LONDON SECURITY PLC

Earnings Release • May 8, 2014

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RNS Number : 5671G

London Security PLC

08 May 2014

London Security plc

Annual Report and Accounts 2013

CHAIRMAN'S STATEMENT

FINANCIAL HIGHLIGHTS

Financial highlights of the audited results for the year ended 31 December 2013 compared with the year ended 31 December 2012 are as follows:

·      revenue of £101.4 million (2012: £94.1 million);

·      operating profit before depreciation and amortisation of £24.1 million (2012: £23.0 million);

·      operating profit of £20.0 million (2012: £19.4 million); and

·      profit after income tax of £13.7 million (2012: £19.0 million).

TRADING REVIEW

The financial highlights illustrate that the Group's revenue increased by £7.3 million (7.8%) to £101.4 million. However, these results are impacted by the movement in the Euro to Sterling average exchange rate which has decreased from 1.23 to 1.18. This movement in exchange rates accounts for £3.2 million of the increase in revenue. If the 2013 results had been translated at 2012 rates, revenue would have been £98.2 million instead of £101.4 million (increase of 4.4% on prior year). Turnover also reflects additional revenue of £3.5 million from new subsidiaries Noris Feuerschutzgerate G.m.b.H. and GC Fire Protection Ltd.

Operating profit increased by £0.6 million (3.1%) to £20.0 million. Adjusting for the change in the exchange rate on the same basis as above, operating profit would have been £19.3 million instead of £19.4 million (decrease of 0.5%). This performance is very satisfactory in this difficult trading environment and reflects the negative contribution from our new subsidiaries in their first year.

Last year profit after tax included the sale of part the Group's site in Elland, West Yorkshire. The profit on sale was £5.9 million. After adjusting for this profit after tax has increased by £0.6 million (4.6%).

A more detailed review of this year's performance is given in the Annual Report and Accounts.

ACQUISITIONS

It remains a principal aim of the Group to grow through acquisition.  Acquisitions are being sought throughout Europe and the Group will invest at prices where an adequate return is envisaged by the Board. In the year under review the Group has consolidated its presence, particularly in Austria and the UK with the acquisition of Noris Feuerschutzgerate G.m.b.H. and the acquisition of contracts on incorporation of GC Fire Protection Ltd.

MANAGEMENT AND STAFF

2013 was a year in which the staff performed well and, on your behalf, I would like to express thanks and appreciation for their contribution.

FINANCING

The Group's borrowings were refinanced in May 2013 and the Group has a new £19.7 million facility with Lloyds Bank plc until 2018. The Group has entered into interest rate agreements fixing LIBOR to 1.05% and EURIBOR to 0.84% plus a margin of between 1.10% and 1.25% to take advantage of the low market interest rates prevailing at the time. The agreements took effect from May 2013 and remain in effect until the loans are repaid in 2018.

DIVIDENDS

A final dividend in respect of 2012 of £0.38 per ordinary share was paid to shareholders on 8 July 2013.

An interim dividend in respect of 2013 of £0.38 per ordinary share was paid to shareholders on 12 December 2013.

The Board is recommending the payment of a final dividend in respect of 2013 of £0.31 per ordinary share to be paid on 8 July 2014 to shareholders on the register on 13 June 2014. The shares will be marked ex-dividend on 11 June 2014.

FUTURE PROSPECTS

Economic growth in the Group's market has been depressed in 2013 but our business remains strong, cash generative and well developed, with positive net funds. Despite signs of a slow recovery, our market reflects reduced customer confidence and consequent reluctance to invest in our products. However, as a leading provider in this market with a well-diversified and loyal customer base, the Board is optimistic for further success in 2014.

ANNUAL GENERAL MEETING

The Annual General Meeting will be held at 10 Bruton Street, 5th Floor, London W1J 6PX on 18 June 2014 at 11 am.  You will find enclosed a form of proxy for use at that Meeting which you are requested to complete and return in accordance with the instructions on the form.  Your Directors look forward to meeting you at that time.

J.G. Murray

Chairman

7 May 2014

Consolidated income statement

for the year ended 31 December 2013

		2013	2012
	Note	£'000	£'000
Revenue		101,362	94,128
Cost of sales		(19,785)	(18,164)
Gross profit		81,577	75,964
Distribution costs		(37,894)	(35,268)
Administrative expenses		(23,729)	(21,267)
Operating profit		19,954	19,429
EBITDA*		24,059	23,041
Depreciation and amortisation		(4,105)	(3,612)
Operating profit		19,954	19,429
Profit on disposal of fixed assets		-	5,928
Finance income		377	221
Finance costs		(475)	(465)
Finance costs - net		(98)	(244)
Profit before income tax		19,856	25,113
Income tax expense		(6,148)	(6,115)
Profit for the year attributable to equity shareholders of the Company		13,708	18,998
Earnings per share
Basic and diluted	1	111.8p	154.9p

* Earnings before interest, tax, depreciation and amortisation.

Consolidated statement of comprehensive income

for the year ended 31 December 2013

		2013	2012
		£'000	£'000
Profit for the financial year		13,708	18,998
Other comprehensive income:
Items that will not be reclassified subsequently to profit or loss
- currency translation differences on foreign currency net investments, net of tax		331	(507)
- actuarial loss recognised in the Nu-Swift pension scheme		(72)	(26)
- movement on deferred tax relating to Nu-Swift pension scheme surplus		(485)	-
- Nu-Swift pension surplus recognised/(not recognised) due to uncertainty over future recoverability		1,794	(573)
- actuarial loss recognised in the Ansul pension scheme		(381)	(465)
- movement on deferred tax relating to Ansul pension scheme deficit		166	180
Other comprehensive gain/(loss) for the year, net of tax		1,353	(1,391)
Total comprehensive income for the year		15,061	17,607

Consolidated statement of changes in equity

for the year ended 31 December 2013

						Profit
	Share	Share	Capital	Merger	Other	and loss
	capital	premium	redemption	reserve	reserve	account	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2012	123	344	1	2,033	5,889	57,648	66,038
Total comprehensive income for the year
Profit for the financial period	-	-	-	-	-	18,998	18,998
Other comprehensive income:
- exchange adjustments	-	-	-	-	(507)	-	(507)
- actuarial loss on pension scheme	-	-	-	-	-	(491)	(491)
-  movement on deferred tax relating to pension asset	-	-	-	-	-	180	180
-  movement in net pension asset not recognised due to uncertainty over future recoverability	-	-	-	-	-	(573)	(573)
Total comprehensive (expense)/income for the year	-	-	-	-	(507)	18,114	17,607
Contributions by and distributions to owners of the Company:
- dividends	-	-	-	-	-	(6,621)	(6,621)
- purchase of own shares	-	-	-	-	-	(5)	(5)
Total contributions by and distributions to owners of the Company	-	-	-	-	-	(6,626)	(6,626)
At 1 January 2013	123	344	1	2,033	5,382	69,136	77,019
Total comprehensive income for the year
Profit for the financial period	-	-	-	-	-	13,708	13,708
Other comprehensive income:
- exchange adjustments	-	-	-	-	331	-	331
- actuarial loss on pension schemes	-	-	-	-	-	(453)	(453)
-  net movement on deferred tax relating to pension asset	-	-	-	-	-	(319)	(319)
-  brought forward pension surplus recognised	-	-	-	-	-	1,794	1,794
Total comprehensive income for the year	-	-	-	-	331	14,730	15,061
Contributions by and distributions to owners of the Company:
- dividends	-	-	-	-	-	(9,319)	(9,319)
- release of provision for unclaimed dividends	-	-	-	-	-	50	50
Total contributions by and distributions to owners of the Company	-	-	-	-	-	(9,269)	(9,269)
At 31 December 2013	123	344	1	2,033	5,713	74,597	82,811

The merger reserve is not a distributable reserve. The other reserve relates entirely to the effects of changes in foreign currency exchange rates.

Consolidated statement of financial position

as at 31 December 2013

		2013	2012
		£'000	£'000
Assets
Non-current assets
Property, plant and equipment		9,973	9,511
Intangible assets		58,325	54,455
Deferred tax asset		632	488
Retirement benefit surplus		2,424	-
Derivative financial instruments		92	-
		71,446	64,454
Current assets
Inventories		8,826	9,123
Trade and other receivables		21,153	18,512
Cash and cash equivalents		20,565	17,861
		50,544	45,496
Total assets		121,990	109,950
Liabilities
Current liabilities
Trade and other payables		(16,992)	(15,767)
Income tax liabilities		(866)	(65)
Borrowings		(1,878)	(15,060)
Derivative financial instruments		-	(99)
Provision for liabilities and charges		(4)	(4)
		(19,740)	(30,995)
Non-current liabilities
Trade and other payables		(509)	(427)
Borrowings		(16,261)	-
Deferred tax liabilities		(991)	(333)
Retirement benefit obligations		(1,678)	(1,176)
		(19,439)	(1,936)
Total liabilities		(39,179)	(32,931)
Net assets		82,811	77,019
Shareholders' equity
Ordinary shares		123	123
Share premium		344	344
Capital redemption reserve		1	1
Merger reserve		2,033	2,033
Other reserves		5,713	5,382
Retained earnings		74,597	69,136
Total shareholders' equity		82,811	77,019

Consolidated statement of cash flow

for the year ended 31 December 2013

		2013	2012
		£'000	£'000
Cash flows from operating activities
Cash generated from operations		22,913	20,621
Interest paid		(418)	(419)
Income tax paid		(5,625)	(7,051)
Net cash generated from operating activities		16,870	13,151
Cash flows from investing activities
Acquisition of subsidiary undertakings (net of cash acquired)		(3,002)	(1,226)
Purchases of property, plant and equipment		(2,537)	(5,402)
Proceeds from sale of property, plant and equipment		275	7,146
Proceeds from sale of intangible assets		33	1
Purchases of intangible assets		(2,575)	(1,162)
Interest received		96	217
Net cash used in investing activities		(7,710)	(426)
Cash flows from financing activities
Repayments of borrowings		(16,610)	(10,658)
New borrowings		19,675	-
Associated loan arrangement fees		(488)	-
Purchase of own shares		-	(5)
Dividends paid to Company's shareholders		(9,319)	(6,621)
Net cash used in financing activities		(6,742)	(17,284)
Effects of exchange rates on cash and cash equivalents		286	(623)
Net increase/(decrease) in cash in the year		2,704	(5,182)
Cash and cash equivalents at beginning of the year		17,861	23,043
Cash and cash equivalents at end of the year		20,565	17,861

Notes to the financial statements

for the year ended 31 December 2013

1 Earnings per share

The calculation of basic earnings per ordinary share ("EPS") is based on the profit on ordinary activities after taxation of £13,708,000 (2012: £18,998,000) and on 12,261,477 (2012: 12,261,486) ordinary shares, being the weighted average number of ordinary shares in issue during the year.

For diluted EPS, the weighted average number of shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. There was no difference in the weighted average number of shares used for the calculation of basic and diluted earnings per share as there are no potentially dilutive shares outstanding.

	2013		2012
	£'000	Pence	£'000	Pence
Profit on ordinary activities after taxation	13,708	111.8	18,998	154.9

2 This preliminary announcement does not constitute the Company's statutory accounts within the meaning of Section 434 of the Companies Act 2006.

The results for the year ended 31 December 2013 have been extracted from the full accounts of the Group for that year which received an unqualified auditor's report and which have not yet been delivered to the Registrar of Companies.  The financial information for the year ended 31 December 2012 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies. The report of the auditor on those filed accounts was unqualified.  The accounts for the year ended 31 December 2013 and 31 December 2012 did not contain a statement under s498 (1) to (4) of the of the Companies Act 2006 or under s237(1) to (4) of the Companies Act 1985.

This preliminary announcement has been prepared in accordance with International Financial Reporting Standards. The Group will post its annual report and accounts to shareholders on 16 May 2014. A copy of the annual report and accounts can be found on the company's webpage (www.londonsecurity.org).

Enquiries:                             London Security plc

Richard Pollard

Company Secretary                                                            Tel:         01422 372852

WH Ireland Limited

Andrew Kitchingman                                                          Tel:       0113 394 6600

This information is provided by RNS

The company news service from the London Stock Exchange

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