LMS Capital plc Annual Report 2009

FY2009 Annual Report · LMS Capital plc
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LMS Capital plc
Annual Report 2009

LMS Capital plc is an investment company with 
over 30 years’ experience in identifying, investing 
in and creating proﬁ table returns. Our objective 
is to deliver superior absolute returns for our 
shareholders through a risk-diversiﬁ ed portfolio 
of investments.

Financial highlights*

q   Net Asset Value per share was 84p

(31 December 2008: 89p)

q   Net Asset Value was £227.7 million
(31 December 2008: £241.5 million)

q   The return on the investment portfolio

was a loss of £4.9 million after recording 
unrealised currency losses of £13.5 million
(2008: loss of £36.7 million after unrealised 
currency gains of £45.5 million)

q   The loss for the year was £12.7 million 

(2008: loss of £40.8 million)

q   The business had cash of £14.4 million 

at 31 December 2009 and no debt

Operational highlights

q   Investment of £6.2 million for a 53.3% interest 

in Updata Infrastructure UK Limited in support 
of a management buyout

q   Sale of 7 Global Limited to 365iT plc

q   Successful migration of the Company’s shares 
to trading on the Main Market of the London 
Stock Exchange

q   Appointment of Glenn Payne as Chief Executive 

Ofﬁ cer on 1 March 2010

* Investment management business.

ifc 
Introduction
01  Financial highlights
02  Strategy
03  Our portfolio
04  Chairman’s statement

06  Operating review
10  Financial review
14  Company Proﬁ les
20 

 Principal unquoted investments

22 

 Board of Directors and Investment 
team and advisers
 Corporate governance report

24 
30  Risk factors
32  Remuneration report
40  Directors’ report
43 
44 

 Statement of directors’ responsibilities
 Independent auditors’ report 
to the members of LMS Capital plc

46 
 Consolidated income statement 
47  Statements of comprehensive income
48  Consolidated statement of ﬁ nancial position
49  Company statement of ﬁ nancial position
50  Statements of changes in equity
51 
52  Company cash ﬂ ow statement
53 
84 

 Notes to the ﬁ nancial information
 Shareholder information

 Consolidated cash ﬂ ow statement

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Overview

LMS Capital plc  01

 
 
Strategy

The Company’s strategy is to obtain 
superior absolute return for our 
shareholders through a risk-diversiﬁ ed 
portfolio of investments.

LMS Capital plc is an investment company. 
Our objective is to deliver superior absolute 
return for our shareholders through a risk-
diversiﬁ ed portfolio of investments. 

We understand the drivers of demand in the 
sectors in which we invest and this enables 
us to recognise the potential of both new 
ideas and young companies requiring growth 
funding. These sectors currently include applied 
technology, energy and water, healthcare and 
medical, media and consumer and real estate. 
We do, however, retain the freedom to invest 
outside our core sectors in order to take 
advantage of opportunities when they arise. 

Investments are principally in the UK and US, 
although the Company is not restricted from 
expanding into other markets.

A deep knowledge of our chosen sectors 
acquired over 30 years allows LMS Capital 
to invest in and with leading management 
teams. The Company undertakes rigorous 
inquiry and carries out full due diligence into 
new investments to understand the investee 
company’s business, evaluate information on 
their marketplace and competition, meet 

their management, directors and existing 
shareholders and, if necessary commission 
reports from external experts.

We also understand the cyclical nature of 
the sectors in which we are working and 
through taking long-term positions are able 
to adjust our economic interest to reﬂ ect the 
longer holding period. One of the principal 
characteristics of LMS Capital which 
differentiates us from other private equity 
investors is the time horizon over which 
we are able to invest. As an active, and 
supportive, long-term investor we are not 
constrained by the ﬁ xed investment periods 
of most private equity funds. It is not 
uncommon for us to hold investments for 
long periods of time where we believe that 
this will deliver greater shareholder value. 

The Board will continue to manage the 
Company’s portfolio in line with its overall 
objective. In this regard, we may make 
realisations from within the existing portfolio 
where we believe that the proceeds of 
realisation could generate better returns 
if deployed elsewhere.

02 LMS Capital plc

2009 Business review

Our portfolio

Portfolio split by sector

(cid:74) Applied technology  

(cid:74) Media and consumer  

(cid:74) Energy and water  

(cid:74) Healthcare and medical  

(cid:74) Real estate 

(cid:74) Other 

Total  

Portfolio split by asset type and geography

31% 

24% 

18% 

11% 

9% 

7% 

£65.8m

(cid:74) UK Funds  

£52.3m 

(cid:74) US Funds  

£39.8m 

(cid:74) UK Quoted  

£23.9m 

(cid:74) US Quoted  

£18.7m 

(cid:74) UK Unquoted  

£15.1m

(cid:74) US Unquoted  

14% 

34% 

8% 

16% 

19% 

9% 

£30.2m 

£73.2m

£17.3m

£34.6m

£39.8m

£20.5m 

100% 

£215.6m 

Total  

100% 

£215.6m 

Applied
technology
£65.8m

Media and
consumer
£52.3m

Energy and
water
£39.8m

UK
Quoted
£17.3m

UK
Unquoted
£39.8m

UK Funds
£30.2m

Real
estate
£18.7m

Other
£15.1m

Healthcare
and medical
£23.9m

US 
Quoted
£34.6m

US
Unquoted
£20.5m

US Funds
£73.2m

Vintage(1)

(cid:74) 1-2 years  

(cid:74) 3-4 years 

(cid:74) 5-6 years 

(cid:74) 6+ years 

Total  

11% 

18% 

23% 

48% 

£23.6m

£37.9m 

£49.7m 

£104.4m 

100% 

£215.6m 

11%

18%

23%

(1) Vintage is based on year of first investment and includes fund interests.

Valuation basis

(cid:74) Directors’ valuation  

(cid:74) Public market quotation 

(cid:74) Third party valuation 

Total  

20% 

24% 

56% 

£42.5m

£51.9m

£121.2m

100% 

£215.6m 

20%

24%

48%

56%

Overview

LMS Capital plc  03

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Results

The return on the investment portfolio 
for the year was a net loss of £4.9 million 
(2008: net loss of £36.7 million). Included in 
this is a small realised net loss for the 
year of £0.1 million (2008: realised gains 
of £17.3 million, most of which related to the 
sale of Energy Cranes) and net unrealised losses 
of £4.8 million, signiﬁ cantly reduced from 
£54.1 million last year. After overheads, the 
loss for the year ended 31 December 2009 was 
£12.7 million (year ended 31 December 2008: 
loss of £40.8 million). 

The investment portfolio at 31 December 2009 
was valued at £215.6 million (31 December 
2008: £202.0 million), an increase of 
£13.6 million or 7%.

The quoted portfolio (to which there were 
no additions in 2009) recovered somewhat in 
value during the year, although our holdings 
in the oilﬁ eld services sector in particular 
have yet to beneﬁ t from a sustained increase 
in global demand for energy. We have 
continued to take a cautious view of the 
carrying values of our unquoted holdings 
until the recovery in public markets is fully 
reﬂ ected in private transactions.

For the Group as a whole (including consolidation 
of the portfolio subsidiaries) the consolidated 
loss for the year was £14.8 million (2008: loss 
of £6.1 million). 

The Board is not recommending payment of a 
dividend for the year ended 31 December 2009 
(year ended 31 December 2008: nil).

Chairman’s statement

2009 was a year of uncertainty and instability 
in the ﬁ nancial markets and the effect on the 
private equity sector was to reduce fund raising 
and transaction activities to the lowest level 
seen for many years. The Company focused 
its efforts on maintaining its strong balance 
sheet and on managing its existing portfolio. 
One acquisition was made through participation 
in a management buyout and there were 
some small disposals, both of quoted and 
unquoted interests.

The Company ended 2009 with a Net Asset 
Value per share of 84p, a reduction of 6% 
compared to the end of 2008; much of this 
decline was attributable to a strengthening of 
the Sterling/US dollar exchange rate. At the 
year end the Company’s balance sheet showed 
net cash of £14.4 million and no borrowings. 
During the year there was also a reduction in 
the Company’s outstanding commitments to 
funds from £71.1 million to £58.7 million and 
we expect this reducing trend to continue.

04  LMS Capital plc

Chairman’s statement

Balance sheet

Share capital

At the year end the Company had no 
direct debt. Further, as the primary method 
of funding development capital is equity, 
there is very little external debt in the 
unquoted portfolio. 

Board and management

Last month the Company announced the 
appointment of Glenn Payne as Chief Executive 
with effect from 1 March 2010. His experience 
will provide impetus to the Company’s next 
phase of development. The appointment of 
a new chief executive is an appropriate time 
for me to step down from your Board which 
I shall do at the conclusion of the forthcoming 
Annual General Meeting. Your Board has 
appointed Robert Rayne to succeed me as 
Chairman. This appointment means that the 
Company will continue to beneﬁ t from his 
many contacts and long experience in the 
private equity sector and I wish Robbie Rayne 
and Glenn Payne in their new roles every 
success in taking the business forward.

David Verey joined the Board in September 
2009 and his considerable experience as an 
investment banker and in private equity will 
be of great value to the Company. Martin Pexton 
left the Company at the end of September 
2009 and on behalf of the Board I should 
like to thank him for his contribution to the 
business since it became independent in 2006. 

2009 was a year of change at LMS Capital when 
many of its investee companies were required 
to make signiﬁ cant reductions in headcount 
and overheads to adjust to a difﬁ cult operating 
environment. Your Board would like to extend 
its appreciation to all the Company’s employees, 
as well as to the management teams of our 
investee companies, for their contribution to 
the Group’s continuing progress.

As in previous years, at the forthcoming 
Annual General Meeting the Company will be 
seeking authority to purchase up to 14.99% 
of its issued share capital. The Company 
also needs, once again, to obtain a waiver 
in respect of the Takeover Code obligations 
that a repurchase of shares above a certain 
limit would place on the Rayne family 
shareholders. 

There were no purchases of shares by the 
Company during 2009; the current number 
of ordinary shares in issue is 272,640,952.

Outlook

Although your Board does not expect a 
fundamental change in economic conditions 
in 2010 we are hopeful of a slow and steady 
recovery of the principal economies in which 
your Company invests; there are currently 
signs of merger and acquisition activity 
increasing in 2010.

Your Board believes that our continued 
strategy of a risk diversiﬁ ed portfolio and 
our strong ﬁ nancial position will enable 
us to surmount these challenges. We shall 
continue to seek exit opportunities for 
selected investments and to ensure that 
capital outlays are subject to rigorous review 
and due diligence. Your Board is conﬁ dent 
that the Company is well positioned to protect 
its existing assets and take advantage of 
increased investment opportunities in the 
short to medium term.

Jonathan Agnew 
Chairman

26 March 2010

Chairman’s statement

LMS Capital plc  05

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Operating review

The Company’s resilience following the 
turbulence in international markets in the 
closing months of 2008 is a testimony to the 
key fundamentals of our investment strategy 
– a risk and geographically diversiﬁ ed 
portfolio of investments. This resilience 
also reﬂ ects the low levels of debt in the 
overall portfolio. These principles have 
enabled us to see out these recent economic 
difﬁ culties while at the same time taking 
advantage of opportunities which the current 
environment presents.

The last year has seen considerably reduced 
activity in the private equity arena and while 
we have maintained a satisfactory level of 
deal ﬂ ow, transaction levels have been very 
low in the face of reduced liquidity in the 
ﬁ nancial markets. Consequently we have 
added only one new investment during the 
year and made relatively few realisations.

Our primary focus during 2009 has been on 
managing our existing portfolio companies 
to ensure that each has adapted to the 
current business environment of reduced 
demand and reduced liquidity. Faced with 
the expectation that this environment will 
continue at least through 2010, we have 
also used this period to review our longer 
term strategy for each investment.

Our objective remains unchanged. We aim 
to deliver sustained medium- to long-term 
growth for our shareholders; we are not 
constrained by the ﬁ xed investment periods 
of most private equity funds and we are 
therefore able to hold investments for longer 
than many other funds where we believe 
that this will deliver greater shareholder 
value. We understand the drivers of demand 
in the sectors in which we invest and this 
enables us to recognise the potential of both 
new ideas and young companies requiring 
growth funding. 

Investment portfolio

The portfolio in the Group’s core investment 
management business is risk diversiﬁ ed
and comprises:

(cid:129)  early stage companies;

(cid:129)  companies requiring development or growth 
ﬁ nance where the normal holding period has 
been three to ﬁ ve years but could now be 
seven or eight years; and

(cid:129)  shorter term investments in the pre- and 
post-IPO market which usually provide 
liquidity within three to four years. 

06  LMS Capital plc

2009 Business review

The Company’s resilience is a 
testimony to the key fundamentals
of our investment strategy – a risk 
and geographically diversiﬁ ed 
portfolio of investments

The movement in the investment portfolio 
during the year was as follows:

1 January  
Additions in the year 
Realisations 
Valuation adjustments, net 
Foreign currency (losses)/gains 

31 December  

2009 
£million 

202.0 
32.7 
(14.3) 
8.7 
(13.5) 

215.6 

2008
£million

282.1
51.6
(77.6)
(99.6)
45.5

202.0

Additions include £7.6 million (2008: 
£12.4 million) of new investments and 
£25.1 million (2008: £39.2 million) of follow 
on funding, including £14.8 million (2008: 
£15.8 million) of capital calls from funds. 
The ﬁ gure for realisations relates principally 
to sales of quoted stocks and adjustments 
for fund distributions (the ﬁ gure for 2008 
included £65.0 million in respect of Energy 
Cranes International Limited). 

The foreign currency gains or losses are 
unrealised and reﬂ ect the weakening of the US 
dollar against the pound sterling, principally 
in the ﬁ rst part of the year. It is the Board’s 
current policy not to hedge the Company’s 
underlying non-sterling investments.

Applied technology

In July we acquired a 53.3% interest in 
Updata Infrastructure UK Limited (‘Updata’) 
investing £6.2 million in a management 
buyout. Updata designs, builds and manages 
cost-effective high-capacity broadband 
networks for public sector organisations 
in the UK and differentiates itself from its 
competitors through its culture of excellence 
in customer service. In the ﬁ rst six months 
since our investment Updata has performed 
strongly with growth in revenues and proﬁ ts 
which are in line with our expectations at the 
time of investment.

In November we completed the sale of our 
interest in 7 Global Limited to 365 iT plc 
(‘365iT’), a private company which provides 
a comprehensive suite of IT services and 
solutions to UK businesses. We received shares 
in 365iT in return for our 7 Global shares and 
since the end of the year we have participated 
in a fund raising by 365iT which has taken our 
holding to 15%.

2009 Business review

LMS Capital plc  07

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Wesupply Limited enjoyed strong sales 
growth in 2009 with revenues increasing by 
around 70% compared to 2008. In particular 
the company, in partnership with IBM, 
secured a contract with Sainsbury’s to 
be its business-to-business platform for 
connectivity to 4,000 of its suppliers. Despite 
the increase in revenues the company traded 
at a loss in 2009 and we have taken steps to 
reduce the cost base of the business in 2010.

Entuity Limited had a successful year – it 
increased revenues year on year by 16% and 
achieved a positive EBITDA result for the ﬁ rst 
time in its history. The company has a clear 
strategy and we expect further progress in 2010.

Coppereye Limited had a disappointing 
performance in 2009 after a strong 2008. 
Its unique technology has a long sales cycle.

Kizoom’s revenues improved 20% over the prior 
year and this coupled with cost reductions 
resulted in a substantially reduced loss for the 
year. However this performance was below 
expectations and we are currently reviewing 
the strategic options for this business. 

In the USA, Penguin Computing, which 
provides high performance computing (‘HPC’) 
solutions using Linux cluster servers, continued 
to make good progress. In August the company 
launched HPC as a Service, offering on-demand 
access to high performance clusters over the 
Internet, thereby signiﬁ cantly reducing 
customers’ capital outlays for HPC.

Energy and water

This sector was particularly affected by 
the difﬁ cult economic conditions in 2009 
as activity levels fell in the face of reduced 
world demand. Most of our interests in this 
sector are in quoted stocks, in particular 
Weatherford International Ltd which 
experienced difﬁ cult trading conditions 

during 2009 in line with the oilﬁ eld services 
sector generally. However the company’s 
share price recovered from a low of $9 around 
the end of 2008 to just under $18 at the end 
of 2009. We made no purchases or sales of 
shares in the company during the year.

In August Venture Production plc was 
acquired by Centrica plc, a transaction 
that produced cash of £4.1 million for the 
Company.

Pims Group Limited, a private UK-based 
company which designs, installs and 
services pumping systems for domestic and 
commercial water systems, performed well 
in a difﬁ cult trading environment. It has also 
continued to make bolt-on acquisitions to 
expand its presence in its chosen markets. 
Pims is a co-investment with Inﬂ exion 2006 
Buyout Fund. 

Offshore Tool and Energy Corporation, which 
specialises in fabrication projects for the oil 
and gas and water industries, made good 
progress during the ﬁ rst half of 2009 but 
could not sustain this in the second half of 
the year. Increasing order intake is a priority 
for the business in the ﬁ rst quarter of 2010, 
following rigorous cost cutting measures 
during the second half of last year.

Healthcare and medical

This sector has proved to be more resilient 
than most during 2009. We made no 
purchases or sales in this sector during the 
year but our existing portfolio has made 
strong progress. 

ProStrakan Group continues to report good 
progress in line with its strategic objectives 
and expects 2010 to be its ﬁ rst full year of 
operating proﬁ tability. This progress has not 
yet been reﬂ ected in a sustained improvement 
in the company’s share price which, despite 

08  LMS Capital plc

2009 Business review

Our primary focus during 
2009 has been on managing 
our portfolio companies

movements during 2009, was little changed 
at the end of the year compared to the end 
of 2008. However, the price improved during 
January 2010 on the back of an encouraging 
trading update for 2009 and positive 
expectations for 2010. 

HealthTech Holdings (formerly Healthcare 
Management Systems) which is based in the 
USA has enjoyed a successful 2009 as the 
hospital market in which it operates has 
shown resilience in the generally difﬁ cult 
trading environment. Since the end of the year 
it has acquired a complementary business 
which extends its offering to Accident & 
Emergency departments. 

Media and consumer

Our principal interest in this sector is via 
San Francisco Equity Partners, the US fund 
where we are the major investor. For Method 
Products, Inc, which sells environmentally 
friendly homecare products, 2009 was a year 
of consolidation, during which it reviewed 
and rationalised its various product lines. 
The company believes that the resulting 
improved product focus will drive signiﬁ cant 
growth in revenues and proﬁ tability in the 
medium term. The beginning of 2010 has seen 
the launch of its new laundry products with 
very positive media and consumer reaction 
to date.

Yes To Inc has become one of the fastest 
growing brands in the worldwide natural 
personal-care market, and its award-winning 
products are currently sold by leading 
retailers across North America, Europe 
and Asia. The company is beneﬁ ting from 
consumers’ growing preference for natural 
products over synthetic.

Rave Reviews Cinemas, a co-investment 
with one of our fund interests, had a 
successful year in 2009, during which it 
improved revenues and cash ﬂ ow. At the 
end of the year it completed a restructuring 
which substantially reduced its debt and 
which should result in the business paying 
dividends in the medium term.

Other

In July we sold part of our interest in 
Inﬂ exion 2006 Buyout Fund for approximately 
£1 million in cash. This transaction also 
reduced our outstanding commitment to this 
fund by £1.4 million.

Also in July, Viking Moorings, an investment 
in the Inﬂ exion 2003 Buyout Fund, was 
sold, producing proceeds to the Company 
of £2.5 million.

2009 Business review

LMS Capital plc  09

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Financial review

Basis of preparation of ﬁ nancial information

The Company reports its results under 
International Financial Reporting Standards 
as adopted for use in the European Union 
(‘Adopted IFRS’), and the consolidated 
ﬁ nancial statements include the consolidation 
of portfolio companies which are also 
subsidiaries (‘portfolio subsidiaries’). Since the 
Board manages the Company as an investment 
business, this ﬁ nancial review focuses on 
the results of the investment management 
operations. Note 2 to the ﬁ nancial information 
includes the separate results and net assets 
of the investment management business. 
Where appropriate, this review includes 
comments on the results and ﬁ nancial position 
of the portfolio subsidiaries.

Investment management

Net Asset Value at 31 December 2009 
was £227.7 million (31 December 2008: 
£241.5 million), a decrease of £13.8 million 
or 6%. The Net Asset Value per share was 
84p (31 December 2008: 89p). 

The Group’s return on its investment portfolio 
for the year ended 31 December 2009 was a 
loss of £4.9 million (year ended 31 December 
2008: loss of £36.7 million) as follows:

Approximately 60% of the portfolio at 
31 December 2009 is denominated in 
US dollars (2008: 59%) and the above table 
includes the impact of currency movements. 
In the year ended 31 December 2009 the 
weakening of the US dollar against pound 
sterling resulted in an unrealised foreign 
currency loss of £13.5 million. During the 
year ended 31 December 2008 there was 
a signiﬁ cant strengthening of the dollar 
against pound sterling and the unrealised 
gain for that year was £45.5 million.

Realised gains on quoted securities include 
£2.0 million in connection with the sale of our 
shares in Venture Production plc to Centrica 
plc, with the balance arising on the sale 
of other, smaller holdings during the year. 
The realised losses on unquoted securities 
arose on the sale of 7 Global to 365iT.

The unrealised gains on our quoted portfolio 
reﬂ ect the net impact of the changes in the 
capital markets during the year. Of the total 
of £9.7 million, £7.5 million is attributable to 
our holding in Weatherford International. 

The principal constituents of the net 
unrealised loss for the year on our unquoted 
securities are as follows:

Realised gains/(losses) 
Quoted securities 
Unquoted securities 
Funds 

Unrealised gains/(losses) 
Quoted securities 
Unquoted securities 
Funds 

Total gain/(loss) 

Year ended 31 December

2009 
£’000 

2008
£’000

2,503 
(1,867) 
(755) 

574
14,620
2,114

(119) 

17,308

9,741 
(8,491) 
(6,007) 

(31,122)
(27,506)
4,572

(4,757) 

(54,056)

(4,876) 

(36,748)

Coppereye 
Kizoom 
Offshore Tool and Energy 
Updata 
Rave Reviews Cinemas 
HealthTech Holdings 

Other investments (net) 

Total net unrealised loss 

Unrealised
gain/(loss)
£’000

(5,226)
(3,240)
(1,861)
1,800
(1,745)
3,580

(6,692)
(1,799)

(8,491)

10  LMS Capital plc

2009 Business review

 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The unrealised losses above reﬂ ect the 
combined impact on our valuation criteria 
of changes in the revenue and proﬁ tability 
multiples of comparable businesses which 
are used in the underlying calculations and 
the operating performances of the individual 
businesses within the portfolio. 

In most cases the multiples used are either 
the same as or more favourable than those 
prevailing at the end of 2008. The unrealised 
gains or losses set out above for 2009 arise 
principally as a result of the companies’ 
performance. In particular, the results of 
Kizoom and Coppereye in 2009 were below 
expectations, such that a strategic review 
of these businesses is in progress which is 
likely to result in exit by us. Conversely the 
performances of Updata and HealthTech 
Holdings have resulted in a higher valuation 
for those businesses.

The unrealised valuation loss on our fund 
interests reﬂ ects the fact that many of these 
are US funds and the net decrease in our 
carrying value arises from the weakening 
of the US dollar against the pound sterling, 
principally in the ﬁ rst half of the year. 
The net unrealised loss for the year was 
£6.0 million, being unrealised foreign 
currency losses of £7.8 million offset by 
net valuation adjustments of £1.8 million.

In line with other funds of funds we rely on 
reports from general partners as at the end 
of the third quarter in establishing our year 
end carrying value, with adjustments made 
for calls, distributions and foreign currency 
movements since that date. 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 £0.5 million (2008: £0.6 million) and 
comprises dividends on quoted securities 
and management charges made to portfolio 
companies. Administration expenses for the 
year were £8.0 million (2008: £5.6 million); 
the current year includes a number of non-
recurring charges (including £0.4 million 
for the costs of the Company moving to the 
Ofﬁ cial List and £0.8 million as compensation 
for loss of ofﬁ ce to a director) whereas 2008 
beneﬁ ted from a one-off VAT refund of 
£1.1 million. Net interest income for the year 
was £0.2 million (2008: £1.8 million) reﬂ ecting 
the lower interest rates during the year as 
well as the lower levels of uninvested cash. 
The tax charge for the year was £0.3 million 
(2008: £0.6 million).

Investments

The Group’s investments are included in the 
balance sheet at fair values determined in 
accordance with industry guidelines. 

Additions to the investment portfolio during 
the year were £32.7 million (year ended 
31 December 2008: £51.6 million) of which 
£7.6 million (2008: £12.4 million) was for 
new investments and £25.1 million (2008: 
£39.2 million) for follow on investments 
including £14.8 million (2008: £15.8 million) 
for capital calls from funds. 

There were no additions to quoted securities 
during the year (2008: £17.5 million); the most 
signiﬁ cant new investment was £6.2 million 
for our stake in Updata. The follow on 
investments (excluding fund calls) included 
£9.5 million (2008: £12.0 million) for the 
UK unquoted portfolio and £0.8 million 
(2008: £0.9 million) for the US portfolio. 

2009 Business review

LMS Capital plc  11

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Proceeds of realisations were £13.9 million 
(2008: £97.1 million, of which £82.9 million 
was from the sale of Energy Cranes), 
including sales of quoted securities of 
£6.9 million (2008: £3.9 million) and 
distributions from funds of £5.6 million 
(2008: £8.1 million). 

At 31 December 2009 the Group had 
commitments of £58.7 million (31 December 
2008: £71.1 million) to meet capital calls 
from its fund interests which the Directors 
estimate will be called over the next ﬁ ve years. 
In terms of assessing the level of the Group’s 
commitment in this area, the Directors do not 
expect fund commitments to exceed liquid 
assets (being cash and quoted securities); 
at 31 December 2009 liquid assets were 
£66.3 million. 

Consolidated results

Consolidated revenues for the year were 
£32.5 million (2008: £19.8 million), all in the 
portfolio subsidiaries. The increase over the 
previous year reﬂ ects the inclusion of Updata 
for the ﬁ rst time (from acquisition in July 
2009), the inclusion of Citizen Limited for 
a full year (2008: four months only) and the 
improved revenue performances by Entuity, 
Kizoom and Wesupply.

Consolidated operating expenses 
were £51.1 million for the year (2008: 
£46.1 million), including goodwill impairment 
charges of £4.6 million (2008: £11.2 million). 
Excluding goodwill impairment, the increase 
in operating expenses reﬂ ects principally 
the inclusion of Updata and Citizen as set 
out above.

Financial position

The consolidated balance sheet at 
31 December 2009 includes cash and cash 
equivalents of £17.0 million (31 December 
2008: £42.6 million) and borrowings of 
£7.6 million (31 December 2008: £2.8 million) 
in the portfolio subsidiaries. 

Cash in the investment management business 
was £14.4 million (31 December 2008: 
£41.3 million). Part of the Company’s cash 
has been and will be committed during 2010 to 
meets calls from funds and to provide further 
funding for existing unquoted investments. 
The business also has a £15 million borrowing 
facility with The Royal Bank of Scotland, 
which is due to expire in April 2011. 
The investment management business had 
no borrowings during 2009.

Robert Rayne
Chairman designate

26 March 2010

12  LMS Capital plc

2009 Business review

LMS Capital plc – Top 20 investments by valuation 31 December 2009*

Investment 

Geography 

Weatherford International Ltd 
Oilﬁ eld services 

Method Products 
Consumer products 

Prostrakan Group plc 
Speciality pharmaceuticals 

Updata Infrastructure UK Limited 
Wide area networks 

Rave Reviews Cinemas 
Cinema operations 

HealthTech Holdings, Inc 
Hospital information systems 

Penguin Computing 
Linux server systems 

Wesupply Limited 
Supply chain connectivity software 

Entuity Limited 
Network management software  

Elateral Limited 
Marketing software 

Gulfmark Offshore Inc 
International offshore services 

Luxury Link 
Internet commerce 

Kizoom Limited 
Transport information services 

Yes To, Inc 
Consumer products 

Chyron Corporation 
Media technology 

Pims Group 
Wastewater systems and services 

BJ Services 
Oil and gas ﬁ eld services 

Agilisys Holdings Limited 
IT services and outsourcing  

Vio Worldwide Limited 
Advertising workﬂ ow services 

Offshore Tool and Energy Corporation 
Specialist engineering 

* Investment management business.

US 

US 

UK 

UK 

US 

US 

US 

UK 

UK 

UK 

US 

US 

UK 

US 

US 

UK 

US 

UK 

UK 

US 

Type of 
investment 

Quoted 

Date of initial  Book value 
£’000 
investment 

2001 

22,647 

% of net
 assets

10%

Fund portfolio 
company 

2004 

17,265 

Quoted 

1999 

15,226 

Unquoted 

2009 

8,000 

Unquoted 

2002 

7,115 

Unquoted 

2007 

7,000 

Fund portfolio 
company 

2004 

5,586 

Unquoted 

2000 

5,500 

Unquoted 

2000 

4,500 

Unquoted 

2000 

4,500 

Quoted 

2008 

4,363 

Fund portfolio 
company 

2006 

4,283 

Unquoted 

1997 

4,000 

Fund portfolio 
company 

2008 

3,726 

Quoted 

1995 

3,501 

Unquoted 

2008 

2,905 

Quoted 

2007 

2,870 

Unquoted 

2000 

2,000 

Unquoted 

2002 

2,000 

Unquoted 

1998 

2,000 

8%

7%

4%

3%

3%

3%

2%

2%

2%

2%

2%

2%

2%

2%

1%

1%

1%

1%

1%

2009 Business review

LMS Capital plc  13

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Company Proﬁ les

Updata Infrastructure UK Limited
www.updata.biz

Updata is a specialist managed network 
services provider solely focused on the local 
authority market throughout the UK.

Established in 2003, Updata was set up to 
provide broadband services utilising Local 
Loop Unbundling (LLU) as a cost effective 
alternative technology platform on which to 
compete with established service providers. 
Today Updata is recognised as the de facto 
specialist LLU Operator within its market, 
having won contracts in excess of £80 million 
since inception. Updata has expanded its 
service offering beyond LLU and indeed quite 
some way beyond simple connectivity. Current 
services include data centre management, 
ISP services, hosted services, ﬁ rewall 
management and migration services. The 
principal drive within the business today 
is the augmentation of its considerable 
networking expertise with those ancillary 
value added services mentioned above. 
Additionally, the business is actively looking 
to offer a broader converged solution 
incorporating both voice (ﬁ xed and mobile) 
and data to meet growing customer demands.

The local authority market is addressed via a 
combination of direct sales and indirect sales 
via a small number of strategic partnerships 
with the likes of Siemens, Unisys, Research 
Machines and Logicalis. Updata now own and 
manage networks across Wales, Kent, Essex, 
Cheshire, Peterborough, Herefordshire and 
Dorset to name a few. Updata is a preferred 
supplier to The Ofﬁ ce of Government Commerce 
(OGC) and Adit North procurement frameworks, 
through which it generates considerable 
business and customer credibility.

Typically, Updata owns and manages 
the entire infrastructure for which it is 
responsible. Contracts are entered into on 
a three, ﬁ ve or seven year basis, generating 
recurring revenues which now account for 
around 50% of year on year sales. 

There is a growing realisation by end users 
that signiﬁ cant economic efﬁ ciencies can be 
leveraged through shared services and public 
sector networks (PSNs). Updata’s underlying 
network design lends itself very well to 
the concept of ‘one network for multiple 
stakeholders’ and indeed Updata forms a 
major part of some of the largest PSNs in the 
country, namely, PSBA (Wales); KPSN (Kent) 
and the County-wide network now serving 
Essex County Council and half a dozen other 
users (including the Fire & Rescue service) 
within the county.

Whilst the consequences of the expected 
tightening of the public sector purse may 
possibly contribute to a depressed market in 
the short to medium term, Updata believes 
that it is in a unique position in terms of 
pedigree, references and ﬁ nancial stability 
to offer a genuine alternative for customers 
looking to extract better value from its WAN 
related investments. This is a very risk 
adverse customer segment, which historically 
has chosen large and safe over small and 
innovative. Updata could be considered 
big enough to be safe and small enough 
to be innovative.

The Company’s investment in Updata had a 
book value of £8 million as at 31 December 2009.

14  LMS Capital plc

2009 Business review

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2009 Business review

LMS Capital plc  15

 
 
HealthTech Holdings Inc

HealthTech Holdings, Inc. is a healthcare 
information technology holding company with 
two major portfolio companies, Healthcare 
Management Systems, Inc. and MEDHOST, 
Inc. The company expects combined revenue 
in excess of $100 million in 2010. In addition, 
MEDHOST will develop an integrated 
emergency department system for the HMS 
solution designed for community hospitals.

LMS Capital’s stake in HealthTech Holdings 
had a book value of £7 million as at 
31 December 2009.

Healthcare Management Systems
www.hmstn.com

MEDHOST
www.medhost.com

Based in Nashville, Tennessee, Healthcare 
Management Systems (HMS) develops, sells 
and supports integrated clinical and ﬁ nancial 
hospital information systems and services. 
This integrated approach provides HMS’s 
customers with peerless stability and 
effectiveness in communications and 
signiﬁ cantly increases productivity within 
their facilities and with their external agencies.

HMS provides their system to over 650 
community hospitals; behavioural, rehabilitation 
and long-term acute care facilities; and multi-
entity healthcare organisations within the 
United States. Compared to other vendors, 
HMS focuses speciﬁ cally on providing 
solutions and services to the sub 200-bed 
healthcare marketplace. 

HMS maintains a continued commitment to 
growth in developing technology and quality 
customer service. In 2009, HMS launched 
its learning institute which provides the 
industry’s most comprehensive training 
and implementation process by providing 
a variety of easy to use, convenient and cost 
effective training and education opportunities 
to meet the needs of its customers.

In February 2010, HealthTech Holdings 
acquired MEDHOST, a leading provider within 
the United States of emergency department 
information systems. MEDHOST’s Emergency 
Department Information System (EDIS) 
includes real time patient tracking, nurse 
charting, physician documentations, order 
entry and comprehensive reporting. This 
powerful EDIS was designed by clinicians, 
not software developers, so it eliminates 
everything that hinders care in the emergency 
department, such as drop down menus, too 
many screens, confusing dialogue boxes, 
multiple key strokes and other obstacles 
that impede patient care. 

MEDHOST’s innovative technology is easy 
to navigate and features a unique touch 
screen design and an Administrative ToolKit 
for customising processes. The graphical 
ﬂ oorplans improve staff communication 
through automated notiﬁ cation, risk alerts 
and visual cues, and it allows clinicians to 
quickly and easily decipher which patients 
are highest acuity, who has tests completed or 
pending, which rooms and beds are available, 
and manage all other patient care priorities. 

16 LMS Capital plc

2009 Business review

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2009 Business review

LMS Capital plc  17

 
 
Luxury Link, LLC

Luxury Link, LLC is the parent company of 
LuxuryLink.com and FamilyGetaway.com, 
the web’s pioneering sites devoted to online 
luxury and family travel deals. Luxury Link, 
LLC is a US unquoted investment made 
by San Francisco Equity Partners, a 
partnership in which LMS Capital is a 
founding partner.

Luxury Link
www.luxurylink.com

Family Getaway
www.familygetaway.com

Founded in 1997, LuxuryLink.com is the 
leader in online luxury travel with a proven 
track record of longevity, credibility and 
success. Designed for travellers seeking 
inspiration and exceptional values at the 
world’s ﬁ nest hotels and resorts, holidays can 
be purchased via online auctions or via “buy 
now” special offers. 

LuxuryLink.com only offers the world’s very 
best hotels, tours and cruises and works hard 
to ensure that everything it offers meets high 
standards of quality, service and luxury. 
Before it lists an item, the company’s vetting 
team uses a three page checklist of amenities 
to evaluate whether a resort or travel operator 
meets its standards – most hotels are four or 
ﬁ ve star. If a holiday is bid for by auction, 
once the auction is won LuxuryLink.com will 
also make the reservation on behalf of the 
successful bidder, unlike other websites who 
make the auction winner book themselves.

During the current economic situation, 
LuxuryLink.com has seen business boom 
and has been voted a “Top Travel Website” 
for both 2009 and 2008 by Travel & Leisure 
magazine and “Best Travel Website” for 2008 
by CNBC.

In February 2010, in response to requests 
for family and child friendly holidays, the 
team behind LuxuryLink.com launched a new 
website dedicated to families seeking the 
best places to stay at exceptional values – 
FamilyGetaway.com. As with LuxuryLink.com, 
holidays can be purchase via online auctions 
or via “buy now” special offers at up to 65% 
off retail value.

FamilyGetaway.com offers a wide spectrum 
of family travel accommodations and 
experiences including global hotel collections, 
boutique hotels, villas, all-inclusive holidays, 
historic hotels, all in the three-to-ﬁ ve star 
range in popular family destinations such as 
California, Florida, Europe, Mexico, Hawaii 
and the Caribbean.

The FamilyGetaway.com website has been 
designed to make it practical and easy to ﬁ nd 
suitable holidays for families depending on 
their requirements. Families can choose which 
holiday by type (e.g. beach, all-inclusive or 
cruise); by interests (e.g. active, adventure or 
skiing) or by speciﬁ c activities for children.

18  LMS Capital plc

2009 Business review

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Entuity Limited
www.entuity.com

Method Products, Inc
www.methodproducts.com

Founded in 1997, Entuity® is a leading provider 
of innovative management solutions that deliver 
network insight, predictability and control, 
enabling enterprises, system integrators and 
managed service providers to monitor and 
manage network services and assets, meet 
service level commitments, implement best 
practices in service delivery. 

Entuity competes in a mature and competitive 
market but is making steady progress thanks 
to continued product improvements. With its 
Insight Center Perspectives, the company has 
successfully positioned itself as the ‘next 
generation’ of network management, bringing 
business-focused service and value to the 
forefront. One of those Perspectives is for 
‘Green IT’ initiatives, and the company is 
winning awards and praise for its uniqueness 
and innovation in the network management 
industry. For example, the Green IT Perspective 
currently allows the University of Minnesota 
to monitor the nightly shut-down of more than 
50,000 devices. This will allow the university 
to save more than $2 million in total annual 
utility costs. In early 2010, Entuity ﬁ nished 
a project with the University, installing a 
centrally managed network support service 
that supports the wireless mobility needs of its 
students and staff, with 9,500 wireless access 
points, serving some 80,000 people spread over 
a campus of 1,204 acres: the largest current-
generation wireless conﬁ guration in the world.

Since introducing a strategic plan to stimulate 
sales from partnerships and reseller agreements, 
Entuity’s indirect channel partners have 
quadrupled in number over the last four years. 
Indirect revenues doubled from 2008 to 2009 
alone and the company experienced a 20% growth 
in 2009, despite the global economic downturn. 

The Company’s interest in Entuity had a book 
value of £4.5 million as at 31 December 2009.

Method Products is the maker of eco-friendly 
household and personal care products and 
within eight years it has become the world’s 
largest and fastest growing green homecare 
company. Having started in the United States, 
the company’s products are now available in 
the United Kingdom, Ireland and Australia.

There are no toxic ingredients used in 
Method’s products. All ingredients in 
Method’s products are environmentally safe 
and friendly, with each ingredient being 
independently assessed by EPA, a world- 
renowned scientiﬁc research institute.

In late January 2010, Method launched a 
new revolutionary laundry detergent in 
the US, made with smartclean technology 
– a powerful, patent-pending, plant-based 
formula that gets clothes really clean with 
a formula that’s super green. It cuts down 
on the need for large bottles of laundry 
detergent and packs it into a smaller, ultra-
concentrated, lightweight bottle. Instead of 
using a measuring cap, which is prone to 
dripping, Method’s product uses a no-mess, 
precision-dosing pump. The result of this is 
a product that is smaller and lighter in size 
than its rivals, which means that it is cheaper 
to ship as it takes up less packaging space. 
It also uses less water. This results in a super 
green product. The launch of the detergent 
has proven a great success and has received 
much coverage in the press and on television 
in the US.

Current retailers of Method Products in the 
UK are John Lewis and Waitrose, Selfridges, 
Tesco, Sainsbury’s, Boots, Co-Op, Homebase 
and B&Q.

Method is a US unquoted investment made by 
San Francisco Equity Partners, a partnership 
in which LMS Capital is a founding partner.

2009 Business review

LMS Capital plc  19

 
 
 
Principal unquoted investments

Company 

365 iT plc

Company 

Kizoom

Company 

Elateral Limited

Description 

 365 iT delivers expert and 
affordable computer and 
network services including 
Managed IT Services, Uniﬁ ed 
Communications, Business 
Continuity, Virtualisation, 
and IT Security.

Description 

 Provision of urban digital 
networks, supplying and 
servicing intelligent transport 
systems, iPlus Points 
and wireless broadband 
city networks.

Description 

 Supply chain software to 
streamline and automate 
marketing processes, from 
creative design and marketing 
to printing and fulﬁ lment, 
via an online collaborative 
workﬂ ow tool.

MD 

Peter MacLean

CEO 

Andrew Fraser

CEO 

Paul Goater

Website 

www.365itechnology.com

Website 

www.kizoom.com

Website 

www.elateral.com

Company 

Agilisys Holdings Limited

Company 

CopperEye Limited

Company 

Description 

 An IT services and outsourcing 
provider which designs, builds 
and operates an integrated 
end-to-end suite of IT and 
business process services, 
for public and private sector 
clients.

Description 

 Specialised search solutions 
for business transaction data 
that facilitates quick retrieval of 
speciﬁ c records from months 
or years of history and billions 
of business transactions.

Description 

 Emerging Markets Advisory 
Corporation Limited

 An alternative asset 
management business 
focused primarily on the 
transition markets of 
South Eastern Europe.

CEO 

Kay Andrews

CEO 

Carmen Carey

CEO 

 Matthew Gilpin

Website 

www.agilisys.co.uk

Website 

www.coppereye.com

Website 

www.emac-global.com

Company 

 Pims Group Limited

Company 

Corizon Limited

Company  Wesupply Limited

Description 

 A supplier of waste water 
pumping systems and services 
across the UK.

Description 

 Software solutions which 
allow enterprise users, such 
as contact centre agents, to 
access multiple applications 
from a single user interface.

Description 

 Supply chain management 
software, offering a fully 
conﬁ gurable on-demand 
and collaborative 
web-based solution.

CEO 

Charlie White

CEO 

Eric Guilloteau

CEO 

Bob Godfrey

Website 

www.pimsgroup.co.uk

Website 

www.corizon.com

Website 

www.wesupply.com

20  LMS Capital plc

2009 Business review

Company 

Entuity Limited

Description 

 Network management software 
that facilitates the deployment 
and management of IP 
services, reduction of network 
downtime, and compliance with 
service level commitments.

Company 

 Updata Infrastructure
UK Limited

Description 

 Updata creates, implements 
and then manages secure, 
cost-effective high-capacity 
broadband networks for public 
sector organisations and mobile 
operators.

Company 

Telespree Communications

Description 

 Self-service platform for 
automated activation, ongoing 
account management and 
location-based advertising 
for mobile devices.

CEO 

Michael Jannery

CEO 

Richard Bennett

CEO 

Bill DeKay

Website 

www.entuity.com

Website 

www.updata.biz 

Website 

www.telespree.com

Company 

 Healthcare Management 
Systems, Inc*

Description 

 Integrated clinical and ﬁ nancial 
hospital information systems 
and services, focusing on 
rural, community, behavioural, 
rehabilitation and multi-entity 
healthcare organisations.

Where Advisors Prosper SM 

Company 

Envestnet Asset Management

Company 

Vio Worldwide Limited

Description 

 A provider of wealth 
management solutions, via 
web-based tools, to the 
ﬁ nancial advisory sector.

Description 

 Supply chain software solutions 
for the advertising, publishing 
and graphic arts industries.

CEO 

Thomas M Stephenson

CEO 

Judson Bergman

MD 

Chris Friend

Website 

www.hmstn.com

Website 

www.envestnet.com

Website 

www.vio.com

 *Part of HealthTech Holdings, Inc.

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ITS Engineered Systems Inc*

Company 

Rave Reviews Cinemas LLC

Company 

Eye-Fi, Inc.

Description 

 Oil and gas production/recovery 
systems, encompassing 
custom engineering, fabrication, 
installation, training and service.

Description 

 Operator of multiplex cinemas 
in the United States.

Description 

 Developer of wireless memory 
cards which integrate with Wi-Fi 
networks to automatically send 
photos from a digital camera 
to online, in-home and 
retail destinations.

President 

Mike Decarlo

CEO 

Tom Stephenson

CEO 

Jef Holove

Website 

www.itses.com

Website 

www.ravemotionpictures.com

Website 

www.eye.ﬁ 

*Part of Offshore Tool & Energy

2009 Business review

LMS Capital plc  21

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Board of Directors

1) Jonathan Agnew 11
Chairman
Age: 68

2) Robert Rayne 11
Chairman designate
Age: 61

3) Glenn Payne 1
Chief Executive Ofﬁ cer
Age: 45

4) Antony Sweet 1
Chief Financial Ofﬁ cer
Age: 55

Directorships: 
Chairman of Ashmore Global 
Opportunities Ltd, Beazley plc 
and The Cayenne Trust plc, 
and senior independent director 
of Rightmove plc.

Experience: 
Jonathan was a managing 
director of Morgan Stanley 
and subsequently group chief 
executive of Kleinwort Benson 
and has been chairman of 
Nationwide Building Society, 
Limit plc, Gerrard Group plc 
and Henderson Geared Income 
& Growth Trust plc.

Directorships: 
Chairman of Derwent London 
plc and a non-executive director 
of Weatherford International 
Ltd and Chyron Corporation, 
as well as a number of unlisted 
companies.

Experience: 
Robbie established LMS 
Capital’s investment activities in 
the early 1980s as investment 
director and later managing 
director and chief executive of 
London Merchant Securities plc. 
He has expertise in a wide 
range of sectors, including 
real estate, media, consumer, 
technology and energy. 
Previous directorships include 
First Leisure Corporation and 
Crown Sports plc.

Directorships: 
A number of Group companies.

Experience: 
Glenn joined LMS Capital 
as CEO on 1 March 2010. 
Previously, he was a director 
of First Reserve Corporation, 
a leading investment ﬁ rm 
specialising in the energy 
industry. He has also worked 
at Suez Energy, a major global 
electricity and gas provider, 
as director of strategy and 
at McKinsey & Co. as an 
Engagement Manager serving 
electric power and natural gas 
clients. Before joining McKinsey, 
he was at the Atlantic Richﬁ eld 
Company (ARCO, now BP), 
where he served as a Director 
of Business Development.

Directorships: 
Wesupply Ltd (non-executive), 
and a number of Group 
companies.

Experience: 
In addition to his ﬁ nance 
responsibilities Tony participates 
actively in investment activities, 
particularly supporting portfolio 
companies in formulating 
strategic plans and funding 
requirements. Before joining the 
Company, he was chief ﬁ nancial 
ofﬁ cer 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.

5) John Barnsley 111
Senior Independent 
Non-Executive Director
Age: 61

Directorships: 
Non-executive director of 
Grainger plc, American 
Appraisal (UK) Limited and 
European Cardiovascular 
Genetics Foundation, chairman 
of Westover Medical Ltd 
and senior independent non-
executive director of Northern 
Investors Company plc.

Experience: 
John was chairman of North 
London Research Committee, 
chairman of KCS Global 
Holdings Ltd and non-executive 
director of Syltone plc. Prior to 
December 2001, he spent 
22 years as a partner of 
PricewaterhouseCoopers, 
including four years as UK 
managing partner.

6) Richard Christou 11
Non-Executive Director
Age: 65

Directorships: 
Chairman, Fujitsu Services 
Holdings PLC, and director of 
a number of Fujitsu subsidiary 
companies, and English Touring 
Opera Limited.

Experience: 
Richard began his career 
in 1967 and has held 
various positions within the 
telecommunications industry, 
joining ICL in 1990. In April 2002 
ICL changed its name to Fujitsu 
and he moved into the role of 
executive chairman. He is now 
president of the global business 
group at Fujitsu Ltd where he 
has responsibility for all of 
Fujitsu’s overseas regions 
including EMEA, The Americas, 
APAC and China.

7) Bernard Duroc-Danner 1
Non-Executive Director
Age: 56

Directorships: 
Chairman, president and chief 
executive ofﬁ cer of Weatherford 
International Ltd and director 
of a number of oilﬁ eld service 
sector companies.

Experience: 
Bernard was a non-executive 
director of London Merchant 
Securities plc and president 
and chief executive ofﬁ cer of 
EVI, Inc. (now Weatherford 
International Ltd). Previously, 
he held positions at Arthur D. 
Little and Mobil Oil Inc.

8) David Verey 111
Non-Executive Director
Age: 59

Directorships: 
Daily Mail & General Trust plc, 
Soﬁ na S.A., a member of the 
supervisory board of Bank 
Gutmann and a member of the 
international advisory board of 
The Blackstone Group.

Experience: 
With over 30 years of 
experience, David has extensive 
industry knowledge and 
was previously Chairman of 
Blackstone Group UK where he 
remains as a member of their 
International Advisory Board. 
Previously he worked for Lazard 
Brothers for 28 years becoming 
Chief Executive in 1990 and 
Chairman two years later. 

22  LMS Capital plc

2009 Business review

Investment team and advisers

1) Pieter Hooft 1
Managing Director, 
UK investments

Pieter joined LMS Capital in 
November 2006 and leads 
the Group’s UK investment 
activities. Pieter has over 15 
years’ investment experience 
in MBOs and development 
capital in the UK and across 
Europe. He has been involved 
in deals in a broad range 
of sectors including media, 
consumer, business services 
and industrial. As well as Apax 
Partners, Pieter has previously 
worked for JP Morgan Partners, 
Botts & Company and Bain 
and has also had operational 
experience as chairman of 
Germany’s second-largest 
chain of ﬁ tness clubs. 

2) Edward Snow 1
Director, 
UK investments

Ed leads LMS Capital’s UK 
technology investing, having 
joined LMS at the start of 
2007 from Amadeus Capital 
Partners, a venture capital ﬁ rm 
specialising in backing start-ups. 
Prior to Amadeus, Ed was with 
Deutsche Bank’s global markets 
division for two years. Ed also 
co-founded and later ﬂ oated 
a vehicle technology start-up 
in the 1990s. Ed has investment 
and operational experience 
gained from a range of sectors 
including infrastructure software, 
medical technology and 
comms hardware. 

3) Jamie Rhodes
Investment Manager, 
UK investments

4) Jamie Szpiro
Investment Manager, 
UK Investments

Jamie joined LMS Capital in 
2004 and works across the 
Group’s UK direct investment 
portfolio as well as being 
responsible for UK fund 
investments and quoted 
stocks. Jamie is a specialist 
in consumer products, retail, 
leisure, logistics and distribution 
and has extensive operational 
and entrepreneurial experience 
having funded, operated and 
sold three successive ventures 
in the food and beverage sector; 
including an award-winning 
restaurant in London and a 
chain of sandwich bars in the 
North of England.

Jamie joined LMS Capital 
in June 2008 from Singer & 
Friedlander where he was 
a Director in the Corporate 
and Structured ﬁ nance team 
focusing on mid-market buyouts. 
Jamie has a broad range of 
ﬁ nancial experience spanning 
Corporate Finance, Property 
Finance and Leveraged Finance. 
He also has direct operational 
and M & A experience having 
been a senior Director of 
Wintrust plc, where he oversaw 
its sale and subsequent 
integration into Singer and 
Friedlander. Jamie focuses 
on new deal opportunities as 
well as managing a number 
of portfolio relationships.

1Audit Committee
1Remuneration Committee
1Nomination Committee
1Investment Committee

5) Scott Potter
Managing Partner, 
San Francisco Equity 
Partners (US)

6) Gene Weber
Managing Partner, 
Weber Capital Management, 
LLC (US)

7) Brian Bank
Managing Partner, 
Pinecrest Capital 
Partners

Scott joined LMS Capital in 
2003 with responsibility for 
the Group’s US private equity 
portfolio and in 2005 established 
San Francisco Equity Partners 
(SFEP), with LMS Capital as the 
founding limited partner. San 
Francisco Equity Partners is a 
private equity fund focused on 
growth equity investments in the 
consumer products, consumer 
services and business services 
industries. Scott had broad 
operational experience having 
served as SVP, Field Operations 
for Inktomi Corporation and 
Chief Executive of Quiver, a 
venture backed internet software 
business in which LMS Capital 
was a signiﬁ cant investor.

Gene is the managing partner 
of Weber Capital Management, 
a ﬁ rm that operates a number 
of funds in which LMS Capital 
invests. He founded Weber 
Capital Management in 1994 and 
is a long term investor in public 
and private growth companies 
in the information technology, 
communications and healthcare 
sectors in the US. From 1983 to 
1994, Gene was a partner with 
the investment management 
ﬁ rm Weiss, Peck & Greer in their 
San Francisco venture capital 
ofﬁ ce having joined them from 
McKinsey & Company. Gene 
has over 26 years experience 
in investment management and 
has managed four funds holding 
positions in over 130 companies.

Brian has been working with 
LMS Capital for over ten 
years and is responsible for 
selecting and managing the 
Group’s investments in US 
venture capital and private 
equity partnerships as well as 
overseeing LMS Capital’s US 
based co-investment portfolio. 
Recent co-investments include 
Healthcare Management 
Systems (HMS) and Eye-Fi. 
Brian was previously with 
Ernst & Young’s management 
consulting group, with Miller 
and Schroeder Inc as a 
municipal bond underwriter 
and with the Center for 
Strategic and International 
Studies as an international 
political-military analyst.

2009 Business review

LMS Capital plc  23

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Corporate governance report

The Board of LMS Capital plc is committed to maintaining high standards of corporate governance 
and business ethics. As a company, LMS Capital is required to comply with the Combined Code on 
Corporate Governance issued by the Financial Reporting Council (‘the Code’). A copy of the Code is 
publicly available from the Financial Reporting Council’s website, www.frc.org.uk. This report explains 
how the Company has applied the principles set out in Section 1 of the Code and the extent to which 
it has complied with the detailed provisions of the Code. The period under review is the year ended 
31 December 2009. The Board considers that the Company has complied with all of the provisions of 
the Code throughout the period under review.

On 4 February 2010, the Company announced that it was appointing a new Chief Executive Ofﬁ cer on 
1 March 2010, that Jonathan Agnew would be retiring from the Board after the Annual General Meeting 
on 13 May 2010 and that Robert Rayne, the previous Chief Executive Ofﬁ cer, would be succeeding him 
as Chairman. Paragraph A2.2 of the Code states that a chief executive should not go on to be chairman 
of the same company, however, if exceptionally a board decides that a chief executive should become 
chairman it needs to explain the reasons to its shareholders. The Board has deemed that this is an 
exceptional case for the following reasons:

(1)  It will allow continued access to the network and relationships developed by Robert Rayne over the 

last 40 years;

(2)  Robert Rayne has an ongoing involvement with the investee companies’ managements and is the 

Company representative on some of their boards; and

(3) It will provide the Company with continued access to the advisory boards of a number of funds.

As Chairman, Mr Rayne will continue to act in an executive capacity for a period of time to ensure that 
there is a smooth transition to the incoming new Chief Executive Ofﬁ cer.

Board of Directors

The Board’s role
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.

Composition
Throughout the period under review, the Board was comprised of seven directors. For most of the period, 
it was four non-executive directors (including the non-executive Chairman) and three executive directors. 
However, in September 2009, one executive director left the Company and one non-executive director 
joined the Company. Accordingly, the composition as at 31 December 2009 was ﬁ ve non-executive 
directors and two executive directors. On 1 March 2010, a new executive director was appointed to the 
Board. In addition, Mr Agnew, the current non-executive Chairman, has advised that he will leave the 
Company after the Annual General Meeting on 13 May 2010.

Brief biographies of the directors appear on page 22. The Board considers that it has an appropriate 
balance of expertise and ability available to it.

The Chairman and Chief Executive Ofﬁ cer
There is a clear separation of the roles of the Chairman and the Chief Executive Ofﬁ cer. Broadly, the 
Chairman is responsible for the effective running of the Board, whilst the Chief Executive Ofﬁ cer is 
responsible for the executive management and performance of the Company’s operations.

Non-executive directors
The original non-executive directors were all re-appointed in April 2009 for a further term of three 
years or until the Annual General Meeting at which they next have to retire by rotation, whichever 
is the earlier. Subject to agreement, satisfactory performances and re-election by shareholders, their 
directorships may be renewed for further terms. David Verey was appointed a non-executive director in 
September 2009 and will stand for election at the Annual General Meeting to be held on 13 May 2010 as 
required by the Company’s Articles of Association. Assuming he is successfully appointed, it will be for a 
term of three years.

24  LMS Capital plc

Corporate governance report

In the opinion of the Board, John Barnsley, Richard Christou, Bernard Duroc-Danner and David Verey 
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.

The Board is of the view that the Chairman and each of the non-executive directors committed sufﬁ cient 
time during 2009 to fulﬁ lling their duties as members of the Board.

Senior independent director
John Barnsley acts as the senior independent non-executive director. In this role he is available to 
shareholders if they have concerns which cannot be resolved by discussions with the Chairman, the 
Chief Executive Ofﬁ cer or the Chief Financial Ofﬁ cer or where such contact is inappropriate. In addition, 
the senior independent director is available to attend meetings with major shareholders in order to 
develop an understanding of their issues and concerns.

External non-executive directorships
The Board believes that executive directors should be able to accept external non-executive directorships 
in other companies in order to widen their skills and knowledge for the beneﬁ t of the Company, whilst 
continuing to discharge their executive responsibilities to the Company. Any executive director who 
wishes to take on an external non-executive directorship must obtain prior Board approval and may 
not take on more than one such directorship (not including those companies in which the Company 
has invested and where he represents the Company). He may retain any fees paid in respect of such 
directorships.

Insurance
The Company maintains directors’ and ofﬁ cers’ liability insurance and provides the directors and 
ofﬁ cers with a qualifying third party indemnity within the limits allowed by the Companies Act.

Neither the Company’s indemnity nor insurance provides cover in the event that a director is proved to 
have acted fraudulently or dishonestly.

Board procedures
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, 
who is responsible to the Chairman for ensuring that board procedures are complied with and that 
applicable rules and regulations are followed and for advising and supporting the Chairman and the 
Board on corporate governance matters.

Powers and delegation
The Board delegates speciﬁ c responsibilities to the Audit, Nomination and Remuneration Committees, 
which operate within clearly deﬁ ned terms of reference approved by the Board. These committees 
report regularly to the Board. The Board has adopted a schedule of matters reserved to it for approval. 
These include the approval of ﬁ nancial statements, strategic plans, annual budgets, acquisitions and 
disposals and major capital and operating expenditure proposals.

Board meetings

Six scheduled board meetings were held in 2009. At each scheduled meeting, the Board considers a 
report from the Chief Executive Ofﬁ cer on current trading and signiﬁ cant business issues, such as major 
investment or divestment proposals and strategy. A ﬁ nancial report is provided by the Chief Financial 
Ofﬁ cer and other reports and presentations are provided by senior management. Papers for each 
scheduled board meeting are usually provided four working days before the meeting. In addition to the 
scheduled meetings, one further meeting was held to discuss the Company’s future strategy.

Corporate governance report

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Attendance at board meetings
The following were directors of the Company and attended the following number of meetings of the 
Board and (where they were members) its committees during the year ended 31 December 2009:

Board 

Audit Committee  Remuneration Committee 

Nomination Committee

Meetings held 

Meetings attended
Jonathan Agnew 
Robert Rayne 
Martin Pexton1 
Antony Sweet 
John Barnsley 
Richard Christou2 
Bernard Duroc-Danner 
David Verey3 

Notes:

7 

7 
7 
4 
7 
7 
4 
6 
2 

4 

4 
- 
- 
- 
4 
1 
- 
1 

6 

6 
- 
- 
- 
6 
6 
- 
2 

3

3
3
-
-
3
3
3
1

1. Mr Pexton left the Company on 30 September 2009.

2. Mr Christou resigned from the Audit Committee in September 2009.

3. Mr Verey joined the Board on 7 September 2009 and was appointed to all of the Board Committees at that time.

Board committees

Each Board Committee has established clear and deﬁ ned terms of reference detailing its responsibilities 
and powers. These are available to review on the Company’s website at www.lmscapital.com.

Audit Committee
During 2009, the Audit Committee members were John Barnsley (Committee Chairman), Jonathan Agnew, 
Richard Christou (who resigned from the Committee in September 2009) and David Verey (who joined 
the Committee in September 2009). John Barnsley is considered by the Board to have recent and relevant 
ﬁ nancial experience, for the purpose of the Code. A representative of the Company’s external auditors, 
the Chief Financial Ofﬁ cer and other directors attend meetings of the Audit Committee at the invitation 
of the Chairman of the Committee.

The Audit Committee met four times during 2009. Its role is to assist the Board with the discharge 
of its responsibilities in relation to internal and external audits and controls, including reviewing the 
Company and Group ﬁ nancial statements, considering the scope of the annual audit and the extent of 
the non-audit work undertaken by external auditors, advising on the appointment of external auditors 
and reviewing the effectiveness of the risk management and internal control systems in place within 
the Company.

Additionally, the Audit Committee keeps under review the conduct of the external audit and its cost 
effectiveness. The Audit Committee makes recommendations to the Board regarding the reappointment 
or removal of the external auditors, 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.

The Audit Committee also monitors the Company’s whistleblowing policy and Mr Barnsley, as the 
Company’s senior independent non-executive director, is the contact for staff who may have a concern 
that they cannot raise under their normal chain of management.

26  LMS Capital plc

Corporate governance report

 
Remuneration Committee
The Remuneration Committee currently comprises Richard Christou, who chairs the Committee, John 
Barnsley and David Verey (who joined the Committee in September 2009). The composition and role of 
the Remuneration Committee is described more fully in the Remuneration report.

Nomination Committee
The Nomination Committee currently comprises Jonathan Agnew, who chairs the Committee, 
Robert Rayne, John Barnsley, Richard Christou, Bernard Duroc-Danner and David Verey (who joined 
the Committee in September 2009). 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 may arise. 
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.

The Committee will also determine succession plans for each of the directors. When considering 
succession planning, the Committee will look at the balance, structure and composition of the Board and 
take into account the future challenges and opportunities facing the Company.

The Committee meets as required, but at least once each year. During 2009, the Committee met three 
times. The Committee met once to discuss and approve the appointment of David Verey as non-executive 
director, prior to which the individual members of the Committee had met with Mr Verey on a one-to-
one basis. The Committee also met twice during the year to discuss the recruitment of a new Chief 
Executive Ofﬁ cer. The Committee authorised a sub-committee comprising of John Barnsley, who chaired 
the sub-committee, Robert Rayne and David Verey to oversee the recruitment and to meet the proposed 
candidates. The Committee appointed Spencer Stuart to assist the recruitment process and a list of 
candidates was compiled. This was reduced to a short list of about ten candidates whom the individual 
members of the sub-committee met. A ﬁ nal list of four candidates was drawn up and these candidates 
met further with the members of the sub-committee and other members of the Board on an individual 
basis. The candidates also met the senior management of the Company. A Nomination Committee 
meeting was then held in January 2010 to recommend to the Board the appointment of Glenn Payne 
as the new Chief Executive Ofﬁ cer. At this meeting, under the Chairmanship of John Barnsley, the 
Committee also decided to recommend to the Board the appointment of Robert Rayne as Chairman 
to succeed Jonathan Agnew after he retired from the Board.

Investment Committee
In addition to the principal Board committees described above, there is also an Investment Committee. 
This currently comprises Robert Rayne, who chaired the Committee during 2009, Antony Sweet, 
Pieter Hooft and Ed Snow (who was appointed to the Committee on 6 July 2009). Martin Pexton left 
the Committee in September 2009. Following his appointment as Chief Executive Ofﬁ cer, Glenn Payne 
will chair the Investment Committee. The Committee is responsible for reviewing and implementing 
investment and divestment proposals. It also makes proposals relating to the Company’s investment 
policy for the Board to adopt and for regularly reporting to the Board on the performance and management 
of the Company’s investments. The Committee is scheduled to meet twice a month, but may meet more 
often as circumstances require. 

Board reappointments

In accordance with the Code and the Company’s Articles of Association, at least a third of the directors 
on the Board must retire and offer themselves for re-election. Messrs Rayne, Sweet and Duroc-Danner 
will retire at the forthcoming Annual General Meeting and, being eligible, each offers himself for 
re-election at the meeting. Mr Verey (who was appointed to the Board on 7 September 2009) and 
Mr Payne (who was appointed to the Board on 1 March 2010) will each offer himself for election to 
the Board at the Annual General Meeting in accordance with the Company’s Articles of Association. 
The biography for each director can be found on page 22.

Board appraisal

Due to the changes in the Board composition in 2009 and early 2010, no appraisal took place as it was 
felt that such an appraisal would not be beneﬁ cial at that time. It is envisaged that an appraisal will 
take place in late 2010, or in early 2011. 

Corporate governance report

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Shareholder communications

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 AGM as an occasion to communicate with all shareholders, including 
private investors, who are provided with the opportunity to question the directors.

At the AGM 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, Remuneration and Nomination 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.

Internal control

Process
The Audit Committee, on behalf of the Board, has overall responsibility for the Company’s system of 
internal and ﬁ nancial 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 in depth the effectiveness of the Company’s internal controls on an 
annual basis and will take any necessary actions should any signiﬁ cant failings or weaknesses be 
identiﬁ ed. 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 Chief Executive Ofﬁ cer and through him, as appropriate, to other managers acting 
within delegated authority limits and in accordance with clearly deﬁ ned systems of control.

Financial matters and the responsibility for the day-to-day ﬁ nancial aspects of the business are 
delegated to the Chief Financial Ofﬁ cer and through him, as appropriate, to members of his ﬁ nancial 
team acting within delegated authority limits and in accordance with clearly deﬁ ned systems of control. 
The Chief Financial Ofﬁ cer reports to the Board on ﬁ nancial 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 they are properly and consistently applied in relation to 
signiﬁ cant 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, 
which is currently considered adequate. 

In the Audit Committee’s view, the information it has is sufﬁ cient to enable it to review the effectiveness 
of the Company’s system of internal controls in accordance with the ‘Internal Control Revised Guidance 
for Directors’ on the Combined Code (Turnbull).

28  LMS Capital plc

Corporate governance report

Directors’ conﬂ icts of interests
The directors’ statutory duty to avoid conﬂ icts of interest with the Company came into force during 
2008. The Company’s Articles of Association allow the directors to authorise conﬂ icts of interest and 
a register has been set up to record all conﬂ ict situations declared. The conﬂ icts declared are all very 
minor in nature and there have been no conﬂ icts which have resulted in a director having to be excluded 
from the decision making process. The register is maintained and updated by the Company Secretary and 
the Board reviews it at each Board meeting.

Risk review
The Board is of the view that an ongoing process for identifying, evaluating and managing signiﬁ cant 
risks faced by the Group was in place during 2009 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 ﬁ nancial and non-ﬁ nancial implications and, so far as possible, take 
action to reduce those risks. Details of risks potentially facing the Group can be found on page 30.

Financial reporting

The directors have acknowledged, in the Statement of directors’ responsibilities set out on page 43, 
their responsibility for preparing the ﬁ nancial statements of the Company and the Group. The external 
auditors have included, in the independent auditors’ report set out on pages 44 to 45, 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 understandable assessment of the Company and Group 
ﬁ nancial position for the ﬁ rst six months of each accounting period. In addition, as a company listed 
on the Main Market, the Company produces two interim management statements, usually in May and 
November, which provide an unaudited quarterly review of the Company’s ﬁ nancial position.

Shares and voting rights

Details of the Company’s issued share capital, and the voting rights attached to the shares, can be found 
in the Directors’ report on page 41.

Going concern

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 6 to 9. The ﬁ nancial position of 
the Company, its cash ﬂ ows, liquidity position and borrowing facilities are described in the ﬁ nancial 
review on pages 10 to 11. The directors have also considered, in preparing this statement, the Financial 
Reporting Council’s ‘Going Concern and Liquidity Risk Guidance for Directors of UK Companies 2009’.

The directors have a reasonable expectation that the Company has adequate resources to continue in 
operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of 
accounting in preparing the annual ﬁ nancial statements.

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Chairman

26 March 2010

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LMS Capital plc  29

 
 
Risk factors

The Group has an ongoing process for identifying, evaluating and managing the risks which the business 
is exposed to and this is monitored by the Audit Committee at each meeting. The key risks, and how the 
Group mitigates their effects, are as follows:

Economic and ﬁ nancial risk

The Group is subject to economic factors (such as the demand and output of the environments in which its 
investments operate) which may negatively impact corporate performance and growth rates. The investment 
portfolio may not achieve the Company’s growth targets which may result in the Company’s Net Asset 
Value declining. We manage this by monitoring the trading and cash ﬂ ows of our portfolio companies 
on a regular basis which allows us to act quickly should there be a need to do so.

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 background economic conditions) cannot be ascertained 
with certainty. Accordingly, we rely on our budgeting and forecasting procedures to ensure that the cash 
requirements of the Group are met.

A lack of liquidity in the capital markets could mean that the Company may not be able to raise funds 
for its corporate purposes, including the funding of new or existing investments. The Board regularly 
reviews the Company’s funding requirements and believes it has sufﬁ cient funds to meet its expected 
cash obligations for the foreseeable future. The Company’s existing working capital facility is undrawn 
and we can also raise funds from the sale of our quoted portfolio investments if required.

The Group is subject to the impact of changes in market prices for our quoted investments, as well 
as movements in interest rates and exchange rates. A signiﬁ cant 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. Any realisations or distributions from US investments are retained in US dollars 
to be utilised for future investments.

The Group has made fund 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 and the monitoring of this exposure is 
included in the Group’s budgeting and forecasting procedures referred to above.

Investment risk

The Group’s investment risk arises as a result of its investment strategy, individual investment decisions 
and the performance of its investments. The Group’s portfolio is risk-diversiﬁ ed, comprising holdings in 
quoted and unquoted companies at different stages of development in the UK and the US, together with a 
number of fund investments. 

Before the Group makes a new investment, we undertake rigorous inquiries into the business concerned. 
We understand the company’s business plan; evaluate information on its market place and competition; 
meet management, directors and existing shareholders and we commission reports from external experts 
as necessary. This includes consideration of potential exit routes from the proposed investment.

30  LMS Capital plc

Risk factors

Our investment management process requires regular reporting 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 of the Company.

There may not be a clear exit route for the Company from any individual investment which could result 
in negative liquidity and have a cash ﬂ ow impact on the Company. If an investment is not performing 
well, and is absorbing too much of the Group’s resources (both ﬁ nancial and human), the Company 
will seek an exit from that investment. If necessary, the Company will seek a solvent closure of any 
investment where we consider this to be in the Company’s best interest.

Operational risk

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 ﬁ nancial 
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 ﬁ nancial reporting 
systems are subject to an annual audit.

The ability to recruit, develop and 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.

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LMS Capital plc  31

 
 
Remuneration report

Introduction

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 2009. The report has been 
prepared in accordance with the Companies Act 2006 (‘the Act’) and the Combined 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 2009” is, in accordance with 
the Act, subject to audit by the Company’s auditors. The remainder of the information in this report is 
not subject to audit. 

The Remuneration Committee

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:

(cid:129)  Review and recommend annually employee compensation strategies;

(cid:129)  Review and recommend remuneration policy for the Company’s annual compensation review;

(cid:129)   Set the remuneration for executive directors and monitor the level and structure of remuneration for 

senior management; and

(cid:129)  Approve targets for any performance-related pay schemes applicable to executive directors. 

The Committee is made up of non-executive directors, the members during 2009 being:

(cid:129)  Richard Christou (Committee Chairman)

(cid:129)  John Barnsley

(cid:129)  David Verey (appointed on 7 September 2009)

Under the Combined 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 and David Verey are 
considered by the Board to be independent non-executive directors. 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 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 Committee has also considered remuneration data published by Deloitte.

Remuneration policy

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.

32  LMS Capital plc

Remuneration report

The Company compensates its executive directors and senior management by balancing the following 
elements of compensation:

(cid:129)  base salary, payable in cash;

(cid:129)  beneﬁ ts-in-kind;

(cid:129)  bonus;

(cid:129)  long-term incentives; and

(cid:129)  carried interest.

The mix of these components is managed to create a total compensation package which should be:

(cid:129)  directly linked to the Company’s overall performance and proﬁ tability;

(cid:129)  based upon individual and business contribution;

(cid:129)  retentive in the long term; and

(cid:129)  market competitive.

The Committee reviews remuneration policy on a regular basis and, where appropriate, it will propose or 
implement changes to ensure that the Company has appropriate policies to enable it to attract executives 
of the highest calibre. 

Base salaries The ﬁ xed 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 set between the median and upper quartile of the market compared 
with other quoted companies of similar size. Base salary is the only element of remuneration which is 
pensionable.

Beneﬁ ts-in-kind The beneﬁ ts-in-kind available to executive directors are a car allowance, pension 
contribution (with the exception of Robert Rayne), private healthcare, life assurance, personal accident 
cover, permanent health insurance and subsidised gym membership.

Bonuses Annual bonuses, which are non-pensionable, are based upon achievement of targets set by the 
Committee, having regard to the performance of the Company and the external market. Consideration 
is given 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 the majority of their total remuneration is provided in the form of variable compensation. 
The maximum bonus payments are 150% of base salary for Robert Rayne and 100% of salary for 
Antony Sweet.

Long-term incentives The Committee considers the grant of long-term incentives to executive directors 
and other executives. The Committee made awards under the Performance Share Plan following 
publication of the Company’s results for 2008. The Committee reviewed the long-term incentive plans 
currently available and deemed them sufﬁ cient for now, however, the Committee is mindful of the need 
to keep remuneration systems under review in order to provide the appropriate level of challenge and 
incentivisation.

In setting executive directors’ salaries for 2010, the Committee took into account current economic 
and market factors as well as the salaries and beneﬁ ts received by other employees of the Company. 
For 2010, Mr Rayne’s salary was reduced by £30,000 and Mr Sweet’s salary remained at its 2009 level. 

Remuneration report

LMS Capital plc  33

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Deferred Share Bonus Plan

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 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 ﬁ rst anniversary of the award date, the second 
third on the second anniversary and the ﬁ nal 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 satisﬁ ed or the Remuneration Committee determines that the performance condition 
should be treated as satisﬁ ed, but 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 were made on 30 March 2007 as follows:

Robert Rayne 
Martin Pexton 

Changes in the year were as follows:

Outstanding at 1 January 2009 
Awards during the year 
Exercised during the year 
Lapsed during the year 

Outstanding at 31 December 2009 

No. of shares 

First release date 

Final release date 

Expiry date

2,864,292  30 March 2008  30 March 2011  30 March 2017
–
1,432,146  30 March 2008  30 March 2010 

Mr Rayne 

Mr Pexton

2,148,219 
– 
(716,073) 
(716,073) 

716,073 

954,764
–
(477,382)
(477,382)

–

The performance condition for the ﬁ rst release at 30 March 2008 was satisﬁ ed and both Mr Rayne and 
Mr Pexton exercised their options. The Committee exercised its discretion and paid cash instead of issuing 
shares to satisfy the exercises. Details of these payments can be found later in this report under Directors’ 
remuneration in 2009. The performance conditions for the second and third releases have not been satisﬁ ed. 
The outstanding award granted to Mr Pexton lapsed when he left the Company on 30 September 2009.

Executive Share Option Plan

Under this Plan, approved by shareholders, the Company grants share options to executive directors 
and other executives within the Company. The maximum value of a grant in any one calendar year 
is three times the individual’s basic salary, provided the participant does not receive an award under 
the Performance Share Plan in that year. Options are normally exercisable between three and ten 
years following the grant, subject to the performance condition having been satisﬁ ed. The performance 
condition requires that, for 25% of the shares under option to vest, the Net Asset Value per share of the 
Company must increase by at least 3% per annum above the increase in the Retail Prices Index, starting 
with the Net Asset Value per share at the end of the ﬁ nancial year preceding the date of grant. If the 
increase in the Net Asset Value per share exceeds the growth in the Retail Prices Index by at least 8% 
per annum, the option can be exercised in respect of all the shares under option. There is a straight-line 
scale of vesting for increases in Net Asset Value per share between 3% and 8% per annum.

34  LMS Capital plc

Remuneration report

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
In the event of a change of control awards may be released early provided that the performance 
condition has been satisﬁ ed. If the change of control occurs before the end of the full period over which 
performance would otherwise be measured, the Remuneration Committee will determine the extent to 
which the performance condition has been satisﬁ ed.

Awards of options to executive directors have been made as follows: 

Martin Pexton 

Robert Rayne 

Antony Sweet 

Grant date 

No. of shares 

Exercise price 

First exercise date 

Expiry date

2 April 2007 
1 April 2008 
2 April 2007 
1 April 2008 
2 April 2007 
1 April 2008 

319,727 
329,729 
523,809 
537,837 
251,700 
518,918 

73.5p 
74.0p 
73.5p 
74.0p 
73.5p 
74.0p 

–
2 April 2010 
–
1 April 2011 
2 April 2010 
1 April 2017
1 April 2011  31 March 2018
2 April 2010 
1 April 2017
1 April 2011  31 March 2018

Outstanding at 1 January 2009 
Awards during the year 
Exercised during the year 
Lapsed during the year 

Outstanding at 31 December 2009 

Mr Rayne 

Mr Sweet 

Mr Pexton

1,061,646 
– 
– 
(523,809) 

770,618 
– 
– 
(251,700) 

649,456
–
–
(649,456)

537,837 

518,918 

–

The performance conditions for the award of options granted in April 2007 have not been satisﬁ ed and 
therefore the options have lapsed. The market price of an ordinary share at 31 December 2009 was 
52.00p and the range during the year was 36.00p to 52.00p.

Performance Share Plan

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 one half of the award, the performance condition is that 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 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%, 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.

In the event of a change of control awards may be released early provided that the performance 
condition has been satisﬁ ed or the Remuneration Committee determines that the performance condition 
should be treated as satisﬁ ed, but 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 shares were made on 6 April 2009 to executive directors as follows:

Martin Pexton1 
Robert Rayne 
Antony Sweet 

No. of shares 

First release date 

Expiry date

417,811 
662,505 
329,172 

6 April 2012 
6 April 2012 
6 April 2012 

–
 5 April 2019
 5 April 2019

1. The award of shares to Mr Pexton lapsed when he left the Company on 30 September 2009.

Remuneration report

LMS Capital plc  35

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Carried interest The Committee aims to ensure that incentive arrangements are competitive with the 
private equity industry. The executive directors participate in the carried interest arrangements in place 
for staff involved in the management and development of the investment portfolio.

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 and consequently more 
demanding than the hurdle rate commonly found in private equity funds. The percentage of capital gains, 
after the preferred return, which may be allocated to participants in aggregate may not exceed 20%. 

No carried interest payments were made in the year ended 31 December 2009.

Performance graph

The Committee considers the FTSE 250 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 since the 
Company ﬁ rst listed on 12 June 2006 compared with that of the FTSE 250 Index. 

Total Shareholder Return graph since 12 June 2006

160

140

120

100

80

60

40

20

0

June 06  December 06  June 07 

December 07

June 08  December 08

June 09 December 09  

LMS Capital  
FTSE 250 – Price index

Source: Datastream

36  LMS Capital plc

Remuneration report

 
Service contracts

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 will terminate on the director reaching age 65. 

The following table provides details of the executive directors’ service contracts:

Martin Pexton3 
Robert Rayne 
Antony Sweet 

Notes: 

Date of appointment 

Date of contract 

  1 February 2007  14 March 2007 
6 April 2006  14 March 2007 
6 April 2006  14 March 2007 

Notice period 
from Company 

12 months 
12 months 
12 months 

Notice period
from director

6 months
6 months
6 months

1. Each of these contracts is a rolling contract.

2.  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 beneﬁ ts.

3.  Mr Pexton received compensation for loss of ofﬁ ce on the early termination of his contract, details of which can be found in the 

Directors’ Remuneration section of this report. 

Non-executive directors

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:

Jonathan Agnew1 
John Barnsley 
Richard Christou 
Bernard Duroc-Danner  
David Verey 

Notes

Date of 
 appointment 

Date of 
appointment letter 

7 April 2006 
7 April 2006 
7 April 2006 
7 April 2006 

6 April 2009 
6 April 2009 
6 April 2009 
6 April 2009 
7 September 2009  4 September 2009 

Date of expiry
of current term

May 2011
18 May 2012
18 May 2012
13 May 2010
13 May 2010

1.  Mr Agnew has announced his intention to resign from the Board at the forthcoming 2010 Annual General Meeting to be held on 

13 May 2010.

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:

Chairman 
Remuneration Committee Chairman 
Audit Committee Chairman 
Non-executive not chairing Committee 

£75,000
£45,000
£45,000
£40,000

Non-executive directors do not participate in the Company’s incentive plans or pension schemes. 

Remuneration report

LMS Capital plc  37

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Directors’ remuneration in 2009

The following table shows the total remuneration earned in respect of 2009.

Salary/ 
fees 
£’000 

 75 
 45 
 45 
40 
 188 
 398 
 198 
 13 
1,002 

Car 
allowance 
£’000 

Beneﬁ ts 
-in-kind1 
£’000 

Pension 
£’000 

 – 
 – 
 – 
 – 
 11 
 20 
 15 
 – 
 46 

 – 
 – 
 – 
 – 
 7 
 20 
 10 
 – 
 37 

 – 
 – 
 – 
 – 
 38 
 – 
 30 
 –  
 68 

Bonus 
£’000 

 – 
 – 
 – 
 – 
 – 
 200 
 100 
 – 
 300 

2009 
Total 
£’000 

 75 
 45 
 45 
 40 
 244 
 638 
 353 
 13 
1,453 

2008
Total
£’000

 75
 45
 45
 40
 392
 517
 284
 –
1,398

Jonathan Agnew 
John Barnsley 
Richard Christou 
Bernard Duroc-Danner 
Martin Pexton2 
Robert Rayne3 
Antony Sweet 
David Verey4 
Total 

Notes:

1. Beneﬁ ts in kind for executive directors are insurances and subsidised gym membership.

2.  The amounts for Mr Pexton are up to the date of his leaving the Company, being 30 September 2009. In addition to the above, 
Mr Pexton received £216,015 (being 45.25p per share over 477,382 shares) when exercising the ﬁ rst tranche of his award under 
the Deferred Share Bonus Plan. The payment was subject to deduction of income tax and national insurance. Mr Pexton was paid 
£600,000 (comprising compensation for salary, bonus and beneﬁ ts for the 12 month notice period to which he was entitled under the 
terms of his service contract and statutory compensation) as a termination payment and he remains interested in the carried interest 
plan. In addition, Mr Pexton was paid £150,000 by reference to his pro rata bonus for the period January to September 2009.

3.  In addition to the above, Mr Rayne received £361,617 (being 50.50p per share over 716,073 shares) when exercising the ﬁ rst tranche 
of his award under the Deferred Share Bonus Plan. The payment was subject to deduction of income tax and national insurance.

4. From date of appointment, being 7 September 2009.

5.  Fees payable in respect of executive directors serving as non-executive directors of companies to which they were nominated by 
LMS Capital are not retained by them but paid to the Company. Robert Rayne is Chairman of Derwent London plc and receives a 
fee at the rate of £150,000 per annum, which he retains.

6.  Fees payable to non-executive directors in 2009 from companies to which they were nominated as directors by LMS Capital were 

as follows:

  (cid:129)  John Barnsley £24,000
  (cid:129)  Richard Christou £3,000

7.  Mr Payne was appointed as Chief Executive Ofﬁ cer on 1 March 2010. His basic salary is £300,000. In addition, he will receive a 

guaranteed bonus of £300,000 for the ﬁ rst 12 months of working for the Company. Thereafter, he will be entitled to discretionary 
bonuses and share option awards.

Directors’ pension entitlements

Mr Sweet receives a contribution into a personal pension arrangement of 15% of base salary. Mr Rayne 
does not receive a pension contribution. While a director, Mr Pexton received a contribution of 20% of 
base salary.

38  LMS Capital plc

Remuneration report

 
 
 
 
 
Directors’ share interests

The beneﬁ cial interests of those directors who held ofﬁ ce at 31 December 2009 in the ordinary shares of 
the Company are set out below.

Jonathan Agnew 
John Barnsley 
Richard Christou 
Bernard Duroc-Danner 
Robert Rayne 
Antony Sweet 
David Verey 

Notes

At 31 December 2009 

At 31 December 2008

 291,058 
 317,000 
 169,965 
 550,800 
8,208,356 
 1,702 
 0 

 291,058
 317,000
 169,965
 550,800
7,853,626
 1,702
01

1.  At date of appointment, being 7 September 2009.

The following directors had non-beneﬁ cial interests in the ordinary share capital of the Company: 

(cid:129)  Robert Rayne holds a non-beneﬁ cial interest in 21,748,571 ordinary shares held in trust. 

Except as stated above:

(cid:129)   no changes in the above directors’ interests have taken place between 31 December 2009 and the date 

of this report; and 

(cid:129)   the Company is not aware of any other interests of any director (or any member of his immediate 

family) in the ordinary share capital of the Company. 

Richard Christou 
Chairman, Remuneration Committee

26 March 2010

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LMS Capital plc  39

 
 
 
 
 
 
 
 
 
  
 
 
 
  
 
 
  
  
 
 
  
 
 
 
 
  
 
 
  
  
 
 
 
Directors’ report

The directors present their report and the audited ﬁ nancial statements of the Group for the year ended 
31 December 2009.

Principal activities

LMS Capital plc is an international investment company whose shares are traded on the Main Market 
of the London Stock Exchange (the Company was previously quoted on AIM but moved to the Main 
Market on 30 June 2009). The investment portfolio comprises investments in both the UK and the US, 
with a spread of early stage and second round technology investments, development capital and mature 
company buyouts.

Business review

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. All the information detailed in these sections is incorporated by reference into this 
report and deemed to form part of this report:

(cid:129) Operating review on pages 6 to 9;

(cid:129) Financial review on pages 10 to 13;

(cid:129) Corporate governance report on pages 24 to 29;

(cid:129) Principal risks and uncertainties facing the business on pages 30 to 31;

(cid:129) Directors’ declaration in relation to relevant audit information on page 42; and

(cid:129) Directors’ responsibilities in relation to the ﬁ nancial statements on page 43.

Employees

LMS Capital plc had 15 employees at 31 December 2009 (31 December 2008: 18). Employees are 
kept informed about signiﬁ cant business issues and the Group’s performance by means of regular 
meetings, email updates and other in-house communications. Employees are supported in their ongoing 
professional development and attend training courses which are paid for by the Company. For personal 
development, the employee is provided with time off. All employees participate in the performance share 
plan and executive share option scheme offered by the Company. Should an 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 ﬁ nd 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 total number of employees employed by the Group, as at 31 December 2009, was 292 (31 December 
2008: 294).

Charitable donations

During 2009, LMS Capital plc made one charitable donation of £3,500 (2008: £5,125). The donation was 
made to Business in the Community, the charity which brings businesses together to help with their 
local communities, tackle carbon emissions and improve working conditions.

Political donations

The Company did not make any political donations during 2009 (2008: £nil).

Creditor payment policy

The Company’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 2009, trade 
creditors of the Company had an average of approximately 31 days outstanding (31 December 2008: 31 days).

40  LMS Capital plc

Directors’ report

Contractual arrangements

There are no contracts or arrangements with third parties which the Board deem essential to the 
operation of the Company.

Dividends

The Board has decided not to recommend the payment of a dividend in respect of the year ended
31 December 2009 (31 December 2008: £nil).

Directors

The names and biographical details of the current directors of the Company are given on pages 24 to 25. 
In addition, further information about the Board is set out in the Corporate governance report on 
pages 24 to 29. During the year, Martin Pexton resigned as an executive director of the Company 
on 11 September and left the Company on 30 September 2009. David Verey was appointed as a 
non-executive director on 7 September 2009. Since the end of the year under review, Glenn Payne 
has been appointed as an executive director of the Company on 1 March 2010. 

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 32 to 39. Qualifying 
third party indemnities are in force for each of the directors.

Shares and voting rights

The Company’s share capital is comprised of ordinary shares of 10p each and, as at 26 March 2010, there 
are 272,640,952 shares in issue. Each issued share carries one vote, accordingly the total voting rights 
in the Company are 272,640,952. No shares are currently held in treasury. Only options over shares 
have been granted during the year and these are subject to performance conditions before they can be 
exercised – further details can be found in the Remuneration report on pages 32 and 39. There are no 
restrictions on the transfer of shares.

Substantial shareholdings

As at 26 March 2010, the Company has been notiﬁ ed of the following persons who, directly or indirectly, 
are interested in 3% or more of the Company’s voting rights.

Name 

Withers Trust Corporation Limited1 
Trustees of Lord Rayne’s Will Trust1 
Schroders plc2 
Lady Jane Rayne1 
Jupiter Asset Management Limited3 
Taube Hodson Stonex Partners Limited  
Mineworkers Pension Scheme2 
Mantra Investissement SCA 
British Coal Staff Superannuation Scheme2 
Robert Rayne 

1. There are common interests in certain of these shares

Number of shares 
or voting rights held 

Percentage of
issued share capital

48,382,302 
43,062,624 
37,157,775 
27,494,405 
21,814,614 
13,815,461 
8,830,834 
8,786,373 
8,410,952 
8,208,356 

17.75
15.80
13.63
10.09
8.00
5.07
3.24
3.22
3.09
3.01

2.  Schroders plc manages the shares for the Mineworkers Pension Scheme and British Coal Staff Superannuation Scheme and 

therefore these shares are included within their own interest.

3. 14,817,277 shares (5.43%) are managed on behalf of The Rayne Foundation who control the voting rights to these shares.

Directors’ report

LMS Capital plc  41

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Annual General Meeting

The Company’s Annual General Meeting will be held at Durrants Hotel, George Street, London W1H 5BJ 
at 11.00 am on 13 May 2010. The notice of meeting, which includes explanatory notes, provides full 
details of the resolutions being proposed at the Annual General Meeting and is available to view on the 
Company’s website, www.lmscapital.com.

Auditors and disclosure of information to auditors

The directors who held ofﬁ ce at the date of approval of this report each conﬁ rm that, so far as they 
are aware:

(cid:129)  there is no relevant audit information (as deﬁ ned by the Companies Act 2006) of which the Company’s 

auditors are unaware, and

(cid:129)  they have each taken all the steps that ought to have been taken as a director of the Company to make 
themselves aware of any relevant audit information and to establish that the Company’s auditors are 
aware of that information.

The auditors, KPMG Audit Plc, have indicated their willingness to continue in ofﬁ ce and resolutions will 
be proposed at the forthcoming Annual General Meeting to reappoint them as auditors and to authorise 
the directors to ﬁ x their remuneration.

By order of the Board.

Matthew Jones
Company Secretary

26 March 2010

42  LMS Capital plc

Directors’ report

Statement of directors’ responsibilities

The directors are responsible for preparing the Annual Report and the Group and parent company 
ﬁ nancial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare Group and parent company ﬁ nancial statements for each 
ﬁ nancial year. Under that law they are required to prepare the Group ﬁ nancial statements in accordance 
with IFRSs as adopted by the EU and applicable law and have elected to prepare the parent company 
ﬁ nancial statements on the same basis.

Under company law the directors must not approve the ﬁ nancial statements unless they are satisﬁ ed 
that they give a true and fair view of the state of affairs of the Group and parent company and of their 
proﬁ t or loss for that period. In preparing each of the Group and parent company ﬁ nancial statements, 
the directors are required to:

(cid:129) select suitable accounting policies and then apply them consistently;

(cid:129) make judgements and estimates that are reasonable and prudent;

(cid:129) state whether they have been prepared in accordance with IFRSs as adopted by the EU; and

(cid:129)  prepare the ﬁ nancial statements on the going concern basis unless it is inappropriate to presume that 

the Group and the parent company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufﬁ cient to show 
and explain the parent company’s transactions and disclose with reasonable accuracy at any time 
the ﬁ nancial position of the parent company and enable them to ensure that its ﬁ nancial 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, Remuneration report and Corporate governance report that complies with that law and those 
regulations.

The directors are responsible for the maintenance and integrity of the corporate and ﬁ nancial 
information included on the Company’s website. Legislation in the UK governing the preparation and 
dissemination of ﬁ nancial statements may differ from legislation in other jurisdictions. 

We conﬁ rm to the best of our knowledge that: 

(cid:129)  the ﬁ nancial statements, prepared in accordance with IFRSs as adopted by the EU, give a true and fair 
view of the assets, liabilities, ﬁ nancial position and proﬁ t or loss of the Company and the undertakings 
included in the consolidation taken as a whole; and 

(cid:129)  the Directors’ report includes a fair review of the development and performance of the business and the 
position of the Company and the undertakings included in the consolidation taken as a whole, together 
with a description of the principal risks and uncertainties that they face.

For and on behalf of the Board

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R A Rayne  
Chairman designate 

26 March 2010

A C Sweet
Chief Financial Ofﬁ cer

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Statement of directors’ responsibilities

LMS Capital plc  43

 
 
Independent auditors’ report 
to the members of LMS Capital plc 

We have audited the ﬁ nancial statements of LMS Capital plc for the year ended 31 December 2009 set 
out on pages 46 to 83. The ﬁ nancial 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 ﬁ nancial 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 auditors’ 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.

Respective responsibilities of directors and auditors

As explained more fully in the Statement of directors’ responsibilities set out on page 43, the directors 
are responsible for the preparation of the ﬁ nancial statements and for being satisﬁ ed that they give a 
true and fair view. Our responsibility is to audit the ﬁ nancial 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.

Scope of the audit of the ﬁ nancial statements

A description of the scope of an audit of ﬁ nancial statements is provided on the APB’s web-site at 
www.frc.org.uk/apb/scope/UKP.

Opinion on ﬁ nancial statements

In our opinion:

(cid:129)   the ﬁ nancial statements give a true and fair view of the state of the Group’s and of the parent 
company’s affairs as at 31 December 2009 and of the Group’s loss for the year then ended;

(cid:129)   the Group ﬁ nancial statements have been properly prepared in accordance with IFRSs as adopted 

by the EU;

(cid:129)   the parent company ﬁ nancial statements have been properly prepared in accordance with IFRSs as 
adopted by the EU and as applied in accordance with the provisions of the Companies Act 2006; and

(cid:129)   the ﬁ nancial statements have been prepared in accordance with the requirements of the Companies 

Act 2006 and, as regards the Group ﬁ nancial statements, Article 4 of the IAS Regulation.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion:

(cid:129)   the part of the Remuneration report to be audited has been properly prepared in accordance with the 

Companies Act 2006; and

(cid:129)   the information given in the Directors’ report for the ﬁ nancial year for which the ﬁ nancial statements 

are prepared is consistent with the ﬁ nancial statements; and

(cid:129)   information given in the Corporate governance report set out on pages 24 to 29 in this Annual Report 

with respect to internal control and risk management systems in relation to ﬁ nancial reporting 
processes and about share capital structures is consistent with the ﬁ nancial statements.

44  LMS Capital plc

Independent auditors’ report

Matters on which we are required to report by exception

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:

(cid:129)   adequate accounting records have not been kept by the parent company, or returns adequate for our 

audit have not been received from branches not visited by us; or

(cid:129)   the parent company ﬁ nancial statements and the part of the Remuneration report to be audited are 

not in agreement with the accounting records and returns; or

(cid:129)   certain disclosures of directors’ remuneration speciﬁ ed by law are not made; or

(cid:129)   we have not received all the information and explanations we require for our audit; or

(cid:129)   a Corporate governance report has not been prepared by the Company.

Under the Listing Rules we are required to review:

(cid:129)   the directors’ statement, set out on page 29, in relation to going concern; and

(cid:129)   the part of the Corporate governance report on pages 24 to 29 in this Annual Report relating to the 

Company’s compliance with the nine provisions of the June 2008 Combined Code speciﬁ ed for our review.

Anthony Cecil
Senior Statutory Auditor

For and on behalf of KPMG Audit Plc, Statutory Auditor
Chartered Accountants
8 Salisbury Square
London
EC4Y 8BB

26 March 2010

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Independent auditors’ report

LMS Capital plc  45

 
 
Consolidated income statement

Continuing operations 
Revenue from sales of goods and services 
Gains and losses on investments 
Interest income 
Investment and other income 

Operating expenses 

Loss before ﬁ nance costs 
Finance costs 

Loss before tax 
Taxation 

Loss from continuing operations 
Discontinued operations 
 Proﬁ t from discontinued operations (net of taxation)  

Loss for the year 

Attributable to: 
Equity holders of the parent 
Minority interests 

Basic and diluted loss per ordinary share 

Continuing operations 

Basic and diluted loss per ordinary share 

Year ended 
31 December 
2009 
£’000 

Year ended
31 December
2008
£’000

Notes 

2 

3 
4 

5 

7 

8 

9 

32,526 
3,998 
166 
973 

37,663 
(51,133) 

(13,470) 
(342) 

(13,812) 
(939) 

(14,751) 

– 

(14,751) 

(15,148) 
397 

(14,751) 

19,790
(32,137)
1,802
582

(9,963)
(46,114)

(56,077)
(221)

(56,298)
(579)

(56,877)

50,755

(6,122)

(5,929)
(193)

(6,122)

10 

10 

(5.6)p 

(2.1)p

(5.6)p 

(20.1)p

The notes on pages 53 to 83 form part of these ﬁ nancial statements.

46  LMS Capital plc

Consolidated income statement

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Statements of comprehensive income

Group

Loss for the year 
Exchange differences on translation of foreign operations 

Total comprehensive loss for the year 

Attributable to: 
Equity holders of the parent 
Minority interests 

Year ended 
31 December 
2009 
£’000 

Year ended
31 December
2008
£’000

(14,751) 
(200) 

(14,951) 

(15,348) 
397 

(14,951) 

(6,122)
1,083

(5,039)

(4,846)
(193)

(5,039)

Company

The company has no recognised income or expense other than its loss for the year of £15,056,000 (year 
ended 31 December 2008: loss of £3,027,000) which includes an impairment loss on investments in 
subsidiaries of £11,709,000 (year ended 31 December 2008: nil).

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The notes on pages 53 to 83 form part of these ﬁ nancial statements.

Statements of comprehensive income

LMS Capital plc  47

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated statement of ﬁ nancial position

Non-current assets 
Property, plant and equipment 
Intangible assets 
Investments  
Other long-term assets 

Non-current assets 

Current assets 
Inventories 
Operating and other receivables 
Cash and cash equivalents 

Current assets 

Total assets 

Current liabilities 
Bank overdrafts 
Interest-bearing loans and borrowings   
Operating and other payables 
Deferred income 
Current tax liabilities 

Current liabilities 

Non-current liabilities 
Interest-bearing loans and borrowings   
Deferred income 
Deferred tax liabilities 

Non-current liabilities 

Total liabilities 

Net assets 

Equity 
Share capital 
Capital redemption reserve 
Merger reserve 
Foreign exchange translation reserve 
Retained earnings 

Equity attributable to owners of the parent 
Minority interests 

Total equity 

31 December 
2009 
£’000 

31 December
2008
£’000

Notes 

11 
12 
13 

14 
15 
16 

16 
17 
18 
19 

17 
19 
20 

21 

21 

7,057 
29,525 
188,133 
80 

224,795 

812 
10,768 
16,950 

28,530 

3,216
26,798
179,546
15

209,575

319
8,309
42,615

51,243

253,325 

260,818

(369) 
(2,394) 
(7,921) 
(8,704) 
(1,007) 

(20,395) 

(4,795) 
(2,116) 
(401) 

(7,312) 

–
(1,656)
(10,335)
(3,426)
(410)

(15,827)

(1,170)
(2,697)
(41)

(3,908)

(27,707) 

(19,735)

225,618 

241,083

27,265 
5,635 
84,083 
1,012 
106,773 

224,768 
850 

225,618 

27,265
5,635
84,083
1,212
122,741

240,936
147

241,083

The ﬁ nancial statements on pages 46 to 83 were approved by the Board on 26 March 2010 and were 
signed on its behalf by:

RA Rayne
Chairman designate

The notes on pages 53 to 83 form part of these ﬁ nancial statements.

48  LMS Capital plc

Consolidated statement of ﬁ nancial position

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Company statement of ﬁ nancial position

Non-current assets 
Property, plant and equipment 
Investments in subsidiaries  

Non-current assets 

Current assets 
Operating and other receivables 
Amounts receivable from subsidiaries   
Cash and cash equivalents 

Current assets 

Total assets 

Current liabilities 
Operating and other payables 
Amounts payable to subsidiaries 

Current liabilities 

Net assets 

Equity 
Share capital 
Capital redemption reserve 
Retained earnings 

Equity attributable to owners of the parent 

31 December 
2009 
£’000 

31 December
2008
£’000

Notes 

11 
13 

15 
15 
16 

18 
18 

21 

21 

158 
281,801 

281,959 

743 
11,607 
4,277 

16,627 

288
293,510

293,798

297
5,548
12,018

17,863

298,586 

311,661

(1,960) 
(68,760) 

(70,720) 

(1,556)
(66,363)

(67,919)

227,866 

243,742

27,265 
5,635 
194,966 

227,866 

27,265
5,635
210,842

243,742

The ﬁ nancial statements on pages 46 to 83 were approved by the Board on 26 March 2010 and were 
signed on its behalf by:

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Company statement of ﬁ nancial position

LMS Capital plc  49

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Statements of changes in equity

Group

Balance at 1 January 2008 
Total recognised income 
and expense  
Distribution to 
minority interests 
Disposal of portfolio 
subsidiaries 
Repurchase of shares 
Share-based payments 

Balance at 31 December 2008 
Total recognised income 
and expense  
Acquisition of portfolio
subsidiary 
Share-based payments  

Capital 
Share   redemption 
 reserve 
capital 
£’000 
£’000 

Foreign
exchange
translation 
reserve 
£’000 

Merger 
reserve 
£’000 

Retained 
earnings 
£’000 

Total 
£’000 

Minority 
interests 
£’000 

Total
equity
£’000

28,643 

4,257  84,083 

(867)  133,047  249,163 

5,283  254,446

– 

– 

– 

– 

– 
(1,378) 
– 

– 
1,378 
– 

– 

– 

– 
– 
– 

1,083 

(5,929) 

(4,846) 

(193) 

(5,039)

– 

996 
– 
– 

– 

– 

(575) 

(575)

3,372 
(8,638) 
889 

4,368 
(8,638) 
889 

(4,368) 
– 
– 

–
(8,638)
889

27,265 

5,635  84,083 

1,212  122,741  240,936 

147  241,083

– 

– 
– 

– 

– 
– 

– 

– 
– 

(200) 

(15,148)  (15,348) 

397 

(14,951)

– 
– 

– 
(820) 

– 
(820) 

306 
– 

306
(820)

Balance at 31 December 2009 

27,265 

5,635  84,083 

1,012  106,773  224,768 

850  225,618

Capital 
Share   redemption 
 reserve 
capital 
£’000 
£’000 

Retained 
earnings 
£’000 

 Total
equity
£’000

  28,643 
– 
(1,378) 
– 

  27,265 
– 
– 

4,257  221,618  254,518
(3,027)
(3,027) 
(8,638)
(8,638) 
889
889 

– 
1,378 
– 

5,635  210,842  243,742
(15,056)  (15,056)
(820)

(820) 

– 
– 

  27,265 

5,635  194,966  227,866

Company

Balance at 1 January 2008 
Total recognised income and expense  
Repurchase of shares 
Share-based payments  

Balance at 31 December 2008 
Total recognised income and expense  
Share-based payments  

Balance at 31 December 2009 

The notes on pages 53 to 83 form part of these ﬁ nancial statements.

50  LMS Capital plc

Statements of changes in equity

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated cash ﬂ ow statement

Cash ﬂ ows from operating activities 
Loss for the year 
Adjustments for: 
Depreciation and amortisation 
Goodwill impairment 
(Gains)/losses on investments 
Gain on discontinued operations, net of income tax   
Loss on sale of property, plant and equipment 
Translation differences 
Share-based payments 
Finance costs 
Interest income 
Income tax expense 

Change in inventories 
Change in operating and other receivables 
Change in operating and other payables 

Interest paid 
Income tax paid 

Net cash used in operating activities   

Cash ﬂ ows from investing activities 
Interest received 
Acquisition of property, plant and equipment 
Proceeds from disposals of property, plant and equipment 
Disposal of discontinued operations, net of cash disposed of 
Acquisition of investments 
Acquisition of subsidiaries, net of cash acquired 
Proceeds from sale of investments 

Net cash (used in)/from investing activities 

Cash ﬂ ows from ﬁ nancing activities 
Repurchase of own shares 
Drawdown of interest bearing loans 
Distribution to minority interests 

Net cash from/(used in) ﬁ nancing activities 

Net (decrease)/increase in cash and cash equivalents 
Cash and cash equivalents at the beginning of the year 
Effect of exchange rate ﬂ uctuations on cash held 

Cash and cash equivalents at the end of the year    

Cash and cash equivalents above comprise 
Cash and cash equivalents 
Bank overdrafts 

Cash and cash equivalents at the end of the year 

16 

Year ended 
31 December 
2009 
£’000 

Year ended
31 December
2008
£’000

Notes 

(14,751) 

(6,122)

12 

1,762 
4,598 
(3,998) 
– 
56 
433 
(422) 
342 
(166) 
939 

(11,207) 
(147) 
1,396 
(2,219) 

(12,177) 
(342) 
(321) 

(12,840) 

166 
(2,749) 
3 
– 
(18,853) 
(6,116) 
13,981 

(13,568) 

– 
554 
– 

554 

(25,854) 
42,615 
(180) 

16,581 

16,950 
(369) 

16,581 

1,199
11,224
32,137
(49,436)
–
(1,958)
889
221
(1,802)
579

(13,069)
(9,878)
13,342
(3,397)

(13,002)
(221)
(183)

(13,406)

1,802
(1,685)
12
80,543
(40,019)
(5,645)
11,503

46,511

(8,638)
1,855
(575)

(7,358)

25,747
14,263
2,605

42,615

42,615
–

42,615

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The notes on pages 53 to 83 form part of these ﬁ nancial statements.

Consolidated cash ﬂ ow statement

LMS Capital plc  51

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year ended 
31 December 
2009 
£’000 

Year ended
31 December
2008
£’000

Notes 

(15,056) 

(3,027)

13 

144 
11,709 
(422) 
(60) 
(2,541) 

(6,226) 
(446) 
6 
(1,121) 

(7,787) 

60 
(14) 

46 

– 

– 

(7,741) 
12,018 

4,277 

4,277 
– 

4,277 

134
–
889
(336)
(1,906)

(4,246)
186
(658)
19,333

14,615

336
(111)

225

(8,638)

(8,638)

6,202
5,816

12,018

12,018
–

12,018

Company cash ﬂ ow statement

Cash ﬂ ows from operating activities 
Loss for the year 
Adjustments for: 
Depreciation 
Impairment of investments in subsidiaries 
Share-based payments 
Interest income 
Income tax credit 

Change in operating and other receivables 
Change in operating and other payables 
Change in amounts due to subsidiaries  

Net cash (used in)/from operating activities 

Cash ﬂ ows from investing activities 
Interest received 
Acquisition of property, plant and equipment 

Net cash from investing activities 

Cash ﬂ ows from ﬁ nancing activities 
Repurchase of own shares 

Net cash used in ﬁ nancing activities 

Net (decrease)/increase in cash and cash equivalents 
Cash and cash equivalents at the beginning of the year 

Cash and cash equivalents at the end of the year 

Cash and cash equivalents above comprise 
Cash and cash equivalents 
Bank overdrafts 

Cash and cash equivalents at the end of the year 

16 

The notes on pages 53 to 83 form part of these ﬁ nancial statements.

52  LMS Capital plc

Company cash ﬂ ow statement

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the ﬁ nancial information

1. Principal accounting policies

Reporting entity

LMS Capital plc (‘the Company’) is domiciled in the United Kingdom. These ﬁ nancial statements
are presented in pounds sterling because that is the currency of the principal economic environment 
of the Company’s operations. The consolidated ﬁ nancial statements of the Company for the year ended 
31 December 2009 comprise the Company and its subsidiaries (together ‘the Group’).

The Company was formed on 17 March 2006 and commenced operations on 9 June 2006 when it received 
the demerged investment division of London Merchant Securities. The consolidated ﬁ nancial 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. 

Basis of preparation

These ﬁ nancial statements have been prepared in accordance with International Financial Reporting 
Standards as adopted for use in the European Union (‘Adopted IFRS’).

The Group’s business activities and ﬁ nancial position are set out in the Operating and Financial review 
on pages 6 to 13. In addition Note 23 to the ﬁ nancial information includes a summary of the Group’s 
ﬁ nancial risk management processes, details of its ﬁ nancial instruments and its exposure to credit 
risk and liquidity risk. Taking account of the ﬁ nancial 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 to continue in operational existence for the foreseeable future. 
Accordingly they continue to adopt the going concern basis in preparing the annual report and accounts.

These ﬁ nancial statements were authorised for issue by the directors on 26 March 2010. 

The accounting policies set out below have been applied consistently for all periods.

The ﬁ nancial statements have been prepared on the historical cost basis except for investments held at 
fair value through proﬁ t or loss which are measured at fair value.

Changes in accounting policy and disclosure

The accounting policies adopted are consistent with those of the previous ﬁ nancial year except as follows:

IAS 1: Presentation of Financial Statements
The revised standard separates owner and non-owner changes in equity. The statement of changes 
in equity includes only details of transactions with owners. The revised standard also introduces the 
statement of comprehensive income which presents all items of recognised income and expense, either 
in one single statement or in two linked statements. The Group has elected to present two statements.

IFRS 2: Share-based Payment (revised)
Amendments to IFRS 2:

(cid:129)   Clariﬁ ed the deﬁ nition of vesting conditions and prescribed the treatment for an award that is 

cancelled; and 

(cid:129)   Clariﬁ ed the scope and accounting for Group cash-settled share-based payment transactions.

The Group adopted these amendments with effect from 1 January 2009; they did not have an impact on 
the ﬁ nancial position or performance of the Group.

Notes to the ﬁ nancial information

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1. Principal accounting policies (continued)

IFRS 7: Financial Instruments Disclosures – Improving Disclosures about Financial Instruments
The amendments to IFRS 7 require fair value measurements to be disclosed by the source of inputs using 
a three-level hierarchy:

(cid:129)   Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);

(cid:129)   Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either 

directly (as prices) or indirectly (derived from prices) (Level 2);

(cid:129)   Inputs for the asset or liability that are not based on observable market data (unobservable inputs) 

(Level 3).

In addition, the amendment revises the speciﬁ c minimum liquidity risk disclosures including the 
contractual maturity of non-derivative and derivative ﬁ nancial liabilities, and a description of how 
this risk is managed.

IFRS 3: Business combinations (revised)
The amendments to IFRS 3 include signiﬁ cant changes in the accounting for business combinations, 
including the valuation of non-controlling interests, accounting for transaction costs, initial recognition 
and subsequent remeasurement of contingent consideration and business combinations achieved in 
stages.

The revised standard does not apply to the Group for 2009 and will be implemented with effect from 
1 January 2010. 

There are no other standards available for early adoption which would have an impact on the ﬁ nancial 
position or performance of the Group.

Use of estimates and judgements

The preparation of ﬁ nancial 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 signiﬁ cant areas of estimation uncertainty and critical judgements in applying 
accounting policies that have the most signiﬁ cant effect on the amounts recognised in the ﬁ nancial 
statements is included in the following notes:

(cid:129)  Note 1 – valuation of investments held at fair value through proﬁ t or loss;

(cid:129)  Note 12 – measurement of the recoverable amounts of cash-generating units containing goodwill.

54  LMS Capital plc

Notes to the ﬁ nancial information

1. Principal accounting policies (continued)

Basis of consolidation

The ﬁ nancial statements comprise the ﬁ nancial statements of the Company and its subsidiary 
undertakings up to 31 December 2009. The Company’s subsidiary undertakings fall into two categories:

(cid:129)  Investment companies through which the Group conducts its investment activities; and

(cid:129)   Certain portfolio companies which form part of the Group’s investment activities but which, by virtue 
of the size of the Group’s shareholding or other control rights, fall within the deﬁ nition of subsidiaries 
under Adopted IFRS (‘portfolio subsidiaries’). The portfolio subsidiaries are included within the 
consolidated ﬁ nancial information although they continue to be managed by the Group as investments 
held for capital appreciation. Note 30 includes details of the companies concerned. 

Subsidiaries
The ﬁ nancial statements of the subsidiaries are included in the consolidated ﬁ nancial statements from 
the date that control commences until the date that control ceases. The portfolio subsidiaries’ UK GAAP 
ﬁ nancial statements are consolidated and restatements are made to comply with Adopted IFRS.

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 identiﬁ able net assets and contingent liabilities acquired 
is recognised as goodwill. If the cost of acquisition is lower than the fair value of the identiﬁ able net 
assets and contingent liabilities acquired, the amount is credited to the income statement in the period 
of acquisition.

The interest of minority shareholders is stated at their share of the fair value of the identiﬁ able assets, 
liabilities and contingent liabilities recognised, except to the extent that losses applicable to the minority 
exceed minority interest.

All intra Group transactions and proﬁ ts or losses are eliminated on consolidation. 

Associates
Associates are those entities in which the Group has signiﬁ cant inﬂ uence, but not control, over the 
ﬁ nancial 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 signiﬁ cant inﬂ uence 
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 proﬁ t 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 business.

Investments in subsidiaries

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

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 of 20 years.

Goodwill

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-
generating units and is tested annually for impairment.

Notes to the ﬁ nancial information

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1. Principal accounting policies (continued)

Investments

The Group manages its investments with a view to proﬁ t 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 proﬁ t and loss and carried in the 
balance sheet at fair value. Other investments including loan investments are classiﬁ ed 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
Quoted investments for which an active market exists are valued at the closing bid price at the balance 
sheet date. 

Unquoted direct investments
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:

(cid:129)   Investments in which there has been a recent funding round involving signiﬁ cant ﬁ nancing from 

external investors are valued at the price of the recent funding, discounted if an external investor is 
motivated by strategic considerations;

(cid:129)   Investments in an established business are valued using revenue or earnings multiples depending on 

the stage of development of the business and the extent to which it is generating sustainable proﬁ ts or 
positive cash ﬂ ows;

(cid:129)   Investments in a business the value of which is derived mainly from its underlying net assets rather 

than its earnings are valued on the basis of net asset valuation;

(cid:129)   Investments in an established business which is generating sustainable proﬁ ts or positive cash ﬂ ows 
but for which other valuation methods are not appropriate are valued by calculating the discounted 
cash ﬂ ow of future cash ﬂ ows or earnings;

(cid:129)   Investments in early stage businesses not generating sustainable proﬁ ts or positive cash ﬂ ows and 

for which there has not been any recent independent funding are valued by calculating the discounted 
cash ﬂ ow of the investment to the investors.

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 satisﬁ ed that the 
valuation methods used by the funds are not materially different from the Group’s valuation methods.

Property, plant and equipment

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. 

56  LMS Capital plc

Notes to the ﬁ nancial information

1. Principal accounting policies (continued)

Depreciation is charged using the straight-line method over the estimated useful lives of the assets 
as follows:

(cid:129)  Freehold property 

50 years

(cid:129)  Leasehold improvements 

the term of the lease

(cid:129)  Plant and equipment   

3–10 years

(cid:129)  Fixtures and ﬁ ttings 

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.

Leased assets

Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are 
classiﬁ ed as ﬁ nance leases. Assets acquired by way of ﬁ nance 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 balance sheet.

Impairment of assets

Loans and receivables
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 ﬂ ows 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 ﬂ ows 
discounted at the original effective interest rate. 

Individually signiﬁ cant 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. 

Non-ﬁ nancial assets
The carrying amounts of the Group’s non-ﬁ nancial 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 proﬁ t or loss. For an asset that does not 
generate largely independent cash ﬂ ows, 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 ﬂ ows are discounted to their 
present value using a pre-tax discount rate that reﬂ ects current market assessments of the time value of 
money and the risks speciﬁ c 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.

Notes to the ﬁ nancial information

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1. Principal accounting policies (continued)

Foreign currencies

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 balance sheet date 
are reported at the rates of exchange prevailing at that date and exchange differences are included in the 
proﬁ t 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 balance sheet 
date. Income and expense items are translated at the average exchange rates for the period. Exchange 
differences arising on these items are classiﬁ ed 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

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

Operating and other receivables are carried at fair value. Bad debts are written-off when identiﬁ ed.

Cash and cash equivalents

Cash, for the purpose of the cash ﬂ ow 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 or traded in an active market. Cash equivalents include short-term cash deposits with original 
maturity of less than three months.

Financial liabilities

The Group’s ﬁ nancial 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.

Provisions

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 outﬂ ow of economic beneﬁ ts will 
be required to settle the obligation. Provisions are determined by discounting the expected future cash 
ﬂ ows at a pre-tax rate that reﬂ ects current market assessments of the time value of money and the risk 
speciﬁ c to the liability.

58  LMS Capital plc

Notes to the ﬁ nancial information

1. Principal accounting policies (continued)

Income

Revenue from sales of goods and services
Revenue from sales of goods is recognised when the signiﬁ cant 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 licence 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 balance sheet date the related income is deferred and recognised over the remaining life of the 
contract, generally on a straight-line basis. 

Revenues from specialist manufacturing are recognised on delivery of the product to the customer.

Gains and losses on investments
Realised and unrealised gains and losses on investments are recognised in the proﬁ t and loss account in 
the period in which they arise.

Interest income
Interest income is recognised as it accrues using the effective interest method.

Investment income
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.

Expenditure

Employee beneﬁ ts
Short-term employee beneﬁ t 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 deﬁ ned contribution pension schemes are charged as an expense as they fall due.

Share-based payments
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
Finance costs comprise interest payable on borrowings calculated using the effective interest 
rate method.

Notes to the ﬁ nancial information

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1. Principal accounting policies (continued)

Lease payments
Payments made under operating leases are recognised in proﬁ t 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 ﬁ nance leases are apportioned between the ﬁ nance expense and the 
reduction of the outstanding liability. The ﬁ nance 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 conﬁ rmed.

Income tax expense

Income tax expense comprises current and deferred tax. Income tax expense is recognised in proﬁ t 
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 ﬁ nancial 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 proﬁ t, 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 proﬁ ts 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 beneﬁ t 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.

2. Operating segments

The information below has been prepared using the deﬁ nition 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 ﬁ nancial information for the investment 
management business on a stand alone basis, together with the adjustments arising from the 
summarised results and ﬁ nancial position of the portfolio subsidiaries. Adjustments for Energy Cranes 
International Limited (‘Energy Cranes’) are shown separately in the prior year because of the size of this 
business relative to the others.

The consolidation adjustments included below reﬂ ect 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 ﬁ nancial statements.

60  LMS Capital plc

Notes to the ﬁ nancial information

2. Operating segments (continued)

Segment proﬁ t or loss

Year ended 31 December 2009 

Revenues from sales of goods and services 
Gains and losses on investments 
Interest income 
Investment and other income 

Goodwill impairment loss 

Finance costs 

(Loss)/proﬁ t for the year 

Year ended 31 December 2008 

Revenues from sales of goods and services 
Gains and losses on investments 
Interest income 
Investment and other income 

Goodwill impairment loss 

Finance costs 

Continuing operations 
Discontinued operations 

(Loss)/proﬁ t for the year 

Segment net assets

31 December 2009 

Property, plant and equipment 
Intangible assets 
Investments  
Other non-current assets 

Non-current assets 

Cash and cash equivalents 

Other current assets 

Total assets 

Total liabilities 

Net assets/(liabilities) 

Reconciliation

Investment 
management 
£’000 

Portfolio 
 subsidiaries 
£’000 

Consolidation
adjustments 
£’000 

– 
(4,876) 
159 
494 

– 

– 

(12,660) 

32,526 
– 
7 
479 

– 

(6,341) 

2,177 

Group total
£’000

32,526
3,998
166
973

(4,598)

(342)

– 
8,874 
– 
– 

(4,598) 

5,999 

(4,268) 

(14,751)

Investment 

Portfolio 
management   subsidiaries 
£’000 

£’000 

Reconciliation

Discontinued operations

Energy 
Cranes 
£’000 

 Consolidation

Other  adjustments  Group total
£’000
£’000 
£’000  

– 
(36,748) 
1,754 
582 

– 

– 

19,790 
– 
48 
– 

– 

(4,267) 

– 
– 
– 
– 

– 

– 

– 
– 
– 
– 

– 

– 

– 
4,611 
– 
– 

19,790
(32,137)
1,802
582

(11,224) 

(11,224)

4,046 

(221)

(40,796) 
– 

(13,514) 
– 

– 
57,556 

– 
(6,801) 

(2,567) 
– 

(56,877)
50,755

(40,796) 

(13,514)  57,556 

(6,801) 

(2,567) 

(6,122)

Reconciliation

Investment 
management 
£’000 

Portfolio 
 subsidiaries 
£’000 

Consolidation
adjustments 
£’000 

158 
– 
215,632 
– 

215,790 

14,416 

462 

230,668 

(2,802) 

227,866 

6,899 
11,817 
1 
80 

18,797 

2,534 

11,182 

32,513 

(79,519) 

(47,006) 

Group total
£’000

7,057
29,525
188,133
80

224,795

16,950

11,580

– 
17,708 
(27,500) 
– 

(9,792) 

– 

(64) 

(9,856) 

253,325

54,614 

44,758 

(27,707)

225,618

The net asset value of the investment management business at 31 December 2009 includes £227,719,000 
attributable to the equity holders of the parent and £147,000 attributable to minority interests.

Notes to the ﬁ nancial information

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2. Operating segments (continued)

31 December 2008 

Property, plant and equipment 
Intangible assets 
Investments  
Other non-current assets 

Non-current assets 

Cash and cash equivalents 

Other current assets 

Total assets 

Total liabilities 

Net assets/(liabilities) 

Reconciliation

Investment 
management 
£’000 

Portfolio 
 subsidiaries 
£’000 

Consolidation
adjustments 
£’000 

288 
– 
202,049 
– 

202,337 

41,293 

309 

243,939 

(2,283) 

241,656 

2,928 
3,196 
1 
15 

6,140 

1,322 

8,319 

15,781 

(70,604) 

(54,823) 

– 
23,602 
(22,504) 
– 

1,098 

– 

– 

1,098 

53,152 

54,250 

Group total
£’000

3,216
26,798
179,546
15

209,575

42,615

8,628

260,818

(19,735)

241,083

The net asset value of the investment management business at 31 December 2008 includes £241,509,000 
attributable to the equity holders of the parent and £147,000 attributable to minority interests.

The carrying amount and gains and losses of the investments of the investment management business 
can be further analysed as follows:

Asset type 

Funds 
Quoted 
Unquoted 

Funds 
Quoted 
Unquoted 

Revenues

31 December 2009 

31 December 2008

UK 
£’000 

30,259 
17,274 
39,849 

87,382 

US 
£’000 

73,194 
34,601 
20,455 

128,250 

Total 
£’000 

103,453 
51,875 
60,304 

215,632 

UK 
£’000 

29,911 
19,409 
33,686 

83,006 

US 
£’000 

72,390 
27,097 
19,556 

119,043 

Total
£’000

102,301
46,506
53,242

202,049

Year ended 31 December 2009 

Year ended 31 December 2008

Realised  
gains/(losses) 
£’000 

Unrealised 
gains/(losses) 
£’000 

(755) 
2,503 
(1,867) 

(119) 

(6,007) 
9,741 
(8,491) 

(4,757) 

Total 
£’000 

(6,762) 
12,244 
(10,358) 

(4,876) 

Realised  
gains/(losses) 
£’000 

Unrealised
gains/(losses) 
£’000 

2,114 
574 
14,620 

17,308 

4,572 
(31,122) 
(27,506) 

(54,056) 

Total
£’000

6,686
(30,548)
(12,886)

(36,748)

The Group’s revenues from external customers comprise:

Continuing operations 
IT services and software 
Specialist manufacturing 

Year ended  
31 December  
2009 
£’000 

Year ended
31 December
2008
£’000

24,885 
7,641 

32,526 

12,431
7,359

19,790

62  LMS Capital plc

Notes to the ﬁ nancial information

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2. Operating segments (continued)

Geographical information

Continuing operations 
United Kingdom 
United States of America 
Other countries 

Year ended  
31 December  
2009 
£’000 

Revenues 

Year ended 
31 December 
2008 
£’000 

Non-current assets

31 December  
2009 
£’000 

31 December
2008 
£’000

17,640 
8,925 
5,961 

32,526 

7,066 
6,521 
6,203 

19,790 

88,298 
136,497 
– 

224,795 

99,378
110,197
–

209,575

Geographical information on revenue is based on the location of customers and on assets is based on the 
location of the assets. 

Major customers

Revenues from the ten largest customers represent approximately 39% of the Group’s total revenues 
(year ended 31 December 2008: 33%).

3. Interest income

Interest income comprises interest receivable on bank deposits.

4. Investment and other income

Investment and other income comprise the following:

Dividends from quoted securities 
Investment management fees 
Income from investments 
Other 

Year ended  
31 December  
2009 
£’000 

Year ended
31 December
2008
£’000

133 
360 
314 
166 

973 

159
137
286
–

582

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LMS Capital plc  63

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5. Operating expenses

Cost of sales 
Administrative expenses 

Operating expenses include the following:

Depreciation 
Goodwill impairment loss 
Refund of value added tax 
Auditors’ remuneration: 
Fees to group auditors: 
– parent company 
– subsidiary companies 
Non-audit related services: 
– taxation advisory services 
– other 
Fees to non-group auditors 

6. Personnel expenses

Wages and salaries 
Compulsory social security contributions 
Contributions to deﬁ ned contribution plans 
Share-based payment transactions 

Year ended  
31 December  
2009 
£’000 

Year ended
31 December
2008
£’000

13,270 
37,863 

51,133 

8,451
37,663

46,114

Year ended  
31 December  
2009 
£’000 

Year ended
31 December
2008
£’000

1,649 
4,598 
– 

1,142
11,224
(1,078)

67 
133 

19 
80 
196 

65
141

19
–
84

Year ended  
31 December  
2009 
£’000 

Year ended
31 December
2008
£’000

17,854 
1,457 
544 
(178) 

19,677 

16,172
1,634
552
889

19,247

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. No amounts were 
payable under these arrangements for the year ended 31 December 2009 (year ended 31 December 2008: 
nil). If the Group’s investment portfolio were realised at its carrying amount at 31 December 2009, 
carried interest of £nil would become payable (year ended 31 December 2008: £0.1 million).

7. Finance costs

Interest on bank loans and overdrafts 
Interest on other loans 
Finance lease charges 

Year ended  
31 December  
2009 
£’000 

Year ended
31 December
2008
£’000

110 
219 
13 

342 

76
145
–

221

64  LMS Capital plc

Notes to the ﬁ nancial information

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8. Taxation

Current tax expense 
Current period 
Adjustment for prior periods 

Total current tax 

Deferred tax expense
Origination and reversal of temporary differences 

Total tax expense 

Reconciliation of effective tax rate

Loss before tax 

Income tax using the Company’s domestic tax rate – 28% (2009: 28.5%) 
Recognition of previously unrecognised tax losses 
Fair value adjustments not currently taxed 
Non-deductible expenses 
Non-taxable income 
Deferred tax not recognised 
Prior year adjustment 

Total tax expense 

9. Discontinued operations 

Year ended  
31 December  
2009 
£’000 

Year ended
31 December
2008
£’000

471 
224 

695 

579
–

579

Year ended  
31 December  
2009 
£’000 

Year ended
31 December
2008
£’000

244 

244 

939 

–

–

579

Year ended  
31 December  
2009 
£’000 

Year ended
31 December
2008
£’000

(13,812) 

(3,867) 
(123) 
(1,901) 
3,717 
(234) 
3,123 
224 

939 

(56,298)

(16,045)
(619)
14,120
4,946
(4,533)
2,710
–

579

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There were no disposals constituting discontinued operations in the year ended 31 December 2009. 
In March 2008 the Group sold its entire interest in Energy Cranes International Limited and in June 2008 
the Group sold its entire interest in AssetHouse Technology Limited. 

Results of discontinued operations

Revenues 
Expenses 

Results from operating activities 
Taxation 

Results from operating activities, net of tax 
Gain on sale of discontinued operations, net 
Tax on gain on sale of discontinued operations 

Proﬁ t for the year 

Basic earnings/(loss) per ordinary share 
Diluted earnings/(loss) per ordinary share 

Year ended
31 December
2008
£’000

33,142
(31,240)

1,902
(583)

1,319
49,436
–

50,755

18.0p
17.7p

Notes to the ﬁ nancial information

LMS Capital plc  65

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9. Discontinued operations (continued)

Cash ﬂ ows from/(used in) discontinued operations

Net cash used in operating activities 
Net cash used in investing activities 
Net cash from ﬁ nancing activities 

Net cash used in discontinued operations 

Effect of disposal on the ﬁ nancial position of the Group

Property, plant and equipment 
Intangible assets 
Investments 
Other non-current assets 
Inventories 
Trade and other receivables 
Cash and cash equivalents 
Bank overdrafts 
Interest bearing loans and borrowings   
Trade and other payables 
Provisions 

Net assets  

Consideration received, satisﬁ ed in cash 
Cash disposed of 

Net cash inﬂ ow 

10. Basic and diluted loss per ordinary share

Year ended
31 December
2008
£’000

(8,977)
(849)
7,375

(2,451)

Year ended
31 December
2008
£’000

12,216
39,587
527
–
15,326
25,763
3,043
–
(43,447)
(10,813)
(8,052)

34,150

83,586
(3,043)

80,543

The calculation of basic loss per ordinary share is based on the loss of £15,148,000 (year ended 
31 December 2008: loss of £5,929,000), being the loss for the year attributable to the parent, divided 
by the weighted average number of ordinary shares in issue during the year 272,640,952 (year ended 
31 December 2008: 281,758,491).

The calculation of loss per ordinary share for continuing operations is based on the loss of £15,148,000 
(year ended 31 December 2008: loss of £56,684,000), being the loss for the year attributable to the parent, 
divided by the weighted average number of ordinary shares in issue during the year of 272,640,952 
(year ended 31 December 2008: 281,758,491).

There was no dilution effect on the loss for the year or the loss from continuing operations in either year.

66  LMS Capital plc

Notes to the ﬁ nancial information

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11. Property, plant and equipment

Group

Cost 
Balance at 1 January 2008 
Additions 
Acquisitions through business combinations 
Disposals 
Disposals of subsidiaries 
Effect of movement in exchange rates 

Balance at 31 December 2008 

Balance at 1 January 2009 
Additions 
Acquisitions through business combinations 
Disposals 
Effect of movement in exchange rates 

Balance at 31 December 2009 

Depreciation and impairment losses 
Balance at 1 January 2008 
Depreciation charge for the year 
Disposals 
Disposals of subsidiaries 
Effect of movement in exchange rates 

Balance at 31 December 2008 

Balance at 1 January 2009 
Depreciation charge for the year 
Disposals 
Effect of movement in exchange rates 

Balance at 31 December 2009 

Carrying amounts 

At 31 December 2008 

At 31 December 2009 

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Land and 
buildings 
£’000 

Plant and 
 equipment 
£’000 

Fixtures
and ﬁ ttings 
£’000 

3,547 
87 
– 
– 
(2,288) 
439 

1,785 

1,785 
2 
– 
– 
(173) 

1,614 

830 
71 
– 
(210) 
231 

922 

922 
91 
– 
(92) 

921 

863 

693 

16,841 
1,538 
180 
(75) 
(14,538) 
361 

4,307 

4,307 
2,309 
2,888 
(118) 
(128) 

9,258 

6,028 
947 
(63) 
(4,855) 
136 

2,193 

2,193 
1,340 
(61) 
(40) 

3,432 

2,114 

5,826 

866 
60 
31 
– 
(549) 
9 

417 

417 
438 
82 
(7) 
(4) 

926 

141 
124 
– 
(94) 
7 

178 

178 
218 
(5) 
(3) 

388 

239 

538 

Total
£’000

21,254
1,685
211
(75)
(17,375)
809

6,509

6,509
2,749
2,970
(125)
(305)

11,798

6,999
1,142
(63)
(5,159)
374

3,293

3,293
1,649
(66)
(135)

4,741

3,216

7,057

At 31 December 2009 land and buildings with a carrying amount of £693,000 (31 December 2008: 
£863,000) are subject to a registered debenture to secure bank loans.

At 31 December 2009 the carrying amount of plant and equipment includes £278,000 held under ﬁ nance 
leases (31 December 2008: £nil).

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LMS Capital plc  67

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11. Property, plant and equipment (continued)

Company

Cost 
Balance at 1 January 2008 
Additions 

Balance at 31 December 2008 

Balance at 1 January 2009 
Additions 

Balance at 31 December 2009 

Depreciation and impairment losses 
Balance at 1 January 2008 
Depreciation charge for the year 

Balance at 31 December 2008 

Balance at 1 January 2009 
Depreciation charge for the year 

Balance at 31 December 2009 

Carrying amounts 

At 31 December 2008 

At 31 December 2009 

Plant and 
 equipment 
£’000 

Fixtures
and ﬁ ttings 
£’000 

51 
111 

162 

162 
14 

176 

11 
82 

93 

93 
54 

147 

69 

29 

295 
– 

295 

295 
– 

295 

24 
52 

76 

76 
90 

166 

219 

129 

Total
£’000

346
111

457

457
14

471

35
134

169

169
144

313

288

158

68  LMS Capital plc

Notes to the ﬁ nancial information

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12. Intangible assets

Group

Cost 
Balance at 1 January 2008 
Acquisitions through business combinations 
Disposals of businesses 
Effect of movement in exchange rates 

Balance at 31 December 2008 

Balance at 1 January 2009 
Acquisitions through business combinations 
Adjustment to goodwill at acquisition 

Balance at 31 December 2009 

Impairment losses 
Balance at 1 January 2008 
Impairment loss 
Amortisation 

Balance at 31 December 2008 

Balance at 1 January 2009 
Impairment loss 
Amortisation 

Balance at 31 December 2009 

Carrying amounts 

At 31 December 2008 

At 31 December 2009 

Software 
 licence 
£’000 

– 
2,088 
– 
– 

2,088 

2,088 
– 
– 

2,088 

– 
– 
57 

57 

57 
– 
113 

170 

2,031 

1,918 

Goodwill 
£’000 

75,922 
4,320 
(39,586) 
– 

40,656 

40,656 
8,733 
(1,295) 

48,094 

4,665 
11,224 
– 

15,889 

15,889 
4,598 
– 

20,487 

24,767 

27,607 

Total
intangible
assets
£’000

75,922
6,408 
(39,586)
–

42,744

42,744
8,733 
(1,295)

50,182

4,665
11,224
57

15,946

15,946
4,598
113

20,657

26,798

29,525

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The adjustment to goodwill at acquisition relates to the acquisition of Citizen Limited in September 
2008, based on information received prior to September 2009.

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 which is equivalent to its value in use. 

An analysis of goodwill is set out below:

Goodwill 
impairment 
recognised in 
the year ended 
31 December 
2009 
£’000 

Goodwill
impairment
recognised in
the year ended 
31 December 
 2008 
£’000 

Offshore Tool and Energy Corporation   
Entuity Limited 
Wesupply Limited 
CopperEye Limited 
Kizoom Limited 
Citizen Limited 
Updata Infrastructure UK Ltd 

64 
– 
– 
1,585 
1,806 
1,143 
– 

4,598 

610 
2,846 
– 
– 
7,768 
– 
– 

11,224 

27,607 

24,767

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Carrying 
amount 
2009 
£’000 

1,508 
4,981 
5,120 
1,426 
5,121 
718 
8,733 

Carrying
amount
2008
£’000

1,572
4,981
5,120
3,011
6,927
3,156
–

Notes to the ﬁ nancial information

LMS Capital plc  69

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12. Intangible assets (continued)

The impairment loss in each year reﬂ ects 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.

13. Investments 

Group

The movements in investments were as follows:

Carrying value 
Balance at 1 January 2008 
Purchases 
Disposals 
Distributions from partnerships 
Fair value adjustments 
Transfers to portfolio subsidiaries 

Balance at 31 December 2008 

Balance at 1 January 2009 
Purchases 
Disposals 
Distributions from partnerships 
Fair value adjustments 

Balance at 31 December 2009 

Unquoted securities

  Quoted securities 
£’000 

Equity 
£’000 

 Loans 
£’000 

Funds 
£’000 

Total
£’000

63,824 
17,525 
(3,721) 
– 
(31,122) 
– 

46,506 

46,506 
1 
(6,136) 
– 
11,505 

51,876 

20,225 
1,336 
– 
– 
2,142 
– 

23,703 

23,703 
1,561 
– 
– 
1,014 

26,278 

13,089 
5,383 
(352) 
– 
(4,084) 
(7,000) 

86,374 
15,775 
– 
(6,313) 
6,465 
– 

183,512
40,019
(4,073)
(6,313)
(26,599)
(7,000)

7,036 

102,301 

179,546

7,036 
2,500 
(500) 
– 
(2,511) 

102,301 
14,791 
(968) 
(5,366) 
(7,304) 

179,546
18,853
(7,604)
(5,366)
2,704

6,525 

103,454 

188,133

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 
deﬁ ned 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).

Level 3: inputs for the asset that are not based on observable market data (unobservable inputs).

Level 1 
Level 2 
Level 3 

2009 
£’000 

51,876 
– 
136,257 

188,133 

2008
£’000

46,506
–
133,040

179,546

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:

Opening balance 
Total (gain)/loss in proﬁ t or loss 
Purchases 
Transfers to portfolio subsidiaries 
Realisations 

70  LMS Capital plc

Notes to the ﬁ nancial information

2009 
£’000 

133,040 
(8,801) 
18,852 
– 
(6,834) 

2008
£’000

119,688
4,523
22,494
(7,000)
(6,665)

136,257 

133,040

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13. Investments (continued)

Company

The movement in investments in subsidiaries was as follows:

Opening balance 
Impairment loss 

2009 
£’000 

293,510 
(11,709) 

281,801 

2008
£’000

293,510
–

293,510

Details of subsidiaries are set out in Note 30.

The impairment loss for the year reﬂ ects the impact of changes in the values of the net assets of 
subsidiaries on the carrying value of the Company’s investment. 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.

14. Inventories

Work in progress 
Finished goods 

2009 
£’000 

191 
621 

812 

Group

2008
£’000

71
248

319

Changes in ﬁ nished goods and work in progress recognised as cost of sales amounted to a credit of 
£493,000 (year ended 31 December 2008: £54,000).

15. Operating and other receivables 

Trade receivables 
Other receivables and prepayments 
Amounts receivable from subsidiaries   

16. Cash and cash equivalents

Bank balances 
Short-term deposits 

Cash and cash equivalents 
Bank overdrafts 

2009 
£’000 

8,518 
2,250 
– 

10,768 

2009 
£’000 

2,793 
14,157 

16,950 
(369) 

16,581 

Group 

2008 
£’000 

6,497 
1,812 
– 

8,309 

Group 

2008 
£’000 

1,438 
41,177 

42,615 
– 

42,615 

2009 
£’000 

– 
743 
11,607 

12,350 

2009 
£’000 

410 
3,867 

4,277 
– 

4,277 

Company

2008
£’000

–
297
5,548

5,845

Company

2008
£’000

147
11,871

12,018
–

12,018

Notes to the ﬁ nancial information

LMS Capital plc  71

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17. Interest bearing loans and borrowings

Non-current liabilities
Secured bank loans 
Other unsecured loans 
Finance lease liabilities 

Current liabilities
Secured bank loans 
Other unsecured loans 
Finance lease liabilities 

Terms and conditions of outstanding loans are as follows:

Secured bank loan 
Secured bank loan 
Secured bank loan 
Secured bank loan 
Other secured loans 
Unsecured loan 
Unsecured loan 
Unsecured loan 
Finance lease liabilities 
Finance lease liabilities 

Currency 

£ 
£ 
USD 
USD 
USD 
£ 
USD 
USD 
£ 
USD 

Nominal 
interest rate 

  LIBOR plus 2.50% 
7.5% 
7.51% 
8.25% 
Various 
21% 
4.95% 
12% 
25% 
6.45% 

Finance lease liabilities are payable as follows:

Future 
minimum 
lease  
payments 
£’000 

80 
327 
– 

407 

Interest 
£’000 

17 
57 
– 

74 

2009 

Present 
value of 
minimum 
lease  
payments 
£’000 

63 
270 
– 

333 

Less than one year 
Between one and ﬁ ve years 
More than ﬁ ve years 

Maturity 

2010 
2014 
2020 
2010 
2010 
2014 
2010 
2010 
2014 
2014 

Future 
minimum 
lease  
payments 
£’000 

– 
– 
– 

– 

2009 
£’000 

3,255 
1,270 
270 

4,795 

765 
1,566 
63 

2,394 

2009 
£’000 

Carrying 
amount 

91 
2,540 
764 
612 
13 
1,270 
100 
1,466 
278 
55 

7,189 

Interest 
£’000 

– 
– 
– 

– 

Group

2008
£’000

1,170
–
–

1,170

254
1,402
–

1,656

Group

2008
£’000

Carrying
amount

–
–
897
–
527
–
_
1,402
–
–

2,826

2008

Present
value of
minimum
lease 
payments
£’000

–
–
–

–

72  LMS Capital plc

Notes to the ﬁ nancial information

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
18. Operating and other payables

Trade payables 
Non-trade payables and accrued expenses 
Amounts payable to subsidiaries 

19. Deferred income

2009 
£’000 

2,739 
5,182 
– 

7,921 

Group 

2008 
£’000 

2,271 
8,064 
– 

10,335 

2009 
£’000 

85 
1,875 
68,760 

70,720 

Company

2008
£’000

62
1,494
66,363

67,919

Deferred income comprises amounts invoiced to customers in respect of goods or services which had not 
been delivered at the balance sheet date. It arises principally on maintenance contracts for hardware and 
software which typically cover a period of one year or more.

20. Deferred tax liabilities

Recognised deferred tax liabilities

Deferred tax liabilities were attributable to the following:

Property, plant and equipment 
Financial assets at fair value through proﬁ t or loss 

Unrecognised deferred tax liabilities

The Group has no unrecognised deferred tax liabilities.

Deferred tax assets

2009 
£’000 

339 
62 

401 

Group

2008
£’000

–
41

41

The Group’s investment management business has capital losses for tax purposes of £10.9 million 
at 31 December 2009 (31 December 2008: £4.7 million) available to offset future proﬁ ts chargeable to 
tax. In addition, if the Group were to dispose of its investment portfolio at book value at 31 December 
2009 it would realise further net capital losses for tax purposes of £55.7 million (31 December 2008: 
£65.5 million). Deferred tax assets have not been recognised in respect of these items because it is 
not probable that future taxable proﬁ t will be available against which the Group can utilise the 
beneﬁ ts therefrom.

The Group’s portfolio subsidiaries have tax losses of £118.9 million at 31 December 2009 (31 December 
2008: £118.4 million) available to offset future proﬁ ts chargeable to tax.

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21. Capital and reserves 

Share capital 

Balance at beginning of the year 
Repurchase of shares  

Balance at end of the year 

i

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  Ordinary shares

2009 
Number 

2009 
£’000 

2008 
Number 

  272,640,952 
– 

27,265  286,429,228 
(13,788,276) 

– 

  272,640,952 

27,265  272,640,952 

2008
£’000

28,643
(1,378)

27,265

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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.

Notes to the ﬁ nancial information

LMS Capital plc  73

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
21. Capital and reserves (continued)

Capital redemption reserve

The capital redemption reserve comprises the nominal value of those shares purchased by the Company 
out of its own proﬁ ts and cancelled. 

Treasury shares

The Company has no shares held in treasury.

Merger reserve

The Company commenced operations on 9 June 2006 when it received the demerged investment division 
of London Merchant Securities. Consolidated ﬁ nancial statements were prepared for the nine months 
ended 31 December 2006 to reﬂ ect the two step demerger process: this comprised an initial common 
control transaction followed by a subsequent demerger of the Group. The consolidated ﬁ nancial 
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.

Foreign exchange translation reserve

The foreign exchange translation reserve comprises all foreign currency movements arising from the 
translation of the ﬁ nancial statements of foreign operations.

22. Share-based payments

Company

Executive share option plan
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. 

Options granted under the plan are subject to the following vesting criteria. If the Net Asset Value per 
share of the Company increases by at least 3% per annum above the increase in the Retail Prices Index 
based on the Net Asset Value per share at the ﬁ nancial year end preceding the date of grant, 25% of the 
shares under option will vest three years after the date of grant. If the increase in the Net Asset Value 
per share exceeds the growth in the Retail Prices Index by at least 8% per annum, 100% of the options 
will be exercisable three years after the date of grant. There is a straight-line scale for increases in Net 
Asset Value per share between 3% and 8% per annum.

Movements during the year were as follows:

Outstanding at 1 January  
Granted during the year 
Exercised during the year 
Lapsed during the year 

Outstanding at 31 December  

2009 
Number 

2008
Number

4,045,807 
– 
– 
(2,185,812) 

1,962,067
2,493,641
–
(409,901)

1,859,995 

4,045,807

Options over 739,860 (2008: 409,901) ordinary shares lapsed as a result of employees leaving the 
Company and options over 1,445,952 lapsed as a result of performance criteria not being met.

The weighted average exercise price of options outstanding at 31 December 2009 was 74p 
(31 December 2008: 74p).

74  LMS Capital plc

Notes to the ﬁ nancial information

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
22. Share-based payments (continued)

Deferred share bonus plan
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 ﬁ rst release may take place 
no earlier than the ﬁ rst 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:

Outstanding at 1 January  
Awards during the year 
Exercised during the year 
Lapsed during the year 

Outstanding at 31 December  

2009 
Number 

2008
Number

3,102,983 
– 
(1,193,455) 
(1,193,455) 

4,296,438
–
–
(1,193,455)

716,073 

3,102,983

Under this plan, 1,193,455 shares became eligible for release on 31 March 2008 and were released during 
2009; the Company elected to settle the release for a cash payment of £642,000. The weighted average 
exercise price of the awards outstanding was nil (31 December 2008: nil).

No shares became eligible for release during 2009 since performance criteria were not met and as a 
result 1,193,455 shares lapsed as of 31 December 2008. Of the 1,193,455 shares eligible for release based 
on 2009 performance, 477,382 lapsed when the beneﬁ ciary left the Company during 2009 and 716,073 
lapsed since performance criteria were not met.

At 31 December 2009, 716,073 shares remain eligible for release on 30 March 2011. The weighted average 
exercise price at 31 December 2009 was nil (31 December 2008: nil).

Performance share plan
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 
following performance criteria.

In respect of one half of the award, over the three year measurement period, Total Shareholder Return 
(‘TSR’) must exceed the median TSR of the FTSE 250 Index. At the 50th percentile TSR, 12.5% of the total 
award will vest, rising on a straight-line basis to 50% of the total award vesting at the 75th percentile 
and above.

In respect of the other half of the award, the increase in Net Asset Value per share over the measurement 
period must exceed the increase in the Retail Prices Index by at least 3% per annum. At RPI plus 3%, 
12.5% of the total award will vest, rising on a straight-line basis to 50% of the total award vesting if the 
increase in Net Asset Value per share exceeds RPI by 8% per annum.

On 6 April 2009 the Company granted awards under this plan for the ﬁ rst time in respect of 2,455,888 
ordinary shares to eligible employees; during the year awards covering 450,687 ordinary shares lapsed 
as a result of employees leaving the Company. The weighted average exercise price of the awards 
outstanding was nil (31 December 2008: nil).

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Notes to the ﬁ nancial information

LMS Capital plc  75

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
22. Share-based payments (continued)

Recognition and measurement
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. 

Performance share awards granted during 2009 were valued using the following inputs:

Performance share plan

Fair value at grant date 
Share price 
Exercise price 
Expected volatility 
Option life 
Expected dividends 
Risk-free interest rate 

The (credit)/expense recognised in the income statement for share-based payments is as follows:

Executive share option plan  
Deferred share-based plan 
– Equity-settled 
– Cash settled 
Performance share plan 

2009 
£’000 

(186) 

(844) 
642 
210 

(178) 

£0.42
£0.43
–
20%
10 years
–
3.0%

2008
£’000

318

571
–
–

889

At 31 December 2009, non-trade payables and accrued expenses include £398,000 (2008: £19,000) in 
respect of amounts payable under the Company’s long-term incentive plans.

23. Financial risk management 

The Group has exposure to the following risks from its use of ﬁ nancial instruments:

(cid:129)  Credit risk

(cid:129)  Liquidity risk

(cid:129)  Market risk.

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

Credit risk is the risk of the ﬁ nancial loss to the Group if a customer or counterparty to a ﬁ nancial 
instrument fails to meet its contractual obligations and arises principally from the Group’s receivables 
from customers and its cash and cash equivalents. 

Operating and other receivables 
Cash and cash equivalents 

2009 
£’000 

10,768 
16,950 

27,718 

2008
£’000

8,309
42,615

50,924

76  LMS Capital plc

Notes to the ﬁ nancial information

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
23. Financial risk management (continued)

Operating and other receivables
The Group’s exposure to credit risk is inﬂ uenced 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 speciﬁ c loss component that 
relates to individually signiﬁ cant 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 identiﬁ ed.

The maximum exposure to credit risk for operating and other receivables by geographic region was:

UK 
United States 
Other regions 

The aging of trade receivables was:

Not past due 
Past due 0–30 days 
Past due 31–120 days 
More than 120 days 

2009 
£’000 

7,954 
1,853 
961 

10,768 

Gross 
£’000 

4,052 
1,356 
851 
801 

7,060 

2008
£’000

3,883
2,842
1,584

8,309

2008

Impairment
£’000

–
–
170
393

563

Gross 
£’000 

4,270 
2,969 
462 
1,008 

8,709 

2009 

Impairment 
£’000 

– 
– 
– 
191 

191 

Cash and cash equivalents
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

Liquidity risk is the risk that the Group will not be able to meet its ﬁ nancial obligations as they fall 
due. Its ﬁ nancing requirements are met through a combination of liquidity from the sale of investments, 
the use of cash resources and bank borrowing facilities. The Company has a £15,000,000 facility with 
The Royal Bank of Scotland. Interest would be payable at the percentage rate per annum, which is the 
aggregate of the margin (3.0% per annum), London Interbank Offered Rate (LIBOR) and the mandatory cost. 

The Company did not use this facility during 2009. 

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Notes to the ﬁ nancial information

LMS Capital plc  77

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
23. Financial risk management (continued)

The following are the contractual maturities of ﬁ nancial liabilities:

31 December 2009 

Bank overdrafts 
Interest bearing loans and borrowings 
Finance lease liabilities 
Operating and other payables 

31 December 2008 

Bank overdrafts 
Interest bearing loans and borrowings 
Finance lease liabilities 
Operating and other payables 

Market risk

Carrying  Contractual 
amount  Cash ﬂ ows 
£’000 

£’000 

6 months 
or less 
£’000 

369 

369 
6,856  10,011 
407 
7,921 

333 
7,921 

369 
376 
38 
7,921 

6–12 
months 
£’000 

– 
2,659 
42 
– 

  15,479  18,708 

8,704 

2,701 

Carrying  Contractual 
amount  Cash ﬂ ows 
£’000 

£’000 

6 months 
or less 
£’000 

– 
2,826 
– 

– 
140 
– 
  10,335  10,335  10,335 

– 
3,852 
– 

6–12 
months 
£’000 

– 
2,032 
– 
– 

  13,161  14,187  10,475 

2,032 

1–2 
years 
£’000 

– 
515 
83 
– 

598 

1–2 
years 
£’000 

– 
109 
– 
– 

109 

2–5  More than
5 years
£’000

years 
£’000 

– 
5,410 
244 
– 

5,654 

–
1,051
–
–

1,051

2–5  More than
5 years
£’000

years 
£’000 

– 
270 
– 
– 

270 

–
1,301
–
–

1,301

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 ﬁ nancial instruments. 
The Group aims to manage this risk within acceptable parameters while optimising the return.

Currency risk
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 signiﬁ cant currency 
within the investment portfolio is the US dollar; approximately 60% 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 ﬁ nancial derivatives. 

The Group is exposed to 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. 

The Group’s exposure to foreign currency risk was as follows:

31 December 2009 

31 December 2008

Investments 
Operating and other 
receivables 
Cash and cash equivalents 
Bank overdrafts 
Interest bearing loans 
and borrowings 
Finance lease liabilities 
Operating and other payables 

GBP 
£’000 

USD 
£’000 

59,881 

128,252 

7,568 
15,342 
(369) 

(3,901) 
(278) 
(6,504) 

3,092 
1,528 
– 

(2,955) 
(55) 
(1,380) 

Gross balance sheet exposure 

71,739 

128,482 

Forward exchange contracts 

– 

– 

Net exposure 

71,739 

128,482 

Other 
£’000 

– 

108 
80 
– 

– 
– 
(37) 

151 

– 

151 

GBP 
£’000 

USD 
£’000 

60,502 

119,044 

4,626 
40,621 
– 

– 
– 
(7,118) 

3,476 
1,822 
– 

(2,826) 
– 
(3,209) 

98,631 

118,307 

– 

– 

98,631 

118,307 

Other
£’000

–

207
172
–

–
–
(8)

371

–

371

78  LMS Capital plc

Notes to the ﬁ nancial information

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
23. Financial risk management (continued)

At 31 December 2009 the rate of exchange was USD1.62 = £1.00 (31 December 2008: USD1.46 = £1.00). 
The average rate for the year ended 31 December 2009 was USD1.57 = £1.00 (year ended 31 December 
2008: USD1.84 = £1.00).

A 10% strengthening of the US dollar against the pound sterling would have increased equity 
by £10.9 million at 31 December 2009 (31 December 2008: increase of £12.2 million) and decreased the 
loss from continuing operations for the year ended 31 December 2009 by £13.9 million (year ended 
31 December 2008: decreased by £13.5 million). This assumes that all other variables, in particular 
interest rates, remain constant. 

Interest rate risk
At the reporting date the interest rate proﬁ le of the Group’s interest bearing ﬁ nancial instruments was:

Fixed rate instruments 
Financial assets 
Financial liabilities 

Variable rate instruments 
Financial assets 
Financial liabilities 

2009 
£’000 

– 
7,558 

7,558 

16,950 
– 

16,950 

2008
£’000

–
2,826

2,826

42,615
–

42,615

An increase of 100 basis points in interest rates at the reporting date would have increased equity by 
£246,000 (31 December 2008: increase of £238,000) and decreased the loss from continuing activities 
by £246,000 (year ended 31 December 2008: decrease of £238,000).

Fair values
The carrying amounts of ﬁ nancial assets (excluding investments) and liabilities, shown in the balance 
sheet, approximate their fair values.

The fair values of ﬁ nancial liabilities are based on the present value of future principal and interest cash 
ﬂ ows, discounted at the market rate of interest at the reporting date.

Other market price risk
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 signiﬁ cant income. 

The Group’s management of risk in its investment portfolio focuses on diversiﬁ cation in terms of 
geography, sector, type and stage of investment.

If the investment valuation declined by 10% from the amount at the balance sheet date, with 
all other variables held constant, the loss for the year ended 31 December 2009 would have increased 
by £18.8 million (year ended 31 December 2008: the loss would have increased by £17.9 million). 
An increase in the valuation of investments by 10% at the balance sheet date would have an equal 
and opposite effect on the proﬁ t or loss for the year. 

Notes to the ﬁ nancial information

LMS Capital plc  79

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23. Financial risk management (continued)

Capital management

The Group’s total capital at 31 December 2009 was £225.6 million (31 December 2008: £241.1 million) 
comprising equity share capital and reserves. The Group had borrowings at 31 December of £7.6 million 
(2008: £2.8 million).

The Board monitors and reviews the broad structure of the Group’s capital on an ongoing basis. 
This review includes:

(cid:129)  The planned level of gearing, which takes into accounts planned investment activity;

(cid:129)   The possible buy-back of equity shares for holding in treasury or cancellation, which takes account 

of the discount of the share price to net asset value per share;

(cid:129)  The annual dividend policy.

The Group’s objectives, policies and processes for managing capital are unchanged from the preceding 
accounting year.

24. Acquisitions of subsidiaries

The following acquisition was made during the year ended 31 December 2009:

Updata Infrastructure (UK) Limited 

In July 2009 the Group acquired 53.3% of the issued share capital of Updata Infrastructure Holdings 
Limited (‘Updata Holdings’), which immediately prior to this investment by the Group had acquired 100% 
of the issued share capital of Updata Infrastructure UK Limited. The consideration paid by the Group 
was equivalent to its share of the consolidated net assets of Updata Holdings. 

The acquisition had the following effect on the Group’s assets and liabilities on the acquisition date:

Property, plant and equipment 
Inventories 
Operating and other receivables 
Cash and cash equivalents 
Loans and borrowings 
Operating and other payables 

Net identiﬁ able liabilities 
Intangible assets (goodwill) 

Net assets acquired 
Minority interest 

Consideration paid 

Pre-acquisition
carrying amounts
£’000

2,970
346
3,855
83
(3,809)
(5,673)

(2,228)
8,733

6,505
(306)

6,199

No adjustments were made to pre-acquisition carrying amounts.

The consideration was paid in cash on completion.

The goodwill is attributable to the expected proﬁ tability of the acquired business.

Updata designs, builds and manages carrier-class networks. In the six months to 31 December 2009 the 
company contributed a proﬁ t of £1,400,000 to the consolidated results of the Group. If the acquisition 
had occurred on 1 January 2009, management estimates that consolidated revenue would have been 
£38,874,000 and the consolidated loss for the period would have been £12,885,000.

80  LMS Capital plc

Notes to the ﬁ nancial information

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
24. Acquisitions of subsidiaries (continued)

The following acquisitions were made during the year ended 31 December 2008:

Citizen Limited

In September 2008 the above company underwent a capital reconstruction which took the Group’s voting 
interest from less than 50% to 84% and the company has been included in the consolidated ﬁ nancial 
statements of the Group with effect from this restructuring.

The acquisition had the following effect on the Group’s assets and liabilities on the acquisition date:

Property, plant and equipment 
Intangible assets 
Inventories 
Operating and other receivables 
Cash and cash equivalents 
Loans and borrowings 
Operating and other payables 

Net identiﬁ able liabilities 

Group share of net identiﬁ able liabilities 
Goodwill  

Group equity carrying value on acquisition date 

Pre-acquisition
carrying amounts
£’000

186
2,088
29
480
(83)
(4,050)
(1,805)

(3,155)

(3,155)
3,155

–

No adjustments were made to pre-acquisition carrying amounts.

Citizen (through its wholly-owned subsidiary Vio Worldwide Limited) provides supply chain software 
solutions for the advertising, publishing and graphic arts industries. In the four months to 31 December 
2008 the company contributed a loss of £679,000 to the consolidated results of the Group. 

Kizoom Limited 

In May 2008 Cityspace acquired 100% of the issued share capital of Kizoom Limited. The acquisition had 
the following effect on the Group’s assets and liabilities on the acquisition date:

Property, plant and equipment 
Operating and other receivables 
Cash and cash equivalents 
Operating and other payables 

Net identiﬁ able assets 
Goodwill on acquisition 

Consideration paid 

Pre-acquisition
carrying amounts
£’000

25
635
459
(313)

806
1,165

1,971

No adjustments were made to pre-acquisition carrying amounts.

The consideration was paid in cash on completion.

Kizoom provides solutions to deliver real-time transport information to the internet and mobile devices. 
In the eight months to 31 December 2008 the company contributed a loss of £261,117 to the consolidated 
results of the Group. 

Notes to the ﬁ nancial information

LMS Capital plc  81

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25. Operating leases

Leases as lessee

Non-cancellable operating lease rentals are payable as follows:

Less than one year 
Between one and ﬁ ve years 
More than ﬁ ve years 

26. Capital commitments

Outstanding commitments to funds 

Group 
£’000 

640 
1,147 
– 

1,787 

2009 

Company 
£’000 

400 
600 
– 

1,000 

Group 
£’000 

716 
1,160 
– 

1,876 

2009 
£’000 

58,709 

58,709 

2008

Company
£’000

400
1,000
–

1,400

2008
£’000

71,104

71,104

The outstanding commitments to funds comprise unpaid calls in respect of funds where a member of the 
Group is a limited partner.

27. Contingent liabilities

The Company has guaranteed the indebtedness of certain of the Group’s investments; the amount 
outstanding under these arrangements at 31 December 2009 was £1.8 million (31 December 2008: 
£2.3 million).

28. Related party transactions

With effect from 1 May 2007 the Company entered into a lease agreement with Derwent London plc in 
respect of the premises comprising its head ofﬁ ce and registered ofﬁ ce. Under the terms of the lease the 
Company pays an annual rent of £400,000 to Derwent London plc plus certain service charges.

Under an arrangement with Derwent London plc the Company is entitled to charge that company 
£50,000 per annum as a recharge of ofﬁ ce and related costs of Mr Robert Rayne. Mr Rayne is Chairman 
of Derwent London plc. Amounts outstanding under this arrangement at 31 December 2009 were £14,000 
(31 December 2008: £14,000).

With effect from 29 September 2007 the Company entered into a sub-lease agreement with Weatherford 
UK under which the latter is a sub-tenant of part of the Company’s head ofﬁ ce premises at an annual 
rental of £200,000 plus service charges. Mr Rayne and Dr Duroc-Danner are directors of Weatherford 
International, the ultimate parent undertaking of Weatherford UK. Amounts outstanding under these 
arrangements at 31 December 2009 were £47,000 (31 December 2008: £12,000).

Compensation arrangements for key management are set out in the Remuneration report on pages 
32 to 39.

29. Subsequent events

There were no events subsequent to the balance sheet date that would materially affect the 
interpretation of these ﬁ nancial statements.

82  LMS Capital plc

Notes to the ﬁ nancial information

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
30. Subsidiaries

The subsidiaries comprising the Group’s investment management business (as set out in Note 2) are 
as follows:

Name 

Country of incorporation 

Holding % 

Activity

International Oilﬁ eld Services Limited  
LMS Capital (Bermuda) Limited 
LMS Capital (ECI) Limited 
LMS Capital (General Partner) Limited 
LMS Capital (GW) Limited 
LMS Capital Group Limited 
LMS Capital Holdings Limited 
Lioness Property Investments Limited 
Lion Property Investments Limited 
Lion Investments Limited 
Lion Cub Investments Limited 
Lion Cub Property Investments Limited 
Tiger Investments Limited  
LMS Tiger Investments Limited 
LMS Tiger Investments (II) Limited 
Westpool Investment Trust plc 

Bermuda 
Bermuda 
England and Wales 
Bermuda 
Bermuda 
England and Wales 
England and Wales 
England and Wales 
England and Wales 
England and Wales 
England and Wales 
England and Wales 
England and Wales 
England and Wales 
England and Wales 
England and Wales 

100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 
100 

Investment holding
Investment holding
Investment holding
Investment holding
Investment holding
Investment holding
Investment holding
Investment holding
Investment holding
Investment holding
Dormant
Investment holding
Investment holding
Investment holding
Investment holding
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 deﬁ nition of subsidiaries under IFRS. These 
portfolio subsidiaries are included within the consolidated ﬁ nancial information although they continue 
to be managed by the Group as investments held for capital appreciation.

Name 

Citizen Limited 

Country of incorporation 

Holding % 

Activity

England and Wales 

CopperEye Limited 

England and Wales 

Entuity Limited 

Kizoom Limited 

England and Wales 

England and Wales 

Offshore Tool and Energy Corporation 

United States of America 

100 

Updata Infrastructure Holdings Limited  England and Wales 
England and Wales 
Wesupply Limited 

53.3 
98 

84 

76 

68 

94 

Software solutions for the  
advertising, publishing and 
graphic arts industries

Specialised search solutions  

for business transaction data

Network management  

software

Urban digital networks and  

intelligent transport systems
Specialist engineering 
design and fabrication
Carrier-class networks
Supply chain 
management software

O
v
e
r
v
e
w

i

i

B
u
s
n
e
s
s

r
e
v
e
w

i

G
o
v
e
r
n
a
n
c
e

i

F
n
a
n
c
a

i

l

S
t
a
t
e
m
e
n
t
s

Notes to the ﬁ nancial information

LMS Capital plc  83

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shareholder information

Registered ofﬁ ce

Company website

Carlton House
33 Robert Adam Street
London W1U 3HR
Tel: +44 (0)20 7935 3555
Email: webenquiries@lmscapital.com
Website: www.lmscapital.com

Company registered in England

Number 5746555

Company Secretary

Matthew Jones FCIS

Registrars

Capita Registrars
Northern House
Woodsome Park
Fenay Bridge
Huddersﬁ eld
West Yorkshire HD8 0LA
Tel: (UK) 0871 664 0300
(Outside UK) +44 (0)20 8639 3399
Email: ssd@capitaregistrars.com

Shareholder enquiries

All administrative enquiries relating to 
shareholders, such as notiﬁ cation of change of 
address or the loss of a share certiﬁ cate, should 
be made to the Company’s registrars, Capita 
Registrars, whose address is given above.

Electronic shareholder communications

The Company has opted to send shareholders 
communications via the Company website rather 
than via the post. This is more environmentally 
friendly and cost efﬁ cient. 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.

Share dealing service

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/

84  LMS Capital plc

Shareholder information

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 notiﬁ ed by email when press releases are 
announced. For further information, please visit 
www.lmscapital.com

Brokers

J.P. Morgan plc
20 Moorgate
London EC2R 6DA

Winterﬂ ood Securities Limited
The Atrium Building
Cannon Bridge
25 Dowgate Hill
London EC4R 2GA

Auditors

KPMG Audit Plc
8 Salisbury Square
London EC4Y 8BB

Bankers

Barclays Bank plc
1 Churchill Place
London E14 5HP

The Royal Bank of Scotland plc
36 St. Andrew Square
Edinburgh EH2 2YB

Solicitors

Clifford Chance LLP
10 Upper Bank Street
London E14 5JJ

Ashurst LLP
Broadwalk House
5 Appold Street
London EC2A 2HA

Financial calendar 2010

Annual General Meeting 13 May

Interim Management Statements 
May and November

Half-year results August*

Year-end 31 December

* This date is provisional and may change.

Designed and produced by Radley Yeldar www.ry.com 

Carlton House, 33 Robert Adam Street, London W1U 3HR
Telephone +44 (0)20 7935 3555 www.lmscapital.com