Half-yearly report
LUPUS CAPITAL plc
INTERIM REPORT
FOR THE SIX MONTHS ENDED
30 JUNE 2008
Chairman's Statement
Dear Shareholder,
I am pleased to report that your company continued to grow during the
six months to 30th June 2008 despite the economic travails of the
banking crisis, U.S housing market slump, raw material cost
escalations and the apparent start of a European business decline.
Controlling our costs, growing market shares at the expense of weaker
competitors, close customer relationships, new product development as
well as the benefits from the integration, improvements and synergies
of our Laird acquisition have enabled us to increase our earnings per
share by over 4%. I would like to thank all our employees for their
dedication and commitment during this severely debilitating economic
climate, enabling Lupus to continue to achieve its objectives.
Pre tax profits on an adjusted basis were £14.5m which compares to
£10.1m for the same period in 2007. Sales were £137.0m up from
£79.0m. 2008 figures include a full six months contribution from
Laird rather than two months in 2007.
Adjusted earnings per share1 of 7.56p were up 4.4% which is a
creditable increase from 7.24p in the six months to June 2007.
1 before amortisation of acquired intangible assets, deferred tax on
amortisation of acquired intangible assets, exceptional items,
unwinding of discount on provisions and the associated tax effect.
The directors have declared an interim dividend of 2.06p per share
which is at a maintained level as the interim dividends paid for 2007
half year. Shareholders will be paid on 10th November 2008 for those
shares registered at the close of business on 10th October 2008.
In the event that you prefer to receive shares instead of a cash
dividend, a notice from our Registrars, Capita, is enclosed that will
allow you to do this. Please either complete the form or, for further
details, call Capita direct on 0871 664 0381 (calls cost 10p per
minute plus network extras) or email shares@capitaregistrars.com.
Below is given a short overview of the performance of each of Lupus
Capital's businesses.
* Gall Thomson, our manufacturer of breakaway couplings, continued
to enjoy buoyant markets in the first six months of 2008 and yet
again delivered a record performance both in sales, profits and
cash generation.
* Building Products division is a manufacturer of items such as
seals, locks, balances, handles, doors and hinges for the U.S.
and European door and window industry. Our sales are
approximately 60% to the refurbishment/remodelling (RMI) market
which is a steadier and less volatile source of custom than the
40% which we trade to the new build market.
Costs have been aggressively attacked. Employee numbers have been
reduced by over 10% affecting office staff and the production
workforce; in addition temporary labour has been flexed. Raw material
input prices, particularly steel and polypropylene, as well as
freight, have increased dramatically and we have been successful in
passing some of these on. A number of facilities have been closed,
with further manufacturing relocated to China and a new low cost
factory in Mexico has been established to deal with work transferred
from higher cost U.S. plants.
In the U.S. the new build housing market was substantially down and
the RMI sector marginally lower on the previous period. However, we
have been able to achieve market share increases and limit our sales
decline to only 15% lower than 2007 first half like for like. In our
non U.S. markets we have started to see slowing conditions
particularly in Spain, and the UK although Eastern Europe is holding
up well. Overall though sales were marginally up by 2%.
Continuing inventory and working capital controls have enabled us to
generate cash despite the seasonal increase in business activity.
Rigorous examination of capital expenditure has limited all but
essential cash outflows. After some major first half expenditure
including a £5.7m share buyback, as well as the £12.5m interest free
deferred acquisition cost due to Laird, our net debt position as at
30 June 2008 stood at £112.4m. In addition, during the period we
repaid £8.5m of debt to our banks.
The last few months of the year are undoubtedly going to be difficult
and uncertain. Sales and order books appear to be changing from
historically relatively predictable patterns to more volatile
fluctuations. Raw material prices need constant attention and costs
have to be reduced. Our share price regrettably has been hit hard by
both the general stock market conditions and sentiment regarding the
housing industry. However, we are confident that once markets improve
we will emerge stronger and more profitable.
Greg Hutchings
Chairman
30 September 2008
Group income statement
Year ended
Six months Six months 31
ended 30 June ended 30 December
2008 June 2007 2007
(unaudited) (unaudited) (audited)
Note £'000 £'000 £'000
Revenue 3 137,020 79,028 216,859
Cost of sales (89,503) (48,365) (142,675)
Gross profit 47,517 30,663 74,184
Administrative
expenses (33,619) (20,808) (51,461)
Operating
profit 3 13,898 9,855 22,723
Analysed as:
Operating profit
before exceptional
items and
amortisation of
intangible assets 18,791 12,357 31,857
Exceptional items - - (1,385)
Amortisation of
intangible assets (4,893) (2,502) (7,749)
Operating profit 13,898 9,855 22,723
Finance income 4 968 479 1,888
Finance costs 4 (5,703) (2,772) (9,241)
Net finance costs (4,735) (2,293) (7,353)
Profit before
taxation 9,163 7,562 15,370
Income tax expense 5 (2,932) (2,671) (3,128)
Profit for the year
from continuing
operations 6,231 4,891 12,242
Earnings per share
- Basic and diluted
EPS from continuing
operations1 6 4.79p 5.33p 10.68p
Non GAAP measure
Adjusted1 profit before 14,459
taxation 10,064 25,021
Earnings per share
- Adjusted1 basic and diluted 6
EPS from continuing 7.56p 7.24p 14.82p
operations
1 before amortisation of acquired intangible assets, deferred tax on
amortisation of acquired intangible assets, exceptional items,
unwinding of discount on provisions and the associated tax effect.
Group statement of recognised income and expense
Six months Six months Year
ended 30 June ended 30 June ended 31
2008 2007 December
2007
(unaudited) (unaudited) (audited)
Note £'000 £'000 £'000
Actuarial losses on defined benefit plans - - (159)
Exchange differences on retranslation of foreign operations 1,515 679 (148)
Effective portion of changes in value of cash flow (113) - (1,546)
hedges
Tax on items recognised directly in equity - - 54
Income and expense recognised directly in equity 1,402 679 (1,799)
Profit for the period 6,231 4,891 12,242
Total recognised income and expense for the 8 7,633 5,570 10,443
period
- attributable to equity shareholders of the Company
Group balance sheet
At 31
At 30 June At 30 June December
2008 2007 2007
(unaudited) (unaudited) (audited)
Note £'000 £'000 £'000
ASSETS
Non-current assets
Intangible assets 302,066 317,727 306,345
Property, plant and
equipment 35,886 35,590 36,325
Deferred tax 10,828 8,060 6,611
Derivative financial
instruments - 1,118 -
348,780 362,495 349,281
Current assets
Inventories 35,007 33,410 35,261
Trade and other
receivables 42,620 49,717 36,755
Cash and cash
equivalents 31,034 30,815 46,969
108,661 113,942 118,985
TOTAL ASSETS 457,441 476,437 468,266
LIABILITIES
Current liabilities
Current tax payable (6,545) (6,444) (3,743)
Trade and other payables (45,411) (59,559) (57,974)
Finance lease
obligations (188) (106) (188)
Interest bearing loans
and borrowings (21,676) (11,024) (16,694)
(73,820) (77,133) (78,599)
Non-current liabilities
Finance lease
obligations (135) (204) (214)
Deferred tax (30,163) (30,967) (25,315)
Interest bearing loans
and borrowings (121,272) (138,687) (129,865)
Employee benefit
liability (3,245) (3,320) (3,497)
Provisions (17,873) (21,615) (20,892)
Derivative financial
instruments (1,659) - (1,546)
Other creditors (142) (110) (1,206)
(174,489) (194,903) (182,535)
TOTAL LIABILITIES (248,309) (272,036) (261,134)
NET ASSETS 209,132 204,401 207,132
EQUITY
Capital and reserves
attributable to equity
holders of the Company
Called up share capital 8 6,864 6,861 6,861
Share premium 8 101 45 45
Merger reserve 8 10,389 10,389 10,389
Hedging reserve 8 (1,659) 1,118 (1,546)
Translation reserve 8 (286) (974) (1,801)
Retained earnings 8 193,723 186,962 193,184
TOTAL EQUITY 209,132 204,401 207,132
Group cash flow statement
At 31
At 30 June At 30 June December
2008 2007 2007
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Cash flows from operating
activities
Operating profit 13,898 9,855 22,723
Depreciation 2,911 1,831 4,702
Amortisation 4,893 2,502 7,749
Loss on sale of property,
plant and equipment - - (12)
Movement in inventories (722) 2,363 1,173
Movement in trade and other
receivables (5,886) (2,778) 11,665
Movement in trade and other
payables (292) 5,655 3,267
Movement in provisions (1,048) - 1,110
Income tax paid (1,527) (1,993) (6,492)
Net cash inflow from
operating activities 12,227 17,435 45,885
Investing activities
Payments to acquire
property, plant and
equipment (2,630) (1,159) (3,918)
Proceeds from sales of
property, plant and
equipment 329 7 -
Acquisition of subsidiary,
net of cash acquired (12,500) (238,231) (239,397)
Interest received 989 479 1,867
Net cash outflow from
investing activities (13,812) (238,904) (241,448)
Financing activities
Proceeds from shares issue,
net of costs 59 131,270 131,536
Purchase of treasury shares (5,692) - (1,075)
Equity dividends paid - (2,983) (3,753)
New borrowings 5,012 119,667 119,064
Interest paid (5,607) (2,773) (7,172)
Repayment of short term
borrowings (8,514) (2,500) (5,000)
Repayment of capital
element of finance leases (79) (78) (88)
Net cash (outflow)/inflow
from financing activities (14,821) 242,603 233,512
(Decrease)/increase in cash
and cash equivalents (16,406) 21,134 37,949
Effect of exchange rates on
cash and cash equivalents 471 (57) (718)
Cash and cash equivalents
at the beginning of the
period 46,969 9,738 9,738
Cash and cash equivalents
at the period end 31,034 30,815 46,969
Notes to the Interim Report
1. Status of the interim financial statements
The Group's interim financial statements for the six months ended 30
June 2008 were authorised
for issue by the directors on 30 September 2008. The consolidated
interim financial information,
which is unaudited, does not constitute statutory accounts
within the meaning of Section 240
of the Companies Act 1985. The statutory accounts for the year
ended 31 December 2007
have been reported on by the Group's auditors, received an
unqualified audit report and have
been filed with the registrar of companies at Companies House.
2. Accounting policies
The interim financial information has been prepared on the basis of
the recognition
and measurement requirements of International Financial Reporting
Standards (IFRS), which
were the accounting policies used in the Report and Accounts for the
Group for the year
ended 31 December 2007. The accounting policies are unchanged from
those used
in the last annual accounts.
3. Segmental analysis
Oil services Building products Total
Six Six Six Six
months Year ended months months Year months Year
Six months ended 31 ended 30 ended ended 31 Six months ended ended 31
ended 30 30 June December June 30 June December ended 30 June 30 June December
June 2008 2007 2007 2008 2007 2007 2008 2007 2007
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Continuing
operations
Revenue 6,294 6,182 11,342 130,726 72,846 205,517 137,020 79,028 216,859
Operating
profit 2,606 2,065 5,557 11,292 7,790 17,166 13,898 9,855 22,723
Net
finance
costs (4,735) (2,293) (7,353)
Profit before income
tax 9,163 7,562 15,370
Income tax
expense (2,932) (2,671) (3,128)
Profit for the period
6,231 4,891 12,242
4. Finance income and costs
Six months ended Six months ended Year ended 31
30 June 2008 30 June 2007 December 2007
£'000 £'000 £'000
Finance income
Bank interest
receivable 968 479 1,845
Fair value
gains on
financial
instruments - - 43
968 479 1,888
Finance costs
Interest
payable on bank
loans and
overdraft (5,045) (2,679) (8,303)
Finance charges
payable under
finance lease
and hire
purchase
contracts (13) (11) (23)
Amortisation of
borrowing costs (182) (82) (264)
Unwinding of
discount on
provisions (403) - (517)
Other finance
costs (60) - (134)
(5,703) (2,772) (9,241)
Net finance
costs (4,735) (2,293) (7,353)
5. Taxation
Six months ended 30 Six months ended Year ended 31
June 2008 30 June 2007 December 2007
£'000 £'000 £'000
Current income
tax:
Current income
tax charge 3,618 2,645 6,786
Adjustments in
respect of prior
periods (52) - 278
Total current
income tax 3,566 2,645 7,064
Deferred tax:
Effect of change
in rates - - (2,013)
Origination and
reversal of
timing
differences (560) 26 (1,964)
Other items (74) - 41
Total deferred
tax (634) 26 (3,936)
Income tax
expense in the
income statement 2,932 2,671 3,128
6. Earnings per share
Basic earnings per share amounts are calculated by dividing the net
profit for the year attributable
to ordinary equity shareholders by the weighted average of ordinary
shares outstanding during
the period plus the weighted average number of ordinary shares that
would be issued on the
conversion of all the dilutive potential ordinary shares into
ordinary shares. There were no
potentially dilutive shares.
Six months
ended 30 Six months ended 30 Year ended 31
June 2008 June 2007 December 2007
000's 000's 000's
Weighted average
number of shares
(excluding treasury
shares) 137,281 91,711 114,648
Weighted average
number of treasury
shares (7,174) - (39)
Weighted average
number of shares 130,107 91,711 114,609
Earnings per share from continuing operations before exceptional
items and intangible asset amortisation
The Group presents as exceptional items on the face of the income
statement those
material items of income and expense, which because of the nature and
expected
infrequency of the events giving rise to them, merit separate
presentation to allow
shareholders to understand better the elements of financial
performance in the period,
so as to facilitate comparison with prior periods and to assess
better trends in
financial performance.
To this end, adjusted underlying basic and diluted earnings per share
is also presented
as an additional measure and using the weighted average number of
ordinary shares for
both basic and diluted amounts as per the table above. Net profit
from continuing
operations before exceptional items is derived as follows:
Year ended
Six months ended 30 Six months ended 31 December
June 2008 30 June 2007 2007
£'000 £'000 £'000
Profit for the
year from
continuing
operations 6,231 4,891 12,242
Exceptional
costs - - 1,385
Amortisation of
intangible
assets and
unwinding
discount on
provisions 5,296 2,502 8,266
Tax effect on
exceptional
costs and
amortisation of
intangible
assets (1,695) (751) (2,895)
Deferred tax
adjustment
relating to the
rate of
corporation
changing from
30% to 28% - - (2,013)
Adjusted
underlying
profit after tax 9,832 6,642 16,985
Adjusted
underlying basic
and diluted
earnings per
share 7.56p 7.24p 14.82p
7. Dividends
Six months ended 30 Six months ended Year ended 31
June 2008 30 June 2007 December 2007
£'000 £'000 £'000
Dividends paid
in the year
were as
follows:
Final dividend
for 2006 at
3.34p per
share - 2,059 2,059
Special
interim
dividend for
2007 at 1.50p
per share - 925 925
Interim
dividend for
2007 at 0.56p
per share - - 769
- 2,984 3,753
Dividends not
reflected in
the financial
statements:
Proposed
interim
dividend for
the year 2008
at 2.06p per
share (2007:
0.56p ) 2,675 769 -
Proposed final
dividend for
the year 2007
at 3.51p per
share 4,557 - 4,557
8. Reconciliation of movements in equity
Share Share Other Hedging Translation Retained Total
capital premium reserves reserve reserve earnings
account
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1
January
2007 3,083 45 10,389 - (1,653) 58,117 69,981
Shares
issued net
of costs 3,778 - - - - 126,938 130,716
Derivative
financial
instruments - - - 1,118 - - 1,118
Total
recognised
income and
expense for
the period - - - - 679 4,891 5,570
Dividends
paid - - - - - (2,984) (2,984)
At 30 June
2007 6,861 45 10,389 1,118 (974) 186,962 204,401
Shares
issued net
of costs - - - - - 820 820
Total
recognised
income and
expense for
the period - - - (2,664) (827) 7,246 3,755
Dividends
paid - - - - - (769) (769)
Share
buyback - - - - - (1,075) (1,075)
At 31
December
2007 6,861 45 10,389 (1,546) (1,801) 193,184 207,132
Shares
issued net
of costs 3 56 - - - - 59
Total
recognised
income and
expense for
the period - - - (113) 1,515 6,231 7,633
Share
buyback - - - - - (5,692) (5,692)
At 30 June
2008 6,864 101 10,389 (1,659) (286) 193,723 209,132
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