 communications (Funds V, VI & VII) Spectrum Equity US Communications, media, 1999 5,596Investors information services (Funds III & IV) Weber Funds US Micro-cap listed 1999 5,456 technology companies (Funds I & II and GW 2001) Scottish Equity UK Information 2001 4,874Partners technology, healthcare and energy (Funds II & III) Brynwood Partners US Consumer products 2004 4,499 (Fund V)
*San Francisco Equity Partners manages these investments.
vendor