Final Results

Lupus Capital PLC 20 March 2001 Financial & Corporate Public Relations Royex House Aldermanbury Square London EC2V 7HR Tel: 020 7606 1244 Fax: 020 7606 1245 Email: merlinfinancial.com Tuesday 20th March 2001 PRESS RELEASE Lupus Capital plc Financial results for the year ended 31 December 2000 Lupus Capital plc ('Lupus') today announced its financial results for the year ended 31 December 2000. Highlights are as follows: * Lupus is making good progress with its investment strategy. Portfolio now includes one wholly-owned subsidiary, Gall Thomson, and two strategic investments in Armitage Brothers and European Colour. * Operating profit on continuing operations before goodwill amortisation and interest is £1.31 million, turnover £4.77 million and profit before tax £527,000. * Final dividend of 0.225p, together with interim dividend of 0.1p, to give total dividend for the year of 0.325p, an increase of 8%. * Gall Thomson's continuing businesses have achieved record sales and operating profit. It has made an excellent start to the year and has a strong order book. * Lupus is continuing to build its investment portfolio and expects to make significant progress in implementing its strategy with further corporate activity in 2001. Commenting on the results, Charles Ryder, Chief Executive said: 'We are making good progress and expect to reach the optimum number of investments in our portfolio in the next few months. 2001 will be an exciting period for the Group and we look forward to the future with confidence'. For further information, please contact: Lupus Capital plc Tel: 020 7976 8000 Charles Ryder, Chief Executive James Orr, Finance Director Merlin Financial Tel: 020 7606 1244 Paul Downes Vanessa Maydon Statement of the Chairman and the Chief Executive 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 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. At 31 December 1999 and 30 June 2000, the Group's wholly-owned subsidiary, Gall Thomson Environmental Limited ('Gall Thomson'), was recorded as a current investment on the basis that it was held with a view to subsequent resale. Applicable accounting practice now requires normal consolidation of financial information for Gall Thomson, and, accordingly, this presentation has been adopted at 31 December 2000 and comparative information restated. 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 will include a more detailed description of wholly-owned businesses. Implementation of strategy Lupus's strategy is to hold, at any one time, major investments in approximately five companies. Such investments may be wholly owned or represented by a strategic interest in up to some 20% of the issued share capital of the particular company. Following the acquisition of Gall Thomson in December 1999 Lupus has continued to build up its portfolio of assets during the course of 2000. In May, the Group announced that it had a acquired a holding representing 13.3% of the issued share capital of Armitage Brothers plc, a company which develops, manufactures and supplies pet accessories and pet food. In August, Lupus announced that it held 3.5% of the issued share capital of European Colour plc, an interest which has subsequently been increased to a current level of 10.1% of the issued share capital. European Colour is a speciality chemicals company which manufactures specialist pigments and performance coatings. Lupus expects to reach its optimum level, in terms of numbers of companies in which it has a major interest, during the first half of this year. Lupus will then be in a position to pursue the key element of its strategy, the generation of significant returns by providing and, where necessary, implementing strategic plans for these companies including appropriate exit routes. Financial review In the year to 31 December 2000, Lupus's continuing operations made an operating profit before goodwill amortisation and interest of £1.31 million (1999 continuing operations: loss of £1.15 million) on turnover of £4.77 million (1999 continuing operations: £nil). After a charge of £750,000 (1999: £nil) for goodwill amortisation, Lupus's continuing operations made an operating profit before taxation in the period of £556,000 (1999: loss of £ 1.15 million). Profit before taxation, including net interest and dividend income of £36,000 and a loss on disposal of operations of £47,000, was £ 527,000 (1999: loss of £687,000). The net assets of Lupus at 31 December 2000 were £15.36 million (£15.85 million at 31 December 1999) representing 9.05p per share (9.35p per share in 1999). Net debt amounted to £2.84 million (1999: net funds of £3.71 million). Dividends The Board is recommending a final cash dividend of 0.225p per share (1999: 0.2p). Combined with an interim dividend of 0.1p, this makes a total dividend of 0.325p (1999: 0.3p) per share for the year, which represents an increase of 8.33%. Subject to approval at the AGM, the final dividend will be paid on 1 June 2001 to shareholders on the register at the close of business on 4 May 2001. Review of investments Lupus acquired Gall Thomson, then a listed company, the major business of which is the supply of marine breakaway couplings for oil and gas applications in December 1999. In the year under review, Gall Thomson's continuing businesses have performed very well, significantly exceeding budget. The acquisition of two add-on businesses has also enhanced Gall Thomson's strategic value. The continuing operations recorded sales of £4.77 million and operating profits of £2.33 million; both sales and operating profits attained record levels. Gall Thomson's main business has been particularly strong. Furthermore, this excellent performance was largely achieved without any major benefit from new activity resulting from the sustained period of higher oil prices. These higher price levels are now beginning to impact favourably on the level of exploration and new production activity in the oil and gas industry, which, in turn, is beginning to benefit Gall Thomson's order book. In February 2000, Lupus strengthened Gall Thomson by acquiring a dedicated manufacturing facility in Great Yarmouth at a total cost of approximately £ 540,000. This acquisition has had a beneficial impact on Gall Thomson's margins. An acquisition was also made in May to strengthen Gall Thomson's industrial couplings business, at a cost of £126,000. The industrial couplings business, principally operating through Gall Thomson's subsidiary, KLAW Products Limited, made particularly strong progress in the second half of the year, achieving record levels of sales and operating profits. On 4 May 2000, Lupus announced that Gall Thomson had disposed of its subsidiary, Survey Equipment Services, Inc. ('SES'), based in Houston, Texas. SES, which represented a small part of Gall Thomson, is involved in the supply, sale and rental of specialist marine navigation and survey equipment to the oil and gas industry. SES was sold for a cash consideration of $1.4 million. In the nine months to 31 December 1999 SES recorded a break-even result on a turnover of $1.6 million. Net assets at 31 December 1999 were $2.0 million. The market in which SES operates became progressively weaker in 1999 and this trend continued into the early part of 2000: SES made a trading loss of $65,000 in the first four months of the year. Lupus felt that this small loss-making subsidiary, unrelated to Gall Thomson's core business, was a major distraction to management and a drain on the Group's resources. On 4 May 2000, Lupus disclosed that it held 538,000 shares in Armitage Brothers plc ('Armitage') representing 13.3% of the issued share capital of Armitage. Armitage develops, manufactures and supplies pet accessories and pet foods. Lupus believes that there is continuing growth in consumer demand in both of these sectors but that there needs to be consolidation amongst the suppliers for a number of reasons, including major change relating to the distribution and retailing of the products. Lupus announced on 30 August 2000 that it held 1,626,236 shares in European Colour plc ('European Colour') representing 3.5% of the issued share capital of the company. Following further share purchases during the intervening period, it was announced on 15 February 2001 that Lupus held a total of 4,691,616 shares, representing 10.1% of European Colour's issued share capital. European Colour is a speciality chemicals company comprising a holding company with two divisions producing specialist pigments and performance coatings. European Colour is a highly profitable company but operates in a sector which, particularly in recent years, has been, and continues to be, subject to worldwide consolidation. The benefits of consolidation, particularly as the global economy continues to revert to its long-term historic norm of sustained low inflation or, indeed, deflation, are apparent in almost all the sectors in which Lupus has invested or will be investing. These benefits include buying power, in terms of raw materials and services, access to better and more extensive marketing and distribution, access to capital and easier access to recruiting new management, better trained to make use of the developments in information technology. Lupus takes an active interest in companies which it believes need to take advantage of these benefits, resulting in, inter alia, the release of significant shareholder value which would not otherwise be attained. Current trading Gall Thomson has made an excellent start to the year and the outlook, with a strong order book, continues to be encouraging. Lupus believes that Gall Thomson will achieve significant growth in sales and profitability during the course of the year. Lupus continues to build up its portfolio of assets and is currently giving detailed consideration to a number of potential investments. In the meantime, the Group continues to develop its relationships, and the inter-change of ideas, with those companies in which it has already taken a strategic investment. The Board believes that Lupus will make significant progress in implementing its strategy during 2001 and looks forward to the future with confidence. Lupus Capital plc Group profit and loss account For the year ended 31 December 2000 2000 1999 £000 £000 Turnover Continuing operations 4,772 - Discontinued operations 291 16,964 5,063 16,964 Cost of sales (1,768) (13,510) Gross profit 3,295 3,454 Administrative expenses - excluding goodwill (2,159) (4,128) amortisation Administrative expenses - goodwill amortisation (750) (116) Administrative expenses (2,909) (4,244) Other operating income 152 32 Operating profit/(loss) Continuing operations 556 (1,154) Discontinued operations (18) 396 538 (758) Discontinued operations: Loss on disposal of tangible fixed assets - (40) (Loss)/profit on sale of operations (47) 125 491 (673) Interest receivable and similar income 439 197 Interest payable and similar charges (403) (211) Profit/(loss) on ordinary activities before taxation 527 (687) Taxation (324) 16 Profit/(loss) on ordinary activities for the year 203 (671) Ordinary dividends (551) (419) Retained loss for the financial year (348) (1,090) Earnings/(loss) per share 0.12p (0.86p) Diluted earnings/(loss) per share 0.12p (0.86p) Earnings/(loss) before goodwill amortisation per 0.57p (0.71p) share There were no recognised gains and losses in each year other than the profit/(loss) for the financial year. Lupus Capital plc Group balance sheet At 31 December 2000 2000 As restated £000 £000 1999 £000 £000 Fixed assets Intangible assets 13,643 14,271 Tangible assets 606 635 Investments 3,933 - 18,182 14,906 Current assets Stocks and work-in-progress 177 111 Debtors 1,349 2,813 Investments 204 1,187 Cash at bank and in hand - 5,212 1,730 9,323 Creditors: amounts falling due within one year (4,556) (8,377) Net current (liabilities)/assets (2,826) 946 15,356 15,852 Capital and reserves Capital up share capital 848 725 Share premium accounts 4,396 4,543 Shares to be issued - 2,961 Merger reserve 10,389 7,552 Profit and loss account (277) 71 Equity shareholders' funds 15,356 15,852 Lupus Capital plc Company balance sheet At 31 December 2000 2000 1999 £000 £000 £000 £000 Fixed assets Tangible assets - 3 Investments 8,711 8,670 8,711 8,673 Current assets Debtors 16,943 21,026 Cash at bank and in hand 939 197 17,882 21,223 Creditors: amounts falling due within one year (560) (6,093) Net current assets 17,322 15,130 Total assets less current 26,033 23,803 liabilities Creditors: amounts falling due (7,876) (7,876) after more than one year 18,157 15,927 Capital and reserves Called up share capital 848 725 Share premium account 4,396 4,543 Shares to be issued - 2,961 Merger reserve 10,389 7,552 Profit and loss account 2,524 146 Equity shareholders' funds 18,157 15,927 The financial statements were approved by the Board on 20 March 2001. Lupus Capital plc Group statement of cash flows For the year ended 31 December 2000 As restated 2000 1999 £000 £000 £000 £000 Net cash outflow from (2,450) (1,441) operating activities Returns on investments and servicing of finance Interest received 327 185 Interest paid (403) (155) Interest element of - (55) finance lease rental payments Dividends received 112 8 36 (17) Taxation UK corporation tax paid (458) (143) Capital expenditure and financial investment Sale of tangible fixed 202 174 assets Purchase of tangible (151) (66) fixed assets Sale of investments 898 491 Purchase of investments (3,766) (1,276) (2,817) (677) Acquisitions and disposals Purchase of subsidiary (738) (6,528) undertakings Disposal of subsidiary 551 7,180 undertakings Net cash acquired with - 5,014 subsidiary undertakings Net (cash) / overdrafts (171) 2,191 in disposed operations (358) 7,857 Equity dividends paid (509) (306) Net cash (outflow) / inflow before financing (6,556) 5,273 Financing Issue of shares net of - 281 costs New long-term loans 3,250 1,500 Repayment of long-term (4,750) (1,678) loans Repayment of capital - (161) element of finance leases Acquisition of dividend - (867) rights (1,500) (925) (Decrease) / increase in (8,056) 4,348 cash ====== ======= Lupus Capital plc Reconciliation of net cash flow to movement in net (debt)/funds For the year ended 31 December 2000 As restated 2000 1999 £000 £000 (Decrease) / increase in cash (8,056) 4,348 Cash inflow from increase in loans (3,250) (1,500) Cash outflow from repayment of loans 4,750 1,678 Repayment of capital element of finance - 161 leases Change in net funds from cash flows (6,556) 4,687 Acquisitions and disposals - 395 New finance leases - (155) Movement in net funds (6,556) 4,927 Net funds / (debt) at 1 January 3,712 (1,215) Net (debt) / funds at 31 December (2,844) 3,712 ======= ======= Reconciliation of shareholders' funds For the year ended 31 December 2000 As restated 2000 1999 £000 £000 Profit/(loss) for the financial year 203 (671) Net movement on share issues - 10,993 Goodwill reinstated on disposal of subsidiaries - 1,649 Dividends paid and proposed on equity shares (551) (419) Costs set against share premium account (148) - Net movement in shareholders' funds (496) 11,552 Opening shareholders' funds 15,852 4,300 Closing shareholders' funds 15,356 15,852 ======= ======= Lupus Capital plc Notes to the financial statements For the year ended 31 December 2000 1. The financial information set out in this document does not constitute statutory group accounts. Statutory accounts for the year ended 31 December 1999 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 2000 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 profit after taxation for the financial year and on a weighted average number of shares in issue during the year of 167,953,570 ordinary shares of 0.5p (1999: 77,707,599). The diluted earnings per share is based on the profit after taxation for the financial year and on 167,953,570 ordinary shares of 0.5p (1999: 77,707,599). The calculation of earnings before goodwill amortisation per share is based on the profit after taxation for the financial year adjusted for the goodwill amortisation charge of £750,000 (1999: £116,000) and on the weighted average number of shares in issue during the year of 167,953,570 ordinary shares of 0.5p (1999: 77,707,599). 3. Dividends The Board is recommending a final cash dividend of 0.225p per share (1999: 0.2p). Subject to approval at the AGM, the final dividend will be paid on 1 June 2001 to shareholders on the register at the close of business on 4 May 2001. The ex-dividend date will be on 2 May 2001. 4. The Annual General Meeting The Annual General Meeting will be held at the offices of Ashurst Morris Crisp, Broadwalk House, 5 Appold Street, London, EC2A 2HA at 11:00am on 14 May 2001.

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