Lms Capital Regulatory News (LMS)

25 January 2017

LMS Capital plc

Net Asset Value Estimate and Progress on Realisations

LMS Capital plc (the "Company") is a listed Investment Company focused on investing directly, and through third party funds, in small to medium size private companies in the UK, Europe and the US. Gresham House Asset Management Ltd ("GHAM") was appointed to manage the investment portfolio in August 2016, alongside a change of mandate from realisation to focused direct private equity investment at the smaller end of the market.

Since assuming the investment mandate, significant progress has been made in transitioning to external management and towards achieving target annualised cost savings. GHAM has progressively engaged with the underlying portfolio companies, implementing new investment processes under the guidance of its newly established Investment Committee, with a focus on long term shareholder value creation. GHAM has appointed Tim Farazmand to the Investment Committee. Tim has over 30 years' experience in UK mid-market private equity most recently as Managing Director of Lloyds Development Capital and was also Chairman of the British Venture Capital Association.

Net Asset Value Estimate

The Company has commenced the year end valuation review process which is based on the latest performance updates from portfolio companies and third party fund manager valuations. Whilst valuations of the Company's US investments have benefitted from currency movements, performance in some of the Company's investments has deteriorated since June 2016, impacting their respective valuations.

As a consequence, the Board currently estimates that the year-end net asset value will be in the region of £67 million (69.5p per share). This estimate is subject to further evaluation and completion of the annual audit. The estimate takes into account the tender offer in September 2016 which returned £6 million to shareholders and incorporates one off costs associated with the transition from being self-managed to an externally managed company. Once complete, this transition is expected to deliver estimated annualised savings of approximately £1 million.

The valuation methodology and policy adopted is consistent with prior years and is in line with IPEV guidelines and takes account of active sales processes where relevant.

Progress on Realisations

The Company has concluded an agreement to a two stage sale of one of its US investments. The exit valuation is in line with the NAV as of 30 June 2016. The stage 1 payment of $4.5 million was received on 23 January 2017. The second and final stage will be settled either as a one off payment of $5 million in January 2018 or a loan note repayable with interest in instalments over 4 years.

The Company has also agreed the realisation of its holding in a US listed companies fund. The realisation is expected to complete in stages during the first half of 2017. The first stage, representing 35% of the holding, has been completed at a premium to 30 June 2016 NAV and proceeds of $1.3 million have been received. The balance is due to be paid in the second quarter of 2017 and will be determined by the NAV of the fund at the time.

Realisations since the circular sent to shareholders on 27 July 2016 have totalled £6.9 million. As set out in the circular, when net realisation proceeds reach £12 million, up to £6 million will be returned to shareholders in a tender offer.

The company expects to announce its audited results in mid-March.

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