LONDON SECURITY PLC

Earnings Release • May 15, 2024

National Storage Mechanism | Additional information

RNS Number : 5353O

London Security PLC

15 May 2024

London Security plc

THIS  ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE UK VERSION OF REGULATION (EU) NO 596/2014 WHICH IS PART OF UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018, AS AMENDED. UPON THE PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

Final Results for the Year Ended 31 December 2023

Chairman's statement

J.J. Murray, Chairman

Financial Highlights

Financial highlights of the audited results for the year ended 31 December 2023 compared with the year ended 31 December 2022 are as follows:

•     revenue of £219.7 million (2022: £188.9 million);

•     operating profit of £31.6 million (2022: £27.2 million);

•     profit for the year of £23.3 million (2022: £20.2 million);

•     cash of £32.7 million (2022: £34.0 million);

•     earnings per share for the year of £1.90 (2022: £1.65); and

•     a dividend per share of £1.24 (2022: £0.84).

Trading review

The financial highlights illustrate that the Group's revenue increased by £30.8 million (16.3%) to £219.7 million and operating profit increased by £4.4 million (16.2%) to £31.6 million. These results reflect:

•     the effect of input inflation which our companies initially absorbed, but as it became clear that it was a longer term trend we passed on appropriate price increases to our customers;

•     the positive impact of acquisitions in 2023 and the full year's trading of acquisitions in 2022;

•     improved performance from our service business in continental Europe;

•     continued improvement from newer service offerings (e.g. emergency lights and passive fire protection); and

•     the movement in the Euro to Sterling average exchange rate, which had a positive effect of £3.0 million on reported revenue and £0.5 million on operating profit. A more detailed review of this year's performance is given in the Financial Review and the Strategic Report.

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 acquired two security businesses in Belgium.  The Group has also continued with the acquisition of service contracts from smaller well-established businesses for integration into the Group's existing subsidiaries and has grown its presence in Austria, the Netherlands, the United Kingdom and Germany.

Management and staff

2023 was a year in which the staff performed well and, on behalf of the shareholders, I would like to express thanks and appreciation for their contribution. The Group recognises that we can only achieve our aims with talented and dedicated colleagues who provide outstanding customer service in every area of the business.

Jacques Gaston Murray

Mr. Murray sadly passed away on 7 June 2023. Mr. Murray was appointed to the Board in January 2000, following his acquisition of a controlling interest in the Company, and he has had a prominent role in guiding the Company's successful performance and strategy since that time. The Board would like to place on record its immense appreciation for the many years of service that Mr. Murray dedicated to the Company.

Dividends

An exceptional one-off interim dividend in respect of 2023 of £0.82 per ordinary share was paid to shareholders on 7 December 2023. The Board is recommending the payment of a final dividend in respect of 2023 at the same level as 2022 of £0.42 per ordinary share. This would be paid on 12 July 2024 to shareholders on the register on 14 June 2024 with the shares marked ex-dividend on 13 June 2024.

Future prospects

The markets in which we operate are entering what is likely to be a period of low growth albeit with declining inflation from high levels in 2023. The London Security Group however has a healthy balance sheet, strong cash reserves and a track record for good cash generation. The Board therefore considers that the Group is well placed to weather any downturn. We will also continue to invest in our future and the Group plans to continue to grow through acquisitions.

Annual General Meeting

The Annual General Meeting ("AGM") will be held at 2 Jubilee Way, Elland, West Yorkshire HX5 9DY, on 25 June 2024 at 11.30 am. The Company confirms that shareholders are able to attend in person should they wish to do so. However, we strongly encourage shareholders to vote on all resolutions by completing the enclosed form of proxy for use at that Meeting, which you are requested to return in accordance with the instructions on the form.

J-J. Murray

Chairman

14 May 2024

Consolidated income statement

for the year ended 31 December 2023

			2023	2022
		Note	£'000	£'000
	Revenue		219,705	188,898
	Cost of sales		(58,988)	(49,748)
	Gross profit		160,717	139,150
	Distribution costs		(81,373)	(70,565)
	Administrative expenses		(47,762)	(41,420)
	Operating profit		31,582	27,165
	EBITDA*		42,660	37,269
	Depreciation and amortisation		(11,078)	(10,104)
	Operating profit		31,582	27,165
	Finance income		226	31
	Finance costs		(264)	(242)
	Finance costs - net		(38)	(211)
	Profit before income tax		31,544	26,954
	Income tax expense		(8,280)	(6,729)
	Profit for the year		23,264	20,225
	Profit is attributable to:
	Equity shareholders of the Company		23,264	20,216
	Non-controlling interest		-	9
			23,264	20,225
	Earnings per share
	Basic and diluted	1	189.8p	164.9p

*     Earnings before interest, tax, depreciation and amortisation.

The above results are all as a result of continuing operations.

Consolidated statement of comprehensive income

for the year ended 31 December 2023

		2023	2022
		£'000	£'000
Profit for the financial year		23,264	20,216
Other comprehensive (expense)/income:
Items that may be reclassified subsequently to profit or loss:
- currency translation differences on foreign currency net investments		(1,579)	3,602
Items that will not be reclassified subsequently to profit or loss:
- actuarial gain/(loss) recognised in the Nu-Swift Pension Scheme		52	(111)
- movement on deferred tax relating to the Nu-Swift Pension Scheme surplus		(18)	38
- actuarial (loss)/gain recognised in the Ansul Pension Scheme		(171)	1,249
- movement on deferred tax relating to the Ansul Pension Scheme deficit		43	(285)
Other comprehensive expense for the year, net of tax		(1,673)	4,493
Equity shareholders of the Company		21,591	24,709
Non-controlling interest		-	9
Total comprehensive income for the year		21,591	24,718

Consolidated statement of changes in equity

for the year ended 31 December 2023

			Capital
	Ordinary	Share	redemption	Merger	Other	Retained	Non-controlling	Total
	shares	premium	reserve	reserve	reserves	earnings	interest	equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2022 as previously presented	123	344	1	2,033	5,056	124,072	118	131,747
Impact of IAS 12 amendment	-	-	-	-	-	12	-	12
At 1 January 2022 as restated	123	344	1	2,033	5,056	124,084	118	131,759
Total comprehensive income for the year
Profit for the financial year	-	-	-	-	-	20,216	9	20,225
Other comprehensive income/(expense):
- exchange adjustments	-	-	-	-	3,602	-	-	3,602
- actuarial gain on pension schemes	-	-	-	-	-	1,138	-	1,138
- net movement on deferred tax relating to pension deficit	-	-	-	-	-	(247)	-	(247)
Total comprehensive income/(expense) for the year	-	-	-	-	3,602	21,107	9	24,718
Contributions by and distributions to owners of the Company:
- purchase of own shares	-	-	-	-	-	(13)	-	(13)
- dividends	-	-	-	-	-	(10,298)	-	(10,298)
	-	-	-	-	-	((10,311)	-	((10,311)
Reduction in non-controlling interest	-	-	-	-	-	(158)	(127)	(285)
At 31 December 2022 and 1 January 2023	123	344	1	2,033	8,658	134,722	-	145,881
Total comprehensive income for the year
Profit for the financial year	-	-	-	-	-	23,264	-	23,264
Other comprehensive income:
- exchange adjustments	-	-	-	-	(1,579)	-	-	(1,579)
- actuarial loss on pension schemes	-	-	-	-	-	(119)	-	(119)
- net movement on deferred tax relating to pension schemes	-	-	-	-	-	25	-	25
Total comprehensive income for the year	-	-	-	-	(1,579)	23,170	-	21,591
Contributions by and distributions to owners of the Company:
- purchase of own shares	-	-	-	-	-	(33)	-	(33)
- dividends	-	-	-	-	-	(15,196)	-	(15,196)
	-	-	-	-	-	(15,229)	-	(15,229)
At 31 December 2023	123	344	1	2,033	7,079	142,663	-	152,243

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 2023

		2023	2022
		£'000	£'000
Assets
Non-current assets
Property, plant and equipment		17,749	14,940
Right of use assets		6,549	5,975
Intangible assets		77,382	77,076
Deferred tax asset		749	719
Retirement benefit surplus		342	276
		102,771	98,986
Current assets
Inventories		22,143	22,260
Trade and other receivables		44,488	40,699
Cash and cash equivalents		32,737	33,962
		99,368	96,921
Total assets		202,139	195,907
Liabilities
Current liabilities
Trade and other payables		(36,403)	(36,431)
Income tax liabilities		(2,275)	(1,440)
Borrowings		(381)	(1,598)
Lease liabilities		(2,274)	(2,040)
Provision		(6)	(10)
		(41,339)	(41,519)
Non-current liabilities
Trade and other payables		(1,090)	(936)
Borrowings		(97)	(236)
Lease liabilities		(4,402)	(4,033)
Derivative financial instruments		-	-
Deferred tax liabilities		(1,811)	(2,211)
Retirement benefit obligations		(1,021)	(953)
Provision		(136)	(138)
		(8,557)	(8,507)
Total liabilities		(49,896)	(50,026)
Net assets		152,243	145,881
Shareholders' equity
Ordinary shares		123	123
Share premium		344	344
Capital redemption reserve		1	1
Merger reserve		2,033	2,033
Other reserves		7,079	8,658
Retained earnings		142,663	134,722
Total equity		152,243	145,881

Consolidated statement of cash flows

for the year ended 31 December 2023

		2023	2022
		£'000	£'000
Cash flows from operating activities
Cash generated from operations		38,234	30,489
Interest paid		(256)	(111)
Income tax paid		(8,229)	(7,055)
Net cash generated from operating activities		29,749	23,323
Cash flows from investing activities
Acquisition of subsidiary undertakings (net of cash acquired)		(1,582)	(4,078)
Purchases of property, plant and equipment		(7,665)	(4,626)
Proceeds from the sale of property, plant and equipment		721	730
Purchases of intangible assets		(3,033)	(3,193)
Interest received		212	4
Net cash used in investing activities		(11,347)	(11,163)
Cash flows from financing activities
Repayments of borrowings		(1,443)	(2,312)
Payment of lease liabilities		(2,484)	(2,356)
Dividends paid to the Company's shareholders		(15,196)	(10,298)
Purchase of own shares		(33)	(13)
Reduction in non-controlling interest		-	(285)
Net cash used in financing activities		(19,156)	(15,264)
Net increase in cash in the year		(754)	(3,104)
Cash and cash equivalents at the beginning of the year		33,962	35,681
Effects of exchange rates on cash and cash equivalents		(471)	1,385
Cash and cash equivalents at the end of the year		32,737	33,962

Notes to the financial statements

for the year ended 31 December 2023

1 Earnings per share

The calculation of basic earnings per ordinary share ("EPS") is based on the profit on ordinary activities after taxation of £23,264,000 (2022: £20,225,000) and on 12,260,286 (2022: 12,261,477) 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.

	2023			2022
	£'000	Pence		£'000	Pence
Profit on ordinary activities after taxation	23,264	189.8		20,225	164.9

2 This financial information within 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 2023 have been extracted from the full accounts of the Group for that year which received an unmodified auditor's report, and which have not yet been delivered to the Registrar of Companies.  The financial information for the year ended 31 December 2022 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 unmodified and does not include a statement under section 498(2) or (3) of the Companies Act 2006.

This preliminary announcement has been prepared in accordance with the recognition and measurement principles of UK adopted international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with the AIM rules. The financial information included in this preliminary announcement does not include all the disclosures required in accounts prepared in accordance with UK adopted international accounting standards in conformity with the requirements of the Companies Act 2006 and accordingly it does not itself comply with UK adopted international accounting standards in conformity with the requirements of the Companies Act 2006.  The accounting policies used in the preparation of this preliminary announcement have remained unchanged from those set out in the statutory accounts for the year ended 31 December 2022. They are also consistent with those in the full accounts for the year ended 31 December 2023, which have yet to be published.

The Group will post its annual report and accounts to shareholders on 23 May 2024, a copy of the annual report and accounts will be available on the company's website ( www.londonsecurity.org ).

The person responsible for arranging the release of this announcement on behalf of the Company is Richard Pollard, Company Secretary.

Enquiries

London Security plc
Richard Pollard Company Secretary	Tel: 01422 372 852
WH Ireland Limited
Chris Fielding	Tel: 0207 220 1666

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