Preliminary Results

Capcon Holdings plc ("Capcon" or the "Company")

Preliminary results for the year ended 30 September 2010

__________________________________________________________________________________________

Main points

§ Strong cash flow from operations.

§ Gross margins maintained.

§ Stable trading in difficult market conditions.

§ Argen investigations division continues recovery.

§ Review of growth opportunities continues.

Capcon Holdings plc, the AIM listed investigations and risk management company, announces its audited consolidated results for the year ended 30 September 2010.

Enquiries:

Capcon Holdings plc

Cliff Cavender, Director 0870 067 5050

Allenby Capital Limited

(nominated adviser and broker)

Nick Naylor / Nick Athanas 020 3328 5656

Chairman's statement

Operational review

Despite the continuing economic difficulties and challenging market conditions, we have been able to maintain a stable trading performance in the year ended 30 September 2010. The leisure and hospitality sector, in which many of our clients operate, has failed to recover to the extent expected at the beginning of the financial year and is the main factor in reducing our Group operating profit to a lower level than last financial year. However, following positive action by the management to control costs, we have continued to generate cash from operating profit and reduced bank borrowings.

As previously reported, last financial year included significant income from our engagement by the insolvency practitioner acting for Stanford International Bank (SIB). It was expected that this work would lead to further investigatory work for this client and other insolvency practitioners. However, considering the level of working capital that has been required to be invested in SIB alone, the Board decided that pursuit of such work was not appropriate for Capcon at this stage of its development, and no significant profit has been generated in this financial year from investigation services supplied to insolvency practitioners.

A considerable effort has been expended in developing the Argen investigations division to raise the profile of this prestigious name and rebuild the business as a leading corporate investigator. As a consequence, we have gained new clients and increased the underlying sales level both in the UK and overseas.

Action taken to reduce operating costs in the previous financial year has created a solid operating base to enable the Group to endure the current harsh trading conditions. This reshaping of the cost base, together with recent trends towards the provision of higher added value services and higher margin levels, leads the Board to believe that Capcon will emerge from the recession a stronger company with greater growth potential.

The Board has devoted considerable time to matters of strategic development that will facilitate the growth of Capcon as a public company. As well as review and appraisal of potential synergistic business acquisitions, the Board has considered the development of complementary businesses utilising the investment of new funds into Capcon. Although no specific new acquisitions are currently being progressed, these reviews will remain an important on-going process for the Board in the current financial year.

On 13 August 2010 it was announced that Jane Fowler had been appointed to the Board as a Non Executive Director with immediate effect. Jane has extensive experience in forensic accounting, risk management, investigative services and compliance and we are delighted to have the benefit of her considerable experience on the Board.

Financial overview

Sales for the year to 30 September 2010 were £3.13 million (2009: £3.65 million) representing a 14.2% decrease on last year. This decrease was primarily due to lower activity for services to the leisure sector and the absence of investigatory work for SIB, which was a major contributor to sales income in 2009. The overall gross margin of 39.5% showed a slight improvement on last year's level of 39.4%. This reflects an improved margin level achieved on audit and stocktaking services which more than offset the adverse effect of the lower sales level of investigatory services, which traditionally yield a higher margin level than audit and stocktaking services.

The Group achieved a profit from operations of £0.13 million (2009: £0.25 million) for the year and a loss before tax of £0.13 million (2009: loss of £0.05 million) was generated after charging interest of £0.27 million (2009: £0.31 million). The interest charge includes a net charge of £0.01m (2009: £0.10million) resulting from the revaluation (as required under IFRS) of the Group's cap and collar agreement with its bank, which expires in 2013.

The Directors considered that no further impairment of goodwill was necessary for the year.

The basic loss per share of 1.1p for the year compares with 0.5p loss per share for the year ended 30 September 2009.

It has been another year in which a considerable amount of time has been spent by the Directors on corporate development matters, including the review of various potential business opportunities that the Board believe could enhance the Group's prospects for growth in the medium term. Meanwhile, continued attention to the containment of central overhead costs has been a high priority for the Directors and has been an important factor in ensuring that operating profit is achieved despite the difficult trading conditions and lack of opportunities to develop the Group's operations in the year. Central overhead costs were reduced by 3.3% in the year ended 30 September 2010 compared to the previous year.

There was a net cash inflow from operating activities before changes in working capital of £0.16 million (2009: £0.28 million) which was reduced to £0.15 million (2009: £0.34 million) after working capital movements. Total borrowings were increased in the year by £0.07 million from £1.70 million to £1.77 million, due to a reduction in invoice discounting and bank borrowings, being more than offset by increased Directors' loans. During the year, the Group redeemed £0.03 million of loan stock, leaving a balance of £0.65 million at the end of the financial year, bearing interest of 10% p.a., of which £0.60 million is held by two directors. The debt owed by Stanford International Bank since last financial year remains unpaid but the Directors, having received acknowledgement from the administrator that the debt is owed, believe that it will be settled when the administrator has realised sufficient funds, although timing of this settlement remains uncertain.

A continuing reduction in the level of borrowings remains a priority and, accordingly, the Directors will continue the policy of not recommending the payment of a dividend, as last year, until such time as the company has positive reserves.

Directors' interests

On 5 February 2010, 418,350 shares were issued to Cliff Cavender following his exercise of share options in the Company at 6p per share. This issue of shares has increased his holding to the equivalent of 5.6% of the issued share capital at 30 September 2010. Post year end, Ken Dulieu purchased 25,000 shares at 4p per share increasing his holding to the equivalent of 50.02% of the issued share capital of Capcon Holdings Plc. As at the date of this report, the number of shares held by the Directors is now equivalent to 86.3% of the issued capital.

Audit, stocktaking and investigations - Leisure

Sales of £2.69 million were 12.4% lower than last year due to reduced revenues from audit and stocktaking services and contract based investigatory services. Profit from operations was £0.41 million compared to £0.47 million last year, a 12.8% reduction. The difficulties for the leisure sector, referred to in the Group's Interim Report for the six months ended 31 March 2010, continued into the second half of the financial year, with a consequent adverse effect on sales levels. In addition, a long standing contract for investigatory services for a major ferry company was not renewed this year due to a restructuring and rationalisation by the client. However, there are signs that some areas within the leisure sector may be slowly recovering from the protracted recessionary period, evidenced by an increase in enquiries for our services in the second half of the financial year. In addition, some of our major clients have commenced acquisition programmes and, as a consequence, started to increase demand for our services towards the end of the financial year. As previously reported, the true value of our services is invariably highlighted when clients' gross margin levels are adversely affected by short term cut backs in our services. As a consequence, we believe that the need to re-instate our controls and procedures to previous levels will be acknowledged by many of our larger clients and will lead to higher sales in the current financial year.

The growing budget hotel sector has continued to create higher demand for our audit and stocktaking services where the more sophisticated nature of the work undertaken justifies a higher fee level to reflect the value added. In addition we have launched a new service, 'Margin Review', which is a consultancy service aimed at helping clients to improve their margins by implementing better controls. The consequent higher margin levels we are now achieving, combined with our continued pressure on reducing operating costs in all areas, has softened the impact of lower sales in this financial period. The operating profit margin for leisure based services has reduced by only 0.1% to 15.1% despite a significant reduction in sales of high margin investigation services.

As part of our ongoing attention to improving and updating our services, we have been investing in our IT systems to give greater on line access to clients through any web browser, thus allowing much greater flexibility and convenience. We have also re-branded the division and launched a new, more informative and user friendly website which is more focused on customers' needs than its predecessor.

Other investigation services

Sales for other investigation services for the year ended 30 September 2010 were £0.45 million compared to £0.58 million last year, a 22% decrease. However, the sales for last financial year included a significant level of services relating to an engagement to the insolvency practitioner for Stanford International Bank. That engagement was untypical of the usual services provided through the Argen brand name which showed a 12% increase on investigation services provided this financial year compared to last. Operating profit for this division has reduced from £0.19 million last year to £0.12 million in the year to 30 September 2010, which masks an increase in underlying profit for 'Other' investigation services if the engagement on Stanford International Bank is excluded.

The growth in investigative services provided by Argen is encouraging and we continue to gain new clients in the UK and overseas. The Argen business is project driven and, therefore, non recurring by nature, which makes it difficult to predict future income with any certainty. However, the growing client base and regular referrals from existing clients give us confidence that sales from this division should remain buoyant in the current financial year. In addition, ongoing marketing initiatives to raise the profile of Argen will further strengthen the prospects for increasing the client base.

We continue to maintain our overhead cost base at a minimal level until we are confident that the higher sales activity is sustainable in the medium term. Meanwhile, the limited internal resources must continue to be shared between operational and business development activities which, inevitably, limit the rate of growth at the present time.

Current trading and prospects

The current financial year has seen a continuation of the difficult trading conditions in the leisure sector although demand for 'Other' investigation services, which covers several sectors including financial services, continues to increase. We are optimistic that demand for our audit and stocktaking services will improve in the medium term as clients are reminded that our services are an essential feature in maintaining their profit margin levels, irrespective of the slow market recovery in the leisure and hospitality sector.

Within the first quarter of the current financial year, audit and stocktaking have been requested to tender on significant appointments for two large new clients' and feedback which to date has been very positive. The Directors are confident that the management can continue this trend of growth. In addition, all major divisions are reviewing their current operations to develop marketing and business development plans, to raise the profile of Capcon further as the leisure industry continues to recover from the recession.

The Directors continue to view Capcon as a stable vehicle upon which to build and develop new opportunities. It is acknowledged that there are currently limitations to growth until a suitable opportunity is identified, which will also facilitate the restructuring of the Group's balance sheet and make the Company more attractive to existing shareholders and new potential investors in the future. Therefore, identifying such an opportunity in the short term will remain the Board's high priority.

K P Dulieu

Chairman

25 February 2011

Capcon Holdings plc

Consolidated statement of comprehensive income for the year ended 30 September 2010

__________________________________________________________________________________________

Note 2010 2009

£ £

Revenue 3,134,274 3,652,396

Cost of sales (1,894,687) (2,214,589)

_______ _______

Gross profit 1,239,587 1,437,807

Administrative expenses (1,106,110) (1,185,160)

_______ _______

Profit from operations 133,477 252,647

Finance income - 8,667

Finance expense (265,293) (315,971)

_______ _______

Loss before taxation attributable to owners of the parent (131,816) (54,657)

Tax expense - - _______ _______

Loss for the year attributable to owners of the parent (131,816) (54,657)

Other comprehensive loss - -

_______ _______

Total comprehensive loss attributable to owners of the parent (131,816) (54,657)

_______ _______

Loss per share for loss 1

attributable to the owners of the

parent during the year

Basic (1.1p) (0.5p)

Diluted (1.1p) (0.5p)

Consolidated statement of changes in equity for the year ended 30 September 2010

__________________________________________________________________________________________

Group Share Share Retained Total capital premium Merger earnings Equity

account reserve

£ £ £ £ £

At 1 October 2008 116,803 2,817,895 950,000 (4,621,124) (736,426)

Total comprehensive loss for the year

attributable to the owners of the parent - - - (54,657) (54,657)

_______ _______ _______ ________ ________

At 1 October 2009 and 30 September 2009 116,803 2,817,895 950,000 (4,675,781) (791,083)

Issue of Share Capital 5,053 25,047 - - 30,100

Total comprehensive loss for the year

attributable to the owners of the parent - - - (131,816) (131,816)

_______ _______ _______ _______ ________

At 30 September 2010 121,856 2,842,942 950,000 (4,807,597) (892,799)

_______ _______ _______ ________ _______

Consolidated statement of financial position at 30 September 2010

__________________________________________________________________________________________

(Company No 4196004)

2010 2009

£ £

Assets

Non current assets

Intangible assets 1,425,264 1,425,264

Property, plant and equipment 36,694 36,543

_______ _______

Total Non current assets 1,461,958 1,461,807

Current assets

Trade and other receivables 751,971 840,299

Derivative financial assets 376 8,667

Cash 746 706

_______ _______

Total current assets 753,093 849,672

_______ _______

Total assets 2,215,051 2,311,479

Liabilities

Non current liabilities

Loans and borrowings 605,378 600,000

Derivative financial liabilities 47,881 37,556

_______ _________

Total non current liabilities 653,259 637,556

______ _______

Current liabilities

Trade and other payables 1,134,161 1,200,885

Loans and borrowings 1,166,762 1,102,971

Derivative financial liabilities 50,118 57,600

Provision 103,550 103,550

_______ _________

Total current liabilities 2,454,591 2,465,006

_______ _______

Total liabilities 3,107,850 3,102,562

_______ _______

Net liabilities (892,799) (791,083)

_______ _______

Capital and reserves

Called up share capital 121,856 116,803

Share premium account 2,842,942 2,817,895

Merger reserve 950,000 950,000

Retained earnings (4,807,597) (4,675,781)

_______ _______

Shareholders' deficit (892,799) (791,083)

_______ _______

The financial statements were approved by the Board and authorised for issue on 25 February 2011

C J Cavender

Director

Consolidated statement of cash flows for the year ended 30 September 2010

__________________________________________________________________________________________

2010 2009

£ £

Cash flows from operating activities

Loss for the year (131,816) (54,657)

Depreciation 22,366 23,949

Finance income - (8,667)

Finance expense 265,293 315,971

_______ _______

Cash flows from operating activities before

 changes in working capital 155,843 276,596

Decrease in trade and other receivables 88,328 16,204

Increase/(decrease) in trade and other payables (95,224) 46,404

_______ _______

Net cash generated from operating activities 148,947 339,204

Cash flows from investing activities

Purchase of property, plant and equipment. (9,717) (4,072)

_______ _______

Net cash used in investing activities (9,717) (4,072)

Cash flows from financing activities

Issue of ordinary shares 30,100 -

Finance expense paid (116,847) (114,889)

Increase in director loans 86,824 -

Repayment of loan stock (25,000) -

Repayment of invoice discounting facilities (44,347) (134,690)

Principal payment under finance leases (5,279) (5,026)

_______ _______

Net cash used in financing activities (74,549) (254,605)

_______ _______

Increase in net cash and cash equivalents in the year 64,681 80,527

Cash and cash equivalents at the beginning (463,513) (544,040)

 of year

_______ _______

Cash and cash equivalents at the end of year (398,832) (463,513)

_______ _______

Notes to the final results for the year ended 30 September 2010 

1 Loss per share

Loss per ordinary share has been calculated using the weighted average number of shares in issue during the relevant financial periods. The weighted average number of equity shares in issue is 11,953,079 (2009-11,680,292) and the earnings, being loss after tax, are £131,816 (2009 - £54,657, loss).

2010 2009

£ £

Reconciliation of losses

Loss used for calculation of basic and diluted EPS (131,816) (54,657)

_______ _______

Reconciliation of denominator

Shares used for calculation of basic EPS 11,959,988 11,680,292

_______ _______

Shares used in calculation of diluted EPS 11,959,988 11,680,292

_______ _______

Loss per share

Basic (1.1p) (0.5p)

Diluted (1.1p) (0.5p)

Employee options have been excluded from the calculation of diluted EPS as their exercise price is greater than the average share price for the year. The number of shares options in issue at 30 September 2010 was 125,000 (2009: 1,163,850).

2 The financial information set out above does not constitute the company's statutory accounts for the years ended 30 September 2010 and 30 September 2009 but is derived from those accounts. Statutory accounts for 2009 have been delivered to the Registrar of Companies and those for 2010 will be delivered following the company's annual general meeting. While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS), this announcement does not itself contain sufficient information to comply with IFRS. Capcon will publish a full annual report that complies with IFRS on 28 February 2011.

3 The total number of ordinary shares in issue as at today's date is 12,185,598.

4 The Audited Annual Report and Accounts for the year ended 30 September 2010 and the Notice of Annual General Meeting will be available to view and download from Capcon's website (www.capconplc.com) from 28 February 2011 in accordance with rule 26 of the AIM Rules for Companies.