Final Results
Lupus Capital PLC
30 March 2004
Lupus Capital plc
Lupus Capital plc announces its preliminary results for the year ended 31 December 2003
Highlights
• £2,848,000 * pre tax profits
• 1.2p* earnings per share
• 0.37p dividend per share
*Adjusted for goodwill of £740,000 and final investment activity loss
of £200,000
• £1,908,000** pre tax profits
• 0.65p** earnings per share
** Statutory basis
Greg Hutchings, Executive Chairman, said:
'Lupus Capital, in which I have a substantial investment, is an excellent
foundation from which to build an exciting industrial enterprise. It has:
• No net debt • Gall Thomson Environmental growth potential
• Good financial results • Sound cash generation
• Underlying reliability of earnings • No pension deficit
The important structural changes in the Group have now taken place. We have a
clear strategy, a sound balance sheet, good operating activities and an
enthusiastic entrepreneurial management team, ambitious to drive Lupus Capital
plc forward. We are confident that we have the right platform to deliver further
value for shareholders.'
For further information please contact:
85 Buckingham Gate, London SW1E 6PD
Telephone: 020 7976 8000
Fax: 020 7976 8014
E-mail: Enquiries@lupuscapital.co.uk
Listed on the London Stock Exchange and classified under 'Speciality and other
finance'
Chairman's Statement
Dear Shareholder,
I am pleased to report that the last year was a very constructive time of change
for your Company. Earlier this calendar year I was appointed executive chairman
and Denis Mulhall also joined the board as an executive director. We would like
to thank Konrad Legg, your previous non-executive chairman, as well as Fred Hoad
and Roland Tate, for all their good work and we are grateful to them for
remaining non-executive directors on the Board.
Results for the year
Our financial results for the year to 31 December 2003 were good.
Adjusted pre-tax profits were £2,848,000 (2002: £1,637,000) before goodwill,
exceptional items and the final investment activity loss. After tax, this
translates into earnings per share of 1.20p (2002: £0.67p) out of which we are
paying a total full year dividend of 0.37p net (2002: 0.62p). Gall Thomson
Environmental, our main subsidiary, performed well despite the slow down in
orders due to the conflict in Iraq.
Pre-tax profits for the year were £1,908,000 (2002: loss £1,361,000), after
£740,000 of goodwill and the final loss on investment activities of £200,000,
which translates into earnings per share of 0.65p (2002: loss 0.89p).
Dividend
The Board is recommending a final dividend of 0.25p per share (2002: 0.50p per
share) making the total for the year ending 31 December 2003 of 0.37p per share
(2002: 0.62p per share). As shareholders are aware the structure and strategy
of the Company have changed significantly. The board has rebased the dividend,
which is expected to be paid in July, back to the level of the year before last.
As explained in note 6 the company is to seek shareholder and Court approval
regarding a capital reorganisation to enable this payment.
Employees
I would like to thank, on behalf of all shareholders, all our employees for the
hard work and dedication shown over what has been a difficult and changing few
years.
Background
In January and February 2004 I personally invested £2,137,500 in the shares of
the Company as I felt it was an excellent base from which to build a major
industrial enterprise. Denis Mulhall, with whom I worked at Tomkins PLC, has
also invested £252,000 personally. We chose Lupus for a number of reasons:
• The existing non-executives and their advisors had reorganised and
rationalised the Group, leaving it free of any debts;
• As can be seen from the 2003 results, Lupus produced good financial results
and continues to demonstrate underlying reliability of earnings;
• Gall Thomson Environmental has growth potential;
• The reliable cash generation provides a sound base for paying dividends;
and
• Unlike many listed companies, there is no pension deficit as only defined
contributions schemes are in use.
Strategy
Our strategy is to build shareholder value through the acquisition of
undervalued or under-managed businesses, using a spectrum of funding
instruments, where with the application of our management skills and systems we
can achieve greater profitability. Once they have been improved and potential
long-term growth configurations installed, we would expect to realise a gain
through a variety of exit mechanisms.
Our strategy is very similar to that which we developed at Tomkins PLC, with one
key exception. Institutional investors in the public markets are not sympathetic
to public conglomerate organisations; they have, however, even though with very
diverse interests, favoured private equity structures. We intend to follow
private equity principles with investment exits by demergers or sale and cash
returns to shareholders when appropriate.
The speed and management experience we possess together with the flexibility of
being able to offer an on-going interest should give us a competitive edge over
private equity competitors. In addition, we have proven management skills and
systems, as well as the application of financial modelling.
Our approach to sectors will be very disciplined and with a clear focus. Target
companies will be involved in industrial manufacturing, processing or services
or distribution for industries, businesses or consumers. Retailing, financial
services, property and media are outside our range. Our key requirements are
asset based, positive cash flow, UK-centric, under-valued or under-managed, but
not loss making, companies. In addition we will target fragmented industries,
seek consolidations, as well as develop organic growth opportunities.
We will choose to operate in stable markets where the technology is low-risk
rather than markets exposed to quick innovation and sudden obsolescence. We
prefer to sell high quantities of inexpensive items or fulfil a high volume of
contracts as opposed to a small number of very significant cost constituents.
We expect to inject our management skills, operating systems, financial control
mechanisms and strategy experience to improve profitability and financial
efficiency.
Our industrial focus and business experience of acquiring, stabilising,
controlling, investing in and developing businesses, together with a strong
existing operation gives Lupus Capital plc exciting prospects.
Current status
Shareholders will know that Lupus Capital plc is listed on the London Stock
Exchange and classified for historical reasons under 'Speciality and Other
Finance'. We intend to remain with this until such time as the composition of
the Group changes, when a more appropriate sector will be selected. As of the
end of March 2004 our market capitalisation was approximately £40m. Gall
Thomson Environmental Ltd., which is our main operating company, will be
retained within the Group.
Business of Gall Thomson Environmental
Gall Thomson Environmental Ltd. is the world's leading supplier of marine
breakaway couplings. Its subsidiary, KLAW Products Ltd., is a supplier of
industrial couplings including quick release couplings and breakaway couplings.
A Gall Thomson marine breakaway coupling is used in the oil and gas industry to
enable a loading line to part safely and then to shut off the product supply in
the event of a vessel moving off station during the loading or discharging of
oil and gas products, whether at offshore moorings or jetty terminals. The
purpose of the breakaway coupling is to prevent environmental pollution and
damage to pumping and transfer equipment. Gall Thomson Environmental also
supplies the quick release Welin Lambie camlock coupling which is used in the
hose and loading arm system for the transfer of oil and gas products.
The greater number of our couplings are designed and made for the major oil
producers to order. Stock and working capital levels are thus easily visible.
There is also an increasing demand for refurbishment of our products which have
been in use for many years and exposed to the elements. The excellence of the
couplings and their technology together with the huge environmental and
financial consequences of risking less established products gives Gall Thomson
Environmental a significant advantage and strong market share.
The principal activity of KLAW is that of the manufacture, assembly and
distribution of industrial quick release couplings to the oil and gas
industries, such as refining, exploration and construction. Their couplings are
also used in the transportation of product by road and rail.
Outlook
Gall Thomson Environmental has started 2004 with a steady order book and looks
forward to continued success. There are opportunities in most areas of the world
due to an increase in world floating production systems, as well as the
traditional Single Point Mooring business. The drive to exploration in deeper
waters (greater than 1,000 metres) which require off loading techniques as
opposed to pipeline infrastructure, provides a sound basis for the Gall Thomson
Environmental business in the short and long term. KLAW has started the year
well and has become CE markings approved. During 2002 and 2003 new products were
developed, which, together with the existing range, are expected to generate
higher sales. Additional personnel are being employed to increase market
penetration.
The important structural changes in the Group have now taken place. We have a
clear strategy, a sound balance sheet, good operating activities and an
enthusiastic entrepreneurial management team ambitious to drive Lupus Capital
plc forward. I am confident that we have the right platform to deliver further
value for shareholders.
Greg Hutchings
Chairman
30 March 2004
Consolidated profit and loss account
For the year ended 31 December 2003
Note 2003 2002
£000 £000
Turnover 6,551 6,638
Cost of sales (1,940) (1,935)
Gross profit 4,611 4,703
Administrative expenses - excluding exceptional (1,682) (2,679)
items And
goodwill amortisation
Administrative expenses - exceptional items - (1,148)
Administrative expenses - goodwill amortisation (740) (741)
Administrative expenses (2,422) (4,568)
Operating profit 2,189 135
(Loss) / profit on disposal of fixed asset investments (200) 213
Income from investments - 273
Amounts written off fixed asset investments - (1,595)
Interest receivable and similar income 161 155
Interest payable and similar charges (242) (542)
Profit/ (loss) on ordinary activities before taxation 1,908 (1,361)
Taxation 2 (788) (151)
Profit / (loss) on ordinary activities for the year 1,120 (1,512)
Ordinary dividends 3 (758) (1,058)
Retained profit/(loss) for the year 362 (2,570)
Earnings / (loss) per share 4 0.65p (0.89p)
Earnings per share before exceptional items, goodwill 4 1.20p 0.67p
and investment activity
Consolidated statement of total recognised gains and losses
There were no recognised gains and losses in each year other than the profit of
£1,120,000 (2002: loss £1,512,000) for the financial year.
All results relate to continuing operations.
Consolidated balance sheet
As at 31 December 2003
2003 2002
£000 £000
Fixed assets
Intangible assets 11,421 12,161
Tangible assets 415 463
Investments - 3,822
11,836 16,446
Current assets
Stocks and work-in-progress 251 200
Debtors 2,871 2,096
Cash at bank and in hand 97 -
3,219 2,296
Creditors: amounts falling due within one (2,360) (6,693)
year
Net current assets/(liabilities) 859 (4,397)
Total assets less current liabilities 12,695 12,049
Creditors: amounts falling due after more
than one year (85) (80)
Net assets 12,610 11,969
Capital and reserves
Called up share capital 864 853
Share premium account 4,709 4,441
Merger reserve 10,389 10,389
Profit and loss account (3,352) (3,714)
Equity shareholders' funds 12,610 11,969
Company balance sheet
As at 31 December 2003
2003 2002
£000 £000
Fixed assets
Investments 25,100 8,711
25,100 8,711
Current assets
Debtors 39 13,675
Cash at bank and in hand 2,782 1,064
2,821 14,739
Creditors: amounts falling due within one (4,519) (879)
year
Net current (liabilities)/assets (1,698) 13,860
Total assets less current liabilities 23,402 22,571
Creditors: amounts falling due after more
than one year (7,876) (7,876)
Net assets 15,526 14,695
Capital and reserves
Called up share capital 864 853
Share premium account 4,709 4,441
Merger reserve 8,920 8,920
Profit and loss account 1,033 481
Equity shareholders' funds 15,526 14,695
Consolidated cash flow statement
For the year ended 31 December 2003
Note 2003 2002
£000 £000
Net cash inflow from operating activities 5 1,289 2,112
Returns on investments and servicing of finance
Interest received 161 155
Interest paid (273) (531)
Dividends received 56 258
(56) (118)
Taxation
UK corporation tax paid (146) (544)
Capital expenditure and financial investment
Sale of tangible fixed assets 4 -
Purchase of tangible fixed assets (8) (16)
Sale of fixed asset investments 3,622 3,051
Purchase of fixed asset investments - (1,070)
3,618 1,965
Equity dividends paid (1,060) (630)
Net cash inflow before financing 3,645 2,785
Financing
Issue of shares net of costs 279 25
Increase in cash 3,924 2,810
Reconciliation of net cash flow to movement in net debt
For the year ended 31 December 2003
2003 2002
£000 £000
Increase in cash 3,924 2,810
Change in net debt from cash flows 3,924 2,810
Net debt at 1 January (3,827) (6,637)
Net funds / (debt) at 31 December 97 (3,827)
Reconciliation of equity shareholders' funds
For the year ended 31 December 2003
2003 2002
£000 £000
Profit / (loss) for the financial year 1,120 (1,512)
Net movement on share issues 279 25
Dividends paid and proposed on ordinary (758) (1,058)
shares
641 (2,545)
Opening shareholders' funds 11,969 14,514
Closing shareholders' funds 12,610 11,969
Notes to the preliminary results
1. Nature of the financial information
The financial statements, which have been prepared in accordance with applicable
accounting standards under the historical cost convention, consolidate the
results of the Company and its subsidiary undertakings for the year ended 31
December 2003.
The results for the year ended 31 December 2003 are unaudited. Those for the
year ended 31 December 2002 are an abridged version of the Group's full
accounts, which received an unqualified audit report, not containing statements
under section 237(2) or 273(3) of the Companies Act 1985, and which have been
filed with the Registrar of Companies.
The financial information set out above does not constitute statutory accounts
of the Company for the year ended 31 December 2003 as defined in section 240 of
the Companies Act 1985 but is derived from those accounts. Statutory accounts
for the year ended 31 December 2003 will be delivered to the Registrar of
Companies following the Annual General Meeting.
2. Taxation
2003 2002
£000 £000
Taxation based on the result for the year:
UK Corporation tax on income for the year 846 175
Adjustment in respect of prior year (58) (24)
788 151
2003 2002
£000 £000
Profit/(loss) on ordinary activities before 1,908 (1,361)
taxation
Profit/(loss) on ordinary activities multiplied by
standard
rate of corporation tax in the UK of 30% 572 (408)
(2002: 30%)
Effects of:
Expenses not deductible for tax purposes:
Increase in provision against listed - 478
investments
Goodwill amortisation 222 222
Dividends received - (82)
Other items 15 29
Capital allowances in advance of depreciation (9) 6
Other timing differences (14) -
Loss on sale of investment 60 -
Utilisation of tax losses - (64)
Marginal rate relief - (6)
Adjustments to tax charge in respect of previous (58) (24)
periods
Current tax for the year 788 151
Factors affecting future tax charges:
There are excess tax losses of £4,536,000 (£4,324,000) within the Group which
will be available for relief against any future taxable profits of the Group.
In accordance with the Group's accounting policy, no deferred tax asset has been
recognised.
The amounts not recognised are as follows:
2003 2002
£000 £000
Depreciation in advance of capital allowances - (6)
Tax losses (1,361) (1,297)
Capital losses (2,028) (1,062)
Other short term timing differences - (14)
(3,389) (2,379)
3. Dividends
2003 2002
£000 £000
Ordinary dividend:
Proposed final dividend at 0.25p per share (2002: 551 853
0.50p)
Interim dividend at 0.12p per share (2002: 0.12p) 207 205
758 1,058
4. Earnings / (loss) per share
The calculation of basic earnings / (loss) per share is based on the
profit/(loss) after taxation for the financial year and on a weighted average
number of shares in issue during the year of 171,772,126 ordinary shares of 0.5p
(2002: weighted average 170,302,702).
An adjusted EPS figure is provided to show the earnings before exceptional
items, goodwill and the impact of the Group's listed investments which were
disposed of following the change of board in November 2002. The calculation of
adjusted earnings per share is based on adjusted profit which is set out below
and on the weighted average number of shares in issue during the year
171,772,126 ordinary shares of 0.5p (2002: weighted average 170,302,702).
2003 2002
£'000 £,000
Profit/loss on ordinary activities after taxation 1,120 (1,512)
Administrative expenses - exceptional items - 1,148
Goodwill amortisation 740 741
Impact of ceasing investment activities:
- Loss/(profit) on disposal of fixed asset 200 (213)
investments
- Income from investments - (273)
- Amounts written off fixed asset investments - 1,595
Taxation effects of the above - (344)
2,060 1,142
5. Notes to the statement of cash flows
(a) Reconciliation of operating profit to net cash inflow from operating activities
2003 2002
£000 £000
Operating profit 2,189 135
Depreciation 52 74
Amortisation of goodwill 740 741
Movement in stock and work-in-progress (51) (28)
Movement in debtors (1,006) 115
Movement in creditors (635) 1,031
Provision against carrying value of fixed - 44
assets
1,289 2,112
(b) Analysis of net cash / (debt)
1 Cash 31
January December
2003 flow 2003
£000 £000 £000
Overdrafts (3,827) 3,827 -
Cash balances - 97 97
Net cash/debt (3,827) 3,924 97
6. Post balance sheet date events
As resolved at an Extraordinary General Meeting of the Company on 16 February
2004, 17,283,944 ordinary shares, which do not rank for dividends declared in
respect of the financial year ended 31 December 2003, were allotted to Mr
Hutchings on that date. Progressive Value Management Limited was given notice
on that date and paid a fee of £625,800 in accordance with its contract.
On 26 March 2004 the Company allotted 47,539,257 ordinary shares to the trustees
of the Lupus Employee Share Ownership Trust ('the LESOT') under the employee
incentive arrangements described in the circular dated 21 January 2004 and
approved by shareholders on 16 February 2004. These shares rank for the
proposed final dividend in respect of the financial year ended 31 December 2003.
The LESOT subscribed for the shares in cash at a price of 17.25p per share
using funds contributed to the LESOT by the Company.
The potential beneficiaries of the LESOT include the family of Greg Hutchings,
executive chairman of the Company. Under the terms of the incentive arrangements
any shares appointed to the benefit of any employee's family in respect of this
award and any award in the second period of the arrangements will revert to the
LESOT if that employee ceases to be employed by the Company on or before 31
December 2005, or if later, within 12 months following the allotment of shares
in respect of the second period and no shares shall be appointed to be held for
the family of any employee if, at the date of the appointment, the employee
concerned is not employed by the Company.
The issue of the shares to the LESOT will give rise to an additional £237,696 of
paid up share capital and £7,962,826 of share premium, offset by a charge to the
reserves of £8,200,522. There is no change to the net assets of the Company as
a result of the share issue. However, there is a reduction of £8,200,522 in the
distributable reserves which will impede the Company's ability to pay dividends
in the future. In the circular dated 21 January 2004 it was noted that the
award of shares under the incentive arrangements might impact distributable
reserves and that the Board would take appropriate action in respect of such
impact. The Company intends to convene an extraordinary general meeting of
shareholders to approve a reduction of the entire share premium account to
create a reserve to offset the deficit on distributable reserves. The capital
reduction will also be conditional on the approval of the Court.
7. Annual report
Copies of the annual report and accounts will be sent to shareholders in the
near future and will be obtainable from the Company's head office at 85
Buckingham Gate, London SW1E 6PD.
This information is provided by RNS
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