28th Sep 2006 07:03
Lupus Capital PLC28 September 2006 LUPUS CAPITAL plc Interim ReportFor the six months ended 30 June 2006 Chairman's Statement Dear Shareholder, The period that we are reporting on has been a very exciting and successful timefor your company. Gall Thomson has produced record results, we have acquiredand absorbed Schlegel and Lupus Capital has achieved excellent growth in sales,profits, dividends and cash generation, which, together with a strong balancesheet, enables future development. Pre-tax profits for the six months to 30 June 2006 were £3,880,000 (compared tothe pre-tax profit of £871,000 last year). Sales were £23,684,000 up from£3,137,000. These results led to earnings per share of 0.570p, up by almost 3times, from 0.210p last half year. The figures for the period are not directlycomparable as they include a major acquisition and have been prepared on thebasis of the requirements of UK GAAP. The comparative figures for the sameperiod in 2005 and for the year ended 31 December 2005 have been restated toconform to UK GAAP, as explained in the notes to the accounts. The directors have declared a second interim dividend of 0.049p per share. Together with the first interim of 0.114p paid in April 2006, this brings thetotal interim payments up to 0.163p per share (2005: 0.132p per share) which isan increase of over 23%. The second interim will be paid on 27 October 2006 toshareholders on the register at the close of business on 6 October 2006. The £84 million acquisition of Schlegel, a leader in the manufacture andmarketing of door and window seals, was completed on 4 April 2006. This hasbroadened the sphere of operations of Lupus Capital plc and management hasreviewed the risk profile of the enlarged group. In the three months of ourhalf year the integration has proceeded smoothly. A number of fresh operational initiatives have been introduced, such as thereassignment of production between plants, efficiency and scrap initiatives andadditional workforce recruitment at lower cost levels. In sales and marketingnew customers have been won, exports to Eastern Europe have increased, priceshave been raised to reflect higher raw material costs and there has been arefocusing on higher margin customers and products. Under finance, workingcapital controls have been emphasised and financial analysis has initiatedtargets to recoup transportation and production costs. The incumbent managementteam is enthusiastic and more motivated to continue to develop the business. Sales were up over 10 per cent year on year with the US and Germany particularlystrong thanks to new products, market share gains and a good overall globalmarket both in new build and refurbishment. Profit growth resulted from these increased sales, productivity and costcontrols, which led to excellent cash generation after capital expenditure andworking capital requirements. Raw Material input costs continue to rise - these are mostly being passed on toour customers. The weakness of the dollar has had only a limited impact on thetranslation of profits. Gall Thomson, our manufacturer of marine and industrial breakaway couplings forthe oil and other heavy industries, for the first half year to 30 June 2006 hadrecord order books, produced growing profits over last year and continued todeliver commendable cash generation. Its market remains buoyant. We anticipate that Lupus will produce double digit earnings per share growth duefirstly, to the performance of our strong existing business, secondly, to thewell-priced acquisition and thirdly, to the reinvigorated Schlegel providing aprofit increase over the previous year. We have a well constructed strategy, a sturdy balance sheet, healthy operatingactivities, robust cash generation and an eager entrepreneurial management teamwho enjoy the challenge of continuing to develop Lupus Capital plc. Greg HutchingsChairman 28 September 2006 Consolidated profit and loss account Six months Six months ended ended Year ended 30 June 2006 30 June 2005 31 December 2005 (unaudited) (unaudited) (unaudited) Notes (restated) (restated) £'000 £'000 £'000 Revenue 4 23,684 3,137 7,479 Operating profit 4 4,389 832 2,345 Interest and similar items (509) 39 90 Profit before taxation 3,880 871 2,435 Taxation (1,476) (373) (1,025) Profit attributable to shareholders 2,404 498 1,410of the company Earnings per share - basic and 5 0.57p 0.21p 0.59pdiluted Consolidated Balance Sheet At 30 June At 30 June At 31 December 2006 2005 2005 (unaudited) (unaudited) (unaudited) Notes (restated) (restated) £'000 £'000 £'000 Non-current assets Goodwill 7 82,602 10,311 9,940 Tangible non-current assets 14,261 434 443 96,863 10,745 10,383 Current assets Inventories 8,521 371 331 Receivables 18,477 2,016 2,965 Cash 4,288 2,410 2,654 31,286 4,797 5,950 Current liabilities 8 (20,343) (1,101) (1,915) Net current assets 10,943 3,696 4,035 Total assets less current 107,806 14,441 14,418 liabilities Non-current liabilities 8 (40,678) (15) (21) Net assets 67,128 14,426 14,397 Capital and reserves Share capital 9 3,081 1,188 1,188 Merger reserve 10,389 10,389 10,389 Lesot reserve - (8,201) - Retained earnings 9 53,658 11,050 2,820 67,128 14,426 14,397 Consolidated Statement of Recognised Gains and Losses Six months ended Six months Year ended Ended 30 June 2006 30 June 2005 31 December 2005 (unaudited) (unaudited) (unaudited) Notes £'000 £'000 £'000 Opening balance - as previously 15,878 14,668 14,668stated Restatement 3 (1,481) (740) (740) Opening balance - as restated 3 14,397 13,928 13,928 Profit for the financial period/ 2,404 498 1,410year Shares issued net of costs 9 51,593 - - Translation adjustment (334) - - Dividends paid 6 (932) - (941) Closing balance 67,128 14,426 14,397 Consolidated Cash Flow Statement Six months Six months Year ended ended ended 30 June 2005 30 June 2005 31 December 2005 (unaudited) (unaudited) (unaudited) (restated) (restated) £'000 £'000 £'000 Cash flows from operating activitiesOperating profit 4,389 832 2,345 Depreciation 544 7 58Amortisation of goodwill 22 370 741Movement in inventories 1,339 (120) (80)Movement in receivables (1,462) 306 (642)Movement in payables 303 (120) 342 Interest received 179 155 316Interest paid (688) (117) (226) Corporation tax paid (709) (507) (806) Net cash from operating activities 3,917 806 2,048 Investing activitiesAcquisition, net of cash acquired (47,223) - -Schlegel debt repaid upon acquisition (40,281) - -Property, plant and equipment (400) (45) (105) Net cash from investing activities (87,904) (45) (105) FinancingIssue of shares net of costs 51,593 - -Capital element of finance leases (40) - 3Bank loan 35,000 - -Equity dividends paid (932) - (941) Net cash from financing activities 85,621 - (938) Increase in cash and cash equivalents 1,634 761 1,005 Notes 1. Status of the financial statements These financial statements are not the Company's statutory accounts for thepurposes of Section 240 of the Companies Act 1985. They are unaudited. TheCompany's statutory accounts for the year ended 31 December 2005, prepared inaccordance with IFRS, received an unqualified audit report and have been filedwith the registrar of companies at Companies House. The Directors approved the interim report on 28 September 2006. 2. Accounting policies The interim financial information has been prepared in accordance with UnitedKingdom Generally Accepted Accounting Principles (UK GAAP), which are theaccounting policies to be used in the Report and Accounts of the Group for theyear ended 31 December 2006. The consolidated financial statements for the year ended 31 December 2005 wereprepared in accordance with International Financial Reporting Standards (IFRS).UK GAAP differs in some respects from IFRS. The relevant change of accountingpolicy is as follows: Under IFRS, the requirement to amortise goodwill was replaced by an impairmentreview of the value of the Company's investments. The directors conducted animpairment review and concluded that the value at which Gall ThomsonEnvironmental Limited (Gall Thomson) was stated in the Company's balance sheetat 1 January 2004 and the value at which KLAW Products Limited was stated in thebalance sheet of Gall Thomson at 1 January 2004 were not greater than therealisable values of those investments. Therefore the carrying value ofgoodwill under IFRS was the value as at 1 January 2004 and no further provisionwas made against that value. Under UK GAAP a decision to cease amortisationrepresents a change in accounting policy; no such change was made in respect of2004 or 2005. The Board has resolved that amortisation should be discontinuedunder UK GAAP with effect from 1 January 2006. Therefore the valuation ofgoodwill is lower under UK GAAP by two years' amortisation. The accounting policies are unchanged from those used in the last annual accounts except where otherwise stated. 3. Restatements The restatements required by the changes in accounting policy, as set out in note 2 above, are as follows: (a) Profit after taxation Six months ended Year ended 30 June 2005 31 December 2005 (unaudited) (unaudited) £'000 £'000 Profit for the financial period/year, as 868 2,151 previously stated under IFRS Amortisation of goodwill (370) (741) As reported under UK GAAP 498 1,410 (b) Net assets At 1 January 2006 At 1 January 2005 (unaudited) (unaudited) £'000 £'000 Opening net assets, as previously stated 15,878 14,668under IFRS Amortisation of goodwill (1,481) (740) As reported under UK GAAP 14,397 13,928 4. Revenue and operating profit The group's income and profit for the period included three months' results for the Schlegel business acquired on 4 April 2006. The analysis of the operating results is as follows: Schlegel Pre-existing Lupus Total group (3 months) (6 months) £'000 £'000 £'000 Revenue 19,746 3,938 23,684 Cost of sales (7,381) (1,307) (8,688) Gross profit 12,365 2,631 14,996 Administrative expenses (9,297) (1,310) (10,607) Operating profit 3,068 1,321 4,389 5. Earnings per share Earnings per share figures are based on the weighted average of 421,753,113ordinary shares in issue during the half-year ended 30 June 2006 (half-year to30 June 2005 and year to 31 December 2005: 237,696,286 shares). The number ofshares in issue at 30 June 2006 was 616,267,715 (30 June 2005: 237,696,286shares). 6. Dividends The final dividend for the year ended 31 December 2005 of 0.278p per share(2004: 0.264p per share) was paid to shareholders on 22 June 2006 and absorbed£661,000. A special interim dividend of 0.114p per share was paid on 21 April 2006. Thedirectors have today, 28 September 2006, declared a further interim dividend of0.049p per share, making total interim payments of 0.163p per share (2005:0.132p). This second interim dividend will be payable on 27 October 2006 toshareholders on the register at the close of business on 6 October 2006. Thetwo interims together will absorb £573,000 (2005: £314,000). The dividends paid or payable and those proposed are summarised below: Six months Six months Year ended Ended Ended 31 December 30 June 30 June 2005 2006 2005 (a) dividends reflected in the financial statements Dividends paid per share 0.392p - 0.396p (b) dividends not reflected in the financial statements Final dividend proposed per share - 0.264p 0.278p Interim dividend proposed per share 0.049p 0.132p - 7. Goodwill The building products business of Schlegel was acquired on 4 April 2006 for £84million. These interim results include a provisional assessment of fair valueof the assets and liabilities and consequently of the goodwill. 8. Liabilities Current liabilities include the £5,000,000 loan and non-current liabilities include the non-current loan of £30,000,000 described under note 9 below. No drawings have been made under the revolving loan facility. Net debt stood at £31,800,000. 9. Funding of the acquisition of Schlegel The acquisition of Schlegel was financed by: (i) Raising £53 million by way of a placing and open offer of 378,571,429 ordinary shares in Lupus at an issue price of 14p per share. The shares were issued through a subsidiary in such manner that the entire premium on the issue became available as a credit to distributable reserves. (ii) A new debt facility provided by Bank of Scotland comprising a term loan of £35,000,000 (of which £30,000,000 is current and £5,000,000 long-term) and a multicurrency revolving loan facility of £10,000,000. Secretary Cavendish Administration Limited Registered office Crusader House 145-157 St John Street London EC1V 4RU The interim report will be sent to shareholders and copies will be made available to the public at the registered office of the Company and at the Company's website www.lupuscapital.co.uk. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Tyman