Final Results for the Year Ended 31 December 2017

RNS Number : 0834N

London Security PLC

04 May 2018

London Security plc

Final Results for the Year Ended 31 December 2017

Chairman's statement

Financial highlights

Financial highlights of the audited results for the year ended 31 December 2017 compared with the year ended 31 December 2016 are as follows:

· revenue of £125.9 million (2016: £114.8 million);

· EBITDA of £27.9 million (2016: £26.3 million);

· operating profit of £21.7 million (2016: £20.9 million);

· profit for the year of £14.3 million (2016: £13.8 million); and

· a dividend per share of £0.80 (2016: £0.80).

Trading review

The financial highlights illustrate that the Group's revenue increased by £11.1 million (9.7%) to £125.9 million. However, these results are impacted by the movement in the Euro to Sterling average exchange rate, which has decreased from 1.23 to 1.14. This movement in exchange rate had a favourable effect of £7.3 million on reported revenue. If the 2017 results had been translated at 2016 rates, revenue would have been £118.6 million instead of £125.9 million (increase of 3.3% on the prior year).

Operating profit increased by £0.8 million (3.8%) to £21.7 million. Adjusting for the change in the exchange rate on the same basis as above, operating profit would have been £20.2 million instead of £21.7 million (decrease of 3.3%). 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 consolidated its presence in the Netherlands, Germany and the UK with the acquisitions of service contracts from nine smaller well-established businesses for integration into the Group's existing subsidiaries. In addition, the Group has taken a 75% interest in a further business in the United Kingdom which will allow us to bring in house a partner with which we have previously subcontracted.

Management and staff

2017 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.

Michael Gailer

Following a short illness Michael Gailer sadly passed away on 5 March 2018. Michael had provided wise counsel to the Company for over 19 years. Michael will be deeply missed by his fellow Directors and our thoughts and condolences are with his family at this difficult time.

Dividends

A final dividend in respect of 2016 of £0.40 per ordinary share was paid to shareholders on 5 July 2017. An interim dividend in respect of 2017 of £0.40 per ordinary share was paid to shareholders on 7 December 2017. The Board is recommending the payment of a final dividend in respect of 2017 of £0.40 per ordinary share to be paid on 5 July 2018 to shareholders on the register on 8 June 2018. The shares will be marked ex-dividend on 7 June 2018.

Future prospects

The Group will continue to grow and consolidate the fire protection industry with the finest customer care.

Annual General Meeting

The Annual General Meeting will be held at 2 Eaton Gate, London SW1W 9BJ, on 20 June 2018 at 2 pm. 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

3 May 2018

Consolidated income statement

for the year ended 31 December 2017

		2017	2016
	Note	£'000	£'000
Revenue		125,873	114,845
Cost of sales		(26,626)	(23,638)
Gross profit		99,247	91,207
Distribution costs		(47,751)	(42,191)
Administrative expenses		(29,757)	(28,154)
Operating profit		21,739	20,862
EBITDA*		27,934	26,321
Depreciation and amortisation		(6,195)	(5,459)
Operating profit		21,739	20,862
Finance income		237	176
Finance costs		(392)	(433)
Finance costs - net		(155)	(257)
Profit before income tax		21,584	20,605
Income tax expense		(7,239)	(6,822)
Profit for the year		14,345	13,783
Profit is attributable to:
Equity shareholders of the Company		14,310	13,783
Non-controlling interest		35	-
		14,345	13,783
Earnings per share
Basic and diluted	1	116.7p	112.4p

* 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 2017

	2017	2016
	£'000	£'000
Profit for the financial year	14,345	13,783
Other comprehensive income/(expense):
Items that may be reclassified subsequently to profit or loss:
- currency translation differences on foreign currency net investments	1,439	4,441
Items that will not be reclassified subsequently to profit or loss:
- actuarial gain recognised in the Nu-Swift pension scheme	734	263
- movement on deferred tax relating to Nu-Swift pension scheme surplus	(257)	(92)
- actuarial gain/(loss) recognised in the Ansul pension scheme	721	(200)
- movement on deferred tax relating to Ansul pension scheme deficit	(313)	61
Other comprehensive income for the year, net of tax	2,324	4,473
Total comprehensive income for the year	16,669	18,256

Consolidated statement of changes in equity

for the year ended 31 December 2017

		Share	Capital
	Share	premium	redemption	Merger	Other	Retained	Non-controlling	Total
	capital	account	reserve	reserve	reserve	earnings	interest	equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2016	123	344	1	2,033	2,590	82,932	-	88,023
Total comprehensive income for the year
Profit for the financial year	-	-	-	-	-	13,783	-	13,783
Other comprehensive income/(expense):
- exchange adjustments	-	-	-	-	4,441	-	-	4,441
- actuarial gain on pension schemes	-	-	-	-	-	63	-	63
- net movement on deferred tax relating to pension asset	-	-	-	-	-	(31)	-	(31)
Total comprehensive income for the year	-	-	-	-	4,441	13,815	-	18,256
Contributions by and distributions to owners of the Company: - dividends	-	-	-	-	-	(9,808)	-	(9,808)
- release of accrual for unclaimed dividends	-	-	-	-	-	82	-	82
Total contributions by and distributions to owners of the Company	-	-	-	-	-	(9,726)	-	(9,726)
At 31 December 2016 and 1 January 2017	123	344	1	2,033	7,031	87,021	-	96,553
Total comprehensive income for the year
Profit for the financial year	-	-	-	-	-	14,310	35	14,345
Other comprehensive income/(expense):
- exchange adjustments	-	-	-	-	1,439	-	-	1,439
- actuarial gain on pension schemes	-	-	-	-	-	1,455	-	1,455
- net movement on deferred tax relating to pension asset	-	-	-	-	-	(570)	-	(570)
Total comprehensive income for the year	-	-	-	-	1,439	15,195	35	16,669
Contributions by and distributions to owners of the Company: - dividends	-	-	-	-	-	(9,808)	-	(9,808)
Contribution from non-controlling interest on business combination	-	-	-	-	-	-	154	154
At 31 December 2017	123	344	1	2,033	8,470	92,408	189	103,568

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 2017

	2017	2016
	£'000	£'000
Assets
Non-current assets
Property, plant and equipment	11,589	10,937
Intangible assets	61,724	62,749
Deferred tax asset	589	919
Retirement benefit surplus	4,397	3,574
	78,299	78,179
Current assets
Inventories	11,749	11,095
Trade and other receivables	26,063	23,138
Cash and cash equivalents	24,652	22,602
	62,464	56,835
Total assets	140,763	135,014
Liabilities
Current liabilities
Trade and other payables	(19,576)	(19,344)
Income tax liabilities	(1,699)	(1,180)
Borrowings	(11,125)	(1,870)
Derivative financial instruments	(54)	-
Provision for liabilities and charges	-	(35)
	(32,454)	(22,429)
Non-current liabilities
Trade and other payables	(1,003)	(957)
Borrowings	-	(10,789)
Derivative financial instruments	-	(172)
Deferred tax liabilities	(1,830)	(1,705)
Retirement benefit obligations	(1,721)	(2,279)
Provision for liabilities and charges	(187)	(130)
	(4,741)	(16,032)
Total liabilities	(37,195)	(38,461)
Net assets	103,568	96,553
Shareholders' equity
Ordinary shares	123	123
Share premium	344	344
Capital redemption reserve	1	1
Merger reserve	2,033	2,033
Other reserves	8,470	7,031
Retained earnings	92,408	87,021
Equity attributable to owners of the Parent Company	103,379	96,553
Non-controlling interest	189	-
Total equity	103,568	96,553

Consolidated statement of cash flow

for the year ended 31 December 2017

	2017	2016
	£'000	£'000
Cash flows from operating activities
Cash generated from operations	25,182	26,059
Interest paid	(368)	(408)
Income tax paid	(7,249)	(7,213)
Net cash generated from operating activities	17,565	18,438
Cash flows from investing activities
Acquisition of subsidiary undertakings (net of cash acquired)	(1,220)	(2,222)
Purchases of property, plant and equipment	(3,384)	(2,774)
Proceeds from the sale of property, plant and equipment	349	323
Purchases of intangible assets	(600)	(1,662)
Interest received	30	43
Net cash used in investing activities	(4,825)	(6,292)
Cash flows from financing activities
Repayments of borrowings	(1,809)	(1,819)
Dividends paid to Company's shareholders	(9,808)	(9,726)
Contribution from non-controlling interest	154	-
Net cash used in financing activities	(11,463)	(11,545)
Effects of exchange rates on cash and cash equivalents	773	2,265
Net increase in cash in the year	2,050	2,866
Cash and cash equivalents at the beginning of the year	22,602	19,736
Cash and cash equivalents at the end of the year	24,652	22,602

Notes to the financial statements

for the year ended 31 December 2017

1 Earnings per share

The calculation of basic earnings per ordinary share ("EPS") is based on the profit on ordinary activities after taxation of £14,310,000 (2016: £13,783,000) and on 12,261,477 (2016: 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.

	2017		2016
	£'000	Pence	£'000	Pence
Profit on ordinary activities after taxation	14,310	116.7	13,783	112.4

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 2017 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 2016 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 2017 and 31 December 2016 did not contain a statement under s498 (1) to (4) 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 2018. A copy of the annual report and accounts can be found on the company's webpage (www.londonsecurity.org).

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