Zombie fund LMS will take three to five years to die

published 15 March 2012

Net asset value per share held steady at 90p in 2011 at investment company LMS Capital as the company embarked on the mammoth task of unwinding its portfolio.

The investment portfolio showed a net gain of £8.7m compared to £23.9m the previous year, including realised gains of £6.4m (2010: realised loss of £1.0m). The company is in the process of conducting an orderly realisation of all the assets of the company, and has put a freeze on all new investments.

The directors aim to make an initial return of cash to shareholders by the end of 2012, with a further distribution by the end of 2013. Full realisation of the portfolio is likely to be completed in three to five years.

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Proceeds of realisations during the year were £62.7m (2010: £24.3m) including sales of quoted securities of £31.6m (2010: £6.2m), proceeds from the secondary sales of funds of £14.6m (2010: nil) and distributions from funds of £11.7m (2010: £13.7m).

Outstanding commitments to funds were £18.9m at the end of the year, down from £40.7m at the end of 2010. As at December 31st the investment management business had net cash of £30.6m and no debt (December 31: net debt of £5.0m).

Revenue in 2011 shot up to £47.3m from £38.1m in 2011 but gains on on investments were much lower at £7.9m versus £29.3m the year before. That meant that, once operating expenses had been taking into account, the firm dipped into the red, with a loss before tax of £0.37m, compared to a profit of £26.7m the year before.

The consolidated post-tax loss for the year (including portfolio subsidiaries) from continuing operations was £1.0m as against a profit of £25.1m in 2010.

Richard Christou, Chairman of LMS Capital, said: "During 2011 the investment portfolio has generally performed well. There has been good progress by the board towards the successful execution of the [realisation] plan and we believe that the investment portfolio has the potential to release significant cash to shareholders in the medium term.

"We have acted to reduce costs and implemented a realisation plan for the portfolio with the aim of making a first distribution to shareholders in the latter part of this year. The economic background remains difficult, but the board is focused on optimising value and cash flow for the benefit of all shareholders."

The share price rose 3% to 60.00p.