Lon.sec Regulatory News (LSC)

5 May 2009 15:24



LONDON SECURITY PLC

05 May 2009

PRELIMINARY RESULTS

FINANCIAL HIGHLIGHTS

Set out below are the financial highlights of the audited results for the year ended 31 December 2008: 

Turnover of £74.9million (2007: £66.6million)

Operating profit before depreciation of £21.6million (2007: £18.8million)

Operating profit of £18.9million (2007: £16.8million)

TRADING REVIEW

The financial highlights illustrate that the Group's turnover increased by 12.4% to £74.9 million and operating profit increased by 12% to £18.9 million. However these results partially reflect the movement in the Sterling to Euro exchange rate which has declined from 1.46 to 1.26. If the 2008 results from the European subsidiaries had been translated at 2007 rates turnover would have increased by 1.5% to £67.6 million and operating profit would have decreased by 0.6% to £16.7 million, compared to 2007.

In mainland Europe, the Group has continued to build upon its strong position in servicing fire extinguishers and hose reels and growing our new activities through our multi-service strategy offering customers a complete range of services around the first intervention on fires and first-aid. This strategy has enabled the Group's evolution from solely an extinguisher supplier to the customers' safety partner. In addition the Group has made a significant acquisition in Belgium.

In the UK, the profit decrease reflects a reduction in the number of extinguisher units serviced. This has been partially offset by stable turnover in our alarms business which generated increased operating profit in 2008. Management continues to invest in training of the field force, and identifying cost efficiencies.

ACQUISITIONS

In September 2008, the Group acquired the contracts, and use of the brand name Somati in Belgium. This business unit has added £2.3 million to turnover since the acquisition in September. In the UK we have acquired contracts to service fire equipment from acquisitions. No fixed overhead was added as a result of these UK acquisitions.

It remains a principal aim of the Group to grow through acquisitions. Acquisitions are being sought throughout Europe and the Group will invest at the upper end of the price spectrum where an adequate return is envisaged by the Board.

A strategy was implemented in 2006 to replace the cold-calling field sales force with an acquisition team. This has started to escalate and is proving successful in growing the business for the future.

MANAGEMENT AND STAFF

2008 was a year in which the staff performed well and, on your behalf, I would like to express thanks and appreciation for their contribution.

DIVIDENDS

A first interim dividend in respect of 2008 of £0.57 per ordinary share was paid to shareholders on 25 April 2008. A second interim dividend of £0.73 per ordinary share was paid on 22 May 2008 to shareholders on the register at 30 April 2008. 

The Board is not recommending the payment of a final dividend in respect of 2008.

Dividend policy continues to be reviewed regularly by the Board.

FINANCING

In order to pay the interim dividends referred to above the Group arranged an additional £15 million of bank loans with Lloyds Bank plc.

In order to finance the acquisition of Somati's assets, customer list, and brand name referred to above, the Group arranged £3million of bank loans with Lloyds Bank plc.

FUTURE PROSPECTS

The outlook for 2009 is for a downturn in revenue and profitability due to world economic conditions. Despite this, our Group is in a strong position to deal with the recession.

									2008	2007
								Note	£’000	£’000
Revenue									74,892	66,605
Cost of sales									(12,618)	(11,351)
Gross profit									62,274	55,254
Distribution costs									(27,051)	(22,453)
Administrative expenses									(16,346)	(16,008)
EBITDA*									21,592	18,785
Depreciation and amortisation									(2,715)	(1,992)
Operating profit									18,877	16,793
Profit on disposal of subsidiary undertakings									—	4,216
Finance income									1,679	952
Finance costs									(3,362)	(2,652)
Exchange loss on foreign currency									(7,654)	(2,097)
Finance costs – net									(9,337)	(3,797)
Profit before income tax									9,540	17,212
Income tax expense									(3,983)	(4,017)
Profit for the year attributable to equity shareholders of the Company									5,557	13,195
Earnings per share
Basic and diluted								1	45.2p	107.3p
Dividends
Dividends paid per share									130.0p	50.0p

* Earnings before interest, depreciation, amortisation and impairment charges.

								2008	2007
								£’000	£’000
Assets
Non-current assets
Property, plant and equipment								9,787	7,863
Intangible assets								53,210	47,236
Deferred tax asset								743	743
								63,740	55,842
Current assets
Inventories								8,545	5,687
Trade and other receivables								20,820	14,358
Cash and cash equivalents								10,875	11,807
								40,240	31,852
Total assets								103,980	87,694
Liabilities
Current liabilities
Trade and other payables								(17,148)	(14,475)
Income tax liabilities								(1,548)	(1,891)
Borrowings								(7,488)	(5,388)
Provision for liabilities and charges								—	(49)
								(26,184)	(21,803)
Non-current liabilities
Trade and other payables								—	(43)
Borrowings								(46,241)	(27,022)
Derivative financial instruments								(212)	(19)
Deferred tax liabilities								(41)	(100)
Retirement benefit obligations								(742)	(949)
Provision for liabilities and charges								(46)	(130)
								(47,282)	(28,263)
Total liabilities								(73,466)	(50,066)
Net assets								30,514	37,628
Shareholders’ equity
Ordinary shares								123	123
Merger reserve								2,033	2,033
Other reserves								5,124	1,071
Retained earnings								23,234	34,401
Total shareholders’ equity								30,514	37,628

								2008	2007
								£’000	£’000
Cash flows from operating activities
Cash generated from operations								15,552	19,328
Interest paid								(2,687)	(2,033)
Income tax paid								(4,826)	(4,556)
Net cash generated from operating activities								8,039	12,739
Cash flows from investing activities
Acquisition of subsidiary undertakings								(222)	(231)
Net proceeds from sale of subsidiary undertakings								—	4,587
Purchases of property, plant and equipment								(2,923)	(2,707)
Proceeds from sale of property, plant and equipment								426	401
Purchases of intangible assets								(5,156)	(578)
Proceeds from sale of intangible assets								31	18
Interest received								1,188	278
Net cash generated by/(used in) investing activities								(6,656)	1,768
Cash flows from financing activities
Purchase of own shares								—	(97)
Repayments of borrowings								(4,535)	(5,133)
New long term loans								18,200	—
Dividends paid to Company’s shareholders								(15,980)	(6,146)
Net cash used in financing activities								(2,315)	(11,376)
Net (decrease)/increase in cash in the year								(932)	3,131
Cash and cash equivalents at beginning of the year								11,807	8,676
Cash and cash equivalents at the end of the year								10,875	11,807

								2008	2007
							Notes	£’000	£’000
Profit for the financial year								5,557	13,195
Currency translation differences on foreign currency net investments							25	4,053	1,328
Actuarial (loss)/gain recognised in pension scheme							22	(708)	1,473
Movement on deferred tax relating to pension scheme							20	(36)	(988)
Net income recognised directly in equity								3,309	1,813
Total recognised income for the year attributable to equity shareholders
of the Company								8,866	15,008

1 Earnings per Share

The calculation of basic earnings per ordinary share ("EPS") is based on the profit on ordinary activities after taxation of £5,557,000 (2007: £13,195,000) and on 12,294,798 (2007: 12,295,811) ordinary shares, being the weighted average number of ordinary shares in issue during the year.

For diluted earnings per ordinary share, the weighted average number of shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The only potential ordinary shares in the Group are in respect of the unapproved share option scheme. The revised weighted average number of shares is 12,296,487 (2007: 12,297,500). After taking into account the effect of dilutive securities, the basic EPS and adjusted EPS figures are unaltered.

						2008			2007
						£’000	Pence	£’000		Pence
Profit on ordinary activities after taxation						5,557	45.2	13,195		107.3
Eliminate effect of:
– Profit on disposal of subsidiary undertakings						—	—	(4,216)		(34.3)
Adjusted profit for the period						5,557	45.2	8,979		73.0

2 This preliminary announcement does not constitute the Company's statutory accounts within the meaning of Section 240 of the Companies Act 1985.

The results for the year ended 31 December 2008 have been extracted from the full accounts of the Group for that year which received an unqualified auditors' report and which have not yet been delivered to the Registrar of Companies. The financial information for the year ended 31 December 2007 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies. The report of the auditors on those filed accounts was unqualified.  The accounts for the year ended 31 December 2008 and 31 December 2007 did not contain a statement under s237(2) or s237(3) of the Companies Act 1985.

This preliminary announcement has been prepared in accordance with International Financial Reporting Standards. The Group will post its annual report and accounts to shareholders on 15 May 2009. A copy of the annual report and accounts can be found on the company's webpage (www.londonsecurity.org). 

Enquiries: London Security plc Richard Pollard Company Secretary Tel: 01422 372852

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