Interim Results

Lupus Capital PLC 12 September 2002 12 September 2002 PRESS RELEASE Lupus Capital plc Interim results for the six months ended 30 June 2002 Lupus Capital plc ('Lupus') today announced its financial results for the six months ended 30 June 2002. Highlights are as follows: â€¢ Operating profit before goodwill amortisation of Â£1,013,000 (2001: Â£666,000), an increase of 52%, on turnover up 23% to Â£3.03m (2001: Â£2.46m). â€¢ Profit before tax increased by 45% to Â£512,000 (2001: Â£352,000). â€¢ Interim dividend up 9% at 0.12p per share (2001: 0.11 p). â€¢ Oil services subsidiary, Gall Thomson, continued to perform at record levels. - ENDS - Lupus Capital plc Tel: 020 7976 8000 Charles Ryder www.lupuscapital.com Chief Executive James Orr Finance Director Merlin Financial Tel: 020 7606 1244 Paul Downes / Tom Randell Interim results for the six months ended 30 June 2002 Strategy The strategy of Lupus Capital plc ('Lupus' or 'the Group') 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 seeks to generate significant returns by providing and, where necessary, implementing strategic plans for these companies, including appropriate exit routes. Lupus creates value by providing a service to shareholders and company boards, as well as to acquisitive well-run international companies looking to expand and diversify their businesses. A brief review of the activities of each of Lupus's investments is made in its interim and full year statements, particularly in relation to companies that are wholly-owned. Additionally, each Annual Report and Accounts includes a more detailed description of wholly-owned businesses. Implementation of strategy In March in our Annual Report it was noted that 2001 had been a difficult year for both the commercial and financial markets. Uncertainty has continued to grip the world's financial markets which has led to a lack of corporate confidence in most of the developed economies. In turn, this has meant that corporate activity - in particular the acquisition and disposal of businesses - has continued to be very sluggish. It has been, and continues to be, in general terms, a buyers' market. Given this background, Lupus has not progressed towards realisation of some of its investments with the speed which it had envisaged. Lupus is confident that there will be a gradual upturn in corporate activity in the coming months, with the most evident acquirors being large companies taking the opportunity to add market share. Given that organic growth is very difficult to achieve in these times of low inflation, such opportunistic acquisitions often provide the only means of achieving above average growth. Lupus therefore believes, in line with its comments in the Annual Report, that it will be involved in progressing a number of realisations during the remainder of 2002. Furthermore, Lupus is investigating in detail a number of promising opportunities for subsequent re-investment. Notwithstanding the difficult financial markets, and the general background of lacklustre economic performance, the trading performances of Lupus's various investments have been encouraging. Gall Thomson Environmental Limited ('Gall Thomson') continues to perform at record levels. Furthermore, in recent weeks and months, all of the companies in which Lupus has a disclosed strategic stake - European Colour plc, Armitage Brothers plc, Castings plc and Shiloh plc - have also reported sustained or improved trading performance and, in certain cases, appropriate corporate action. Financial review In the six months to 30 June 2002 Lupus made an operating profit before goodwill amortisation and interest of Â£1,013,000 (2001: Â£666,000) on turnover of Â£3.03 million (2001: Â£2.46 million). After a charge of Â£370,000 for goodwill amortisation (2001: Â£370,000) Lupus made an operating profit before interest and taxation in the period of Â£643,000 (2001: Â£296,000). Profit before taxation was Â£512,000 (2001: Â£352,000). Interest costs in the period, net of dividends received, were Â£131,000 (2001: net benefit of Â£56,000). Dividend income was substantially lower than in the same period last year, because the great majority of such payments from Lupus's current list of investments are now received in the second half of the year. The net assets of Lupus at 30 June 2002 were Â£14.60 million (2001: Â£15.42 million), representing 8.57p per share (9.08p per share at 30 June 2001), a small increase on the figure at 31 December 2001. Net debt amounted to Â£7.02 million (2001: Â£6.37 million). Dividends The Board is declaring an interim cash dividend of 0.12p per share (2001: 0.11p), a 9.1 per cent increase over last year's figure. The dividend will be paid on 25 October 2002 to shareholders on the register at the close of business on 4 October 2002. Gall Thomson Gall Thomson has continued to achieve outstanding results, further building on the strong growth in 2000 and 2001. In the six months to 30 June 2002 Gall Thomson again performed at record levels, exceeding both budget and last year's comparative figures. Sales in the period were Â£3.03 million (2001: Â£2.46 million), an increase of 22.9%. Operating profits before corporate costs were Â£1.80 million (2001: Â£1.37 million), an increase of 31.4%. Operating profits after corporate costs were Â£1.66 million (2001: Â£1.26 million), an increase of 31.7%. Gall Thomson continues to be highly cash generative. By far the most important factor in Gall Thomson's performance continues to be the ongoing success and growth of its main business, the supply of marine breakaway couplings to the oil industry. The Gall Thomson product is the market leader in its field to the point of being almost a generic name for marine breakaway couplings. Gall Thomson benefits from the increasing use of techniques of production and shipment which specify the use of marine breakaway couplings. Sales of industrial couplings, the smaller element of Gall Thomson's business, also performed well and Lupus believes that this business has significant potential in international markets. Lupus believes that the outlook for Gall Thomson's marine business remains exciting. In the Annual Report Lupus set out several factors which it believed were particularly important in relation to Gall Thomson's success and future growth. Briefly these were: - â€¢ The sustained higher level of oil prices, leading major oil companies to undertake significantly enhanced programmes of exploration and production. â€¢ Gall Thomson's very strong global market leadership in marine breakaway couplings. â€¢ The increasing general demand for environmental safeguards throughout the world. â€¢ The need to accelerate the geographic dispersal of oil exploration and production, away from a perceived overdependence on the Middle East. Such a trend is likely to have been accelerated by events since 11 September 2001. Recent independent surveys not only confirm this overall assessment of growth potential but indeed point to an even more rapid development of oil production in increasingly deep waters over the next few years. Such deepwater production usually requires the use of floating production and off-loading systems which, in turn, specify the use of marine breakaway couplings. Review of investments Armitage Brothers plc ('Armitage') On 6 September 2002, Armitage, which develops, manufactures and supplies pet accessories and pet foods, reported on its results for the year to 2 June 2002. Lupus believes that these results were very satisfactory as they included a significant improvement in operating profits and an increase in cash balances from Â£0.26 million to Â£1.35 million. Lupus continues to maintain a close relationship with the board and senior management of Armitage, discussing a wide range of strategic matters. Such matters are being addressed by Armitage's board, as is made clear in their Chairman's statement of 6 September 2002. Lupus believes that Armitage possesses a strong portfolio of brands in both its dog food and accessories divisions which are of significant value. Lupus owns 549,500 shares in Armitage, representing 13.6% of the issued share capital of the company. European Colour plc ('European Colour') In March, Lupus reported that it had been involved in prolonged and detailed discussions about strategic matters with the board and senior management of European Colour. It was also reported that European Colour had just announced certain board changes; Lupus strongly supported these board changes, believing that the company would then fully address its key strategic issues. On 11 September 2002, European Colour announced that it had agreed to sell Tor Coatings Limited ('Tor'), its coatings division, for a cash consideration of Â£13.0 million plus a one-off special dividend of approximately Â£0.49 million. Lupus agrees with the company's statement that the sale is a significant step forward in achieving European Colour's goal of maximising shareholder value. Lupus notes that the financial position of European Colour will be substantially strengthened by the sale and it also allows for the reinstatement of dividends on ordinary shares. Furthermore, the directors of European Colour have stated that they expect a much improved result for the half year ending 30 September 2002. Lupus therefore strongly supports the sale of Tor and has given an irrevocable commitment to vote in favour of the sale at European Colour's EGM, expected to take place on 4 October 2002. Lupus owns 4,691,616 shares in European Colour representing 10.1% of the issued share capital of the company. Shiloh plc ('Shiloh') Lupus believes that Shiloh, which provides a range of healthcare services and supplies, has significant growth opportunities in a number of its business areas including mobility services, sterilisation services, incontinence products and wound care products. Having transformed itself from a cotton spinning company into a broad-based healthcare business over recent years, Shiloh has been making a series of changes to its management and structure to manage these growth opportunities effectively. Lupus has been working closely with the board and senior management of Shiloh, discussing a range of strategic issues. During the year, Shiloh has made a number of announcements which Lupus believes signal both its intention to grasp growth opportunities and to put in place the requisite management structure. These announcements include the appointment of Graham Collyer as Chief Executive designate. Lupus believes that Graham's experience at Seton Healthcare, which was a major growth company in the healthcare sector in the 1990's, is very applicable to Shiloh. Over the last few months, Lupus has acquired further shares in Shiloh and now owns 866,482 shares representing 12.97% of the issued share capital of the company. Castings plc ('Castings') Castings, one of the leading ductile and malleable ironfounders in Europe, has an outstanding record of profitability and cash generation over many years. Its most recent results - for the year to 31 March 2002 - continued its pattern of achieving excellent returns even in difficult times. Lupus notes that, in achieving such excellent returns, Castings has continued to invest heavily in its business - capital expenditure was Â£12.5 million in the last financial year - both to increase efficiency and service new orders, but still retained cash of approximately Â£27 million at their year end, 31 March 2002. Equally, it has succeeded in exporting an increasing amount of its product with 48% of total sales going overseas, most of it to Europe, in the last financial year. Set against this excellent record, Lupus believes that there continues to be a mismatch between Castings's stock market value and its commercial value. Lupus has held discussions about such strategic matters with the board and senior management of Castings. Lupus owns 2,000,000 shares in Castings representing 4.6% of the issued share capital of the company. Current trading Gall Thomson's excellent performance in the first half has continued into the second half. The outlook for Gall Thomson both for the rest of the year, and for next year, is very encouraging. Although the overall level of corporate activity has been low, Lupus is confident that this will slowly pick up in the coming months. Lupus is encouraged, for example, by European Colour's announcement of the agreement to sell Tor, its coatings division. Lupus believes that there are many interesting prospects in terms of new investments and the Board continues to view the future with confidence. Group profit and loss account Six month Six month Year period ended period ended ended 30 June 30 June 31 December 2002 2001 2001 (Unaudited) (Unaudited) (Audited) Â£000 Â£000 Â£000 Turnover 3,027 2,463 5,341 Operating profit Continuing operations - excluding goodwill amortisation 1,013 666 1,568 Goodwill amortisation (370) (370) (741) 643 296 827 Profit on sale of fixed asset investments - - 718 Income from investments 53 216 299 Amounts written off fixed asset investments - - (1,425) Interest and similar items (184) (160) (306) Profit on ordinary activities before taxation 512 352 113 Taxation (236) (116) (368) Profit / (loss) on ordinary activities after taxation 276 236 (255) Ordinary dividends (205) (187) (612) Retained profit / (loss) 71 49 (867) Earnings / (loss) per share 0.16p 0.14p (0.15)p Diluted earnings / (loss) per share 0.16p 0.14p (0.15)p Earnings before goodwill amortisation per share 0.38p 0.36p 0.29p Dividend per share 0.12p 0.11p 0.36p There were no recognised gains or losses in each period other than the profit on ordinary activities after taxation. Group balance sheet 30 June 30 June 31 December 2002 2001 2001 (Unaudited) (Unaudited) (Audited) Â£000 Â£000 Â£000 Fixed assets Intangible fixed assets 12,533 13,273 12,902 Tangible fixed assets 534 601 565 Investments 8,070 7,051 7,185 21,137 20,925 20,652 Current assets Stocks and work-in-progress 215 165 172 Debtors 1,493 1,848 2,021 Investments - 299 - 1,708 2,312 2,193 Creditors: amounts falling due within one year (8,170) (7,820) (8,254) Net current liabilities (6,462) (5,508) (6,061) Total assets less current liabilities 14,675 15,417 14,591 Creditors: amounts falling due after more than one year (78) - (77) Net assets 14,597 15,417 14,514 Capital and reserves Called up share capital 852 849 851 Share premium account 4,429 4,407 4,418 Merger reserve 10,389 10,389 10,389 Profit and loss account (1,073) (228) (1,144) Equity shareholders' funds 14,597 15,417 14,514 Group statement of cash flows Six month Six month Year period ended period ended ended 30 June 30 June 31 December 2002 2001 2001 (Unaudited) (Unaudited) (Audited) Â£000 Â£000 Â£000 Net cash inflow / (outflow) from operating activities 1,176 288 875 Returns on investments and servicing of finance Interest received 80 87 149 Interest paid (258) (247) (418) Dividends received 53 35 299 (125) (125) 30 Taxation UK Corporation tax paid (128) (89) (367) Capital expenditure and financial investment Sale of tangible fixed assets - 2 3 Purchase of tangible fixed assets (6) (38) (48) Sale of fixed asset investments - 90 3,230 Purchase of fixed asset investments (886) (3,284) (6,845) Sale of current asset investments - - 298 Purchase of current asset investments - - (425) (892) (3,230) (3,787) Equity dividends paid (426) (382) (569) Net cash outflow before financing (395) (3,538) (3,818) Financing Issue of shares net of costs 12 12 25 Decrease in cash (383) (3,526) (3,793) Reconciliations Six month Six month Year period ended period ended ended 30 June 30 June 31 December 2002 2001 2001 (Unaudited) (Unaudited) (Audited) Â£000 Â£000 Â£000 Reconciliation of net cash flow to movement in net debt Decrease in cash (383) (3,526) (3,793) Change in net debt from cash flows (383) (3,526) (3,793) Opening net debt (6,637) (2,844) (2,844) Closing net debt (7,020) (6,370) (6,637) Six month Six month Year period ended period ended ended 30 June 30 June 31 December 2002 2001 2001 (Unaudited) (Unaudited) (Audited) Â£000 Â£000 Â£000 Reconciliation of operating profit to net cash flows from operating activities Operating profit 643 296 827 Depreciation 37 41 86 Amortisation of goodwill 370 370 741 Movement in stock (43) 12 5 Movement in debtors 527 (319) (686) Movement in creditors (358) (95) (85) Profit on disposal of current asset investments - (17) (13) Net cash flow from operating activities 1,176 288 875 Notes to the interim statement 1. The interim financial information has been prepared on the basis of the accounting policies set out in the Report and Accounts for the Group for the year ended 31 December 2001. The interim financial information does not constitute statutory accounts and is not audited. A copy of the Group's 2001 statutory accounts has been filed with the Registrar of Companies; the auditors' opinion on those accounts was unqualified. 2. The calculation of earnings per share is based on the profit after taxation and 170,182,258 ordinary shares (2001: 169,726,551) being the weighted average number of shares in issue during the half year. The weighted average number of shares in issue during the year ended 31 December 2001 was 169,827,998. The calculation of fully diluted earnings per share is based on the profit after taxation and 170,182,258 ordinary shares being the weighted average number of shares in issue during the period, after allowing for share options (June 2001: 169,726,551 and December 2001: 169,827,998). An additional earnings per share figure is provided to show the earnings before goodwill amortisation per share, the calculation of which is based on the profit after taxation adjusted for the goodwill amortisation charge of Â£370,000 (2001: Â£370,000) and 170,182,258 ordinary shares being the weighted average number of shares in issue during the period (June 2001: 169,726,551 and December 2001: 169,827,998). 3. The Directors have declared an interim dividend of 0.12 pence per share (2001: 0.11 pence) to shareholders on the register on the close of business on 4 October 2002, which will be paid on 25 October 2002. 4. The board of Directors approved the interim financial statement on 11 September 2002. This information is provided by RNS The company news service from the London Stock Exchange

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