Resolute Mining Regulatory News (RSG)

29 Jun 2006 07:02

Reliance Security Group PLC29 June 2006 THURSDAY 29 JUNE 2006 PRESS RELEASE Reliance Security Group plc Preliminary announcement of results for the Year ended 28 April 2006 •Turnover up 2.3% to £317.5m (2005: £310.3m) •Profit before tax and exceptional items: £13.1m (2005: £15.6m) •Earnings per share before exceptional items: 41.7p (2005: 47.4p) earnings per share 30.7p (2005: 61.3p) •Dividend per share up 7.0% to 20.0p (2005: 18.7p) •Challenging market conditions in Security Services •Organic growth in FM •Continuing investment in growth markets •Forward FM order book £716m (2005: £731m) Brian Kingham, Chairman, commenting on the results said: "We have achieved results in line with our expectations despite challengingconditions in the security services market. Our businesses in facilitiesmanagement and business process outsourcing have performed well. We areutilising our strong financial position to continue to invest in growthmarkets." Notes to Editors Reliance is an established market leader in the provision of contract security,facilities management, support services, and business process outsourcing.Reliance employs over 12,000 people from a network of offices throughout the UK. For further information : Brian Kingham Chairman 020 7730 9716 Julian Nicholls Group Managing Director 01895 205002 Chairman's Statement IntroductionThe Group's results for the year to 28 April 2006 are in line with expectations. In the security services market, conditions have remained challenging withcontinuing pressure on margins. We have devoted extensive management effort andincurred considerable expense in complying with government regulation, whichcame into effect in March 2006. The diversion of resource has resulted in someslippage in our security market share. Nonetheless, we expect that regulationwill have a gradual beneficial effect. We have reorganised the security divisionand its senior management team to take full advantage of the new dynamics of aregulated security market. We are exploiting the extensive growth opportunities in the diverse, £60 billionper annum facilities management and business process outsourcing market. We havewon a wide range of new contracts and important contracts have been successfullyrenewed. This will help to offset the effect of the expiry of our electronicmonitoring contract in March 2006. We continue to invest in developingcomplementary new products and services to meet customers' requirements fororganisational change, process improvement and the application of the latesttechnologies. We have invested significantly in business development resourceand activity levels are high. ResultsTurnover for the year to 28 April 2006 increased by 2.3% to £317.5 million(2005: £310.3 million). Pre-exceptional, pre-tax profit for the year was £13.1million (2005: £15.6 million). Excluding exceptional items, earnings per sharewas 41.7p (2005: 47.4p). The net exceptional pre-tax charge of £3.5 million(2005: net exceptional profit of £3.0 million) is explained fully in theFinancial Review below. Net cash generated from operations was £11.8 million(2005: £15.7 million) and we ended the year with net cash of £21.1 million(2005: £27.7 million), notwithstanding the £10.1 million outlay of the cashreturn to shareholders in December. DividendA final dividend is proposed of 15.5p making a total for the year of 20.0p, 7.0%higher than last year (2005: final dividend 14.5p, total 18.7p). The proposedfinal dividend is subject to approval at the AGM on 7 September 2006 and payableon 22 September 2006 to shareholders on the register on 1 September 2006. StrategyRecognising the requirement to adapt to changes in markets, technologies andcustomer needs, the board regularly reviews the strategy for the group and itsoperating businesses. The latest such review confirmed our long-term strategy. Our strategy continues to be built around differentiating Reliance from othersuppliers - primarily through innovation, service quality, people developmentand teamwork - enabling us to outperform our competitors in both growth andmargins, thus generating superior value for our shareholders. Our security services business is undergoing major changes as a result ofGovernment regulation. In a market worth £3 billion per annum we arestrengthening our leadership position and responding robustly to consolidation,offering customers an innovative balance of technology and manpower services. We will increase our already substantial presence in the larger and fastergrowing markets of facilities management and business process outsourcing. Wewill continue to grow recurring revenues by expanding the range of complementaryservices delivered under long term contracts to both public and private sectorcustomers. We seek to establish leadership positions in specific niches where wehave specialist knowledge and the necessary core competencies. We will maintain a strong balance sheet enabling us to consider acquisitionopportunities which can broaden or strengthen our core businesses. CommunityThe group has a strong tradition of working with voluntary, charitable and notfor profit organisations with complementary aims and capabilities. We seek toincrease our support and encouragement of those working to promote innovation,enterprise and the development of young people. We were delighted this year tohelp bring Made In Brunel, a breathtaking array of innovation and design fromthe students of Brunel University, to the wider international audience incentral London. Our work with Crime Concern, Cumberland Lodge, the PoliceService and numerous community groups serves to enrich our experience andcapacity to serve our customers. PeopleI welcome this opportunity to express on behalf of the board our warmest thanksto our people. Their enthusiasm, dedication and professionalism is the veryheart of our business and is what enables us to offer a Reliance difference.Nowhere was this better demonstrated than in the care and concern for ourcustomers and the speed of response shown by our people in London on 7 July2005. I cannot over emphasise the importance we attach to constantly refreshing andrenewing the many initiatives we take to support and enable our people toperform their work better. Finding new and imaginative ways to help them achievehigh levels of efficiency and customer care is a core strength of the group andone we work tirelessly to sustain and elevate. The renewal of our Investors InPeople accreditation this year serves to emphasise the towering significance ofbest practice and the rewards of constantly improving and innovating in theleadership and management of our people. Investors In People offers a persuasiveset of principles for improving business performance and competitiveness througha planned approach to setting and communicating business objectives anddeveloping the training and skills required to achieve them. Our long term strength, our ability to grow and to offer customers products andservices in which they see significant value, is dependent on constantlylearning, improving and developing skills. In the last year we have takenfurther initiatives. Our work with the business school at Brunel University hasenabled us to strengthen the Reliance Academy and increase its contribution insupporting the extensive efforts of our people to enhance their knowledge andperformance. BoardDuring the year we announced the retirements from the group board of NeilFrench, as Group Finance Director, and Tony Hales, as a non-executive director,as well as the appointment of David Walter as a non-executive director. Neilremains on the board in a non-executive capacity to oversee the transition tohis successor. At the year end, Mark Radcliffe retired and Roger Wood was appointed as anon-executive director. Mark has given Reliance unstinting and invaluablesupport and advice over a long period and we are deeply grateful. We wish him along and happy retirement. We are delighted to welcome Roger to the board. Hisextensive experience in technology and service businesses will be invaluable,especially in the further development of our business process outsourcingactivities. We continue to strengthen our operating company boards through internalpromotions and attracting accomplished managers who share our passion for thevalues that inspire the success of Reliance. Michael Carre was appointedmanaging director of Reliance Security Services and Sandra Burrell, ChrisBurnell, Mark Tuckwell and Ian Foster, all established Reliance managers, alsojoined its board. FutureThe potential for future organic growth remains highly attractive, particularlynow we have strengthened the senior management teams in all three of our majorbusinesses. However, the year ahead will be challenging, with the expiry of a number oflarge contracts in 2006 making us dependent on winning further significant newbusiness. The beneficial effects of security industry regulation will also taketime to materialise. We enjoy a strong competitive position in large and growing markets. We haveconsistently invested in developing our businesses and positioning them forgrowth, which is being steadily realised. We expect to see further growth indemand for our services. The public sector is moving strongly to a mixed economymodel for bringing innovation and change in the delivery of services. We arewell placed to operate in a broader spectrum of public sector markets which wehave yet to access. In the private sector we expect increased demand asbusinesses seek to rationalise their supply chain for services and implementchange and improvement in business processes. Our forward order book remainshealthy and we continue to enjoy a strong financial position. Brian KinghamChairman Operational Review During my first year with Reliance, I have had the opportunity to witness firsthand the excellent and inspiring work which our colleagues perform for ourcustomers. I have also been able to observe and learn from our customers thetangible difference which we make to their businesses and the importance whichthey attach to the services we provide. I am excited by the opportunities which are presented in both our FacilitiesManagement and Security Services markets and the firm foundation they give us tobuild and develop the group. This year, however, has been a year of mixed performance but, despite thechallenges which we have faced, it has also been marked by successes. Security ServicesTurnover was £187.8 million (2005: £192.7 million) and segment operating profitbefore exceptional items and excluding the Group's share of its associate was£4.9 million (2005: £5.0 million). This reduction in both turnover and profit toa large extent reflects the impact of a rather turbulent and unpredictablemarket in the run up to regulation and licensing in March 2006. Our electronicsecurity business, Reliance High-Tech, continued to improve and exceededexpectations, but only has a marginal impact on the overall result at this stageof its development. Meeting the requirements of the Private Security Industry Act has beenchallenging and has caused some distraction within the business. During the yearwe have trained and tested nearly 7,000 people to regulatory standards and wehave done so without disrupting the service to our customers. It is a tribute tothe Reliance project team that we have also achieved Approved Contractor Statusfor manpower security, door supervision and CCTV operation. As the market settles in its new regulated environment, I believe that thepressure will relax, and that we will start to see a shift towards improvedmargins. In order to prepare for the changes in the market we have restructuredthe management team and significantly strengthened its sales and marketingcapabilities. We have made good progress this year in developing our reputation for excellencein customer service and innovation. As we continue to seek ways to differentiateand respond to the needs of our customers, we are increasingly aware of theirchanging priorities. During the course of the year our mobile response activity, Patrol Net, has beenestablished as a separate business unit with a centralised command centre andenhanced capabilities. This has already led to the development of a number ofnew services, including the provision of escorts for lone workers and securityrisk assessments for multi-site customers. Among others, we have won significantnew contracts with Boots, Matalan, the Co-op and Phones 4U. The integration ofmanpower security and mobile response is an increasingly popular requirement forretail customers with high street premises and we have recently been awarded acontract to provide this service to New Look stores. The trend among our customers to seek improved effectiveness and economy throughthe integration of technology, remote monitoring, site based services and mobileresponse has continued this year. Remote surveillance and monitoring areimportant constituents in the mix of services which are required. Our state ofthe art remote surveillance centre is already well established and we continueto invest in the latest software and systems to extend our leadership in thisarea. We were delighted to win the award for the "Best Integrated Security Solution"at the 2005 Security Excellence Awards. This award was presented to Reliance fordemonstrating the best integration of manpower and electronic security systemsat BMW where we have worked closely with our customer to reshape and improvetheir security provision while reducing cost. British Security IndustryAssociation awards were also won for "Best Use of Technology" for our work inintegrating manpower and electronic security for Harper Collins and C&J Clark.In 2006 we also won a major contract with ITV for this integrated service. We have made good progress in our electronic security business by winningsignificant new contracts with Air Products, the National Offender ManagementService (NOMS), Trinity Mirror, and Bank of America. We are continuing todifferentiate our services by staying at the forefront of technology. The public sector remains an important part of our activity, where we havecontracts with NHS hospitals, universities and colleges of further education,local authorities and social housing providers. Our work with the public sectoralso extends to the wider policing family where a good example of this isProject Griffin, an initiative launched by the City of London Police in 2004.Its purpose is to better equip private security businesses to assist in theevent of a major incident. We have trained over 170 officers in London and areparticipating in the extension of the project to Manchester. Facilities ManagementTurnover was £129.7 million (2005: £117.5 million), and segment operating profitincluding the Group's share of its joint venture and associate but beforeexceptional items was £7.3 million (2005: £8.3 million). This year we have improved our capability to develop solutions for our customersby strengthening our business development resource. We have also appointed newmanaging directors to our business process outsourcing and facilities managementbusinesses. We were obviously disappointed not to renew our electronic monitoring contractin Scotland but heartened by the fact that this had nothing to do with servicequality, which the Scottish Executive made a point of publicly praising. Theresult of our continued attention to delivering the highest standards of serviceand of developing our understanding of our customers has been the renewal andextension of many of our other contracts and the securing of new business. Ourforward order book remains strong at £716 million (2005: £731 million). Our 100% record of delivery of over 400,000 items, together with serviceimprovements from the application of new IT systems, was instrumental in theaward of a new five year contract with the Forensic Science Service. We havebeen awarded a new four year contract to provide custody services to West MerciaPolice, and our contract with Thames Valley Police has been extended andbroadened in the range of services we provide. Our facilities managementcontract with British Telecom has been renewed for a further three years. Our focus on working closely with our customers has again offered us significantopportunity for increasing our business with them. Our contracts with Centrextraining colleges and 3M are good examples of where we have added new buildings,locations and services to existing arrangements. The market for the provision of business process outsourcing and facilitiesmanagement continues to grow. Our position as market leader in the provision ofcustody services has recently been enhanced with a new four year contract withWarwickshire Police. We have also been contracted by Devon & Cornwall Police toprovide a range of facility services across their estate. Other notable contractwins include the provision of facility services to Durham University and the AA. During the year we have continued to mobilise our Private Finance Initiativecontracts. The year saw the opening of the latest, purpose built, detaineehanding and investigation centre for Sussex Police in Eastbourne. For ClevelandPolice we commenced early services and construction on the Middlesbrough &Langbaurgh Divisional Headquarters. The construction and mobilisation of newheadquarters for the Health & Safety Executive in Merseyside was completed, aswas the new headquarters for Gloucestershire Police. The Gloucestershire building is of remarkable environmentally sensitive designand among its features is the utilisation of the latest technology in geothermalheating and cooling. By the end of January 2006, on time and on budget, some 450police staff had taken occupancy. Reliance is providing full facility services,including manpower security, electronic security and access control, catering,cleaning and janitorial services, reception, porterage, registry and estatemanagement. Operational OutlookOverall, I am pleased with the progress that we have made in our businesses overthe financial year and I am looking forward to building on this over the comingmonths. All our businesses have exciting potential, which we remain committed torealising. Julian NichollsGroup Managing Director Financial Review OverviewIn the year to 28 April 2006 the Group turnover increased 2.3% to £317.5 million(2005: £310.3 million) before exceptional income of £0.8 million (2005: £nil).Pre-exceptional profit on ordinary activities before taxation was 16.4% lower at£13.1 million (2005: £15.6 million) largely due to the expiry in 2005 of asignificant contract in the facilities management sector, the absence of acontribution from our former investment in Safe Estates Services Ltd followingdivestment in December 2004 and challenging market conditions in our securityservices sector. Net cash was £21.1 million (2005: £27.7 million) reflecting good levels oforganic cash generation in the year partly offset by the £10.1 million outlay ofthe cash return to shareholders (described below) and £3.3 million net cashoutflow largely relating to the regulation of the private security industry. The return on operating assets (being the ratio of profit on ordinaryactivities, before net finance income and exceptional items, to operating assetswas 255.2% (2005: 191.2%) and the return on shareholders' funds (profit aftertax, excluding exceptionals, to net assets) was 35.1% (2005: 31.9%). On 16 December 2005 1,792,737 shares were acquired by the company for anaggregate cash consideration of £9.9 million, of which 400,000 shares weretransferred into treasury and the balance were cancelled. As a result thecompany now has a total of 21,512,855 shares in issue (excluding treasuryshares). Transaction costs were £0.2 million. Exceptional ItemsPre-tax net exceptional costs were £3.5 million (2005: net income £3.0 million)and largely relate to the cost of compliance with security industry regulationin England & Wales of £4.1 million (2000: £0.6 million) net of amounts recoveredfrom customers of £0.8 million (2005: £nil). After 20 March 2006, the date fromwhich security industry regulation became effective, our related manpowersecurity revenue and costs will be recognised within turnover, cost of sales andoverheads in the usual way. £0.1 million of costs relating to the Group'stransfer to the AIM Market in August 2005 have also been treated as exceptional. The prior year exceptional net income comprised a profit of £4.3 million arisingfrom the disposal of Safe Estates Services Ltd, a £0.7 million write down of thegoodwill relating to Goldrange Limited, the Group's event security business, and£0.6 million of regulation related costs. Accounting Matters Accounting policiesThere has been no significant change in accounting policies during the yearother than the adoption of FRS 21 in respect of dividends which are nowrecognised when declared. Accordingly the proposed final dividend has not beenrecorded as a liability and prior years have been restated. International Financial Reporting StandardsThe Group is not yet required to adopt International Financial ReportingStandards, under the AIM Market's reporting regime, until its 2007/08 financialyear. As previously indicated, the adoption of IFRS is not expected to have amaterial impact on reported earnings per share and the impact on consolidatednet assets is expected to be immaterial. Group Results Operating marginGroup gross margin excluding exceptionals has decreased to 18.8% (2005: 19.9%)partly due to the ending of a higher margin contract in the facilitiesmanagement sector. Effective cost control has resulted in Group administration costs reducing to£48.9 million (2005: £49.5 million); as a percentage of turnover these costshave decreased to 15.4% (2005: 16.0%). Group operating margin, being the ratio of pre-exceptional operating profit toturnover, has decreased to 3.4% (2005: 3.9%) which reflects decreased grossmargins. Net interest receivableNotwithstanding the outlay of the cash return to shareholders of £10.1 million(2005: £nil) net interest receivable increased to £0.9 million (2005: £0.6million) reflecting improved returns on deposits and increased net cash balancesup to December 2005. TaxationThe net taxation charge for the year, excluding exceptional items, was £2.8million (2005: £4.7 million) which represents an effective tax rate of 29.4%(2005: 31.1%), reflecting the utilisation of brought forward tax losses in asubsidiary undertaking. The net exceptional charge of £3.5 million is fully taxdeductible; the net exceptional profit of £3.0 million in the prior yearresulted in a tax credit of £0.2 million. Earnings per shareEarnings per share, before exceptional items, was 41.7 pence per share (2005: 47.4p). At 28 April 2006, following the earlier tender offer there were21,512,855 (2005: 23,305,592) shares in issue, excluding 400,000 treasury sharesbut including 542,599 (2005: 542,599) shares held by the employee shareownership trust. DividendsThe 2006 interim dividend paid was 4.5 pence per share (2005: 4.2 pence pershare). The final proposed dividend is 15.5 pence per share (2005: 14.5 penceper share) although changes in accounting policy discussed above require this tobe reported in 2006/07. Dividend cover before exceptional items is 2.2 times(2005: 2.5 times); the Board considers this level of dividend cover entirelyappropriate given the Group's cash balances Cash flowThe Group's underlying cash generation has again been strong. EBITDA, excludingexceptional items, declined by 15.7% to £13.0 million (2005: £15.4 million)principally reflecting a reduction in operating profit. The cash outflowrelating to exceptional items was £3.3 million (2005: £0.6 million). However,effective cash controls resulted in a reduction in working capital of £2.3million (2005: £0.9 million). Consequently, net cash inflow from operatingactivities was £11.8 million (2005: £15.7 million). Dividends received from associates were £1.0 million (2005: £1.4 million) andnet interest received was £0.9 million (2005: £0.5 million), the latterreflecting higher returns on deposits and higher cash balances prior to the cashreturn to shareholders in December. Corporation tax paid was £3.4 million (2005:£3.2 million). The net cash outflow from capital expenditure and investing activities was £2.5million (2005: £0.2 million). This comprises of a long term loan of £1.1 millionwhich was advanced to a PFI special purpose company (2005: £nil) and net capitalexpenditure of £1.4 million (2005: £1.2 million), reflecting an increased spendon IT systems. There were no disposals of current asset investments in the year(2005: proceeds of £1.0 million). There were no cash flows associated with acquisitions and disposals (2005: £7.0 million net cash inflow). The prior year figure reflects the sale of theGroup's interest in its associate, Safe Estates Services Ltd, and a paymentrelating to the completion of an earn-out arrangement. Dividends paid, excluding dividends paid in respect of shares held by theemployee share ownership trust, increased by 7.8% to £4.2 million (2005: £3.9million). Cash inflow before financing was £3.6 million (2005: £17.3 million). The net cash outflow from financing was £10.2 million (2005: £0.3 million),reflecting the £9.9 million cash return to shareholders and associated costs of£0.2 million (2005: £nil). The decrease in cash in the year was £6.6 million (2005: increase £17.0million). For management purposes, the Group focuses on free cash flow, being cash flowfrom operating activities less tax and interest paid plus dividends receivedfrom associates. Over time, the Group expects to achieve free cash flow ofapproximately 70% of pre-exceptional, pre-tax profit. In aggregate, over theyears 2002 to 2006 the Group's free cash flow has been 91.7% of pre-exceptional,pre-tax profit. The Group will incur an increased level of capital expenditure in 2006/07,largely IT related, and expects to make further but less substantial investmentsin PFI special purpose companies. These factors notwithstanding, the Groupexpects to be modestly cash generative, overall, in 2006/07. The Group's policyis to maintain committed, medium term borrowing facilities that are more thansufficient to meet its foreseeable medium term financing requirements. Segment ResultsThe security services and facilities management segments include the results ofthose of the Group's businesses, joint ventures and associated undertakings thatprovide site based security services and facilities management servicesrespectively to customers. Central administrative costs and operating assetshave been allocated to the two segments. A more detailed analysis is set out innote 3 to the accounts below. Security Services Turnover decreased 2.5% to £187.8 million (2005: £192.7 million) and operating profit before exceptionals and the Group's share of its associate decreased 2.0% to £4.9 million (2005: £5.0 million) largely reflecting tougher market conditions in security services. The prior year associate's profit of Safe Estates Services Ltd was £1.8 million. Segment operating margin excluding the Group's share of its associate remains unchanged at 2.6% (2005: 2.6%). Facilities Management Turnover increased 10.3% to £129.7 million (2005: £117.5 million) and operating profit excluding exceptionals but including the Group's share of the profit from its joint venture and associate decreased 12.0% to £7.3 million (2005: £8.3 million) largely reflecting the ending of a significant contract. Operating margin excluding exceptionals and the Group's share of profit from its associate but including the Group's share of profit from its joint venture was 4.6% (2005: 6.0%). The Group's share of the profit from its joint venture and associate is £1.4 million (2005: £1.1 million). Reliance Security Group plcConsolidated profit and loss accountfor the year ended 28 April 2006 Pre-exceptional Exceptional items items 2006 2006 2006 2005 Notes £'000 £'000 £'000 £'000--------------------- ------ ---------- --------- --------- ---------Turnover: Group and share of joint venture 3, 4 317,483 758 318,241 310,257 Less: share of joint venture's turnover 3 (259) - (259) ---------------------- ------ ---------- --------- --------- --------- Group turnover - continuing operations 3 317,224 758 317,982 310,257 ---------- --------- --------- ---------Cost of sales - excluding exceptional item (257,598) - (257,598) (248,568) - exceptional item 4 - (3,828) (3,828) (386) ---------- --------- --------- --------- Total cost of sales (257,598) (3,828) (261,426) (248,954)--------------------- ------ ---------- --------- --------- --------- Gross profit 59,626 (3,070) 56,556 61,303 Administrative expenses ---------- --------- --------- --------- - excluding exceptional items (48,905) - (48,905) (49,493) - exceptional items 4 - (398) (398) (888) ---------- --------- --------- --------- Total administrative expenses (48,905) (398) (49,303) (50,381)--------------------- ------ ---------- --------- --------- --------- Group operating profit excluding share of jointventure and associates - continuing operations 10,721 (3,468) 7,253 10,922 ---------- --------- --------- ---------Share of joint venture's operating profit/(loss) 3 154 - 154 (138) - continuing operationsShare of associate's operating profits 3 1,274 - 1,274 1,181 - continuing operationsShare of associate's operating profits 3 - - - 1,818 - discontinued operations ---------- --------- --------- --------- Total share of operating profits of joint venture and associates 1,428 - 1,428 2,861--------------------- ------ ---------- --------- --------- --------- Operating profit: Group and share of joint venture and associates 3 12,149 (3,468) 8,681 13,783--------------------- ------ ---------- --------- --------- --------- Non-operating exceptional gain on disposal ofinvestment in associate 4 - - - 4,256--------------------- ------ ---------- --------- --------- --------- Profit on ordinary activities before finance income/(charges) 12,149 (3,468) 8,681 18,039 Finance income/(charges) ---------- --------- --------- ---------Group 1,050 - 1,050 555Joint venture (137) - (137) -Associates 13 - 13 20 ---------- --------- --------- --------- Net finance income 926 - 926 575 --------------------- ------ ---------- --------- --------- ---------Profit on ordinary activities before taxation 13,075 (3,468) 9,607 18,614 Tax on profit on ordinary activities 4, 5 (3,849) 1,040 (2,809) (4,673)--------------------- ------ ---------- --------- --------- --------- Profit on ordinary activities after taxation and for the year 7 9,226 (2,428) 6,798 13,941--------------------- ------ ---------- --------- --------- --------- 2006 2005 Notes £'000 £'000---------------------- ------ --------- ---------Earnings per ordinary shareBasicContinuing operations 30.7p 37.1pDiscontinued operations - 24.2p---------------------- ------ --------- --------- 6 30.7p 61.3p---------------------- ------ --------- --------- DilutedContinuing operations 30.7p 36.8pDiscontinued operations - 24.1p---------------------- ------ --------- --------- 6 30.7p 60.9p---------------------- ------ --------- --------- Dividend per ordinary share for the year 20.0p 18.7p---------------------- ------ --------- --------- There are no material differences between reported and historical cost profitsand losses. The Group has no recognised gains or losses other than the results as set outabove and, therefore, no statement of total recognised gains and losses has beenprepared. Reliance Security Group plcConsolidated balance sheetas at 28 April 2006 Restated (*) 2006 2005 Notes £'000 £'000-------------------------- ----- --------- --------Fixed assetsTangible assets 5,445 6,138 --------- --------InvestmentsShare of gross assets of joint venture 10,602 7,675Share of gross liabilities of joint venture (10,718) (7,808) --------- --------Share of net liabilities of joint venture (116) (133)Associated undertaking 135 253Others 1,701 467 --------- --------Total investments 1,720 587-------------------------- ----- --------- -------- 7,165 6,725-------------------------- ----- --------- -------- Current assetsStocks 1,725 1,465Debtors: amounts due within one year 36,488 37,767Debtors: amounts due after more than one year 3,553 4,253Cash at bank and in hand 24,557 31,107-------------------------- ----- --------- -------- 66,323 74,592-------------------------- ----- --------- -------- Liabilities: amounts falling due within one yearBorrowings (3,376) (3,378)Creditors (41,250) (41,177)Corporation tax (2,069) (2,750)-------------------------- ----- --------- -------- (46,695) (47,305)-------------------------- ----- --------- --------Net current assets 19,628 27,287-------------------------- ----- --------- --------Total assets less current liabilities 26,793 34,012-------------------------- ----- --------- -------- Liabilities: amounts falling due after more than one yearBorrowings (124) -Other creditors (400) (200)-------------------------- ----- --------- -------- (524) (200)-------------------------- ----- --------- -------- -------------------------- ----- --------- --------Net assets 26,269 33,812-------------------------- ----- --------- -------- Capital and reservesCalled up share capital 1,095 1,165Capital redemption reserve 70 -Share premium account 2,534 2,534Own shares held (5,025) (2,825)Revaluation reserve 232 152Profit and loss account 27,363 32,786-------------------------- ----- --------- --------Equity shareholders' funds 7 26,269 33,812-------------------------- ----- --------- -------- (*) See note 1 Reliance Security Group plcConsolidated cash flow statementfor the year ended 28 April 2006 2006 2005 Notes £'000 £'000--------------------------- ------ -------- --------Net cash inflow from operating activities 8 11,835 15,726--------------------------- ------ -------- --------Dividends from associate 1,005 1,421--------------------------- ------ -------- --------Returns on investment and servicing of financeInterest received 1,238 809Interest paid (281) (293)Interest element of finance lease repayments (31) (30)--------------------------- ------ -------- --------Net cash inflow from returns on investmentand servicing of finance 926 486 --------------------------- ------ -------- --------TaxationUK corporation tax paid (3,399) (3,199)--------------------------- ------ -------- -------- Capital expenditure and financial investmentPurchase of tangible fixed assets (1,389) (1,252)Sale of tangible fixed assets 18 11Loan advanced to joint venture (1,122) -Purchase of fixed asset investment - (32)Repayment of fixed asset investment - 20Sale of current asset investment - 1,036--------------------------- ------ -------- --------Net cash outflow from capital expenditureand financial investment (2,493) (217)--------------------------- ------ -------- -------- Acquisitions and disposalsPurchase of subsidiary undertaking- deferred consideration paid - (266)Purchase of interest in joint venture - (5)Sale of interest in associate - 7,260--------------------------- ------ -------- --------Net cash inflow from acquisitions and - 6,989disposals --------------------------- ------ -------- --------Equity dividends paid (4,245) (3,938)--------------------------- ------ -------- --------Net cash inflow before financing 3,629 17,268--------------------------- ------ -------- -------- FinancingPayments to redeem equity shares (7,660) -Payments to acquire treasury shares (2,200) -Payments of expenses on redemption of equityshares, and acquisition of treasury shares (236) -Proceeds from exercise of options in shares heldthrough the ESOP trust - 8Capital element of finance lease repayments (83) (266)--------------------------- ------ -------- --------Net cash outflow from financing (10,179) (258)--------------------------- ------ -------- --------(Decrease)/increase in cash in the year (6,550) 17,010--------------------------- ------ -------- -------- Reconciliation of net cash flow to movement in net cash(Decrease)/increase in cash in the year (6,550) 17,010Cash flow from finance leases (122) 266--------------------------- ------ -------- --------Movement in net cash in the year (6,672) 17,276Net cash at start of year 27,729 10,453--------------------------- ------ -------- --------Net cash at end of year 9 21,057 27,729--------------------------- ------ -------- -------- Reliance Security Group plcNotes to the preliminary statementfor the year ended 28 April 2006 The financial information set out above does not constitute the Group'sstatutory accounts for the years ended 28 April 2006 or 29 April 2005, but isderived from those accounts. Statutory accounts for 29 April 2005 have beendelivered to the Registrar of Companies and those for 28 April 2006 will bedelivered following the Company's annual general meeting. The auditors havereported on those accounts: their reports were unqualified and did not containstatements under s.237(2) or (3) Companies Act 1985. 1. Accounting convention The Group accounts have been prepared in accordance with applicable UnitedKingdom accounting standards and under the historical cost convention, asmodified by the revaluation of land and buildings. This preliminary announcementhas been prepared on the basis of the accounting policies laid down in thoseaccounts. Accounting policies have been consistently applied in dealing withitems which are considered material in relation to the Group's accounts, subjectto the two changes in the year as set out below. The financial years of allGroup companies are the 52 or 53 weeks up to the Friday before, or falling on,the accounting reference date of 30 April. The Group adopted Financial Reporting Standard 21 Events After the Balance SheetDate (FRS 21) and Financial Reporting Standard 22 Earnings per Share (FRS 22)during the year. The adoption of FRS 21 has resulted in the Group restating its closing netassets for the prior year to exclude dividends proposed but not yet declared atthe balance sheet date. This exclusion of proposed dividends previously reportedwithin current liabilities has increased closing net assets at 29 April 2005 by£3,301,000. In addition the figure for opening net assets for the year ended 29April 2005 has similarly been increased by £2,982,000. The adoption of FRS 22 has not led to any adjustment to the previously reportedfigures for basic and diluted earnings per share. Additional analysis of theearnings between those attributable to continuing and discontinued operations,including comparative figures, has been reported in note 6 as required by thestandard. 2. Consolidation The consolidated profit and loss account and balance sheet incorporate theaccounts of Reliance Security Group plc, its subsidiary undertakings and itsshare of the profits/losses and net assets/liabilities of its joint ventures andassociates. The results of subsidiary undertakings, joint ventures or associatesacquired or sold during the year are included in the consolidated profit andloss account from or to the date on which control passed. 3 Segmental information Security Facilities Security Facilities Services Management Total Services Management Total 2006 2006 2006 2005 2005 2005 £'000 £'000 £'000 £'000 £'000 £'000------------------ -------- --------- ------- -------- -------- -------Group turnover - excluding exceptionalrevenue 187,818 129,406 317,224 192,730 117,527 310,257 Exceptional revenue 673 85 758 - - ------------------- -------- --------- ------- -------- -------- -------Group turnover 188,491 129,491 317,982 192,730 117,527 310,257 Share of joint venture's turnover - 259 259 - - ------------------- -------- --------- ------- -------- -------- -------Turnover: Group and share of joint venture 188,491 129,750 318,241 192,730 117,527 310,257------------------ -------- --------- ------- -------- -------- ------- Group operating profit before exceptionalitems, excluding share of joint venture andassociate - continuing operations 4,880 5,841 10,721 4,979 7,217 12,196 -------- --------- ------- -------- -------- -------Share of joint venture's operating profit/(loss) - continuing operations - 154 154 - (138) (138)Share of associate's operating profits -continuing operations - 1,274 1,274 - 1,181 1,181Share of associate's operating profits -discontinued operations - - - 1,818 - 1,818 -------- --------- ------- -------- -------- ------- Total share of operating profits of joint venture and associates before exceptionalitems - 1,428 1,428 1,818 1,043 2,861 -------- --------- ------- -------- -------- ------- Operating profit before exceptional items: Group and share of joint venture and associates 4,880 7,269 12,149 6,797 8,260 15,057 -------- --------- ------- -------- -------- ------- Group operating exceptional items (3,295) (173) (3,468) (1,274) - (1,274) -------- --------- ------- -------- -------- -------Operating profit: Group and share of joint venture and associates 1,585 7,096 8,681 5,523 8,260 13,783 -------- --------- ------- -------- -------- -------Non-operating exceptional gain on disposal ofinvestment in associate - - - 4,256 - 4,256 -------- --------- ------- -------- -------- -------Profit on ordinary activities before financeincome/(charges) 1,585 7,096 8,681 9,779 8,260 18,039 -------- --------- ------- -------- -------- ------- In accordance with the equity method adopted for accounting for associates,Group turnover excludes its share of turnover of associated undertakings of£30,050,000 (2005: £31,564,000). Security Facilities Security Facilities Restated(*) Services Management Total Services Management Total 2006 2006 2006 2005 2005 2005 £'000 £'000 £'000 £'000 £'000 £'000------------------- ------- --------- ------ ------- -------- -------- Group operating assets/(liabilities) (880) 5,621 4,741 3,870 3,884 7,754Share of joint venture's net liabilities - (116) (116) - (133) (133)Share of associate'snet assets - 135 135 - 253 253------------------- ------- --------- ------ ------- -------- -------- Total operatingassets/(liabilities) (880) 5,640 4,760 3,870 4,004 7,874------------------- ------- --------- ------ ------- -------- -------- Reconciliation oftotal operatingassets to total netassets: Total operatingassets 4,760 7,874 Items excluded: Net cash 21,057 27,729Investments in otherparticipatinginterests 579 467Loan to jointventure 1,122 -Taxation payable (2,069) (2,750)Deferred taxation 769 460Net interestreceivable 51 32---------------- ---------- --------- ------ ------- -------- --------Total netassets (*) 26,269 33,812---------------- ---------- --------- ------ ------- -------- -------- Operating assets are those net assets controlled by Reliance's operatingdivisions. (*) See note 1 4 Exceptional items 2006 2005 £'000 £'000-------------------------- ---------- ---------Operating exceptional items-------------------------- ---------- ---------TurnoverRevenue received towards cost of implementationof Private Security Industry Act 758 - Cost of salesCost of implementation of Private Security (3,828) (386)Industry Act Administrative expenses ---------- ---------Cost of implementation of Private Security Industry Act (312) (218)Impairment of goodwill held in respect of Goldrange Limited - (670)Legal and professional costs of re-listing on AIM (86) - ---------- --------- (398) (888) -------------------------- ---------- ---------Total operating exceptional charge (3,468) (1,274) Non-operating exceptional itemGain on disposal of investment in associate - Safe Estates Services Limited - 4,256-------------------------- ---------- ---------Total exceptional (charge)/gain (3,468) 2,982 Tax credit on exceptional (charge)/gain 1,040 181-------------------------- ---------- --------- (2,428) 3,163-------------------------- ---------- --------- The net cash outflow in the year in respect of the operating exceptionalitems was £3,310,000 (2005: £604,000). There were no tax credits or charges relating to the exceptional goodwill write-off or gain on disposal of the investment in associate in the year ended 29April 2005. 5 Taxation Corporation tax, excluding tax credits on exceptional charges, for the yearended 28 April 2006 has been calculated at an effective rate of 29.4% (2005:31.1%). 6 Earnings per share 2006 2005 --------------- ---------------- Basic Diluted Basic Diluted pence pence pence pence per per per per £'000 share share £'000 share share-------------------- ----- ------- ------- ------ ------- ------- Profit for the period attributable to equityshareholdersContinuing operations 6,798 30.7p 30.7p 8,429 37.1p 36.8pDiscontinued operations - - - 5,512 24.2p 24.1p-------------------- ----- ------- ------- ------ ------- ------- 6,798 30.7p 30.7p 13,941 61.3p 60.9p Add back/(deduct):Exceptional items(see note 4) 2,428 11.0p 11.0p (3,163) (13.9p) (13.8p)-------------------- ----- ------- ------- ------ ------- -------Earnings excludingexceptional items 9,226 41.7p 41.7p 10,778 47.4p 47.1p-------------------- ----- ------- ------- ------ ------- ------- Represented byContinuing operations 9,226 41.7p 41.7p 9,522 41.9p 41.6pDiscontinued operations - - - 1,256 5.5p 5.5p-------------------- ----- ------- ------- ------ ------- ------- 9,226 41.7p 41.7p 10,778 47.4p 47.1p-------------------- ----- ------- ------- ------ ------- ------- 2006 2005 Number Number---------------------------- -------- --------Weighted average number of shares 22,808,186 23,305,592Weighted average number of shares held in treasury (142,857) -Weighted average number of shares held in ESOP trust (542,599) ( 544,907) ---------------------------- -------- -------- Shares used to calculate basic earnings per share 22,122,730 22,760,685Dilutive potential shares - 138,557---------------------------- -------- -------- Shares used to calculate diluted earnings per share 22,122,730 22,899,242 ---------------------------- -------- -------- The basic and diluted earnings per share have been calculated in accordancewith FRS 22, based on profit after tax and the weighted average number ofordinary shares in issue during the year, less own shares held in treasuryand by the ESOP trust. 7 Reconciliation of movement in equity shareholders' funds Called up Capital Share Own Profit share redemption account shares Revaluation and loss Restated(*) capital reserve premium held reserve account 2006 2005 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000----------------- -------- -------- -------- -------- -------- -------- -------- --------Group At start of the year aspreviously stated 1,165 - 2,534 (2,825) 152 29,485 30,511 20,819Prior period adjustment for proposed dividends (*) - - - - - 3,301 3,301 2,982----------------- -------- -------- -------- -------- -------- -------- -------- --------At start of year asrestated 1,165 - 2,534 (2,825) 152 32,786 33,812 23,801 Share based payments - - - - - - - 8Reclassification - - - - 80 (80) - -Purchase of own shares (70) 70 - (2,200) - (7,896) (10,096) -Profit on ordinaryactivities after taxation - - - - - 6,798 6,798 13,941Dividends paid - - - - - (4,245) (4,245) (3,938)----------------- -------- -------- -------- -------- -------- -------- -------- --------At end of the year asrestated (*) 1,095 70 2,534 (5,025) 232 27,363 26,269 33,812----------------- -------- -------- -------- -------- -------- -------- -------- -------- In accordance with s.264 Companies Act 1985 the value of own shares held must be deducted from the profit and loss account of the Company in calculating its distributable reserves. (*) See note 1 8 Reconciliation of operating profit to net cash inflow from operating activities 2006 2005 £'000 £'000-------------------- ------- -------Operating profit 7,253 10,922Depreciation charges 2,272 3,045Amortisation of goodwill - 88Exceptional goodwill impairment - 670(Profit)/loss on the sale of fixed assets (3) 85(Increase)/decrease in stocks (260) 205Decrease/(increase) in debtors 2,317 (6,756)Increase in creditors 256 7,467-------------------- ------- -------Net cash inflow from operating activities 11,835 15,726-------------------- ------- ------- 9 Analysis and reconciliation of net cash 2005 Cash flow 2006 £'000 £'000 £'000--------------------------- -------- -------- ------- Cash at bank and in hand 31,107 (6,550) 24,557 --------------------------- -------- -------- -------Loan due within one year (3,315) - (3,315)Finance leases and hire purchase contracts (63) (122) (185)--------------------------- -------- -------- -------Total borrowings (3,378) (122) (3,500)--------------------------- -------- -------- -------Net cash 27,729 (6,672) 21,057--------------------------- -------- -------- ------- This information is provided by RNS The company news service from the London Stock Exchange