TIDMLMS
RNS Number : 0842P
LMS Capital PLC
06 February 2023
7 February 2023
LMS CAPITAL PLC
NAV Estimate as at 31 December 2022
LMS Capital plc (the "Company" or "LMS") the listed investment
company provides the following update and estimate of net asset
value ("NAV") as at 31 December 2022.
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.
The Board currently estimates that the year end NAV will be in
the region of GBP46.6m (2021: GBP49.1 million) which equates to
57.7p per share (2021: 60.8p per share). This represents a
reduction of 3.7% on the prior year after adjusting for dividends
paid and reflects information currently available to the Board on
the performance of individual investments in the Company's
portfolio and is subject to further evaluation as well as
completion of the annual audit.
The performance is summarised below:
Preliminary Unaudited Audited
31 December 30 June 2022 31 December 2021
2022
GBP 'm
------------------------------------------------
NEW INVESTMENTS - DACIAN 10.1 9.4 7.9
------------- -------------- -----------------
MATURE ASSET PORTFOLIO 20.8 20.8 23.0
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Total Investment Portfolio 30.9 30.2 30.9
------------- -------------- -----------------
Cash 17.9 18.9 20.1
------------- -------------- -----------------
Other Net Assets/Liabilities (2.2) (2.1) (1.9)
------------- -------------- -----------------
Net Asset Value 46.6 47.0 49.1
Pence per Share 57.7p 58.2p 60.8p
------------- -------------- -----------------
The valuation methodology and policy adopted is consistent with
prior years and is in line with IPEV guidelines. The carrying value
of the funds is based on the latest available information from the
respective fund managers, generally the 30 September 2022 fund
valuation reports except for Weber, a fund of listed US
investments, which is based on a 31 December 2022 valuation.
Overview
-- Dacian
o 2022 was the first full year of operation for Dacian, the
Romanian oil and gas production company in which LMS holds $9.1
million of senior loan notes and 32% of the ordinary shares.
o Dacian has been profitable and cash generative during its
first year, energy prices remain substantially higher than when the
acquisition was underwritten in August 2020;
o As reported in our half year and Q3 announcements, backlog
maintenance problems, inherited on takeover of the estate, have
interrupted production in some wells and in the short term have
diverted the company's resources from its planned workover projects
to develop the fields and expand production. However, as a result
of management actions during Q2 and Q3, Dacian believe that
production is stabilising and expect to devote resources to
development activities with the aim of producing production gains
during 2023;
o During the year the Company has recognised GBP1.3 million of
accrued interest on its loan notes;
o The Board expects the investment to meet or exceed the
Company's medium-term return targets over its life.
-- Mature asset portfolio
o Overall, taking account of foreign exchange movements and
underlying valuation changes over the year, the mature asset
portfolio showed a net reduction in value of GBP1.3 million.
Information on the movements by asset is included in note 1
below;
o The mature asset portfolio comprises assets for the large part
managed by third-party managers and 82% of which is in the three
largest positions, Brockton, Medhost and Opus. LMS does not control
the realisation process but maintains a close dialogue with the
managers. Our expectation is that there may be some liquidity in
2023, although greater liquidity is more likely in 2024 and
2025.
-- Running costs were net GBP1.7 million (2021: GBP1.8 million)
in line with budget and remain strictly controlled. 2022 showed a
reduction compared to the prior year as the benefits of income from
the Company's co-investment activities began to be realised.
-- Cash balances were GBP17.9 million, 22p per share, (31 December 2021: GBP20.1 million)
Deployment of capital
In our half year report we referenced opportunities in real
estate development and investment; we have continued to develop
both activities.
-- Real estate development - the retirement living sector offers
an opportunity with strong demand drivers, where our experience in
land assembly, planning, design and development of specialist use
real estate can be deployed alongside sector operating knowhow. We
have assembled an advisory group, which has screened a number of
opportunities during the year and we are currently in discussion on
a small number of potential projects. In evaluating potential
opportunities we are mindful of the risks, in particular around
escalating construction costs and a slowing housing market. We will
only take forward opportunities that offer risk adjusted returns
that meet the Company's long-term return criteria.
-- Real estate investment - we have been working with our real
estate investment team to establish an investment platform which
will allow LMS to bring co-investment capital, alongside its own
investment, on a deal by deal basis. We believe the market in 2023
will create some attractive buying opportunities.
-- Energy - in the medium term we anticipate further "late life"
oil and gas production opportunities with the Dacian team although
the priority for 2023 is to achieve the target production gains on
the existing assets.
Outlook
The Board is aware of the impact on overall returns of the
Company's uninvested cash. However it remains disciplined and
focussed on ensuring capital is deployed in areas where the Company
has clear competitive advantage, in particular in energy and in
real estate, and in the longer term will generate attractive
returns for investors.
The Dacian team has now completed its first year of operation
and believes that it is well positioned in 2023 to demonstrate the
production gains that underpin the investment case for this asset.
In real estate we are cautious about market conditions but see
opportunities and expect to deploy capital during the year
alongside our real estate industry partners.
Further information on the performance of the portfolio,
underlying investment valuations and changes during the year will
be included in the Company's audited results for the year ended 31
December 2022, which it expects to announce in March 2023.
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulation (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
For further information please contact:
LMS Capital plc
Nick Friedlos, Managing Director
0207 935 3555
Note 1 - NAV changes and portfolio summary
Overall, for the year as a whole, the Company's NAV, after
adding back dividends paid, has decreased by GBP1.8
million, 3.7%. The principal components of the full year change
are described below.
-- Foreign exchange net gains on the investment portfolio during
the year were GBP2.8 million. 76% of the Company's investment
portfolio is denominated in US Dollars.
-- Excluding the effect of foreign exchange rate changes, the
mature asset portfolio showed a net reduction of GBP4.1 million in
the year. The principal elements were:
o An increase of GBP0.5 million in Brockton reflecting the
unwinding of the discounted cash flows;
o An increase of GBP0.8 million in the valuation of the Opus
Capital Venture Partners fund. This fund has two principal
remaining investments, both of which are performing well and the
manager believes, subject to market conditions, have good prospects
for realisation;
o Decreases totalling GBP2.3 million on two assets reflecting
actual or imminent disposal values
-- GBP1.8 million on ICU which is being sold by SFEP,
anticipated to conclude imminently, and will produce proceeds of
approximately GBP0.3 million for LMS. This is a disappointing
outcome and a poor result from the fund. ICU is the last SFEP asset
in the portfolio;
-- GBP0.5 million reduction in value of Eden Ventures fund which
sold its last remaining asset in Q4 2022.
o A decrease of GBP0.9 million in Weber Capital Partners, a US
listed small cap fund. The decrease reflects quoted market price
changes during the year;
o A decrease of GBP0.7 million reflecting a reduction in the
valuation of Medhost by Primus, the lead manager. The company
operates in a mature market and continues to be profitable and cash
generative and is performing in line with budget;
o A decrease of GBP0.6 million in the valuation of Elateral;
and
o Other portfolio net reductions were GBP0.9 million.
-- Interest accrued on Dacian amounted to GBP1.3 million.
-- Other movements were a net reduction of GBP1.8 million and include the following:
o Full year running costs were GBP1.7 million;
o Investment support costs (support costs for real estate and
co-investment activities) were GBP0.4 million; and
o Other movements include unrealised foreign exchange gains of
GBP0.4 million on non-portfolio assets, principally US Dollar bank
accounts, GBP0.3 million tax payable, and GBP0.2 million of bank
interest receivable.
Quoted Investments
Investment 31 Dec 2022 30 June 31 Dec 2021
GBP' m 2022 GBP'm
GBP' m
IDE Group
(now Tialis) 0.1 0.1 0.2
------------ -------- ------------
Other 3 small holdings 0.1 0.1 0.2
----------------- ------------ -------- ------------
Total 0.2 0.2 0.4
------------ -------- ------------
Unquoted Investments
Investment 31 Dec 2022 30 June 31 Dec 2021
GBP' m 2022 GBP'm
GBP' m
Onshore oil and gas production
Dacian Petroleum USD assets in Romania 10.1 9.4 7.9
----------- -------------------------------- ------------ -------- ------------
Provides cloud based
enterprise and departmental
management and healthcare
engagement solutions
to community hospitals
Medhost USD in the US. 5.7 5.3 6.0
----------- -------------------------------- ------------ -------- ------------
UK/US software company
in the digital marketing
sector providing marketing
Elateral Sterling content management solutions 0.6 0.6 0.8
----------- -------------------------------- ------------ -------- ------------
Design and distribution
of eyewear, principally
reading glasses, through
ICU USD large US retailers 0.2 0.6 1.7
----------- -------------------------------- ------------ -------- ------------
USD/
Other investments Sterling 0.1 0.2 0.1
--------------------------------------------- ------------ -------- ------------
Total 16.7 16.1 16.5
------------ -------- ------------
Funds
Investment Currency 31 Dec 2022 30 June 31 Dec 2021
GBP' m 2022 GBP'm
GBP' m
UK real estate fund,
the remaining asset
Brockton of which is a debt investment
Capital Fund in a high end London
1 Sterling residential development 6.0 6.0 5.6
----------- -------------------------------- ------------ -------- ------------
Opus Venture Early-stage technology
Capital Fund fund with two principal
2 USD remaining assets 5.3 5.4 3.9
----------- -------------------------------- ------------ -------- ------------
US listed microcap investment
fund focussed primarily
Weber Capital on medical and technology
Partners USD sectors 2.0 1.8 2.6
----------- -------------------------------- ------------ -------- ------------
USD/
Other investments Sterling 0.7 0.8 1.8
--------------------------------------------- ------------ -------- ------------
Total 14.0 14.0 13.9
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END
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