Final Results

Lupus Capital PLC
07 April 2003


Lupus Capital plc

Preliminary announcement of results for the year ended 31 December 2002


Highlights

  • Operating profit before exceptional items and goodwill amortisation increased by 29%
  • Proposed final dividend increased by 100%
  • Four out of original six quoted investments disposed of and one of remainder subject to a takeover bid
  • Borrowings reduced from £7.02 million at 30 June 2002 to £3.83 million at year end
  • Annualised central costs reduced from £1.3 million to £0.5 million


Konrad Legg, Chairman, stated 'The Board is pleased with the progress which has been made and which can be anticipated
in implementation of the new strategy'.


Chairman's Statement


The past few months have been eventful for the Company and since this is my first statement as Chairman of Lupus, I
believe it is appropriate to set out details of these events before commenting on the progress which has been made.



Change of Board

Last October three of the Company's institutional shareholders, being disillusioned with the Company's failure to
deliver shareholder value as promised, served notice requiring an Extraordinary General Meeting to be convened. The
purpose of the meeting, which took place on 28 November 2002, was to consider the removal of the then directors (other
than the Chairman, Oliver Stocken) and the appointment of Fred Hoad, Roland Tate and myself as directors. The
requisition set out a proposed new strategy to realise the Company's investments, minimise central costs and return
cash to all shareholders.



All the resolutions were passed and implemented. Mr Stocken resigned as Chairman, as he had indicated he would do if
his colleagues were removed from the Board. I was appointed as Chairman in his place and I am pleased to report to you
now on the Company's results for the year ended 31 December 2002 and, in particular, on the progress which has been
made since our appointment.



Appointment of manager

As envisaged in the requisition, Progressive Value Management Limited ('PVML'), an investment realisation specialist,
has been engaged to manage the Company's affairs and to implement the new strategy within a maximum period of two
years.



Financial results

The Company's results for the year ended 31 December 2002 reflect the change in strategy approved by the shareholders.
For the majority of the year the former Board and management were charged with responsibility for the Company's affairs
and the results are heavily influenced by the overhead structure which prevailed during that period. The Group made an
operating profit, before exceptional items and goodwill amortisation, of £2,024,000 (2001: £1,568,000) on turnover of
£6,638,000 (2001: £5,341,000). Charges were made of £946,000 (2001: Nil) for exceptional costs related to the closure
of the London office, £202,000 (2001: Nil) for costs related to the EGM and £741,000 (2001: £741,000) for goodwill
amortisation. After these charges, the Group made an operating profit of £135,000 (2001: £827,000).



In view of the Company's intended realisation of its assets, investments in listed securities have been written down to
their market values at the year end or subsequent disposal proceeds. After these adjustments, which amount in aggregate
to £1,595,000 (2001: £1,425,000), and after other non-operating items, the Group made a loss before taxation of
£1,361,000 (2001: profit £113,000).



The net assets of the Group at 31 December 2002 were £11,969,000 (2001: £14,514,000) representing 7.02p per share
(2002: 8.53p per share). Net debt amounted to £3,827,000 (2001: £6,637,000).



Background to the Extraordinary General Meeting

The Group had been running with annual central costs of £1.4 million. Given the size of the Company and the simplicity
of its operations, this was a significant source of unrest among investors. Investors were also unhappy with the
incentive plan for executives which rewarded successful sales of investments but did not set off realised losses.
However, the main impetus for the Board changes was a growing conviction among shareholders that the former Board,
despite a stated intention to do so, would not sell the Company's principal investment, Gall Thomson. Indeed, there
were concerns that even if Gall Thomson were sold there would be no direct benefit to shareholders since the former
Chief Executive had stated that the Company would retain the sale proceeds rather than return them to shareholders.
When the former Board finally became aware of the extent of shareholder dissatisfaction they proposed a partial tender
on unspecified terms and, on the eve of the extraordinary general meeting, announced receipt of an indicative offer for
Gall Thomson of £14.5 million. This offer was described as 'a material increase on the level of offers received for
Gall Thomson during the sale process carried out during the past two years'. This statement ignored the fact that the
indicative offer was below the Board's stated minimum price expectation of £14.6 million and well below the price paid
for Gall Thomson and the value at which the holding was being carried in the Group's books. PVML subsequently
investigated the indicative offer and quickly concluded that it was unacceptable, not least because it required a
significant cash balance to be left in Gall Thomson.



Significant expenses were incurred by the former Board in seeking to defeat the resolutions. Oriel Securities Limited,
the Company's former financial advisers, received £50,000 for their  advice and were paid compensation of £25,000 for
termination of the contractual retainer arrangements recently agreed by the former Board. In total, the former Board
paid £185,000 for advice in connection with the extraordinary general meeting. Although, in the opinion of the new
Board, £185,000 of advisory fees was disproportionate to any benefit which the Company could have expected to achieve,
we decided not to pursue any claims for refunds since we were advised that such claims were unlikely to succeed.



Key issues

Following their appointment the new Board and PVML identified four main issues to be addressed in order to implement
the new strategy:



1. Sale of Gall Thomson, ensuring that its value and potential were preserved during the sale process;

2. Sale of the six listed investments;

3. Reduction of the Group's cost base;

4. Rationalisation of the corporate structure.


Progress regarding the key issues


Sale of Gall Thomson

PVML has held numerous meetings with the senior management of Gall Thomson to become familiar with the business and to
form an opinion of its realisable value. A number of potential purchasers came forward or were contacted following the
announcement of the Company's new strategy. PVML is currently negotiating the broad outlines and conditions of the sale
of Gall Thomson with various parties.



Sale of the other six listed investments

PVML analysed and evaluated the six listed investments of the Company and agreed with the Board an appropriate course
of action regarding the disposal of each stake.



The most significant shareholding was in Castings. This was sold in December 2002 for £3.05 million which enabled the
Company to reduce significantly the amount outstanding under its bank overdraft facility. The Company's holdings in
Sinclair (William), Roxspur and European Colour were sold after the year end realising £1.14 million.



The remaining two investments are Armitage Bros. and Shiloh. Armitage Bros. announced on 20 March 2003 that it had
reached agreement on the terms of a recommended cash offer of 200p per share and had received irrevocable undertakings
to accept the Offer from shareholders representing 59.4% of the Company.



Reduction of the Group's cost base

Having terminated the employment contracts of all the staff, PVML closed the office at 85 Buckingham Gate, London with
effect from 15 January 2003. There were more staff than might have been expected given the size of the Company's
operations and the staff were relatively highly paid. With the exception of one junior member of staff, all executives
had the benefit of twelve months notice and two had had their notice periods extended as recently as August 2002.
Accordingly, this exercise has been costly, but it has resulted in a considerable reduction in the continuing operating
expenses.  So far, a reduction in overheads of £0.75 million on an annual basis has been achieved.



The previous board entered into a five year lease of the premises in Buckingham Gate in 2001 at a cost in excess of £50
per square foot and with little flexibility for sub-letting. An agent has been appointed to negotiate the surrender of
the lease or to procure a suitable assignee. The offices are in a central and prestigious location but rental levels
have fallen since the Company entered into the commitment. It is therefore anticipated that further costs will be
incurred in connection with the disposal of the lease and an appropriate estimate of the relevant amounts has been
included in the overall provision for closure of the office.



The furniture and equipment have been disposed of at the best prices achievable. Various lease commitments for items
such as photocopiers and cars have been terminated by negotiation. In general these commitments did not envisage early
termination by the Company and therefore the scope for negotiation was limited.



The Company had been incurring significant expenses in terms of consultancy fees, solicitors' fees and entertaining
expenses. These expenses have been dramatically curtailed since adoption of the new strategy.



A subsidiary of Lupus has a lease of a 20,000 square feet property in a business centre outside Tewkesbury in
Gloucestershire which expires in 2014. The property is let for the same period to a first class tenant and is cash
neutral. The Company is exploring the possibility of surrendering the lease in the context of the tenant entering into
a new lease directly with the landlord.



Corporate structure

Preliminary analysis has been carried out as to the best methods of re-structuring the Group in order to facilitate
return of cash to shareholders.



Business of Gall Thomson

Gall Thomson, based in Great Yarmouth, is the world's leading supplier of marine breakaway couplings. Its subsidiary,
Klaw Products Ltd, based in Trowbridge, 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 also supplies the quick
release Wellin Lambie Camlock coupling which is used in the hose and loading arm system for the transfer of oil and gas
products.



Klaw Products Ltd principal activity is the manufacture, assembly and distribution of industrial quick release
couplings etc to the oil and gas industries. They are also used in the transportation of product by road and rail.



In 2002, Gall Thomson recorded sales of £6.64 million (2001: £5.34 million), an increase of 24.3 %. Operating profits
before Group management charges and goodwill amortisation were £3.8 million (2001: £2.71 million), an increase of
24.8%.



Gall Thomson has started 2003 with a healthy order book and looks forward to continued success. There are opportunities
in most areas of the world owing 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) supports the need for off
loading techniques as opposed to pipeline infrastructure. This bodes well for the Gall Thomson business in the short
and long term.



KLAW has started the year well with a healthy order book. During 2002 KLAW developed new products and also acquired the
EU stamp. The new products, together with the existing product range, are expected to produce increased sales and new
personnel are being employed to increase market penetration.



Dividend

In accordance with its commitment to return cash to shareholders at the earliest opportunity, the Board is recommending
a final cash dividend of 0.5p per share (2001: 0.25p per share). Combined with an interim dividend of 0.12p, this makes
a total dividend of 0.62p per share (2001: 0.36p per share) for the year, representing an increase of 72.2%.  Subject
to approval at the AGM, the final dividend will be paid on 21 May 2003 to shareholders on the register at the close of
business on 22 April 2003.



Current Trading

The Board is pleased with the progress which has been made and which can be anticipated in implementation of the new
strategy. £4.19 million has already been raised from the sale of four of the six quoted investments. The cost base has
been reduced and in this context I am particularly grateful for the assistance of the staff at Cavendish
Administration, the new Company Secretary, whose advice has been invaluable on a number of technical and commercial
issues. I would also like to thank the directors and staff of Gall Thomson for their continuing efforts and dedication,
which has resulted in another record year. Clearly, the sale of Gall Thomson remains the single most important factor
in achieving value for shareholders and PVML has approached this task in a methodical and committed way.



Konrad Legg
Chairman





Group profit and loss account
For the year ended 31 December 2002

                                                                            2002                        2001
                                                                            £000                        £000
Turnover
    Continuing operations                                                  6,638                       5,341
Cost of sales                                                            (1,935)                     (1,577)
Gross profit                                                               4,703                       3,764
Administrative expenses - excluding
goodwill
    Amortisation and exceptional items                                   (2,679)                     (2,209)
Administrative expenses - exceptional items                              (1,148)                           -
Administrative expenses - goodwill                                         (741)                       (741)
amortisation
Administrative expenses                                                  (4,568)                     (2,950)
Other operating income                                                         -                          13

Operating profit - Continuing operations                                     135                         827

Profit on disposal of fixed asset                                            213                         718
investments
Income from investments                                                      273                         299
Amounts written off fixed asset investments                              (1,595)                     (1,425)
Interest receivable and similar income                                       155                         149
Interest payable and similar charges                                       (542)                       (455)

(Loss)/Profit on ordinary activities before                              (1,361)                         113
taxation

Taxation                                                                   (151)                       (368)

Loss on ordinary activities for the year                                 (1,512)                       (255)

Ordinary dividends                                                       (1,058)                       (612)
Retained loss for the financial year                                     (2,570)                       (867)


Loss per share                                                           (0.89)p                     (0.15)p
Earnings before exceptional items
    And goodwill amortisation per share                                    0.22p                       0.29p


Statement of total recognised gains and losses

There were no recognised gains and losses in each year other than the loss for the financial year.


Group balance sheet
At 31 December 2002

                                                                         2002                      2001
                                                            £000         £000         £000         £000

Fixed assets
Intangible assets                                                      12,161                    12,902
Tangible assets                                                           463                       565
Investments                                                             3,822                     7,185
                                                                       16,446                    20,652
Current assets
Stocks and work-in-progress                                  200                       172
Debtors                                                    2,096                     2,021
                                                           2,296                     2,193

Creditors: amounts falling due within one                (6,693)                   (8,254)
year
Net current liabilities                                               (4,397)                   (6,061)

Total assets less current liabilities                                  12,049                    14,591

Creditors: amounts falling due after more
than one year                                                            (80)                      (77)

Net assets                                                             11,969                    14,514

Capital and reserves
Called up share capital                                                   853                       851
Share premium account                                                   4,441                     4,418
Merger reserve                                                         10,389                    10,389
Profit and loss account                                               (3,714)                   (1,144)
Equity shareholders' funds                                             11,969                    14,514



Company balance sheet
At 31 December 2002

                                                                             2002                        2001
                                                               £000          £000          £000          £000

Fixed assets
Investments                                                                 8,711                       8,711
                                                                            8,711                       8,711
Current assets
Debtors                                                      13,675                      16,083
Cash at bank and in hand                                      1,064                       1,514
                                                             14,739                      17,597

Creditors: amounts falling due within one                     (879)                       (510)
year
Net current assets                                                         13,860                      17,087

Total assets less current liabilities                                      22,571                      25,798

Creditors: amounts falling due after more
than one year                                                             (7,876)                     (7,876)

Net assets                                                                 14,695                      17,922

Capital and reserves
Called up share capital                                                       853                         851
Share premium account                                                       4,441                       4,418
Merger reserve                                                              8,920                      10,389
Profit and loss account                                                       481                       2,264
Equity shareholders' funds                                                 14,695                      17,922




Group statement of cash flows
For the year ended 31 December 2002


                                                                         2002                      2001
                                                            £000         £000         £000         £000

Net cash inflow from operating activities                               2,112                       875

Returns on investments and servicing of
finance
Interest received                                            155                       149
Interest paid                                              (531)                     (418)
Dividends received                                           258                       299
                                                                        (118)                        30
Taxation
UK corporation tax paid                                                 (544)                     (367)

Capital expenditure and financial investment
Sale of tangible fixed assets                                  -                         3
Purchase of tangible fixed assets                           (16)                      (48)
Sale of fixed asset investments                            3,051                     3,230
Purchase of fixed asset investments                      (1,070)                   (6,845)
Sale of current asset investments                              -                       298
Purchase of current asset investments                          -                     (425)
                                                                        1,965                   (3,787)


Equity dividend paid                                                    (630)                     (569)

Net cash inflow /(outflow) before financing                             2,785                   (3,818)

Financing
Issue of shares net of costs                                               25                        25

Increase / (decrease) in cash                                           2,810                   (3,793)



Reconciliation of shareholders' funds
For the year ended 31 December 2002

                                                                                           2002          2001
                                                                                           £000          £000

Loss for the financial year                                                             (1,512)         (255)
Net movement on share issues                                                                 25            25
Dividends paid and proposed on equity shares                                            (1,058)         (612)
                                                                                        (2,545)         (842)
Opening shareholders' funds                                                              14,514        15,356
Closing shareholders' funds                                                              11,969        14,514


Notes:

Accounting policy

The Group accounts consolidate the results of Gall Thomson Environmental Limited and KLAW Products Limited, which have
been prepared on a going concern basis.  In view of the stated objective of the new Board to realise the investments,
minimise central costs and return cash to all shareholders, the Group's other assets have been included on an 'orderly
realisation' basis.  This basis differs from a going concern basis in that the investments are valued at actual
disposal prices achieved after 31 December 2002 or at closing mid-market values at 31 December 2002, rather than at
their strategic value, and in that additional provisions and accruals have been made to reflect the realisable value of
fixed assets and the costs incurred to minimise ongoing central costs.



Loss/earnings per share

The calculation of basic loss 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 170,302,702 ordinary shares of 0.5p. (2001: weighted average
169,827,998).



An additional EPS figure is provided to show the earnings before exceptional items and goodwill amortisation per share,
the calculation of which is based on the loss after taxation for the financial year adjusted for the exceptional
administrative expenses of £1,148,000 and the goodwill amortisation charge of £741,000 (2001: £nil and £741,000
respectively).



Dividend

The directors recommend a final ordinary dividend of 0.5p per share.  If approved by the Annual General Meeting, this
dividend will be paid on 21 May 2003 to shareholders on the register at 22 April 2003.



Status of this report

The financial information set out above does not constitute the Company and Group's statutory accounts for the year
ended 31 December 2002 but is derived from those accounts. Statutory accounts for the year ended 31 December 2002 are
to be delivered to the Registrar of Companies following the Annual General Meeting.



The above results for the year ended 31 December 2002 are unaudited.  Those for the year ended 31 December 2001 are an
abridged version of the Group's full accounts, which received an unqualified audit report, not containing statements
under section 237(2) or 237(3) of the Companies Act 1985, and which have been filed with the Registrar of Companies.



Company Secretary: Cavendish Administration Limited
Crusader House, 145-157 St. John Street, London EC1V 4RU


Registered Office: 85 Buckingham Gate, London SW1E 6PD




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