SAF.L Regulatory News (SAF)

14 August 2015

Safeland plc

("Safeland" or the "Company")

Audited final results for the year ended 31 March 2015

Managing Director's Statement

Key achievements

The year to 31 March 2015 saw a number of key achievements, although post-year end brought considerable sadness as our Chairman Ray Lipman passed away on 9 June. I would like to pay tribute to Ray - my father - who co-founded the group and led it with distinction for many years.

As announced by Ray in his Chairman's Statement last year, we were able to make our first distribution to shareholders for more than a decade (a dividend in specie equivalent to 10.73p per share) in the year to 31 March 2015, from the proceeds of the demerger of Safestay plc in May 2014 following a capital restructuring. Subsequent strong trading in the year to 31 March 2015 has enabled the directors to recommend a final dividend of 1.75p per share, subject to shareholders' approval at the Company's AGM on 17 September 2015, payable on 25 September 2015 to holders of shares registered at close of business on 28 August 2015.

On 6 November 2014, we announced that we had exchanged contracts on the sale of 31 residential units in Wimbledon for a total of £10.23 million. Construction of these flats started earlier this year. In July 2015, the first block of 17 flats was completed and sold; the remaining flats are anticipated to complete and be sold later this month.

In addition, in November 2014, we announced completion of the sale of the Chandos Tennis Club to a prominent housebuilder who plans to develop the site. We have already received initial consideration of £4.0 million in cash and we will receive four detached houses in the development, which the directors expect to be completed and transferred to the Company by summer 2017. The directors have estimated the value of these four houses in aggregate to be £9.2 million when they are completed.

The £4.0 million initial consideration received from the sale of the Chandos Tennis Club was used to repay bank borrowings which had been secured on the site. There may be additional overage consideration payable to Safeland from the onward sale of residential units on the site if certain sales value per square foot thresholds are achieved.

Financial review

Group revenue for the year to 31 March 2015 of £10.2 million comprises sales of development properties, rental income, management fees, and hotel revenue from the north London hotel purchased in the preceding year, and was broadly in line with the £10.4 million in the year to 31 March 2014. However, we increased our gross profit from £2.1 million to £2.7 million and, most notably with the profit from the disposal of the Chandos Tennis Club, our operating profit climbed considerably, from £1.3 million in the year to 31 March 2014 to £6.9 million in the year to 31 March 2015.

The value of our trading stock has increased during the year by more than £2 million, from £12.5 million at 31 March 2014 to £14.7 million at 31 March 2015. However, mainly as a result of the tennis club disposal and a consequent reduction in bank borrowings, the statement of financial position shows gearing as at 31 March 2015 of 54%, reduced from 69% as at 31 March 2014.

Net assets - our total balance sheet value or NAV - rose from £10.6 million at 31 March 2014 (equivalent to 63p per share) to £14.7 million (equivalent to 87p per share) at 31 March 2015, a 38% increase year-on-year.

Total shareholder returns increased considerably, to 150.2% in the year ended 31 March 2015, from 86.7% in the year ended 31 March 2014.

Outlook

We remain confident that our recent and planned property developments combine to make the outlook positive for shareholders. The property market in and around London remains buoyant. Therefore, while we are mindful of potential increases in interest rates and the possible impact on London real estate of stock exchange uncertainty and the financial crisis in Greece, we view the year ahead with confidence.

Larry Lipman

Managing Director

13 August 2015

Strategic Report

The directors present their strategic report on the affairs of the Company and the Group together with the financial statements for the year ended 31 March 2015.

Principal activities

The principal activities of the Group comprise property trading, property refurbishment (including redevelopment), property investment and property fund management. In the previous year, the group acquired a hotel which continues to operate while planning for alternative use is sought.

Review of business and future prospects

The Group's key achievements and financial review are detailed in the Managing Director's Statement.

A dividend equivalent to 10.73p per share was paid by the Company during the year to 31 March 2015, representing payment in full of the funds generated by our 20% share in Safestay plc (2014: £nil). The directors recommend the payment of a final dividend of 1.75p per share subject to shareholders' approval at the Company's AGM on 17 September 2015, payable on 25 September 2015 to holders of shares registered at close of business on 28 August 2015.

Key performance indicators

The Group's key performance indicators are net asset value per share and total shareholder return and are detailed in the financial review section of the Managing Director's Statement.

The directors were pleased to see the increase in the share price from 24.27p to 50.00p during the year to 31 March 2015 which, together with a dividend which comprised a distribution in specie from our holding in Safestay plc, gave a shareholder return of 150.2%, up from 86.7% in the year to 31 March 2014.

Net asset value per share is calculated by dividing net assets per the consolidated statement of financial position by the number of shares in issue at that date. Total shareholder return measures the return to shareholders from share price movements supplemented by other returns such as dividends.

Principal risks and uncertainties

The principal risks and uncertainties that could potentially have an impact on the Group's performance are detailed below.

Business risk

Safeland operates in the property market, which over the years has always been liable to price fluctuations, dependent upon the state of the UK economy. In the event that there was a drop in the value of property throughout the country, this would obviously affect the properties held by Safeland at that time, but would also present an opportunity for buying at distinctly lower levels than exist at present. The Group mitigates the risk of downturns in property values by ensuring diversity within its property portfolio.

An assessment of the eventual value of four houses in a development to be constructed has been made by the directors using their knowledge of the current property market in the relevant geographic area and their assessment of that market over the period to completion of the development. That value has been discounted to a present-day value using a discount rate which comprises the weighted average cost of capital.

It is conceivable that governments may wish to harmonise the rate of stamp duty throughout Europe, which may cause an increase in the UK rates that exist at present which would erode the margins that Safeland is able to attain on its trades.

Over the years, Safeland has added value by obtaining change of permitted use of properties. Adverse changes to the planning requirements could affect this methodology.

Financial risk

In order to finance the purchase of properties that Safeland trades in, it uses bank loans with variable interest rates that track LIBOR. Increases in the LIBOR rate will adversely affect the profit that Safeland is able to make. This has been partially mitigated by the use of interest rate swaps and caps.

The determining factor as to how much Safeland is able to buy at any one time is limited by cash and there may be times when opportunities are not able to be taken advantage of as all available monies have been allocated elsewhere. Strict financial controls are in operation to ensure that monies cannot be expended above the available limits.

Financial risk management policies are described in the notes to the financial statements.

Larry Lipman

Managing Director

13 August 2015

Consolidated Income Statement

Year ended 31 March 2015

The revenue and operating result for the year is derived from continuing operations in the United Kingdom.

Consolidated Statement of Comprehensive Income

Year ended 31 March 2015

Consolidated Statement of Financial Position

31 March 2015

These financial statements were approved by the Board of Directors and authorised for issue on 13 August 2015.

Consolidated Statement of Changes in Equity

Year ended 31 March 2015

Consolidated Statement of Cash Flows

Notes to the accounts

31 March 2015

1 BASIS OF PREPARATION

On 13 August 2015, the Directors approved this final results announcement for publication. Copies of this announcement are available from the Company's registered office at 1a Kingsley Way, London N2 0FW and on its website www.safeland.co.uk. The Annual Report and Accounts will be sent to shareholders in due course and will also be available on the Company's website www.safeland.co.uk. The financial information presented above does not constitute statutory financial statements as defined by section 435 of the Companies Act 2006 for the year ended 31 March 2015 or the year ended 31 March 2014.

The financial information for the year ended 31 March 2015 is derived from the statutory financial statements for that year, prepared under IFRS, upon which the auditors have reported. The audit report was unqualified, did not include references to matters to which the auditor drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The statutory financial statements for the year ended 31 March 2015 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

The financial information for the year ended 31 March 2014 is derived from the statutory financial statements for that year, prepared under IFRS, upon which the auditors have reported. The audit report was unqualified, did not include references to matters to which the auditor drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The accounting policies applied in this announcement are consistent with those of the annual financial statements for the year ended 31 March 2014, as described in those annual financial statements.

2. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

Net asset value at 31 March 2015 was £14,754,000 (2014: £10,610,000), equivalent to 87p per ordinary share (2014: 63p). The net asset value is taken from the Consolidated Statement of Financial Position.

3. investment properties

The fair value of the investment properties at 31 March 2015 comprises freehold properties of £265,000 (2014: £4,765,000) and long leasehold properties of £458,000 (2014: £578,000). The leasehold and freehold investment property have been classified within level 3 of the fair value hierarchy (unobservable inputs).

During the year to 31 March 2015, the sale of the Chandos tennis club to a prominent housebuilder was completed. The consideration payable comprises £4,000,000 in cash, which has been received, and the balance will be satisfied by way of the transfer to Safeland of four detached houses (valued by Safeland's directors at £9,200,000 in aggregate, discounted back to £7,800,000 for the purposes of these accounts) in the completed development.

The Chandos tennis club sale is an arms-length market-based transaction that includes deferred consideration. The deferred element of the consideration will not be revalued (other than unwinding the discount applied to it) and comprises four detached houses (valued by the Group's directors as level 2 inputs under IFRS 13, at £9,200,000 in aggregate) in the completed development anticipated by summer 2017. The Group is not responsible for the construction work required to complete these houses.

The deferred element of the consideration will not be revalued until formal completion of the construction works in respect of these properties. Unwinding the discount applied to it will be included in finance costs in the Statement of Comprehensive Income and also added to the value of the relevant properties.

The initial value of houses under construction has been determined using a directors' estimate based on their detailed knowledge of the relevant property market. This is a Level 2 valuation within the IFRS 13 hierarchy.

The discount rate applied to the deferred consideration was 6.5% comprising:

The Group's borrowing rate and the rate applied to the risk premium have been determined by the Directors' based upon their knowledge of the Group's financial position and their knowledge of the housing market in London.

The proceeds and profit on sale were as follows:

The leasehold and freehold investment property have been classified within level 3 of the fair value hierarchy (unobservable inputs).

The investment properties consist of residential property located in North London and have been valued by the Directors. The methodology to value these properties is to compare historical comparable market transactions less a percentage reduction to reflect the limitations of restrictive tenancies. Based on valuations at 31 March 2015, if the percentage reduction was 5% higher or lower and all other variables were held constant, the Group's net profit would increase or decrease immaterially (2014: £65,000).

The valuation of the Chandos tennis club of £4,500,000 at 31 March 2014

The comparative valuation shown in the table below represents the Chandos Tennis Club, which was sold in the year to 31 March 2015.

31 March 2014 valuation

The directors do not consider the fair value of the Group's lease obligations associated with its long leasehold investment properties to be material to the financial statements. As a result, no finance lease obligations are included in the statement of financial position at 31 March 2014 or 31 March 2015.

The Group has pledged investment properties with a carrying value of £703,000 (2014: £5,323,000) to secure banking facilities granted to the Group.

The fair value of the Group's investment properties at 31 March 2015 had been arrived at on the basis of market value as defined in the Apportionment and Valuation Manual of the Royal Institution of Chartered Surveyors. The valuations were performed by directors.

Property rental income earned by the Group from its investment properties amounted to £146,000 (2014: £37,000). Direct operating expenses arose on these properties during the year of £1,000 (2014: £1,000).

The historical cost of investment properties included in the financial statements at 31 March 2015 is £833,000 (2014: £1,169,000) of which £295,000 (2014: £464,000) are freehold and £545,000 (2014: £705,000) are long leasehold properties.

4. TRADING PROPERTIES

The Group has pledged properties for resale with carrying value of £12,747,000 (2014: £11,103,000) to secure banking facilities granted to the Group.

Properties for resale were reviewed for impairment as at 31 March 2015, the Directors are satisfied that no impairment is necessary.

Trading properties are properties acquired or developed and held for sale and are shown at the lower of cost or net realisable value. The cost of trading properties are those costs directly associated with the acquisition and development of a specific site. Net realisable value is the estimated selling price in the ordinary course of business less estimated costs to completion and the estimated costs necessary to make the sale.

5. NOTES TO THE CASH FLOW STATEMENT