Tyman Regulatory News (TYMN)

LUPUS CAPITAL PLC

("Lupus" or "the Group" or "the Company")

UNAUDITED PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2011

Lupus Capital plc, a leading international supplier of components to the door and window industry, announces preliminary results for the year ended 31 December 2011.

Financial Highlights - Continuing Operations

"Underlying" is defined as before amortisation of intangible assets, deferred tax on amortisation of intangible assets, exceptional items, unwinding of discount on provisions, amortisation of borrowing costs and the associated tax effect.

·; Disposal of Gall Thomson for cash consideration of £75 million leads to the creation of a focused Building Products Group

·; Pro Forma Underlying Net Debt at 31 December 2011 following disposal of Gall Thomson of c. £23 million reduces leverage from 2.24x to 0.7x Net Debt: EBITDA

·; Underlying Earnings Per Share from continuing operations increased by 3 per cent. to9.04 pence (2010: 8.78 pence)

·; Dividend increased by 75 per cent. to 3.5 pence per share (2010: 2.0 pence)

Reconciliation of Continuing and Discontinued Operations

Jamie Pike, Non-Executive Chairman, commented:

"The disposal of Gall Thomson upon favourable terms marks the completion of the refocusing of Lupus as a supplier of components to the door and window industry worldwide. The Group now has significant financial flexibility to achieve its strategic goals and to accelerate the development of the Building Products Division.

"We believe that the Building Products Division will continue to outperform its key markets in 2012 and beyond due to the Group's relative financial strength following the disposal of Gall Thomson. Market conditions, however, remain challenging across all our markets.

"In North America we are pleased with the new facility in Atlanta, Georgia as it comes on stream and the integration of Overland Products into the Group.

"The increase in the dividend of 75 per cent. to 3.50p is a sign of our confidence in the Group's improved financial position and prospects. Going forward, the Board intends to continue a progressive dividend policy taking into account the Group's leverage, earnings growth potential and future expansion plans.

The Board believes the Group is now well positioned for the future."

13 March 2012

Enquiries:

A presentation for analysts and investors will be held at the offices of Collins Stewart Hawkpoint, 88 Wood Street, London EC2V 7QR at 11.00 am on Tuesday 13 March 2012.

CHAIRMAN'S STATEMENT

OVERVIEW

The trading environment in the US and UK building products markets during 2011 proved to be as challenging as expected. However the continued focus of the Group on self help measures enabled further progress to be made as the Group moves towards recovery in its end markets.

The disposal of Gall Thomson upon favourable terms marks the completion of the refocusing of Lupus as a supplier of components to the door and window industry worldwide. The Group has significant financial flexibility to achieve its strategic goals and to accelerate the development of the Building Products Division and the Board believes the Group is now well positioned for the future.

RESULTS FROM CONTINUING OPERATIONS

For the year ended 31 December 2011, compared with the prior year, the Group generated the following results from Continuing Operations:

SALES

Total sales of Building Products in the year of £230.4 million decreased by 8.8 per cent. from the prior year (2010: £252.5 million). In constant currency terms, total sales decreased in the year by 7.6 per cent.

MARGINS

Despite our success in passing on pound for pound input cost increases, the lower volumes sold by the Building Products Division in 2011 impacted both gross and operating margins. The Group's gross profit margin decreased to 31.5 per cent. from 32.9 per cent. in 2010. The Underlying operating margin for the Group decreased from 10.3 per cent. in 2010 to 9.7 per cent. in 2011.

PROFITS

Underlying earnings before interest, tax, depreciation and amortisation were £27.7 million (2010: £32.5 million).

Underlying operating profit decreased by 14.1 per cent. to £22.4 million (2010: £26.1 million). On a constant currency basis this represents a decrease of 12.8 per cent. over the prior year.

Underlying administrative expenses decreased by £6.8 million or 12.0 per cent. to £50.1 million (2010: £56.9 million). Administration costs included lower freight, commission and management incentive costs associated with the subdued levels of activity.

Net finance costs decreased by 20.2 per cent. to £9.7 million (2010: £12.1 million), reflecting a combination of lower levels of absolute debt and the beneficial impact of the 2011 refinancing on margins payable. Amortisation of borrowing costs increased from £2.3 million to £3.1 million reflecting the write off of £2.9 million of costs associated with the 2009 bank facility. Net cash interest paid of £6.7 million (2010: £9.3 million) was 27.9 per cent. lower than that paid in 2010.

Underlying profit before taxation from continuing operations was £0.5 million lower at £16.3 million (2010: £16.8 million) with the improved interest position partially offsetting the decline in Underlying Operating Profit.

EARNINGS PER SHARE

Underlying earnings per share from continuing operations increased by 3 per cent. to 9.04 pence (2010: 8.78 pence). Basic earnings per share from continuing operations increased from 1.15 pence in 2010 to 6.23 pence.

EXCEPTIONAL COSTS

Exceptional costs of £0.8 million (2010: £0.4 million) were incurred during the period, principally in connection with the further restructuring of the UK composite doors business and the reorganisation of the Building Products Division outside of North America.

TAXATION

There was a net tax credit in the year amounting to £6.8 million in respect of continuing operations (2010: charge of £0.3 million). Exceptional tax credit adjustments in respect of prior periods of £5.0 million arose in 2011 from the clarification with the tax authorities of the tax treatment of provisions, principally those made at the time of the acquisitions in 2006 and 2007.

Excluding the effect of the change in tax rates on deferred tax and the adjustments in respect of prior periods, the Underlying tax rate on the Underlying profit before taxation of continuing operations was 28 per cent. (2010: 32 per cent.). The Underlying tax rate decreased during 2011 due mainly to the corporation tax rate reductions in the United Kingdom.

The Underlying cash tax rate in the year was 11 per cent. (2010: 14 per cent.) and is lower than the Underlying tax rate due to historic losses utilised and tax deductible goodwill. The Underlying cash tax rate is expected to trend towards the Underlying tax rate over the coming years.

DIVIDEND

The Group's enhanced financial position following the disposal of Gall Thomson enables the Board to recommend a final dividend of 3.5 pence per share (2011: 2.0p per share) an increase of 75 per cent. and covered 2.6 times by Underlying Earnings per Share from continuing operations. The final dividend will absorb approximately £4.5 million of cash resources and is expected to be paid following the Annual General Meeting scheduled for 25 May 2012.

The Board has reviewed the Group's dividend policy in the light of the Group's altered profitability and cashflow characteristics. Going forward, the Board intends to continue a progressive dividend policy taking into account the Group's leverage, earnings growth potential and future expansion plans and intends to target dividend cover of between 2.0 - 2.5 x Underlying EPS through the cycle.

The Group intends to resume interim dividend payments during 2012.

Financial Position

During the year the Group continued to focus on the tight management of working capital, operational cash generation and the reduction of net debt.

CASHFLOW

For the Group as a whole, net cash inflow from operating activities of £30.7 million was approximately 15 per cent. lower than the prior year (2010: £36.3 million) principally due to lower levels of operating profit combined with some incremental investment in working capital in the year.

Capital expenditure increased by 32 per cent. to £4.4 million (2010: £3.3 million) which meant that Operational Cashflow fell to £28.2 million (2010: £35.3 million).

Operational Cashflow from continuing operations was approximately £19.0 million (2010: £28.7 million) and Operating Cash Conversion from continuing operations was approximately 84.8 per cent. (2010: 110.0 per cent.). This is lower than our through the cycle target which remains at 100 per cent.. Over the past three years the Group has averaged Operating Cash Conversion from continuing operations of 115 per cent..

NET DEBT POSITION

As at 31 December 2011, the Group's Underlying Net Debt was £91.2 million (2010: £94.7 million). This figure is stated after the payment of approximately US$15 million to acquire Overland, as announced on 23 December 2011. On a pro forma basis the Group's Underlying Net Debt following the disposal of Gall Thomson at 31 December 2011 would have been approximately £23 million.

Average Underlying Net Debt during the year was £91.8 million (2010: £113.9 million). Under the IFRS definition, which reduces debt by unamortised bank fees, net debt at the year end was £88.8 million (2010: £91.7 million).

BANKING AND COVENANTS

During the year the Group refinanced its banking facilities into a new £110 million multicurrency term loan and a £30 million multicurrency working capital facility. This successful early refinancing of facilities gives Lupus a sound financial platform until March 2016 and provides the Group with more favourable terms, reduced costs and significantly enhanced flexibility.

1 All covenant measures calculated as defined by the Group's 2011 facility agreement.

2 Headroom relates to EBITDA or cashflow available for relevant debt service

The Group's key banking performance metric is leverage, calculated as the proportion of Underlying Net Debt to Adjusted EBITDA. On a pro forma basis, following the disposal of Gall Thomson, the Group's leverage at the year end would have been approximately 0.7x, measured on the same basis as the banking covenants.

Following the disposal and related permanent debt repayments of approximately £30 million the Group's facilities reduce to a multicurrency term loan of approximately £80 million and a £30 million multicurrency working capital facility.

DEFINED BENEFIT PENSION AND POST RETIREMENT BENEFIT SCHEMES

The Group's principal defined benefit pension scheme and post retirement healthcare benefit scheme is operated in the US. The pension scheme is closed to new entrants and post retirement healthcare benefit contributions are capped.

At 31 December 2011, the defined benefit obligation for all Group pension and post retirement healthcare benefit schemes was £21.8 million (2010: £18.9 million) and the schemes had plan assets of £12.1 million (2010: £11.6 million), resulting in an increased net deficit on the schemes of £9.7 million (2010: £7.2 million).

Cash contributions made to the schemes in the year were £1.2 million (2010: £0.8 million).

DISCONTINUED OPERATIONS

The results of Gall Thomson are presented in aggregate as discontinued and are disclosed as a one line item on the face of the consolidated income statement. Transaction-related costs (including legal and accountancy costs and adviser fees) of approximately £2 million will be charged against the profit on sale of discontinued operations in the 2012 financial statements.

The disposal of Gall Thomson for £75 million was announced on 13 March 2012 and will lead to an accounting profit on disposal of approximately £53 million, which will be recognised in the 2012 financial statements.

BUILDING PRODUCTS

1Comparative figures for 2010 have been revised to reflect the elimination of intragroup trading more accurately and to re-apportion head office overheads previously included in the results of the discontinued Oil Services division.

The Building Products division comprises the Group's door and window hardware and seals operations. The division's businesses are market leaders and operate across the Americas, the UK, Europe and Australasia. In 2011, trading in our building products businesses declined as markets continued to be difficult.

During the year, we completed an organisational restructuring of our Building Products Division outside of North America with separate MD divisional roles created for the UK and Ireland business and the International business. External hires have been appointed to these key management roles and this reorganisation and strengthening of our divisional management team will enable us to provide increased focus to each region and facilitate expansion into new products and geographies.

US BUILDING PRODUCTS

1Comparative figures for 2010 have been revised to reflect the elimination of intragroup trading more accurately and to

 re-apportion head office overheads previously included in the results of the discontinued Oil Services division.

Amesbury, our North American Building Products business, had an encouraging start to the financial year however saw demand soften across the remainder of 2011 as US window shipments fell year on year. Quoting levels across Amesbury increased in the fourth quarter as customers continue to look at consolidating their supply base and consider new product development opportunities.

We remain positive about the long term prospects for Amesbury and in 2011 continued to invest in the North American business. Towards the year end we started the fit out of our new extrusion plant in Atlanta which came on stream in February 2012 and, in December 2011, we announced the US$15 million acquisition of Overland which adds a number of complementary stamping products to the Amesbury offering.

We have started a significant programme of investment in IT systems in Amesbury that will move all our North American businesses onto a common platform, streamlining reporting and improving our customer and supplier interface. Over the next three years we expect to invest approximately US$5 million in this programme.

New products launched into the American market in 2011 included our initial casement winder offering, microbial pile, intumescent seals, as well as numerous bespoke products developed for individual customers.

UK BUILDING PRODUCTS

1 Comparative figures for 2010 have been revised to reflect the elimination of intragroup trading more accurately and to

re-apportion head office overheads previously included in the results of the discontinued Oil Services division.

In the UK and Ireland, grouphomesafe's smaller portfolio businesses - Balance, Ventrolla and Linear - each exhibited very strong growth and continued to take market share, with our differentiated product offering partially offsetting weaker demand from larger customers such as window fabricators and social housing contractors.

The distribution sector held up well during the year as consumers continued to undertake small scale repair projects, however, the OEM sector saw marked declines as homeowners appeared reluctant to commit to larger scale refurbishment projects. The social housing sector continued to contract as Housing Associations and Local Authorities reduced expenditure.

There were significant movements in input costs during the year with increases coming through in the first half which eased in the second half. We successfully continued our policy of passing on cost increases as they occurred in order to defend margins. Despite input cost volatility and continued losses incurred within our composite doors business, the Underlying operating margin for grouphomesafe improved slightly in the year as we successfully flexed our cost base.

Our composite door business had another difficult year with further declines in its key social housing markets, and remained loss making across the year as a whole. The business had some initial success in the year in selling direct to the trade and retail composite door markets and will look to develop this route to market further in 2012 following the introduction of our on line door configurator. In 2011, further actions were taken to reduce the cost base, streamline manufacturing processes and review the operational footprint.

During the period we continued the development of "grouphomesafe" as the umbrella brand for our UK Building Products business and maintained our focus on improving our customer service within the UK market, as we seek to differentiate ourselves from the competition by setting industry leading standards for delivery on time and in full.

New products launched into the UK and Ireland market in 2011 included a door offering from Ventrolla, a range of suited hardware and a biometric lock offering from ERA and an intumescent seal from Schlegel.

International Building Products

1Comparative figures for 2010 have been revised to reflect the elimination of intragroup trading more accurately and to

re-apportion head office overheads previously included in the results of the discontinued Oil Services division.

Our International Building Products division, which goes to market under the Schlegel brand, has seen sales decrease in 2011 compared with the corresponding period last year.

Northern and Eastern European markets remained strong and demonstrated growth year on year, however Southern European markets remained subdued. Our Brazilian business continued to gain market share and position. In Australasia, the year started slowly following the various natural disasters in the region but showed some signs of improvement towards the year end. Profitability in the division was affected by a combination of operational gearing and product mix.

The new management structure we have put in place for the International Division enables us to provide increased focus to the division and should facilitate expansion into new products, applications and geographies.

Group 2011 Operational Performance

During 2011 we remained focused on maintaining tight controls over costs in all our businesses. Headcount at 31 December 2011 in the Building Products Division of 1,880 was lower than the prior year (2010: 1,956) as we flexed labour where necessary and permitted limited selective hiring of permanent personnel only where merited by business activity levels.

Raw material prices of steel and oil derivative products increased during the first half of the financial year but ameliorated during the second half. We continued to adopt a structured and disciplined approach to increases to our cost base, ensuring that we multisource product wherever possible and remain diligent in passing permanent cost increases on to customers.

We have continued our focus on tight management of working capital. Some investment in inventory was required during the year, in part a consequence of the high levels of trading that we saw at the end of 2010 which depressed year end inventory levels.

During the year a number of our customers ceased trading, however vigilant management of customer credit risks throughout the year, starting at the point of sale, meant that bad debts written off amounted to only 0.3 per cent. of sales (2010: 0.1 per cent.). During the year we were successful in extending credit terms over the purchase of certain products which in turn benefited our payables position with no adverse affect on our supplier base.

We continue to promote the financial strength of the Group to the credit insurers of our major suppliers in order to optimise the credit terms that we receive from our supplier base and to work closely with our customer base to ensure we understand their balance sheet position and creditworthiness.

PROPERTY

During the year we have continued to examine our manufacturing footprint as we seek to develop centres of excellence that give us sufficient flexibility to manage current demand levels but allow us the potential to respond quickly to changes in the market environment if required.

In North America we completed the first stage of rationalisation of operations at Sioux Falls, South Dakota; combining our Door and Window hardware facilities onto a single site. We retain the freehold of the vacant site and are exploring options for divestiture. We signed a five year lease on our new Atlanta extrusion facility and took on an additional 20,000 sq ft at our leasehold facility in Juarez, Mexico as we continue to develop our near shoring strategy for the North American market.

In the UK we extended our lease at EWS Wolverhampton for a further five years to March 2020 and assigned the lease on Unit B, one of the two remaining surplus properties at Peterlee, County Durham.

During the year the Group utilised aggregate property provisions of £1.3 million and released further property provisions of £1.2 million principally in connection with the exit from Unit B at Peterlee.

Since the year end we have successfully assigned the lease on Unit A at Peterlee and have been released from all remaining obligations in connection with the Peterlee site. This will result in a release to the income statement in 2012 of around £1.9 million of provisions, which will increase 2012 profit after tax by approximately £1.4 million.

The exit of the two Peterlee properties will save the Group in excess of £3.0 million in cash costs of rent, rates, utilities and services over the six years to March 2018.

DISCONTINUED OPERATIONS - OIL AND GAS SERVICES

1 Comparative figures for 2010 have been revised to exclude the apportionment of head office overheads previously

included in the results of the discontinued Oil Services division.

In 2011 our Oil and Gas Services division comprised the Gall Thomson and Klaw businesses. Gall Thomson Environmental is the world's leading supplier of marine breakaway couplings ("MBC"s) and, through its KLAW subsidiary, is a supplier of industrial couplings including quick release and breakaway couplings.

2012 GUIDANCE

Following the disposal of Gall Thomson, the Group will have very different operating characteristics in 2012 and beyond.

The increased operational gearing of the Group will lead to greater volatility in the income statement depending on whether volumes increase or decrease. The Group will continue to explore routes to make the cost base more flexible in line with changes in sales volumes.

As a predominantly northern hemisphere building products company, the Group would expect to turn cash positive in September each year and to generate substantially all of its surplus cash in the last six weeks of the financial year.

Capital Expenditure in 2012 is expected to be between £5 million and £6 million, reflecting increased investment in new product development and the announced investment in Amesbury IT systems.

We continue to see opportunities for profitable investment that distinguish us from the competition across all of our businesses, as evidenced by the acquisition of Overland Products in December 2011, and will continue to deploy capital selectively where we believe it will enhance shareholder value.

OUTLOOK

2012 has started with sales and orders broadly in line with 2011, which is encouraging considering the relatively strong start we saw last year. However we expect our end markets to remain relatively subdued across this year as a whole as market conditions remain challenging across all our geographies.

In 2012 the UK and Irish markets are expected to show further decline compared with 2011, reflecting lower consumer spending on RMI and continued downward pressure on social housing budgets. In North America we expect markets to be broadly flat across the year and in Continental Europe we expect markets overall to be slightly down with Southern European markets remaining difficult. In Australasian markets we expect to see a return to growth this year and continued development in South American markets.

We believe that the Building Products Division will continue to outperform its key markets in 2012 and beyond due in part to the Group's relative financial strength following the disposal of Gall Thomson.

The disposal of Gall Thomson marks the completion of the refocusing of Lupus as a supplier of components to the door and window industry worldwide. The Group now has significant financial flexibility to achieve its strategic goals and to accelerate the development of the Building Products Division.

The increase in the dividend of 75 per cent. to 3.50p is a sign of our confidence in the Group's improved financial position and prospects. Going forward, the Board intends to continue a progressive dividend policy taking into account the Group's leverage, earnings growth potential and future expansion plans.

The Board believes the Group is now well positioned for the future.

Definitions

Where appropriate "Underlying" is defined as before amortisation of intangible assets, deferred tax on amortisation of intangible assets, exceptional items, unwinding of discount on provisions, amortisation of borrowing costs and the associated tax effect.

"Underlying Net Debt" is defined as interest bearing loans and borrowings, net of cash and cash equivalents, plus unamortised borrowing costs added back.

"Operational Cashflow" is defined as Net cash inflow from operating activities before Income tax paid and after Payments to acquire property, plant and equipment.

"Operating Cash Conversion" is defined as Operational Cashflow divided by Underlying operating profit.

"Continuing Operations" is defined as the operations of the Lupus Capital Group excluding Gall Thomson Environmental Limited and its subsidiaries.

Exchange Rates

The following foreign exchange rates have been used in the financial statements:

Roundings

Percentages have been calculated using figures rounded to the nearest thousand extracted from the financial statements, which may lead to small differences in some figures and percentages quoted.

Unaudited consolidated income statement

for the year ended 31 December 2011

1 Before amortisation of intangible assets, deferred tax on amortisation of intangible assets, exceptional items, unwinding of discount on provisions, amortisation of borrowing costs and the associated tax effect.

Unaudited consolidated statement of comprehensive income

for the year ended 31 December 2011

Unaudited consolidated statement of changes in equity

for the year ended 31 December 2011

1 Other reserves are non-distributable capital reserves which arose on previous acquisitions.

Unaudited consolidated balance sheet

As at 31 December 2011

Unaudited consolidated cash flow statement

For the year ended 31 December 2011

NOTES TO THE FINANCIAL STATEMENTS

1. BASIS OF PREPARATION AND ACCOUNTING POLICIES

The financial information, which comprises the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity, consolidated balance sheet, consolidated cash flow statement and related notes, is derived from the full Group financial statements for the year ended 31 December 2011, which have been prepared under International Financial Reporting Standards as adopted by the European Union (IFRS) and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. It does not constitute full accounts within the meaning of section 434 of the Companies Act 2006. This financial information has been agreed with the auditors for release.

The Group Annual Report and Accounts for the year ended 31 December 2011 on which the auditors have yet to report, will be delivered to the Registrar of Companies in due course, and made available to shareholders 20 working days prior to the Annual General Meeting.

The accounting policies used in completing this financial information have been consistently applied in all periods shown. These accounting policies are detailed in the Group's financial statements for the year ended 31 December 2010 which can be found on the Group's website. 

2. SEGMENTAL ANALYSIS

The following tables present group revenue and profit and certain assets and liability information regarding the Group's product segments, which have been generated using group accounting policies, with no differences of measurement applied.

Comparative figures for 2010 have been revised to reflect the elimination of intragroup trading more accurately and to re-apportion head office overheads previously included in the results of the discontinued Oil Services division.

SEGMENT REVENUE AND RESULTS

The group has two operating segments: Building products and Oil services, one of which has a geographical analysis included within the tables below.

SEGMENT ASSETS AND LIABILITIES