TIDMLSC
RNS Number : 7470N
London Security PLC
22 May 2020
London Security plc
Final Results for the Year Ended 31 December 2019
Chairman's statement
J.G. Murray, Chairman
Financial highlights
Financial highlights of the audited results for the year ended
31 December 2019 compared with the year ended 31 December 2018 are
as follows:
-- revenue of GBP146.9 million (2018: GBP137.7 million);
-- operating profit of GBP24.2 million (2018: GBP23.2 million);
-- profit for the year of GBP16.8 million (2018: GBP16.5 million*);
-- earnings per share for the year of GBP1.36 (2018: GBP1.34*); and
-- a dividend per share of GBP0.80 (2018: GBP0.80).
* restated - see note 2
Trading review
The financial highlights illustrate that the Group's revenue
increased by GBP9.2 million (6.7%) to GBP146.9 million and
operating profit increased by GBP1.0 million (4.3%) to GBP24.2
million. These results reflect:
-- the positive impact of acquisitions in 2018 and 2019 in the
United Kingdom, Austria, Belgium, the Netherlands and Denmark;
-- improved performance from our service business in continental Europe; and
-- continued improvement from newer service offerings (e.g.
emergency lights and passive fire protection); offset by
-- the movement in the Euro to Sterling average exchange rate,
which had an adverse effect of GBP1.0 million on reported revenue
and GBP0.2 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 has
acquired eight established fire protection businesses and has grown
its presence in the Netherlands, Belgium and the UK, with the
acquisition of service contracts from smaller well-established
businesses for integration into the Group's existing
subsidiaries.
Management and staff
2019 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.
Dividends
A final dividend in respect of 2018 of GBP0.40 per ordinary
share was paid to shareholders on 5 July 2019. An interim dividend
in respect of 2019 of GBP0.40 per ordinary share was paid to
shareholders on 29 November 2019. The Board is recommending the
payment of a final dividend in respect of 2019 of GBP0.20 per
ordinary share to be paid on 10 July 2020 to shareholders on the
register on 12 June 2020. The shares will be marked ex-dividend on
11 June 2020.
Coronavirus impact assessment
It is clear that the coronavirus pandemic will have a
significant impact on the business and we have taken a number of
actions to weather the storm. When the pandemic first appeared in
China, the initial threat was to our supply chain. It is now very
clear that the risk to customer demand is by far our greatest
challenge and we are prepared for a significant downturn in sales
for the duration of the pandemic.
Many of the components which we are reliant on are sourced from
China and we have therefore suffered some delays in the delivery of
such components in the first quarter. The Chinese government's
response to the outbreak has meant that capacity returned over the
course of February and into March. Our strategic stockholding has
meant our production impact has been minimised. We are continuing
to monitor the effects on our manufacturing capability.
With a return to relative normality on the supply side, we are
now focused on customer demand. By the middle of March, the virus
had impacted all of our European trading territories. Throughout
Europe governments are responding to the pandemic by applying
severe restrictions on movement and introducing social distancing
measures which have forced many of our customers to temporarily
close. We have prepared the business for varying levels of sales
declines by temporarily reducing staff levels in some
locations.
We have evaluated the remaining demand for our services and
sectors where this is deemed essential, for example in some areas
including health, communications and utilities. In addition, where
customers still want work carrying out and we able to work within
government guidelines, we are continuing to provide our usual
levels of service. This is varying by country, with the Netherlands
operating at over 50% but other countries being affected more.
Where we offer call out or support services under contracts, for
example for fire alarms, we continue to offer these services and
fulfil our contractual obligations.
During this period of uncertainty we have been in constant
contact with our staff, customers, banks and advisers to ensure
clear and concise communication. Our priority is to do all we can
to ensure that our offices, depots and services are kept as safe as
possible, in order to protect our employees and business partners
at all times. Many of our employees and customers are experiencing
very difficult circumstances and we continue to support them in
many ways. The health and wellbeing of our people is our highest
priority. We are thankful and proud of our team members who
continue to respond as essential service providers.
We have modelled the effects of this sales decline along with
all the measures we can take to ensure that the Company remains
within its cash and bank facilities, and have prepared cash flow
forecasts for a period in excess of 12 months. Based upon this
modelling, the Group has sufficient cash beyond June 2021 without
renegotiating its bank facilities.
Future prospects
As the situation continues, cash management will be a key
consideration; the London Security Group has a healthy balance
sheet, strong cash reserves and a track record for good cash
generation. Debt recovery remains consistent with previous years
and staff costs will be controlled using the furlough process where
applicable. The Board therefore considers that its strong balance
sheet and material net cash position means that it is well placed
to navigate through the impact of the coronavirus outbreak, which
will inevitably impact profitability while the various
international lockdowns continue..
Annual General Meeting
The Annual General Meeting ("AGM") will be held at 2 Jubilee
Way, Elland, West Yorkshire, HX5 9DY, on 30 June 2020 at 11.30 am.
Under the UK government's current prohibition on non-essential
travel and public gatherings, it will not be possible for
shareholders to attend the AGM in person. We therefore 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.G. Murray
Chairman
21 May 2020
Consolidated income statement
for the year ended 31 December 2019
2019 2018
Restated
- see
note
2
Note GBP'000 GBP'000
----------------------------------- ---- -------- ---------
Revenue 146,920 137,711
Cost of sales (36,293) (31,780)
----------------------------------- ---- -------- ---------
Gross profit 110,627 105,931
Distribution costs (54,140) (50,593)
Administrative expenses (32,333) (32,163)
----------------------------------- ---- -------- ---------
Operating profit 24,154 23,175
----------------------------------- ---- -------- ---------
EBITDA* 32,503 29,557
Depreciation and amortisation (8,349) (6,382)
----------------------------------- ---- -------- ---------
Operating profit 24,154 23,175
----------------------------------- ---- -------- ---------
Finance income 142 131
Finance costs (254) (171)
----------------------------------- ---- -------- ---------
Finance costs - net (112) (40)
----------------------------------- ---- -------- ---------
Profit before income tax 24,042 23,135
Income tax expense (7,229) (6,623)
----------------------------------- ---- -------- ---------
Profit for the year 16,813 16,512
----------------------------------- ---- -------- ---------
Profit is attributable to:
Equity shareholders of the Company 16,653 16,399
Non-controlling interest 160 113
----------------------------------- ---- -------- ---------
16,813 16,512
----------------------------------- ---- -------- ---------
Earnings per share
Basic and diluted 1 135.8p 133.7p
----------------------------------- ---- -------- ---------
* 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 2019
2019 2018
Restated
- see
note
2
GBP'000 GBP'000
--------------------------------------------------------- ------- ---------
Profit for the financial year 16,813 16,512
---------------------------------------------------------- ------- ---------
Other comprehensive (expense)/income:
Items that may be reclassified subsequently to profit
or loss:
- currency translation differences on foreign currency
net investments (2,389) 361
Items that will not be reclassified subsequently to
profit or loss:
- actuarial gain recognised in the Nu-Swift Pension
Scheme 414 16
- movement on deferred tax relating to the Nu-Swift
Pension Scheme surplus (145) (6)
- actuarial loss recognised in the Ansul Pension Scheme (412) (145)
- movement on deferred tax relating to the Ansul Pension
Scheme deficit 103 36
---------------------------------------------------------- ------- ---------
Other comprehensive (expense)/income for the year,
net of tax (2,429) 262
---------------------------------------------------------- ------- ---------
Equity shareholders of the Company 14,224 16,661
Non-controlling interest 160 113
---------------------------------------------------------- ------- ---------
Total comprehensive income for the year 14,384 16,774
---------------------------------------------------------- ------- ---------
Consolidated statement of changes in equity
for the year ended 31 December 2019
Share Capital
Share premium redemption Merger Other Retained Non-controlling Total
capital account reserve reserve reserve earnings interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------- ------- ------- ---------- ------- ------- -------- --------------- -------
At 1 January 2018 (previously
reported) 123 344 1 2,033 8,470 92,408 189 103,568
------------------------------------------------------- ------- ------- ---------- ------- ------- -------- --------------- -------
Prior year adjustment
(note 2) - - - - - 1,179 - 1,179
------------------------------------------------------- ------- ------- ---------- ------- ------- -------- --------------- -------
At 1 January 2018 (as
restated) 123 344 1 2,033 8,470 93,587 189 104,747
------------------------------------------------------- ------- ------- ---------- ------- ------- -------- --------------- -------
Total comprehensive income
for the year
Profit for the financial
year (restated - note
2) - - - - - 16,399 113 16,512
Other comprehensive income/(expense):
- exchange adjustments - - - - 361 - - 361
- actuarial loss on pension
schemes - - - - - (129) - (129)
* net movement on deferred tax relating to pension
asset - - - - - 30 - 30
------------------------------------------------------- ------- ------- ---------- ------- ------- -------- --------------- -------
Total comprehensive income
for the year (restated
- note 2) - - - - 361 16,300 113 16,774
------------------------------------------------------- ------- ------- ---------- ------- ------- -------- --------------- -------
Contributions by and distributions
to owners of the Company:
- dividends - - - - - (9,809) - (9,809)
------------------------------------------------------- ------- ------- ---------- ------- ------- -------- --------------- -------
At 31 December 2018 and
1 January 2019 (restated
- note 2) 123 344 1 2,033 8,831 100,078 302 111,712
------------------------------------------------------- ------- ------- ---------- ------- ------- -------- --------------- -------
Total comprehensive income
for the year
Profit for the financial
year - - - - - 16,653 160 16,813
Other comprehensive income/(expense):
- exchange adjustments - - - - (2,389) - - (2,389)
- actuarial gain on pension
schemes - - - - - 2 - 2
* net movement on deferred tax relating to pension
asset - - - - - (42) - (42)
------------------------------------------------------- ------- ------- ---------- ------- ------- -------- --------------- -------
Total comprehensive (expense)/income
for the year - - - - (2,389) 16,613 160 14,384
------------------------------------------------------- ------- ------- ---------- ------- ------- -------- --------------- -------
Contributions by and distributions
to owners of the Company:
- dividends - - - - - (9,809) - (9,809)
------------------------------------------------------- ------- ------- ---------- ------- ------- -------- --------------- -------
Distribution to non-controlling
interest - - - - - - (113) (113)
------------------------------------------------------- ------- ------- ---------- ------- ------- -------- --------------- -------
At 31 December 2019 123 344 1 2,033 6,442 106,882 349 116,174
------------------------------------------------------- ------- ------- ---------- ------- ------- -------- --------------- -------
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 2019
2019 2018 2017
Restated Restated
- see note - see note
2 2
GBP'000 GBP'000 GBPGBP'000
-------------------------------------------- -------- ----------- -----------
Assets
Non-current assets
Property, plant and equipment 12,164 12,077 11,589
Right of use assets 2,360 - -
Intangible assets 67,504 66,077 63,578
Deferred tax asset 683 811 589
Retirement benefit surplus 4,959 4,430 4,397
--------------------------------------------- -------- ----------- -----------
87,670 83,395 80,153
-------------------------------------------- -------- ----------- -----------
Current assets
Inventories 13,434 13,293 11,749
Trade and other receivables 27,822 28,732 26,063
Cash and cash equivalents 27,143 26,110 24,652
--------------------------------------------- -------- ----------- -----------
68,399 68,135 62,464
-------------------------------------------- -------- ----------- -----------
Total assets 156,069 151,530 142,617
--------------------------------------------- -------- ----------- -----------
Liabilities
Current liabilities
Trade and other payables (23,158) (22,713) (19,576)
Income tax liabilities (987) (1,731) (1,699)
Borrowings (2,048) (2,125) (11,125)
Lease liabilities (1,134) - -
Derivative financial instruments - - (54)
Provision for liabilities and charges - (5) -
--------------------------------------------- -------- ----------- -----------
(27,327) (26,574) (32,454)
-------------------------------------------- -------- ----------- -----------
Non-current liabilities
Trade and other payables (850) (922) (1,003)
Borrowings (5,122) (7,441) -
Lease liabilities (1,256) - -
Derivative financial instruments (47) (41) -
Deferred tax liabilities (2,909) (2,779) (2,505)
Retirement benefit obligations (2,215) (1,880) (1,721)
Provision for liabilities and charges (169) (181) (187)
--------------------------------------------- -------- ----------- -----------
(12,568) (13,244)) (5,416)
-------------------------------------------- -------- ----------- -----------
Total liabilities (39,895) (39,818) (37,870)
--------------------------------------------- -------- ----------- -----------
Net assets 116,174 111,712 104,747
--------------------------------------------- -------- ----------- -----------
Shareholders' equity
Ordinary shares 123 123 123
Share premium 344 344 344
Capital redemption reserve 1 1 1
Merger reserve 2,033 2,033 2,033
Other reserves 6,442 8,831 8,470
Retained earnings 106,882 100,078 93,587
--------------------------------------------- -------- ----------- -----------
Equity attributable to owners of the Parent
Company 115,825 111,410 104,558
Non-controlling interest 349 302 189
--------------------------------------------- -------- ----------- -----------
Total equity 116,174 111,712 104,747
--------------------------------------------- -------- ----------- -----------
Consolidated statement of cash flows
for the year ended 31 December 2019
2019 2018
GBP'000 GBP'000
--------------------------------------------- -------- --------
Cash flows from operating activities
Cash generated from operations 32,363 28,385
Interest paid (160) (147)
Income tax paid (7,639) (7,393)
---------------------------------------------- -------- --------
Net cash generated from operating activities 24,564 20,845
---------------------------------------------- -------- --------
Cash flows from investing activities
Acquisition of subsidiary undertakings
(net of cash acquired) (2,264) (4,274)
Purchases of property, plant and equipment (3,974) (3,551)
Proceeds from the sale of property, plant
and equipment 329 398
Purchases of intangible assets (2,068) (746)
Interest received 27 12
---------------------------------------------- -------- --------
Net cash used in investing activities (7,950) (8,161)
---------------------------------------------- -------- --------
Cash flows from financing activities
Repayments of borrowings (2,091) (1,614)
Payment of lease liabilities (1,750) -
Dividends paid to the Company's shareholders (9,809) (9,809)
Distribution to non-controlling interest (113) -
---------------------------------------------- -------- --------
Net cash used in financing activities (13,763) (11,423)
---------------------------------------------- -------- --------
Effects of exchange rates on cash and
cash equivalents (1,818) 197
---------------------------------------------- -------- --------
Net increase in cash in the year 1,033 1,458
Cash and cash equivalents at the beginning
of the year 26,110 24,652
---------------------------------------------- -------- --------
Cash and cash equivalents at the end of
the year 27,143 26,110
---------------------------------------------- -------- --------
Notes to the financial statements
for the year ended 31 December 2019
1 Earnings per share
The calculation of basic earnings per ordinary share ("EPS") is
based on the profit on ordinary activities after taxation of
GBP16,653,000 (2018: GBP16,399,000) and on 12,261,477 (2018:
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.
2019 2018
Restated - see
note 32
-------------- -----------------
GBP'000 Pence GBP'000 Pence
--------------------------------------------- ------- ----- --------- ------
Profit on ordinary activities after taxation 16,653 135.8 16,399 133.7
--------------------------------------------- ------- ----- --------- ------
2 Prior year adjustment
While preparing the Group's financial statements for the year
ended 31 December 2019 the management of London Security plc
noticed that they had failed to account for deferred tax
liabilities on the acquisition of certain intangible assets arising
through business combinations in accordance with paragraph 19 of
IAS12 Income Taxes in previous years. Management estimates that a
deferred tax liability of GBP881,000 (2017: GBP675,000) and
goodwill of GBP2,382,000 (2017: GBP1,854,000) were not previously
recognised at 31 December 2018. Retained earnings at 1 January 2018
have been restated by GBP1,179,000 from GBP92,408,000 to
GBP93,587,000. The deferred tax liability at 1 January 2018 has
been restated by GBP675,000 from GBP1,830,000 to GBP2,505, 000.
Goodwill at 1 January 2018 has been restated by GBP1,854,000 from
GBP61,724,000 to GBP63,578,000. The analysis below shows a
reconciliation of the balance sheet at 31 December 2018 and the
income statement for the year ended 31 December 2018 as previously
reported and as restated.
Balance sheet as at 31 December 2018
Previously Prior year adjustment As restated
reported
GBP'000 GBP'000 GBP'000
Assets
Non Current Assets
Property, plant &
equipment 12,077 - 12,077
Intangible assets 63,695 2,382 66,077
Deferred tax asset 811 - 811
Retirement benefit
surplus 4,430 - 4,430
81,013 2,382 83,395
----------- ---------------------- ------------
Current Assets
Inventories 13,293 - 13,293
Trade & other receivables 28,732 - 28,732
Cash & cash equivalents 26,110 - 26,110
68,135 - 68,135
----------- ---------------------- ------------
Total Assets 149,148 2,382 151,530
----------- ---------------------- ------------
Liabilities
Current Liabilities
Trade & other payables (22,713) - (22,713)
Income tax liabilities (1,731) - (1,731)
Borrowings (2,125) - (2,125)
Provision for liabilities
& charges (5) - (5)
(26,574) - (26,574)
----------- ---------------------- ------------
Non Current Liabilities
Trade & other payables (922) - (922)
Borrowings (7,441) - (7,441)
Derivative financial
instruments (41) - (41)
Deferred tax liabilities (1,898) (881) (2,779)
Retirement benefit
obligations (1,880) - (1,880)
Provision for liabilities
& charges (181) - (181)
(12,363) (881) (13,244)
----------- ---------------------- ------------
Total Liabilities (38,937) (881) (39,818)
----------- ---------------------- ------------
Net Assets 110,211 1,501 111,712
----------- ---------------------- ------------
Shareholders' Equity
Ordinary shares 123 - 123
Share premium 344 - 344
Capital redemption
reserve 1 - 1
Merger reserve 2,033 - 2,033
Other reserve 8,831 - 8,831
Retained earnings 98,577 1,501 100,078
Equity attributable
to owners of the Parent
Company 109,909 1,501 111,410
Non-controlling interest 302 - 302
----------- ---------------------- ------------
Total equity 110,211 1,501 111,712
----------- ---------------------- ------------
Income statement for the year ended 31 December 2018
Previously Prior year adjustment As restated
reported
GBP'000 GBP'000 GBP'000
Revenue 137,711 - 137,711
Cost of sales (31,780) - (31,780)
Gross profit 105,931 - 105,931
Distribution costs (50,593) - (50,593)
Administrative expenses (32,163) - (32,163)
Operating profit 23,175 - 23,175
Finance income 131 - 131
Finance costs (171) - (171)
----------- ---------------------- ------------
Finance costs - net (40) - (40)
Profit before income
tax 23,135 - 23,135
Income tax expense (6,945) 322 (6,623)
Profit for the year 16,190 322 16,512
----------- ---------------------- ------------
Basic and diluted earnings per share for the prior year have
also been restated. The amount of the correction for the basic and
diluted earnings per share was an increase of 2.6p per share.
3 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
2019 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 2018 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 2019 and 31 December 2018 did not contain a
statement under s498 (1) to (4) of the Companies Act 2006.
This preliminary announcement has been prepared in accordance
with the recognition and measurement principles of International
Financial Reporting Standards ("IFRS"). The financial information
included in this preliminary announcement does not include all of
the disclosures required in accounts prepared in accordance with
IFRS and accordingly it does not itself comply with IFRS. With the
exception of the adoption of IFRS16, 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 2018. They are also consistent with those in the
full accounts for the year ended 31 December 2019, which have yet
to be published.
The Group will post its annual report and accounts to
shareholders on 4 June 2020. A copy of the annual report and
accounts can be found on the company's webpage (
www.londonsecurity.org ).
The Directors have prepared this financial information on the
fundamental assumption that the Group is a going concern and will
continue to trade for at least 12 months following the date of
approval of the financial information. In determining whether the
Group's accounts should be prepared on a going concern basis the
Directors have considered the factors likely to affect future
performance. At 31 December 2019 the Group held cash and cash
equivalents of GBP27 million. Total debt at 31 December 2019 was
GBP7 million, of which GBP2 million is due for repayment in the
year to 31 December 2020.
The Chairman's Statement contains a Covid-19 impact assessment
detailing the effect it is having on our business. The group has
seen a severe decline in turnover as social distancing and travel
policies are implemented. Further to the approval of the 2020
budget in December 2019, the Directors have considered the
potential impact of the Covid-19 outbreak on the Group's results
and have modelled a base case reforecast. The base case reforecast,
is based on the directors' current knowledge and expectation and
includes a level of restrictions that would remain in force into
June 2021. The base case reforecast includes significant cash
headroom. In preparing the base case reforecast, there are key
judgements in relation to the timing of when the engineers will be
able to return to customer sites and provide fire protection
services and the level of support from the Government's in which
the Group operates in relation to employment costs. The Directors
have concluded that while the assumptions in the base case
reforecast include significant judgement, they are appropriate and
as at the date of approving the preliminary announcement, our
engineers are returning to work in some of the Countries that the
Group operates. In addition, the directors are satisfied that
further action could be taken, if necessary, including suspending
dividend payments. Whilst the directors expect the group's bankers
to be supportive should the group request loan repayment deferrals
or forgiveness of any covenant breaches should the actual impact of
Covid-19 be worse than reforecast, the Directors consider that the
group could repay its external loans should that support not be
available. The directors have also modelled sensitivities to the
base case reforecast, which demonstrates that the group is forecast
to have significant cash headroom after applying these
sensitivities.
Accordingly, the directors have a reasonable expectation that
the company has adequate resources to continue in operational
existence for the foreseeable future and are satisfied that it is
appropriate to adopt the going concern basis in preparing this
financial information.
Enquiries
London Security plc
Richard Pollard Tel: 01422 372 852
Company Secretary
WH Ireland Limited
Chris Fielding Tel: 0207 220 1666
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR PPUCCAUPUUMP
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