Interim Results
Lupus Capital PLC
28 September 2004
Lupus Capital plc
Interim results for the six months ended 30 June 2004
Lupus Capital plc ('Lupus') today announced its unaudited interim results for the six months ended 30 June 2004
Chairman's Statement
Dear Shareholder,
As I am sure you are aware, substantial changes took place in the first half of the year, mainly in February 2004, as
approved by shareholders at the EGM. These comprised the installation of a new central management team, a
subscription issue for £1,556,000 and a change of strategy for your company. Whilst the costs of these have been
taken during this period the underlying business has progressed unhindered.
I am pleased to report a satisfactory first half year of trading results. Adjusted pre-tax profits were up 11.6% on
last year, before goodwill and other adjustments (which have no cash cost to the Company), and exceptional items. Our
order book is currently at a high level and operating cash flow has been strong as a result of improved cash collecting
procedures.
Sales to 30 June 2004 were £3,044,000 (2003: £2,886,000) up 5.5% with adjusted pre-tax profit of £1,240,000 (2003:
£1,111,000) up 11.6%. Adjusted pre-tax profit excludes goodwill amortisation of £370,000 (2003: £370,000), lesot share
scheme charges of £5,468,000 (2003: £nil) - both of which are non-cash items - exceptional items of £1,309,000 (2003:
£nil) and in 2003 a loss of £200,000 on disposal of investments. The lesot scheme charges arise as a consequence of
meeting the share price criterion as approved by shareholders at the EGM on 16 February 2004. Exceptional items
comprise the cost of the strategy realignment, management changes and advisors' fees, for both achieving objectives
established in November 2002 and expenditure for completing the EGM proposals. After these adjustments the pre-tax
result was a loss of £5,907,000 (2003: £541,000 profit).
During the period the Company effected a capital reorganisation in order to continue to pay dividends. The directors
have declared an increased interim dividend of 0.126p per share (2003: 0.12p per share), up 5%, payable on 29 October
2004 to shareholders on the register at the close of business on 8 October 2004.
Cash collection and the monies received from the share subscription in February 2004 less cash costs of the deal has
resulted in a strong balance sheet containing £1,569,000 net cash at 30 June 2004.
Our strategy as laid out in our Annual Report published on 22 April 2004 has been well documented and received. We
are currently examining a number of opportunities which have potential for the company. Whilst we are fully committed
to expanding the group it is our intention to do this carefully and economically as opposed to rushing into unwise
situations.
Trading prospects for Gall Thomson remain good. The order profile is encouraging and management are confident about
the business flow and improved activity in the current period. With regard to Lupus Capital plc, we have a clear
strategy, a sound balance sheet, good operating activities, excellent cash generation and an enthusiastic
entrepreneurial management team, ambitious to drive Lupus Capital plc forward. I am confident that we have the right
platform to deliver value for shareholders.
Greg Hutchings
Chairman
28 September 2004
Group profit and loss account
Six months Six Year ended
months
ended ended 31 December
2003
30 June 2004 30 June 2003
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Turnover 3,044 2,886 6,551
Operating (loss)/profit
Continuing operations - excluding
exceptional items, lesot charges and
goodwill amortisation 1,237 1,197 2,929
Exceptional items (1,309) - -
Lesot charges (5,468) - -
Goodwill amortisation (370) (370) (740)
(5,910) 827 2,189
Loss on disposal of fixed asset - (200) (200)
investments
Interest and similar items 3 (86) (81)
(Loss)/profit on ordinary activities (5,907) 541 1,908
before taxation
Taxation 10 (273) (788)
(Loss)/profit on ordinary activities (5,897) 268 1,120
after taxation
Ordinary dividends (299) (207) (758)
Retained (loss)/profit (6,196) 61 362
(Loss)/earnings per share (2.81p) 0.16p 0.65p
Adjusted earnings per share before 0.41p 0.49p 1.20p
exceptional items, lesot charges,
goodwill amortisation and investment
activity
Dividend per share 0.126p 0.12p 0.37p
Statement of total recognised gains and losses
There were no recognised gains and losses in each period other than the (loss) /
profit for the period.
Group Balance Sheet
At
31December
At 30 June At 30 June
2004 2003
2003
£'000 £'000
£'000
(unaudited) (unaudited) (audited)
Fixed assets
Intangible fixed assets 11,051 11,792 11,421
Tangible fixed assets 417 438 415
11,468 12,230 11,836
Current assets
Stock and work-in-progress 262 186 251
Debtors 1,854 1,872 2,871
Cash 1,569 - 97
3,685 2,058 3,219
Creditors: amounts falling due within one year (2,020) (1,894) (2,360)
Net current assets 1,665 164 859
Total assets less current liabilities 13,133 12,394 12,695
Creditors: amounts falling due after more than (20) (84) (85)
one year
Net assets 13,113 12,310 12,610
Capital and reserves
Share capital 1,188 864 864
Share premium - 4,710 4,709
Merger reserve 10,389 10,389 10,389
Profit and loss account 1,536 (3,653) (3,352)
Equity shareholders' funds 13,113 12,310 12,610
Group Cash Flow Statement
Six months ended Six months Year ended
30 June 2004 ended
(unaudited) 31 December
30 June 2003 2003
(unaudited) (audited)
£'000 £'000 £'000
Operating activities
Net cash (outflow)/inflow from operating (5,010) 479 1,289
activities
Return on investments and servicing of finance
Interest received 113 70 161
Interest paid (103) (185) (273)
Dividends received - 56 56
10 (59) (56)
Taxation
UK corporation tax (paid)/recovered (198) 181 (146)
Capital expenditure and financial investment
Sale of tangible fixed assets - 4 4
Purchase of tangible fixed assets (29) (5) (8)
Sale of fixed asset investments - 3,621 3,622
(29) 3,620 3,618
Equity dividends paid - (852) (1,060)
Net cash (outflow)/inflow before financing (5,227) 3,369 3,645
Financing
Issue of shares net of costs 6,699 141 279
Increase in cash 1,472 3,510 3,924
Notes
1. Status of these financial statements
These financial statements are not the Company's statutory accounts for the purposes of Section 240 of the Companies
Act 1985. They are unaudited. The Company's statutory accounts for the year ended 31 December 2003 received an
unqualified audit report and have been filed with the registrar of companies at Companies House.
The interim financial information has been prepared on the basis of the accounting policies set out in the Report and
Accounts of the Group for the year ended 31 December 2003. The Directors approved the interim report on 28 September
2004.
2. Exceptional expenses
The exceptional expenses relate to the restructuring of the business consequent upon the appointment of a new executive
team headed by Mr Hutchings and are expected to be of a non-recurring nature. They comprise professional and
consultancy fees, termination and performance fees of the outgoing manager, costs of printing circulars, listing fees
for new share issues and certain expenses related to re-opening the executive office.
3. Incentive Arrangements and Lupus employee share ownership trust ('Lesot')
As explained in a circular to shareholders dated 21 January 2004, the Board put forward proposals whereby Mr Hutchings
would join the Company as Executive Chairman and invest £2,137,500 in shares of the Company, including a subscription
of £1,555,555 for new ordinary shares, and whereby new employee Incentive Arrangements would be established, comprising
the lesot and an EMI scheme, under which awards of ordinary shares would be made, the purchase price of such shares
being funded by contributions from the Company, if certain criteria were met. Shareholders approved these proposals at
an Extraordinary General Meeting on 16 February 2004 and they were then effected.
The criterion for the award of the shares pertaining to the First Period of the Incentive Arrangements was wholly
fulfilled. Consequently, on March 2004 the Company issued and allotted to the lesot 47,539,257 new ordinary shares,
out of which 714,285 are available to satisfy an EMI option granted to Mr Hutchings on 17 February 2004 within the EMI
scheme.
4. Capital reorganisation
As explained in a circular to shareholders dated 27 April 2004, the issue of shares to the lesot described above gave
rise to an additional £237,696 of paid up share capital and £7,962,826 of share premium, offset by a charge to reserves
of £8,200,522. There was no change to the Company's net assets, but distributable reserves were reduced. The Board
therefore sought and obtained approval from shareholders and from the Court to effect a capital reduction through the
cancellation of the amount standing to the credit of the Company's share premium account. The cancellation was
registered on 18 June 2004.
5. Profit and loss account
The cost of the allotment to the lesot is being charged to current profit over the period to 31 July 2004, being the
First Period of the Incentive Arrangements, at the rate of 14.125p per share. The charge to profit and loss account in
the period ended 30 June 2004 was £5,468,438.
6. Earnings per share
Earnings per share figures are based on the weighted average of 209,819,393 ordinary shares in issue during the
half-year ended 30 June 2004 (half-year to 30 June 2003: 170,652,919 shares; year to 31 December 2003: 171,772,126
shares). The number of shares in issue at 30 June 2004 was 237,696,286.
7. Dividend
The Directors have declared an interim dividend of 0.126p per share (2003: 0.12p) to shareholders on the register at
the close of business on 8 October 2004, which will be paid on 29 October 2004.
8. Reconciliation of equity shareholders' funds
Six months ended Six months Year ended
30 June 2004 ended 31 December 2003
(unaudited) 30 June 2003 (audited)
(unaudited)
£'000 £'000 £'000
Profit / (loss) for the financial (5,897) 268 1,120
period/year
Shares issued net of costs and debit 6,699 141 140
reserve
Reinstatement of share premium - 139 139
Dividends paid and proposed on (299) (207) (758)
ordinary shares
503 341 641
Opening shareholders' funds 12,610 11,969 11,969
Closing shareholders' funds 13,113 12,310 12,610
9. Movement on share capital and reserves
Share Share Merger Profit & Total
capital premium reserve loss
account account
£'000 £'000 £'000 £'000 £'000
At 1 January 2004 864 4,709 10,389 (3,352) 12,610
Share issue net of 86 1,145 - - 1,231
costs
Lesot share issue 238 7,963 - (8,201) -
Capital - (13,817) - 13,817 -
reorganisation
Loss for the period - - - (5,897) (5,897)
Lesot cost included - - - 5,468 5,468
in loss for the
period
Dividend - - - (299) (299)
At 30 June 2004 1,188 - 10,389 1,536 13,113
10. Reconciliation of operating (loss)/profit to net cash flow
from operating activities
Six months ended Six months Year ended
30 June 2004 ended
(unaudited) 31 December
30 June 2003 2003
(unaudited) (audited)
£'000 £'000 £'000
Operating (loss)/profit (5,910) 827 2,189
Depreciation 27 26 52
Amortisation of goodwill 370 370 740
Movement in stock and work in progress (11) 14 (51)
Movement in debtors 1,017 133 (1,006)
Movement in creditors (503) (891) (635)
Net cash flow from operating (5,010) 479 1,289
activities
The interim report will be sent to shareholders and copies will be made available to the public at the registered
office of the Company: Crusader House, 145-157 St John Street, London EC1V 4RU - and at the Company's website
www.lupuscapital.co.uk.
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