(LCT.L) Lincat Group PLC Buy/Sell

Martin Craddock, Chairman:

"Our businesses have delivered a robust performance against a back-drop of lower demand and a highly competitive market-place. The improvement in sales between the first and second quarters is encouraging."

Contacts Martin Craddock, Chairman
Paul Bouscarle, Chief Executive
Lincat Group plc

27 August 2009

Chairman's statement

The results for the six months to 28 June 2009 demonstrate the ability of Lincat Group to trade strongly and profitability at a time of sharply falling demand. This robust performance allows us to maintain our interim dividend at 10.2p per share.

Financial results

In April I reported that sales for January and February 2009 were 18% lower than in 2008, whilst in my AGM statement in May I indicated that this figure had improved to 13%. I am therefore pleased to report that Group sales from continuing operations for the six months to 28 June 2009 were ultimately just 8% lower than the prior year, at £14.947m compared with £16.299m in 2008, indicating an element of recovery towards the end of the period. This recovery was led by Lincat Ltd, whose sales responded positively to a package of dealer incentives introduced in March.

The Group's gross margin fell from 51.6% to 49.7% as our businesses sought to maintain price competitiveness. In the current climate of depressed demand it is unrealistic to expect gross margins to be held without losing market share. Over time we would look to rebuild gross margins back to 50% but our priority now is to maintain volumes and to grow market share in particular against competitors with a high proportion of imported products, whose margins are being squeezed by the general weakness of sterling.

During the period employee numbers were reduced to reflect the lower level of sales, resulting in a one-off charge of £130k. Around the Group particular attention has been paid to cost monitoring and, where possible, cost reduction, although we have been careful to protect product development and marketing support for product launches.

Operating profits for the period were 26% down at £2.113m (2008: £2.842m) as a result of lower turnover and a reduced gross margin. Whilst disappointing to report, I nevertheless commend our businesses for achieving a net operating margin of 14.1% during one of the toughest trading periods for many years. Net interest charges of £65k (2008: £266k) reflect lower levels of borrowings and lower interest rates. Repayment of the term loan taken out to part-finance the share buy-back of August 2007 remains ahead of schedule.

Basic earnings per share from continuing operations fell broadly in line with pre-tax profits from 34.4p to 26.9p, as there were no shares issued or cancelled in the period.

Dividend

As indicated earlier, the Board has declared an interim dividend of 10.2p, the same as in 2008, which will be paid on 9 October 2009 to all shareholders on the register at 18 September 2009.

IMC's Hertfordshire site

As previously announced, the terms for the sale of this vacated site were renegotiated in June and that a further £1.0m non-refundable deposit was received from the buyers in July of this year. The Group has now received a total of £3.0m in non-refundable deposits and will continue to retain title to the site until the balance of £4.5m, which is due on 16 December 2009, has been paid.

Disposal of Mercury

The Group's domestic appliance subsidiary, Mercury Appliances Ltd, was acquired on 25 August 2009 by Aga Rangemaster Group plc. Mercury had seen the sharpest sales decline of any Group company during the current downturn and recorded a pre-tax loss of £196k in the half year to 28 June 2009. The £425,000 proceeds of sale are expected to more than cover the costs of exit from this business.

Current trading

We are hopeful that the slow recovery seen in the second quarter will continue into the second half of the year but recognise the potentially fragile nature of any recovery. We shall, however, continue our investment in new products and will seek to build market share through organic growth.

Martin Craddock, Chairman

27 August 2009

CONDENSED CONSOLIDATED INCOME STATEMENT

6 months 6 months Year
to 28/06/09 to 30/06/08 to 02/01/09
Notes £'000 £'000 £'000

Continuing Operations
Revenue 1 14,947 16,299 32,903
Cost of sales (7,512) (7,893) (16,308)
Gross profit 7,435 8,406 16,595
Distribution costs (2,301) (2,740) (5,214)
Administrative expenses (1,445) (1,296) (2,525)
Other operating expenses (1,576) (1,528) (3,143)
Operating profit 2,113 2,842 5,713
Finance income - 3 8
Finance costs (65) (269) (469)
Expected return on pension scheme 198 241 480

assets
Interest on pension scheme (198) (195) (388)

liabilities
Profit before taxation 2,048 2,622 5,344
Taxation (588) (750) (2,168)
Profit after tax from continuing 1,460 1,872 3,176

operations

Profit after tax from 4 (164) (61) (90)

discontinued operations

Profit for the period 1,296 1,811 3,086
Profit for the period 1,296 1,811 3,086

attributable to equity shareholders

Earnings per share from continuing operations:
Basic 2 26.9p 34.4p 58.4p
Diluted 2 26.8p 34.4p 58.4p

Earnings per share from total operations:
Basic 2 23.8p 33.3p 56.8p
Diluted 2 23.8p 33.2p 56.7p

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

6 months 6 months Year
to 28/06/09 to 30/06/08 to 02/01/09
£'000 £'000 £'000
Profit for the period 1,296 1,811 3,086

Other comprehensive income:
Actuarial losses on defined benefit (1,011) (586) (694)

pension scheme
Tax on the above 283 164 194
Other comprehensive income for the (728) (422) (500)

period, net of tax

Total comprehensive income for the 568 1,389 2,586

period

Total comprehensive income for the 568 1,389 2,586

period attributable to equity shareholders

CONDENSED CONSOLIDATED BALANCE SHEET

As at As at As at

Notes £'000 £'000 £'000

Non-current assets
Goodwill 693 693 693
Other intangible assets 100 159 124
Property, plant & equipment 8,874 9,088 9,157
Deferred tax asset - 105 6
9,667 10,045 9,980

Current assets
Inventories 3,431 3,940 3,930
Trade and other receivables 5,855 6,256 5,036
Cash and cash equivalents 430 344 732
9,716 10,540 9,698
Non-current assets classified as held 3 2,178 2,178 2,178

for sale

Total assets 21,561 22,763 21,856

Non-current liabilities
Bank loans (2,652) (5,074) (3,042)
Retirement benefit obligation 5 (1,436) (375) (435)
Deferred tax liabilities (576) (342) (928)
(4,664) (5,791) (4,405)

Current liabilities
Trade and other payables (4,086) (4,759) (4,098)
Current tax liabilities (590) (817) (703)
Bank overdrafts and loans (623) (966) (640)
Provisions (352) (467) (354)
(5,651) (7,009) (5,795)

Liabilities directly associated with non-current assets classified as held for sale
Non-refundable deposit on sale of 3 (2,000) (1,000) (2,000)

property

Total liabilities (12,315) (13,800) (12,200)
Net assets 9,246 8,963 9,656

Shareholders' equity
Issued share capital 543 543 543
Share premium account 2 2 2
Investment in own shares (16) (16) (16)
Other reserves 874 874 874
Retained earnings 7,843 7,560 8,253
Total equity 9,246 8,963 9,656

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

Share capital Share premium Investment in own Other reserve Retained earnings Total
shares
£'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2008 543 2 (16) 874 7,097 8,500

Total comprehensive income for
the period - - - - 1,389 1,389

Credit to equity for
share-based payments - - - - 34 34
Dividends paid - - - - (960) (960)
At 30 June 2008 543 2 (16) 874 7,560 8,963

Total comprehensive income for
the period - - - - 1,197 1,197

Credit to equity for
share-based payments - - - - 34 34
Dividends paid - - - - (538) (538)
At 2 January 2009 543 2 (16) 874 8,253 9,656

Total comprehensive income for
the period - - - - 568 568

Credit to equity for
share-based payments - - - - 14 14
Dividends paid - - - - (992) (992)
At 28 June 2009 543 2 (16) 874 7,843 9,246

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

6 months 6 months Year
to 28/06/09 to 30/06/08 to 02/01/09
Notes £'000 £'000 £'000
Net cash from operating 6 1,426 3,665 6,470

activities

Investing activities
Interest received - 1 8
Disposal proceeds of property, 46 22 34

plant & equipment
Non-refundable deposit on sale 3 - 1,000 2,000

of property
Purchase of intangible assets (3) (21) (35)
Purchases of property, plant & (347) (379) (876)

equipment
Expenditure on product (25) - (35)

development
Net cash (used in)/released by (329) 623 1,096

investing activities

Financing activities
Dividends paid (992) (960) (1,498)
Repayment of borrowings (407) (2,047) (4,399)
Net cash used in financing (1,399) (3,007) (5,897)

activities

(Decrease)/increase in cash and (302) 1,281 1,669

cash equivalents

Cash and cash equivalents at
beginning of the period 732 (937) (937)
Cash and cash equivalents at 430 344 732

end of the period

Cash and cash equivalents
Cash in hand and at bank 430 344 732

BASIS OF PREPARATION AND ACCOUNTING POLICES

Basis of preparation

Lincat Group plc, a Public Limited Company, is incorporated and domiciled in the United Kingdom.

The interim financial statements for the period ended 28 June 2009 (including the comparatives for the period ended 30 June 2008 and the year ended 2 January 2009) were approved by the board of directors on 26 August 2009. Under the Security Regulations Act of the EU, amendments to the financial statements are not permitted after they have been approved.

It should be noted that accounting estimates and assumptions are used in the preparation of the interim financial information. Although these estimates are based on management's best knowledge and judgment of current events, actual results may ultimately differ from those estimates.

The interim financial information contained within this report does not constitute statutory accounts as defined in the Companies Act 2006. The full accounts for the year ended 2 January 2009 received an unqualified report from the auditors and did not contain a statement under Section 237(2) or (3) of the Companies Act 1985.

Accounting policies

This interim financial report has been prepared under the historical cost convention. The principal accounting policies and methods of computation adopted to prepare the interim financial information are consistent with those detailed in the 2008 financial statements except for the first time adoption of IAS 1 'Presentation of Financial Statements (Revised 2007)' and IFRS 8 'Operating Segments'.

The adoption of IAS 1 (Revised 2007) does not affect the financial position or profits of the Group but does give rise to additional disclosures. The measurement and recognition of the Group's assets, liabilities, income and expenses is unchanged, however some items that were recognised directly in equity are now recognised in 'Other comprehensive income'. IAS 1 (Revised 2007) affects the presentation of owner changes in equity and introduces a 'Statement of comprehensive income'. The adoption of IFRS8 has not required a change to the presentation of the segments disclosed in the interim financial statements.

The Group's other accounting policies have been applied consistently throughout the Group for the purposes of preparation of this report.

Notes to the consolidated financial statements

1. Segmental information

Business segment - revenue
6 months 6 months Year
to 28/06/09 to 30/06/08 to 02/01/09
£'000 £'000 £'000
Lincat - commercial catering equipment 8,948 10,331 19,832
IMC - bar equipment and kitchen 4,643 4,877 9,713

machinery
Britannia - kitchen ventilation 1,356 1,091 3,358

systems
Continuing operations 14,947 16,299 32,903

Business segment - profit
6 months 6 months Year
to 28/06/09 to 30/06/08 to 02/01/09
£'000 £'000 £'000
Lincat 1,294 1,918 3,418
IMC 861 1,142 2,272
Britannia 219 17 495
Continuing operations 2,374 3,077 6,185
Central costs (261) (235) (472)
Net finance costs (65) (220) (369)
Taxation (588) (750) (2,168)
Discontinued operations (164) (61) (90)
Profit for the period 1,296 1,811 3,086

Geographical segment - revenue
6 months 6 months Year
to 28/06/09 to 30/06/08 to 02/01/09
£'000 £'000 £'000
United Kingdom 12,360 13,438 27,507
Rest of Europe 1,759 1,970 3,658
North America 11 19 20
Rest of World 817 872 1,718
Continuing operations 14,947 16,299 32,903

2. Earnings per share

6 months 6 months Year
to 28/06/09 to 30/06/08 to 02/01/09
£'000 £'000 £'000

Earnings
From continuing operations 1,460 1,872 3,176
From discontinued operations (164) (61) (90)
From total operations 1,296 1,811 3,086
Average number of shares during year '000 '000 '000
For basic earnings per share 5,434 5,434 5,434
Dilutive effect of Sharesave Scheme 7 15 8

options
For diluted earnings per share 5,441 5,449 5,442

Earnings per share from continuing operations
Basic 26.9p 34.4p 58.4p
Diluted 26.8p 34.4p 58.4p

Earnings per share from total operations
Basic 23.8p 33.3p 56.8p
Diluted 23.8p 33.2p 56.7p

3. Assets held for sale

As at As at As at

£'000 £'000 £'000
IMC's Hertfordshire freehold property 2,178 2,178 2,178
Non-refundable deposit on sale of property (2,000) (1,000) (2,000)
178 1,178 178

On 11 April 2008, the directors entered into an unconditional contract for the sale of IMC's vacant Hertfordshire site for £7.5m. As at 28 June 2009, non-refundable deposits of £2m had been received. Following a renegotiation of the terms of the contract, another non-refundable deposit of £1m was received on 6 July 2009 with the balance of £4.5m receivable on completion at 16 December 2009.

4. Discontinued operations

Following a strategic review, the Group decided to seek a buyer for its domestic appliance business, Mercury Appliances. This disposal was completed on 25 August 2009. The results of Mercury Appliances, which have been shown as discontinued operations in the condensed consolidated income statement, were as follows:

6 months 6 months Year
to 28/06/09 to 30/06/08 to 02/09/09
£'000 £'000 £'000
Revenue 696 891 1,794
Expenses (892) (976) (1,924)
Loss before tax (196) (85) (130)
Tax 32 24 40
Loss after tax attributable to (164) (61) (90)

discontinued operations

Mercury contributed the following to the Group's cash flows:

6 months 6 months Year
to 28/06/09 to 30/06/08 to 02/09/09
£'000 £'000 £'000
Operating activities (127) (62) 34
Investing activities (2) (15) (15)

5. Retirement benefit obligation

As at As at As at

£'000 £'000 £'000
Gross (deficit)/surplus at beginning of period (435) 164 164
Contributions 32 31 63
Current service cost (22) (30) (60)
Finance income - 46 92
Actuarial loss (1,011) (586) (694)
Gross deficit at end of the period (1,436) (375) (435)
Deferred tax asset 402 105 122
Net deficit (1,034) (270) (313)

The defined benefit scheme was reviewed by a qualified actuary as at 28 June 2009. The principal assumptions were:

6 months 6 months Year
to 28/06/09 to 30/06/08 to 02/01/09
Retail price inflation 3.2% 3.9% 2.6%
Discount rate 6.2% 6.7% 6.5%
Pension increases in payment 3.1% 3.6% 2.6%
General salary increases 3.2% 3.9% 2.6%

6. Net cash from operating activities

6 months 6 months Year
to 28/06/09 to 30/06/08 to 02/01/09
£'000 £'000 £'000
Operating profit from continuing 2,113 2,842 5,713

operations
Operating loss from discontinued (193) (75) (112)

operations Adjustments for:
Depreciation and amortisation 542 506 1,089
Share based payments 14 34 68
Decrease in provisions (2) (1) (114)
Decrease in inventories 499 489 499
(Increase)/decrease in receivables (809) 380 1,603
Increase/(decrease) in trade and 73 495 (282)

other payables
Cash generated by operations 2,237 4,670 8,464
Interest paid (78) (248) (437)
Corporation tax paid (733) (757) (1,557)
Net cash from operating activities 1,426 3,665 6,470

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