Final Results - Year Ended 31 December 1999
Lupus Capital PLC
22 March 2000
Lupus Capital plc
Financial results for the year ended 31 December 1999
Lupus Capital plc ('Lupus') today announced financial results for the year
ended 31 December 1999.
In February 1999, an investor group led by Charles Ryder and James Orr
acquired a 29.6% stake in the Company, then known as Environmental Property
Services plc ('EPS'), and a number of Board and management changes ensued
resulting in the total transformation of the Company during the course of the
year.
The results very largely relate to businesses which are no longer part of the
Group following the sale of the property services operations of the former EPS
in August 1999. Other key points from the statement are as follows:
* The disposal of the EPS businesses for a sale consideration of £7.99 million
left Lupus in a position to pursue its new strategy of investing in or
acquiring small and medium sized companies facing corporate and commercial
strategic barriers to development.
* In line with the new strategy, the acquisitions of Octroi Group PLC
('Octroi') and Gall Thomson Environmental plc ('Gall Thomson') were
announced on 29 November 1999 and declared unconditional on 22 December
1999. At the time of the announcement, the value of the offers amounted to
£18.26 million.
* Total sales in the period under review, all of which were from discontinued
operations, were £16.96 million. A pre-tax loss of £0.69 million was
recorded.
* The Group's net assets at the year end were £15.85 million representing
9.35p per ordinary share (1998: £4.30 million representing 5.69p per
ordinary share). Net cash amounted to £3.71 million, including £1.95
million held by Gall Thomson.
* The Board is recommending a final cash dividend of 0.2p (net) per share,
representing a total cash dividend of 0.3p for the year.
* Since the year end, Lupus has announced:
- its intention to sell Survey Equipment Services, Inc., a small part of Gall
Thomson, based in Houston, Texas
- the acquisition of a business principally dedicated to the manufacture of
Gall Thomson's marine breakaway couplings for a cash consideration of
£450,000
* Gall Thomson's major business, the supply of marine breakaway couplings for
oil and gas industry applications, has made a very satisfactory start to the
year and the prospects for the business are encouraging.
* Lupus is actively considering a number of further acquisitions and
investment opportunities.
Commenting on the results, Charles Ryder, Chief Executive of Lupus said:
'Lupus's strategy is to invest in or acquire small and medium sized public
companies facing strategic barriers to development. Our acquisitions of Gall
Thomson and Octroi in December were excellent examples and we expect 2000 to
be a very active year as the Group continues to implement its strategy. '
For further information, please contact:
Lupus Capital plc Tel: 020 7821 0233
or 020 7821 7206
Charles Ryder
Chief Executive
James Orr
Finance Director
Merlin Financial Tel: 020 7606 1244
Paul Downes
Statement of the Chairman and the Chief Executive
Strategy
As a result of the total transformation which took place in 1999, details of
which are set out below, Lupus Capital plc ('Lupus' or 'the Company') adopted
a new strategy during the course of the year.
The strategy of Lupus is to invest in, or acquire, small and medium sized
public companies which are facing strategic barriers to development whether of
a corporate or commercial nature. Lupus intends to generate significant
returns by providing and, where necessary, implementing strategic plans for
these companies, including appropriate exit routes. Lupus will therefore
create value by providing a service to shareholders and company boards, as
well as to acquisitive well-run international companies looking to expand and
to diversify their businesses.
Year of transformation
Lupus underwent great change in 1999.
In February, an investor group led by Charles Ryder and James Orr acquired a
29.6% stake in the Company, then known as Environmental Property Services plc
('EPS'), and a number of Board and management changes ensued. In April, when
the results for the year ended 31 December 1998 were released, the Company
announced its new strategy, the proposal to change its name to Lupus Capital
plc, and the potential sale of its underlying businesses which were all
involved in property services.
Shareholders confirmed the change of name at the Annual General Meeting held
on 4 June 1999.
On 26 July 1999, the Company announced that it had agreed to sell all of its
property services operations to Environmental Property Services Holdings
Limited ('EPS Holdings'), an MBO vehicle led by David Anderson, Managing
Director of these operations. The sale consideration, as adjusted for
Completion Accounts, amounted to £7.99 million, comprising a cash payment to
Lupus of £6.46 million and the assumption of deferred liabilities of £1.53
million. A profit of £125,000 was realised on the disposal.
On 26 July 1999, Lupus also announced the sale of its 29.5% holding in
Superframe Group Plc for a net cash consideration of £491,500.
The sale of the property services operations was completed on 13 August 1999
following approval of the sale by shareholders and left the Company
principally with cash, certain quoted investments, freehold properties and
some sundry debtors and creditors. Most importantly, the sale left Lupus in a
position to pursue its new strategy.
In line with this strategy, Lupus announced on 29 November 1999 offers for
Gall Thomson Environmental plc ('Gall Thomson'), a listed company, and for
Octroi Group PLC ('Octroi'), a de-listed investment company whose principal
assets were cash and a 46% interest in Gall Thomson. At the time of the
announcement, the value of the offers amounted to £18.26 million. Gall
Thomson's principal activities are the supply of marine and industrial
couplings and, through its subsidiary in Houston, Texas, the supply, sale and
rental of specialist marine navigation and survey equipment to the oil and gas
industry. Offers for these companies were declared unconditional in all
respects on 22 December 1999.
Results
Given the sale of the property services operations in August, the Group's
results for the year to 31 December 1999 very largely relate to businesses
which are no longer part of it. These businesses are referred to in the
accounts as discontinued operations.
During the year total sales, all of which were from the discontinued
operations, were £16.96 million (1998: £38.50 million). The Company recorded
a loss before taxation of £0.69 million (1998: profit of £1.04 million).
At 31 December 1999 net assets were £15.85 million representing 9.35p per
ordinary share, including those shares subsequently issued in relation to the
acquisitions of Gall Thomson and Octroi (1998: £4.30 million representing
5.69p per ordinary share). Net cash amounted to £3.71 million, including
£1.95 million held by Gall Thomson (1998: net debt of £1.21 million).
Dividends
The Board has decided that dividends should relate to the success of the
various investments made by the Group although, certainly in the short to
medium term, the emphasis will be on using cash generated from successful
investments for investment in new opportunities.
Given the fundamental transformation of the Group, and more particularly, the
adoption of its new strategy, the Board is therefore recommending a final cash
dividend for the year of 0.2 pence (net) per share, representing a total cash
dividend of 0.3 pence (net). This compares to 0.3 pence paid at the final
stage in 1998 and a total cash dividend for the year of 0.65 pence, such
dividend almost entirely relating to a period before the demerger in December
1998 of the most profitable part of the Group and also before the change of
strategy during the course of 1999. Subject to approval at the AGM, the final
dividend will be paid on 1 June 2000 to shareholders on the register at the
close of business on 8 May 2000. The ex-dividend date will be 2 May 2000.
Events since the year end
In line with its strategy, Lupus announced on 17 February 2000 that it
intended to put up for sale a small part of the Gall Thomson business, Survey
Equipment Services, Inc. ('SES'), which rents, sells and supplies specialist
marine survey and navigation equipment to the oil and gas industry from its
base in Houston, Texas. SES is totally separate from Gall Thomson's main
marine breakaway couplings business and, in Lupus's view, would benefit from
being part of a larger business.
Lupus also announced that Gall Thomson has acquired a business and the
relevant assets from Steel Services (Great Yarmouth) Limited, together with
related property assets, for a cash consideration of £450,000 to which will be
added an agreed valuation for stocks and work-in-progress estimated to be
approximately £50,000. This business and the assets are principally dedicated
to the manufacture of Gall Thomson's marine breakaway couplings and are
inextricably linked to the business. Lupus believes that the acquisition
provides significant added value to Gall Thomson both in terms of immediate
financial performance and longer-term strategic value.
Current trading
In terms of the operations currently owned by Lupus, Gall Thomson's major
business, the supply of marine breakaway couplings, has made a very
satisfactory start to the year and the prospects for the business are
encouraging. In part, this results from the sustained period of higher oil
prices which, in turn, is being reflected in that business's order books.
Lupus continues to give active consideration to a number of further
acquisitions or investments in small and medium sized public companies which
are facing strategic barriers to development.
The Board looks forward to the future with confidence.
Lupus Capital plc
Group profit and loss account
For the year ended 31 December 1999
1999 1998
£000 £000
Turnover
Discontinued operations 16,964 38,497
Cost of sales (13,510) (32,597)
----------- ----------
Gross profit 3,454 5,900
Administrative expenses (4,244) (4,707)
Other operating income 32 95
---------- ----------
Operating (loss)/profit
Continuing operations (1,154) (816)
Discontinued operations 396 2,104
---------- ----------
(758) 1,288
Discontinued operations:
Loss on disposal of tangible fixed assets (40) -
Profit on sale of operations 125 -
Fundamental restructuring cost - (158)
---------- ----------
(673) 1,130
Interest receivable and similar income 197 66
Interest payable and similar charges (211) (155)
---------- ----------
(Loss)/profit on ordinary activities before
taxation (687) 1,041
Tax on (loss)/profit on ordinary activities 16 (388)
---------- ----------
(Loss)/profit for the financial year (671) 653
Ordinary dividends (419) (470)
Dividend in specie - (1,755)
---------- ----------
Retained loss for the financial year (1,090) (1,572)
====== ======
(Loss)/earnings per share (0.86p) 0.94p
Diluted (loss)/earnings per share (0.86p) 0.93p
There were no recognised gains and losses in each year other than the
(loss)/profit for the financial year.
Lupus Capital plc
Group balance sheet
At 31 December 1999
1999 1998
£000 £000 £000 £000
Fixed assets
Intangible assets (882) 3,719
Tangible assets 3 1,070
Investments - 484
----- ------
(879) 5,273
Current assets
Stocks and work-in-progress - 2,464
Debtors 653 6,544
Investments 19,637 -
Cash at bank and in hand 3,262 864
------ -----
23,552 9,872
Creditors: amounts falling due
within one year (6,821) (7,864)
-------- -------
Net current assets 16,731 2,008
------ -----
Total assets less current
liabilities 15,852 7,281
Creditors: amounts falling due
after more than one year - (2,981)
------ -------
15,852 4,300
====== ======
Capital and reserves
Called up share capital 725 378
Share premium account 4,543 4,410
Shares to be issued 2,961 -
Merger reserve 7,552 -
Profit and loss account 71 (488)
------ ------
Equity shareholders' funds 15,852 4,300
====== ======
Lupus Capital plc
Company balance sheet
At 31 December 1999
1999 1998
£000 £000 £000 £000
Fixed assets
Tangible assets 3 27
Investments 8,670 6,949
----- -----
8,673 6,976
Current assets
Debtors 21,026 2,373
Cash at bank and in hand 197 333
------ -----
21,223 2,706
Creditors: amounts falling due
within one year (6,093) (1,690)
------- -------
Net current assets 15,130 1,016
------ -----
Total assets less current
liabilities 23,803 7,992
Creditors: amounts falling due
after more than one year (7,876) (2,535)
------- -------
15,927 5,457
====== ======
Capital and reserves
Called up share capital 725 378
Share premium account 4,543 4,410
Shares to be issued 2,961 -
Merger reserve 7,552 -
Special reserve - 197
Profit and loss account 146 472
------ ------
Equity shareholders' funds 15,927 5,457
===== =====
The accounts were approved by the Board on 22 March 2000.
Lupus Capital plc
Group statement of cash flows
For the year ended 31 December 1999
1999 1998
£000 £000 £000 £000
Net cash (outflow) / inflow from operating
activities (1,441) 1,379
Returns on investments and servicing of finance
Interest received 185 62
Interest paid (155) (164)
Interest element of finance lease rental payments (55) -
Dividends received 8 -
----- -----
(17) (102)
Taxation
UK corporation tax paid (143) (273)
Capital expenditure and financial investment
Receipts from sale of tangible fixed assets 174 135
Payments to acquire tangible fixed assets (66) (130)
Receipts from sale of investments 491 297
Payments to acquire investments (1,276) (437)
-------- ------
(677) (135)
Acquisitions and disposals
Purchase of subsidiary undertakings (6,528) (2,769)
Disposal of subsidiary undertakings 7,180 -
Net cash acquired with subsidiary undertakings 3,064 -
Net overdrafts in disposed operations 2,191 1,063
Payments to acquire intangible fixed assets - (122)
-------- ---------
5,907 (1,828)
Equity dividends paid (306) (519)
--------- ----------
Net cash inflow / (outflow) before financing 3,323 (1,478)
Financing
Issue of shares net of costs 281 95
New long-term loans 1,500 1,000
Repayment of long-term loans (1,678) (425)
Repayment of capital element of finance leases (161) (34)
Acquisition of dividend rights of former
preference shareholders of Octroi Group
Limited (867) -
--------- ------
(925) 636
----- -----
Increase / (decrease) in cash 2,398 (842)
===== =====
Lupus Capital plc
Reconciliation of net cash flow to movement in net funds/(debt)
For the year ended 31 December 1999
1999 1998
£000 £000
Increase / (decrease) in cash 2,398 (842)
Cash inflow from increase in loans (1,500) (1,000)
Cash outflow from repayment of loans 1,678 424
Repayment of capital element of finance leases 161 34
------- ------
Change in net funds from cash flows 2,737 (1,384)
Acquisitions and disposals 395 (199)
New finance leases (155) (35)
------- -------
Movement in net funds 2,977 (1,618)
Net (debt) / funds at 1 January (1,215) 403
------- -------
Net funds / (debt) at 31 December 1,762 (1,215)
======= =======
Reconciliation of shareholders' funds
For the year ended 31 December 1999
1999 1998
£000 £000
(Loss) / profit for the financial year (671) 653
Net movement on share issues 10,993 620
Goodwill reinstated on disposal of subsidiaries 1,649 -
Dividends paid and proposed on equity shares (419) (470)
Demerger dividend in specie - (1,755)
------- --------
Net movement in shareholders' funds 11,552 (952)
Opening shareholders' funds 4,300 5,252
------- -------
Closing shareholders' funds 15,852 4,300
====== ======
Lupus Capital plc
Notes to the financial statements
For the year ended 31 December 1999
1. The financial information set out in this document does not constitute
statutory group accounts. Statutory accounts for the year ended
31 December 1998 containing an unqualified auditors' report and no
statements under Section 237 (2) or (3) of the Companies Act 1985 have
been delivered to the Registrar of Companies. The Report and Accounts for
the year ended 31 December 1999 will be posted to shareholders shortly
and, after adoption at the Annual General Meeting, delivered to the
Registrar of Companies.
2. Earnings per share
The calculation of basic earnings per share is based on the loss after
taxation for the financial year and on a weighted average number of shares
in issue during the year of 77,707,599 ordinary shares of 0.5p
(1998 weighted average 69,578,565).
The diluted earnings per share is based on the loss after taxation for the
financial year and on 77,707,599 ordinary shares (1998: 70,289,832)
calculated as follows:
1999 1998
No. No.
Basic weighted average number of shares 77,707,599 69,578,565
Dilutive potential ordinary shares:
Employee share options - 711,267
----------- ----------
77,707,599 70,289,832
=========== ==========
3. The Annual General Meeting
The Annual General Meeting will be held at the Company's registered
office, Broadwalk House, 5 Appold Street, London EC2A 2HA at 11.00 a.m. on
9 May 2000.