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23 Mar 2009 07:00
23 March 2009
LMS Capital plc
Preliminary Results for the year ended 31 December 2008
The Board of LMS Capital plc, ("LMS Capital" or "the Company"), is pleased to announce the Company's preliminary results for the year ended 31 December 2008.
Financial highlights*
Net Asset Value per share was 89p (31 December 2007: 101p)
Net realised gains on investments were £17.3 million (2007: £6.7 million)
The loss for the year was £40.8 million (2007: profit of £29.8 million)
Portfolio diversification has resulted in significant benefits from the strengthening of the US dollar against the pound sterling
The investment management business had cash of £41.3 million at 31 December 2008 and no debt
* investment management business
Operational highlights:
Successful sale of Energy Cranes in March 2008 for cash proceeds of £83 million
AssetHouse Technology sold in June 2008 at a book loss of £3.7 million
Investment of £2.5 million in Pims Group, a supplier of waste water pumping systems and services
Cityspace acquired Kizoom Limited which delivers transport information to internet and mobile devices
Robert Rayne, Chief Executive Officer of LMS Capital, said:
"Despite the unprecedented turmoil in financial markets and the economy, LMS Capital's strategy has resulted in a more resilient performance than the sector as a whole. However, we have been affected by economic events and the consequent market weakness is reflected in our year end private company valuations. Looking forward we believe that our risk diversification and specialist skills as well as our debt free basis at corporate level will enable us to surmount the challenges ahead."
For further information please contact:
| LMS Capital plc Robert Rayne, Chief Executive Officer Martin Pexton, Managing Director Tony Sweet, Chief Financial Officer | 020 7935 3555 |
| J.P. Morgan Cazenove Limited Michael Wentworth-Stanley | 020 7588 2828 |
| Brunswick Group LLP Simon Sporborg Leonora Burtenshaw | 020 7404 5959 |
About LMS Capital
LMS Capital plc is an international investment company whose shares are traded on AIM. The investment portfolio comprises investments primarily in the US and the UK, with a spread of early stage revenue-generating technology investments, development capital and mature company buyouts.
www.lmscapital.com
Chairman's statement
In spite of significant progress in the first half, in particular the profitable disposal of Energy Cranes, 2008 proved to be an extremely difficult year. The Company ended 2007 with a Net Asset Value per share of 101p and this declined by 12% to end 2008 at 89p. At the year end the strong balance sheet showed net cash of £41.3 million and no borrowings.
Results
Our investment management business achieved realised net gains on investments of £17.3 million for the year ended 31 December 2008 (31 December 2007: £6.7 million). Net unrealised losses on the investment portfolio were £54.1 million (31 December 2007: net unrealised gains of £30.0 million). The loss for the year ended 31 December 2008 was £40.8 million (31 December 2007: profit of £29.8 million).
The investment portfolio at 31 December 2008 was £202.0 million (last year excluding Energy Cranes, £217.1 million, a decline of £15.1 million or 7%).
We have conducted a rigorous review of all the Company's unquoted interests to ensure that their year end valuations fully take into consideration the prevailing market conditions, including the current lack of liquidity in the market.
The quoted portfolio declined in value in the second half when there was significant deterioration in the value of our listed energy holdings; this was in part offset by the strengthening of the US dollar.
For the Group as a whole (including portfolio subsidiaries) the consolidated loss for the year was £6.1 million (31 December 2007: loss of £0.4 million).
The Board is not recommending payment of a dividend for the year ended 31 December 2008 (31 December 2007: Nil).
Balance Sheet
At the year end the Company had no direct debt. Further, as the primary method of funding development capital is equity there is very little external debt in the unquoted portfolio.
Board and management
On behalf of the Board I would like to record our thanks to the management and employees of LMS Capital for their work during the year.
Share capital
As in previous years, at the forthcoming Annual General meeting the Company will be seeking authority to purchase up to 14.99% of its issued share capital. The Company also needs to obtain a waiver in respect of the Takeover Code obligations that a repurchase of shares above a certain limit would place on the Rayne family shareholders.
During the year, 13,788,276 shares were purchased in the market by the Company at an average price of £0.62. These shares were subsequently cancelled, making the current number of ordinary shares in issue 272,640,952.
Outlook
As we expect difficult conditions to continue in 2009 our investment portfolio may be further impacted by market turmoil. We expect that traditional sources of finance will remain scarce.
We believe that our continued strategy of a risk diversified portfolio and our experienced management team, as well as our debt free basis, will enable us to surmount the challenges ahead. We remain focused on each investment within our portfolio to ensure that it adapts to the present environment of reduced demand and tight liquidity.
The Company remains in a strong financial position but we are not complacent. We shall continue to seek exit opportunities for selected investments while ensuring that capital outlays are subject to rigorous review and due diligence.
With no debt and a strong team committed to the careful management of resources, your Board is confident that the Company is well positioned to protect its existing assets and take advantage of investment opportunities as they arise.
Jonathan Agnew
Chairman
23 March 2009
Operating Review
After a successful first half of the year which included the sale of Energy Cranes International ("Energy Cranes") and the acquisition of a number of new investments, the Company was affected by the turbulence in international financial markets in the closing months of 2008. Consequently our final results for the year reflect the impact on our business of the global financial crisis in the form of the unrealised losses which have had a significant impact on our Net Asset Value. However we believe that the principles of our diversified investment strategy will enable us to see out these difficulties while at the same time taking advantage of opportunities which the current economic environment presents.
Our objective remains unchanged. We aim to deliver sustained medium to long-term growth for our shareholders through a risk and geographically diversified portfolio of investments in public and private companies. In particular we are not constrained by the fixed investment periods of most private equity funds and we are therefore able to hold investments for longer than many other funds where we believe that this will deliver greater shareholder value. We understand the drivers of demand in the sectors in which we invest and this enables us to recognise the potential of both new ideas and young companies requiring growth funding.
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 has been three to five years but could now be seven or eight 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
| 2008 | 2007 | ||||
| £ millions | % | £ millions | % | ||
| Early stage | 24.5 | 12 | 27.6 | 10 | |
| Development | 72.7 | 36 | 77.2 | 27 | |
| Growth | 52.3 | 26 | 106.7* | 38 | |
| Post IPO | 52.5 | 26 | 70.6 | 25 | |
| 202.0 | 100 | 282.1 | 100 | ||
Analysis of portfolio by type of investment
| 2008 | 2007 | ||||
| £ millions | £ millions | £ millions | £ millions | ||
| UK | US | Total | Total | ||
| Quoted | 19.4 | 27.1 | 46.5 | 63.8 | |
| Unquoted | 33.7 | 19.5 | 53.2 | 131.9* | |
| Funds | 29.9 | 72.4 | 102.3 | 86.4 | |
| 83.0 | 119.0 | 202.0 | 282.1 | ||
Analysis of portfolio by sector
| 2008 | 2007 | ||||
| £ millions | % | £ millions | % | ||
| Applied technology | 61.3 | 30 | 84.2 | 30 | |
| Energy & water | 30.8 | 15 | 105.7* | 38 | |
| Healthcare & medical | 22.9 | 11 | 18.0 | 6 | |
| Media & leisure | 50.1 | 25 | 44.5 | 16 | |
| Real estate | 15.9 | 8 | 15.4 | 5 | |
| Other | 21.0 | 11 | 14.3 | 5 | |
| 202.0 | 100 | 282.1 | 100 | ||
* 2007 includes Energy Cranes at book value of £65 million
The investment portfolio has decreased by 28% during the year to £202.0 million (2007: £282.1 million) which can be summarised as follows:
| £ millions | ||||
| 1 January 2008 | 282.1 | |||
| Additions in the year | 51.6 | |||
| Book value of realisations | (77.6) | |||
| Valuation adjustments | (99.6) | |||
| Foreign currency gains | 45.5 | |||
| 31 December 2008 | 202.0 | |||
Additions include £12.4 million of new investments and £39.2 million of follow on funding, including £15.8 million of capital calls from funds. The figure for realisations relates principally to Energy Cranes and also includes adjustments for distributions from our fund investments.
The valuation adjustments include £45.5 million in respect of quoted securities of which £36.2 million relates to our oilfield services interests - Weatherford International, Gulfmark Offshore, BJ Services and Stratic Energy. £35.2 million arises on our unquoted interests and the balance relates to our fund positions.
The foreign currency gains are unrealised and reflect the strengthening of the US dollar against the pound sterling in the latter part of the year. It is the Board's current policy not to hedge the Company's underlying non-sterling investments.
Applied Technology
In January 2008 a new Chief Executive was appointed at Cityspace and since then there has been a significant reorganisation of the business. In May we advanced £1.9 million to Cityspace to fund its purchase of Kizoom Limited. Kizoom is a market leader in delivering real-time transport information to the internet and mobile devices. The acquisition of Kizoom reflects an important milestone in the Cityspace strategic growth plan - its established connections to many public transport real-time and timetabled data feeds open up opportunities for Cityspace in these complementary organisations and transport regions.
In August 2008, Eye-Fi, Inc. the developer and manufacturer of the world's first wireless memory card for digital cameras, secured $11 million in series B funding from a number of investors, including $2 million from the Company Eye-Fi's technology works with Wi-Fi networks to send photos automatically from a digital camera to online, in-home and retail destinations. Eye-Fi has received numerous product awards, including being named one of the "100 Best Products of 2008" by PC World magazine.
Following a strategic review of AssetHouse Technologies Limited we concluded that the development potential of the company would only be realised if it were part of a larger group operating in its business sector. In June 2008 we sold our interest in the company to Amino Technologies plc for £1.4m on a debt-free basis, payable in cash. Net cash proceeds were £0.7 million and the realised loss on sale was £3.7 million.
Energy and water
On 31 March 2008 we sold our entire interest in Energy Cranes to a management buyout team backed by Close Brothers Private Equity. This transaction placed an enterprise value on the business of £142 million and the net proceeds to LMS Capital were £82.9 million in cash resulting in a realised gain (over 31 December 2007 book value) of £17.9 million. The Company's return on equity from its investment in Energy Cranes was in excess of 4.5 times, giving an internal rate of return of approximately 40%.
During the year we increased our holding in Weatherford International to 2,050,000 shares and acquired 250,000 shares in Gulfmark Offshore, Inc., a US company that provides marine services to companies involved in offshore exploration and production of oil and natural gas. Grant Prideco was acquired by National Oilwell Varco for a mixture of cash and shares - we subsequently sold the shares we received in exchange.
In June 2008, we invested £2.5 million in Pims Group, a private UK-based company which designs and installs pumping systems for domestic and commercial sewage and storm water. It also provides maintenance services for such systems. Based in the South East, Pims has national coverage and operates in both the domestic and commercial markets. This was a co-investment with Inflexion 2006 Buyout Fund.
Healthcare and medical
We made no purchases or sales in this sector during 2008 but our existing portfolio has made strong progress during the year. In particular, there was a significant increase in the share price of ProStrakan during the year following a number of successes for this business.
Healthcare Management Systems, which provides clinical and financial information systems for hospitals, achieved a significant increase in sales and operating profit. The company now provides its programmes to over 590 community hospitals in the USA.
Other
In July San Francisco Equity Partners (SFEP) invested $5.0 million in Yes To, Inc., an Israel-based consumer products company that created and owns the Yes To Carrots line of natural personal-care products. Yes To Carrots has become one of the fastest growing brands in the worldwide natural personal-care market, and its award-winning products are currently sold by leading retailers in 17 countries across North America, Europe and Asia.
Its investment in Method Products, Inc (which comprises 58% by value of our interest in this fund) continues to do well with a further significant increase in sales during 2008.
Financial review
Basis of preparation of financial information
The Company reports its results under International Financial Reporting Standards as adopted for use in the European Union ("Adopted IFRS"), and the consolidated financial statements include the consolidation of portfolio companies which are also subsidiaries ("portfolio subsidiaries"). Since the Board manages the Company as an investment business, this financial review focuses on the results of the investment management operations. Note 2 to the financial information includes the separate results and net assets of the investment management business. Where appropriate, this review includes comments on the results and financial position of the portfolio subsidiaries.
Results of operations
Net Asset Value at 31 December 2008 was £241.5 million (31 December 2007: £289.0 million), a decrease of £47.5 million or 16%. The Net Asset Value per share was 89p (31 December 2007: 101p).
The Group's return on its investment portfolio for the year ended 31 December 2008 was a loss of £36.7 million (year ended 31 December 2007: gain of £36.7 million) as follows:
| Year ended 31 December | |||
| 2008 | 2007 | ||
| £'000 | £'000 | ||
| Realised gains/(losses) |
| ||
| Quoted securities | 574 | 2,910 | |
| Unquoted securities | 14,620 | - | |
| Funds | 2,114 | 3,794 | |
| 17,308 | 6,704 | ||
| Unrealised gains/(losses) | |||
| Quoted securities | (31,122) | 8,240 | |
| Unquoted securities | (27,506) | 15,374 | |
| Funds | 4,572 | 6,421 | |
| (54,056) | 30,035 | ||
| Total gain/(loss) | (36,748) | 36,739 | |
Approximately 59% of the portfolio at 31 December 2008 is denominated in US dollars (2007: 42%) and the above table includes the impact of currency movements. In the year ended 31 December 2008 the strengthening of the US dollar against pound sterling resulted in an unrealised foreign currency gain of £45.5 million. During the year ended 31 December 2007 there was a slight overall weakening of the dollar and the unrealised loss for that year was £1.4 million.
We are pleased with the progress made by most of the holdings in our portfolio. Unrealised losses reflect the impact of the changes in the capital markets in the last few months of the year. This is reflected particularly in the decline in the value of our quoted portfolio year on year, most of which arose in the final three months of the year. Offsetting this, ProStrakan Group continued to make excellent progress during the year and its share price at the end of 2008 was higher than the previous year.
The principal constituents of the net unrealised loss for the year on our unquoted securities are as follows:
| Unrealised | |||
| gain/(loss) | |||
| £'000 | |||
| Cityspace | (11,025) | ||
| Vio Worldwide | (8,100) | ||
| Corizon | (3,550) | ||
| Wesupply | (3,679) | ||
| Elateral | 1,813 | ||
| (24,541) | |||
| Other investments | (2,965) | ||
| Total net unrealised loss | (27,506) |
The unrealised losses above reflect the impact on our valuation criteria of the current market volatility and in particular the revenue and profitability multiples of comparable businesses which are used in the underlying calculations. Accordingly, in most cases we have reduced the multiples applied to our unquoted interests in determining the appropriate carrying value. In addition the results of Cityspace, Vio and Corizon in 2008 were below plan and were a contributory factor to the reduction in the carrying value. Wesupply has continued to make good progress during 2008 and has generated higher levels of interest and orders from its target market. However, this progress was not sufficient to offset market factors in the valuation process. In the case of Elateral, its excellent progress during 2008 has more than offset the impact of market factors.
The unrealised valuation gain on our fund interests reflects the fact that many of these are US funds and the net increase in our carrying value arises from the strengthening of the US dollar against the pound sterling. In line with other funds of funds we normally rely on reports from general partners as at the end of the third quarter in establishing our year end carrying value, with adjustments made for calls, distributions and foreign currency movements since that date. Given the events of the last quarter of 2008 we have where possible updated the portfolio using values as at the end of the year from fund managers; in the absence of such updates we have used our own judgement on underlying portfolio values to arrive at what we consider to be an appropriate carrying value for each position.
Income from investments in the year was £0.6 million (year ended 31 December 2007: £1.5 million) and comprises dividends on quoted securities and management charges made to portfolio companies. Administration expenses for the year were £5.6 million (year ended 31 December 2007: £7.4 million); the current year benefitted from a one-off VAT refund of £1.1 million. Net interest income for the year was £1.8 million (year ended 31 December 2007: £0.8 million) reflecting the higher levels of uninvested cash during the year. The tax charge for the year was £0.6 million (year ended 31 December 2007: £0.4 million).
Investments
The Group's investments are included in the balance sheet at fair values determined in accordance with industry guidelines.
Additions to the investment portfolio during the year were £51.6 million (year ended 31 December 2007: £57.2 million) of which £12.4 million was for new investments and £39.2 million for follow on investments including £15.8 million for capital calls from funds.
Additions to quoted stocks were £17.5 million, with a focus on the energy sector, in particular oilfield services. New investments included £6.7 million in Gulfmark Offshore Inc, listed on the New York Stock Exchange; we also acquired additional shares in Venture Production and Weatherford International.
We invested £18.3 million in unquoted investments of which £12.0 million was follow on funding for our UK portfolio. Proceeds of realisations were £97.1 million (year ended 31 December 2007: £46.8 million), the majority of which was from the sale of Energy Cranes. Distributions from funds were £8.1 million (year ended 31 December 2007: £14.3 million), including £2.5 million from Brockton Capital Fund I, a real estate opportunity fund which made its first realisation in 2008.
At 31 December 2008 the Group had commitments of £71.1 million to meet capital calls from its fund interests which the Directors estimate will be called over the next five years.
Financial position
The consolidated balance sheet at 31 December 2008 includes cash and cash equivalents of £42.6 million (31 December 2007: £14.5 million) and borrowings of £2.8 million (31 December 2007: £44.7 million) in the portfolio subsidiaries.
Cash in the investment management business of £41.3 million was £33.1 million higher than at the end of 2007, reflecting the disposal of Energy Cranes during the year. Part of the Company's cash has been and will be committed during 2009 to meets calls from funds and to provide further funding for existing unquoted investments.
The business also has a $53 million (£36.35 million) borrowing facility with The Royal Bank of Scotland, of which £5 million was used for a short period during the year. The facility is due to expire in April 2009 and the Company is in discussions with the bank for the renewal of the facility at a lower level of £15 million. The investment management business had no borrowings at the end of 2008 or to date in 2009.
Robert A Rayne
Chief Executive Officer
23 March 2009
Principal investments
The top 20 investments by valuation at 31 December 2008 (excluding fund interests where the Company has only a minority position) are as follows:
| Name | Country | Activity | 2008 | 2007 |
| £'000 | £'000 | |||
| San Francisco Equity Partners | US | Technology, media and retail | 34,691 | 21,731 |
| ProStrakan Group plc | UK | Specialty pharmaceuticals | 15,314 | 11,705 |
| Weatherford International Ltd | US | Oilfield services | 15,173 | 28,349 |
| Rave Reviews Cinemas | US | Cinema operations | 8,859 | 7,253 |
| Cityspace Limited | UK | Transport information services | 6,000 | 12,902 |
| Wesupply Limited | UK | Supply chain connectivity software | 5,500 | 6,650 |
| Gulfmark Offshore Inc | US | International offshore services | 4,070 | - |
| CopperEye Limited | UK | Indexing technology software | 4,000 | 4,000 |
| Elateral Limited | UK | Marketing software | 3,500 | 1,500 |
| Healthcare Management Systems | US | Hospital information systems | 3,420 | 2,520 |
| Entuity Limited | UK | Network management software | 3,000 | 4,000 |
| Chyron Corporation | US | Media technology | 2,818 | 7,303 |
| Pims Group | UK | Waste water systems and services | 2,500 | - |
| Telespree Communications | US | Network solutions for mobile devices | 2,185 | 2,182 |
| Venture Production plc | UK | Operation of stranded oil and gas assets | 2,125 | 1,980 |
| 7 Global Limited | UK | IT managed services | 2,000 | 3,000 |
| Offshore Tool and Energy Corporation | US | Specialist engineering design and fabrication | 2,000 | 2,256 |
| Vio Worldwide Limited | UK | Advertising workflow services | 2,000 | 7,000 |
| BJ Services Company | US | Oil and gas field services | 1,991 | 3,056 |
| Envestnet Asset Management | US | Wealth management solutions | 1,537 | 1,427 |
Consolidated income statement
| Notes | Year ended 31 December 2008 £'000 | Restated Year ended 31 December 2007 £'000 | ||
| Revenue from sales of goods and services | 19,790 | 15,541 | ||
| Gains and losses on investments | (32,137) | 10,899 | ||
| Interest income | 1,802 | 825 | ||
| Investment and other income | 582 | 507 | ||
| (9,963) | 27,772 | |||
| Operating expenses | (46,114) | (28,810) | ||
| Loss before finance costs | (56,077) | (1,038) | ||
| Finance costs | (221) | (75) | ||
| Loss before tax | (56,298) | (1,113) | ||
| Taxation | (579) | (387) | ||
| Loss from continuing operations | (56,877) | (1,500) | ||
| Discontinued operations | ||||
| Profit from discontinued operations (net of taxation) | 3 | 50,755 | 1,108 | |
| Loss for the year | (6,122) | (392) | ||
| Attributable to: | ||||
| Equity holders of the parent | (5,929) | (529) | ||
| Minority interests | (193) | 137 | ||
| (6,122) | (392) | |||
| Loss per ordinary share | 4 | (2.1)p | (0.2)p | |
| Continuing operations | ||||
| Loss per ordinary share | 4 | (20.1)p | (0.5)p |
Consolidated balance sheet
| Notes | 31 December 2008 £'000 | 31 December 2007 £'000 | |
| Non-current assets | |||
| Property, plant and equipment | 3,216 | 14,255 | |
| Intangible assets | 26,798 | 71,257 | |
| Investments | 179,546 | 183,512 | |
| Other non-current assets | 15 | 197 | |
| Non-current assets | 209,575 | 269,221 | |
| Current assets | |||
| Inventories | 319 | 5,738 | |
| Operating and other receivables | 8,309 | 46,299 | |
| Cash and cash equivalents | 42,615 | 14,548 | |
| Current assets | 51,243 | 66,585 | |
| Total assets | 260,818 | 335,806 | |
| Current liabilities | |||
| Bank overdrafts | - | (285) | |
| Interest-bearing loans and borrowings | (1,656) | (7,842) | |
| Operating and other payables | (10,335) | (29,891) | |
| Deferred income | (3,426) | (2,199) | |
| Current tax liabilities | (410) | (601) | |
| Current liabilities | (15,827) | (40,818) | |
| Non-current liabilities | |||
| Interest-bearing loans and borrowings | (1,170) | (36,576) | |
| Deferred income | (2,697) | (2,582) | |
| Deferred tax liabilities | (41) | - | |
| Provisions | - | (1,384) | |
| Non-current liabilities | (3,908) | (40,542) | |
| Total liabilities | (19,735) | (81,360) | |
| Net assets | 241,083 | 254,446 | |
| Equity | |||
| Share capital | 27,265 | 28,643 | |
| Capital redemption reserve | 5,635 | 4,257 | |
| Merger reserve | 84,083 | 84,083 | |
| Foreign exchange translation reserve | 1,212 | (867) | |
| Retained earnings | 122,741 | 133,047 | |
| Equity attributable to owners of the parent | 240,936 | 249,163 | |
| Minority interest | 147 | 5,283 | |
| Total equity | 5 | 241,083 | 254,446 |
Consolidated statement of
recognised income and expense
| Year ended 31 December 2008 £'000 | Year ended 31 December 2007 £'000 | ||
| Exchange differences on translation of foreign operations | 1,083 | 56 | |
| Net income recognised directly in equity | 1,083 | 56 | |
| Loss for the year | (6,122) | (392) | |
| Total recognised income and expense | (5,039) | (336) | |
| Attributable to: | |||
| Equity holders of the parent | (4,846) | (469) | |
| Minority interests | (193) | 133 | |
| (5,039) | (336) |
Consolidated cash flow statement
| | | Year ended 31 December 2008 £'000 | Year ended 31 December 2007 £'000 |
| Cash flows from operating activities | | | |
| Loss for the year | | (6,122) | (392) |
| Adjustments for: | | | |
| Depreciation and amortisation | | 1,199 | 2,190 |
| Goodwill impairment | | 11,224 | - |
| (Gains)/losses on investments | | 32,137 | (10,899) |
| Gain on sale of discontinued operations, net of income tax | | (49,436) | - |
| Translation differences | | (1,958) | 207 |
| Share based payments | | 889 | 3,522 |
| Finance costs | | 221 | 2,445 |
| Interest income | | (1,802) | (918) |
| Income tax expense | | 579 | 3,055 |
| | | (13,069) | (790) |
| Change in inventories | | (9,878) | 4,224 |
| Change in trade and other receivables | | 13,342 | (12,183) |
| Change in trade and other payables | | (3,397) | 1,977 |
| | | (13,002) | (6,772) |
| Interest paid | | (221) | (2,445) |
| Income tax paid | | (183) | (2,997) |
| Net cash used in operating activities | | (13,406) | (12,214) |
| | | | |
| Cash flows from investing activities | | | |
| Interest received | | 1,802 | 918 |
| Acquisition of property, plant and equipment | | (1,685) | (4,764) |
| Proceeds from disposals of property, plant and equipment | | 12 | 2,757 |
| Disposal of discontinued operations, net of cash disposed of | | 80,543 | - |
| Acquisition of investments | | (40,019) | (54,671) |
| Acquisition of subsidiaries | | (5,645) | (12,388) |
| Proceeds from sale of investments | | 11,503 | 46,849 |
| Net cash from/(used in) investing activities | | 46,511 | (21,299) |
| | | | |
| Cash flows from financing activities | | | |
| Repurchase of own shares | | (8,638) | - |
| Drawdown of interest bearing loans | | 1,855 | 18,364 |
| Distribution to minority shareholders | | (575) | - |
| Net cash (used in)/from financing activities | | (7,358) | 18,364 |
| | | | |
| Net decrease in cash and cash equivalents | | 25,747 | (15,149) |
| Cash and cash equivalents at the beginning of the period | | 14,263 | 29,566 |
| Effect of exchange rate fluctuations on cash held | | 2,605 | (154) |
| Cash and cash equivalents at the end of the year | | 42,615 | 14,263 |
| | | | |
| | | | |
| Cash and cash equivalents above comprise | | | |
| Cash and cash equivalents | | 42,615 | 14,548 |
| Bank overdrafts | | - | (285) |
| Cash and cash equivalents at the end of the year | | 42,615 | 14,263 |
| | | | |
Notes
1. Basis of preparation
LMS Capital plc ("the Company") is domiciled in the United Kingdom. These financial statements are presented in pounds sterling because that is the currency of the principal economic environment of the Company's operations. The consolidated financial statements of the Company for the year ended 31 December 2008 comprise the Company and its subsidiaries (together "the Group").
The Company was formed on 17 March 2006 and commenced operations on 9 June 2006 when it received the demerged investment division of London Merchant Securities. The consolidated financial statements are prepared as if the Group had always been in existence. The difference between the nominal value of the Company's shares issued and the amount of the net assets acquired at the date of demerger has been credited to merger reserve.
The Company is an investment company but because it holds majority stakes in certain investments it is required to prepare group accounts that consolidate the results of such investments. In order to present information that is comparable with other investment companies, the results of the Group's investment business on a stand alone basis are set out in Note 2.
A discontinued operation is a component of the Group's business that represents a separate line of business or geographical area of operations that has been disposed of or is held for sale, or is a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. When an operation is classified as a discontinued operation, the comparative income statement is re-presented as if the operation had been discontinued from the start of the comparative period.
This financial information has been prepared in accordance with International Financial Reporting Standards as adopted for use in the European Union ("Adopted IFRS") although the financial information in this announcement is not sufficient to comply with Adopted IFRS.
The Group has decided to adopt early IFRS 8: Operating Segments ("IFRS 8") during the year ended 31 December 2007, which defines requirements for the disclosure of financial information of an entity's operating segments. IFRS 8 replaces IAS 14: Segment Reporting. It follows the 'management approach', which requires the disclosure of segment information based on the internal reports regularly reviewed by management in order to assess each segment's performance and to allocate resources to them. IFRS 8 is effective for reporting periods beginning on or after 1 January 2009. Early adoption is permitted.
The financial information set out in this unaudited preliminary statement does not comprise LMS Capital plc's statutory accounts within the meaning of section 240(5) of the Companies Act 1985. The statutory accounts of LMS Capital plc for the year ended 31 December 2008, currently unaudited and to be published in due course, will be finalised on the basis of the financial information presented by the Directors in this unaudited preliminary statement and will be delivered to the Registrar of Companies in due course and will also be sent to shareholders.
The financial statements have been prepared on the historical cost basis except for the following:
investments held at fair value through profit or loss are measured at fair value, and
derivative financial instruments are measured at fair value.
2. Operating segments
The information below has been prepared using the definition of an operating segment in IFRS 8: Operating Segments which sets out the requirements for the disclosure of financial information of an entity's operating segments. IFRS 8 requires an entity to present segment information on the same basis as the financial information which is reviewed regularly by management to assess performance and to allocate resources.
As an investment company, the Group's primary focus is on the performance of its investment management business. Financial information for this segment is prepared on the basis that all investments are accounted for at fair value.
The information set out below therefore presents summarised financial information for the investment management business on a stand alone basis as a single segment, together with the adjustments arising from the summarised results and financial position of the portfolio subsidiaries. Adjustments for Energy Cranes International Limited ("Energy Cranes") are shown separately because of the size of this business relative to the others.
The consolidation adjustments included below reflect the adjustments necessary to restate the portfolio subsidiaries from the basis included in the investment management segment (investments carried at fair value) to full consolidation in the Group's financial statements.
Consolidated income statement
| Reconciliation | |||||||
| Discontinued operations | |||||||
| Investment management | Portfolio subsidiaries | Energy Cranes | Other | Consolidation adjustments | Group total | ||
| Year ended 31 December 2008 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Revenues from sales of goods and services | - | 19,790 | - | - | - | 19,790 | |
| Gains and losses on investments | (36,748) | - | - | - | 4,611 | (32,137) | |
| Interest income | 1,754 | 48 | - | - | - | 1,802 | |
| Investment and other income | 582 | - | - | - | - | 582 | |
| Finance costs | - | (4,267) | - | - | 4,046 | (221) | |
| Continuing operations | (40,796) | (13,514) | - | - | (2,567) | (56,877) | |
| Discontinued operations | - | - | 57,556 | (6,801) | - | 50,755 | |
| Profit/(loss) for the year | (40,796) | (13,514) | 57,556 | (6,801) | (2,567) | (6,122) | |
| Reconciliation | |||||||
| Discontinued operations | |||||||
| Investment management | Portfolio subsidiaries | Energy Cranes | Other | Consolidation adjustments | Group total | ||
| Year ended 31 December 2007 (Restated) | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Revenues from sales of goods and services to external customers | - | 15,541 | - | - | - | 15,541 | |
| Gains and losses on investments | 36,739 | (260) | - | - | (25,580) | 10,899 | |
| Interest income | 814 | 11 | - | - | - | 825 | |
| Investment and other income | 1,508 | - | - | - | (1,001) | 507 | |
| Finance costs | - | (1,564) | - | - | 1,489 | (75) | |
| Continuing operations | 29,836 | (6,256) | - | - | (25,080) | (1,500) | |
| Discontinued operations | - | - | 1,425 | (2,095) | 1,778 | 1,108 | |
| Profit/(loss) for the year | 29,836 | (6,256) | 1,425 | (2,095) | (23,302) | (392) | |
Consolidated statement of net assets
| Reconciliation | ||||
| Investment Management | Portfolio subsidiaries | Consolidation adjustments | Group total | |
| 31 December 2008 | £'000 | £'000 | £'000 | £'000 |
| Property, plant and equipment | 288 | 2,928 | - | 3,216 |
| Intangible assets | - | 3,196 | 23,602 | 26,798 |
| Investments | 202,049 | 1 | (22,504) | 179,546 |
| Other non-current assets | - | 15 | - | 15 |
| Non-current assets | 202,337 | 6,140 | 1,098 | 209,575 |
| Cash and cash equivalents | 41,293 | 1,322 | - | 42,615 |
| Other current assets | 309 | 8,597 | - | 8,906 |
| Total assets | 243,939 | 16,059 | 1,098 | 261,096 |
| Total liabilities | (2,283) | (70,882) | 53,152 | (20,013) |
| Net assets/(liabilities) | 241,656 | (54,823) | 54,250 | 241,083 |
The net asset value of the investment management business at 31 December 2008 includes £241,509,000 attributable to the equity holders of the parent and £147,000 attributable to minority interests.
| Reconciliation | |||||
| Portfolio subsidiaries | |||||
| Investment management | Energy Cranes | Other | Consolidation adjustments | Group total | |
| 31 December 2007 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Property, plant and equipment | 311 | 11,197 | 2,747 | - | 14,255 |
| Intangible assets | - | 32,497 | - | 38,760 | 71,257 |
| Investments | 282,120 | - | 200 | (98,808) | 183,512 |
| Other non-current assets | - | 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 2007 includes £289,005,000 attributable to the equity holders of the parent and £719,000 attributable to minority interests.
The carrying amount and gains and losses of the investments of the investment management business can be further analysed as follows;
| 31 December 2008 | 31 December 2007 | ||||||
| UK | US | Total | UK | US | Total | ||
| Asset type | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Funds | 29,911 | 72,390 | 102,301 | 28,579 | 57,795 | 86,374 | |
| Quoted | 19,409 | 27,097 | 46,506 | 17,476 | 46,348 | 63,824 | |
| Unquoted | 33,686 | 19,556 | 53,242 | 116,551 | 15,371 | 131,922 | |
| 83,006 | 119,043 | 202,049 | 162,606 | 119,514 | 282,120 | ||
| Year ended 31 December 2008 | Year ended 31 December 2007 | ||||||
| Realised gains | Unrealised gains | Total | Realised gains | Unrealised gains | Total | ||
| Asset type | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Funds | 2,114 | 4,572 | 6,686 | 3,794 | 6,421 | 10,215 | |
| Quoted | 574 | (31,122) | (30,548) | 2,910 | 8,240 | 11,150 | |
| Unquoted | 14,620 | (27,506) | (12,886) | - | 15,374 | 15,374 | |
| 17,308 | (54,056) | (36,748) | 6,704 | 30,035 | 36,739 | ||
Revenues
The Group's revenues from external customers comprise:
| Year ended 31 December 2008 | Restated Year ended 31 December 2007 | ||||
| £'000 | £'000 | ||||
| Continuing operations | |||||
| Software and related services | 12,431 | 5,530 | |||
| Specialist manufacturing | 7,359 | 10,011 | |||
| 19,790 | 15,541 |
Geographical information
| Revenues | Non-current assets | ||||||
| Year ended 31 December 2008 | Restated Year ended 31 December 2007 | 31 December 2008 | 31 December 2007 | ||||
| £'000 | £'000 | £'000 | £'000 | ||||
| Continuing operations | |||||||
| United Kingdom | 7,066 | 3,211 | 99,378 | 115,442 | |||
| United States of America | 6,521 | 11,346 | 110,197 | 152,629 | |||
| Other countries | 6,203 | 984 | - | 1,150 | |||
| 19,790 | 15,541 | 209,575 | 269,221 | ||||
Geographical information on revenue is based on the location of customers and on assets is based on the location of the assets.
Major customers
Revenues from the ten largest customers represent approximately 33% of the Group's total revenues.
3. Discontinued operations
In March 2008 the Group sold its entire interest in Energy Cranes International Limited and in June 2008 the Group sold its entire interest in AssetHouse Technology Limited. These businesses were not discontinued operations or classified as held for sale as at 31 December 2007 and the comparative income statement has been re-presented to show the discontinued operations separately from continuing operations.
Results of discontinued operations
| Year ended 31 December 2008 | Year ended 31 December 2007 | |||
| £'000 | £'000 | |||
| Revenues | 33,142 | 114,243 | ||
| Expenses | (31,240) | (110,467) | ||
| Results from operating activities | 1,902 | 3,776 | ||
| Taxation | (583) | (2,668) | ||
| Results from operating activities, net of tax | 1,319 | 1,108 | ||
| Gain on sale of discontinued operations, net | 49,436 | - | ||
| Tax on gain on sale of discontinued operations | - | - | ||
| Profit for the period | 50,755 | 1,108 | ||
| Basic earnings per ordinary share | 18.0p | 0.4p | ||
| Diluted earnings per ordinary share | 17.7p | 0.4p |
Cash flows from/(used in) discontinued operations
| Year ended 31 December 2008 | Year ended 31 December 2007 | |||
| £'000 | £'000 | |||
| Net cash from/(used in) operating activities | (8,977) | 1,609 | ||
| Net cash used in investing activities | (849) | (16,325) | ||
| Net cash from financing activities | 7,375 | 15,497 | ||
| Net cash from/(used in) discontinued operations | (2,451) | 781 | ||
Effect of disposal on the financial position of the Group
| 31 December 2008 | |||||
| £'000 | |||||
| Property, plant and equipment | 12,216 | ||||
| Intangible assets | 39,587 | ||||
| Investments | 527 | ||||
| Other non-current assets | - | ||||
| Inventories | 15,326 | ||||
| Trade and other receivables | 25,763 | ||||
| Cash and cash equivalents | 3,043 | ||||
| Bank overdrafts | - | ||||
| Interest bearing loans and borrowings | (43,447) | ||||
| Trade and other payables | (10,813) | ||||
| Provisions | (8,052) | ||||
| Net assets and liabilities | 34,150 |
3. Discontinued operations (continued)
Effect of disposal on the financial position of the Group (continued)
| 31 December 2008 | |||||
| £'000 | |||||
| Consideration received, satisfied in cash | 83,586 | ||||
| Cash disposed of | (3,043) | ||||
| Net cash inflow | 80,543 | ||||
4. Loss per ordinary share
The calculation of loss per ordinary share is based on the loss of £5,929,000 (year ended 31 December 2007: loss of £529,000), being the loss for the year attributable to the parent, divided by the weighted average number of ordinary shares in issue during the year 281,758,491 (year ended 31 December 2007: 286,429,228).
The calculation of loss per ordinary share for continuing operations is based on the loss of £56,684,000 (year ended 31 December 2007: loss of £1,381,000), being the loss for the year attributable to the parent, divided by the weighted average number of ordinary shares in issue during the period of 281,758,491 (year ended 31 December 2007: 286,429,228)
There was no dilution effect on the loss from continuing operations or the Group loss in either year.
5. Capital and reserves
Reconciliation of movement in capital and reserves
| Share capital £'000 | Capital Redemption Reserve £'000 | Merger Reserve £'000 | Translation Reserve £'000 | Retained earnings £'000` | Total £'000 | Minority interest £'000 | Total equity £'000 | |
| Balance at 1 January 2007 | 28,643 | 4,257 | 84,083 | (927) | 130,548 | 246,604 | 4,344 | 250,948 |
| Total recognised income and expense | - | - | - | 60 | (529) | (469) | 133 | (336) |
| Share based payments | - | - | - | - | 3,028 | 3,028 | 494 | 3,522 |
| Minority interest on acquisitions | - | - | - | - | - | - | 312 | 312 |
| Balance at 31 December 2007 | 28,643 | 4,257 | 84,083 | (867) | 133,047 | 249,163 | 5,283 | 254,446 |
| Total recognised income and expense | - | - | - | 1,083 | (5,929) | (4,846) | (193) | (5,039) |
| Distribution to minority | - | - | - | - | - | - | (575) | (575) |
| Disposal of portfolio Subsidiaries | - | - | - | 996 | 3,372 | 4,368 | (4,368) | - |
| Repurchase of shares | (1,378) | 1,378 | - | - | (8,638) | (8,638) | - | (8,638) |
| Share based payments | - | - | - | - | 889 | 889 | - | 889 |
| Balance at 31 December 2008 | 27,265 | 5,635 | 84,083 | 1,212 | 122,741 | 240,936 | 147 | 241,083 |