Lupus Capital Share Discussion Threads

[jeffian] 26/4/2012 15:17

Not quite "half its profits"; 31% (£10.1m out of total £32.5m EBITDA), but only 7.6% of turnover and 2.7% of Net Asset Value. The fact is GT was exceptionally profitable but it was a small part of the overall business so no question that shareholder approval was needed.

[a1samu] 26/4/2012 13:56

OK jeffian
I accept that all is spelled out correctly, though confusing, when the regulations take it so lighly, allowing directors to part with a substantial proportion of an Aim business.
Gobsmacking that a company can sell half of its profits and need no shareholder approval to do so!

[jeffian] 26/4/2012 13:49

No, it's quite clear from the section you have reproduced -

"An AIM company must issue notification without delay as soon as the terms of any substantial transaction are agreed, disclosing the information specified by Schedule Four."

A "substantial transaction" only requires shareholders to be "notified without delay". It is only the larger transactions mentioned above which specifically require shareholder approval.

[a1samu] 26/4/2012 13:34

Page 6 of the Aim regulations state:

Substantial transactions

12. A substantial transaction is one which exceeds 10% in any of the class tests. It includes any transaction by a subsidiary of the AIM company but excludes any transactions of a revenue nature in the ordinary course of business and transactions to raise finance which do not involve a change in the fixed assets of the AIM company or its subsidiaries.

An AIM company must issue notification without delay as soon as the terms of any substantial transaction are agreed, disclosing the information specified by Schedule Four.

One of the class test is the amount of pretax profit and the proportion as per the published accounts of the discontinued operations amounts to 48% of the total profits for the year.

I would have thought that this would have required the company to seek shareholder approval.

Why am I wrong in my interpretaions of the rules?

[jeffian] 26/4/2012 13:32

a1samu,

You need to look at the AIM rules to understand the terminology.



(Rules 12, 13, 14 & 15 apply)

A "substantial" transaction is one which involves more than 10% of the company's assets, but this only requires shareholders to be informed promptly. It's only a "Fundamental change of business" (the disposal of 75% assets) or a "Reverse takeover" (an acquisition where the acquired company's assets exceed 100% of the existing company's assets) which require shareholder approval.

[a1samu] 26/4/2012 10:44

The announcement of the 13th March re disposal of GT seems to appear to have a major mistake in it, when it states that under the AIM Rules the disposal is classified as a substantial transaction and there is therefore no requirement to seek the approval of Lupus sharholders. Copy of the paragraph as follows:
7. Principal terms and conditions of the Disposal
Gall Thomson has been sold to the Purchaser for a total cash consideration of GBP75 million subject to certain post-completion adjustments relating to the amounts of cash, debt and net working capital held in the Gall Thomson Group at the date of Disposal.
The Disposal has been effected by way of a sale of the shares in Gall Thomson held by the Lupus Group to the Purchaser.
Under the AiM Rules the Disposal is classified as a substantial transaction and there is therefore no requirement to seek the approval of Lupus Shareholders.
The Directors unanimously consider that the Disposal is in the best interests of Lupus and Lupus Shareholders as a whole.
I am confused. Is the transaction a substantial transaction requiring shareholders approval, or is it a non substantial disposal not requiring shareholders approval?

[jeffian] 23/4/2012 19:20

Well that held up well on a dire day in the market.

[randolph and mortimer] 03/4/2012 17:39

It also has nil assets.



lupus offered £30m for it early 2009, as I have remarked before.

Sell it while you can, not when you have to.

[jeffian] 14/3/2012 11:31

I don't disagree with you in principle, a1samu, but the fact is that GT was marketed very widely over the years and nobody was prepared to pay anything like what we thought it was worth. The fact that it has gone to private equity (presumably a MBO?) rather than a 'trade buyer' follows that pattern, no? I always thought it would go to someone like John Wood where you'd have thought that GT's earnings X WG.'s P/E ratio would have made it hugely attractive, but nobody in the oil services sector has come forward to buy it. Like you, I'm sorry to see it go (it was a significant cash generator with good management which can't have taken up much Head Office time) but once LUP became a pure 'building products' company rather than the 'conglomerate' it used to be, the writing was on the wall for GT.

[a1samu] 14/3/2012 09:06

It is clear that Phoenix is expecting megabucks out of this tranasaction of the purchase of GT. Shame on the timid directors of Lupus who are lacking guts and vision as to where GT could be going in the near term.
This is who Phoenix are, a bunch of Chartered Accountants, and what they are expecting of themselves:
"Phoenix is independent and owned by its executives. We founded Phoenix Equity Partners in 2001 and manage funds provided by leading institutions from around the world, and by the Phoenix team itself. We have offices in London, Manchester and Yorkshire.
Our principal focus is on investing in and supporting outstanding private UK companies. We target companies valued at between £20 million and £200 million. The Phoenix team's track record includes over 100 private equity investments.
Phoenix looks for outstanding managers to acquire businesses with established market positions and significant growth potential. "

[a1samu] 14/3/2012 08:23

Jeffian, your axplanations into the circumstances of the sale of GT are almost plausible, but the fear driven mentality explained in your piece, of the company and directors ill serves the shareholders.

The company/directors did not even attempt to expand or build on the GT niche, let alone drawing attention to themselves because of this lucrative and attractive sideline. All they achieved is that they have let go of GT to some guys with more balls who can see the value and no doubt who will sell on with massive profits.

At the same time the current directors as they are letting go of a lucrative acvtivity, are paying over the odds for the Overland Products Company.

Does this mentality not remind you of a mentality of the small guy who will let go of value and overpay for mediocity.

[sweepie2] 14/3/2012 06:56

Had a phone call from a broker in New York last night offering between £2-6 per share on behalf of a client who is looking at getting 51% of the company. Had to stop myself laughing as he sounded so serious, do these people think we were born yesterday. In the end put him on hold by the radio so I could go to the little boys room. Finally went back to the phone when the football finished and he was still there, told him he was a crook and hung up

[jeffian] 13/3/2012 18:35

That's the way to do it! Announce good figures then wade in and buy at the peak. A definite vote of confidence.


RNS Number : 2914Z
Lupus Capital PLC
13 March 2012


LUPUS CAPITAL PLC
("Lupus" or "the Group" or "the Company")

Director's Dealing

The Company was today informed that Mr. Jamie Pike, Non-Executive Chairman of the Company, today purchased 80,000 ordinary shares of 5p each in the Company for a price of 127p per share.

Following this purchase, Mr. Pike is interested in a total of 405,000 shares in the Company, representing 0.31% of the total issued share capital of the Company.

[jeffian] 13/3/2012 10:15

Yes, I felt a slight twinge about selling this highly profitable little niche company but, as someone who has been around here since pre-Hutchings days, this looks like a good result. When the plan was to sell LUP's assets and distribute the cash back to shareholders in 2003, GT was the last to go. All sorts of fancy valuations were talked about but none achieved despite the company being publicly hawked round the market. When sales were £6.64m they reportedly turned down an offer of £14.5m and the word was they were then looking for £20m

("Ben Franklin - 6 Jun'03 - 10:54 - 1404 of 1701

By my reckoning £20m for GT is 8.5x 2002 GT profts after tax (£3.38m x 70%). Not massively high multiple but does also = 3 x 2002 sales")

but they didn't get it and the deal announced today looks pretty good. Yes, we lose a great, high-margin cash cow, but we also wipe out a significant amount of debt.

I remember talking to the GT management (who I suspect are behind the current buyout) at one AGM and they made the point that they made exceptionally high margins by being a small volume player with a niche product. The fear was that if they got too big or pushed margins too hard, competitors would be tempted into the market, so those 'exceptional' margins (over 50%) are probably not worth the high multiples one might attach to more 'normal' earnings.

Otherwise, steady results which seem to have been well received.

[a1samu] 13/3/2012 07:48

Giving away Gall Thomson at 7.4 x 2011 Ebitda & @ 3.9 x 2011 Sales breaks my heart.

It should have been at 15 x 2011 Ebitda at least!

And having paid £10.3M for Overland Products Company for pretax profits of £1M.

[jeffian] 03/3/2012 19:47

Could be the explanation?

[jeffian] 27/2/2012 12:43

Hmmm. Nudging recent highs again. Although the Trading Statement on 23 Jan was fairly cautious, there seems to be a spring in the step of the sector (look at TPK, WOS, KGP and the housebuilders). Barring the odd Euro collapse or Iranian oil war, things might work out better than expected!

[jeffian] 19/1/2012 11:53

Yes, looking as if it could re-test the 140 level. There was a pre-close trading update on 21/1 last year so I suppose we'll get one soon, and I imagine that current strength anticipates good news (though in my experience it tends to fall back again once the news is out unless it is of the better-than-expected variety!).

[a0148009] 12/1/2012 11:41

Jeffian

Yes still a substantial holder here.
Better news from USA on housing starts, renewal and extension of debt facility on improved terms,lower Corp Tax charge, forecast 2p div in March,recent acquisition all assisting sentiment.
Think around 10x 13.8p 2012 forecast earnings and price of 140p seems about right for the moment.
I sold a very small amount of my holding today on the pop - must confess more out of boredom than conviction - not the best way to invest!

AO

[jeffian] 12/1/2012 10:16

Anyone left here? LUP seems to be moving back towards highs. Building products market seems to be holding up remarkably well (viz TPK, WOS etc) and even housebuilders are doing OK (PSN). Trading update due here late January. Good news?

[jeffian] 21/12/2011 13:24

Well someone seems to like it!

[smicker] 20/12/2011 11:20

Why are they making an acquisition when they have net debt of 94m at the half year and couldn't afford to pay an interim divi? Why are they giving the overland sales for last year rather than the profits.

[jeffian] 12/10/2011 15:02

There was a very strong Trading Statement today from Travis Perkins which I suspect has rubbed off on LUP.

[strangeman] 06/9/2011 12:37

I'd forgotten the results were due today