LMS CAPITAL PLC (LMS) Listed Private Assets Investor presentation Q4 2017 Investment Manager - Gresham House Asset Management Ltd (“GHAM”)
Contents • Summary 3 • Portfolio breakdown 4 • Selected portfolio holdings 5 • LMS background - Gresham House as the new manager 7 • LMS – the valuation opportunity 8 • New Investment Committee - experience and track record 9 • Increased shareholder information and communications 10 • Conclusion 11 • Appendix 12 L I S T E D P R I V A T E E Q U I T Y 2
Summary • LMS – the investment case : (i) Value within existing portfolio – the NAV potential (ii) Gresham House – new manager with alignment and with successful individual track records * (iii) Long-term private markets strategy – focused on reducing the discount to NAV, Realisations, NAV growth and yield objectives plus scaling opportunities • Existing potential drivers of NAV – identified investments could drive potential NAV increase and/or see realisations in the short and medium-term • Gresham House Asset Management (GHAM) is an experienced manager with a track record of creating value* • Execution ahead of schedule since August 2016 (when GHAM became manager) • Manager, Board and shareholders actively engaged in identifying opportunities to scale and create long term value based on Gresham House’s asset management capabilities • Recent shareholder changes and experienced Investment Committee established – resetting for future growth opportunity L I S T E D P R I V A T E E Q U I T Y 3 * Please refer to the track record in the appendix on slide 24
Portfolio breakdown as at 30 September 2017 1 Total NAV (£m) Holding Sector NAV (£m) Quoted stocks 8.1 Weatherford Oil & Gas services 1.9 Gresham House Asset Management 3.1 Coretx Technology services 3.1 Other Other 0.1 UK private – directly held 7.1 Elateral Software 3.5 Entuity Software 3.6 US private – SFEP managed 18.3 YesTo Consumer goods 5.6 Penguin Technology 12.7 US private - other 12.6 Medhost Software 9.6 NEP Utilities (energy services) 3.0 UK funds Eden Venture Partners European technology 1.6 7.5 Brockton Capital Real estate 4.5 Other Other 1.4 US funds Opus Capital Venture Partners Early stage technology 3.8 4.9 companies Weber Capital US small cap 0.6 Other Other 0.5 Cash 4.5 Other net assets/liabilities (3.1) Company net assets 59.9 Source: Gresham House Asset Management 1 The NAV announcement is in the Q3 NAV update L I S T E D P R I V A T E E Q U I T Y 4
Selected portfolio holdings Domicile US • Develops and sells innovative and efficacious natural beauty products; Fund & co- Nature of • Strongly performing brand in rapidly growing sector, with a well regarded investment holding SFEP management team – as evidenced by recent transaction; £5.6m Value • Recent transaction provided additional capital to the company and partial exit to Valuation Sales / investors at a premium to NAV; methodology earnings • Opportunity: Significant revenue growth; gross margin focus; attractive multiple % company 9% comparable transaction multiples (trade buyers) Domicile US • Significant supplier of high powered and cloud computing solutions in North Fund SFEP Nature of America; holding • LMS effective ownership 19%. One other significant PE investor (37%); Value £12.7m • Significant step up in scale over last 2-3 years. Revenues over $150m (and growing); Sales / Valuation earnings methodology • Opportunity: Strategic exit is part of management plan; government contracts multiple offering further growth potential 19% % company L I S T E D P R I V A T E E Q U I T Y 5
Selected portfolio holdings • Provides technology services to the medical sector in the U.S; • LMS owns 8% of the equity; US Domicile • The investment was a co investment alongside the Primus funds as lead Nature of Co-investment investment manager; holding • The original investment was $5m in 2007 and LMS received a return of Value £9.6m capital of $10.1m in December 2013; Valuation GP Valuation • methodology The business is profitable and cash generative; % company 8% • Currently in process to explore strategic options – transaction comparable multiples indicate potential upside • Develops and sells enterprise class network management software to UK Domicile medium and large businesses; Nature of Direct holding • LMS own 67% equity investing alongside founders and management team; • GHAM investment team – new Board member; Value £3.6m • Opportunity: New CEO driving cost reduction, plus revenue growth Valuation Sales / methodology earnings evident multiple % company 67% L I S T E D P R I V A T E E Q U I T Y 6
LMS background - Gresham House as the new manager Background • Gresham House Asset Management (GHAM) awarded mandate to manage LMS in Q3 2016. Transition to external management structure completed H1 2017 • New Investment Committee established – Tony Dalwood, Tim Farazmand, Graham Bird, Robbie Rayne • Annualised costs savings in excess of £1m p.a. will be achieved by end 2017 • Realisation strategy completed - in excess of £20 million realisation proceeds generated in first 9 months of GHAM’s management • Final commitment to return cash to shareholders fulfilled with recent tender; total £17m returned ahead of schedule 1 • Significant shareholder restructuring achieved with placing of c.12% legacy shareholders (buyers included Investment Committee members, new Institutions plus Family Offices) • Portfolio fully reviewed and appraised; portfolio drivers identified, NAV re-appraised • Intention to scale and generate further long-term shareholder value – manager alignment. 1 £6 million returned in August 2016; £11 million returned in August 2017 L I S T E D P R I V A T E E Q U I T Y 7
LMS – The valuation opportunity NAV 74p – LMS share price trades at 37% discount 1 ; (P-E sector average 14% 2 ) 1) Clear shareholder return drivers from existing portfolio – the top 5 investments equate 2) to 60% of NAV Re-deployment of capital – Gresham House Asset Management (GHAM) Investment 3) Committee 4) Objective to scale LMS, increase liquidity, reduce NAV discount and further reduce ongoing charges 1 LMS closing price of 47p as of 23 November 2017 and applying 30 September 2017 NAV of 74p per share. 2 Listed PE sector average discount to NAV as calculated by Cantor Fitzgerald Investment Companies team as at 8 November 2017. L I S T E D P R I V A T E E Q U I T Y 8
New Investment Committee - Experience and track record Tim Farazmand Tim has a strong background in UK mid-market Private Equity with over 30 years in the industry working with a broad variety of companies such as LDC, 3i, RBS PE and Catalyst Fund Management during that time. Most recently Tim was a MD at LDC, the private equity subsidiary of Lloyds Bank plc. Tim is a former Chairman of the British Private Equity and Venture Capital Association (BVCA). Tony Dalwood CEO of Gresham House and Chair of the Investment Committee. Prior to Gresham House he established SVGIM and launched Strategic Equity Capital plc and the Strategic Recovery Funds. Tony is the former CEO of SVG Advisers (Schroder Ventures London), former chair of Downing Active Management Investment Committee and a former member of the UK Investment Committee at PDFM. Currently non-executive director of JP Morgan Private Equity Plc (JPEL). Graham Bird Graham leads the Strategic Equity division of Gresham House Asset Management Ltd (GHAM). He was previously Director of Strategic Investments at SVGIM having helped launch the Strategic Public Equity strategy with Tony Dalwood. Graham has considerable experience as a fund manager and an adviser to quoted companies having previously been a Director within the corporate finance department at JP Morgan Cazenove. More recently Graham held senior positions in industry at Paypoint plc including Strategic Planning and Corporate Development Director, and PayByPhone President & Executive Chairman, managing a growing technology business Robert Rayne Robbie has expertise in a wide range of sectors including real estate, media, consumer, technology and energy. He established LMS Capital’s investment activities in the early 1980s as Investment Director and later Managing Director and Chief Executive of London Merchant Securities. Robbie is Non-Executive Chairman of Derwent London plc and is involved with a number of charitable trusts and foundations. L I S T E D P R I V A T E E Q U I T Y 9
Increased shareholder information and communications • Increased frequency of shareholder communications, including: • Quarterly NAV announcements • Quarterly factsheets uploaded to website • One-on-one investor meetings • Expansion of Investor Relations capability via Gresham House platform • http://www.lmscapital.com L I S T E D P R I V A T E E Q U I T Y 10
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