Annual Report • Dec 31, 2011
Annual Report
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Annual Report & Accounts 2011
LMS Capital is an investment company focused on small to medium sized companies in its preferred sectors of consumer, energy and business services. Following a general meeting on 30 November 2011, the Company is undertaking a realisation strategy which aims to achieve a balance between an efficient return of cash to shareholders and optimising the value of the Company's investments.
| Highlights | 01 | Consolidated income statement | 34 |
|---|---|---|---|
| Chairman's statement | 02 | Consolidated statement of | |
| Operating review | 04 | comprehensive income | 35 |
| Financial review | 07 | Consolidated statement of financial position |
36 |
| Board of Directors | 10 | ||
| Corporate governance report | 12 | Company statement of financial position |
37 |
| Principal risks and uncertainties | 18 | Statements of changes in equity | 38 |
| Remuneration report | 20 | Consolidated cash flow statement | 40 |
| Directors' report | 28 | Company cash flow statement | 41 |
| Statement of directors' responsibilities |
31 | Notes to the financial information | 42 |
| Independent auditor's report | 32 | Shareholders' Information | 80 |
Change in strategy:
2011 was a year of strategic change for the Company. On 30 November 2011 shareholders voted in favour of the asset realisation strategy recommended to them by the Board. The change of strategy was intended to provide liquidity for shareholders and achieve a balance between an efficient return of cash to shareholders and maximising the value of the Company's investments. More information on the implementation of this revised strategy is set out in the Operating Review.
Your Board has made significant progress in establishing a plan to implement this change in strategy and the Directors are satisfied that the Company's plans for the orderly wind-down of the business will achieve a successful outcome for shareholders.
Net Asset Value per share at the end of 2011 was 90p, unchanged from the previous year. Improved performance by many of our unquoted investments led to increased valuations, but the share price of our principal quoted investment, Weatherford International, declined by 36% over the year.
The return on the investment portfolio for the year was a net gain of £8.7 million (2010: £23.9 million). Included in this is a realised net gain for the year of £6.4 million (2010: realised net loss of £1.0 million) which arises principally from gains on sales of certain of our quoted holdings.
The investment portfolio at 31 December 2011 was valued at £218.5 million (31 December 2010: £253.1 million), a reduction of £34.6 million or 14% as proceeds from realisations during the year have not been reinvested. Net cash at 31 December 2011 was £30.6 million (31 December 2010: net debt of £5.0 million).
The Group as a whole (including consolidation of the portfolio subsidiaries) showed a consolidated loss for the year from continuing operations of £1.0 million (2010: profit of £25.1 million).
The Board is not recommending payment of a dividend for the year ended 31 December 2011 (2010: £nil).
As a consequence of the change in strategy, Glenn Payne resigned from the Board on 9 December 2011 and left at the end of December. Nick Friedlos took the role of General Manager from 9 December 2011 and was appointed to the Board on 9 February 2012 as Executive Director with responsibility for overseeing the orderly realisation of the assets of the Company.
On 4 January 2012 Neil Lerner and Martin Knight were appointed as independent Non-Executive Directors; on the same date John Barnsley and David Verey resigned from the Board, Robert Rayne stepped down as Chairman but remains on the Board and I was appointed Chairman. These changes completed the reconstitution of the Board agreed at the time of the general meeting. I look forward to working with the re-shaped Board to implement the change in strategy approved by shareholders.
The change in strategy has placed special demands on all our people. Your Board would like to extend its appreciation to all the Company's employees for their contribution in 2011.
Your Board and management commenced the implementation of the Company's new strategy following the general meeting last November and believe that the investment portfolio has the potential to release significant cash to shareholders in the medium term. The economic background remains very difficult, particularly for small private companies of the type which makes up much of the portfolio, but on the basis that there is no significant worsening of the business environments in the UK and the US your Board expects to progress the orderly wind-down of the business in the coming year and will focus on optimising value and cash flow for the benefit of shareholders.
Richard Christou Chairman
15 March 2012
This review includes an update on developments following the change in the Company's strategy approved by shareholders in the latter part of the year and an outline of the Board's approach to the way forward, as well as a report on the Company's investment activities in 2011.
At the general meeting on 30 November 2011 shareholders approved proposals to modify the Company's objectives and its investment policy. The revised investment policy is to conduct an orderly realisation of the assets of the Company, to be effected in a manner that seeks to achieve a balance between an efficient return of cash to shareholders and maximising the value of the Company's investments.
Accordingly, no investments will be made in new opportunities. Follow-on investments will be made in existing assets to honour commitments made at the time of the initial investment and/or to which the Company is legally obligated, or where the investment is made to protect or enhance the value of an existing asset or to facilitate its orderly realisation. The portfolio as a whole will be managed with a view to progressively returning funds to shareholders over a period of time.
In the period since the general meeting to the date of this report the Directors have:
the asset realisation strategy – this has principally taken the form of headcount reductions.
Initial conclusions from the results of this work are:
Based on this initial plan the Directors aim to make an initial return of cash to shareholders by the end of 2012 with a further distribution by the end of 2013. The Directors currently expect that the full realisation of the portfolio will be completed in approximately three to five years.
Shareholders should note that whilst these are the best estimates of the Board as at the date of this report, they are subject to a number of uncertainties including general market conditions, the future performance of investee companies, the behaviour of other shareholders in investee companies (where the Company is a minority investor) and the level of activity in the mergers and acquisitions market.
The Board will keep shareholders informed on progress through the Company's half-yearly and annual reports; significant individual realisations will be announced as appropriate.
Our key reportable metrics are:
| 2011 | 2010 | 2009 | |
|---|---|---|---|
| Net (loss)/profit (£m)1 | (0.4) | 17.6 | (12.7) |
| Owned EBITDA (£m)2 | 8.9 | 7.5 | (3.0) |
| NAV per share | |||
| (pence) | 90 | 90 | 84 |
Notes:
Owned EBITDA increased as a result of continued focus on profitability at each company. In aggregate the owned EBITDA of £8.9 million is an improvement of 19% on 2010.
In 2011 we realised £31.6 million from our quoted portfolio, comprising:
At the end of December our remaining quoted holdings were valued at £24.2 million (31 December 2010: £63.2 million), of which our interest in Weatherford International at £19.4 million is the principal element. The Weatherford share price performed poorly in 2011 – the price at the end of December 2011 was significantly lower than at December 2010 and this reduced our NAV per share year on year by 4p.
We sold seven of our stakes in private equity funds located in the UK, US and Europe for aggregate gross consideration of £14.6 million which represented 97% of book value at 31 December 2010. Exiting these funds reduced our outstanding capital commitments by £6.8 million. Other distributions from funds were £11.7 million for the year.
Our uncalled fund commitments continue to decrease and at 31 December 2011 stood at a maximum of £18.9 million (down from £40.7 million at the end of 2010).
Our fund holdings at the end of 2011 had a book value of £63.5 million (excluding San Francisco Equity Partners) – the principal interests were:
| 31 December 2011 | |||
|---|---|---|---|
| General partner |
Book value £ million |
IRR for the year |
|
| Brockton Capital | 15.8 | 15% | UK property |
| BV investments | 10.9 | 15% | US buyouts |
| Voreda Capital | 5.3 | 0% | UK property |
| Primus Capital | 4.7 | 32% | US buyouts |
| Amadeus Capital Partners |
3.8 | 22% | UK venture capital |
| Brynwood Capital Partners |
3.2 | 15% | US consumer |
| Opus Capital Venture Partners |
3.2 | 4% | US venture capital |
The above holdings represent 73% of the funds portfolio (excluding San Francisco Equity Partners).
The performance of our direct investments contributed an increase of £13.1 million to our Net Asset Value being a 17% increase over their valuation at 31 December 2010. Key contributors were:
We completed the exits of the underperforming investments Kizoom and Coppereye, and ITS sold its trading operations – all with no significant impact on our Net Asset Value.
We made only one new investment during 2011 – in September we backed the buyout of the IT solutions business by its management from 365iT plc, a business in which LMS Capital already has a small interest. We acquired a stake of 84% in the business at a cost of £2.6 million. Since renamed 365iTMS, the business is a UK IT services provider covering design, deployment and support of IT systems.
| 31 December 2011 | |||
|---|---|---|---|
| Book value £ million |
IRR for the year |
||
| HealthTech Holdings |
23.9 | 89% | US technology |
| Method Products* |
18.9 | 7% | US consumer |
| Updata Infrastructure |
12.7 | 22% | UK technology |
| Apogee Corporation |
11.5 | 33% | UK technology |
| Nationwide Energy |
|||
| Partners | 10.5 | 9% | US energy |
| Yes To, Inc* | 8.3 | 72% | US consumer |
| Rave Reviews | 7.4 | 0% | US consumer |
| Penguin | |||
| Computing* | 5.5 | (23)% | US technology |
| Luxury Link* | 5.1 | 0% | US consumer |
| Entuity | 4.0 | (18)% | UK technology |
The above holdings represent 82% of the direct portfolio (including San Francisco Equity Partners). Items marked * are held by San Francisco Equity Partners.
The financial statements have not been prepared on a going concern basis as the Company is seeking to realise the investment portfolio, return the capital to shareholders and then liquidate the Company, as outlined in the strategy approved by shareholders on 30 November 2011 – see note 1 to the consolidated financial information. No adjustments were necessary to the investment valuations included in these consolidated financial statements as a consequence of the change in the basis of preparation.
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 consolidated 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.
Net Asset Value at 31 December 2011 was £245.0 million, unchanged from a year ago (31 December 2010: £245.0 million). The Net Asset Value per share was 90 pence (31 December 2010: 90 pence).
The Group's return on its investment portfolio for the year ended 31 December 2011 was a gain of £8.7 million (2010: £23.9 million) as follows:
| Year ended 31 December |
|||
|---|---|---|---|
| 2011 £'000 |
2010 £'000 |
||
| Realised gains/(losses) | |||
| Quoted securities | 5,758 | 1,128 | |
| Unquoted securities | (119) | (3,154) | |
| Funds | 719 | 1,037 | |
| 6,358 | (989) | ||
| Unrealised gains/(losses) | |||
| Quoted securities | (13,486) | 14,100 | |
| Unquoted securities | 13,114 | 1,293 | |
| Funds | 2,748 | 9,510 | |
| 2,376 | 24,903 | ||
| Total | 8,734 | 23,914 |
Approximately 65% of the portfolio at 31 December 2011 is denominated in US dollars (31 December 2010: 61%) and the above table includes the impact of currency movements. In the year ended 31 December 2011 the slight strengthening of the US dollar against pound sterling (year on year) resulted in an unrealised foreign currency gain of £0.3 million (2010: £5.6 million). It is the Board's current policy not to hedge the Company's underlying non-sterling investments. Realised gains on quoted securities include £4.7 million in connection with the sale of our shares in ProStrakan Group and £1.5 million on the sale of our Gulfmark Offshore holding.
The unrealised loss on our quoted portfolio reflects the net impact of the changes in the capital markets during the year. Of the total of £13.5 million, £10.7 million is attributable to our holding in Weatherford International and £1.4 million to Chyron Corporation.
The principal constituents of the net unrealised gain on our unquoted securities are as follows:
| Unrealised gain/(loss) £'000 |
|
|---|---|
| HealthTech Holdings | 11,243 |
| Apogee Corporation | 2,750 |
| Updata | 1,741 |
| Nationwide Energy Partners | 855 |
| Elateral | (1,350) |
| Entuity | (928) |
| Other unquoted, net | (1,197) |
| Total unrealised gain, net | 13,114 |
The unrealised gains/losses above reflect the impact on our valuations of changes in the revenue and profitability multiples of comparable businesses, which are used in the underlying calculations, combined with the operating performance of the individual businesses within the portfolio.
In most cases the multiples used are similar to those prevailing at the end of 2010. The unrealised gains or losses set out above for 2011 arise principally as a result of the companies' performance. The results of HealthTech, Apogee and Updata in 2011 have resulted in valuation improvements for those businesses. Lower than planned results from Elateral and Entuity have resulted in write-downs of our carrying values for those investments.
For the valuation of our fund interests we utilise reports from the general partners of our funds 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. We also carry out our own review of individual funds and their portfolios to satisfy ourselves that the underlying valuation bases are consistent with our knowledge of the investments and the sectors in which they operate.
Income from investments in the year was £3.7 million (2010: £0.9 million) and comprises interest and dividends from portfolio companies, dividends on quoted securities and management charges made to portfolio companies.
Administration expenses for the year were £12.9 million (2010: £6.9 million). The figure for 2011 includes one-off costs of £5.0 million comprising £1.6 million of one-off charges for professional fees incurred in relation to the change in investment policy of the Company, £0.9 million compensation payments to staff members who left before the end of the year and £2.5 million to provide for the costs of a management fee commitment regarded as onerous following the change in strategy.
Interest expense for the year was £0.2 million (2010: £0.3 million) reflecting the fact that the Company repaid its loan facility in May. There was a tax credit for the year of £0.2 million (2010: charge of £0.4 million).
The Group's investments are carried at fair values determined in accordance with the International Private Equity and Venture Capital Valuation Guidelines.
Additions to the investment portfolio during the year were £19.3 million (2010: £38.9 million) of which £2.6 million (2010: £17.6 million) was for a new investment, £13.1 million (2010: £17.1 million) to meet capital calls from funds and £3.6 million (2010: £4.2 million) for follow-on investments. There were no purchases of quoted securities during the year (2010: £nil); the new investment in 2011 was 365iTMS.
Proceeds of realisations were £62.7 million (2010: £24.3 million) including sales of quoted securities of £31.6 million (2010: £6.2 million), proceeds from the secondary sales of funds of £14.6 million (2010: £nil) and distributions from funds of £11.7 million (2010: £13.7 million).
At 31 December 2011 the Group had commitments of £18.9 million (31 December 2010: £40.7 million) to meet capital calls from its fund interests. Cash in the investment management business was £30.6 million (31 December 2010: £9.3 million) with no debt (31 December 2010: borrowings of £14.3 million).
Consolidated revenues for the year from continuing operations were £47.3 million (2010: £38.1 million), all in the portfolio subsidiaries. The increase over the previous year reflects the inclusion of Nationwide Energy Partners for a full year (acquired in May 2010) and the acquisition of 365iTMS at the end of September, as well as increased revenues at Entuity and Wesupply of 9% and 15% respectively.
Consolidated operating expenses of continuing operations were £55.9 million (2010: £40.6 million). The increase in operating expenses reflects principally the inclusion of Nationwide Energy Partners (for a full year) and the acquisition of 365iTMS as set out above, as well as the higher costs incurred in the investment management business.
The portfolio subsidiaries continued to make good progress during 2011:
• Nationwide Energy Partners grew revenues by 15% in 2011 and EBITDA by 9%. The company also invested in its business development function such that at the end of 2011 a large proportion of new units budgeted for 2012 are either contracted or close to signing.
• Wesupply grew revenues by 15% but its order intake (bookings) increased by 50% over 2010, much of which is future contracted revenues. It posted a full year operating profit for the first time and has continued this momentum into 2012.
The consolidated loss from continuing operations was £1.0 million (2010: profit of £25.1 million), the downturn compared to last year being in the investment management business. Discontinued operations (being the impact of the sales of Kizoom Limited and Coppereye Limited in April and the sale by ITS Holdings, Inc of its trading subsidiaries in October) contributed a net gain of £2.2 million (2010: net loss of £12.6 million).
The consolidated statement of financial position at 31 December 2011 includes cash and cash equivalents of £34.9 million (31 December 2010: £13.2 million) and borrowings of £11.8 million (31 December 2010: £23.4 million). Cash in the investment management business was £30.6 million (31 December 2010: £9.3 million) and borrowings were £nil (31 December 2010: £14.3 million).
Nick Friedlos Antony Sweet Director Chief Financial Officer
15 March 2012
Non-Executive Chairman Age: 67
Directorships: Fujitsu EMEA plc
Richard is currently an adviser to Fujitsu Limited and Chairman of Fujitsu EMEA plc. He was previously president of the global business group at Fujitsu where he had responsibility for all of the overseas regions including EMEA, the Americas, APAC and China. At Fujitsu he was instrumental in setting many of its global strategies, including its current brand strategy. He will retire from full-time employment with Fujitsu in April 2012. He is a solicitor and holds a law degree from Trinity College Cambridge.
Director Age: 54
Directorships: None
Nick has held financial and operational leadership positions in financial services businesses holding real estate and other assets in both the public markets and in private equity. He was Chief Financial Officer of London Merchant Securities, the real estate and investment business out of which LMS Capital was created. Nick has managed change in the businesses he has been involved with including mergers, reconstructions and portfolio disposals. Most recently he was Chief Executive Officer of Mapeley and was previously a partner at PricewaterhouseCoopers.
Chief Financial Officer Age: 57
Directorships:
Wesupply Ltd (Non-Executive), and a number of Group companies.
In addition to his finance responsibilities Tony oversees the Company's HR requirements and also participates as a member of the operations committee. Before joining the Company, he was chief financial officer of Systems Union Group plc. Prior to that, he was at PricewaterhouseCoopers (the last 13 years as a partner) where he gained experience of a variety of sectors and geographies, working for large multinational companies, as well as smaller entrepreneurial businesses.
Non-Executive Director Age: 58
Chairman, President and Chief Executive Officer of Weatherford International Ltd and director of a number of oilfield service sector companies.
Previously, Bernard was a Non-Executive Director of London Merchant Securities and President and Chief Executive Officer of EVI, Inc. (now Weatherford International Ltd). Prior to this, he held positions at Arthur D. Little and Mobil Oil Inc.
Non-Executive Director Age: 62
Chairman of Imperial Innovations Group plc, Non-Executive director of Chrysalis VCT plc and Toumaz Holdings Limited.
Martin was previously a director of Morgan Grenfell & Co Limited and subsequently became the principal adviser to South Audley Street Investments. He was a governor and council member of Imperial College from 1992 to 2010.
Non-Executive Director Age: 64
Non-Executive director at the Royal Brompton & Harefield NHS Foundation Trust and council member of the RNLI and SOAS.
Neil retired in September 2006 as Risk Management partner for KPMG where he had responsibilities for managing all aspects of professional risk and reputation. Until September 2009 he was Special Advisor to KPMG International's captive insurer.
Non-Executive Director Age: 63
Non-Executive chairman of Derwent London plc and a Non-Executive Director of Weatherford International Ltd and Chyron Corporation, as well as a number of charitable trusts and foundations.
Robbie has expertise in a wide range of sectors, including real estate, media, consumer, technology and energy. He established the Company's investment activities in the early 1980s as investment director and later managing director and chief executive of London Merchant Securities plc.
Non-Executive Director Age: 63
The Net-a-Porter Group Limited.
Mark has been the Chief Executive Officer of The Net-a-Porter Group since 2003. Previously he was Finance Director at Video Networks Limited and Golden Rose Communications Plc. He has also worked in investment banking and is a qualified chartered accountant.
The Board of LMS Capital plc is committed to maintaining high standards of corporate governance and business ethics. This report is made under the UK Corporate Governance Code published by the Financial Reporting Council in June 2010 ('the Code'). Copies of the Code are available from the Financial Reporting Council's website at www.frc.org.uk.
This report explains how the Company has applied the main principles set out in the Code and the extent to which it has complied with the detailed provisions of the Code. The Board considers that the Company has complied with all of the provisions of the Code throughout the year ended 31 December 2011, except as follows:
The Board is responsible to the Company's shareholders for the performance of the Company and for its overall strategic direction, its values and its governance. It provides the leadership necessary to enable the Company's business objectives to be met within the framework of the internal controls detailed below.
The Board currently comprises eight directors, including the Non-Executive Chairman and five other Non-Executive directors and two Executive directors. Throughout 2011, John Barnsley and David Verey served as Non-Executive directors; both resigned on 4 January 2012. Glenn Payne served as Chief Executive Officer during the year until his resignation on 9 December 2011. Martin Knight and Neil Lerner were appointed as Non-Executive directors on 4 January 2012 and Nick Friedlos was appointed as an Executive director on 9 February 2012. Brief biographies of all the directors appear on pages 10 to 11. The Board considers that it has an appropriate balance of skills, knowledge and experience available to it.
During 2011 there was a clear separation of the roles of the Chairman and the Chief Executive Officer, with the Chairman responsible for the effective running of the Board and the Chief Executive Officer responsible for the executive management and performance of the Company's operations.
During the year under review, the Chief Executive Officer was Glenn Payne until his resignation on 9 December 2011. Since that date, no Chief Executive Officer has been appointed. Following the strategic changes agreed by shareholders on 30 November 2011, the Board no longer considers it necessary to appoint a Chief Executive Officer, in particular because the Board wishes to participate extensively in the realisation of the assets of the Company. To this end, the Board appointed Nick Friedlos as Executive director with responsibility for overseeing the orderly realisation of the assets of the Company.
From time to time during the year the Chairman holds meetings with the Non-Executive directors without the executive directors being present. In addition, the Non-Executives meet without the Chairman being present to appraise the Chairman's performance.
Each Non-Executive director is appointed for a term of three years. Subject to agreement, satisfactory performance and re-election by shareholders, their directorships may be renewed for further terms. During the year under review, no new directors
were appointed to the Board. However, following the year end, Martin Knight and Neil Lerner were appointed as Non-Executive directors on 4 January 2012. Subject to re-election by shareholders at the forthcoming Annual General Meeting to be held on 17 May 2012, these directors will serve an initial term of three years and the Board will then decide whether to extend their terms of office.
In the opinion of the Board, the following Non-Executive directors are each considered to be independent in character and judgement and there are no relationships or circumstances which are likely to affect (or could appear to affect) the directors' judgement: Richard Christou (who was independent upon his appointment as Chairman on 4 January 2012), Martin Knight, Neil Lerner and Mark Sebba. In addition, John Barnsley and David Verey, who are no longer directors, were also considered to be independent during the year under review. Bernard Duroc-Danner is a director and shareholder of Weatherford International Ltd and does not participate in board decisions concerning the Company's investment in Weatherford International Ltd. Notwithstanding this interest, the Board considers him to be independent in character and judgment. Given his extensive business and energy sector experience, he provides a valuable contribution to board discussions. Robert Rayne is not considered to be independent.
The Board is of the view that the Chairman and each of the Non-Executive directors who held office during 2011 committed sufficient time to fulfilling their duties as members of the Board.
Throughout 2011, John Barnsley acted as the Company's senior independent Non-Executive director. In this role he was available to shareholders if they had concerns which could not be resolved by discussions with the Chairman, the Chief Executive Officer or the Chief Financial Officer or where such contact was inappropriate. In addition, the Senior Independent Director was available to attend meetings with major shareholders in order to develop an understanding of their issues and concerns.
Following John Barnsley's resignation on 4 January 2012, no senior independent Non-Executive director has been appointed. The directors consider that the revised composition of the Board provides sufficient channels of communication
between the Board and shareholders. In particular, the recently appointed Non-Executive directors, each of whom has been appointed as a chairman of a board committee, are both independent and are able to fill this role.
In accordance with the Code and the Company's Articles of Association, all directors are subject to election by shareholders at the first Annual General Meeting following their appointment. Thereafter at least a third of the directors on the Board must retire and offer themselves for re-election. Martin Knight and Neil Lerner (who were appointed to the Board on 4 January 2012) and Nick Friedlos (who was appointed as Executive director on 9 February 2012) will retire at the forthcoming Annual General Meeting and, being eligible, each will offer himself for re-election at the meeting. A brief biography for each of these directors can be found on pages 10 to 11.
With the Board's prior agreement, Executive directors are permitted to accept one external Non-Executive directorship in other companies and may retain any fees received in that role.
The Company's Articles of Association allow the directors to authorise conflicts of interest and a register has been set up to record all conflict situations declared. A register of these interests is maintained and updated by the Company Secretary and the Board reviews it at each Board meeting. All declared conflicts have been approved by the Board.
There are agreed procedures for the directors to take independent professional advice, if necessary, at the Company's expense. All directors have access to the advice and services of the Company Secretary.
The Board has adopted a schedule of matters reserved to it for approval. These include the approval of financial statements, strategic plans, annual budgets, acquisitions and disposals and major capital and operating expenditure proposals. The Board delegates specific responsibilities to the Audit, Nomination and Remuneration Committees, which operate within written terms of reference approved by the Board. These committees report regularly to the Board.
Five scheduled board meetings were held in 2011. At each scheduled meeting, the Board considers a report on current operations and significant business issues, such as major divestment proposals and strategy. A financial report is provided by the Chief Financial Officer and other reports and presentations are provided by senior management. Papers for each scheduled board meeting are usually provided during the week before the meeting.
The following were directors of the Company during 2011. They attended the following number of scheduled meetings of the Board and (where they were members) its committees during the year:
| Board | Audit | Remuneration | |
|---|---|---|---|
| Meetings held | 5 | 2 | 5 |
| Richard Christou | 4 | – | 4 |
| John Barnsley | 5 | 2 | 5 |
| Bernard Duroc-Danner | 5 | – | – |
| Glenn Payne | 5 | – | – |
| Robert Rayne | 5 | – | – |
| Mark Sebba | 5 | 2 | 5 |
| Antony Sweet | 5 | – | – |
| David Verey | 5 | 2 | 4 |
Attendances set out above include attendance in person or by telephone or video link. In addition to the scheduled Board meetings specified above, the Board held fourteen ad-hoc meetings during 2011. During 2011, no meetings of the Nomination Committee took place, but the Committee's responsibilities were carried out by the Special Committee. Four meetings of the Special Committee (described below) took place in December 2011 and January 2012 and these were attended by all members of the committee.
Each Board Committee has established terms of reference detailing its responsibilities and powers. These are available in the Investor Relations section of the Company's website at www.lmscapital.com.
The Audit Committee currently comprises Neil Lerner (Committee Chairman), Martin Knight and Mark Sebba. Messrs Knight and Lerner joined the Committee on 4 January 2012. During 2011 John Barnsley chaired this committee and was considered by the Board to have recent and relevant financial experience for the purpose of the Code. Of the present committee members, Neil Lerner is considered by the Board to have recent and relevant financial experience. The Chairman of the Committee may invite non-members to attend committee meetings and these typically include: a representative of the Company's external auditor, the Chief Financial Officer and other directors.
The Audit Committee met twice during 2011. Its role is to assist the Board with the discharge of its responsibilities in relation to the Company and Group financial statements including internal controls and external audits.
Additionally, the Audit Committee keeps under review the conduct of the external audit and its effectiveness. The Committee makes recommendations to the Board regarding the re-appointment or removal of the external auditor, their terms of engagement and the level of their remuneration. The Committee also reviews the process which is in place to ensure the independence and objectivity of the external auditors.
A policy regarding the engagement of the external auditors to supply non-audit services is in place. The policy recognises the importance of maintaining the objectivity and independence of the external auditors by minimising their involvement in projects of a non-audit nature. It is, however, also acknowledged that, due to their detailed understanding of the Company's business, it may sometimes be necessary to involve the external auditors in non-audit related work, principally comprising further assurance services relating to due diligence and other duties carried out in respect of acquisitions and disposals and tax services. During 2011, KPMG provided non-audit services, principally corporate tax advice. The fees paid to them for this work were £27,000.
The Audit Committee also monitors the Company's whistleblowing policy. Throughout 2011 John Barnsley, as the Company's senior independent Non-Executive director, acted as the contact for staff who may have a concern that they cannot raise under their normal chain of management. Neil Lerner now fulfils that role.
The Nomination Committee currently comprises Richard Christou, who chairs the Committee, Bernard Duroc-Danner, Martin Knight, Neil Lerner, Robert Rayne and Mark Sebba. Martin Knight and Neil Lerner joined the Committee on 4 January 2012. Throughout 2011 John Barnsley and David Verey served as members of this Committee. The Committee is responsible for assisting the Board in determining the composition and make-up of the Board. It is also responsible for periodically
reviewing the Board's structure and identifying potential candidates to be appointed as directors, as the need arises. The selection process is, in the Board's view, both rigorous and transparent in order to ensure that appointments are made on merit and against objective criteria set by the Committee. In the process by which Martin Knight and Neil Lerner were appointed, an external executive search consultant was engaged and, prior to the decision being taken, there was an opportunity for other directors to meet the proposed candidates. These appointments were handled by the Special Committee appointed on 24 November 2011, rather than by the Nomination Committee, in line with the delegation to that committee of certain specific duties by the Board following the change in strategic direction approved by shareholders on 30 November 2011. In reviewing potential candidates, directors took into account the need to consider the benefits of diversity on the Board.
When considering succession planning, the Committee looks at the balance, structure and composition of the Board and takes into account the future challenges and opportunities facing the Company.
The Nomination Committee normally meets as required, but at least once each year. During 2011, no meetings of this Committee took place, but the Committee's responsibilities were carried out in December 2011 by the Special Committee which met three times that month. Following the year end, the Special Committee and the Nomination Committee each met once, dealing with the appointment of new directors and officers, and the composition of committees.
The Remuneration Committee currently comprises Martin Knight, who chairs the Committee, Richard Christou and Mark Sebba. Martin Knight joined the Committee on 4 January 2012 and was appointed Committee Chairman in place of Richard Christou with effect from 10 February 2012. Throughout 2011 John Barnsley and David Verey served as members of this Committee. Further information about the Remuneration Committee is set out in the Remuneration Report on pages 20 to 27.
In addition to the principal Board committees described above, the Special Committee was established as a formal committee of the Board on 24 November 2011. Its members were: Mark Sebba, who chaired the Committee, Richard Christou and Robert Rayne. Its remit included conducting the search for and appointing two new Non-Executive directors, and reviewing the executive management team in the context of the revised investment strategy. These duties having been completed, the Committee was dissolved on 4 January 2012.
There is also an Operations Committee (previously known as the Investment Committee) which is not a formal committee of the Board. This currently comprises Robert Rayne, who chairs the Committee, Nick Friedlos and Antony Sweet, and Pieter Hooft and Jamie Szpiro from the investment team. The Committee meets regularly and is responsible for implementing investment and divestment decisions. It also makes proposals relating to the Company's investment and divestment policy for the Board to consider and for regularly reporting to the Board on the performance and management of the Company's investments.
The Audit Committee, on behalf of the Board, has overall responsibility for the Company's system of internal and financial controls and risk management and for reviewing the effectiveness of this system. Such a system can only be designed to manage, rather than eliminate, the risk of failure to achieve business objectives and can therefore only provide reasonable, and not absolute, assurance against material misstatement or loss.
The Audit Committee reviews the effectiveness of the Company's internal controls at least once a year and will take any necessary actions should any significant failings or weaknesses be identified. Internal controls, included within risk management, are a standing agenda item for each Audit Committee meeting.
Operational matters and the responsibility for the day-to-day management of the businesses are delegated to the Executive Director with responsibility for overseeing the orderly realisation of the assets of the Company and through him, as appropriate, to other managers acting within delegated authority limits and in accordance with clearly defined systems of control.
Financial matters and the responsibility for the day-to-day financial aspects of the business are delegated to the Chief Financial Officer and through him, as appropriate, to members of his financial team acting within delegated authority limits and in accordance with clearly defined systems of control. The Chief Financial Officer reports to the Board on financial matters at each board meeting.
Policies and procedures, which are subject to ongoing review and updated as required, are communicated across the Company and designed to ensure that they are properly and consistently applied in relation to significant risks, investment decisions and management issues arising within the Company. The Board believes that this delegated management structure ensures a strong link between overall corporate strategy and its implementation within an effective control environment.
The Company has no internal audit department, relying on in-house resource and external advisers to gain comfort on internal controls. In the Audit Committee's view, the information it has is sufficient to enable it to review the effectiveness of the Company's system of internal controls.
The Board is of the view that an ongoing process for identifying, evaluating and managing significant risks faced by the Group was in place during 2011 and up to the date of this report. Risk review is a continuing process embedded within the business. The business is also required to have processes to formally identify risks, consider financial and non-financial implications and, so far as possible, take action to reduce those risks. Details of risks potentially facing the Group can be found on pages 18 to 19.
The Company communicates regularly with its major institutional shareholders and ensures that all the directors, including the Non-Executive directors, have an understanding of the views and concerns of major shareholders about the
Company. This is achieved by the Executive directors maintaining contact from time to time with representatives of institutional shareholders to discuss matters of mutual interest relating to the Company and reporting back to the Board. Shareholders have the opportunity to meet any of the directors of the Company should they so wish.
Additionally, the Board uses the Annual General Meeting as an occasion to communicate with all shareholders, including private investors, who are provided with the opportunity to question the directors. At the Annual General Meeting the level of proxy votes lodged on each resolution is made available, both at the meeting and subsequently on the Company's website. Each substantially separate issue is presented as a separate resolution. Members of the Audit, Nomination and Remuneration Committees are available to answer questions from shareholders.
The interim and annual results of the Company, along with all other press releases, are posted on the Company's website, www.lmscapital.com, as soon as possible after they have been announced to the market. The website also contains an archive of all documents sent to shareholders, as well as details on the Company's investments, strategy and share price.
The directors have acknowledged, in the Statement of Directors' Responsibilities set out on page 31, their responsibility for preparing the financial statements of the Company and the Group. The external auditor has included, in the independent auditor's report set out on pages 32 to 33, a statement about their reporting responsibilities.
The directors are also responsible for the publication of an unaudited half-year management statement for the Company, which provides a balanced and fair assessment of the Company and Group financial position for the first six months of each accounting period. In addition, the Company produces two interim management statements, usually in May and November, which provide an unaudited quarterly review of the Company's financial position.
The Company's business activities, together with the factors likely to affect its future development, performance and position, are set out in the Operating Review on pages 4 to 6. The financial position of the Company, its cash flows, liquidity position and borrowing facilities are described in the financial review on pages 7 to 9.
In previous years, the consolidated financial statements have been prepared on a going concern basis. However, on 30 November 2011 the shareholders approved a change in the investment policy of the Company with the objective of conducting an orderly realisation of the assets of the Company in a manner that seeks to achieve a balance between an efficient return of cash to shareholders and maximising the value of the Company's investments. As the directors intend to liquidate the Company following the realisation and settlement of the remaining net assets, which may be over a number of years, these consolidated financial statements have not been prepared on a going concern basis. No adjustments were necessary to the investment valuations included in these consolidated financial statements as a consequence of this change in basis of preparation. Taking account of the financial resources available to it, the directors believe that the Group is well-placed to manage its business risks successfully despite the current uncertain economic outlook. After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources for the foreseeable future.
Richard Christou Chairman
15 March 2012
This section provides a summary of the principal risks and uncertainties that could have a material adverse effect on the Group's strategy, performance and financial condition. The Group has an ongoing process for identifying, evaluating and managing risk with the aim of mitigating the impact of the risks and uncertainties to which the business is exposed. This process provides reasonable, rather than absolute, assurance in managing risk and cannot eliminate it.
The Group's risk profile derives from a combination of two elements – the Group's own strategy, including the actions taken within that strategic framework, and the effects of changes in the external economic environment in which it operates, including the impact on the companies in its investment portfolio. The Board has taken into account the impact of the change in strategy agreed at the general meeting on 30 November 2011 in assessing the risks which could have a material effect on the achievement of the Group's revised objectives. This change has principally impacted communication with stakeholders and counterparties and staff retention and incentivisaton (see further details below). The Board is satisfied that the Group's risk management process is appropriate in the context of the revised strategy.
The Audit Committee oversees the Group's risk management process and is provided with a report on risk management at each of its meetings. The management of specific risks is the responsibility of the executive directors and members of the Group's senior management team.
The principal risks and uncertainties summarised below are not set out in order of probability of occurrence or materiality; the Group may also be adversely affected by other risks and uncertainties besides those described here.
The Group is subject to economic factors (such as the market demands of the sectors in which its investments operate) which may negatively impact the performance and growth rates of the Company's investments, which may result in the Company's Net Asset Value and net income declining. We seek to mitigate the potential impact of this by monitoring the trading performance and
cash flows of our portfolio companies on a regular basis which allows us to act quickly should there be a need to do so.
A lack of liquidity in the capital markets could mean that the Company may not be able to realise its investments in line with planned timings and values. This could impact the timing and amount of capital returned to shareholders under the Company's asset realisation strategy. Difficulties could arise in agreeing the Company's plans to realise investments with investee companies' management and investing partners leading to realisations being lower and/or later than planned.
Many of our investments produce little or no recurring income and the timing of realisations of unquoted investments (which itself may be a function of underlying economic conditions) cannot be ascertained with certainty. We rely on our detailed budgeting and forecasting procedures to ensure that the cash requirements of the Group are met. The Board regularly reviews the Company's working capital requirements and believes it has sufficient liquid resources to meet its expected cash obligations for the foreseeable future.
The Group is subject to the impact of changes in market prices for its quoted investments, as well as to movements in interest rates and exchange rates. A significant proportion of our investment portfolio is denominated in a currency other than pounds sterling, principally US dollars. Changes in the value of the US dollar affect the valuation of the Company's US investments, and therefore impact the valuation of the portfolio as a whole. The Group regards its exposure to exchange rate changes on the underlying investment as part of its overall investment return and monitors its overall exposure to foreign currencies at a portfolio level. It is the Board's current policy not to hedge the Company's underlying non-sterling investments.
The Group has made investments and by virtue of these investments may be obliged to make further capital contributions. Whilst the maximum amount of the future commitment is known, the timing of such capital calls cannot be predicted with certainty. The monitoring of this exposure is included in the Group's budgeting and forecasting procedures referred to above.
The Group's investment risk arises as a result of individual investment decisions and the performance of its investments. Our investment management process requires regular monitoring of the performance and prospects of each investment; this is usually achieved by board representation or equivalent at each investment. The experience of the executive management team is a key factor in mitigating our risk of loss on individual investments. The progress of each investment is reported regularly to the Board including an update on expected realisation timing and value.
The Group has a number of internal processes and systems to ensure that it complies with all legal and regulatory obligations, as well as internal controls designed to ensure the integrity of its financial information and reporting. The Audit Committee, on behalf of the Board, regularly reviews these systems, which include reports on the Company's risk management procedures.
The ability to retain capable people is of fundamental importance to the Group's strategy and the loss of key staff could adversely affect investment returns. The Group operates in a competitive industry and aims to remunerate staff in line with market practice. The asset realisation strategy initiated at the end of 2011 has increased the risk that staff retention will decline, particularly if the Company is unable to offer employment conditions which at least match other companies in our industry.
This Remuneration report describes the Company's overall remuneration policy and gives details of the remuneration arrangements for Directors for the year ended 31 December 2011. The report has been prepared in accordance with the Companies Act 2006 ("the Act") and the UK Corporate Governance Code issued by the Financial Reporting Council in June 2010 ("the Code").
In accordance with the Act, a resolution to approve this report will be put to shareholders at the forthcoming Annual General Meeting.
The information set out in the section headed "Directors' remuneration in 2011" is, in accordance with the Act, subject to audit by the Company's auditor. The remainder of the information in this report is not subject to audit.
The Board has delegated to the Remuneration Committee responsibility for reviewing and recommending the remuneration strategy and policies for the Company and for setting the remuneration of the executive directors.
To achieve this, the responsibilities of the Committee are to:
The Committee is made up of Non-Executive directors, the members during 2011 being:
John Barnsley and David Verey resigned as directors on 4 January 2012 and Martin Knight was appointed a member of the Committee on that date. He became Chairman of the Committee at the conclusion of its meeting on 9 February 2012.
Under the Code and the terms of reference of the Committee, at least two independent Non-Executive directors must serve on the Committee. Richard Christou, John Barnsley, Mark Sebba and David Verey are considered by the Board to be independent Non-Executive directors, as is Martin Knight. The Committee invites the Chairman and the Executive directors to attend Committee meetings, when appropriate, to provide a management perspective on all aspects of employee compensation.
The Committee takes advice, where it considers it appropriate, on technical aspects of compensation policy from independent external consultants appointed by the Committee. Clifford Chance has provided advice on long-term incentive arrangements.
The Company's remuneration policy is designed to ensure that the Company is able to attract, motivate and retain the talent required to run the Company successfully. The Company aims to structure the remuneration of Executive directors and senior management in such a way as to motivate them to perform in the best interests of shareholders.
The Company compensates its Executive directors and senior management by balancing the following elements of compensation:
The mix of these components is managed to create a total compensation package which should be:
The Committee reviews remuneration policy on a regular basis. A review is currently underway as a consequence of the Company's change in strategy, following its general meeting in November 2011. As stated in the letter to shareholders of 7 November 2011, the intention is to establish arrangements for 2012 and beyond which will align management's interests with those of shareholders in the wind down process and will, if required, be subject to shareholder approval.
Base salaries The fixed compensation elements of Executive directors and senior management are reviewed annually by the Committee, having regard to individual performance and comparative market data. Base salaries are generally around the median of the market compared with other entities of similar size in the private equity sector. Base salary is the only element of remuneration which is pensionable.
Benefits-in-kind The benefits-in-kind available to Executive directors are pension contribution, private healthcare, life assurance, personal accident cover, permanent health insurance and subsidised gym membership.
Bonuses Annual bonuses, which are nonpensionable, are based upon achievement of targets set by the Committee, having regard to the Company's performance and individual achievement of operational goals. The aim is to incentivise Executive directors and senior management to achieve outstanding performance, and to ensure that a significant proportion of their total remuneration is provided in the form of variable compensation. For 2011 the bonus target was 100% assuming a good market and the achievement of the targets set by the Committee.
Share-based incentives The Committee considers the grant of share-based incentives to Executive
directors and other executives. The Committee made awards under the Performance Share Plan following publication of the Company's results for 2010. The Committee has determined that in the context of a realisation strategy, further share based awards are not an effective form of incentive. Accordingly no further awards are proposed under the existing share incentive plans. The schemes in operation during 2011 are described below.
This Plan, approved by shareholders, was established as an inducement to recruitment for key executives of the Company. Participants may receive only one grant. No more than 3% of the shares in issue may be awarded under this Plan, and in any ten year period the number of shares issued under this Plan, the Executive Share Option Plan and the Performance Share Plan together may not exceed 5% of the shares in issue. The rules permit an individual award up to a normal maximum of 0.5% of the shares in issue, although in exceptional circumstances the Committee may grant an award in excess of this.
The performance condition is that the increase in the Net Asset Value per share must exceed the increase in the Retail Prices Index by an average of at least 3% per annum. In the case of an award of up to 0.5% of the shares in issue, one third may be released on the first anniversary of the award date, the second third on the second anniversary and the final third on the third anniversary. Where an award exceeds 0.5%, the release takes place over a four year period. The Committee may decide at its discretion that, when shares are due to be released, the participant may be given the cash equivalent of the market value of the shares.
In the event of a change of control awards may be released early provided that the performance condition has been satisfied or the Remuneration Committee determines that the performance condition should be treated as satisfied. However the Committee may at its discretion reduce the award to take into account the length of time between the date of award and the date of the change of control.
Awards in the form of nil-cost options have been made as follows:
| No. of shares |
First release date |
Final release date |
Expiry date |
Outstanding at 31 December 2011 |
|
|---|---|---|---|---|---|
| Award made on 13 April 2010 | |||||
| Glenn Payne | 1,500,000 | 13 April 2011 | 31 December 2011* | 30 June 2013 | 1,125,000 |
| Antony Sweet | 100,000 | 13 April 2011 | 13 April 2013 | 12 April 2020 | 66,667 |
| Total | 1,191,667 |
* This is the date on which Mr Payne's service contract came to an end.
Movements in the year were as follows:
| Glenn Payne |
Antony Sweet |
Total 2011 |
Total 2010 |
|
|---|---|---|---|---|
| Outstanding at 1 January | 1,500,000 | 100,000 | 1,600,000 | 716,073 |
| Awards during the year | – | – | – | 1,600,000 |
| Lapsed during the year | (375,000) | (33,333) | (408,333) | (716,073) |
| Outstanding at 31 December | 1,125,000 | 66,667 | 1,191,667 | 1,600,000 |
For those shares awarded on 13 April 2010, the performance condition for the first release was satisfied and shares were released on 13 April 2011 as follows:
• 375,000 shares with a market value of £230,000 were released to Mr Payne;
• 33,333 shares with a market value of £20,000 were released to Mr Sweet.
In addition the performance condition over 750,000 shares awarded to Mr Payne was deemed satisfied on his leaving date such that the shares (market value £417,000) were released to him and the related options are exercisable by him until 30 June 2013.
The performance condition for the second release is not expected to be satisfied and the related share award is shown as lapsed during 2011. The lapses in 2010 relate to a previous award to Mr Rayne in 2007.
The Company has a share option plan that entitles directors and employees to purchase shares in the Company at the market price of the shares at the date of grant of the option, subject to Company performance criteria. Under the terms of the scheme, options may be exercised between three and ten years after the date of grant. At 31 December 2011 there were no option grants outstanding under this plan (2010: nil).
The rules of the Plan, approved by shareholders, permit an annual award of performance shares up to 150% of the participant's basic salary, if no grant is made to that person under the Executive Share Option Plan in that year.
For those awards granted in 2009, the performance conditions are that for one half of the award the Total Shareholder Return (TSR) over the three year measurement period must exceed the median Total Shareholder Return of the FTSE 250 Index. At the 50th percentile TSR, 12.5% of the total shares will vest, rising on a straight-line basis to 50% vesting at the 75th percentile TSR and above. For the other half of the award, the increase in the Net Asset Value per share over the period must exceed the increase in the Retail Prices Index (RPI) by at least 3% per annum. At RPI plus 3%, 12.5% of the total shares that are subject to the award will vest, rising on a straight-line basis to 50% vesting if the increase in Net Asset Value per share exceeds RPI by 8% per annum.
For those awards granted in 2010 and onwards, the performance conditions are that, for 25% of the total award to vest, TSR over the three year measurement period must exceed the median Total Shareholder Return of the FTSE All-Share Index. For the remaining 75% of the award, the increase in Net Asset Value per share over the period must exceed the increase in RPI by at least 3% per annum. At RPI plus 3%, 18.75% of the total shares that are subject to the award will vest, rising on a straight-line basis to the remaining 75% vesting if the increase in Net Asset Value per share exceeds RPI by 8% per annum.
In the event of a change of control awards may be released early provided that the performance condition has been satisfied or the Remuneration Committee determines that the performance condition should be treated as satisfied. However the Committee may at its discretion reduce the award to take into account the length of time between the date of award and the date of the change of control.
Awards of shares in the form of nil-cost options which remain outstanding are as follows:
| Grant date | No. of shares | Release date | Expiry date | |
|---|---|---|---|---|
| Robert Rayne | 13 April 2010 | 683,451 | 13 April 2013 | 12 April 2020 |
| 11 April 2011 | 509,298 | 11 April 2014 | 10 April 2021 | |
| Antony Sweet | 13 April 2010 | 259,789 | 13 April 2013 | 12 April 2020 |
| 11 April 2011 | 252,111 | 11 April 2014 | 10 April 2021 |
There were no releases of performance share awards in 2011 (2010: nil). A performance share award was made to Mr Payne in 2011, but it lapsed on 31 December 2011 on termination of his employment.
The Committee aims to ensure that incentive arrangements are competitive with the private equity industry. The Executive directors and Robert Rayne participate in the carried interest arrangements in place for staff involved in the management and development of the investment portfolio.
For the 2009 and previous pools, carried interest will be payable in respect of pre-tax net capital gains on investments, excluding third party fund investments, after a preferred return to the Company, currently at the rate of 6% per annum. The preferred return is a threshold beyond which carried interest is payable.
For the 2010 and 2011 pools, carried interest will be payable in respect of pre-tax net capital gains on investments, after a hurdle of 8% is reached, which is more usual practice in the private equity sector.
The percentage of eligible capital gains which may be allocated to participants in aggregate may not exceed 20%. Participants are allocated a proportion of the overall maximum at the commencement of each annual pool and may be diluted by new joiners during the life of the pool up to a maximum of 20%. The rules also include provision for reduction in the proportion allocated to each participant in the event that person ceases to be an employee.
No carried interest payments were made in the year ended 31 December 2011 (2010: £nil).
The Committee considers the FTSE All-Share Index a relevant index for Total Shareholder Return and comparison disclosure as it represents a broad equity market index of which the Company is a member.
The performance graph below shows the Company's Total Shareholder Return performance for the five year period ended 31 December 2011 compared with that of the FTSE All-Share Index.
Total Shareholder Return graph since 1 January 2007
The Committee's general policy is that all Executive directors should have rolling contracts of employment with notice periods of 12 months from the Company and six months from the director. Each contract states that it will terminate on the director reaching age 65.
The following table provides details of the Executive directors' service contracts:
| Date of appointment |
Date of contract |
Notice period from company | Notice period from director |
|
|---|---|---|---|---|
| Nick Friedlos | 9 February 2012 | 21 March 2012 | 12 months until December 2013, reducing in stages to 6 months by June 2014 |
6 months |
| Antony Sweet | 6 April 2006 | 14 March 2007 | 12 months | 6 months |
Notes:
Each of these contracts is a rolling contract.
Mr Friedlos is entitled to a basic salary of £220,000 per annum plus benefits-in-kind. He is not entitled to a pension contribution.
The Executive directors' service contracts enable the Company at its option to make payment in lieu of notice upon early termination of the contract. Following a change of control, there is provision for either the Company or the Executive director to terminate employment upon payment of 95% of annual salary and benefits.
The Committee's policy is for all Non-Executive directors to have letters of appointment with the Company. Under their letters of appointment, both Non-Executive directors and the Company are required to give one month's notice to terminate appointments. Non-Executive directors are subject to the re-election requirements under the Company's Articles of Association. There are no provisions for Non-Executive directors to receive compensation upon early termination.
The following table provides details of the Non-Executive directors' letters of appointment:
| Date of appointment | Date of expiry of current term | |
|---|---|---|
| John Barnsley | 7 April 2006 | Resigned 4 January 2012 |
| Richard Christou | 7 April 2006 | 11 May 2014 |
| Bernard Duroc-Danner | 7 April 2006 | 13 May 2013 |
| Martin Knight | 4 January 2012 | 17 May 2012 |
| Neil Lerner | 4 January 2012 | 17 May 2012 |
| Robert Rayne | 6 April 2006 | 1 October 2013 |
| Mark Sebba | 28 September 2010 | 11 May 2014 |
| David Verey | 7 September 2009 | Resigned 4 January 2012 |
Fees for Non-Executive directors are usually determined every two years by the Board as a whole (upon the recommendation of the executive directors), based on market information and in accordance with the restrictions contained in the Company's Articles of Association.
The current fees for Non-Executive directors, which are non-pensionable, are:
Mr Rayne was an Executive director from 6 April 2006 to 1 October 2010, whereupon he became Non-Executive Chairman. Under Mr Rayne's letter of appointment as Non-Executive Chairman, he participated in the carried interest plan and share option schemes up to the end of 2011, and was entitled to cover under the Company's various insurance policies. The other Non-Executive directors do not participate in the Company's incentive plans or share schemes or other benefits.
With effect from 4 January 2012, Mr Rayne stepped down as Chairman, remaining a Non-Executive director. His fee has reduced accordingly. He also has a consulting agreement with the Company to provide advice in connection with the Company's realisation plans. He is entitled to a fee of £60,000 per annum under this consultancy arrangement.
The following table shows the total remuneration earned in respect of 2011.
| Salary/ Fees |
Benefits in kind1 |
Pension | Bonus | Compensation payment |
2011 Total |
2010 Total |
|
|---|---|---|---|---|---|---|---|
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | |
| John Barnsley | 45 | – | – | – | – | 45 | 45 |
| Richard Christou | 45 | – | – | – | – | 45 | 45 |
| Bernard Duroc-Danner | 40 | – | – | – | – | 40 | 40 |
| Glenn Payne2 | 330 | 6 | 50 | 200 | 360 | 946 | 590 |
| Robert Rayne Executive | – | – | – | – | – | – | 456 |
| Robert Rayne3 Non-Executive |
100 | 20 | – | – | – | 120 | 30 |
| Mark Sebba | 40 | – | – | – | – | 40 | 10 |
| Antony Sweet | 215 | 11 | 32 | 200 | – | 458 | 453 |
| David Verey | 40 | – | – | – | – | 40 | 40 |
| Jonathan Agnew | – | – | – | – | – | – | 31 |
| Total | 855 | 37 | 82 | 400 | 360 | 1,734 | 1,740 |
Notes:
Benefits-in-kind for Executive directors shown above are insurances and subsidised gym membership.
The amounts for Mr Payne are up to the date of his leaving the Company, being 31 December 2011. He was paid £360,000 (comprising compensation for salary, bonus and benefits for the 12 month notice period to which he was entitled under the terms of his service contract) as a termination payment and he remains interested in the carried interest plan. In addition the performance condition over 750,000 shares awarded to him in 2010 under the Deferred Share Bonus Plan was deemed satisfied such that the shares were released to him and the related options are exercisable by him at nil cost within 18 months of his leaving date.
Under Mr Rayne's letter of appointment as Non-Executive Chairman, he was entitled to cover under the Company's various insurance policies.
Fees payable in respect of Executive directors serving as Non-Executive directors of companies to which they were nominated by the Company are not retained by them but paid to the Company.
In setting Executive directors' salaries for 2011, the Committee took into account current economic and market factors as well as the salaries and benefits received by other employees of the Company. For 2012, Mr Sweet's salary is unchanged from 2011.
Mr Sweet receives contributions into a personal pension arrangement of 15% of base salary.
The beneficial interests of those directors who held office at 31 December 2011 in the ordinary shares of the Company are set out below.
| At 31 December |
At 31 December |
|
|---|---|---|
| 2011 | 2010 | |
| John Barnsley | 350,000 | 317,000 |
| Richard Christou | 169,965 | 169,965 |
| Bernard Duroc-Danner | 550,800 | 550,800 |
| Robert Rayne | 8,208,356 | 8,208,356 |
| Mark Sebba | 210,000 | 210,000 |
| Antony Sweet | 51,702 | 1,702 |
| David Verey | 309,000 | 309,000 |
The following directors had non-beneficial interests in the ordinary share capital of the Company:
• Robert Rayne holds a non-beneficial interest in 21,748,571 ordinary shares held in trust.
Except as stated above:
Martin Knight Chairman, Remuneration Committee
15 March 2012
The directors present their report and the audited financial statements of the Group for the year ended 31 December 2011.
LMS Capital plc is an international investment company whose shares are traded on the London Stock Exchange. The investment portfolio comprises publicly quoted and private company investments in both the UK and the US held directly and through funds.
On 30 November 2011, shareholders approved a change in the investment policy of the Company with the objective of conducting an orderly realisation of the assets of the Company in a manner that seeks to achieve a balance between an efficient return of cash to shareholders and maximising the value of the Company's investments. As the directors intend to liquidate the Company following the realisation and settlement of the remaining net assets, which may be over a number of years, they have not prepared the financial statements on a going concern basis. The effect of this is explained in note 1 to the consolidated financial information.
A detailed review of the Group's activities and performance during the year, together with details of events since the year end and likely future developments, can be found within the following sections of this Annual Report, which are deemed to be incorporated by reference into this report:
The Group has analysed and considered its social, environmental and ethical risks and found none to be material. The Company Secretary of LMS Capital monitors the Company's corporate and
social responsibility and feedback to the Board is provided where applicable.
As part of the due diligence undertaken when making an investment, the Company looks at the potential investment's record on environmental and social matters to satisfy itself that the investment is responsibly managed in this area.
The total number of employees employed by the Group, as at 31 December 2011, was 243 (31 December 2010: 251). Employees are kept informed about significant business issues and the Group's performance by means of regular meetings, email updates and other in-house communications.
Should an LMS Capital employee become disabled while in the Company's employ, the Company will continue to employ that person in the same role if possible, or do its utmost to find a role suitable for that employee, including arranging appropriate training. The Company gives full and fair consideration to applications for employment by disabled people, having regard to their particular aptitudes and abilities.
The Group ensures that it reduces its environmental impact wherever possible. In January 2011 the Company moved to and refitted new premises. As part of the refit, it installed environmentally friendly fittings (such as motion sensor lighting) and used recycled materials wherever possible. Some of the materials removed as part of the fit out were recycled by an investee company in their new premises. Any surplus office equipment resulting from the move was either given away to charities or disposed of in a responsible and environmentally friendly manner. Video conferencing facilities are available to reduce business travel where possible.
The new premises are more modern and energy efficient than the previous premises and under the lease for the new premises the Company and its landlord have agreed to devise and comply with an energy management plan; to operate initiatives to reduce, reuse and recycle waste; and to maintain and share data about energy and resource consumption to ensure that the premises are used in accordance with the energy management plan and in a way which improves energy efficiency.
Office waste is recycled and segregated wherever possible. During 2011, the Company produced 932 bags of waste of which nearly half were recycled. The Company will endeavour to increase the proportion recycled during 2012.
The majority of the Company's employees travel to the office using public transport.
The Group did not make any charitable donations during 2011 (2010: £nil). However LMS Capital does provide without charge office accommodation and services within its premises for The Rayne Foundation (www.raynefoundation.org.uk). The estimated monetary value of this in 2011 was £44,000 (2010: £23,000). The Rayne Foundation aspires to understand and engage with the needs of UK society, and to find ways and means to help address those needs. It focuses on work which has wider than just local application or which is of national importance. It does this within four sectors: the Arts; Education; Health & Medicine; and Social Welfare & Development.
In addition, LMS Capital provides the use of its meeting rooms and facilities to two charities: The Chicken Shed Theatre Company (www. chickenshed.org.uk) and The Place2Be (www.theplace2be.org.uk), for their trustee meetings and other functions.
Individual fund raising activities by employees of the Group are supported by their respective employers and colleagues.
The Group did not make any political donations during 2011 (2010: £nil).
LMS Capital's policy and practice in the UK is to agree terms of payment with suppliers at the time of contract and to make payment in accordance with those terms, subject to satisfactory performance. The Company does not follow any code or standard on payment practice. At 31 December 2011, trade creditors of the Company had an average of approximately 31 days outstanding (31 December 2010: 31 days). There is no creditor payment policy in force for the Group as a whole.
There are no contracts or arrangements with third parties which the Board deem essential to the operation of the Company.
In January 2011, the Company moved office to 100 George Street, London W1U 8NU. The landlord of this property is Derwent London plc. Robert Rayne is Non-Executive Chairman of Derwent London plc. Weatherford International Ltd, which previously occupied a floor of Carlton House, 33 Robert Adam Street, London W1U 3HR (the Company's previous office), contributed £450,000 towards the Company's office move so that it could take on the lease for the whole of Carlton House. Both Robert Rayne and Bernard Duroc-Danner are directors of Weatherford International Ltd and LMS Capital plc holds shares in Weatherford International Ltd.
The Board has decided not to recommend the payment of a dividend in respect of the year ended 31 December 2011 (2010: £nil).
The names and biographical details of the current directors of the Company are given on pages 10 to 11. In addition, further information about the Board is set out in the corporate governance report on pages 12 to 17.
Details of the current directors' service contracts and letters of appointment, together with their interests in the Company's shares, are shown in the Remuneration Report on pages 20 to 27. The Company maintains directors' and officers' liability insurance and provides the directors and officers with a qualifying third party indemnity within the limits permitted by the Companies Act 2006.
The Company's share capital is comprised of ordinary shares of 10p each and, as at 15 March 2012, there are 272,674,285 shares in issue. Each share carries one vote. No shares are currently held in treasury. There are no restrictions on the transfer of shares.
As at 15 March 2012, the Company has been notified that the following persons are interested (directly or indirectly) in 3% or more of the Company's voting rights:
| Name | Number of shares or voting rights held |
Percentage of issued share capital |
|---|---|---|
| Schroders plc1 | 49,414,714 | 18.12 |
| Withers Trust Corporation Ltd2 | 41,803,802 | 15.33 |
| Trustees of Lord Rayne's Will Trust2 | 35,152,624 | 12.89 |
| Lady Jane Rayne2 | 27,494,405 | 10.08 |
| Jupiter Asset Management Ltd3 | 22,123,614 | 8.11 |
| Mantra Investissement SCA4 | 13,645,222 | 5.00 |
| Taube Hodson & Stonex Partners LLP | 12,573,061 | 4.61 |
| Mineworkers Pension Scheme1 | 8,830,834 | 3.24 |
| British Coal Staff Superannuation Scheme1 | 8,410,952 | 3.09 |
| Robert Rayne | 8,208,356 | 3.01 |
The figure includes shares held by Schroders plc in their own right as well as shares managed by Schroders plc on behalf of the Mineworkers Pension Scheme and British Coal Staff Superannuation Scheme.
There are common interests in certain of these shares.
14,817,277 shares (5.43%) are managed by Jupiter Asset Management Ltd on behalf of The Rayne Foundation, which controls the voting rights attached to these shares.
Notification of this holding was received on 11 January 2012. The notification in force at the year end related to 8,786,373 shares, equivalent to 3.2% of the Company's issued share capital.
The Company's Annual General Meeting will be held at Durrants Hotel, George Street, London W1H 5BJ at 12 noon on 17 May 2012. The notice of meeting, which includes explanatory notes and provides full details of the resolutions being proposed at the Annual General Meeting, is available to view on the Company's website at www.lmscapital.com.
The auditor, KPMG Audit Plc, has indicated their willingness to continue in office and resolutions will be proposed at the forthcoming Annual General Meeting to re-appoint them as auditor and to authorise the directors to fix their remuneration.
The directors who held office at the date of approval of this report each confirm that, so far as they are aware, there is no relevant audit information (as defined by Section 418 (3) of the Companies Act 2006) of which the Company's auditor is unaware; and each director has taken all the steps that ought to have been taken as a director to make himself aware of any relevant audit information and to establish that the Company's auditor is aware of that information.
By order of the Board.
Jon Edis-Bates Company Secretary
15 March 2012
The directors are responsible for preparing the Annual Report and the group and parent company financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare group and parent company financial statements for each financial year. Under that law they are required to prepare the group financial statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the parent company financial statements on the same basis.
Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and parent company and of their profit or loss for that period. In preparing each of the group and parent company financial statements, the directors are required to:
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
We confirm that to the best of our knowledge:
For and on behalf of the Board
15 March 2012
Nick Friedlos Antony Sweet Director Chief Financial Officer
We have audited the financial statements of LMS Capital plc for the year ended 31 December 2011 set out on pages 34 to 79. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
As explained more fully in the Directors' Responsibilities Statement set out on page 31, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.
A description of the scope of an audit of financial statements is provided on the APB's website at www.frc.org.uk/apb/scope/private.cfm.
In our opinion:
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure made in note 1 to the financial statements which explains that the financial statements are now not prepared on the going concern basis for the reason set out in that note.
In our opinion:
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
Under the Listing Rules we are required to review:
Chartered Accountants
8 Salisbury Square London EC4Y 8BB
15 March 2012
| Year ended 31 December 2011 |
Year ended 31 December 2010 |
||
|---|---|---|---|
| Notes | £'000 | £'000 | |
| Continuing operations | |||
| Revenue from sales of goods and services | 2 | 47,334 | 38,132 |
| Gains and losses on investments | 2 | 7,912 | 29,331 |
| Interest income | 3 | 65 | 34 |
| Dividend income | 4 | 801 | 35 |
| Other income from investments | 4 | 360 | 878 |
| 56,472 | 68,410 | ||
| Operating expenses | 5 | (55,903) | (40,589) |
| Profit before finance costs | 569 | 27,821 | |
| Finance costs | 7 | (941) | (1,160) |
| (Loss)/profit before tax | (372) | 26,661 | |
| Taxation | 8 | (595) | (1,567) |
| (Loss)/profit from continuing operations | (967) | 25,094 | |
| Discontinued operations | |||
| Gain/(loss) from discontinued operations (net of taxation) | 9 | 2,232 | (12,559) |
| Profit for the year | 1,265 | 12,535 | |
| Attributable to: | |||
| Equity holders of the parent | 561 | 10,984 | |
| Non-controlling interests | 704 | 1,551 | |
| 1,265 | 12,535 | ||
| Earnings per ordinary share - basic | 10 | 0.2p | 4.0p |
| Earnings per ordinary share - diluted | 10 | 0.2p | 3.9p |
| Continuing operations | |||
| Earnings/(loss) per ordinary share - basic | 10 | (0.6)p | 8.6p |
| Earnings/(loss) per ordinary share - diluted | 10 | (0.6)p | 8.5p |
| Year ended 31 December 2011 £'000 |
Year ended 31 December 2010 £'000 |
|
|---|---|---|
| Profit for the year | 1,265 | 12,535 |
| Exchange differences on translation of foreign operations | 216 | (113) |
| Total comprehensive profit for the year | 1,481 | 12,422 |
| Attributable to: | ||
| Owners of the Parent | 777 | 10,871 |
| Non-controlling interests | 704 | 1,551 |
| 1,481 | 12,422 |
| 31 December | 31 December | ||
|---|---|---|---|
| 2011 | 2010 | ||
| Non-current assets | Notes | £'000 | £'000 |
| Property, plant and equipment | 11 | 6,931 | 9,491 |
| Intangible assets | 12 | 33,381 | 28,123 |
| Investments | 13 | 185,201 | 220,703 |
| Other long-term assets | 20 | 43 | |
| Non-current assets | 225,533 | 258,360 | |
| Current assets | |||
| Inventories | 14 | 200 | 1,851 |
| Operating and other receivables | 15 | 14,881 | 12,818 |
| Cash and cash equivalents | 16 | 34,858 | 13,229 |
| Current assets | 49,939 | 27,898 | |
| Total assets | 275,472 | 286,258 | |
| Current liabilities | |||
| Interest-bearing loans and borrowings | 17 | (2,420) | (18,812) |
| Operating and other payables | 18 | (10,163) | (13,859) |
| Deferred income | 19 | (7,221) | (5,014) |
| Current tax liabilities | (1,406) | (2,276) | |
| Current liabilities | (21,210) | (39,961) | |
| Non-current liabilities | |||
| Interest-bearing loans and borrowings | 17 | (9,406) | (4,597) |
| Deferred income | 19 | (1,777) | (2,084) |
| Deferred tax liabilities | 20 | (469) | (614) |
| Provisions and other long-term liabilities | 21 | (2,222) | (172) |
| Non-current liabilities | (13,874) | (7,467) | |
| Total liabilities | (35,084) | (47,428) | |
| Net assets | 240,388 | 238,830 | |
| Equity | |||
| Share capital | 22 | 27,268 | 27,265 |
| Share premium | 17 | – | |
| Capital redemption reserve | 5,635 | 5,635 | |
| Merger reserve | 84,083 | 84,083 | |
| Foreign exchange translation reserve | 1,115 | 899 | |
| Retained earnings | 118,794 | 117,827 | |
| Equity attributable to owners of the parent | 236,912 | 235,709 | |
| Non-controlling interests | 3,476 | 3,121 | |
| Total equity | 22 | 240,388 | 238,830 |
The financial statements on pages 34 to 79 were approved by the Board on 15 March 2012 and were signed on its behalf by:
Director
| 31 December | 31 December | ||
|---|---|---|---|
| 2011 | 2010 | ||
| Notes | £'000 | £'000 | |
| Non-current assets | |||
| Property, plant and equipment | 11 | 759 | 339 |
| Investments in subsidiaries | 13 | 281,801 | 281,801 |
| Non-current assets | 282,560 | 282,140 | |
| Current assets | |||
| Operating and other receivables | 15 | 179 | 198 |
| Amounts receivable from subsidiaries | 15 | 23,766 | 26,231 |
| Cash and cash equivalents | 16 | 10,650 | 2,679 |
| Current assets | 34,595 | 29,108 | |
| Total assets | 317,155 | 311,248 | |
| Current liabilities | |||
| Interest bearing loans | 17 | – | (14,281) |
| Operating and other payables | 18 | (3,485) | (2,292) |
| Amounts payable to subsidiaries | 18 | (94,557) | (70,018) |
| Current liabilities | (98,042) | (86,591) | |
| Net assets | 219,113 | 224,657 | |
| Equity | |||
| Share capital | 22 | 27,268 | 27,265 |
| Share premium | 17 | – | |
| Capital redemption reserve | 5,635 | 5,635 | |
| Retained earnings | 186,193 | 191,757 | |
| Equity attributable to owners of the parent | 22 | 219,113 | 224,657 |
The financial statements on pages 34 to 79 were approved by the Board on 15 March 2012 and were signed on its behalf by:
| Capital | Non | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Share | Share | redemption | Merger | Translation | Retained | controlling | Total | ||
| capital | premium | reserve | reserve | reserve | earnings | Total | interests | equity | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Balance at 1 January 2010 |
27,265 | – | 5,635 | 84,083 | 1,012 | 106,773 | 224,768 | 850 | 225,618 |
| Total comprehensive income for the year |
|||||||||
| Profit for the year | – | – | – | – | – | 10,984 | 10,984 | 1,551 | 12,535 |
| Exchange differences on translation of foreign operations |
– | – | – | – | (113) | (113) | – | (113) | |
| Changes in ownership interests |
|||||||||
| Acquisition of non controlling interest with a change in control |
– | – | – | – | – | – | – | 967 | 967 |
| Disposal of non controlling interest without a change in control |
– | – | – | – | – | – | – | (247) | (247) |
| Transactions with owners, recorded directly in equity |
|||||||||
| Share-based payments | – | – | – | – | – | 70 | 70 | – | 70 |
| Balance at 31 December 2010 |
27,265 | – | 5,635 | 84,083 | 899 | 117,827 | 235,709 | 3,121 | 238,830 |
| Total comprehensive income for the year |
|||||||||
| Profit for the year | – | – | – | – | – | 561 | 561 | 704 | 1,265 |
| Exchange differences on translation of foreign operations |
– | – | – | – | 216 | – | 216 | – | 216 |
| Changes in ownership interests |
|||||||||
| Acquisition of non controlling interest with a change in control |
– | – | – | – | – | – | – | 233 | 233 |
| Transactions with owners, recorded directly in equity |
|||||||||
| Distributions to non-controlling interests |
– | – | – | – | – | – | – | (582) | (582) |
| Share-based payments | – | – | – | – | – | 406 | 406 | – | 406 |
| Shares issued in the year | 3 | 17 | – | – | – | – | 20 | – | 20 |
| Balance at 31 December 2011 |
27,268 | 17 | 5,635 | 84,083 | 1,115 | 118,794 | 236,912 | 3,476 | 240,388 |
| Capital | |||||
|---|---|---|---|---|---|
| Share capital £'000 |
Share premium £'000 |
redemption reserve £'000 |
Retained earnings £'000 |
Total equity £'000 |
|
| Balance at 1 January 2010 | 27,265 | – | 5,635 | 194,966 | 227,866 |
| Total comprehensive income for the year |
|||||
| Loss for the year | – | – | – | (3,279) | (3,279) |
| Transactions with owners, recorded directly in equity |
|||||
| Share-based payments | – | – | – | 70 | 70 |
| Balance at 31 December 2010 | 27,265 | – | 5,635 | 191,757 | 224,657 |
| Total comprehensive income for the year |
|||||
| Loss for the year | – | – | – | (5,970) | (5,970) |
| Transactions with owners, recorded directly in equity |
|||||
| Share-based payments | – | – | 406 | 406 | |
| Shares issued in the year | 3 | 17 | – | – | 20 |
| Balance at 31 December 2011 | 27,268 | 17 | 5,635 | 186,193 | 219,113 |
| Notes | Year ended 31 December 2011 £'000 |
Year ended 31 December 2010 £'000 |
|
|---|---|---|---|
| Cash flows from operating activities | |||
| Profit for the year | 1,265 | 12,535 | |
| Adjustments for: | |||
| Depreciation and amortisation | 5 | 3,505 | 2,450 |
| Impairment of intangible assets | 12 | – | 7,665 |
| Gains on investments | (7,912) | (29,331) | |
| (Gain)/loss on sale of discontinued operations, net of income tax | 9 | (3,300) | 2,015 |
| Translation differences | 557 | (280) | |
| Share-based payments | 23 | 406 | 70 |
| Finance costs | 941 | 1,234 | |
| Interest income | (65) | (37) | |
| Income tax expense | 595 | 1,567 | |
| (4,008) | (2,112) | ||
| Change in inventories | 1,537 | (1,039) | |
| Change in operating and other receivables | (2,860) | (1,056) | |
| Change in operating and other payables | 4,563 | 1,317 | |
| (768) | (2,890) | ||
| Interest paid | (941) | (1,234) | |
| Income tax paid | (1,458) | (298) | |
| Net cash used in operating activities | (3,167) | (4,422) | |
| Cash flows from investing activities | |||
| Interest received | 65 | 37 | |
| Acquisition of property, plant and equipment | 11 | (2,628) | (3,737) |
| Acquisition of deferred installation asset | 12 | (2,365) | (1,433) |
| Disposals of property, plant and equipment | 39 | 85 | |
| Disposals of discontinued operations, net of cash disposed of | 9 | 1,079 | 165 |
| Other disposals | – | 1,560 | |
| Acquisition of investments | 13 | (15,398) | (26,991) |
| Acquisition of subsidiaries, net of cash acquired | 25 | (2,651) | (7,450) |
| Proceeds from sale of investments | 57,967 | 23,880 | |
| Net cash from/(used in) investing activities | 36,108 | (13,884) | |
| Cash flows from financing activities | |||
| Issue of new shares | 20 | – | |
| Drawdown of interest bearing loans | 7,919 | 15,133 | |
| Repayment of interest bearing loans | (18,685) | – | |
| Distributions paid to non-controlling interests | (582) | – | |
| Disposal of non-controlling interest without a change in control | – | (247) | |
| Net cash (used in)/from financing activities | (11,328) | 14,886 | |
| Net increase/(decrease) in cash and cash equivalents | 21,613 | (3,420) | |
| Cash and cash equivalents at the beginning of the year | 13,229 | 16,581 | |
| Effect of exchange rate fluctuations on cash held | 16 | 68 | |
| Cash and cash equivalents at the end of the year | 34,858 | 13,229 | |
| Cash and cash equivalents above comprise | |||
| Cash and cash equivalents | 34,858 | 13,229 | |
| Bank overdrafts | – | – | |
| Cash and cash equivalents at the end of the year | 16 | 34,858 | 13,229 |
| Notes | Year ended 31 December 2011 £'000 |
Year ended 31 December 2010 £'000 |
|
|---|---|---|---|
| Cash flows from operating activities | |||
| Loss for the year | (5,970) | (3,279) | |
| Adjustments for: | |||
| Depreciation | 11 | 141 | 122 |
| Share-based payments | 23 | 406 | 70 |
| Interest income | (48) | (24) | |
| (5,471) | (3,111) | ||
| Change in operating and other receivables | 19 | 545 | |
| Change in operating and other payables | 1,193 | 332 | |
| Change in amounts due to subsidiaries | 27,004 | (13,366) | |
| Net cash from/(used in) operating activities | 22,745 | (15,600) | |
| Cash flows from investing activities | |||
| Interest received | 48 | 24 | |
| Acquisition of property, plant and equipment | (585) | (303) | |
| Disposal of property, plant and equipment | 24 | – | |
| Net cash used in investing activities | (513) | (279) | |
| Cash flows from financing activities | |||
| Issue of new shares | 20 | – | |
| Repayment of interest bearing loans | (14,281) | 14,281 | |
| Net cash (used in)/from financing activities | (14,261) | 14,281 | |
| Net increase/(decrease) in cash and cash equivalents | 7,971 | (1,598) | |
| Cash and cash equivalents at the beginning of the year | 2,679 | 4,277 | |
| Cash and cash equivalents at the end of the year | 10,650 | 2,679 | |
| Cash and cash equivalents above comprise | |||
| Cash and cash equivalents | 10,650 | 2,679 | |
| Bank overdrafts | – | – | |
| Cash and cash equivalents at the end of the year | 16 | 10,650 | 2,679 |
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 2011 comprise the Company and its subsidiaries (together "the Group").
The Company was formed on 17 March 2006 and com menced 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 consistent with other investment companies, the results of the Group's investment business on a standalone basis are set out in Note 2.
These financial statements have been prepared in accordance with International Financial Reporting Standards as adopted for use in the European Union ("Adopted IFRS"). The Company is taking advantage of the exemption in Section 408 of the Companies Act 2006 not to present its individual income statement and related notes that form a part of these approved financial statements.
In previous years, the consolidated financial statements have been prepared on a going concern basis. However, on 30 November 2011 the shareholders approved a change in the investment policy of the Company with the objective of conducting an orderly realisation of the assets of the Company in a manner that seeks to achieve a balance between an efficient return of cash to shareholders and maximising the value of the Company's investments. As the Directors intend to liquidate the Company following the realisation and settlement of the remaining net assets, which may be over a number of years, these consolidated financial statements have not been prepared on a going concern basis. No adjustments were necessary to the investment valuations included in these consolidated financial statements as a consequence of the change in the basis of preparation.
The Group's business activities and financial position are set out in the Operating and Financial review on pages 4 to 9. In addition Note 24 to the financial information includes a summary of the Group's financial risk management processes, details of its financial instruments and its exposure to credit risk and liquidity risk. Taking account of the financial resources available to it the directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook. After making enquiries the directors have a reasonable expectation that the Company and the Group have adequate resources for the foreseeable future.
These financial statements were authorised for issue by the directors on 15 March 2012.
The accounting policies set out below have been applied consistently for all periods. The comparative consolidated income statement has been re-presented as if an operation discontinued during the current year had been discontinued from the start of the comparative year (see note 9).
The financial statements have been prepared on the historical cost basis except for investments which are measured at fair value, with changes in fair value recognised in the consolidated income statement.
The accounting policies adopted are consistent with those of the previous financial year.
The preparation of financial statements in conformity with Adopted IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis; revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes:
The financial statements comprise the financial statements of the Company and its subsidiary undertakings up to 31 December 2011. The Company's subsidiary undertakings fall into two categories:
The financial statements of the subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The portfolio subsidiaries' financial statements are consolidated and restatements are made to comply with Adopted IFRS. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.
On acquisition the assets and liabilities of a subsidiary are measured at fair value and any excess of the cost of acquisition over the fair values of the identifiable net assets and contingent liabilities acquired is recognised as goodwill. If the cost of acquisition is lower than the fair value of the identifiable net assets and contingent liabilities acquired, the amount is credited to the income statement in the period of acquisition.
All intra Group transactions and profits or losses are eliminated on consolidation.
Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Investments that are held as part of the Group's investment portfolio are carried in the balance sheet at fair value even though the Group may have significant influence over those companies. This treatment is permitted by IAS 28: Investment in Associates, which requires investments held by investment companies to be excluded from its scope where those investments are designated upon initial recognition as investments held at fair value through profit or loss and accounted for in accordance with IAS 39, with changes in fair value recognised in the income statement in the period of the change. The Group has no interest in associates through which it carries on its investment management business.
Acquisitions and disposals of non-controlling interests
Acquisitions and disposals of non-controlling interests that do not result in a change of control are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. Any difference between the price paid or received and the amount by which non-controlling interests are adjusted is recognised directly in equity and attributed to the owners of the parent.
All business combinations are accounted for by applying the acquisition method. Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group.
For acquisitions on or after 1 January 2010, the Group measures goodwill at the acquisition date as:
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities, are expensed as incurred.
Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss.
On a transaction-by-transaction basis, the Group elects to measure non-controlling interests either at its fair value or at its proportionate interest in the recognised amount of the identifiable net assets of the acquiree at the acquisition date.
For acquisitions before 1 January 2010, goodwill represents the excess of the cost of the acquisition over the Group's interest in the recognised amount (generally fair value) of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess was negative, a bargain purchase gain was recognised immediately in profit or loss.
Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurred in connection with business combinations were capitalised as part of the cost of the acquisition.
Investments in subsidiaries are stated at cost less impairment losses. On disposal of such investments the difference between net disposal proceeds and the corresponding carrying amount is recognised in the income statement.
Intangible assets purchased separately from a business are capitalised at their cost. Intangible assets acquired as part of an acquisition are capitalised at their fair value where this can be measured reliably. Concessions, patents, licences and trademarks purchased by the Group are amortised to nil by equal annual instalments over their useful economic lives.
These are costs related to installation or acquisition of a distribution infrastructure for electric and/or water utilities for a designated housing community.
Such costs are amortised on a straight line basis over the guaranteed service contract period.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is tested annually for impairment.
The Group manages its investments with a view to profit from the receipt of dividends and changes in fair value of equity investments. Therefore all quoted investments, unquoted equity investments and managed funds investments are designated at fair value through profit and loss and carried in the balance sheet at fair value. Other investments including loan investments are classified as loans and receivables and carried in the balance sheet at amortised cost less impairment.
Fair values have been determined in accordance with the International Private Equity and Venture Capital Valuation Guidelines. These guidelines require the valuer to make judgments as to the most appropriate valuation method to be used and the results of the valuations.
Each investment is reviewed individually with regard to the stage, nature and circumstances of the investment and the most appropriate valuation method selected. The valuation results are then reviewed and any amendment to the carrying value of investments is made as considered appropriate.
Quoted investments for which an active market exists are valued at the closing bid price at the reporting date.
Unquoted direct investments for which there is no ready market are valued using the most appropriate valuation technique with regard to the stage and nature of the investment. Valuation methods that may be used include:
Funds
Investments in managed funds are valued at fair value. The general partners of the funds will provide periodic valuations on a fair value basis which the Group will adopt provided it is satisfied that the valuation methods used by the funds are not materially different from the Group's valuation methods.
Property, plant and equipment is stated at cost less accumulated depreciation and any impairment loss.
Cost includes expenditure that is directly attributable to the asset, including where appropriate the cost of materials, direct labour and any other costs directly attributable to bringing the asset to a working condition for its intended use.
Depreciation is charged using the straight-line method over the estimated useful lives of the assets as follows:
| • Freehold property | 50 years |
|---|---|
| • Leasehold improvements | the term of the lease |
| • Plant and equipment | 3 – 10 years |
| • Fixtures and fittings | 3 – 5 years |
When parts of an item of property, plant and equipment have different useful lives, these components are accounted for as separate items of property, plant and equipment.
Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Assets acquired by way of finance leases are stated at an amount equal to the lower of fair value and the present value of the future minimum lease payments at inception of the lease, less accumulated depreciation and any impairment loss.
Other leases are operating leases and are not recognised on the Group's statement of financial position.
Loans and receivables are considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.
An impairment loss in respect of loans and receivables measured at amortised cost is calculated as the difference between their carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate.
Individually significant loans and receivables are tested for impairment on an individual basis. The remaining loans and receivables are assessed collectively in groups that share similar credit risk characteristics.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised.
The carrying amounts of the Group's non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset's recoverable amount is estimated.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the profit or loss.
For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the cash generating unit to which the asset belongs.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Transactions in foreign currencies are recorded at the rate of exchange at the date of transaction. Monetary assets and monetary liabilities denominated in foreign currencies at the reporting date are reported at the rates of exchange prevailing at that date and exchange differences are included in the profit and loss account.
On consolidation the assets and liabilities of the Group's overseas operations including goodwill and fair value adjustments arising on consolidation are translated at the closing rates ruling at the reporting date. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising on these items are classified as equity and transferred to the Group's foreign exchange translation reserve. Such exchange differences are recognised as income or expense in the period in which the related overseas operation is disposed of.
Goodwill and fair value adjustments arising on the acquisition of an overseas operation are treated as assets and liabilities of the overseas entity and translated at the closing rate.
Inventories are stated at the lower of cost and net realisable value. The cost is based on the average cost principle. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The cost of inventories includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes a share of overheads based on normal working capacity.
Operating and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method, less any impairment losses.
Cash, for the purpose of the cash flow statement, comprises cash in hand and cash equivalents, less overdrafts payable on demand.
Cash equivalents are current asset investments which are disposable without curtailing or disrupting the business and are either readily convertible into known amounts of cash at or close to their carrying values. Cash equivalents include short-term cash deposits with original maturity of less than three months.
The Group's financial liabilities include borrowings and operating and other payables.
Interest bearing loans are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest bearing loans and borrowings are stated at amortised cost which is the initial cost less any principal repayments.
Operating and other payables with short duration are not discounted. They are measured at cost which is the fair value of the consideration to be paid in the future for goods and services received.
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risk specific to the liability.
Revenue from sales of goods is recognised when the significant risks and rewards of ownership have been transferred to the buyer. Revenue from sales of services is recognised by reference to the stage of completion of the transaction at the reporting date. Revenue is estimated by applying to the total expected contract revenue, the proportion of total contract costs incurred to date over total expected costs for each contract.
Revenues from software and related services are also predominantly project based with transactions typically including the sale of a software license and related implementation services which are invoiced to customers on their acceptance of the installation. Since these projects are normally short term in nature, revenue is generally recognised in line with customer acceptance.
Maintenance contracts for hardware and software are invoiced to customers in advance and these contracts typically cover a period of one year or more. Where such maintenance services extend beyond the reporting date the related income is deferred and recognised over the remaining life of the contract, generally on a straight-line basis.
Installation fees are separated from the maintenance fees and are recognised as performance occurs. Consideration accrues as contract activity progresses by reference to the value of the work performed. Hence, revenue in respect of service contracts represents the cost appropriate to the stage of completion of each contract plus attributable profits, less amounts recognised in previous years where relevant.
Revenues from energy provision are recognised based on metered consumption by customers; revenues from related services are recognised by reference to the stage of completion of the service provision at the reporting date.
Realised and unrealised gains and losses on investments are recognised in the profit and loss account in the period in which they arise.
Interest income is recognised as it accrues using the effective interest method.
Investment income comprises investment management fees receivable from portfolio companies and dividend income. Dividend income is recognised on the date the Group's right to receive payment is established.
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related services are provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or carried interest incentive arrangements if the Group has a present legal or constructive obligation to pay the amount as a result of past service provided by the employee and the obligation can be estimated reliably.
Payments to defined contribution pension schemes are charged as an expense as they fall due.
The Group has issued share options and awards of performance shares to certain employees. Such options and awards are treated as equity-settled share-based payments and measured at fair value at the date of grant and the fair value is recognised as an expense with a corresponding increase in equity on a straight line basis over the vesting period.
Fair value is calculated by use of a binomial option valuation model taking into account the terms and conditions under which the equity-settled share based payments were issued. Service and non-market performance conditions attached to transactions are not taken into account in determining fair value.
Finance costs comprise interest payable on borrowings calculated using the effective interest rate method.
Payments made under operating leases are recognised in profit or loss on a straight line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense over the term of the lease.
Minimum lease payments under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.
Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that they probably will not reverse in the foreseeable future.
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend is recognised.
A discontinued operation is a component of the Group's business that represents a separate major 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 consolidated income statement is restated as if the operation has been discontinued from the start of the comparative period.
The information below has been prepared using the definition of an operating segment in IFRS 8: Operating Segments. The Group determines and presents information on operating segments based on the information that is provided internally to the directors to enable them to assess performance and 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 standalone basis, together with the adjustments arising from the summarised results and financial position of the portfolio subsidiaries.
The consolidation adjustments included below reflect the adjustments necessary to restate the portfolio subsidiaries from the basis included in the investment management business (investments carried at fair value) to full consolidation in the Group's financial statements. These adjustments include the elimination of intra-group transactions and adjustments in relation to goodwill.
| Year ended 31 December 2011 | Investment management £'000 |
Portfolio subsidiaries £'000 |
Discontinued operations £'000 |
Consolidation adjustments £'000 |
Group total £'000 |
|---|---|---|---|---|---|
| Revenues from sales of goods and services |
– | 47,334 | – | – | 47,334 |
| Gains and losses on investments | 8,734 | – | – | (822) | 7,912 |
| Interest income | 54 | 11 | – | – | 65 |
| Dividend income | 801 | – | – | – | 801 |
| Other income from investments | 2,861 | 3 | – | (2,504) | 360 |
| Impairment of intangible assets | – | – | – | – | – |
| Finance costs | (179) | (3,081) | – | 2,319 | (941) |
| Continuing operations | (434) | 112 | – | (645) | (967) |
| Discontinued operations | – | – | 2,232 | – | 2,232 |
| Profit/(loss) for the year | (434) | 112 | 2,232 | (645) | 1,265 |
| Year ended 31 December 2010 | Investment management £'000 |
Portfolio subsidiaries £'000 |
Discontinued operations £'000 |
Consolidation adjustments £'000 |
Group total £'000 |
|---|---|---|---|---|---|
| Revenues from sales of goods | |||||
| and services | – | 38,132 | – | – | 38,132 |
| Gains and losses on investments | 23,914 | – | – | 5,417 | 29,331 |
| Interest income | 24 | 10 | – | – | 34 |
| Dividend income | 35 | – | – | – | 35 |
| Other income from investments | 920 | 18 | – | (60) | 878 |
| Impairment of intangible assets | – | – | – | (776) | (776) |
| Finance costs | (338) | (2,434) | – | 1,612 | (1,160) |
| Continuing operations | 17,562 | 1,290 | – | 6,242 | 25,094 |
| Discontinued operations | – | – | (12,559) | – | (12,559) |
| Profit/(loss) for the year | 17,562 | 1,290 | (12,559) | 6,242 | 12,535 |
Segment net assets
| Reconciliation | ||||
|---|---|---|---|---|
| 31 December 2011 | Investment management £'000 |
Portfolio subsidiaries £'000 |
Consolidation adjustments £'000 |
Group total £'000 |
| Property, plant and equipment | 759 | 6,172 | – | 6,931 |
| Intangible assets | – | 17,369 | 16,012 | 33,381 |
| Investments | 218,476 | – | (33,275) | 185,201 |
| Other non-current assets | – | 20 | – | 20 |
| Non-current assets | 219,235 | 23,561 | (17,263) | 225,533 |
| Cash and cash equivalents | 30,602 | 4,256 | – | 34,858 |
| Other current assets | 2,516 | 12,629 | (64) | 15,081 |
| Total assets | 252,353 | 40,446 | (17,327) | 275,472 |
| Total liabilities | (7,360) | (46,775) | 19,051 | (35,084) |
| Net assets/(liabilities) | 244,993 | (6,329) | 1,724 | 240,388 |
| 31 December 2010 | Investment management £'000 |
Portfolio subsidiaries £'000 |
Consolidation adjustments £'000 |
Group total £'000 |
|---|---|---|---|---|
| Property, plant and equipment | 339 | 9,152 | – | 9,491 |
| Intangible assets | – | 11,502 | 16,621 | 28,123 |
| Investments | 253,140 | – | (32,437) | 220,703 |
| Other non-current assets | – | 43 | – | 43 |
| Non-current assets | 253,479 | 20,697 | (15,816) | 258,360 |
| Cash and cash equivalents | 9,326 | 3,903 | – | 13,229 |
| Other current assets | 590 | 14,661 | (582) | 14,669 |
| Total assets | 263,395 | 39,261 | (16,398) | 286,258 |
| Total liabilities | (18,429) | (60,802) | 31,803 | (47,428) |
| Net assets/(liabilities) | 244,966 | (21,541) | 15,405 | 238,830 |
The net asset value of the investment management business at 31 December 2011 and at 31 December 2010 is wholly attributable to the equity holders of the parent.
The carrying amount and gain and losses of the investments of the investment management business can be further analysed as follows:
| 31 December 2011 | 31 December 2010 | |||||
|---|---|---|---|---|---|---|
| UK | US | Total | UK | US | Total | |
| Asset type | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Funds | 32,610 | 72,361 | 104,971 | 35,164 | 79,371 | 114,535 |
| Quoted | 860 | 23,339 | 24,199 | 21,091 | 42,122 | 63,213 |
| Unquoted | 42,570 | 46,736 | 89,306 | 41,361 | 34,031 | 75,392 |
| 76,040 | 142,436 | 218,476 | 97,616 | 155,524 | 253,140 |
| Year ended 31 December 2011 | Year ended 31 December 2010 | |||||
|---|---|---|---|---|---|---|
| Asset type | Realised gains/(losses) £'000 |
Unrealised gains/(losses) £'000 |
Total £'000 |
Realised gains/(losses) £'000 |
Unrealised gains/(losses) £'000 |
Total £'000 |
| Funds | 719 | 2,748 | 3,467 | 1,037 | 9,510 | 10,547 |
| Quoted | 5,758 | (13,486) | (7,728) | 1,128 | 14,100 | 15,228 |
| Unquoted | (119) | 13,114 | 12,995 | (3,154) | 1,293 | (1,861) |
| 6,358 | 2,376 | 8,734 | (989) | 24,903 | 23,914 |
The Group's revenues from external customers comprise:
| Year ended | Year ended | |
|---|---|---|
| 31 December | 31 December | |
| 2011 | 2010 | |
| £'000 | £'000 | |
| Continuing operations | ||
| IT services and software | 34,419 | 31,152 |
| Energy and related services | 12,915 | 6,980 |
| 47,334 | 38,132 |
| Revenues | Non-current assets | |||
|---|---|---|---|---|
| Year ended 31 December 2011 £'000 |
Year ended 31 December 2010 £'000 |
31 December 2011 £'000 |
31 December 2010 £'000 |
|
| Continuing operations | ||||
| United Kingdom | 28,810 | 26,635 | 75,278 | 93,924 |
| United States of America | 15,200 | 8,391 | 150,255 | 164,436 |
| Other countries | 3,324 | 3,106 | – | – |
| 47,334 | 38,132 | 225,533 | 258,360 |
Geographical information on revenue is based on the location of customers and on assets is based on the location of the assets.
No single customer contributed more than 10% of the Group's total revenues. In 2010, revenues from one customer of the Group's portfolio subsidiaries segment represented approximately 12% of the Group's total revenues.
Interest income comprises interest receivable on bank deposits.
Investment and other income comprise the following:
| Year ended | Year ended | |
|---|---|---|
| 31 December | 31 December | |
| 2011 | 2010 | |
| £'000 | £'000 | |
| Dividends from quoted securities | 7 | 35 |
| Dividends from unquoted securities | 724 | – |
| Dividends from funds | 70 | – |
| Investment management fees | 128 | 297 |
| Income from investments | 47 | 18 |
| Other | 185 | 563 |
| 1,161 | 913 |
| Year ended | Year ended | |
|---|---|---|
| 31 December | 31 December | |
| 2011 | 2010 | |
| £'000 | £'000 | |
| Cost of sales | 23,358 | 16,894 |
| Administrative expenses | 32,545 | 23,695 |
| 55,903 | 40,589 |
Operating expenses include the following:
| Year ended | Year ended | |
|---|---|---|
| 31 December | 31 December | |
| 2011 | 2010 | |
| £'000 | £'000 | |
| Depreciation | 3,140 | 1,589 |
| Goodwill impairment loss | – | 776 |
| Intangible asset amortisation | 365 | 238 |
| Non-recurring costs | 5,020 | – |
| Auditor's remuneration:- | ||
| Fees to group auditors:- | ||
| – parent company | 75 | 70 |
| – subsidiary companies | 138 | 140 |
| Non-audit related services:- | ||
| – taxation advisory services | 27 | 28 |
| Fees to other auditors (non-KPMG) | 197 | 113 |
Non-recurring costs comprise £1.6 million of one-off charges for professional fees incurred in relation to the change in investment policy of the Company, £0.9 million compensation payments to staff members who left before the end of the year and £2.5 million to provide for the costs of a management fee commitment regarded as onerous following the change in strategy.
| Year ended | Year ended | |
|---|---|---|
| 31 December | 31 December | |
| 2011 | 2010 | |
| £'000 | £'000 | |
| Wages and salaries | 14,014 | 10,881 |
| Compulsory social security contributions | 2,274 | 1,924 |
| Contributions to defined contribution plans | 422 | 386 |
| Share-based payment transactions | 70 | 64 |
| 16,780 | 13,255 |
The Group operates carried interest incentive arrangements in line with normal practice in the private equity industry based on the performance of its investment management business. Carried interest of £0.8 million is accrued at 31 December 2011 (31 December 2010: £nil) calculated on the assumption that the Group's investment portfolio is realised at its year end carrying amount.
| Year ended | Year ended | |
|---|---|---|
| 31 December | 31 December | |
| 2011 | 2010 | |
| £'000 | £'000 | |
| Interest on bank loans and overdrafts | 310 | 343 |
| Interest on other loans | 631 | 817 |
| 941 | 1,160 | |
| 8. Taxation | ||
| Year ended | Year ended | |
| 31 December | 31 December | |
| 2011 | 2010 | |
| £'000 | £'000 | |
| Current tax expense | ||
| Current period | 679 | 1,569 |
| Adjustment for prior periods | (5) | (2) |
| 674 | 1,567 | |
| Deferred tax expense | ||
| Origination and reversal of temporary differences | (79) | – |
|---|---|---|
| (79) | – | |
| Total tax expense | 595 | 1,567 |
Reconciliation of effective tax rate
| Year ended | Year ended | |
|---|---|---|
| 31 December | 31 December | |
| 2011 | 2010 | |
| £'000 | £'000 | |
| (Loss)/profit before tax | (372) | 26,661 |
| Income tax using the Company's domestic tax rate – 26.5% (2010: 28%) | (99) | 7,465 |
| Fair value adjustments not currently taxed | (1,113) | (7,520) |
| Non-deductible expenses | 2,820 | 1,735 |
| Non-taxable income | (1,800) | (338) |
| Deferred tax not recognised | 866 | 227 |
| Prior year adjustment | (79) | (2) |
| Total tax expense | 595 | 1,567 |
In April 2011 the Group sold its entire interests in CopperEye Limited and Kizoom Limited.
In October 2011 ITS (US) Holdings Inc, sold its entire interest in its two operating subsidiaries ITS Engineered Systems Inc, and ITS Water Solutions Inc.
In September 2010 the Group sold its entire interest in Citizen Limited.
| Year ended | Year ended | |
|---|---|---|
| 31 December | 31 December | |
| 2011 | 2010 | |
| £'000 | £'000 | |
| Revenues | 5,357 | 11,445 |
| Expenses | (6,425) | (21,986) |
| Results from operating activities | (1,068) | (10,541) |
| Taxation | – | (3) |
| Results from operating activities, net of tax | (1,068) | (10,544) |
| Gain/(loss) on sale of discontinued operations, net | 3,300 | (2,015) |
| Tax on gain/(loss) on sale of discontinued operations | – | – |
| Gain/(loss) for the year | 2,232 | (12,559) |
| Earnings/(loss) per ordinary share – basic | 0.8p | (4.6)p |
| Earnings/(loss) per ordinary share – diluted | 0.8p | (4.6)p |
| Year ended | Year ended | |
|---|---|---|
| 31 December | 31 December | |
| 2011 | 2010 | |
| £'000 | £'000 | |
| Net cash used in operating activities | (62) | (683) |
| Net cash used in investing activities | – | (17) |
| Net cash from financing activities | 106 | 68 |
| Net cash from/(used in) discontinued operations | 44 | (632) |
| 31 December | |
|---|---|
| 2011 | |
| £'000 | |
| Property, plant and equipment | (2,160) |
| Inventories | (221) |
| Trade and other receivables | (2,825) |
| Cash and cash equivalents | (310) |
| Trade and other payables | 2,147 |
| Deferred income | 3,686 |
| Interest bearing loans and borrowings | 816 |
| Net liabilities | 1,133 |
| Consideration received, satisfied in cash | 1,389 |
| Cash disposed of | (310) |
| Net cash inflow | 1,079 |
| Year ended | |
|---|---|
| 31 December | |
| 2011 | |
| £'000 | |
| Consideration received, satisfied in cash | 1,389 |
| Net liabilities disposed as at 31 December 2010 | 2,119 |
| Loss from operating activities, net of tax | 1,068 |
| Other non-operating items – investment in the year | (1,276) |
| Gain on sale of discontinued operations | 3,300 |
The calculation of the basic and diluted earnings per share, in accordance with IAS 33, is based on the following data:
| Year ended 31 December 2011 |
Year ended 31 December 2010 |
|
|---|---|---|
| Group | £'000 | £'000 |
| Earnings | ||
| Earnings for the purposes of earnings per share being net profit attributable to equity holders of the parent |
561 | 10,984 |
| (Loss)/earnings for the purposes of continuing earnings per share being net (loss)/profit from continuing operations attributable to equity holders of the parent |
(1,671) | 23,543 |
| Number of shares | Number | Number |
| Weighted average number of ordinary shares for the purposes of basic earnings per shares |
272,662,870 | 272,640,952 |
| Effect of dilutive potential ordinary shares: | ||
| Share options and performance shares | 4,230,301 | 5,625,901 |
| Weighted average number of ordinary shares for the purposes of diluted earnings per share |
276,893,171 | 278,266,853 |
| Earnings per share | ||
| Basic | 0.2p | 4.0p |
| Diluted | 0.2p | 3.9p |
| Earnings per share – continuing operations | ||
| Basic | (0.6)p | 8.6p |
| Diluted | (0.6)p | 8.5p |
There was no dilution effect on the loss from continuing operations in the year.
| Land and | Plant and | Fixtures and | ||
|---|---|---|---|---|
| buildings | equipment | fittings | Total | |
| Group | £'000 | £'000 | £'000 | £'000 |
| Cost | ||||
| Balance at 1 January 2010 | 1,614 | 9,258 | 926 | 11,798 |
| Additions | 24 | 3,187 | 526 | 3,737 |
| Acquisitions through business combinations | – | 1,387 | – | 1,387 |
| Disposals | – | (328) | (364) | (692) |
| Disposals of discontinued operations | – | (594) | (9) | (603) |
| Other disposals | – | – | (318) | (318) |
| Effect of movement in exchange rates | 180 | (125) | (21) | 34 |
| Balance at 31 December 2010 | 1,818 | 12,785 | 740 | 15,343 |
| Balance at 1 January 2011 | 1,818 | 12,785 | 740 | 15,343 |
| Additions | – | 1,941 | 687 | 2,628 |
| Acquisitions through business combinations | – | 259 | – | 259 |
| Disposals | – | (23) | (38) | (61) |
| Disposals of discontinued operations | (1,723) | (2,974) | (265) | (4,962) |
| Effect of movement in exchange rates and | ||||
| other adjustments | (66) | (264) | 360 | 30 |
| Balance at 31 December 2011 | 29 | 11,724 | 1,484 | 13,237 |
| Depreciation and impairment losses | ||||
| Balance at 1 January 2010 | 921 | 3,432 | 388 | 4,741 |
| Depreciation charge for the year | 98 | 2,003 | 294 | 2,395 |
| Disposals | – | (274) | (333) | (607) |
| Disposals of discontinued operations | – | (441) | (5) | (446) |
| Other disposals | – | – | (278) | (278) |
| Effect of movement in exchange rates | 244 | (179) | (18) | 47 |
| Balance at 31 December 2010 | 1,263 | 4,541 | 48 | 5,852 |
| Balance at 1 January 2011 | 1,263 | 4,541 | 48 | 5,852 |
| Depreciation charge for the year | – | 2,920 | 254 | 3,174 |
| Disposals | – | (7) | (14) | (21) |
| Disposals of discontinued operations | (1,167) | (1,529) | (115) | (2,811) |
| Effect of movement in exchange rates and other adjustments |
(67) | (181) | 360 | 112 |
| Balance at 31 December 2011 | 29 | 5,744 | 533 | 6,306 |
| Carrying amounts | ||||
| At 31 December 2010 | 555 | 8,244 | 692 | 9,491 |
| At 31 December 2011 | – | 5,980 | 951 | 6,931 |
At 31 December 2011 land and buildings with a carrying amount of £nil (31 December 2010: £555,000) are subject to a registered debenture to secure bank loans.
At 31 December 2011 the carrying amount of plant and equipment includes £185,706 held under finance leases (31 December 2010: £285,475).
| Plant and | Fixtures and | ||
|---|---|---|---|
| equipment | fittings | Total | |
| Company | £'000 | £'000 | £'000 |
| Cost | |||
| Balance at 1 January 2010 | 176 | 295 | 471 |
| Additions | 126 | 177 | 303 |
| Balance at 31 December 2010 | 302 | 472 | 774 |
| Balance at 1 January 2011 | 302 | 472 | 774 |
| Additions | 9 | 576 | 585 |
| Disposals | – | (38) | (38) |
| Balance at 31 December 2011 | 311 | 1,010 | 1,321 |
| Depreciation and impairment losses | |||
| Balance at 1 January 2010 | 147 | 166 | 313 |
| Depreciation charge for the year | 129 | (7) | 122 |
| Balance at 31 December 2010 | 276 | 159 | 435 |
| Balance at 1 January 2011 | 276 | 159 | 435 |
| Depreciation charge for the year | 21 | 120 | 141 |
| Disposals | – | (14) | (14) |
| Balance at 31 December 2011 | 297 | 265 | 562 |
| Carrying amounts | |||
| At 31 December 2010 | 26 | 313 | 339 |
| At 31 December 2011 | 14 | 745 | 759 |
| Deferred | ||||
|---|---|---|---|---|
| installation asset |
Software licence |
Goodwill | Total | |
| Group | £'000 | £'000 | £'000 | £'000 |
| Cost | ||||
| Balance at 1 January 2010 | – | 2,088 | 48,094 | 50,182 |
| Acquisitions through business combinations | 1,916 | – | 7,077 | 8,993 |
| Acquisition of deferred installation asset | 1,433 | – | – | 1,433 |
| Disposal of discontinued operations | – | (2,088) | (1,860) | (3,948) |
| Other disposals | – | – | (1,165) | (1,165) |
| Effect of movement in exchange rates | (126) | – | – | (126) |
| Balance at 31 December 2010 | 3,223 | – | 52,146 | 55,369 |
| Balance at 1 January 2011 | 3,223 | – | 52,146 | 55,369 |
| Acquisitions through business combinations | – | – | 3,717 | 3,717 |
| Acquisition of deferred installation asset | 2,365 | – | – | 2,365 |
| Disposal of discontinued operations | – | – | (23,273) | (23,273) |
| Effect of movement in exchange rates | 7 | – | (452) | (445) |
| Balance at 31 December 2011 | 5,595 | – | 32,138 | 37,733 |
| Impairment losses/amortisation | ||||
| Balance at 1 January 2010 | – | 170 | 20,487 | 20,657 |
| Impairment loss | – | 75 | 7,665 | 7,740 |
| Disposal of discontinued operations | – | (245) | (1,142) | (1,387) |
| Amortisation | 238 | – | – | 238 |
| Effect of movement in exchange rates | (2) | – | – | (2) |
| Balance at 31 December 2010 | 236 | – | 27,010 | 27,246 |
| Balance at 1 January 2011 | 236 | – | 27,010 | 27,246 |
| Disposal of discontinued operations | – | – | (23,273) | (23,273) |
| Amortisation | 365 | – | – | 365 |
| Effect of movement in exchange rates | 14 | – | – | 14 |
| Balance at 31 December 2011 | 615 | – | 3,737 | 4,352 |
| Carrying amounts | ||||
| At 31 December 2010 | 2,987 | – | 25,136 | 28,123 |
| At 31 December 2011 | 4,980 | – | 28,401 | 33,381 |
For the purpose of impairment testing, goodwill is allocated to each portfolio subsidiary which represents the lowest level within the Group at which the goodwill is monitored for internal management purposes. The recoverable amount of each unit has been determined on the basis of its fair value less costs to sell.
An analysis of goodwill is set out below:
| Goodwill impairment recognised in the year ended 31 December 2011 £'000 |
Goodwill impairment recognised in the year ended 31 December 2010 £'000 |
Carrying amount 2011 £'000 |
Carrying amount 2010 £'000 |
|
|---|---|---|---|---|
| 365iTMS Limited | – | – | 3,717 | – |
| ITS (US) Holdings Inc | – | 1,508 | – | – |
| Entuity Limited | – | – | 4,981 | 4,981 |
| Wesupply Limited | – | 776 | 4,344 | 4,344 |
| CopperEye Limited | – | 1,426 | – | – |
| Nationwide Energy Partners LLC | – | – | 6,625 | 7,077 |
| Kizoom Limited | – | 3,955 | – | – |
| Updata Infrastructure UK Limited | – | – | 8,734 | 8,734 |
| – | 7,665 | 28,401 | 25,136 |
The goodwill impairment charge for the year ended 31 December 2010 included £6,889,000 attributable to discontinued operations.
The impairment loss in each year reflects the impact of decreases in the fair value of the relevant portfolio subsidiary; fair value is measured in accordance with the Group's valuation policy for investments which is set out in Note 1. Factors impacting fair values are principally individual company performance and changes in valuation multiples for comparable businesses.
The movements in investments were as follows:
| Unquoted securities | |||||
|---|---|---|---|---|---|
| Group | Quoted securities £'000 |
Equity £'000 |
Loans £'000 |
Funds £'000 |
Total £'000 |
| Carrying value | |||||
| Balance at 1 January 2010 | 51,876 | 26,278 | 6,525 | 103,454 | 188,133 |
| Purchases | 1,104 | 8,023 | 744 | 17,120 | 26,991 |
| Disposals | (6,240) | (484) | (138) | (2,623) | (9,485) |
| Distributions from partnerships | – | – | – | (12,566) | (12,566) |
| Fair value adjustments | 14,935 | 6,252 | (2,707) | 9,150 | 27,630 |
| Reclassifications | 1,538 | (1,538) | – | – | – |
| Balance at 31 December 2010 | 63,213 | 38,531 | 4,424 | 114,535 | 220,703 |
| Balance at 1 January 2011 | 63,213 | 38,531 | 4,424 | 114,535 | 220,703 |
| Purchases | 308 | 1 | 1,823 | 13,266 | 15,398 |
| Disposals | (30,466) | – | (637) | (15,704) | (46,807) |
| Distributions from partnerships | – | – | – | (10,124) | (10,124) |
| Fair value adjustments | (8,857) | 12,755 | (865) | 2,998 | 6,031 |
| Balance at 31 December 2011 | 24,198 | 51,287 | 4,745 | 104,971 | 185,201 |
The table below analyses investments carried at fair value at the end of the year, by the level in the fair value hierarchy into which the fair value measurement is categorised. The different levels have been defined as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets;
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3: inputs for the asset that are not based on observable market data (unobservable inputs).
| 2011 | 2010 | |
|---|---|---|
| £'000 | £'000 | |
| Level 1 | 24,198 | 63,213 |
| Level 2 | – | – |
| Level 3 | 156,258 | 153,066 |
| 180,456 | 216,279 |
The following table shows a reconciliation from the beginning balances to the ending balances for fair value measurements in Level 3 of the fair value hierarchy:
| 2011 | 2010 | |
|---|---|---|
| £'000 | £'000 | |
| Opening balance | 153,066 | 129,731 |
| Total gain/(loss) in profit or loss | 15,753 | 15,402 |
| Purchases | 13,268 | 25,143 |
| Realisations | (25,829) | (15,672) |
| Reclassifications | – | (1,538) |
| Closing balance | 156,258 | 153,066 |
| 2011 | 2010 | |
|---|---|---|
| Company | £'000 | £'000 |
| Investments in subsidiaries | ||
| Cost | 293,510 | 293,510 |
| Opening carrying value | 281,801 | 281,801 |
| Impairment loss | – | – |
| Closing carrying value | 281,801 | 281,801 |
Details of subsidiaries are set out in Note 31.
The values of the underlying net assets in subsidiary companies are calculated in accordance with the Group's accounting policies set out in Note 1.
| Group | ||
|---|---|---|
| 2011 | 2010 | |
| £'000 | £'000 | |
| Work in progress | 189 | 1,671 |
| Finished goods | 11 | 180 |
| 200 | 1,851 |
Changes in finished goods and work in progress recognised as cost of sales amounted to a debit of £1,651,000 (2010: credit of £1,039,000).
| Group | Company | |||
|---|---|---|---|---|
| 2011 | 2010 | 2011 | 2010 | |
| £'000 | £'000 | £'000 | £'000 | |
| Trade receivables | 10,495 | 7,937 | – | – |
| Other receivables and prepayments | 4,386 | 4,881 | 179 | 198 |
| Amounts receivable from subsidiaries | – | – | 23,766 | 26,231 |
| 14,881 | 12,818 | 23,945 | 26,429 |
| Group | Company | |||
|---|---|---|---|---|
| 2011 | 2010 | 2011 | 2010 | |
| £'000 | £'000 | £'000 | £'000 | |
| Bank balances | 5,954 | 7,246 | 91 | 341 |
| Short term deposits | 28,904 | 5,983 | 10,559 | 2,338 |
| Cash and cash equivalents | 34,858 | 13,229 | 10,650 | 2,679 |
| Group | ||
|---|---|---|
| 2011 | 2010 | |
| £'000 | £'000 | |
| Non-current liabilities | ||
| Secured bank loans | 8,646 | 2,866 |
| Other unsecured loans | 640 | 1,513 |
| Finance lease liabilities | 120 | 218 |
| 9,406 | 4,597 | |
| Current liabilities | ||
| Secured bank loans | 425 | 2,080 |
| Other unsecured loans | 1,930 | 16,664 |
| Finance lease liabilities | 65 | 68 |
| 2,420 | 18,812 |
| Group | |||||
|---|---|---|---|---|---|
| 2011 £'000 |
2010 £'000 |
||||
| Nominal | Carrying | Carrying | |||
| Currency | interest rate | Maturity | amount | amount | |
| Secured bank loan | £ | 3.65% | 2016 | 4,737 | – |
| Secured bank loan | £ | 7.50% | 2014 | 1,393 | 3,117 |
| Secured bank loan | USD | 4.36% | 2020 | – | 742 |
| Secured bank loan | USD | 6.00% | 2011 | – | 644 |
| Secured bank loan | £ | LIBOR plus 3.00% | 2011 | – | 5,000 |
| Secured bank loan | USD | LIBOR plus 3.00% | 2011 | – | 9,281 |
| Secured bank loan | USD | LIBOR plus 2.62% | 2011 | – | 441 |
| Secured bank loan | USD | LIBOR plus 2.37% | 2012 | – | 140 |
| Secured bank loan | USD | LIBOR plus 2.00% | 2018 | 2,618 | – |
| Secured bank loan | USD | LIBOR plus 1.75% | 2012 | 301 | – |
| Secured bank loan | USD | 7.18% | 2011 | – | 11 |
| Secured bank loan | USD | 6.06% | 2013 | 23 | 33 |
| Unsecured loan | £ | 21.00% | 2014 | 759 | 1,805 |
| Unsecured loan | USD | 4.65% | 2011 | – | 93 |
| Unsecured loan | USD | 12.00% | 2012 | 1,810 | 1,816 |
| Finance lease liabilities | £ | 25.00% | 2014 | 185 | 240 |
| Finance lease liabilities | USD | 6.45% | 2014 | – | 46 |
| 11,826 | 23,409 |
Terms and conditions of outstanding loans are as follows:
Finance lease liabilities are payable as follows:
| 2011 | 2010 | |||||
|---|---|---|---|---|---|---|
| Future minimum lease payments £'000 |
Interest £'000 |
Present value of minimum lease payments £'000 |
Future minimum lease payments £'000 |
Interest £'000 |
Present value of minimum lease payments £'000 |
|
| Less than one year | 102 | 20 | 82 | 86 | 18 | 68 |
| Between one and five years | 126 | 23 | 103 | 260 | 42 | 218 |
| 228 | 43 | 185 | 346 | 60 | 286 |
| Group | Company | |||
|---|---|---|---|---|
| 2011 | 2010 | 2011 | 2010 | |
| £'000 | £'000 | £'000 | £'000 | |
| Trade payables | 4,049 | 6,040 | 44 | 42 |
| Non-trade payables and accrued expenses | 6,114 | 7,819 | 3,441 | 16,531 |
| Amounts payable to subsidiaries | – | – | 94,557 | 70,018 |
| 10,163 | 13,859 | 98,042 | 86,591 |
Non-trade payables and accrued expenses include a provision of £2,467,000 for fund management fees described in note 21.
Deferred income comprises amounts invoiced to customers in respect of goods or services which had not been delivered at the reporting date. It arises principally on maintenance contracts for hardware and software which typically cover a period of one year or more.
Deferred tax liabilities were attributable to the following:
| Group | ||
|---|---|---|
| 2011 | 2010 | |
| £'000 | £'000 | |
| Property, plant and equipment | 469 | 549 |
| Financial assets at fair value through profit or loss | – | 65 |
| 469 | 614 |
The Group has no unrecognised deferred tax liabilities.
The Group's investment management business has capital losses for tax purposes of £31.9 million at 31 December 2011 (31 December 2010: £11.2 million) available to offset future profits chargeable to tax. In addition, if the Group were to dispose of its investment portfolio at book value at 31 December 2011 it would realise further net capital losses for tax purposes of £31.5 million (31 December 2010: £47.4 million).
The Group's portfolio subsidiaries have tax losses of £59.1 million at 31 December 2011 (31 December 2010: £96.7 million) available to offset future profits chargeable to tax.
Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits from.
| Group | ||
|---|---|---|
| 2011 | 2010 | |
| £'000 | £'000 | |
| Provisions for fund management fees | 2,055 | – |
| Customer security deposits | 167 | 172 |
| 2,222 | 172 |
Full provision of £2,467,000 has been made at 31 December 2011 for fees payable under an investment management agreement which is considered onerous following the change in strategy of the Group from 30 November 2011. The fund management fees are expected to be paid annually until 2015. The current element of the provision of £412,000 is included in operating and other payables.
Share capital
| Ordinary shares | ||||||
|---|---|---|---|---|---|---|
| 2011 | 2011 | 2010 | 2010 | |||
| Number | £'000 | Number | £'000 | |||
| Balance at beginning of the year | 272,640,952 | 27,265 | 272,640,952 | 27,265 | ||
| Exercise of share options | 33,333 | 3 | – | – | ||
| 272,674,285 | 27,268 | 272,640,952 | 27,265 |
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.
The capital redemption reserve comprises the nominal value of those shares purchased by the Company out of its own profits and cancelled.
The Company has no shares held in treasury.
The Company commenced operations on 9 June 2006 when it received the demerged investment division of London Merchant Securities. Consolidated financial statements were prepared for the nine months ended 31 December 2006 to reflect the two step demerger process: this comprised an initial common control transaction followed by a subsequent demerger of the Group. 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 foreign exchange translation reserve comprises all foreign currency arising from the translation of the financial statements of foreign operations.
The Company has a share option plan that entitles certain employees to purchase shares in the Company at the market price of the shares at the date of grant of the option, subject to Company performance criteria. Under the terms of the scheme, options may be exercised between three and ten years after the date of grant. At 31 December 2011 there were no option grants outstanding under this plan (31 December 2010: nil).
The Company has a deferred share bonus plan for key executives. Shares awarded under this scheme are released over three or four years (depending on the size of the award) and the first release may take place no earlier than the first anniversary of the award subject to the increase in the Net Asset Value per share of the Company exceeding the increase in the Retail Prices Index by an average of at least 3% per annum.
Movements during the year were as follows:
| 2011 | 2010 | |
|---|---|---|
| Number | Number | |
| Outstanding at 1 January | 1,870,000 | 716,073 |
| Awards during the year | – | 1,870,000 |
| Exercised during the year | (33,333) | – |
| Lapsed during the year | (515,000) | (716,073) |
| Outstanding at 31 December | 1,321,667 | 1,870,000 |
During the year, 498,333 shares were released having become eligible for release on 13 April 2011; of these, 33,333 were exercised. In addition, 750,000 shares were released in favour of Mr G Payne on his leaving the Company in December 2011, the Remuneration Committee having exercised its discretion and deemed the performance condition satisfied. The weighted average exercise price of the shares released in 2011 was £nil. No shares were eligible for release in 2010.
The shares which lapsed in 2011 and 2010 did so because the performance criteria were not met.
Assuming the performance criteria set out above are met, the awards outstanding and not released at 31 December 2011 (106,667) are eligible for release on 13 April 2013.
The weighted average exercise price of awards outstanding at 31 December 2011 was £nil (31 December 2010: £nil).
The Company has a performance share plan that entitles certain employees to receive an award of performance shares in the Company. Performance shares granted under the plan are subject to the performance criteria set out below.
In respect of awards granted in 2010 and 2011: for 25% of the total award to vest, Total Shareholder Return (TSR) over the three year measurement period must exceed the median TSR of the FTSE All-Share Index. For the remaining 75% of the award, the increase in Net Asset Value per share over the period must exceed the increase in the Retail Prices Index by at least 3% per annum. At RPI plus 3%, 18.75% of the total shares that are subject to the award will vest, rising on a straight-line basis to the remaining 75% vesting if the increase in Net Asset Value per share exceeds RPI by 8% per annum.
| 2011 Number |
2010 Number |
|
|---|---|---|
| Outstanding at 1 January | 3,755,901 | 2,005,201 |
| Granted during the year | 2,045,004 | 1,750,700 |
| Exercised during the year | – | – |
| Lapsed during the year | (2,892,271) | – |
| Outstanding at 31 December | 2,908,634 | 3,755,901 |
Of the awards which lapsed in 2011, 2,005,201 lapsed because the performance criteria were not met and 887,070 lapsed when the beneficiary left the Company.
The weighted average exercise price of awards outstanding at 31 December 2011 was £nil (31 December 2010: £nil).
The fair value of services received in return for grants and awards under the Company's share based incentive plans is based on their fair value measured using a binomial valuation model.
Awards under the performance share plan granted during 2011 were valued using the following inputs:
| Performance share plan |
|
|---|---|
| Fair value at grant date | £0.56 |
| Share price | £0.57 |
| Exercise price | – |
| Expected volatility | 30% |
| Option life | 10 years |
| Expected dividends | – |
| Risk-free interest rate | 3.0% |
The expense recognised in the income statement for share-based payments is as follows:
| 2011 | 2010 | |
|---|---|---|
| £'000 | £'000 | |
| Executive share option plan | – | (260) |
| Deferred share bonus plan | 446 | (170) |
| Performance share plan | (40) | 500 |
| 406 | 70 |
At 31 December 2011, non-trade payables and accrued expenses include £65,000 (31 December 2010: £51,000) in respect of amounts payable under the Company's long-term incentive plans.
Financial instruments by category
The following tables analyse the Group and Company's financial assets and financial liabilities in accordance with the categories of financial instruments in IAS 39. Assets and liabilities outside the scope of IAS 39 are not included in the table below.
| Group |
|---|
| ------- |
| Fair value through profit or |
Loans and | Fair value through profit or |
Loans and | |||
|---|---|---|---|---|---|---|
| loss | receivables | Total | loss | receivables | Total | |
| 2011 | 2011 | 2011 | 2010 | 2010 | 2010 | |
| Assets | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Investments | 180,456 | 4,745 | 185,201 | 216,279 | 4,424 | 220,703 |
| Operating and other receivables | – | 14,881 | 14,881 | – | 12,818 | 12,818 |
| Cash and cash equivalents | – | 34,858 | 34,858 | – | 13,229 | 13,229 |
| Total | 180,456 | 54,484 | 234,940 | 216,279 | 30,471 | 246,750 |
| Fair value through profit or loss |
Loans and receivables |
Total | Fair value through profit or loss |
Loans and receivables |
Total | |
|---|---|---|---|---|---|---|
| Liabilities | 2011 £'000 |
2011 £'000 |
2011 £'000 |
2010 £'000 |
2010 £'000 |
2010 £'000 |
| Bank overdrafts | – | – | – | – | – | – |
| Interest bearing loans and borrowings | – | 11,826 | 11,826 | – | 23,409 | 23,409 |
| Operating and other payables | – | 10,163 | 10,163 | – | 13,859 | 13,859 |
| Total | – | 21,989 | 21,989 | – | 37,268 | 37,268 |
| Fair value through profit or |
Loans and | Fair value through profit or |
Loans and | |||
|---|---|---|---|---|---|---|
| loss | receivables | Total | loss | receivables | Total | |
| 2011 | 2011 | 2011 | 2010 | 2010 | 2010 | |
| Assets | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Operating and other receivables | – | 179 | 179 | – | 198 | 198 |
| Amounts receivable from subsidiaries | – | 23,766 | 23,766 | – | 26,231 | 26,231 |
| Cash and cash equivalents | – | 10,650 | 10,650 | – | 2,679 | 2,679 |
| Total | – | 34,595 | 34,595 | – | 29,108 | 29,108 |
| Fair value through profit or |
Loans and | Fair value through profit or |
Loans and | |||
|---|---|---|---|---|---|---|
| loss | receivables | Total | loss | receivables | Total | |
| 2011 | 2011 | 2011 | 2010 | 2010 | 2010 | |
| Liabilities | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Interest bearing loans and borrowings | – | – | – | – | 14,281 | 14,281 |
| Operating and other payables | – | 3,485 | 3,485 | – | 2,292 | 2,292 |
| Amounts payable to subsidiaries | – | 94,557 | 94,557 | – | 70,018 | 70,018 |
| Total | – | 98,042 | 98,042 | – | 86,591 | 86,591 |
The Group has exposure to the following risks from its use of financial instruments:
This note presents information about the Group's exposure to each of the above risks, its policies for measuring and managing risk, and its management of capital.
Credit risk is the risk of the financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group's receivables from customers and its cash and cash equivalents.
| 2011 | 2010 | |
|---|---|---|
| £'000 | £'000 | |
| Operating and other receivables | 14,881 | 12,818 |
| Cash and cash equivalents | 34,858 | 13,229 |
| 49,739 | 26,047 |
The Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer. Each new customer is analysed individually for creditworthiness before payment and delivery terms are offered. The conduct of customer accounts is reviewed regularly.
The Group establishes an allowance for impairment that represents an estimate of incurred losses in respect of operating and other receivables. This allowance includes a specific loss component that relates to individually significant exposures and a collective loss component for groups of similar assets. This is determined based on historical payment data statistics and is intended to cover losses that have been incurred but not yet identified.
The maximum exposure to credit risk for operating and other receivables by geographic region was:
| 2011 | 2010 | |
|---|---|---|
| £'000 | £'000 | |
| UK | 10,484 | 8,418 |
| United States | 3,433 | 3,090 |
| Other regions | 964 | 1,310 |
| 14,881 | 12,818 |
| 2011 | 2010 | |||
|---|---|---|---|---|
| Gross £'000 |
Impairment £'000 |
Gross £'000 |
Impairment £'000 |
|
| Not past due | 4,733 | – | 2,767 | – |
| Past due 0-30 days | 3,381 | – | 1,322 | – |
| Past due 31-120 days | 1,864 | 72 | 2,975 | – |
| More than 120 days | 826 | 237 | 1,221 | 348 |
| 10,804 | 309 | 8,285 | 348 |
The Group limits its credit risk exposure by only depositing funds with highly rated institutions. Given these ratings the Group does not expect any counterparty to fail to meet its obligations and therefore no allowance for impairment is made for bank deposits.
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. Its financing requirements are met through a combination of liquidity from the sale of investments and the use of cash resources.
The following are the contractual maturities of financial liabilities:
| 31 December 2011 | Carrying amount £'000 |
Contractual cash flows £'000 |
6 months or less £'000 |
6-12 months £'000 |
1-2 years £'000 |
2-5 years £'000 |
More than 5 years £'000 |
|---|---|---|---|---|---|---|---|
| Interest bearing loans and borrowings |
11,640 | 14,013 | 678 | 2,179 | 542 | 7,915 | 2,699 |
| Finance lease liabilities | 186 | 228 | 60 | 42 | 84 | 42 | – |
| Operating and other payables | 10,163 | 10,163 | 10,163 | – | – | – | – |
| 21,989 | 24,404 | 10,901 | 2,221 | 626 | 7,957 | 2,699 |
| 31 December 2011 | Carrying amount £'000 |
Contractual cash flows £'000 |
6 months or less £'000 |
6-12 months £'000 |
1-2 years £'000 |
2-5 years £'000 |
More than 5 years £'000 |
|---|---|---|---|---|---|---|---|
| Interest bearing loans and borrowings |
23,123 | 23,408 | 16,303 | 1,264 | 106 | 5,238 | 497 |
| Finance lease liabilities | 286 | 290 | 35 | 35 | 150 | 70 | – |
| Operating and other payables | 13,859 | 13,897 | 13,886 | 9 | 1 | 1 | – |
| 37,268 | 37,595 | 30,224 | 1,308 | 257 | 5,309 | 497 |
Market risk is the risk that changes in market prices such as foreign exchange rates, interest rates and equity prices will affect the Group's income or the value of its holdings of financial instruments. The Group aims to manage this risk within acceptable parameters while optimising the return.
The Group is exposed to currency risk on those of its investments which are denominated in a currency other than the Group's functional currency which is pounds sterling. The only other significant currency within the investment portfolio is the US dollar; approximately 66% of the investment portfolio within the Group's investment management business is denominated in US dollars.
The Group does not hedge the currency exposure related to its investments. The Group regards its exposure to exchange rate changes on the underlying investment as part of its overall investment return, and does not seek to mitigate that risk through the use of financial derivatives.
The Group is exposed to translation currency risk on sales and purchases which are denominated in a currency other than the Group's functional currency. The currency in which these transactions are denominated is principally US dollars.
| 31 December 2011 | 31 December 2010 | |||||
|---|---|---|---|---|---|---|
| GBP | USD | Other | GBP | USD | Other | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Investments | 48,303 | 132,719 | 4,179 | 67,805 | 146,663 | 6,235 |
| Operating and other receivables | 8,794 | 5,982 | 105 | 8,051 | 4,689 | 78 |
| Cash and cash equivalents | 23,781 | 10,911 | 166 | 5,827 | 7,325 | 77 |
| Interest bearing loans and borrowings | (6,889) | (4,751) | – | (10,013) | (13,110) | – |
| Finance lease liabilities | (186) | – | – | (240) | (45) | – |
| Operating and other payables | (6,076) | (4,083) | (4) | (7,218) | (6,642) | – |
| Gross exposure | 67,727 | 140,778 | 4,446 | 64,212 | 138,880 | 6,390 |
| Forward exchange contracts | – | – | – | – | – | – |
| Net exposure | 67,727 | 140,778 | 4,446 | 64,212 | 138,880 | 6,390 |
The Group's exposure to foreign currency risk was as follows:
At 31 December 2011 the rate of exchange was USD 1.55 = £1.00 (31 December 2010: USD 1. 55 = £1.00). The average rate for the year ended 31 December 2011 was USD 1.61 = £1.00 (year ended 31 December 2010: USD 1.54 = £1.00).
A 10 per cent strengthening of the US dollar against the pound sterling would have increased equity by £12.1 million at 31 December 2011 (31 December 2010: increase of £13.5 million) and decreased the loss from continuing operations for the year ended 31 December 2011 by £14.4 million (year ended 31 December 2010: increased the profit by £14.9 million). This assumes that all other variables, in particular interest rates, remain constant.
Interest rate risk
At the reporting date the interest rate profile of the Group's interest bearing financial instruments was:
| 2011 | 2010 | |
|---|---|---|
| £'000 | £'000 | |
| Fixed rate instruments | ||
| Financial assets | – | – |
| Financial liabilities | 11,826 | 23,409 |
| 11,826 | 23,409 | |
| Variable rate instruments | ||
| Financial assets | 34,858 | 13,229 |
| Financial liabilities | – | – |
| 34,858 | 13,229 |
An increase of 100 basis points in interest rates at the reporting date would have increased equity by £64,000 (31 December 2010: decrease of £4,000) and decreased the loss from continuing activities by £64,000 (year ended 31 December 2010: decreased the profit by £4,000).
The carrying amounts of financial assets (excluding investments) and liabilities, shown in the statement of financial position, approximate their fair values.
The fair values of financial liabilities are based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.
Equity price risk arises from equity securities held as part of the Group's portfolio of investments. The Group's investments comprise quoted investments (quoted on the main stock exchanges in London, US, Canada and AIM) and equity and debt instruments in unquoted businesses. A proportion of its unquoted investments are held through funds managed by external managers.
As is common practice in the venture and development capital industry, the investments in unquoted companies are structured using a variety of instruments including ordinary shares, preference shares and other shares carrying special rights, options and warrants and debt instruments with and without conversion rights. The investments are held for resale with a view to the realisation of capital gains. Generally, the investments do not pay significant income.
The Group's management of risk in its investment portfolio focuses on diversification in terms of geography and sector, as well as type and stage of investment.
If the investment valuation declined by 10% from the amount at the reporting date, with all other variables held constant, the loss from continuing operations for the year ended 31 December 2011 would have increased by £21.8 million (year ended 31 December 2010: decreased the profit by £22.1 million). An increase in the valuation of investments by 10% at the reporting date would have an equal and opposite effect on the profit/loss for the year.
The Group's total capital at 31 December 2011 was £240 million (31 December 2010: £239 million) comprising equity share capital and reserves. The Group had borrowings at 31 December 2011 of £11.8 million (31 December 2010: £23.4 million).
The Board monitors and reviews the broad structure of the Group's capital on an ongoing basis. This review includes:
The Group's objectives, policies and processes for managing capital reflect the change in strategy from November 2011.
The following acquisition was made during the year ended 31 December 2011:
In September 2011 the Group acquired a 84.1% interest in 365iTMS Ltd ("365iTMS"); the acquisition had the following effect on the Group's assets and liabilities on the acquisition date:
| Fair value of net assets acquired/ consideration |
|
|---|---|
| £'000 | |
| Property, plant and equipment | 259 |
| Inventories | 111 |
| Operating and other receivables | 1,897 |
| Cash and cash equivalents | 22 |
| Operating and other payables | (1,659) |
| Deferred income | (1,471) |
| Net identifiable assets and liabilities | (841) |
| Intangible assets (goodwill) | 3,717 |
| Net assets acquired | 2,876 |
| Non-controlling interest | (233) |
| Total payable | 2,643 |
| Deferred cash consideration | (743) |
| Cash consideration paid | 1,900 |
The operating and other receivables comprise gross contractual amounts due of £1,992,124, of which £95,230 was expected to be uncollectable at acquisition date. The non-controlling interest is calculated based on the proportionate interest of the non-controlling interest in the fair value of identifiable net assets acquired.
The goodwill is attributable to the expected profitability of the acquired business. None of the goodwill is expected to be deductible for tax purposes.
365iTMS delivers a range of technology solutions extending from unified communications to network and system infrastructure, security, business continuity and managed services.
In the three months to 31 December 2011 the company contributed a profit of £159,066 to the consolidated results of the Group. If the acquisition had occurred on 1 January 2011, management estimates that consolidated revenue would have been £54,700,762 and the consolidated profit for the period would have been £1,433,182.
The following acquisition was made during the year ended 31 December 2010:
In May 2010 the Group acquired a 55.4% interest in Nationwide Energy Partners LLC ("NEP"); the acquisition had the following effect on the Group's assets and liabilities on the acquisition date:
| Fair value of net assets acquired/ consideration £'000 |
|
|---|---|
| Property, plant and equipment | 1,761 |
| Intangible assets | 1,571 |
| Operating and other receivables | 2,682 |
| Loans and borrowings | (1,086) |
| Operating and other payables | (2,569) |
| Long term liabilities | (192) |
| Net identifiable assets and liabilities | 2,167 |
| Intangible assets (goodwill) | 7,077 |
| Net assets acquired | 9,244 |
| Non-controlling interest | (967) |
| Cash consideration paid | 8,277 |
The operating and other receivables comprise gross contractual amounts due of £2,922,551, of which £240,859 was expected to be uncollectable at acquisition date. The non-controlling interest is calculated based on the proportionate interest of the non-controlling interest in the fair value of identifiable net assets acquired.
Of the total consideration, £7,450,000 was paid on completion and the remainder was paid in May 2011.
The goodwill is attributable to the expected profitability of the acquired business. None of the goodwill is expected to be deductible for tax purposes.
NEP is an energy service provider in Columbus, Ohio and provides owners of multi-unit residential properties with outsourced meter reading, billing and collection services for water and electricity accounts.
In July 2010 the Group made an additional investment in NEP of £1.2 million and increased its interest in the company to 59.5%.
In the seven months to 31 December 2010 the company contributed a profit of £21,661 to the consolidated results of the Group. If the acquisition had occurred on 1 January 2010, management estimates that consolidated revenue would have been £52,515,254 and the consolidated profit for the period would have been £12,218,062.
Leases as lessee
Non-cancellable operating lease rentals are payable as follows:
| 2011 | 2010 | |||
|---|---|---|---|---|
| Group £'000 |
Company £'000 |
Group £'000 |
Company £'000 |
|
| Less than one year | 449 | 289 | 572 | 280 |
| Between one and five years | 1,652 | 1,444 | 1,473 | 1,155 |
| More than five years | 72 | 72 | 650 | 650 |
| 2,173 | 1,805 | 2,695 | 2,085 |
| 2011 | 2010 | |
|---|---|---|
| £'000 | £'000 | |
| Outstanding commitments to funds | 18,894 | 40,711 |
The outstanding commitments to funds comprise unpaid calls in respect of funds where a member of the Group is a limited partner.
The Company has guaranteed the indebtedness of certain of the Group's investments; the amount outstanding under these arrangements at 31 December 2011 was £517,000 (31 December 2010: £1.2 million).
The Company surrendered its lease with Derwent London plc in January 2011 in respect of the premises comprising its head office and former registered office (33 Robert Adam Street). The Company entered a new lease agreement with Derwent London plc for new premises (100 George Street, its current registered office). Under the terms of the lease the Company pays an annual rent of £288,752 to Derwent London plc plus certain service charges. Rent is payable from the 16th January 2011 at a reduced rate of £144,495 for the first 12 months and thereafter at £288,752 per annum.
Weatherford International acquired the lease of 33 Robert Adam Street and in consideration of the Company moving out contributed £450,000 towards the refurbishment of 100 George Street. Mr Rayne and Dr Duroc-Danner are both directors of Weatherford International. Amounts outstanding under these arrangements at 31 December 2011 were £nil (31 December 2010: £6,500).
Compensation arrangements for key management are set out in the Remuneration report on pages 20 to 27.
There were no events subsequent to the balance sheet date that would materially affect the interpretation of these financial statements.
The subsidiaries comprising the Group's investment management business (as set out in Note 2) are as follows:
| Country of | Holding | ||
|---|---|---|---|
| Name | incorporation | % | Activity |
| International Oilfield Services Limited | Bermuda | 100 | Investment holding |
| LMS Capital (Bermuda) Limited | Bermuda | 100 | Investment holding |
| LMS Capital (ECI) Limited | England and Wales | 100 | Investment holding |
| LMS Capital (General Partner) Limited | Bermuda | 100 | Investment holding |
| LMS Capital (GW) Limited | Bermuda | 100 | Investment holding |
| LMS Capital Group Limited | England and Wales | 100 | Investment holding |
| LMS Capital Holdings Limited | England and Wales | 100 | Investment holding |
| LMS NEP Holdings Inc | United States | 100 | Investment holding |
| Lioness Property Investments Limited | England and Wales | 100 | Investment holding |
| Lion Property Investments Limited | England and Wales | 100 | Investment holding |
| Lion Investments Limited | England and Wales | 100 | Investment holding |
| Lion Cub Investments Limited | England and Wales | 100 | Dormant |
| Lion Cub Property Investments Limited | England and Wales | 100 | Investment holding |
| Tiger Investments Limited | England and Wales | 100 | Investment holding |
| LMS Tiger Investments Limited | England and Wales | 100 | Investment holding |
| LMS Tiger Investments (II) Limited | England and Wales | 100 | Investment holding |
| Westpool Investment Trust plc | England and Wales | 100 | Investment holding |
In addition to the above, the Group's carried interest arrangements are operated through three limited partnerships (LMS Capital 2007 LP, LMS Capital 2008 LP and LMS Capital 2009 LP) which are registered in Bermuda.
The following companies form part of the Group's investment activities but, by virtue of the size of the Group's shareholding or other control rights, fall within the definition of subsidiaries under IFRS. These portfolio subsidiaries are included within the consolidated financial information although they continue to be managed by the Group as investments held for capital appreciation.
| Name | Country of incorporation | Holding% | Activity |
|---|---|---|---|
| 365iTMS Limited | England and Wales | 84.1 | Provider of managed IT services & security, Unified communications, Business continuity, Virtualisation |
| Entuity Limited | England and Wales | 69.9 | Network management software |
| Nationwide Energy Partners LLC | United States of America | 59.5 | Energy services provider |
| ITS (US) Holdings Inc | United States of America | 100 | Specialist engineering design and fabrication |
| Updata Infrastructure (UK) Limited | England and Wales | 47.8 | Carrier-class networks |
| Wesupply Limited | England and Wales | 85 | Supply chain management software |
100 George Street London W1U 8NU Tel: +44 (0)20 7935 3555 Email: [email protected] Website: www.lmscapital.com
Company Secretary Jon Edis-Bates
Registrars Capita Registrars The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Tel: (UK) 0871 664 0300 (Outside UK) +44 (0)20 8639 3399 Email: [email protected]
All administrative enquiries relating to shareholders, such as notification of change of address or the loss of a share certificate, should be made to the Company's registrars, Capita Registrars, whose address is given above.
The Company has opted to send shareholders communications via the Company website rather than via the post. This is more environmentally friendly and cost efficient. If you would like to receive paper copies of these communications, please write to the Company's registrars, Capita Registrars, whose address is given above.
A telephone dealing service has been arranged with Stocktrade, which provides a simple way of buying or selling LMS Capital plc ordinary shares. Full details can be obtained by telephoning 08456 010995, quoting the reference: 'Low Co 0236'. For further information, please visit: www.stocktrade.co.uk/LMS/
The Company's website provides further information on the Company's investments, its strategy and its share price, as well as an archive of all press releases, presentations and shareholder documents. You can sign up to be notified by email when press releases are announced. For further information, please visit www.lmscapital.com.
J.P. Morgan Cazenove 10 Aldermanbury London EC2V 7RF
KPMG Audit Plc 8 Salisbury Square London EC4Y 8BB
Barclays Bank plc 1 Churchill Place London E14 5HP
The Royal Bank of Scotland plc 36 St. Andrew Square Edinburgh EH2 2YB
Clifford Chance LLP 10 Upper Bank Street London E14 5JJ
Ashurst LLP Broadwalk House 5 Appold Street London EC2A 2HA
Annual General Meeting: 17 May
Interim Management Statements: May and November
Half-year results: July*
Year-end 31 December
100 George Street, London W1U 8NU Telephone +44 (0)20 7935 3555
www.lmscapital.com
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