Resolute Mining Regulatory News (RSG)

28 Jun 2007 07:01

Reliance Security Group PLC28 June 2007 THURSDAY 28 JUNE 2007 PRESS RELEASE Reliance Security Group plc Preliminary announcement of results for the Year ended 27 April 2007 • Turnover up 8.8% to £345.5m (2006: £317.5m) • Profit before tax and exceptional items: £13.6m (2006: £13.1m) • Earnings per share before exceptional items: 47.4p (2006: 41.9p), earnings per share: 46.1p (2006: 30.9p) • Continuing investment in growth markets • Forward FM order book £710m (2006: £716m) Julian Nicholls, Group Managing Director, commenting on the results said: "In the last year we have made good progress in all our businesses andstrengthened our position in our major markets. It has been an important yearfor Reliance in completing and consolidating the changes we have made to ourmanagement team which has brought a renewed focus and energy to the business. Wehave also made revenue investments in our sales and marketing capabilities. Someof the benefits are already reflected in the progress we have made to renewcontracts with existing customers and win significant new business thuscontinuing to build a firm foundation for the Group." 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 : Julian Nicholls Group Managing Director 01895 205002Mark Harrison Group Finance Director 01895 205002 Chairman's Statement Introduction I am pleased to report the results for the year to 27 April 2007. In security services, our substantial investment in setting up theinfrastructure, administration and validation facilities to meet the newrequirements of government regulation of private security in England and Waleshas been completed and the adjustments to a regulated market are graduallytaking shape. We reversed the trend of the three previous years and enjoyedstrong volume growth. However, the rate of growth in new business slowedsignificantly in the second half. The market remains competitive with continuingpressure on prices and margins. In our facilities management and business process outsourcing businesses, wehave achieved organic growth with existing customers and have successfullymobilised a number of new contracts. This has compensated for contracts lost inthe previous year. We are investing for the future in new and complementaryspecialisms. We are working determinedly towards our long term strategic need todifferentiate our products and services by adding more value for our customersthrough innovation, process improvement, and the application of new technology.We are establishing leadership positions in specific niches in our markets wherewe have specialist knowledge and the necessary core competencies. Possible offer On 17 April 2007, I announced that I was at a very preliminary stage ofconsidering the possibility of making an offer for the minority shareholding inthe Group. On 14 June 2007, I announced that I had made significant progress inthe preparatory work ahead of a possible offer. I also disclosed that a companycontrolled by me had secured an irrevocable commitment from Artemis InvestmentManagement Limited to accept any possible offer in respect of approximately 4.8%of Reliance's issued share capital provided that a firm intention to make suchan offer is announced before 31 July 2007 and is for no less than 916p pershare in cash (inclusive of any final dividend for the financial year to 27April 2007). If any offer were to proceed, apart from adopting a longer termtime frame for investment decisions, I would not envisage any significantchange in the way that we would continue to manage and to operate and conductour business and there would be no effective change of control. Results Turnover increased by 8.8% to £345.5 million (2006: £317.5 million).Pre-exceptional, pre-tax profit for the year was £13.6 million (2006: £13.1million). Excluding exceptional items, earnings per share was 47.4p (2005:41.9p). Net cash generated from operations was £12.2 million (2006: £11.8million) and we ended the year with net cash of £25.4 million (2006: £21.1million). Dividend In light of the possible offer referred to above, your board has decided not torecommend any final dividend at this stage. It intends, however, to reconsider arecommendation, should any firm intention to make an offer not be announcedbefore 31 July 2007. Any dividend recommendation would then be put toshareholders for approval at the AGM, currently proposed to be held on 6September 2007. Strategy Our strategy is built around nourishing long term relationships with ourcustomers and differentiating Reliance from competitors - primarily throughpeople development and teamwork, service quality and the application ofappropriate technology - an emphasis designed to help us over time to outperformour rivals in both growth and margins, thus generating greater opportunity forour people and superior value for our shareholders. Our businesses are highly complementary, offering each other important costneutral benefits of sharing infrastructure, skills development, managementresources, marketing and brand appeal. The businesses have a high level ofshared customers. We aim to apply the benefits of these assets in adding maximumvalue for our customers. In security services, with a market worth approximately £3 billion per annum, wewill continue to strengthen our leadership position and to respond robustly tocompetition, offering customers an innovative blend of technology and manpowerservices. We will continue to build our already substantial presence in the larger andfaster growing markets of facilities management and business processoutsourcing, where we are leaders in some market segments. Our aim is to growour revenue streams by expanding the range of complementary services deliveredunder longer term contracts to both public and private sector customers. Theintention is to build more market leadership positions in specific niches wherewe have specialist knowledge and the necessary core competencies. Community Reliance is an enthusiastic supporter of community, voluntary and charitableendeavour which complement our business aims and those of our customers. Webelieve strong communities are good for business. Our work with Crime Concern,Victim Support, Cumberland Lodge, the Police Service and numerous charitable andcommunity groups serves to enrich our experience and capacity to serve ourcustomers. We have been delighted to sponsor The Prince's Trust. The ReliancePrize for Enterprise and Innovation at Brunel University is now a highlight ofthe annual Made In Brunel International design exhibition. This year we were pleased to support and help set up the community interestcompany, Restorative Solutions. Under the leadership of Sir Charles Pollard theyhave achieved notable success in tackling the problem of re-offending throughfacilitated conferences between offenders and their victims, often in thepresence of family members. We also set up what we consider to be a uniquepartnership: working with Stroud College, Crime Concern and Tomorrow's People wecreated 'The Offender Services Partnership' which has been welcomed by NOMS andthe Probation Service. We are actively working to extend our partnerships withthe charitable 'not for profit' sector to provide fully commercial services tothe public sector. People I am delighted to have this opportunity to express, on behalf of the board, ourthanks and enormous gratitude to our people. We take great pride in theirachievements, dedication, enthusiasm and sheer professionalism. My boardcolleagues and I delight in our constant involvement in celebrating theirachievements at first hand. Our people are the heart of the 'RelianceDifference'. People matter most and our long term success in continuing to add value to theservices we provide is sustained by the renewal of inspiration and the sense ofenthusiasm and mission which characterises our culture. Over the last year, wehave continued to work with the business school at Brunel University and theLeadership Centre at Newcastle University to enhance the contribution of theReliance Academy in its work of fostering outstanding management and leadershipskills across the Group. Reflecting the depth and breadth of our commitment to imaginative interventionsand support in skills and personal development, we were honoured to berecognised by the Corporate Research Foundation and Guardian Newspapers as oneof Britain's top employers. Reliance people won more regional British SecurityIndustry Awards for excellence this year than any other competitor. Theserecognitions serve to remind us of the endless scope for continuous improvement. Investors In People is a centrepiece guiding our constant work in involving ourpeople in setting objectives and improving our competitiveness and businessperformance. The regular re-accreditation process for IIP serves as a reminderof the power of great and comprehensive communications in the sharing of ourbusiness objectives and the development of changing skills to meet them. Thelaunch of our facilities management skills passport this year has proved apopular initiative welcomed by our people with its commitment to life-longlearning. Enabling those in the scheme to take ownership in identifying theirtraining needs, the passport gives valuable impetus to personal development. Board During the year we announced the retirement from the Group board as anon-executive director of Dr. Neil French. We owe Neil a huge debt of thanks forhis contribution and his earlier inspired leadership of the financial managementof the Group over the five years of our most significant growth in diversity andscale. We wish him every happiness and success for the future. We were delightedto welcome Mark Harrison as his successor as Group Finance Director. Mark bringsdistinctive strengths and achievement in both services and manufacturingbusinesses. We have sought every opportunity to strengthen the operating company boards byinternal promotions and appointing gifted managers from outside who share ourpassion for the values that inspire the success of Reliance. Stephen Hollingsjoined the restructured board at Reliance Security Services Ltd as Sales &Marketing Director, and Alison Crossley as Support Services Director. ColinPorton, an early pioneer in the facilities management market, joined RelianceIntegrated Services Ltd as Operations Director. Gerald Cranley, a specialist inbusiness process outsourcing joined the board of Reliance Secure Task ManagementLtd. Future We believe that the outlook for the current year is encouraging. In securityservices, we anticipate some further beneficial effects of regulation and we arewell placed to take advantage of the new regulated market later this year inScotland. However, conditions are likely to remain very competitive, demandingchange, new approaches and higher value added. In the large and dynamicfacilities management and business process outsourcing markets we are continuingto invest in building organisational strength and an increasing number ofcomplementary activities which offer the prospect of higher value and longerterm contracts. Brian KinghamChairman Operational Review In the last year we have made good progress in all our businesses andstrengthened our position in our major markets. It has been an important yearfor Reliance in completing and consolidating the changes we have made to ourmanagement team which has brought a renewed focus and energy to the business. Wehave also made revenue investments in our sales and marketing capabilities. Someof the benefits are reflected in the progress we have made to renew contractswith existing customers and win significant new business thus continuing tobuild a firm foundation for the Group. Security Services Turnover was £207.5 million (2006: £187.8 million, excluding exceptionalrevenue) and segment operating profit before exceptional items was £6.6 million(2006: £4.9 million). This increase in turnover and profit reflects improvementin securing new contracts as well as retaining and developing existingcontracts. Although we have, in common with the industry, lost contracts, wehave experienced fewer terminations this year than last. This year we have wonimportant new contracts with, among others, J Sainsbury, Romec, Pilkington Groupand THE, as well as having extended our existing business with DHL, Arlington,and New Look. We continue to consolidate our leading position in providingsecurity services to shopping centres, with 13 new shopping centre customers,including the provision of a wide range of security related services toScotland's largest covered shopping centre at East Kilbride. Our electronic security business, Reliance High-Tech, continued to improve withsecured new business exceeding expectations. The Private Security Industry Act came into force in England and Wales at theend of March 2006. Meeting the requirements of the Act was a major challengelast year and without doubt caused some distraction within the business. Wesuccessfully achieved Approved Contractor Status for manpower security, keyholding, door supervision and CCTV operation and our preparedness has benefitedus this year in our ability to meet the requirements of new customers. As the market has settled into its newly regulated environment, we have seengreater stability in our customer base, and the beginnings of a change in thepattern of competition with some consolidation among the larger and middle sizedcompanies. In addition, it is likely that with higher barriers to entry therewill be fewer new entrants. However, pricing remains competitive. The Act will also come into force in Scotland in November 2007. As a majorsupplier of security and related services in Scotland, our project team has beenengaged in preparing us for full compliance. I am delighted to report that wewere the first security services company to achieve Approved Contractor Statusin Scotland for security guarding, door supervision and key holding. As we continue to seek ways to differentiate and respond to the needs of ourcustomers, we are increasingly aware of their changing priorities. There hasbeen no slowing in the trend among our customers to explore the options forimproved effectiveness and economy through the integration of technology, remotemonitoring, site based services and mobile response. Remote surveillance andmonitoring are important constituents in the mix of services which our customersrequire. Our state of the art remote surveillance centre is now well establishedand we have continued to invest in the software and systems required to extendour leadership. We have further developed our activities in the centre this yearand extended our capabilities to respond to new areas of market growth,especially in lone worker security. Last year our mobile response activity, Patrol Net, was established as aseparate business unit with a centralised command centre and enhancedcapabilities. We successfully completed this task, finalised the appointment ofmanagement, and have reviewed and refined all operational processes. Ourcomprehensive geographic cover has enabled us to secure new customers withfacilities across the UK, including Northgate Information Solutions, WyevaleGarden Centres, Cambridge County Council, and mobile telephone retailer 3. In order to improve operational performance and our service to customers, wehave embarked on the replacement of our vehicle fleet with Ford Transit Connectvans. The specification of these vehicles provides for increased security forkey storage and facilities for the secure transportation of high value or highrisk items. As part of this exercise, and in recognition of our responsibilityto reduce carbon emissions, we have committed to support a number of emissionsreduction projects. We have also continued to build on our reputation for excellence in customerservice and innovation. This year we are proud that Reliance Officers have wonmore BSIA (British Security Industry Association) regional awards than any othersecurity provider including Outstanding Act, Service to the Customer, and BestUse of Technology. We have also been recognised for the integration of manpowerand technology. In addition we have won a number of other awards which recognise the quality andexcellence of our services. Among these, our landscaping business has wonimportant awards including the National Landscaping Award from the BritishAssociation of Landscaping Industries and 'Luton in Bloom' for its work on oneof the large scale business park it serves. The improvement in performance of our electronic security business, which Ireported last year, has continued. In addition to the major contracts which wehave been developing with our existing customers, including the NationalOffender Management Service (NOMS), we have won a number of major contracts withnew customers including IBM, Accenture, Hertfordshire County Council and BrunelUniversity. We are continuing to explore and develop new applications based onthe integration of new technologies, especially in the area of internet basedsolutions. Organisations across the public sector are important customers, and 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 community centred activity and this year we were proud toreceive the Safer Business Award for our work with Milton Keynes PartnersAgainst Crime. Facilities Management Turnover was £138.0 million (2006: £129.7 million, excluding exceptionalrevenue), and segment operating profit including the Group's share of its jointventure and associate, but before exceptional items, was £6.3 million (2006:£7.3 million). Following last year's success in renewing contracts, we have been active inextending the range of services which we provide to our existing customers andwinning new contracts. Early in the year we were awarded the facilitiesmanagement contract for the AA, which includes the management of five majorbuildings and other properties, and a contract to provide services to Indesit atits four manufacturing sites and headquarters buildings. We also securedcontracts with Infineum and Panasonic to manage their R&D facilities which, forthe former, includes a 35 acre research park. During the year we have continued to grow our close to core support services tothe Police. We mobilised our custody contract with Warwickshire in June and, inthe same month, were awarded the PFI contract for the construction andmanagement of the North Kent Police Divisional HQ. The innovative andenvironmentally sensitive design of this Thamesway operations centreincorporates geothermal heating and cooling to minimise energy consumption. Wecompleted the construction of the Cleveland Police stations on time and tobudget. This is an exciting and developing PFI project and we have recentlyreached agreement with Cleveland Police to extend our services into custody andproperty management. We have continued to explore new and innovative approaches to services whichwill add value to our customers and we are actively assessing new markets forforensic medical services and the provision of specialist staff to the Policeand other services. In order to better serve our facilities management customerswe are developing and growing our mechanical and electrical services business. Our management teams have been active, not only in consolidating our presence inexisting markets, but also in extending our capabilities into new markets. Thisyear we secured a pathfinder transport contract for Cheshire probation serviceproviding transportation for probationers to their place of work. We have alsosecured our first contract in the health sector with Avon and Wiltshire MentalHealth Partnership NHS Trust to move patients in discreet vehicles between homeand treatment centres. This contract has called for specialist training anddevelopment of the Reliance team in patient care and management. These newsectors present us with opportunities to build and develop our capabilities. Julian NichollsGroup Managing Director Financial review Overview In the year to 27 April 2007 the Group turnover increased 8.8% to £345.5 million(2006: £317.5 million) before exceptional income of £nil (2006: £0.8 million).Pre-exceptional profit on ordinary activities before taxation was 3.1% higher at£13.6 million (2006: £13.1 million). Profit before tax was £13.2m (2006: £9.7m). Net cash was £25.4 million (2006: £21.1 million) reflecting good levels oforganic cash generation in the year. Exceptional items Pre-tax net exceptional costs were £0.4 million (2006: £3.5 million) and relateto the net costs of compliance with security industry regulation in Scotland(2006: £3.4 million in England and Wales net of amounts recovered from customersand £0.1m costs of transferring to AIM). Since 20 March 2006, the date fromwhich security industry regulation became effective in England and Wales, ourincremental manpower security revenue and costs are recognised within turnover,cost of sales and overheads in the usual way. Accounting matters Accounting policies There has been no significant change in accounting policies during the yearother than the adoption of FRS 20 in respect of share-based payments asexplained in detail in note 1 to the accounts and the effect of the restatementon the prior year is set out in note 8. International Financial Reporting Standards The adoption of International Financial Reporting Standards has been deferreduntil financial year 2007/08 following the Group transfer to AIM and theadoption of that market's reporting requirements. As previously indicated, theadoption of IFRS is not expected to have a material impact on reported earningsper share and the impact on consolidated net assets is expected to beimmaterial. The Group is undertaking further work to prepare for the transitionto IFRS in 2007/08. Group results Operating margin Group gross margin excluding exceptionals has increased to 19.0% (2006: 18.8%)as a result of effective cost control during the growth in turnover and therealisation of the anticipated benefits from licensing in security services.Group administration costs increased to £54.3 million (2006: £48.8 million)reflecting the investments made to generate longer term growth. As a percentageof turnover these costs have increased to 15.7% (2006: 15.4%). Our share of theoperating profit from our joint venture and associate grew from £1.4 million to£1.7 million. Overall, Group operating margin, being the ratio ofpre-exceptional operating profit to turnover, decreased to 3.7% (2006: 3.8%). Net interest receivable Net interest receivable decreased to £0.7 million (2006: £0.9 million) due tolower average cash balances during the year, following the £10.1 million outlayof the cash return to shareholders in December 2005. Taxation The net taxation charge for the year excluding exceptional items was £3.6million (2006: £3.9 million) which represents an effective tax rate of 26.7%(2006: 29.4%), reflecting the utilisation of brought forward tax losses in asubsidiary undertaking. The net exceptional charge of £0.4 million is fully taxdeductible; the net exceptional charge of £3.5 million in the prior yearresulted in a tax credit of £1.0 million. Earnings per share Basic earnings per share before exceptional items was 47.4 pence per share(2006: 41.9 pence per share). At 27 April 2007, there were 21,512,855 (2006:21,512,855) shares in issue, excluding 400,000 (2006: 400,000) treasury sharesbut including 542,599 (2006: 542,599) shares held by the Group employee shareownership trust. Dividends In the light of the possible offer the board has decided not to recommend anyfinal dividend at this stage. It intends, however, to reconsider arecommendation, should any firm intention to make an offer not be announcedbefore 31 July 2007. Any recommendation would then be put to shareholders forapproval at the AGM, currently proposed to be held on 6 September 2007. The 2007 interim dividend paid was 4.8 pence per share (2006: 4.5 pence pershare). The final dividend for 2006 was 15.5 pence per share. Cash flow The Group's underlying cash generation has again been strong. Net cash inflowfrom operations improved by 3.4% to £12.2 million (2006: £11.8 million)reflecting the improved turnover and operating profit. Working capital increasedby £0.6 million while depreciation reduced by £0.4 million. Dividends received from the associate were £1.1 million (2006: £1.0 million) andnet interest received was £1.0 million (2006: £0.9 million). Corporation taxpaid was £3.4 million (2006: £3.4 million). The net cash outflow from investingactivities was £2.3 million (2006: £2.5 million). In 2007 a long term loan of£0.5 million was advanced to a PFI special purpose company (2006: £1.1 million),and net capital expenditure was £1.8 million (2006: £1.4 million), reflecting anincreased spend on IT systems and office refurbishments. Dividends paid were £4.3 million (2006: £4.2 million), reflecting the higherdividend per share offset by the reduced number of shares following the cashreturn to shareholders. Cash inflow before financing was £4.4 million (2006: £3.6 million), The net cashoutflow from financing was £3.4 million (2006: £10.2 million), reflecting therepayment of the ESOP loan of £3.3 million (2006: £nil). The 2006 outflow wasprincipally due to the £9.9 million cash return to shareholders and associatedcosts of £0.2 million. For management purposes, the Group focuses on free cashflow, being cash flow from operating activities less tax and interest paid plusdividends received from the associate. Over time, the Group targets free cashflow of 70% of pre-exceptional, pre-tax profit. In the year, the Group achieved80.4%, an improvement from 78.9% in 2005/06. The Group will incur an increasedlevel of capital expenditure in 2007/08, largely IT related. These factorsnotwithstanding, the Group expects to be modestly cash generative, overall, in2007/08. The Group's policy is to maintain committed, medium term borrowingfacilities that are more than sufficient to meet its foreseeable medium termfinancing requirements. Segment Results The security services and facilities management segments include the results ofthose of the Group's businesses, joint venture and associated undertaking thatprovide site based security services and facilities management servicesrespectively to customers. Central administrative costs and operating assetshave been allocated to the two segments. Segment operating profit excludesexceptional items and comprises profit on ordinary activities after the share ofjoint venture and associate's results and before finance charges. A moredetailed analysis is set out in note 2 to the accounts. Security services Turnover, excluding exceptionals, increased 10.5% to £207.5 million (2006:£187.8 million) and operating profit before exceptionals increased 33.8% to £6.6million (2006: £4.9 million) largely reflecting progress made by the newmanagement teams, the completion of the SIA compliance regime and theimprovements in our electronic security business. The segment operating marginbefore exceptionals increased to 3.2% (2006: 2.6%). Facilities management Turnover, excluding exceptionals but including share of the joint venture,increased 6.5% to £138.0 million (2006: £129.7 million) and operating profitbefore exceptionals but including share of joint venture and associate decreasedto £6.3 million (2006: £7.3 million) reflecting the ending of a significantcontract and investment for longer term growth. Operating margin beforeexceptionals reduced to 4.6% (2006: 5.6%) Mark HarrisonGroup Finance Director Reliance Security Group plcConsolidated profit and loss accountfor the year ended 27 April 2007 Pre-exceptional Exceptional item item Restated (*) 2007 2007 2007 2006 Notes £'000 £'000 £'000 £'000---------------------- ----- ---------- --------- --------- --------- Turnover: Group and share of joint venture ---------- --------- --------- --------- - excluding exceptional item 3 345,491 - 345,491 317,483 - exceptional item 4 - - - 758 ---------- --------- --------- --------- 345,491 - 345,491 318,241 Less: share of joint venture'sturnover 3 (710) - (710) (259)---------------------- ----- ---------- --------- --------- ---------Group turnover 3 344,781 - 344,781 317,982 Cost of sales ---------- --------- --------- --------- - excluding exceptional item (279,325) - (279,325) (257,598) - exceptional item 4 - (350) (350) (3,828) ---------- --------- --------- --------- Total cost of sales (279,325) (350) (279,675) (261,426)---------------------- ----- ---------- --------- --------- --------- Gross profit 65,456 (350) 65,106 56,556 Administrative expenses ---------- --------- --------- --------- - excluding exceptional items (54,283) - (54,283) (48,835) - exceptional items 4 - (47) (47) (398) ---------- --------- --------- --------- Total administrative expenses (54,283) (47) (54,330) (49,233)---------------------- ----- ---------- --------- --------- --------- Group operating profitexcluding share of jointventure and associate 11,173 (397) 10,776 7,323 ---------- --------- --------- ---------Share of joint venture'soperating profit 3 142 - 142 154Share of associate's operatingprofit 3 1,568 - 1,568 1,274 ---------- --------- --------- --------- Total share of operatingprofits of joint venture andassociate 1,710 - 1,710 1,428---------------------- ----- ---------- --------- --------- --------- Total operating profit: Groupand share of joint venture andassociate before finance income& charges 3 12,883 (397) 12,486 8,751---------------------- ----- ---------- --------- --------- --------- Finance income/(charges) ---------- --------- --------- ---------Group 782 - 782 1,050Joint venture (128) - (128) (137)Associate 16 - 16 13 ---------- --------- --------- --------- Net finance income 670 - 670 926---------------------- ----- ---------- --------- --------- ---------Profit on ordinary activitiesbefore taxation 13,553 (397) 13,156 9,677 Tax on profit on ordinaryactivities 4,5 (3,618) 119 (3,499) (2,830)---------------------- ----- ---------- --------- --------- --------- Profit on ordinary activitiesafter taxation and for the year 9,935 (278) 9,657 6,847---------------------- ----- ---------- --------- --------- --------- Earnings Per ShareBasic 6 46.1p 30.9pDiluted 6 44.9p 30.9p---------------------- ----- ---------- --------- --------- --------- All of the activities of the Group are classed as continuing. There are no material differences between reported and historical cost profitsand losses. (*) The restatement relates to the adoption of FRS 20 as set out in note 1. Reliance Security Group plc Consolidated statement of total recognised gains and losses for the year ended 27 April 2007 Notes 2007 Restated (*) 2006 £'000 £'000 ------------------------------ ----- ------- --------- --------Profit for the year - Group 8,534 5,943 - Joint venture 14 17 - Associate 1,109 887 ------------------------------ ----- ------- --------- -------- Total recognised gains and lossesrelating to 9,657 6,847the year -------- -------- Prior year adjustment in respect ofadoption of FRS 20 7,8 139------------------------------ ----- ------- ---------Total recognised gain since last annualreport 9,796------------------------------ ----- ------- --------- (*) The restatement relates to the adoption of FRS 20 as set out in note 1. Reliance Security Group plcConsolidated balance sheetas at 27 April 2007 Restated (*) 2007 2006 Note £'000 £'000------------------------------ --------- --------- ---------Fixed assetsTangible assets 5,389 5,445Investments --------- ---------Share of gross assets of joint venture 10,526 10,602Share of gross liabilities of joint venture (10,628) (10,718) --------- ---------Share of net liabilities of joint venture (102) (116)Associated undertaking 141 135Others 2,060 1,701 --------- ---------Total investments 2,099 1,720------------------------------ --------- --------- --------- 7,488 7,165------------------------------ --------- --------- ---------Current assetsStocks 1,576 1,725Debtors: amounts due within one year 43,342 36,488Debtors: amounts due after more than one year 3,342 3,493Cash at bank and in hand 25,547 24,557------------------------------ --------- --------- --------- 73,807 66,263------------------------------ --------- --------- ---------Liabilities: amounts falling due within one yearBorrowings (61) (3,376)Creditors (46,994) (41,250)Corporation tax (1,700) (2,069)------------------------------ --------- --------- --------- (48,755) (46,695)------------------------------ --------- --------- ---------Net current assets 25,052 19,568------------------------------ --------- --------- ---------Total assets less current liabilities 32,540 26,733------------------------------ --------- --------- --------- Liabilities: amounts falling due after more than one yearBorrowings (63) (124)Other creditors (134) (44)------------------------------ --------- --------- --------- (197) (168)------------------------------ --------- --------- --------- ------------------------------ --------- --------- ---------Net assets 32,343 26,565------------------------------ --------- --------- --------- Capital and reservesCalled up share capital 1,095 1,095Capital redemption reserve 70 70Share premium account 2,534 2,534Own shares held (5,025) (5,025)Revaluation reserve 230 232Share option reserve 535 157Profit and loss account 32,904 27,502------------------------------ --------- --------- ---------Equity shareholders' funds 7 32,343 26,565------------------------------ --------- --------- --------- (*) The restatement relates to the adoption of FRS 20 as set out in note 1. Reliance Security Group plcConsolidated cash flow statementfor the year ended 27 April 2007 2007 2006 Notes £'000 £'000------------------------------ -------- --------- ---------Net cash inflow from operating activities 9 12,241 11,835------------------------------ -------- --------- ---------Dividends from associate 1,103 1,005------------------------------ -------- --------- ---------Returns on investment and servicing of financeInterest received 1,162 1,238Interest paid (160) (281)Interest element of finance lease repayments (16) (31)------------------------------ -------- --------- ---------Net cash inflow from returns on investment andservicing of finance 986 926------------------------------ -------- --------- --------- TaxationUK corporation tax paid (3,429) (3,399)------------------------------ -------- --------- --------- Capital expenditure and financial investmentPurchase of tangible fixed assets (1,789) (1,389)Sale of tangible fixed assets 2 18Loan advanced to joint venture - (1,122)Purchase of fixed asset investments (491) ------------------------------- -------- --------- ---------Net cash outflow from capital expenditure andfinancial investment (2,278) (2,493)------------------------------ -------- --------- --------- Equity dividends paid (4,257) (4,245)------------------------------ -------- --------- ---------Net cash inflow before financing 4,366 3,629------------------------------ -------- --------- --------- FinancingPayments to redeem equity shares - (7,660)Payments to acquire treasury shares - (2,200)Payments of expenses on redemption of equityshares and - (236)acquisition of treasury sharesRepayment of ESOP loan (3,315) -Capital element of finance lease repayments (61) (83)------------------------------ -------- --------- ---------Net cash outflow from financing (3,376) (10,179)------------------------------ -------- --------- ---------Increase/(decrease) in cash in the year 990 (6,550)------------------------------ -------- --------- ---------Reconciliation of net cash flow to movement in net cashIncrease/(decrease) in cash in the year 990 (6,550)Repayment of ESOP loan 3,315 -Cash flow from finance leases 61 (122)------------------------------ -------- --------- ---------Movement in net cash in the year 4,366 (6,672)Net cash at start of year 21,057 27,729------------------------------ -------- --------- ---------Net cash at end of year 10 25,423 21,057------------------------------ -------- --------- --------- Reliance Security Group plc Notes to the preliminary statement for the year ended 27 April 2007 The financial information set out above does not constitute the Group'sstatutory accounts for the years ended 27 April 2007 or 28 April 2006, but isderived from those accounts. Statutory accounts for 28 April 2006 have beendelivered to the Registrar of Companies and those for 27 April 2007 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 change in the year as set out below. The financial years of all Groupcompanies are the 52 or 53 weeks up to the Friday before, or falling on, theaccounting reference date of 30 April. The Group adopted Financial Reporting Standard 20 Share-based Payment (FRS 20)during the year, to measure the fair value of share options granted. The Group had previously estimated the value of its share options in accordancewith UITF 17 Employee Share Schemes. The adoption of FRS 20 has resulted in theGroup restating its administrative expenses, tax charge, net assets and reservesfor the prior year to reflect the revised basis of calculating the charges andliabilities relating to its share options issued since November 2002. Under FRS 20, equity-settled share-based payments are measured at fair value atthe date of grant and this is expensed on a straight-line basis over the vestingperiod, based on the Group's estimate of the shares that will eventually vest.In addition, the Group has estimated the corresponding charge to class 1ANational Insurance Contributions (NIC) which will arise on its estimate of thenumber of shares which will eventually vest. Deferred tax is recognised inrespect of the total charge made, and an additional deferred tax asset isrecognised in respect of the movement in the imputed taxable gain which would berealised by the option holder if the shares vested at the balance sheet date. A transfer to a share option reserve is made each period to match the fair valueof the share options which has been charged to the profit and loss account.Further adjustments to the share option reserve are made in respect of thedeferred tax on the charge to the profit and loss account for the fair value ofthe share options, and in respect of the movement in the imputed taxable gainwhich would be realised by the option holder if the shares vested at the balancesheet date. The Group's estimated liability to NIC is held as a creditor on thebalance sheet. Details of the restatement of comparative figures are set out in note 8. 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 venture andassociate. 3. Segmental information Security Facilities Total Security Facilities Restated (*) Services Management Services Management Total 2007 2007 2007 2006 2006 2006 £'000 £'000 £'000 £'000 £'000 £'000 ------------------ ------- --------- ------ ------- --------- -------- Total turnover 211,347 137,771 349,118 188,987 129,551 318,538 Less:inter-segmentturnover (3,897) (440) (4,337) (1,169) (145) (1,314) Group turnover- excludingexceptionalrevenue 207,450 137,331 344,781 187,818 129,406 317,224 Exceptionalrevenue - - - 673 85 758------------------ ------- --------- ------ ------- --------- --------Group turnover 207,450 137,331 344,781 188,491 129,491 317,982 Share of jointventure'sturnover - 710 710 - 259 259------------------ ------- --------- ------ ------- --------- --------Turnover:Group andshare of jointventure 207,450 138,041 345,491 188,491 129,750 318,241------------------ ------- --------- ------ ------- --------- -------- Group operatingprofit beforeexceptionalitemsexcludingshare of jointventure andassociate 6,594 4,579 11,173 4,927 5,864 10,791 ------- --------- ------ ------- --------- --------Share of jointventure'soperatingprofits - 142 142 - 154 154 Share ofassociate'soperatingprofits - 1,568 1,568 - 1,274 1,274 ------- --------- ------ ------- --------- --------Total share ofoperatingprofits ofjoint ventureand associatebeforeexceptionalitems - 1,710 1,710 - 1,428 1,428 ------- --------- ------ ------- --------- -------- Operatingprofit beforeexceptionalitems: Groupand share ofjoint ventureand associate 6,594 6,289 12,883 4,927 7,292 12,219 ------- --------- ------ ------- --------- -------- Group operatingexceptionalitems (397) - (397) (3,295) (173) (3,468) ------- --------- ------ ------- --------- --------Total operatingprofit: Groupand share ofjoint ventureand associatebefore financeincome &charges 6,197 6,289 12,486 1,632 7,119 8,751 ------- --------- ------ ------- --------- -------- In accordance with the equity method adopted for accounting for associates,Group turnover excludes its share of turnover of associated undertaking of£31,899,000 (2006: £30,050,000). (*) Group operating profit before exceptional items excluding share of jointventure and associate for 2006 has been restated to reflect the adoption of FRS20 as set out in note 1. Security Facilities Total Security Facilities Restated(*) Services Management Services Management Total 2007 2007 2007 2006 2006 2006 £'000 £'000 £'000 £'000 £'000 £'000------------------- ------- --------- ------ ------- -------- --------Group operating assets/(liabilities) 1,924 3,673 5,597 (643) 5,740 5,097Share of joint venture's net (liabilities) - (102) (102) - (116) (116) Share of associate's net assets - 141 141 - 135 135------------------- ------- --------- ------ ------- -------- --------Total operating assets/(liabilities) 1,924 3,712 5,636 (643) 5,759 5,116------------------- ------- --------- ------ ------- -------- -------- Reconciliation of total operating assets to total net assets: Total operating assets 5,636 5,116 Items excluded:Net cash 25,423 21,057Investments in other participating interests 938 579 Loan to joint venture 1,122 1,122Taxation payable (1,700) (2,069)Deferred taxation 945 709Net interest (payable)/receivable (21) 51------------------- ------- --------- ------ ------- -------- --------Total net assets (*) 32,343 26,565------------------- ------- --------- ------ ------- -------- -------- Operating assets are those net assets controlled by Reliance's operatingdivisions. (*) The restatement relates to the adoption of FRS 20 as set out in note 1. 4. Exceptional items 2007 2006 £'000 £'000-------------------------------- --------- ---------Operating exceptional items-------------------------------- --------- ---------TurnoverRevenue received towards cost of implementation of PrivateSecurity Industry Act - 758 Cost of salesCost of implementation of Private Security Industry Act (350) (3,828) Administrative expenses --------- ---------Cost of implementation of Private Security Industry Act (47) (312)Legal and professional costs of re-listing on AIM - (86) --------- --------- (47) (398)-------------------------------- --------- ---------Total exceptional charge (397) (3,468) Tax credit on exceptional charge 119 1,040-------------------------------- --------- --------- (278) (2,428)-------------------------------- --------- --------- The cash outflow in respect of the operating exceptional items charged in theyear was £397,000 (2006: £3,310,000), before taking into account the cashbenefits of tax relief. In 2006-07, there was a cash outflow of £158,000 inrespect of operating exceptional items charged in 2005-06. 5. Taxation Corporation tax, excluding tax credits on exceptional charges, for the yearended 27 April 2007 has been calculated at an effective rate of 26.7% (2006:29.4%). 6. Earnings per share 2007 2006 Restated (*) Basic Diluted Basic Diluted pence per pence pence pence per per per £'000 share share £'000 share share---------------------- ------ ------ ------- ------- ------- ------- Profit for the periodattributable to equityshareholders 9,657 46.1p 44.9p 6,847 30.9p 30.9p Add back:---------------------- ------ ------ ------- ------- ------- -------Exceptional items - net of tax credit (see note 4) 278 1.3p 1.3p 2,428 11.0p 11.0p---------------------- ------ ------ ------- ------- ------- -------Earnings excluding exceptionalitems 9,935 47.4p 46.2p 9,275 41.9p 41.9p---------------------- ------ ------ ------- ------- ------- ------- 2007 2006 Number Number------------------------------- ---------- --------- Weighted average number of shares 21,912,855 22,808,186Weighted average number of shares held in treasury (400,000) (142,857)Weighted average number of shares held in ESOP trust (542,599) (542,599)------------------------------- ---------- --------- Shares used to calculate basic earnings per share 20,970,256 22,122,730Dilutive potential shares 535,870 -------------------------------- ---------- --------- Shares used to calculate diluted earnings per share 21,506,126 22,122,730------------------------------- ---------- --------- The basic and diluted earnings per share have been calculated in accordance withFRS 22, based on profit after tax and the weighted average number of ordinaryshares in issue during the year, less shares held in treasury and by the ESOPtrust. (*) The restatement relates to the adoption of FRS 20 as set out in note 1. 7. Combined statement of movement in shareholders' funds and movement on reserves Called Capital Share Own Revaluation Share Profit 2007 Restated(*) up premium shares option share redemption account held reserve reserve and loss 2006 capital reserve account £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 -------------------- ------- ------- ------- ------- -------- ------ ------ ------- ---------Group At start of the year as previously stated 1,095 70 2,534 (5,025) 232 - 27,363 26,269 38,812 Prior year adjustment in respect of the fair value of share options granted (*) - - - - - 157 139 296 147 -------------------- ------- ------- ------- ------- -------- ------ ------ ------- ---------At start of year as restated 1,095 70 2,534 (5,025) 232 157 27,502 26,565 33,959 Share-based payments - - - - - 378 - 378 100 Transfer of depreciation on revalued assets - - - - (2) - 2 - - Purchase of own shares - - - - - - - - (10,096) Profit on ordinary activities after taxation - - - - - - 9,657 9,657 6,847 Dividends paid - - - - - - (4,257) (4,257) (4,245) -------------------- ------- ------- ------- ------- -------- ------ ------ ------- ---------At end of the year as restated (*) 1,095 70 2,534 (5,025) 230 535 32,904 32,343 26,565 -------------------- ------- ------- ------- ------- -------- ------ ------ ------- --------- (*) The restatement relates to the adoption of FRS 20 as set out in note 1. 8. Prior year adjustment As explained in Note 1, the Group has adopted FRS 20 during the year, to measurethe fair value of share options granted. The Group had previously estimated the value of its share options in accordancewith UITF 17 Employee Share Schemes. The adoption of FRS 20 has resulted in theGroup restating its administrative expenses, tax charge, net assets and reservesfor the prior year to reflect the revised basis of calculating the charges andliabilities relating to its share options issued since November 2002. The effect of adopting FRS 20 on the financial statements for the year ended 28April 2006 is to increase net assets by £296,000. The share option expense underUITF 17 for the year ended 28 April 2006 was £140,000 (after taxation). Theexpense under FRS 20 for the year ended 28 April 2006 was £91,000 (aftertaxation), increasing profit on ordinary activities after taxation by £49,000. Further details of the effect of the change in policy are set out below: Financial Adoption of FRS Restated statements 20 for year ended financial statements 28 April 2006 for year ended 28 April 2006 ------------------------ ------------- -------- ------------- £'000 £'000 £'000 ------------------------ ------------- -------- -------------Profit and loss account------------------------ ------------- -------- -------------Administrative expenses (48,905) 70 (48,835)------------------------ ------------- -------- -------------Taxation (2,809) (21) (2,830)------------------------ ------------- -------- -------------Profit on ordinaryactivities aftertaxation 6,798 49 6,847------------------------ ============= ======== ============= Balance sheet------------------------ ------------- -------- -------------Debtors due after morethan one year -deferred tax 769 (60) 709------------------------ ------------- -------- -------------Other creditors fallingdue after more than oneyear (400) 356 (44)------------------------ ------------- -------- -------------Net assets 26,269 296 26,565------------------------ ============= ======== ============= Share option reserve:------------------------ ------------- -------- -------------At the start of theyear - 57 57------------------------ ------------- -------- -------------Share-based payments - 100 100------------------------ ------------- -------- -------------At the end of the year - 157 157------------------------ ============= ======== ============= Profit and loss account------------------------ ------------- -------- -------------At the start of theyear 32,786 90 32,876------------------------ ------------- -------- -------------Movement in the year (5,423) 49 (5,374)------------------------ ------------- -------- -------------At the end of the year 27,363 139 27,502------------------------ ============= ======== ============= Equity shareholders'funds 26,269 296 26,565------------------------ ============= ======== ============= 9. Reconciliation of operating profit to net cash inflow from operatingactivities Restated (*) 2007 2006 £'000 £'000 -------------------- ----- --------------------- -------- --------Operating profit 10,776 7,323Depreciation charges 1,829 2,272Loss/(profit) on the sale of fixed assets 14 (3)Fair value share option expense 178 100Decrease/(increase) in stocks 149 (260)(Increase)/decrease in debtors (6,408) 2,317Increase in creditors 5,703 86----------------------- --------------------- -------- --------Net cash inflow from operating 12,241 11,835activities ----------------------- --------------------- -------- -------- (*) The restatement relates to the adoption of FRS 20 as set out in note 1. 10. Analysis and reconciliation of net cash 28 April 27 April 2006 Cash flow 2007 £'000 £'000 £'000 ----- --------- ---------- -------- --------- Cash at bank and in hand 24,557 990 25,547 ----------------------- ----- --------- ---------- -------- --------- Loan due within one year (3,315) 3,315 - Finance leases and hire purchase contracts (185) 61 (124) --------------------------------- ---------- -------- --------- Total borrowings (3,500) 3,376 (124) ----------------------- ----- --------- ---------- -------- --------- Net cash 21,057 4,366 25,423 ----------------------- ----- --------- ---------- -------- --------- This information is provided by RNS The company news service from the London Stock Exchange