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.

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